SECURITIES AND EXCHANGE COMMISSION
AMENDMENT NO. 1
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported): August 25, 2000
UNITED AMERICAN COMPANIES, INC.
(Exact Name of Registrant as specified in its Charter)
Colorado 000-30003 05-0508617
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identif. No.)
8609 Wood Lake Court, Suite 206
Charlotte, North Carolina 28210
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code:
(704) 556-7992
NADEAU & SIMMONS, P.C.
1250 TURKS HEAD BUILDING
PROVIDENCE, RHODE ISLAND 02903
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
WITH COPIES TO:
DELOITTE & TOUCHE
227 WEST TRADE STREET, SUITE 1100
CHARLOTTE, NC 28202-1675
704-372-3560
1250 Turks Head Building, Providence, Rhode Island 02903
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private
Securities Litigation Reform Act of 1995:
Except for historical facts, all matters discussed in this report whichare
forward looking involve a high degree of risks and uncertainties. Potential
risks and uncertainties include, but are not limited to, competitive pressures
from other food export companies and political developments in overseas
markets, economic conditions in the Company's primary markets and other
uncertainties detailed or to be detailed from time to time in the Company's
Securities and Exchange Commission filings.
Item 1. Changes in Control of Registrant.
On August 16, 2000, a closing was concluded under a Plan of Merger (the
"Plan"), pursuant to which a change of control of Providence Capital I, Inc.
("Providence") occurred. Pursuant to the Plan, shareholders of United
American Companies, Inc. ("UAC" and/or "Registrant") were issued 13,500,000
shares of Providence common stock in exchange for all of the issued and
outstanding shares of UAC, a North Carolina corporation. Pursuant to the Plan,
Providence officers and directors resigned and were replaced by new management
as set forth below. Providence advised the shareholders of the pending change
in control through the filing with the Commission on August 10, 2000 and
mailing to its shareholders of an Information Statement on Schedule 14(C),
pursuant to Rule 14 under the Securities and Exchange Act of 1934, as amended
(the "14C").
The following table, which was also included in the 14C, sets forth
certain information with respect to the persons designated as newly appointed
directors of the Registrant under the Plan, including their beneficial
ownership in the Registrant as of the closing under the Plan concluding
August 16, 2000.
<TABLE>
<CAPTION>
Date First
Became Positions and Offices
Name Age Director With the Company
-------------------- ------ --------------- -------------------------
<S> <C> <C> <C>
Mark A. Craven 50 Chairman, Executive Vice
President, Secretary,
Director
Arnold E. Pitoniak 37 CEO, President, Director
William F. Ruth 65 Executive Vice President,
Retail Liquidation Services
Nicholas J. Coolidge 68 Director
Timothy A. Holly 51 Director
-------------------------------------------------------------------------
Please see personal biographies below
</TABLE>
Personal Biographies and Summary of Experience
-----------------------------------------------------------------
Mark A. Craven
In 1971, Mr. Craven became associated with a family apparel firm, Arnold
Craven, Inc., located in High Point, North Carolina. While serving as
President until 1993, he was responsible for expanding the company into
several prominent well-respected retail apparel stores. In 1980, to
compliment the company's retail apparel stores, Mr. Craven formed a direct
marketing catalog business. In 1981, his national catalog won an award for
layout and design from the Direct Marketing Association. After experinecing a
decade long downsizing and tracking a national trend in independent specialty
store closings, Arnold Craven, Inc. filed for bankruptcy in 1994. With the \
knowledge gained from his management during the "Going Out of Business Sale"
conducted for Arnold Craven, Inc. and from his retail knowledge gained through
over 20 years in business, Mr. Craven launched a new career in crisis management
for retailers. Since 1993, he has been involved in liquidations and consulting
services for retail, wholesale, and distribution firms. This has resulted in a
national reputation for excellence in liquidating inventory and maximizing value
for his clients.
Born and raised in High Point, North Carolina, the world's furniture capital,
Mr. Craven has cultivated long-standing contacts in the apparel, textile and
furniture industries. To capitalize on these relations, he developed several
entities to cover all aspects of the liquidation industry. High Point
Furniture Liquidators, LLC, Craven & Ruth Promotions, LLC and The Craven
Companies, LLC. Mr. Craven graduated from Hargrave Military Academy, majored
in Business Administration at Wake Forest University (1968 -- 1971), and
studied at New York University's MRA Institute of Retailing. He is a member
of the Turnaround Management Association.
