As filed with the Securities and Exchange Commission on February 11, 2000
File No. 0-29582
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB/A
THIRD AMENDMENT
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
UNITED COMMUNITY HOLDINGS, INC.
(Name of small business issuer in its charter)
Nevada 75-2798679
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3935 Interstate 55 South, Telephone Number
Jackson, Mississippi, 39212 (601) 371-0009
(Address of principal executive offices)
James F. Robinson
3935 Interstate 55 South
Jackson MS 39212
(601) 371-0009
(Name, address and phone number for agent for service)
Copies to:
Dominic M. Federico, Esq.
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
(972) 248-1922
Securities to be registered under Section 12(b) of the Act: none
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.00001 par value per share
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PART 1
Item 1 DESCRIPTION OF THE BUSINESS
General
United Community Holdings, Inc. is filing this Form 10-SB on a voluntary basis
in order to make the company's financial information equally available to all
parties, including potential investors, and to meet certain listing requirements
for publicly traded securities.
History of Corporations forming the Registrant
This registrant was incorporated on May 31, 1989 with the name
Professionalistics, Inc. under the laws of the State of Delaware. It changed its
name to Pacific Great China Co., Ltd. (herein "PGCC") on May 8, 1996 in
anticipation of a planned business acquisition or merger transaction.
Subsequently, during 1996, the anticipated business acquisition or merger
transaction was abandoned and canceled. PGCC's principal shareholder was Halter
Capital Corporation, a Delaware corporation specializing in providing consulting
services, especially to small businesses.
On December 17, 1998 PGCC changed its state of incorporation from
Delaware to Nevada by means of a merger with and into United Community Holdings,
Inc., a Nevada corporation (herein "UCHI") formed solely for the purpose of
effecting the reincorporation. The Certificate of Incorporation and Bylaws of
UCHI are the Certificate of Incorporation and Bylaws of the surviving
corporation. Such Certificate of Incorporation changed the company's name to
United Community Holdings, Inc. and modified the company's capital structure to
allow for the issuance of 50,000,000 total equity shares, consisting of
50,000,000 shares of common stock with a par value of $0.00001 per share (herein
the "Common Stock).
Prior to its merger with PGCC, UCHI did not engage in any business
activities and the business purpose of UCHI was primarily to seek out and obtain
an acquisition or merger transaction whereby its stockholders would benefit by
owning an interest in a viable business enterprise. Since UCHI had no operations
or significant assets, its principal potential for profits came solely from the
business or operations it would receive in an acquisition or merger transaction.
A merger or acquisition transaction with UCHI would allow a privately held
company to become a publicly owned corporation with a broad shareholder base
without experiencing the substantial time delays and financial expenditures
imposed by some of the filing requirements of federal and state securities laws.
Rosemont Gardens Funeral Chapel-Cemetery, Inc. (herein "Rosemont")
was incorporated on March 4, 1994 under the laws of the State of Mississippi.
Rosemont has an authorized capital stock of 10,000 shares of common stock, of
which only 1000 shares are issued and outstanding. All of its outstanding shares
were originally owned by James F. Robinson. Rosemont founded in 1994 a funeral
home and cemetery in Jackson, Mississippi that it operates. This business is
known as Rosemont Gardens Memorial Park. See "Description of UCHI's Business and
Plans for Development", below.
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Control of UCHI Purchased by Robinson
In January 1999, pursuant to a Stock Purchase Agreement signed on
November 19, 1998, James F. Robinson (herein "Robinson") obtained a controlling
interest in UCHI by acquiring from Halter Capital Corporation 7,200,000 shares,
or approximately 90% of the issued and outstanding common stock, of UCHI.
Robinson paid $50,000 cash as consideration for that stock and for other
services to be rendered by Halter Capital Corporation ("HCC"). As of December
17, 1998 Pacific Great China Co., Ltd., a Delaware corporation, had more than
700 shareholders but no assets and no liabilities. On that same date PGCC
executed a Merger Agreement with UCHI whereby PGCC was merged with and into
UCHI, with one share of UCHI's common stock being exchanged for each share of
common stock of PGCC then outstanding. As a result, United Community Holdings,
Inc., a Nevada corporation, is the surviving corporation resulting from that
merger and the registrant filing this registration statement.
Acquisition of Rosemont Gardens Funeral Chapel-Cemetery, Inc.
As of January 1, 1999, Robinson and UCHI entered into a Stock Purchase
Agreement (under that date) whereby Robinson sold all of the stock in Rosemont
which he then owned (representing 100% of the issued and outstanding shares of
Rosemont) to UCHI in exchange for 1000 shares of UCHI's common stock. As a
result of this transaction Rosemont has become a wholly owned subsidiary of UCHI
and at present it is its only operating subsidiary.
As discussed above, the reason UCHI entered into this transaction with
Robinson was so that it could complete an acquisition or merger transaction
whereby its shareholders would benefit by owning an interest in a viable
business enterprise. Specifically, UCHI desired to enter into a transaction with
a company such as Rosemont that on a consolidated basis either presently
qualified, or in the near future would qualify, for listing on the Nasdaq
SmallCap Market. Upon analysis of Robinson's business plan for Rosemont (See
"Description of UCHI's Business and Plans for Development", below), it was
determined that UCHI had specific plans to meet the assets and net worth
criteria to be listed on the Nasdaq SmallCap Market. For these reasons, UCHI
believed it could best enhance its shareholders' interests in the registrant by
consummating this transaction with Robinson.
UCHI's principal office, as well as the principal office of Rosemont,
is located at 3935 Interstate 55 South, Jackson, Mississippi 39212. The
telephone number for both is (601) 371-0009.
Current Operations of UCHI
UCHI continues to analyze the dramatically and rapidly changing
industry conditions and to develop proactive business strategies. As the
acquisition landscape began challenging following negative announcements by
larger industry players during the year, UCHI started to identify strategies. We
intend to prepare our company for significant and opportunistic growth due to
our belief that there will be dramatic ownership restructuring of previously
consolidated industry assets by others over the next 12 to 24 months.
Accordingly, we will seek to align ourselves with one or more capital partners
that share our view of the opportunities in the industry.
UCHI currently owns 100% of the stock of Rosemont Gardens Funeral
Chapel-Cemetery, Inc. Rosemont Gardens currently operates in Jackson,
Mississippi where cremation only represents 2% of services as compared to as
much as 50% in some areas. We have aggressively moved into the funeral and
cemetery business and are servicing its pre-need and at-need customers. We also
operate a vault manufacturing section which also provides vault merchandise to
our customers on-site. We furnish transportation for our at-need funeral
services and also have available a mortuary and/or embalming facility to
facilitate the funeral home's embalming services.
Rosemont Gardens has doubled its funeral volume over 1998 and is poised
to make a significant gain in the Year 2000. Administrative offices are
maintained with a staff of personnel for the purposes of keeping records of
pre-need sales and customer services. Funeral directors are on staff to conduct
the day to day funeral services.
Certain statements made herein or elsewhere by, or on behalf of, the
Company that are not historical facts are intended to be forward-looking
statements within the meaning of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995.
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Description of UCHI's Business and Plans for Development
UCHI's strategic plan is to acquire and/or construct, own and operate
funeral homes, cemeteries and pre-arrangement centers at various strategically
selected sites in the Southeastern portion of the United States. Each geographic
area selected for development of these community-based funeral homes/cemetery
operations and pre-need centers will be developed in a "cluster" of facilities.
The exact composition of each cluster will vary depending on the anticipated
demands for the company's services in each geographic area selected and the
results of a study to be conducted by UCHI of various demographic factors, as
well as the present and potential markets for funeral homes, cemeteries and
pre-arrangement service centers. The clustering of existing operating facilities
which have been acquired along with the construction of economical satellite
facilities and pre-arrangement sales centers will provide UCHI with the
appearance of an "overnight" presence in the communities selected for
development. Clustering these facilities will also help to ensure that an
adequate cash flow can be generated by the facilities in each cluster to assure
financial independence and reduce the need for cash infusions from other
operating clusters. This clustering approach and the use of standardized designs
for the physical facilities will limit construction costs and increase
operational economies. The cluster concept will permit the economical sharing of
personnel and other resources among the facilities in each cluster, for example,
embalming facilities, hearses, cremation equipment, administrative and financial
services, etc. Actual clusters will vary in configuration from area to area
depending on the availability of existing operating facilities, the population
of the geographic area, the perceived needs in the area and other factors.
During its initial development phase, UCHI will seek to acquire
ownership interests in existing funeral and/or cemetery operations and
facilities, including undeveloped acreage to be used for new funeral and/or
cemetery operations, all of which will be located in the Southeastern portion of
the United States. UCHI may acquire such properties and operations directly
using leverage, newly raised capital or its own internal funds, or by the
issuance of additional shares of stock of UCHI which are currently authorized
but unissued. There is no assurance that UCHI will acquire ownership of, or a
controlling interest in, any of the aforementioned types of properties or
businesses and, as of the date of this registration statement, UCHI has no
contracts or understandings to acquire any such properties or businesses and has
not yet held any discussions which might result in any such acquisitions or
purchases. While UCHI's management is hopeful that such acquisitions or
purchases can be consummated on favorable terms, it can make no such
representations.
Management believes that there are opportunities for UCHI to acquire
ownership interests in several existing operations in its industry that are
under-performing in their markets due to ineffective management and marketing or
substandard facilities. UCHI may attempt to acquire such operations and, by
using UCHI's experienced staff of professionals, to increase the efficiency and
profitability of such operations and/or remodel the existing facilities, while
creating a larger network of funeral homes and cemeteries that can benefit from
UCHI's unique approach to serving its clientele.
At the present time UCHI has not identified any specific business
opportunity that it plans to pursue, nor has UCHI reached any agreement or
definitive understanding with any person concerning an acquisition. Moreover,
none of UCHI's officers, directors or promoters, and no affiliate of UCHI, has
had any preliminary contact or discussions with a representative of any other
company regarding the possibility of an acquisition or merger between UCHI and
such other company. No assurance can be given that UCHI will be successful in
finding or acquiring a desirable business opportunity or that any acquisition
that occurs will be on terms that are favorable to UCHI and its stockholders,
given the fact that only limited funds are currently available for acquisitions
and that UCHI does not know whether it can raise the additional capital which it
believes is necessary to expand.
It is anticipated that business opportunities will come to UCHI's
attention from various sources, including its officers and directors, its
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. UCHI has no plans,
understandings, agreements, or commitments with any individual for such person
to act as a finder of opportunities for UCHI.
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UCHI does not foresee that it would purchase an interest in or enter
into a contract with any business with which an officer or director of UCHI is
affiliated. Should UCHI's management determine in the future, contrary to
management's current expectations, that a transaction with an affiliate would be
in the best interests of UCHI and its stockholders, UCHI is permitted by Nevada
law to enter into such a transaction if:
(1) The material facts as to the relationship or interest of the
affiliate and as to the contract or transactions are disclosed or are known
to the Board of Directors, and the Board in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors constitute
less than a quorum; or
(2) The material facts as to the relationship or interest of the
affiliate and as to the contract or transaction are disclosed or are known
to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(3) The contract or transaction is fair as to UCHI as of the time it is
authorized, approved or ratified, by the Board of Directors or the
stockholders.
The analysis of business opportunities will be undertaken by or under
the supervision of UCHI's executive officers and directors. See "Management."
UCHI anticipates that it will consider, among other things, the following
factors:
(1) Potential for growth and profitability, and anticipated market
expansion;
(2) Competitive position, as compared to other companies of similar
size and experience within the industry segment as well as within the
industry as a whole;
(3) Strength and diversity of existing management or management
prospects that are scheduled for recruitment;
(4) Capital requirements and anticipated availability of required
funds, to be provided by UCHI or from operations, through the sale of
additional securities, through joint ventures or similar arrangements, or
from other sources;
(5) The cost of participation by UCHI as compared to the perceived
tangible and intangible values and potential of such an acquisition;
(6) The extent to which the business opportunity can be advanced;
(7) UCHI's perception of how any particular business opportunity will
be received by the investment community and by UCHI's stockholders;
(8) The accessibility of required management expertise, personnel,
services, professional assistance, and other required items; and
(9) Whether the financial condition of the business opportunity would
be, or would have a significant prospect in the foreseeable future to
become, such as to permit the securities of UCHI, following the business
combination, to qualify to be listed on a national automated securities
quotation system, such as Nasdaq.
UCHI has no employees but Rosemont currently employs approximately ten
people on a full time basis. No employees are members of collective bargaining
units.
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Environmental Matters
UCHI is not aware of any environmental liability relating to its facilities or
operations that would have a material adverse affect on UCHI, its business,
assets or results of operations.
Inflation
Inflation has not historically been a material effect on UCHI's operations and
is not expected to have a material impact on the company or its operations in
the future.
Competition
The funeral home/cemetery industry in the United States has historically been
highly fragmented, consisting of numerous small operations, typically owned by a
family with strong ties to its local geographic service area. Many of these
family-owned businesses do not have successors who are active in the management
of the business. Based on past experience with such owners and the dynamics of
the industry, UCHI believes that many of these business es can be acquired at
attractive cash flow multiples.
Nevertheless, in the past twenty years there has been a growing trend in this
industry toward mergers and consolidation and several large corporations have
acquired thousands of formerly independent operators. While some of these giant
competitors have recently evidenced problems (apparently resulting from
difficulties in economically assimilating their past acquisitions and/or making
acquisitions that were priced unrealistically), these large competitors have
assets, readily marketable stock, cash and other advantages in negotiating
potential merger or acquisition transactions that UCHI, at its current size, can
not effectively counter.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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.
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(2) General Information
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 in accordance with the
provisions of Interpretation #39 of Accounting Principles Board Opinion #16,
whereby the combination of entities under common control are accounted for on an
"as-if-pooled" basis with the Company being the parent company and Rosemont
being a wholly-owned subsidiary. These consolidated entities are referred to as
Company. Accordingly, the consolidated financial statements of the Company and
Rosemont represent the historical consolidated financial statements as of the
first day of the first period presented.
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(3) Results of Operations
The operations for the nine months ended September 30, 1999 compared to the nine
months ended September 30, 1998 show a continued maturation and market
acceptance of the products and operations of the Company's Rosemont subsidiary.
Recognized revenues for the first nine months of 1999 were approximately
$286,000 as compared to approximately $165,000 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 Company incurred cost of sales and providing services of approximately
$134,000 and $118,000, respectively, for the nine months ended September 30,
1999 and 1998. Costs related to cemetery merchandise and funeral services are
recognized at the time the service is provided. Sales commissions, for both
at-need and pre-need funeral sales and sales of cemetery spaces and/or crypts,
are charged to expense, less a nominal percentage, in the month the related
contract is recorded. The allocated cost of cemetery spaces and/or crypts is
charged to operations at the time that at least 25% of the initial contract
price is received by the Company in cash. The Company realized gross profits of
approximately $152,000 (53.06%) for the nine months ended September 30, 1999 as
compared to approximately $118,000 (71.64%) for the nine months ended September
30, 1998. This change in gross profit percentage is due to management's value-
based product pricing policies to provide quality funeral and burial services to
the general public
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 $232,000 for the
nine months ended September 30, 1999 as compared to approximately $386,000 for
the same period of 1998. Interest expense decreased by approximately $38,000,
from approximately $192,000 for the nine months ended September 30, 1998 to
approximately $154,000 for the nine months ended September 30, 1999. This
decrease in interest expense is directly related to the 1998 debt restructuring
of short-term borrowings into a long-term debt agreement and/or the net
retirement of amounts due on the Company's line of credit during 1999.
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 and some additions to property and equipment during 1999.
The principal source 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.
Earnings per share improved from $(0.08) per share for the first nine months of
1998 to approximately $(0.04) per share for the first nine months of 1999.
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(4) 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 $(224,000) and $(553,000) for the first nine months
of 1999 and 1998, respectively. These deficits were supported through advances
on the Company's bank line of credit or through controlling shareholder
advances. The Company has completed the development of the initial cemetery
garden, visitors center and other funeral related buildings. The Company
continues the process of constructing Phase II to its Mausoleum and the second
and third cemetery gardens as internally generated funds and consumer demand
permits. 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.
During the third quarter of 1998, the Company entered into a $2,220,000
long-term note payable to a bank. The note bears interest at 8.00% and is
payable in monthly installments of approximately $18,569, including interest.
Any unpaid principal and interest is due at the note's maturity in June 2003.
The note is secured by land, accounts receivable from prearranged funeral
contracts and cemetery property sales contracts and the personal guarantee of
the Company's controlling shareholder. The proceeds of this note were used to
refinance various short-term notes payable by the Company.
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.
(5) 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 has completed its detailed review by September 1,
1999 and has completed any modifications, upgrades or replacements. No
significant expenditures were required as a result of this exercise and,
accordingly, the costs associated with the Y2K date change compliance did not
have a material effect on the Company's financial position or its results of
operations.
The Company continues to monitor its significant suppliers, shippers, customers
and other external business partners related to their readiness for the Y2K date
change. However, 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.
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Item 3 DESCRIPTION OF PROPERTY
Jackson, Mississippi Property
Rosemont Gardens Memorial Park, which is owned by UCHI's subsidiary,
Rosemont Gardens Funeral Chapel-Cemetery, Inc. is situated on 106 acres of land
located within the city limits of Jackson, Mississippi. It is a combination
funeral home and perpetual care cemetery and mausoleum. The funeral home
contains approximately 17,000 square feet and is designed in the fashion of an
ante-bellum mansion. Its dramatic presentation - high upon a hill bordering
Interstate 55 - offers impressive visibility and has enabled rapid name
recognition. It has been designed to be the "flagship" of a national chain of
community funeral homes and pre-arrangement centers. This facility is currently
large enough to accommodate the financial, administrative and training
facilities that UCHI and its subsidiary will need for several years.
Item 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information table sets forth certain information
regarding UCHI's common stock owned on February 10, 2000 by (1) any person
(including any "group") who is known by UCHI to own beneficially more than 5% of
its outstanding Common Stock, (2) each director and executive officer, and (3)
all executive officers and directors as a group.
Name and Address Shares Owned Percentage
- ------------------------------ ------------ ----------
James F. Robinson 7,201,000 90%
3935 Interstate 55 South
Jackson MS 39212
Kevin B. Halter, Sr. 275,065 3.4%
16910 Dallas Parkway, Suite 100
Dallas TX 75248
Kevin B. Halter, Jr. 275,064 3.4%
16910 Dallas Parkway, Suite 100
Dallas TX 75248
(None of the other officers and directors of UCHI or its subsidiary own any
stock in UCHI.)
Executive Officers and Directors as 7,201,000 90%
a group (five persons)
Item 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors and officers of UCHI are listed below with information
about their respective backgrounds.
Name Age Position
- ---- --- --------
James F. Robinson 72 Chairman of the Board, President &
Chief Executive Officer
Jeffrey D. Aldridge 38 Vice President, Chief Operating
Officer and Director
Margaret R. Lauro 40 Secretary, Treasurer, and Chief
Financial Officer
William E. Lax 51 Director
Gary D. Thrash 49 Director
Directors are elected to serve until the next annual meeting of the shareholders
of UCHI or until their successors have been elected and qualified. Officers
serve at the discretion of the Board of Directors. None of the Directors serve
as directors of any public or reporting corporations except as disclosed below.
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Mr. Robinson was elected to his current positions with UCHI in January 1999. He
has been President and Chief Executive Officer of Rosemont Gardens Funeral
Chapel-Cemetery, Inc. since 1994 when it was founded by him. From 1957 to 1995
he served as President and Chief Executive Officer of Protective Service Life
Insurance Co., Jackson, Mississippi, which specializes in life and accident
insurance. He has been involved in the funeral business in various capacities
for more than 40 years. He has a Science degree from St. Louis College of
Science, St. Louis, Missouri. Mr. Robinson is the father of Mrs. Lauro.
Mrs. Lauro was elected to her current positions with UCHI in January 1999. She
has been Secretary and Treasurer of Rosemont Gardens Funeral Chapel-Cemetery,
Inc. since 1995. From 1980 until 1995 she was Secretary and Treasurer of
Protective Service Life Insurance Co. She has a BBA degree in accounting from
Mississippi State University. Mrs. Lauro is the daughter of Mr. Robinson.
Mr. Aldredge was elected to his current positions with UCHI in January 1999.
Since 1996 he has served as the officer in charge of Corporate Planning and
Development for Rosemont Memorial Gardens. For the previous five years he served
as a financial analyst for PRC Environmental Management, Inc. (Aiken, South
Carolina) and Vitro Corporation (Silverdale, Washington). He has a BBA degree
from Georgia State University.
Mr. Lax was elected a Director of UCHI in January 1999. He has been the Chief
Marketing Officer and Vice President of Acme Towers Group, a telecommunications
infrastructure company with headquarters in Tampa, Florida, since January 1999.
In the last five years he has swerved as Director of Economic and Business
Development for the City of Tampa where he developed a successful international
business development program for the Tampa Metro area, Senior Vice President and
Executive Director of Tampa Metro's Economic and Business Development
Organization which assisted in the creation of 19,000 new jobs in the area, and
Director of Economic and Business Development for Tampa Electric Company. He has
received special recognition at the national and regional levels for his work in
economic and business development. He has a Bachelors degree in Economics from
Millsaps College and a MBA from the University of Arkansas.
Mr. Thrash was elected a Director of UCHI in January 1999. He has been a partner
in the law firm of Singletary & Thrash (Jackson and Biloxi, Mississippi) for the
past 24 years. He specializes in litigation. Mr. Thrash earned both his J.D.
degree and his Bachelor's degree from the University of Mississippi.