Arnold E. Pitoniak
Mr. Pitoniak has 15 years experience as an entrepreneur, investment banker and
merchant banker. While a senior at Wake Forest University, he formed his
first company, and has since formed, developed, bought or sold over 10
companies. Mr. Pitoniak has over three years direct experience as an investment
banker specializing in mergers and acquisition advisory services, as well as
general corporate finance where he raised equity and debt for real estate
developers and other businesses particularly public furniture and textile
companies. His significant entrepreneurial and banking expertise brings a
unique perspective as well as substantial financial and analytical skills with
the ability to negotiate and structure transactions that will help United
American Companies in becoming a fully-integrated asset management and
disposition company.
Mr. Pitoniak attended Southern Methodist University and graduated in 1985 from
Wake Forest University with a Bachelor of Arts degree in Economics. He is a
member of the Turnaround Management Association.
William F. Ruth
Mr. Ruth has over 40 years of diversified retail experience. His long career
began in 1957 with Belk Stores, Inc., one of the country's largest department
store chains. With Belk he held numerous responsible positions including
floor manager, buyer, merchandiser, divisional merchandise manager, general
merchandise manager, and area merchandise manager.
After leaving Belk Stores, Mr. Ruth spent three years operating his own
apparel store in Winston-Salem, North Carolina. He also held a position in
sales with Pine Apparel, an apparel distributor. Mr. Ruth's experience in
merchandising, buying, managing apparel of retail inventory has provided him
the sound base from which he has provided liquidation consulting services to
retailers, wholesalers, and distributors since 1993. Mr. Ruth graduated
with Western Carolina University with a degree in Business Administration.
Nicholas J. Coolidge
Nicholas J. Coolidge is President of Jefferson Worldwide Group Ltd. He
is a graduate of Harvard College (1954) and Harvard Law School (1959) and
spent two years as a lieutenant in the United States Marine Corps. From 1959 to
1969 he was associated with the New York Law firm of Sullivan & Cromwell, where
he worked for investment banking clients on debt and equity financings, both
domestic and international, investment company matters and mergers and
acquisitions. In 1965 he left the practice of law and became a member of
the Corporate Finance Department of Kidder, Peabody & Co. Incorporated in New
York City. While there, he served as a Vice President, Director and
Stockholder, with sixteen professionals under his direction. He had
responsibility for the firm's project finance, leasing, real estate and
Canadian activities. He was active in public offerings, private placements,
international transactions and mergers and acquisitions. While at Kidder,
Peabody he and his staff originated and carried out in excess of 200 separate
financings for new clients involving over two billion dollars of securities.
In 1978 he left Kidder, Peabody and formed Coolidge Securities Corporation, an
investment banking firm engaged in a broad range of financing activities for
corporate and government clients. More recently, he formed Jefferson Worldwide
Group Ltd., a member of the National Association of Securities Dealers, Inc.
(NASD), specializing in private placements for clients. Jefferson Worldwide
Group, Ltd. is also an investment advisor registered with the District of
Columbia.
Timothy A. Holly
Mr. Holly, has extensive expertise and substantial skills in investment
analysis and management, international finance, foreign commercial
intelligence, and strategic planning. He is currently Chief Executive
Officer of Jefferson Acquisition Group, Inc., a merchant banking firm, that
recently acquired All Points Telecom, Inc., a manufacturing firm making the
world's only solar-powered wireless pay phones with internet capability. From
1994 to 1998, Mr. Holly was the Chairman of Stone Harbor Holdings, Ltd (an
offshore venture capital fund).
From 1987 to 1994, Mr. Holly headed Royal Overseas Investment Group,
Ltd., which included Royal Asset Management Company, a registered investment
advisory firm managing the assets of high-net worth individuals and
institutions from the Middle East and Europe. Prior to 1987, he was lead
analyst for two private banks, with responsibility for structuring
foreign direct investments in the United States, advising on over $2.3 billion
of investments of foreign capital. He continues to advise certain members
of the Saudi Royal Family.
Also, active in education, Mr. Holly was on the faculties of both the
University of Massachusetts and the City Colleges of Chicago; the
research staff of the Investment Negotiation Center at the Institute for
International and Foreign Trade Law; the Board of the Association of Schools of
International Affairs; and General Editor of The Fletcher Forum; A
Journal of International Affairs.
Mr. Holly received his undergraduate education in Political Science at
Indiana University; and graduate studies in Comparative Systems, University of
Notre Dame, and law at Georgetown University. He was also a Compton Foundation
Fellow working towards a Ph.D. in International Business and Finance at
the Fletcher School of Law and Diplomacy (administered by Harvard University
and Tufts University).