No director or officer of UCHI has been the subject of any order, judgment, or
decree of any court or any regulatory agency enjoining him from acting as an
investment advisor, underwriter, broker or dealer in the securities industry, or
as an affiliated person, director or employee of an investment company, bank,
savings and loan association, or insurance company or from engaging in or
continuing any conduct or practice in connection with any such activity or in
connection with the purchase or sale of any securities nor has any such person
been the subject of an order of state authority barring or suspending the right
of such a person to be engaged in such activities or to be associated with such
activities.
No director or officer of UCHI has been convicted in any criminal proceeding
(excluding traffic violations) or is the subject of a criminal proceeding which
is currently proceeding. No director or officer of UCHI is the subject of any
legal proceeding involving UCHI or the performance of his duties as such
director or officer.
Item 6 EXECUTIVE COMPENSATION
UCHI (including its subsidiary, Rosemont Gardens Funeral Chapel-Cemetery, Inc.
and its predecessor, Pacific Great China Co., Ltd.) neither paid nor accrued any
form of compensation in any amount to or for its executive officers or directors
for the fiscal years ended December 31, 1996, 1997 and 1998.
11
<PAGE>
Item 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 28, 1999, effective January 1, 1999, UCHI exchanged 1000 shares of
its restricted, unregistered common stock with James F. Robinson, its then
current majority shareholder for 100% of the issued and outstanding stock of
Rosemont Gardens Funeral Chapel-Cemetery, Inc. At closing, that operating
company became of wholly-owned subsidiary of UCHI.
Item 8 DESCRIPTION OF SECURITIES
UCHI is authorized to issue 50,000,000 shares of common stock, par
value $.00001 per share (the "Common Stock"). Each share of Common Stock is
entitled to one vote at all meetings of shareholders. The By-Laws of UCHI
prohibit cumulative voting in the election of directors. All shares of Common
Stock are equal to each other with respect to liquidation rights and dividend
rights. In the event of liquidation, dissolution or winding up of UCHI, holders
of the Common Stock will be entitled to receive, on a pro rata basis, all assets
of UCHI remaining after satisfaction of all liabilities. There are no preemptive
rights to purchase additional shares of Common Stock.
Holders of Common Stock are entitled to receive dividends if and when
declared by the Board of Directors out of funds legally available therefore. See
"Dividend Policy".
PART II
Item 1 MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
RELATED SHAREHOLDER MATTERS
UCHI, after this registration statement is declared effective by the
SEC, intends to file for trading on the OTC Electronic Bulletin Board which is
sponsored by the National Association of Securities Dealers ("NASD"). The OTC
Electronic Bulletin Board is a network of securities dealers who buy and sell
stock. The dealers are connected by a computer network which provides current
information on current "bids" and "asks" as well as volume information.
As of the date of this filing, there is no public market for UCHI's
common stock. As of July 20, 1999 there were 686 holders of record of UCHI's
Common Stock. Currently only 249,679 of the 8,000,808 shares issued and
outstanding are freely tradeable. 7,751,129 outstanding shares are deemed to be
"restricted securities" within the meaning of Rule 144 promulgated under the
Securities Act and may be publicly resold only if registered under the
Securities Act in the future or sold in accordance with an eligible exemption
from registration, such as Rule 144. All of these restricted shares are owned by
affiliates of UCHI.
In general, under Rule 144 as currently in effect, a person (including
an affiliate of UCHI) who beneficially has owned restricted securities that were
acquired from UCHI for at least one year prior to an intended sale date is
entitled to sell within any three-month period a number of shares that does not
exceed the greater of the following:
12
<PAGE>
(a) one percent of the number of shares of common stock then outstanding; or
(b) the average weekly reported trading volume of the common stock during the
four calendar weeks immediately preceding the date on which notice of such sale
is filed with the SEC, provided that manner of sale and notice requirements and
requirements as to the availability of current public information concerning
UCHI are satisfied.
Under Rule 144(k), a person who has not been an affiliate of UCHI for
at least three months preceding the intended sale date and who beneficially has
owned restricted securities acquired from UCHI for at least two years prior to
the sale date, would be entitled to sell the shares without volume limitations,
manner of sale provisions, or notification requirements.
Shares owned by persons who, under the Securities Act, are deemed to be
affiliates of UCHI are subject to volume limitations, manner of sale provisions,
notification requirements, and requirements as to the availability of current
public information regarding UCHI, regardless of how long the shares have been
owned. As defined in Rule 144, an affiliate of an issuer is a person that
directly or indirectly through the use of one or more intermediaries, controls,
or is controlled by, or is under common control with, the issuer.
James F. Robinson is an affiliate of UCHI because he is an officer and
director of UCHI and because he owns more than five percent of the common stock.
If Mr. Robinson resigned and sold all of the currently restricted stock in UCHI
that he now owns in a private transaction and, thereby, ceased to be an
affiliate of UCHI, those shares of UCHI's common stock would become freely
marketable under Rule 144(k) three months thereafter. Since Mr. Robinson
currently owns approximately 90% of the issued and outstanding shares, any sales
made in the public market would probably adversely affect the prevailing market
price of UCHI's stock.
UCHI's transfer agent is Securities Transfer Corporation, 16910 Dallas Parkway,
Suite 100, Dallas, Texas 75248.
Dividend Policy
UCHI has never paid or declared a cash dividends on its Common Stock.
The Board of Directors does not intend to pay any cash dividends in the
foreseeable future but to use all profits, as generated, for the expansion and
growth of UCHI's business. The payment by UCHI of dividends, if any, on its
common stock in the future is subject to the discretion of the Board of
Directors and will depend on UCHI's earnings, financial condition, capital
requirements and other relevant factors.
Item 2 LEGAL PROCEEDINGS
UCHI may from time to time defend various claims and legal actions in
the ordinary course of its operations. Management believes that there are
currently no such claims or actions that will have a material effect on UCHI's
financial position or results of operations.
Item 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The independent accountants for UCHI (including its predecessors,
Rosemont Gardens Funeral Chapel-Cemetery, Inc. and Pacific Great China Co.,
Ltd.) for the fiscal years ended December 31, 1996, 1997 and 1998 was S. W.
Hatfield, CPA, certified public accountants, and there have been no changes in
accountants or disagreements with accountants on accounting or financial
disclosure matters.
13
<PAGE>
Item 4 RECENT SALES OF UNREGISTERED SECURITIES
Other than the sale of the 7,200,000 shares of stock of UCHI by Halter
Capital Corporation to James F. Robinson pursuant to the Stock Purchase
Agreement dated November 17, 1998, there have been no sales of any of the Common
Stock or of the stock of any of UCHI's predecessor organizations.
Item 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation of UCHI provide that no director or
officer of UCHI shall be directly liable for damages incurred in connection with
legal proceedings brought about by reason of being an officer or director if the
person is not ultimately adjudged liable for negligence or misconduct in the
action.
Section 78.751 of the Nevada General Corporation Law contains
provisions relating to indemnification of officers and directors. Generally,
this section provides that a corporation may indemnify any person who was or is
a party to any threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative, except an action by or
in right of the corporation by reason of the fact that he was a director,
officer, employee or agent of the corporation. It must be shown that he acted in
good faith and in a manner he reasonably believed to be in the best interest of
the corporation. Generally, no indemnification may be made where the person has
been determined to be negligent or guilty of misconduct in the performance of
his duty to the corporation.
As to indemnification for liabilities arising under the Securities Act
of 1933 for directors, officers and controlling persons of UCHI, the registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy and unenforceable.
14
<PAGE>
UNITED COMMUNITY
HOLDINGS, INC.
(Formerly Pacific Great China Co., Ltd.)
Consolidated
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
<PAGE>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
CONTENTS
Page
Report of Independent Certified Public Accountants F-3
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-4
Consolidated Statements of Operations and Comprehensive Income
for the years ended December 31, 1998 and 1997 F-6
Consolidated Statement of Changes in Shareholders' Equity
for the years ended December 31, 1998 and 1997 F-7
Consolidated Statements of Cash Flows
for the years ended December 31, 1998 and 1997 F-8
Notes to Consolidated 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 Shareholders
United Community Holdings, Inc.
(formerly Pacific Great China Co., Ltd)
We have audited the accompanying consolidated balance sheets of United Community
Holdings, Inc. (formerly Pacific Great China Co., Ltd) (a Nevada corporation)
and Subsidiary as of December 31, 1998 and 1997 and the related consolidated
statements of operations and comprehensive income, changes in shareholders'
equity and cash flows for each of the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of United Community
Holdings, Inc. (formerly Pacific Great China Co., Ltd.) and Subsidiary 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 F-3 [email protected]
<PAGE>
<TABLE>
<CAPTION>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
CONSOLIDATED 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>
- Continued -
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
CONSOLIDATED BALANCE SHEETS - CONTINUED
December 31, 1998 and 1997
LIABILITIES AND SHAREHOLDERS' 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
Shareholders' Equity
Preferred stock - $0.00001 par value
10,000,000 shares authorized
None issued and outstanding -- --
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 86,274
Accumulated deficit (1,826,255) (1,095,257)
----------- -----------
Total shareholders' equity 950,895 (1,008,903)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,587,116 $ 4,867,308
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
CONSOLIDATEDSTATEMENTS 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
Allocated 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 $(0.09) $(0.06)
==== ====
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.
F-6
<PAGE>
<TABLE>
<CAPTION>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' 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,
as reported 7,999,818 $ 80 $ 5,438 $ (5,518) $ --
Effect of reverse
acquisition of Rosemont
Gardens Funeral Chapel-
Cemetery, Inc. 1,000 -- 80,836 (624,805) (543,969)
----------- ----------- ----------- ----------- -----------
Balances at
January 1, 1997,
as restated 8,000,818 80 86,274 (630,323) (543,969)
Net loss for the year -- -- -- (464,934) (464,934)
----------- ----------- ----------- ----------- -----------
Balances at
December 31, 1997 8,000,818 80 86,274 (1,095,257) (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 8,000,818 $ 80 $ 2,777,070 $(1,826,255) $ 950,895
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
CONSOLIDATED 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 131,881 24,449
Capitalized construction period interest (9,725) (141,835)
Allocated cost of cemetery spaces and crypts 15,325 16,265
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 10,161 32,006
Deferred revenues (100,605) (69,236)
----------- -----------
Net cash used in operating activities (735,092) (603,388)
----------- -----------
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 (451,055) (1,342,179)
Cash collected on prearranged funeral contract receivables 194,379 76,060
Cash collected on long-term receivables for cemetery property sales 103,284 (2,925)
----------- -----------
Net cash used in investing activities (152,369) (1,277,012)
----------- -----------
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) --
Funding received on long-tern lease payables 42,532 --
Principal repayments on long-term lease payables (1,153) --
Contributed capital by shareholder 230,903 --
Net increase in shareholder loan -- 735,820
----------- -----------
Net cash provided by financing activities 595,643 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 $ 185,415
=========== ===========
Income taxes paid for the year $ -- $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
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 business combination 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
The acquisition of Rosemont by the Company was accounted in accordance with the
provisions of Interpretation #39 of Accounting Principles Board Opinion #16,
whereby the combination of entities under common control are accounted for on an
"as-if-pooled" basis with the Company being the parent company and Rosemont
being a wholly-owned subsidiary. These consolidated entities are referred to as
Company. Accordingly, the consolidated financial statements of the Company and
Rosemont represent the historical consolidated financial statements as of the
first day of the first period presented.
Rosemont Gardens Funeral Chapel-Cemetery, Inc. (Company) was 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.
F-9
<PAGE>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
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.
F-10
<PAGE>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
5. Funeral operations - continued
------------------
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.
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.
F-11
<PAGE>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
7. Cemetery operations - continued
-------------------
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 the Company 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 if its former sole shareholder, 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.
The Company uses the asset and liability method of accounting for income
taxes. At December 31, 1998 and 1997, 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 December 31, 1998 and 1997, the Company's deferred tax asset is fully
reserved.
F-12
<PAGE>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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).
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
------------ -------------
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
========== ==========
F-13
<PAGE>
<TABLE>
<CAPTION>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - NOTES PAYABLE
Notes payable consist of the following:
1998 1997
---------- ---------
<S> <C> <C>
$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
$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 $ -
========== =========
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - LONG-TERM DEBT - Continued
<S> <C> <C>
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
==========
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
======= =======
</TABLE>
F-15
<PAGE>
UNITED COMMUNITY HOLDINGS, INC. AND SUBSIDIARY
(formerly Pacific Great China Co., Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
As of December 31, 1998 and 1997, the trust funds and resultant restricted cash
consist of the following components:
<TABLE>
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
<PAGE>
<TABLE>
<CAPTION>
United Community Holdings, Inc.
Consolidated Balance Sheets
September 30, 1999 and 1998
(Unaudited)
ASSETS 1999 1998
------ ----------- -----------
<S> <C> <C>
Current assets
Cash on hand and in bank $ 6,624 $ 14,107
Restricted cash 14,054 21,310
Accounts receivable-at need, net of allowance
for doubtful accounts of $12,500 and $-0-, respectively 5,075 --
Other current assets 5,019 9,166
----------- -----------
Total current assets 30,772 44,583
----------- -----------
Property and equipment - at cost 2,913,033 2,761,331
Accumulated depreciation (324,077) (156,052)
----------- -----------
2,588,956 2,605,279
Land 107,580 107,580
----------- -----------
Net property and equipment 2,696,536 2,712,859
----------- -----------
Other assets
Cemetery property - at cost 1,111,506 1,079,642
Prearranged funeral contracts 1,356,841 1,150,842
Long-term receivables for cemetery property sales 395,109 365,711
Other 16,617 21,342
----------- -----------
Total other assets 2,880,073 2,617,537
----------- -----------
TOTAL ASSETS $ 5,607,381 $ 5,374,979
=========== ===========
</TABLE>
- Continued -
F-17
<PAGE>
<TABLE>
<CAPTION>
United Community Holdings, Inc.
Consolidated Balance Sheets - Continued
September 30, 1999 and 1998
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Current liabilities
Notes payable $ 340,946 $ 3,106,773
Cash overdraft -- --
Current maturities of long-term debt 46,203 --
Accounts payable and other accrued liabilities 94,526 37,986
----------- -----------
Total current liabilities 481,675 3,144,759
----------- -----------
Long-term liabilities
Long-term debt, net of current maturities 2,121,987 --
Deferred prearranged funeral contract revenues 1,828,204 1,426,848
Deferred cemetery property sale revenues 382,799 381,867
Shareholder loan -- --
----------- -----------
Total liabilities 4,814,665 4,953,474
----------- -----------
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 2,961,425 2,143,313
Accumulated deficit (2,168,789) (1,721,888)
----------- -----------
Total shareholders' equity 792,716 421,505
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,607,381 $ 5,374,979
=========== ===========
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
United Community Holdings, Inc.
Statements of Operations and Comprehensive Income
Nine and Three months ended September 30, 1999 and 1998
(Unaudited)
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues
Funeral revenues $ 128,559 $ 118,523 $ 42,285 $ 87,743
Cemetery sales 152,232 31,156 39,790 (42,302)
Finance charge and related revenues 4,933 15,360 1,379 4,137
----------- ----------- ----------- -----------
Total revenues 285,724 165,039 83,454 49,578
----------- ----------- ----------- -----------
Cost of sales and direct expenses
Allocated cost of cemetery
spaces and crypts 18,095 3,692 4,294 464
Cost of cemetery merchandise
and funeral services 70,602 56,808 24,318 21,171
Sales commissions 45,417 57,730 12,784 18,888
----------- ----------- ----------- -----------
Total cost of sales
and direct expenses 134,114 118,230 41,396 40,523
----------- ----------- ----------- -----------
Gross profit 151,610 46,809 42,058 9,055
----------- ----------- ----------- -----------
Operating expenses
General and administrative expenses 231,968 386,133 82,177 134,892
Interest expense 153,739 191,568 43,141 62,251
Depreciation and amortization 118,833 97,270 39,542 32,423
----------- ----------- ----------- -----------
Total operating expenses 504,540 674,971 164,860 229,566
----------- ----------- ----------- -----------
Loss from operations (352,930) (628,162) (122,802) (220,511)
Other income (expense) 10,396 1,531 327 680
----------- ----------- ----------- -----------
Loss before income taxes (342,534) (626,631) (122,475) (219,831)
Income taxes -- -- -- --
----------- ----------- ----------- -----------
Net Loss (342,534) (626,631) (122,475) (219,831)
Other comprehensive income -- -- -- --
----------- ----------- ----------- -----------
Comprehensive Loss $ (342,534) $ (626,631) $ (122,475) $ (219,831)
=========== =========== =========== ===========
Net loss per weighted-average share
of common stock outstanding - Basic $(0.04) $(0.08) $(0.02) $0.03)
==== ==== ==== ====
Weighted-average number of shares
of common stock outstanding - Basic 8,000,818 8,000,818 8,000,818 8,000,818
=========== =========== =========== ===========
</TABLE>
F-19
<PAGE>
<TABLE>
<CAPTION>
United Community Holdings, Inc.
Statements of Cash Flows
Nine months ended September 30, 1999 and 1998
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net loss for the period $(342,534) $(626,631)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 120,853 97,270
Allocated cost of cemetery spaces and crypts 18,095 3,692
(Increase) Decrease in:
Accounts receivable 6,541 --
Other assets 7,702 (11,033)
Increase (Decrease) in:
Accounts payable and other accrued liabilities (15,544) (16,527)
--------- ---------
Net cash used in operating activities (204,887) (553,229)
--------- ---------
Cash flows from investing activities
Transfers (to)/from trust funds and restricted cash 38,741 3,581
Capital expenditures for property, equipment and cemetery property (83,354) (352,143)
Cash collected on prearranged funeral contract and
long-term receivables for cemetery property sales 124,867 60,132
--------- ---------
Net cash used in investing activities 80,254 (193,528)
--------- ---------
Cash flows from financing activities
Net activity on bank line of credit (24,054) 886,773
Principal paid on long-term note payable (30,371) --
Cash paid for loan fees -- (16,200)
Contributed (Repayment of) capital by shareholder 184,355 (402,854)
--------- ---------
Net cash provided by financing activities 129,930 467,719
--------- ---------
Increase in cash 5,297 (279,038)
Cash at beginning of year 1,327 293,145
--------- ---------
Cash at end of year $ 6,624 $ 14,107
========= =========
Supplemental disclosure of interest and income taxes paid
Interest paid for the period $ 151,719 $ 179,457
========= =========
Income taxes paid for the year $ -- $ --
========= =========
</TABLE>
F-20
<PAGE>
United Community Holdings, Inc.
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 in accordance with the
provisions of Interpretation #39 of Accounting Principles Board Opinion #16,
whereby the combination of entities under common control are accounted for on an
"as-if-pooled" basis with the Company being the parent company and Rosemont
being a wholly-owned subsidiary. These consolidated entities are referred to as
Company. Accordingly, the consolidated financial statements of the Company and
Rosemont represent the historical consolidated financial statements as of the
first day of the first period presented.
F-21
<PAGE>
United Community Holdings, Inc.
Notes to Consolidated Financial Statements - Continued
Note 1 - Basis of Presentation - Continued
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements contained as a component of its Form
10-QSB for the quarter ended March 31, 1999 as filed with the Securities and
Exchange Commission. The accompanying financial statements do not include all
disclosures required by generally accepted accounting principles. Users of
financial information provided for interim periods should refer to the annual
audited financial statements contained as a component of its Form 10-QSB for the
quarter ended March 31, 1999 when reviewing the interim financial results
presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 1999.
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 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.
F-22
<PAGE>
United Community Holdings, Inc.
Notes to Consolidated Financial Statements - Continued
Note 2 - 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.
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 nine months ended September 30, 1999 and 1998, depreciation expense
of approximately $118,626 and $96,340, 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.
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.
F-23
<PAGE>
United Community Holdings, Inc.
Notes to Consolidated Financial Statements - Continued
Note 2 - Summary of Significant Accounting Policies - Continued
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.
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.
F-24
<PAGE>
United Community Holdings, Inc.
Notes to Consolidated Financial Statements - Continued
Note 2 - Summary of Significant Accounting Policies - Continued
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 if 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.
The Company uses the asset and liability method of accounting for income
taxes. At September 30, 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 September 30, 1999, the deferred tax asset related to the Company's
nine month 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 September 30, 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 September 30, 1999 and in separate trusts for
the period ended September 30, 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.
F-25
<PAGE>
<TABLE>
<CAPTION>
United Community Holdings, Inc.
Notes to Consolidated Financial Statements - Continued
Note 3 - Trust Funds and Restricted Cash - Continued
As of September 30, 1999 and 1998, the trust funds and resultant restricted cash
consist of the following components:
1999 1998
--------- ---------
<S> <C> <C>
Trust cash $ (265) $43,222
Marketable securities, at fair market value 42,156 -
Unrealized (gains) losses on marketable securities 77,123 -
Amounts due to trust funds from future contract collections (104,960) (21,912)
------- ------
Restricted cash $ 14,054 $21,310
======= ======
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 September 30, 1999 and 1998, the marketable securities held in the trust
funds consist entirely of equity securities and are summarized as follows:
1999 1998
--------- ---------
Aggregate fair value $ 42,156 $ -
Gross unrealized holding gains $ - $ -
Gross unrealized holding losses $ 77,123 $ -
Amortized cost basis $ 119,279 $ -
</TABLE>
F-26
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
- ------
3.1 Articles of Incorporation of UCHI
3.2 Bylaws of UCHI
27. Financial Data Schedule
15
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
UCHI caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 2, 1999 UNITED COMMUNITY HOLDINGS, INC.
by: /s/ James F. Robinson
------------------------------------------
James F. Robinson, Chairman, President
and Chief Executive Officer
POWER OF ATTORNEY
United Community Holdings, Inc. and each person whose signature appears below
hereby designates and appoints James F. Robinson as his attorney-in-fact (the "
Attorney-in-Fact") with full power to act alone, and to execute and in the name
and on behalf of UCHI and each person, individually and in the capacity stated
below, any amendments (including post-effective amendments) to this Registration
Statement, which amendments may make such changes in this Registration Statement
as the Attorney-in-Fact deems appropriate, and to file each such amendment to
this Registration Statement together with all exhibits thereto and any and all
documents in connection therewith.