Beneficial Ownership
The following table sets forth the beneficial ownership of our
outstanding common stock on August 15, 2000 by (i) each director and executive
officer of our company, (ii) all directors and executive officers of our
company as a group, and (iii) each shareholder who was known by us to be the
beneficial owner of more than five percent (5%) of our outstanding shares:
<TABLE>
<CAPTION>
---------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
--------------------------------------------
Name and address # of %of
of beneficial owner shares Class Options
Mark A. Craven 5,700,000 38.00% 250,000
Arnold E. Pitoniak 5,600,000 37.33% 250,000
William F. Ruth 600,000 04.00% 150,000
Timothy A. Holly 1,500,000 10.00%
All Officers and
Directors as a Group 13,500,000 90.00%
PREFERRED STOCK
------------------------------------
</TABLE>
Item 2. Acquisition or Disposition of Assets.
Pursuant to the Plan, Providence acquired all of the shares of UAC.
COMPLETION OF THE MERGER
An Agreement and Plan of Merger and Reorganization was executed on July
26, 2000, by and among Providence and UAC, who joined in the execution of the
Agreement for the purpose of making certain covenants regarding the
Transaction contemplated therein. Providence is a corporation duly
organized and validly existing under the laws of the state of Colorado, with its
registered office at 17 West Cheyenne Mountain Blvd., Colorado Springs,
Colorado 80906, its principal executive office at 1250 Turks Head
Building, and its phone number is (401) 272-5800; UAC is a corporation duly
organized and validly existing under the laws of the state of North Carolina,
with its registered office located in the city of Charlotte, State of North
Carolina, its principal executive office at 8609 Wood Lake Court, Suite 206,
Charlotte, North Carolina 28210, and its phone number is (704) 556-7992.
The respective boards of directors of Providence and UAC deemed it
desirable and in the best interests of their respective corporations, for
Providence to acquire the outstanding capital stock of UAC in exchange for the
issuance of shares of the common stock of Providence and have proposed, declared
advisable and approved such merger (the "UAC Merger") pursuant to the Agreement,
which Agreement has been duly approved by resolutions of the respective boards
of directors of Providence and UAC.
The UAC Merger became effective on the "Effective Date", such date being
the later upon which (i) amended Articles of Incorporation are filed with the
Secretary of State of Colorado and (ii) a Certificate of Merger is filed
with the Secretary of State of North Carolina. The "Closing Date" will be on
or within one (1) business day of the date the Agreement is approved by the
shareholders of Providence.
The UAC Merger is intended to qualify as an I.R.C. 368(b) tax-free
reorganization. At the Closing, (a) UAC shall deliver to Providence a
statement (in such form as may be reasonably requested by counsel to
Providence) conforming to the requirements of Section 1.897-2(h)(1)(i) of
the United States Treasury Regulations, and (b) UAC shall deliver to the IRS
the notification required under Section 1.897-2(h)(2) of the United States
Treasury Regulations.
EFFECT OF UAC MERGER
In all other respects, the identity, existence, purposes, powers,
objects, franchises, rights, and immunities of Providence shall continue
unaffected and unimpaired by the UAC Merger.
The laws of Colorado shall continue to govern UAC. On and after the
Effective Date, the articles of incorporation of UAC shall be the articles of
incorporation of Providence until further amended in the manner provided
by law and in such articles of incorporation (the "Articles"). On the
Effective Date, the bylaws of UAC shall be the bylaws of Providence (the
"Restated Bylaws") until altered, amended, or repealed, or until new bylaws
shall be adopted in accordance with the provisions of law, the Articles, and the
Restated Bylaws.
CONVERSION OF UAC'S STOCK AND OTHER SECURITIES
UAC shareholders will surrender one hundred percent (100%) of their
issued and outstanding common and preferred shares to Providence on the date of
execution of the Agreement. In exchange for receipt of one hundred percent
(100%) of UAC shares, Providence, on the terms and subject to the conditions
herein set forth, shall issue and deliver to UAC shareholders:
On the Closing Date, 13,500,000 Common Shares, $.001 par value ("Providence
Common Stock"), of Providence, on a share-for-share basis, registered in
the name of each UAC shareholder or its nominee.