Pursuant to the requirements of the Securities Act of 1934, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
/s/ James F. Robinson December 2, 1999
------------------------------------------------
James F. Robinson, Chairman, President
and Chief Executive Officer
(Principal Executive Officer)
/s/ Jeffrey D. Aldridge December 2, 1999
------------------------------------------------
Jeffrey D. Aldridge, Vice President,
Chief Operating Officer & Director
/s/ Margaret R. Lauro December 2, 1999
------------------------------------------------
Margaret R. Lauro,
Secretary, Treasurer and Chief Financial Officer
(Principal Accounting Officer)
/s/ William E. Lax December 2, 1999
------------------------------------------------
William E. Lax
Director
/s/ Gary D. Thrash December 2, 1999
------------------------------------------------
Gary D. Thrash
Director
16
EXHIBIT 3.1
ARTICLES OF INCORPORATION
UNITED COMMUNITY HOLDINGS, INC.
The undersigned, being a natural person of the age of eighteen years or more,
acting as Incorporator of a corporation under the General Corporation Law of the
State of Nevada, does hereby adopt the following Articles of Incorporation for
such corporation.
ARTICLE I
NAME
The name of the corporation is United Community Holdings, Inc.
ARTICLE II
REGISTERED OFFICE AND RESIDENT AGENT
The address of the corporation's registered office in the State of Nevada shall
be The Corporation Trust Company of Nevada, One East First Street, Reno, NV
89501. The name of its registered or resident agent shall be The Corporation
Trust Company of Nevada.
ARTICLE III
PURPOSES AND DURATION
The purposes for which the corporation is organized are to conduct any type of
business endeavor which is legal pursuant to the laws of the State of Nevada.
The corporation's period of duration shall be perpetual.
ARTICLE IV
SHARES OF STOCK
The total number of shares of stock which the CORPORATION shall have
authority to issue is Fifty Million (50,000,000) shares of Common Stock. The par
value of each of such shares is $0.00001 which amounts in the aggregate to Five
Hundred Dollars ($500).
ARTICLE V
COMMENCE BUSINESS
The CORPORATION will not commence business until it has received for
the issuance of its shares consideration of the value of Five Hundred Dollars
($500.00), consisting of money or property actually received.
16
<PAGE>
ARTICLE VI
MAJORITY VOTE
With respect to any action to be taken by the shareholders of the
CORPORATION under the General Corporation Law of Nevada or otherwise, the vote
or occurrence of the holders of a majority of the issued and outstanding shares
of the CORPORATION shall control.
ARTICLE VII
NO CUMULATIVE VOTING
Cumulative voting is expressly prohibited. At each election of
directors, every shareholder entitled to vote at such election shall have the
right to vote, in person or by proxy, the number of shares owned by him for as
many persons as there are directors to be elected and for whose election he has
a right to vote; no shareholders shall be entitled to cumulate his votes by
giving one candidate as many votes as the number of such directors multiplied by
his shares shall equal, or by distributing such votes on the same principal
among any number of such candidates.
ARTICLE VIII
PRE-EMPTIVE RIGHTS
No holder of any stock of the CORPORATION shall be entitled as a matter
of right to purchase or subscribe for any part of any stock of the CORPORATION
authorized by these Articles or for any additional stock of any class to be
issued by reason of any increase of the authorized stock of the CORPORATION or
for any bonds, certificates of indebtedness, debentures, warrants, options or
other securities convertible into any class of stock of the CORPORATION, but any
stock authorized by these Articles or any such additional authorized issue of
any stock or securities convertible into any stock may be issued and disposed of
by the Board of Directors to such persons, firms, corporations or associations
for such consideration and upon such terms and in such manner as the Board of
Directors may decide in its discretion without offering any thereof on the same
terms or on any terms to the shareholders then of record or to any class of
shareholders, provided only that such issuance may not be inconsistent with any
provision of law or with any of the provisions of these Articles.
ARTICLE IX
CERTAIN INSIDER TRANSACTIONS
Any contract or other transaction between the CORPORATION and one or
more of its directors, or between the CORPORATION and any firm of which one or
more of its directors are members or employees, or in which they are interested,
or between the CORPORATION and any corporation or association of which one or
more of its directors are shareholders, members, directors, officers or
employees, or in which they are interested, shall be valid for all purposes,
notwithstanding the presence of the director or directors at the meeting of the
Board of Directors of the CORPORATION that acts upon, or in reference to, the
contract or transaction, and notwithstanding his or their participation in the
action, if the facts of such interest shall be disclosed or known to the Board
of Directors and the Board of Directors shall, nevertheless, authorize or ratify
the contract or transaction, the interested director or directors to be counted
in determining whether a quorum is present and to be entitled to vote on such
authorization or ratification. This Article shall not be construed to invalidate
any contract or other transaction that would otherwise be valid under the common
and statutory law applicable to it.
17
<PAGE>
ARTICLE X
INDEMNIFICATION
The CORPORATION may indemnify any person made a party to any action,
suit or proceeding, whether civil or criminal, by reason of the fact that he or
she, his or her testator, or intestate, is or was a director, officer, or
employee of the CORPORATION, or of any CORPORATION which he or she served in
such capacity at the request of the CORPORATION, against the reasonable
expenses, including attorney's fees, actually and reasonably incurred by him or
her in connection with the defense of the action, suit or proceeding or in
connection with any appeal in it. This right to indemnification conferred by
this Article shall not restrict the power of the CORPORATION to make any other
type of indemnification permitted by law.
ARTICLE XI
INSURANCE
The CORPORATION shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
CORPORATION, or who is or was serving at the request of the CORPORATION as a
director, officer, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, against any liability asserted against him or her and incurred by
him or her in any such capacity or arising out of his or her status as such a
person, whether or not the CORPORATION would have the power to indemnify him or
her against such liability by statute.
ARTICLE XII
LIMITATION ON LIABILITY
No person shall be liable to the CORPORATION for any loss or damage
suffered by it on account of any action taken or omitted to be taken by him or
her as a director, officer or employee of the CORPORATION in good faith, if, in
the exercise of ordinary care, this person:
A. Relied upon financial statements of the CORPORATION represented to
be correct by the President or the officer of the CORPORATION having
charge of its books of account, or stated in a written report by an
independent public or certified public accountant or firm of such
accountants fairly to reflect the financial condition of the CORPORATION;
or considered the CORPORATION's assets to be equal to their book value; or
B. Relied upon the written opinion of any attorney hired by or
representing the CORPORATION.
ARTICLE XIII
BYLAWS
Except to the extent such power may be modified or divested by action
of the shareholders representing a majority of the issued and outstanding shares
of the Common Stock of the CORPORATION taken at a regular or special meeting of
the shareholders, the power to adopt, alter, amend or repeal the Bylaws of the
CORPORATION shall be vested in the Board of Directors.
18
<PAGE>
ARTICLE XIV
DIRECTORS
The number of Directors constituting the initial Board of Directors is
two, and the name and address of the persons who are to serve as Director until
the first annual meeting of the shareholders or until their successors are
elected and qualified is:
Name Address
---- --------
Kevin B. Halter 16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
Kevin B. Halter, Jr. 16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
ARTICLE XV
OFFICERS
Until the first annual meeting of shareholders or until their
successors are elected and qualified the officers of this CORPORATION shall be:
President: Kevin B. Halter
Vice President and Secretary: Kevin B. Halter, Jr.
ARTICLE XVI
INCORPORATOR
The name address of the Incorporator is:
Name Address
---- -------
Kevin B. Halter, Jr. 16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation on this____ day of November, 1998.
UNITED COMMUNITY HOLDINGS, INC.
By /s/ Kevin B. Halter, Jr.
------------------------
Kevin B. Halter, Jr.
19
EXHIBIT 3.2
BYLAWS OF
UNITED COMMUNITY HOLDINGS, INC.
(a Nevada corporation)
ARTICLE I
GENERAL
1.1 GENERAL OFFICES Unless otherwise determined by resolution of the
Board of Directors, the principal office of the Corporation shall be located in
the City of Jackson, County of Hinds, State of Mississippi. The Corporation may
have such other offices, either within or without the State of Nevada, as the
Board of Directors may determine or as the affairs of the Corporation may
require from time to time.
1.2 REGISTERED OFFICE The Corporation shall have and continuously
maintain in the State of Nevada a registered office which is now established as
being in care of The Corporation Trust Company of Nevada , One East First
Street, Reno, Nevada 89501. The address of the registered office may be changed
from time to time by the Board of Directors.
1.3 REGISTERED OR RESIDENT AGENT The Corporation shall have and
continuously maintain in the State of Nevada, a registered or resident agent,
which agent is now designated as The Corporation Trust Company of Nevada. The
registered or resident agent may be changed from time to time by the Board of
Directors.
ARTICLE II
SHAREHOLDERS
2.1 ANNUAL SHAREHOLDERS' MEETINGS An annual meeting of the shareholders
shall be held each year on a day to be selected by the Chairman of the Board of
Directors or the President within six months after the end of the Corporation's
fiscal year, for the purpose of electing Directors and for the transaction of
such other business as may come before the meeting. The annual meeting shall not
be held on a date declared a legal holiday by the State of Nevada. If the
election of the Directors shall not be held on the date selected for any annual
meeting of Shareholders, or at any adjournment thereof, the Board of Directors
shall cause the election to be held at a special meeting of the shareholders as
soon thereafter as conveniently may be held.
2.2 SPECIAL MEETINGS Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute or these Bylaws, may
be called by the Chairman of the Board, President, the Board of Directors, or
the holders of not less than 25% of all outstanding shares of the Corporation
entitled to vote at the meeting. Business transacted at a special meeting shall
be limited to the purposes stated in the notice of the meeting.
2.3 PLACE OF MEETING The Chairman of the Board of Directors or the
President may designate any place, either within or without the State of Nevada,
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting of shareholders. A waiver of notice signed by
all shareholders entitled to vote at a meeting may designate any place, either
within or without the State of Nevada, unless otherwise prescribed by statute,
as the place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
office of the Corporation in the State of Nevada.
20
<PAGE>
2.4 NOTICE OF MEETING Written or printed notice stating the place, day
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
(10) nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the Chairman of the Board,
President, the Secretary, or the person(s) calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States Mail
addressed to the shareholder at his address as it appears in the stock transfer
books of the Corporation, with postage thereon prepaid.