--Providence Common Stock
None of the currently issued and outstanding shares of Providence Common
Stock, $.001 par value, issued and outstanding at the effective time of the
UAC Merger shall be converted as a result of the UAC Merger;
--Fractional Interests
No fractional shares of preferred or common stock of Providence or
certificate or scrip representing the same shall be issued. In lieu thereof each
holder of UAC shares having a fractional interest arising upon such
conversion will be rounded up into one full additional share of common stock of
Providence;
--Status of Common Stock
All shares of common stock of Providence into which UAC shares are
converted as herein provided shall be fully paid and non-assessable and shall be
issued in full satisfaction of all rights pertaining to such Providence Common
Stock;
--Independent Appraisal, Right to Dissent and Obtain Payment for Shares
Procedures for Protection of Dissenter's Rights. In order to establish a
"fair value" for the UAC shares which are paid in cash in lieu of conversion
into the shares of Providence, as provided in this Article VI, the Board of
Directors of UAC shall establish the value of UAC shares prior to the UAC
Merger, and shall afford to such shareholders of UAC all of the rights,
and implement the procedures for protection of dissenters' rights, pursuant
to the provisions of the North Carolina Business Corporation Act, as amended,
the terms and provisions of which are hereby incorporated by reference and
made a part hereof.
UAC SHAREHOLDER DISSENTER'S RIGHTS
The Board of Directors of UAC shall establish the value of UAC's shares
prior to the UAC Merger, and shall afford to the shareholders of UAC all of the
rights, and implement the procedures for protection of dissenters'
rights, pursuant to the provisions of the North Carolina Business Corporation
Act. The capital surplus and retained earnings accounts of UAC shall be
determined, in accordance with generally accepted accounting principles, by
the board of directors of UAC. Nothing herein shall prevent the board of
directors of UAC from making any future changes in its accounts in accordance
with law.
INVESTMENT REPRESENTATION LETTER
At the Closing, each of the UAC shareholders shall execute and deliver to
UAC an investment representation letter statement in such form as may be
reasonably requested by counsel.
Amendment to Articles of Incorporation
The Board of Directors and shareholders have unanimously approved for the
restatement and amendment of the Company's Articles of Incorporation in
order to change Providence's name to "UNITED AMERICAN COMPANIES, INC.".
Approval of the restatement and amendment will not result in any other
material amendment or change to the Registrant's Articles of
Incorporation. The restatement and amendment is required to effect Providence's
acquisition of UAC.
MARKET RISKS AND OTHER BUSINESS FACTORS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), Congress encouraged public companies to make "forward looking
statements" by creating a safe harbor to protect companies from securities
law liability in connection with forward-looking statements. We intend to
qualify both our written and oral forward-looking statements for
protection under the Reform Act and any other similar safe harbor provisions.
Generally, forward-looking statements include expressed expectations of
future events and the assumptions on which the expressed expectations are based.
All forward looking statements are inherently uncertain as they are based on
various expectations and assumptions concerning future events and they
are subject to numerous known and unknown risks and uncertainties which could
cause actual events or results to differ materially from those projected.
Due to those uncertainties and risks, the investment community is urged
not to place undue reliance on our written or oral forward looking statements.
We undertake no obligation to update or revise our for forward looking
statements to reflect future developments. In addition, we undertake no
obligation to update or revise forward looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time.
Item 5. Other Information
BUSINESS DESCRIPTION
UAC CORPORATION-
DESCRIPTION OF THE BUSINESS
UNITED AMERICAN COMPANIES, INC.
United American Companies, Inc. ("UAC"), is a Colorado corporation.
Its primary purpose is to become a public company specializing in asset
evaluation, acquisition, finance of liquidation and management and by seizing
undervalued opportunities in the retail, wholesale, distribution and
manufacturing sectors with the strategy of UAC being two-fold; creating high
current returns and income by liquidating assets and creating equity value over
a period of time by purchasing operating companies at value and increasing that
value over time and selling those companies for a significant return on
investment. This purpose is partly based upon the following factors:
* Domestic retail capacity is four times the level needed for US
consumers
* Periodic declines in consumer spending result in more retail
failures
* Dominant retailers like Wal-Mart and Home Depot accelerate the
pace of retail failures
* E-commerce and e-tailing will increase failures of traditional
retailers
* Middle Market default rates indicate higher defaults among
retailers
* In 1999, major principal liquidations exceeded an estimated $15
Billion
* Brands like London Fog and Bonwit Teller have been liquidated and
are therefore gone from the retail market
* In 1999, assets of companies filing bankruptcy exceeded $30
billion.
* Opportunities exist for brand licensing and exporting of liquidated
assets.
* Opportunities exist for purchasing old world economy companies
applying new world economy strategies and e-commerce at below
enterprise value.