2.5 ACTION WITHOUT MEETING Unless otherwise provided by the Articles of
Incorporation, any action required to be taken at any annual or special meeting
of stockholders, or any action which may be taken at any annual or special
meeting, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be give to those stockholders who have not
consented in writing.
2.6 FIXING THE RECORD DATE For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other purpose, the Board of
Directors of the Corporation may fix in advance a date as the record date for
such determination of shareholders, such date in any case to be not more than
sixty (60) days and not less than ten (10) days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If no record date is fixed for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders, or shareholders entitled to
receive payment of a dividend, the date on which notice of the meeting is mailed
or the date on which the resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section,
such determination shall apply to any adjournment thereof except where the
determination has been made through the closing of stock transfer books and the
stated period of closing has expired.
2.7 VOTING LISTS
A. The officer or agent having charge of the stock transfer books for
shares of the Corporation shall make, at least ten (10) days before each
meeting of shareholders, a complete list of the shareholders entitled to
vote at such meeting or any adjournment thereof, arranged in alphabetical
order, with the address of and the number of shares held by each, which
list, for a period of ten (10) days prior to such meeting, shall be kept
at the registered office of the Corporation or the principal office of the
Corporation, if it be other than the registered office, and shall be
subject to inspection by any shareholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to inspection by any shareholder
during the meeting. The original stock transfer books shall be prima facie
evidence as to who are the shareholders entitled to examine such list or
transfer books or to vote at any meeting of shareholders.
B. Failure to comply with the requirements of this Section shall not
affect the validity of any action taken at such meeting.
C. An officer or agent having charge of the stock transfer books who shall
fail to prepare the list of shareholders or keep the same on file for a
period of ten (10) days, or produce and keep it open for inspection at the
21
<PAGE>
meeting, as provided in this Section, shall be liable to any shareholder
suffering damage on account of such failure, to the extent of such damage.
In the event that such officer or agent does not receive notice of a
meeting of shareholders sufficiently in advance of the date of such
meeting reasonable to enable him or her to comply with the duties
prescribed by this Section, the Corporation, but not such officer or
agent, shall be liable to any shareholder suffering damage on account of
such failure, to the extent of such damage.
2.8 QUORUM OF SHAREHOLDERS The holders of a majority of the shares of
the Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. The vote of the holders of a
majority of the shares entitled to vote at any meeting of shareholders at which
a quorum is present, shall be the act of that shareholders' meeting, unless the
vote of a greater number is required by law.
2.9 VOTING OF SHARES
A. Each outstanding share, regardless of class, shall be entitled to one
vote on any matter submitted to a vote of the shareholders, except to the
extent that the Articles of Incorporation provide for more or less than
one vote per share or limit or deny voting rights to the holders of the
shares of any class or series, and except as otherwise provided by the
General Corporation Law of Nevada.
B. Treasury shares, shares of this Corporation's stock owned by another
corporation, the majority of the voting stock of which is owned or
controlled by this Corporation, and shares of this Corporation's stock
held by this corporation in a fiduciary capacity shall not be voted,
directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares at any given time.
C. A shareholder may vote either in person or by a proxy executed in
writing by the shareholder or by the shareholder's duly authorized
attorney in fact. No proxy shall be valid after eleven (11) months from
the date of its execution unless otherwise specifically provided in the
proxy. Each proxy shall be revocable unless expressly provided therein to
be irrevocable and unless otherwise made irrevocable by law.
D. At each election for Directors every shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the
number of shares owned by the shareholder for as many persons as there are
Directors to be elected and for whose election the shareholder has a right
to vote.
2.10 METHOD OF VOTING Voting on any question or in any election shall
be by written ballot.
2.11 RULES OF PROCEDURE To the extent applicable, Robert's Rules of
Order may govern the conduct and procedure at all shareholders' meetings.
2.12 TELEPHONE MEETINGS Subject to the provisions required or permitted
by the General Corporation Law of Nevada for notice of meetings, unless
otherwise restricted by the Articles of Incorporation or these Bylaws,
shareholders may participate in and hold a meeting of shareholders, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
2.13 CUMULATIVE VOTING Cumulative voting is expressly prohibited by the
Articles of Incorporation for this Corporation.
2.14 PRE-EMPTIVE RIGHTS No holder of any stock of the Corporation shall
be entitled as a matter of right to purchase or subscribe for any stock of the
Corporation authorized by the Articles of Incorporation or for any additional
stock of any class to be issued by reason of any increase of the authorized
22
<PAGE>
stock of the Corporation, or for any bonds, certificates of indebtedness,
debentures, warrants, options or other securities convertible into any class of
stock of the Corporation, but any stock authorized by the Articles of
Incorporation or any such additional authorized issue of any stock or securities
convertible into any stock may be issued and disposed of by the Board of
Directors to such persons, firms, corporations or associations for such
consideration and upon such terms and in such manner as the Board of Directors
may in its discretion determine without offering any thereof on the same terms
or on any terms to the shareholders then of record or to any class of
shareholders, provided only that such issuance may not be inconsistent with any
provision of law or with any of the provisions of the Articles on Incorporation.
ARTICLE III
DIRECTORS
3.1 MANAGEMENT The business and affairs of the Corporation shall be
managed by its Board of Directors. Directors need not be residents of Nevada or
shareholders of the Corporation in order to qualify as a director.
3.2 NUMBER The number of directors of the Corporation shall consist of
three or more members as shall be elected by the shareholders from time to time.
The number of directors may be increased or decreased from time to time by
amendment to this Section of the Bylaws or may be established by the vote of
shareholders at any regular Annual Meeting of Shareholders, but no decrease in
the number of directors shall have the effect of shortening the term of any
incumbent director.
3.3 ELECTION At the first annual meeting of shareholders and at each
annual meeting thereafter, the shareholders shall elect directors to hold office
until the next succeeding annual meeting.
3.4 TERM OF OFFICE Unless removed in accordance with these Bylaws each
director shall hold office for the term for which the director is elected and
until the director's successor shall have been elected and qualified.
3.5 REMOVAL The entire Board of Directors or any director may be
removed from office, either with or without cause, at any special meeting of
shareholders by the affirmative vote of a majority in number of shares of the
shareholders present in person or by proxy at such meeting and entitled to vote
for the election of such director or directors if notice of intention to act
upon the question of removing such director shall have been stated as one of the
purposes for the calling of such meeting and such meeting shall have been called
in accordance with these Bylaws.
3.6 VACANCY
A. Any vacancy occurring in the Board of Directors may be filled in
accordance with paragraph C of this Section or may be filled by the
affirmative vote of a majority of the remaining directors, though less
than a quorum of the Board of Directors. A director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in
office.
B. A directorship to be filled by reason of an increase in the number of
directors may be filled in accordance with paragraph C of this Section or
may be filled by the Board of Directors for a term of office continuing
only until the next election of one or more directors by the shareholders;
provided that the Board of Directors may not fill more than two such
directorships during the period between any two successive annual meetings
of shareholders.
C. Any vacancy occurring in the Board of Directors or any directorship to
be filled by reason of an increase in the number of directors may be
filled by election at an annual or special meeting of shareholders called
for that purpose.
23
<PAGE>
3.7 QUORUM A majority of the number of directors fixed by these Bylaws
shall constitute a quorum for the transaction of business unless a greater
number is required by law or these Bylaws. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless a greater number is required by law or these
Bylaws.
3.8 ANNUAL DIRECTORS' MEETINGS Immediately after the annual meeting of
the shareholders and at the place such meeting of the shareholders has been
held, the Board of Directors shall meet each year for the purpose of electing
the officers of the Corporation and consideration of any other business that may
properly be brought before the meeting. No notice of any kind to either old or
new members of the Board of Directors for this annual meeting shall be
necessary.
3.9 REGULAR MEETINGS The Board of Directors may provide by resolution
the time and place, either within or without the State of Nevada, for the
holding of regular meetings without other notice that such resolution.
3.10 SPECIAL MEETINGS Special meetings of the Board of Directors may be
called by the Chairman of the Board , the President or shall be called at the
request of any two members of the Board of Directors and shall be held upon
notice by letter, telegram, or fax, delivered for transmission not later than
during the third business day immediately preceding the day for the meeting, or
by word of mouth, telephone, or radiophone received not later than during the
second business day immediately preceding the day for the meeting. Notice of any
special meeting of the Board of Directors may be waived before or after the time
of the meeting. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Nevada, as the place for holding any special meeting of the Board of Directors
called by them.
3.11 NO STATEMENT OF PURPOSE OF MEETING REQUIRED Neither the business
proposed to be transacted nor the purpose of any regular or special meeting of
the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
3.12 COMPENSATION By resolution of the Board of Directors, the
Directors may be paid their expenses, if any, in connection with attendance at
such meeting of the Board of Directors, and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefore.
3.13 ATTENDANCE AND PRESUMPTION OF ASSENT Attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened. A director who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless that director's dissent shall be
entered in the minutes of the meeting or unless that director shall file a
written dissent to such action with the person acting as the Secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
3.14 EXECUTIVE AND OTHER COMMITTEES The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an Executive Committee and one or more other committees,
each of which, to the extent provided in such resolution or in these Bylaws,
shall have and may exercise all of the authority of the Board of Directors,
except that no such committee shall have the authority of the Board of Directors
in reference to amending the Articles of Incorporation of the Corporation,
approving a plan of merger or consolidation, recommending to the shareholders
the sale, lease, or exchange of all or substantially all of the property and
assets of the Corporation other than in the usual and regular course of the
Corporation's business, recommending to the shareholders a voluntary dissolution
of the Corporation or a revocation thereof, amending, altering, or repealing
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these Bylaws or adopting new Bylaws, filling vacancies in the Board of Directors
or any committee, filling any directorship to be filled by reason of an increase
in the number of directors, electing or removing officers or members of any such
committee, fixing the compensation of any member of such committee. No committee
shall have the power or authority to declare a dividend or to authorize the
issuance of shares of the Corporation. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
3.15 REMOVAL OF COMMITTEE MEMBERS Any member of a committee elected by
the Board of Directors may be removed from said committee, whenever in the
judgment of the Board of Directors the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of a member of
a committee shall not itself create any contract right.
3.16 WAIVER BY UNANIMOUS CONSENT IN WRITING Any action required or
permitted to be taken at a meeting of the Board of Directors, any Executive
Committee or any other committee of the Board of Directors, may be taken without
a meeting if a consent in writing, setting forth the action so taken, is signed
by all of the members of the Board of Directors, the Executive Committee or any
other committee of the Board of Directors, as the case may be, and then
delivered to the Secretary of the Corporation for inclusion in the Minute Book
of the Corporation. Such consent shall have the same force and effect as a
unanimous vote at a meeting, and may be stated as such in any document or
instrument filed with Secretary of State.