To realize the opportunities from conditions in the economic market place
and to effectively enter the comprehensive asset management industry, UAC
has acquired in an exchange of common stock, either complete ownership or
control of several entities comprising the Craven Companies (the "Craven
Group" or "Craven") -- a nationally recognized liquidator of consumer
product inventories, thereby making UAC a fully-integrated asset management
company.
The Craven Group has antecedents dating back to 1993. Craven's
principals and senior management have over 100 years experience in retail sales,
marketing, distribution, finance, management and in the liquidation of retail
inventory and assets. The Craven Group has served hundreds of clients
and has liquidated close to 1,000 wholesale and retail units.
To become a fully integrated asset management company specializing in
evaluation, acquisition, financing, liquidation, management and
positioning of assets, company, in November 1999, the Craven Group's activities
were structured as several Delaware limited liability companies -- each
containing the name "Fox." However, this designation was recently changed to
"Craven" to reflect certain internal changes and to take advantage of the widely
known and respected name of the Craven Chairman -- Mark Craven, an established
expert in the liquidation of retail inventories. The Craven Group is
comprised of the following affiliate entities:
* Craven and Ruth, Inc. - merchandise sales, factoring, distribution
* The Craven Companies, LLC- management services to Craven Group
Companies
* Craven and Ruth Promotions, LLC. - retail and wholesale liquidations
* High Point Furniture Liquidators, LLC - retail and wholesale
liquidations
* Craven Merchandise Distributors, LLC- furniture factoring and
distribution
* Craven Advisory Group, LLC - business consulting services
* Craven Valuation Services, LLC - retail inventory valuations and
appraisals
* Craven Capital Partners, LLC - principal purchasers of retail
inventory and assets from distressed retailers (inventory liquidated
by other Craven entities)
* Promo Services, LLC - provider of sign materials and promotion
advertising preparation and placement of advertising
* CrossStone Capital Group, LLC - investment and merchant banking.
The Craven Group employs seven full-time professionals who have extensive
financial, retail, and liquidation experience. Craven also has 50 professionals
who are contracted with on an as needed basis to assist in Craven's
implementation of its liquidation methodology. These contracted human
resources assist with appraisals and evaluations, liquidations, and marketing
activities. As additional support, Craven has an adequate back-office staff of
four to handle the collective activities of the group.
Craven uses a proprietary financial model and analysis to value
inventories. The model incorporates many variables including US economic
indicators andindustry information such as gross profit margins, turnover, age,
product mix, distribution channels, computability, seasonality, and market
values, then compares the results to data of competitive retailers,
manufacturers, or wholesales. In the past, the Craven model has been applied in
its "fee-based liquidation" business - i.e., where clients retain Craven to
conduct liquidation sales and promotions. While Craven will continue operating
a fee-based practice, it intends to become an "equity" liquidator - i.e., where
Craven, as a principal, acquires the assets and then determines the most
appropriate means of liquidation, disposition, or positioning of the assets.
Though Craven, as an equity liquidator, would initially be the smallest
of 8 national liquidators of consumer products inventories, the potential
returns are expected to be quite significant - far surpassing the income
potential of fee-based business. In many instances, the larger
liquidators form joint ventures to acquire large inventories (at auctions, in
bankruptcies, etc.). These arrangements reduce competition and, in turn,
improve profit potential. To date, Craven has lacked the necessary capital to
participate as a principal in such transactions. However, UAC is presently
pursuing a placement of $100,000,000 via a debt securities offering and/or by
securing a revolving line of credit. To date, in preliminary discussions with
institutional funders, UAC's proposal has been very well received.
UAC shall have has its initial directors:
* Mark Craven, Chairman of the Board of Directors
* Arnold E. Pitoniak, Chief Executive Officer
* William F. Ruth, Executive Vice President,
Retail Liquidation Services
* Timothy A. Holly, Director of UACI
* Nicholas J. Coolidge, Director of UACI
---------------------------------------
The Craven Companies LLC and Affiliates
12 Months projected 2001
Total Revenues $ 49,192,000
Operating Costs/Expenses 41,006,000
EBITDA 8,186,000
UAC currently derives its income via fee-based litigation consulting,
small "equity" liquidation transactions where the company, as a principal,
acquires the assets and then determines the most appropriate means of
liquidation,disposition or positioning of those assets, and consulting fees from
services to liquidation clients including valuations, financing, marketing and
advertising. However, with a large line of credit facility which the company
is currently negotiating of $100,000,000, UAC would be able to participate
in much larger "equity" principal liquidation transactions. Although there is
no guarantee of this funding, several institutional investors have expressed
a strong interest in a preferred offering or debt instrument financing in
the form of a secured line of credit.
However, these pro forma numbers post-closing reflect certain financings
and other assumptions which are not the control of management or the company.
Certain statements, estimates and forward-looking projections prepared by
the company may not be representative of future outcome. The company makes
no representation as to their attainability, nor can any such representation
be implied. In addition, because the estimates and assumptions underlying
such projections are inherently subject to significant economic, market, and
regulatory uncertainty and contingencies, which are difficult or
impossible to predict accurately and are beyond the company's control, there is
significant risk that the projections will not be realized. Accordingly, actual
results may be materially different from those projected.
Legal Proceedings
Neither the Company nor any of our affiliates are a party, nor is any of their
property subject, to material pending legal proceedings or material proceedings
known to be contemplated by governmental authorities. The Company is expected
to be involved from time to time in various claims, actions and lawsuits
incidental to its business. The Company believes the ultimate liability
there under, if any, will not have a material affect on the financial condition
of the Company.
Item 7. Financial Statements, Pro-Forma Financial Information and Exhibits.
(a) Financial Statements of Business to be acquired. The following financial
statements of Craven & Ruth, Inc. are included in this Current Report.
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE PERIOD FROM FEBRUARY 1, 1998
(DATE OF INCEPTION) TO DECEMBER 31, 1998, YEAR ENDED
DECEMBER 31, 1999, AND SIX MONTHS ENDED JUNE 30, 1999 AND
1998 (UNAUDITED):
Balance Sheets 2
Statements of Operations 3
Statements of Shareholders' Equity (Deficiency) 4
Statements of Cash Flows 5
Notes to Financial Statements 6-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Craven & Ruth, Inc.
Charlotte, North Carolina
We have audited the accompanying balance sheets of Craven & Ruth, Inc. (the
"Company") as of December 31, 1998 and 1999, and the related statements of
operations, shareholders' equity (deficiency), and cash flows for the period
from February 1, 1998 (date of inception) to December 31, 1998 and the year
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based upon our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998 and
1999, and the results of its operations and its cash flows for the period from
February 1, 1998 to December 31, 1998 and the year ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche, LLP
DELOITTE & TOUCHE, LLP
Charlotte, North Carolina
October 30, 2000
<PAGE>
BALANCE SHEETS
(UNAUDITED AS TO JUNE 30, 2000 INFORMATION)
<TABLE>
<CAPTION>
December 31, December 31, June 30
1998 1999 2000
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ - $ 4,787 $ 7,493
Accounts receivable 3,833 24,966 49,134
Prepaid expenses and other
current assets 184 473 -
------- --------- ---------
Total current assets 4,017 30,226 56,627
PROPERTY AND
EQUIPMENT, NET (note 3) 7,848 45,069 39,654
------- --------- ---------
TOTAL ASSETS 11,865 75,295 96,281
------ --------- ---------
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and other
accrued expenses $ 14,785 43,802 58,100
Current maturities of long-term
debt (Note 4) - 6,994 7,096
-------- -------- ---------
Total current liabilities 14,785 50,796 65,196
-------- -------- ---------
LONG TERM DEBT (Note 4) - 18,917 15,303
COMMITMENTS AND CONTINGENCIES
(Note 5)
SHAREHOLDERS' EQUITY (DEFICIENCY)
(Note 6)
Common stock $1 par value;
100,000 shares authorized;
1,000 shares issued and
outstanding 1,000 1,000 1,000
Receivable from shareholders (1,000) (1,000) (1,000)
Receivable earnings (deficit) (2,920) 5,582 15,782
--------- --------- ----------
Total shareholders' equity
(deficiency) (2,920) 5,582 15,782
--------- --------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIENCY) 11,865 75,295 96,281
--------- --------- ----------
</TABLE>
See notes to financial statements
<PAGE>
STATEMENTS OF OPERATIONS
(UNAUDITED AS TO JUNE 30, 1999 AND 2000 INFORMATION)
<TABLE>
<CAPTION>
Period From Six-Month
February 1, 1998 Year Ended Period Ended
(Date of Inception) December 31, 1999 June 30, 1999 June 30, 2000
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES (Note 2) $ 211,287 $ 2,073,145 $ 486,279 $ 1,141,908