3.17 TELEPHONE MEETING Subject to the provisions required or permitted
by the General Corporation Law of Nevada for notice of meetings, unless
otherwise restricted by the Articles of Incorporation, members of the Board of
Directors, or members of any committee designated by the Board of Directors, may
participate in and hold a meeting of the Board of Directors or that committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section shall constitute presence in
person at such meeting, except where a person participates in the meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
ARTICLE IV
OFFICERS
4.1 NUMBER The principal officers of the corporation shall consist of a
President, one or more Vice Presidents (the number thereof to be determined by
the Board of Directors), a Secretary and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers
and agents as may be deemed necessary may be elected or appointed by the Board
of Directors. Any two (2) or more offices may be held by the same person. No
officer need be a shareholder, a director, or a resident of Nevada.
4.2 ELECTION AND TERM OF OFFICE The officers of the Corporation shall
be elected by the Board of Directors at its annual meeting or as soon thereafter
as conveniently possible. New or vacated offices may be filled at any meeting of
the Board of Directors. The subordinate officers and agents not elected or
appointed by the Board of Directors shall be appointed by the President or any
other principal officer to whom the President shall delegate that authority.
Each officer shall hold office until that officer's successor shall have been
fully elected and shall have qualified or until that officer's death or until
that officer shall resign or shall have been removed in the manner hereafter
provided. Election or appointment of an officer or agent shall not of itself
create contract rights.
4.3 REMOVAL Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
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4.4 VACANCIES A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, may be filled by the Board of Directors
for the unexpired portion of the term as herein provided.
4.5 AUTHORITY Officers and agents shall have such authority and perform
such duties in the management of the Corporation as are provided in these Bylaws
or as may be determined by resolution of the Board of Directors not inconsistent
with these Bylaws.
4.6 PRESIDENT Unless the Board of Directors elects a Chairman of the
Board and designates him as the principal executive officer of the Corporation,
the President shall be the principal executive officer of the Corporation and
shall have general and active management of the business and affairs of the
Corporation. Unless a Chairman of the Board has been elected, the President
shall preside at all meetings of the Shareholders and of the Board of Directors.
The President may sign, with the Secretary or an Assistant Secretary,
certificates for shares of the Corporation, any deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has authorized to
be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed. The President shall see that all orders and resolutions of
the Board of Directors are carried into effect, and shall perform all duties
incident to the office of President and such other duties as may be prescribed
by the Board of Directors from time to time.
4.7 VICE PRESIDENT In the absence of the President or in the event of
the President's death, inability or refusal to act the Vice President, or in the
event there be more than one Vice President, the Vice Presidents in the order
designated by the Board of Directors or in the absence of any designation then
in the order of their election, shall perform all the duties of the President,
and when so acting shall have all the powers of and be subject to all the
restrictions upon the President. The Vice President shall perform such other
duties as from time to time may be assigned by the Chairman of the Board,
President or by the Board of Directors.
4.8 SECRETARY The Secretary shall keep the minutes of the Shareholders'
and Board of Directors' meetings in appropriate minute books; see that all
notices are duly given in accordance with the provisions of these Bylaws or as
required by law; be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all documents
and instruments which have been duly executed by this Corporation in accordance
with the provisions s of these Bylaws or the Articles of Incorporation for this
Corporation or as required or permitted by law; keep a register of the mailing
address for each shareholder as it has been furnished to the Secretary by such
shareholder; sign with the President stock certificates representing shares of
the Corporation, the issue of which shall have been authorized by resolution of
the Board of Directors; have general charge of the stock transfer books of the
Corporation; and in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned by the
Chairman of the Board, President or by the Board of Directors.
4.9 TREASURER The Treasurer shall be the principal financial officer of
the Corporation and shall have charge and custody and be responsible for all
funds and securities of the Corporation; receive and give receipts for monies
due and payable to the Corporation from any source whatsoever, and deposit all
such monies in the name of the Corporation in such banks, trust companies or
other depositories as shall be selected by the Board of Directors; render to the
Chairman of the Board, the President and the Board of Directors, whenever the
same shall be required, an account of all transactions as Treasurer and of the
financial condition of the Corporation; if required by the Board of Directors
give bond for the faithful performance of the duties of this office and for the
restoration to the Corporation, in case of the Treasurer's death, resignation,
retirement, or removal from office, of all books, papers, vouchers, money, and
other property of whatever kind in the Treasurer's possession or under his
control belonging to the Corporation; and in general perform all of the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned by the Chairman of the Board, President or by the Board of
Directors.
4.10 ASSISTANT TREASURER AND ASSISTANT SECRETARY The Assistant
Treasurer shall, if required by the Board of Directors, give bond for the
faithful discharge of his duties in such sums and with such sureties as the
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Board of Directors shall determine. The Assistant Secretary as authorized by the
Board of Directors may sign with the President stock certificates representing
shares of the Corporation, the issue of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Treasurer and Assistant
Secretary, in general, shall perform such duties as shall be assigned to them by
the Treasurer or the Secretary, respectively, or by the Board of Directors.
4.11 SALARIES The salaries of the principal officers shall be fixed
from time to time by the Board of Directors and no officer shall be prevented
from receiving such salary by reason of the fact that the officer is also a
director of the Corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1 CONTRACTS, DEEDS, MORTGAGES AND OTHER DOCUMENTS Subject always to
the specific direction of the Board of Directors, all deeds and mortgages made
by the Corporation and all other written contracts and agreements to which the
Corporation shall be a party shall be executed in its name by the President or
Vice President (or one of the Vice Presidents if there are more than one), and
when requested, the Secretary shall attest to such signatures and affix the
corporate seal to the instruments.
5.2 LOANS No indebtedness shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
5.3 CHECKS, DRAFTS, ETC. All checks, drafts, notes, bonds, other orders
for the payment of money, or other evidences of indebtedness issued in the name
of the Corporation, shall be signed by such officer or officers, agent or agents
of the Corporation and in such manner as shall from time to time be determined
by a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
5.4 DEPOSITS All funds of the Corporation not otherwise employed, shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board of Directors may select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 CERTIFICATES FOR SHARES. The Corporation shall deliver stock
certificates representing all shares to which shareholders are entitled in such
form as may be determined by the Board of Directors. Each certificate
representing shares shall state upon the face thereof that the Corporation is
organized under the laws of the State of Nevada; the name of the person to whom
it is issued; the number and class of shares and the designation of the series,
if any, which such certificate represents; the par value of each share
represented by such certificate, and any restrictions or statements required by
law. Such certificates shall be signed by the President or Vice President and
either by the Secretary or Assistant Secretary or such officer or officers as
the Board of Directors shall designate, and may be sealed with the seal of the
Corporation or a facsimile thereof.
6.2 FACSIMILE SIGNATURES The signatures of the President or Vice
President, Secretary or Assistant Secretary or such officer or officers as these
Bylaws or the Board of Directors of the Corporation shall prescribe upon a
certificate may be facsimiles, if the certificate is countersigned by a transfer
agent or registered by a registrar. In case any officer who has signed or whose
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facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer at the date
of its issuance.
6.3 ISSUANCE Shares (both treasury and authorized but unissued) may be
issued for such consideration, not less than the par value, and to such persons
as the Board of Directors may determine from time to time.
6.4 SUBSCRIPTIONS Unless otherwise provided in the subscription
agreement, subscriptions for shares, whether made before or after organization
of the Corporation, shall be paid in full at such time or in such installments
and at such times as shall be determined by the Board of Directors. Any call
made by the Board of Directors for payment on subscriptions shall be uniform as
to all shares of the same class or as to all shares of the same series, as the
case may be. In case of default in the payment on any installment or call when
payment is due, the Corporation may proceed to collect the amount due in the
same manner as any other debt due to the Corporation.
6.5 PAYMENT The consideration paid for the issuance of shares of the
Corporation shall consist of money actually paid, labor or services actually
performed, or property, both tangible and intangible, actually received.
Certificates for shares may not be issued until the full amount of the
consideration, fixed as provided by law, has been paid. When such consideration
shall have been paid to the Corporation or to a corporation of which all of the
outstanding shares of each class are owned by the Corporation, the shares shall
be deemed to have been issued and the subscriber or Shareholder entitled to
receive such issue shall be a Shareholder with respect to such shares, and the
shares shall be considered fully paid and non-assessable. Neither promissory
notes nor the promise of future services shall constitute payment or partial
payment for shares of the Corporation. In the absence of fraud in the
transaction, the judgment of the Board of Directors or the shareholders as the
case may be, as to the value of the consideration received for shares shall be
conclusive.
6.6 LIEN The Corporation shall have a first and prior lien on all
shares of its stock and upon all dividends being declared upon the same for any
indebtedness of the respective holders thereof to the Corporation.
6.7 REPLACEMENT OF LOST OR DESTROYED CERTIFICATES The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost or destroyed, upon the making of an affidavit of fact by the
person claiming that the certificate or certificates representing shares has
been lost or destroyed. When authorizing the issuance of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or the owner's legal representative, to give the
Corporation a bond with a surety or sureties satisfactory to the Corporation
with respect to the certificate or certificates alleged to have been lost or
destroyed.
6.8 TRANSFER OF SHARES Shares of stock shall be transferable only on
the books of the Corporation by the holder thereof in person or by the holder's
duly authorized attorney. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation or its transfer agent shall issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
6.9 REGISTERED SHAREHOLDERS The Corporation shall be entitled to treat
the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
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ARTICLE VII
DIVIDENDS AND RESERVES
7.1 DECLARATION AND PAYMENT Subject to provisions (if any) contained
in the statutes or the Articles of Incorporation, dividends may be declared by
the Board of Directors at any regular or special meeting and may be paid in
cash, property, or in shares of the Corporation. Such declaration and payment
shall be at the discretion of the Board of Directors.
7.2 RECORD DATE The Board of Directors may fix in advance a record date
for the purpose of determining shareholders entitled to receive payment of any
dividend, such record date to be not more than sixty (60) days and not less than
ten (10) days prior to the payment date of such dividend. In the absence of any
action by the Board of Directors, the date upon which the Board of Directors
adopted the resolution declaring such dividend shall be the record date.
7.3 RESERVES There may be created by resolution of the Board of
Directors out of the earned surplus of the Corporation such reserve or reserves
as the Directors from time to time, in their discretion, think proper to provide
for contingencies, to pay dividends, or to repair or maintain any property of
the Corporation, or for such other purposes as the Directors shall think
beneficial to the Corporation, and the Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE VIII
INDEMNIFICATION
8.1 DEFINITIONS In this Article:
A. "Corporation" includes any domestic or foreign predecessor entity of
the Corporation in a merger, consolidation, or other transaction in which
the liabilities of the predecessor are transferred to the Corporation by
operation of law and in any other transaction in which the Corporation
assumes the liabilities of the predecessor but does not specifically
exclude liabilities that are the subject matter of this Article VIII.
B. "Director" means any person who is or was a director of the Corporation
and any person who, while a director of the Corporation, is or was serving
at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise.