COST OF REVENUES (Note 2) 46,827 1,493,441 222,506 659,203
---------- ----------- --------- -----------
GROSS PROFIT 164,460 579,704 263,773 482,705
OPERATING EXPENSES
(Note 5) 148,562 487,758 103,875 425,231
DEPRECIATION 1,479 7,980 3,990 6,719
---------- ----------- --------- -----------
OPERATING INCOME 14,419 83,966 155,908 50,755
INTEREST EXPENSE 339 264 - 355
---------- ----------- --------- -----------
NET INCOME 14,080 83,702 155,908 50,400
---------- ----------- --------- -----------
</TABLE>
See notes to financial statements
<PAGE>
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
(UNAUDITED AS TO JUNE 30, 2000 INFORMATION)
<TABLE>
<CAPTION>
Total
Receivable Retained Shareholders'
Common Stock from Earnings Equity
Shares Amount Shareholders (Deficit) (Deficiency)
<S> <C> <C> <C> <C> <C>
INITIAL CAPITALIZATION
OF THE COMPANY
(February 1, 1998) 1,000 $ 1,000 $ 1,000
Receivable from shareholders $ (1,000) (1,000)
Distributions to shareholders $ (17,000) (17,000)
Net Income 14,080 14,080
------- -------- ---------- ----------- ---------
BALANCE (DEFICIENCY) AT
DECEMBER 31, 1998 1,000 1,000 (1,000) (2,920) (2,920)
Distributions to shareholders (75,200) (75,200)
Net Income 83,702 83,702
------- -------- ---------- ----------- ---------
BALANCE AT DECEMBER 31, 1999 1,000 1,000 (1,000) 5,582 5,582
ACTIVITY JANUARY 1, 2000
THROUGH JUNE 30, 2000
(UNAUDITED)
Distributions to shareholders (40,200) (40,200)
Net Income 50,400 50,400
-------- -------- ----------- ----------- ----------
BALANCE AT JUNE 30, 2000
(UNAUDITED) 1,000 $ 1,000 (1,000) 15,782 15,782
-------- -------- ----------- ----------- ----------
</TABLE>
See notes to financial statements
<TABLE>
STATEMENTS OF CASH FLOWS
(UNAUDITED AS TO JUNE 30, 1999 AND 2000 INFORMATION)
<CAPTION>
Period from Six Month
February 1, 1998 Year Ended Period Ended
(Date of Inception) December 31, 1999 June 30, 1999 June 30, 2000
To December 31, 1998 (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 14,080 $ 83,702 $ 155,908 $ 50,400
Adjustments to reconclie
net income to net cash
provided by operating
activities:
Depreciation 1,479 7,980 3,990 6,719
Changes in operating
assets and liabilities:
Accounts receivable and
other accrued expenses (3,833) (21,133) (21,635) (24,168)
Prepaid expenses and other
current assets (184) (289) 184 473
Accounts payable and other
accrued expenses 14,785 29,017 5,864 14,298
-------- --------- --------- ---------
Net cash provided by
operating activites 26,327 99,277 132,583 47,722
-------- --------- --------- ---------
INVESTING ACTIVITIES -
Purchase of property
and equipment 9,327 16,365 4,164 1,304
-------- --------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from long-
term debt 4,018
Principal repayments on
long-term debt (4,018) (2,925) (3,512)
Distributions to
shareholders (17,000) (75,200) (28,000) (40,200)
--------- ---------- ---------- ----------
Net cash used in
financing activities (17,000) (78,125) (28,000) (43,712)
--------- ---------- ---------- ----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS - 4,787 100,419 2,706
CASH AND CASH
EQUIVALENTS:
Beginning of Period - - - 4,787
--------- ---------- ---------- ----------
End of Period $ - $ 4,787 $ 100,419 $ 7,493
--------- ---------- ---------- ----------
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION
-Cash paid during the
period for interest $ 339 $ 264 $ - $ 355
--------- ---------- ---------- ----------
SUPPLEMENTAL DISCLOSURES
OF NON-CASH FINANCING
ACTIVITIES
-Receivable from shareholders
for purchase of common
stock $ 1,000 $ 1,000 $ 1,000 $ 1,000
-------- ---------- ---------- ----------
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED AS TO JUNE 30, 1999 AND 2000 INFORMATION)
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Craven and Ruth, Inc. (the "Company") was incorporated in 1998 as a
privately held, North Carolina corporation located in High Point, North
Carolina. The Company operates a fee-based asset liquidation business by
conducting liquidation and promotions sales for the retail industry.
In August 2000, the Company was combined with an affiliated entity under
common management and control (The Craven Companies) and merged into a
newly created entity, United American Companies, Inc. ("UAC"). UAC was
then merged into Providence Capital I, Inc., an SEC registrant, in a
merger transaction accounted for as a reverse acquisition (see Note 6).