C. "Expenses" include court costs and attorneys' fees.
D. "Official capacity" means:
(1). When used with respect to a director, the office of director in
the Corporation, and
(2). When used with respect to a person other than a director, the
elective or appointive office in the Corporation held by the
officer or the employment or agency relationship undertaken by the
employee or agent in behalf of the Corporation, but
(3). In both Paragraphs (1) and (2) does not include service for any
other foreign or domestic corporation or any partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or
other enterprise.
E. "Proceeding" means any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, any appeal in such an action, suit, or proceeding, and any
inquiry or investigation that could lead to such an action, suit, or proceeding.
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8.2 POWER TO INDEMNIFY The Corporation may indemnify a person who
was, is, or is threatened to be made a named defendant or respondent in a
proceeding because the person is or was a director only if it is determined in
accordance with Section 8.6 of this Article that the person:
A. Conducted himself in good faith;
B. Reasonably believed:
(1) In the case of conduct in his official capacity as a director of the
Corporation, that his conduct was in the Corporation's best interests;
and
(2) In all other cases, that his conduct was at least not opposed to the
Corporation's best interests; and
C. In the case of any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful.
8.3 LIMITATIONS A director may not be indemnified under Section 8.2 of
this Article for obligations resulting from a proceeding:
A. In which the person is found liable on the basis that personal benefit
was improperly received by him, whether or not the benefit resulted from
an action taken in the person's official capacity; or
B. In which the person is found liable to the Corporation.
8.4 TERMINATION OF A PROCEEDING The termination of a proceeding by a
judgment, order, settlement, or conviction, or on a plea of nolo contendere or
its equivalent is not of itself determinative that the person did not meet the
requirements set forth in Section 8.2 of this Article.
8.5 PROCEEDING BROUGHT BY THE CORPORATION A person may be indemnified
under Section 8.2 of this Article against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the person in
connection with the proceeding, but if the proceeding was brought by or in
behalf of the Corporation, the indemnification is limited to reasonable expenses
actually incurred by the person in connection with the proceeding.
8.6 DETERMINATION OF INDEMNIFICATION A determination of
indemnification under Section 8.2 of this Article must be made:
A. By a majority vote of a quorum consisting of directors who at the
time of the vote are not named defendants or respondents in the
proceeding;
B. If such a quorum cannot be obtained, by a majority vote of a
committee of the Board of Directors, designated to act in the matter
by a majority vote of all Directors, consisting exclusively of
directors who at the time of the vote are not named defendants or
respondents in the proceeding;
C. By special legal counsel selected by the Board of Directors or a
committee of the Board by vote as set forth in Subsection A or B of
this Section 8.6, or, if such a quorum cannot be obtained and such a
committee cannot be established, by a majority vote of all Directors;
or
D. By the shareholders in a vote that excludes the shares held by the
directors who are named defendants or respondents in the proceeding.
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8.7 AUTHORIZATION OF INDEMNIFICATION Authorization of indemnification
and determination as to reasonableness of expenses must be made in the same
manner as the determination that indemnification is permissible, except that if
the determination that indemnification is permissible is made by special legal
counsel, authorization of indemnification and determination as to reasonableness
of expenses must be made in the manner specified by Subsection C of Section 8.6
of this Article, for the selection of special legal counsel. A provision
contained in the Articles of Incorporation, these Bylaws, a resolution of
Shareholders or Directors, or an agreement that makes mandatory the
indemnification permitted under Section 8.2 of this Article shall be deemed to
constitute authorization of indemnification in the manner required by this
Section 8.7 even though such provision may not have been adopted or authorized
in the same manner as the determination that indemnification is permissible.
8.8 INDEMNIFICATION OF A DIRECTOR
A. The Corporation shall indemnify a director against reasonable expenses
incurred by him in connection with a proceeding in which he is named a
defendant or respondent because he is or was a director if he has been
wholly successful, on the merits or otherwise, in the defense of the
proceeding.
B. If, in a suit for the indemnification required by Section 8.8 of this
Article, a court of competent jurisdiction determines that the director is
entitled to indemnification under that section, the court shall order
indemnification and shall award to the director the expenses incurred in
securing the indemnification.
C. If, upon application of a director, a court of competent jurisdiction
determines, after giving any notice the court considers necessary, that the
director is fairly and reasonable entitled to indemnification in view of
all the relevant circumstances, whether or not he has met the requirements
set forth in Section 8.2 of this Article or has been adjudged liable in the
circumstances described in Section 8.3 of this Article, the court may order
the indemnification that the court determines is proper and equitable. The
court shall limit indemnification to reasonable expenses if the proceeding
is brought by or in behalf of the Corporation or if the director is found
liable on the basis that personal benefit was improperly received by him,
whether or not the benefit resulted from an action taken in the person's
official capacity.
D. Reasonable expenses incurred by a director who was, is or is threatened
to be made a named defendant or respondent in a proceeding may be paid or
reimbursed by the Corporation in advance of the final disposition of the
proceeding after:
1. The Corporation receives a written affirmation by the director of
his good faith belief that he has met the standard of conduct
necessary for indemnification under this Article and a written
undertaking by or on behalf of the director to repay the amount paid
or reimbursed if it is ultimately determined that he has not met those
requirements; and
2. A determination that the facts then known to those making the
determination would not preclude indemnification under this Article.
E. The written undertaking required by Subsection D of this Section 8.8
must be an unlimited general obligation of the director but need not be
secured. It may be accepted without reference to financial ability to make
repayment. Determinations and authorizations of payment under Subsection D
of this Section 8.8 must be made in the manner specified by Section 8.6 of
this Article for determining that indemnification is permissible.
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F. Notwithstanding any other provision of this Article, a Corporation may
pay or reimburse expenses incurred by a director in connection with his
appearance as a witness or other participation in a proceeding at a time
when he is or is not a named defendant or respondent in the proceeding.
8.9 INDEMNIFICATION OF OTHERS
A. An officer of the Corporation shall be indemnified as, and to the same
extent, provided by Subsections A, B and C of this Section 8.9 for a
director and is entitled to seek indemnification under those Subsections to
the same extent as a director. The Corporation may indemnify and advance
expenses to an officer, employee, or agent of the Corporation to the same
extent that it may indemnify and advance expenses to directors under this
Article.
B. The Corporation may indemnify and advance expenses to persons who are
not or were not officers, employees, or agents of the Corporation but who
are or were serving at the request of the Corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit
plan, or other enterprise to the same extent that it may indemnify and
advance expenses to directors under this Article.
C. The Corporation may indemnify and advance expenses to an officer,
employee, agent, or person identified in Subsection B of this Section 8.9
and who is not a director to such further extent, consistent with law, as
may be provided by the Corporation's Articles of Incorporation, Bylaws,
general or specific action of its Board of Directors, or contract or as
permitted or required by common law.
8.10 INDEMNITY INSURANCE The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the Corporation or who is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, against any liability asserted against him
and incurred by him in such a capacity or arising out of his status as such a
person, whether or not the Corporation would have the power to indemnify him
against that liability under this Article.
8.11 REPORTS TO SHAREHOLDER Any indemnification of or advance of
expenses to a director in accordance with this Article shall be reported in
writing to the shareholders with or before the notice or waiver of notice of the
next shareholders' meeting or with or before the next submission to shareholders
of a consent to action without a meeting pursuant to the General Corporation Law
of Nevada and, in any case, within the 12 month period immediately following the
date of the indemnification or advance.
8.12 EMPLOYEE BENEFIT PLANS For the purposes of this Article, the
Corporation is deemed to have requested a director to serve an employee benefit
plan whenever the performance of his duties to the Corporation also imposes
duties on or otherwise involves services by him to the plan or participants or
beneficiaries of the plan pursuant to applicable law. Action taken or omitted by
him with respect to an employee benefit plan in the performance of his duties
for a purpose reasonable believed by him to be in the interest of the
participants and beneficiaries of the plan is deemed to be for a purpose which
is not opposed to the best interests of the Corporation.
ARTICLE IX. MISCELLANEOUS
9.1 LIMITATION OF LIABILITY No person shall be liable to the
Corporation for any loss or damage suffered by it on account of any action taken
or omitted to be taken by that person as a director, officer or employee of the
Corporation in good faith, if, in the exercise of ordinary care, this person:
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A. Relied upon financial statements of the Corporation represented to this
person to be correct by the President or the officer of the Corporation
having charge of its books of account, or stated in a written report by an
independent public or certified public accountant or firm of such
accountants, fairly to reflect the financial condition of the Corporation,
or considered the Corporation's assets to be equal to their book value; or
B. Relied upon the written opinion of an attorney for the Corporation.
9.2 FISCAL YEAR The fiscal year of the Corporation shall be fixed by a
resolution of the Board of Directors.
9.3 SEAL The corporate seal shall be in such form as may be determined
by the Board of Directors. Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
9.4 BOOKS AND RECORDS The Corporation shall keep correct and complete
books and records of account and shall keep minutes of the proceedings of its
shareholders and the Board of Directors, and shall keep at its registered office
or principal place of business, or at the office of its transfer agent or
registrar, a record of its shareholders, giving the names and addressees of all
shareholders and the number and class of the shares held by each. Any books,
records and minutes may be in written form or in any other form capable of being
converted into written form within a reasonable time. Any person who shall have
been a holder of record of shares for at least six (6) months immediately
preceding demand, or shall be the holder of record of at least five percent (5%)
of all the outstanding shares of a corporation, upon written demand stating the
purpose thereof, shall have the right to examine, in person or by agent,
accountant, or attorney, at any reasonable time or times, for any proper
purpose, its relevant books and records of account, minutes and records of
shareholders, and to make copies thereof, all at such person's expense.
9.5 ANNUAL STATEMENT The Board of Directors shall present at each
annual meeting of shareholders a full and clear statement of the business and
financial condition of the Corporation.
9.6 RESIGNATION Any director, officer or agent may resign by giving
written notice to the Chairman of the Board, President or the Secretary. Such
resignation shall take effect at the time specified therein, or immediately if
no time is specified therein. Unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
9.7 AMENDMENT OF BYLAWS These Bylaws may be altered, amended, or
repealed either by unanimous written consent of the Board of Directors, in the
manner stated in Article 3.16 herein, or at any meeting of the Board of
Directors at which a quorum is present, by the affirmative vote of a majority of
the Directors present at such meeting, provided notice of the proposed
alteration, amendment, or repeal is contained in the notice of such meeting
9.8 INVALID PROVISIONS If any part of these Bylaws shall be held
invalid or inoperative for any reason, the remaining parts, so far as possible
and reasonable, shall be valid and operative.
9.9 HEADINGS The headings used in these Bylaws have been inserted for
administrative convenience only and do not constitute matter to be construed in
their interpretation.
9.10 WAIVER OF NOTICE Whenever any notice is required to be given to
any shareholder or director of the Corporation, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be equivalent to the giving of such notice.
9.11 GENDER. Words which import one gender shall be applied to any
gender wherever appropriate and words which import the singular or plural shall
be applied to either the plural or singular wherever appropriate.
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<NAME> United Community Holdings, Inc.
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