Unaudited Financial Statements - The condensed financial statements as of
and for the six months ended June 30, 1999 and June 30, 2000 are
unaudited. In the opinion of management, the unaudited balance sheet at
June 30, 2000, and the unaudited statements of operations, shareholders'
equity and cash flows for the six months ended June 30, 1999 and June 30,
2000, include all adjustments, which include only normal recurring
adjustments, necessary to present the financial position and results of
operations and cash flows for the periods then ended in accordance with
accounting principles generally accepted in the United States of America.
The results of operations for the six months ended June 30, 2000 are not
necessarily indicative of results to be expected for the full fiscal year.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents - The Company considers all highly liquid
temporary cash investments with an original maturity of ninety days or
less to be cash equivalents.
Property and Equipment - Property and equipment is carried at historical
cost and is being depreciated using the straight-line method over the
estimated useful lives of the related assets, which range from three to
five years.
Income Taxes - The Company elected an S Corporation status for federal and
state income tax purposes for the years ended December 31, 1998 and 1999.
As such, the Company's taxable income is included in the shareholders'
personal income tax returns. Accordingly, no provision for federal and
state income taxes has been included in the Company's statements of
operations.
Revenue Recognition - The Company currently derives all of its revenues
through merchandise sales, commission or fee based income, and service
revenues.
Merchandise Sales - Merchandise sales reflect the reimbursement by
Customers of costs paid by the Company to third parties for inventory
used to augment the customer's inventory subject to sale. The purpose
for the augmented inventory is to enhance the quality and/or quantity of
the inventory being sold. The Company takes title and other risks of
ownership, including risk of loss, upon its purchase of the merchandise
and is reimbursed for its costs from the proceeds from the sale of such
inventory during the course of the sale. The Company recognizes such
revenues as the sale of such merchandise occurs.
Commission (Fee) Based Revenue - The Company charges its customers a
fixed percentage of sale proceeds for consulting services provided in
conjunction with an inventory sale such as a liquidation sale,
promotional sale or "going out of business" sale. The Company
recognizes such revenues as the fees are earned, which typically occurs
upon the sale of the customer's merchandise.
Service Revenue - In addition to consulting services, the Company offers
promotional services (direct mail advertising, signage, etc.) related to
a particular inventory sale. The Company bills its customers for such
services and recognizes the revenue upon completion and is generally
reimbursed through the proceeds of the sale.
In 1998, revenue from two customers represented approximately 12.9% and
12.6%, respectively, of total 1998 revenues. In 1999, revenue from two
customers represented 18.9% and 38.8%, respectively, of total 1999 revenues.
Cost of Revenues - Cost of revenues consists primarily of augmented
merchandise purchases (see Merchandise Sales above) and direct costs related
to inventory sales. These direct costs typically consist of contract labor
and other outside services, mailing and printing costs and field consultant
fees.
Advertising - The Company expenses advertising costs as incurred.
Advertising expense was approximately $26,000 and $13,000 for 1998 and 1999,
respectively, and is included in operating expenses in the accompanying
statements of operations.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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 amounts could differ from these estimates.
Recent Accounting Pronouncements - In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities. This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value. The Company will be required to
adopt the new reporting guidelines for the fiscal year beginning
January 1, 2001. The Company has not fully analyzed the provisions of
this statement or its effects on its financial statements.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 and 1999 are summarized as
follows:
1998 1999
Equipment $ 561 $ 1,392
Furniture and fixtures 571 571
Computer equipment 8,195 15,728
Vehicles - 36,837
------ -------
Total 9,327 54,528
Less accumulated depreciation 1,479 9,459
------ -------
Property and equipment, net $7,848 $45,069
------ -------
4. FINANCING ARRANGEMENTS
Long-term debt at December 31, 1999 consists of the following:
Note payable to Ford Motor Credit, due
in 48 monthly installments of $324
collateralized by a vehicle 13,182
Note payable to Ford Motor Credit, due
in 48 monthly installments of $313
collateralized by a vehicle 12,729
-------
25,911
Less current maturities 6,994
-------
Long-term debt $18,917
-------
Future maturities of long-term debt at
December 31, 1999 are follows:
Year Ending December 31:
2000 $ 6,994
2001 7,200
2002 7,411
2003 4,306
---------
Total $ 25,911
---------
5. COMMITMENTS AND CONTINGENCIES
Related Party Transactions
During 1998 and 1999, the Company leased office space under an operating
lease from a shareholder of the Company. Rental expense charged to
operations for this operating lease totaled approximately $4,200 and $4,800
for the period from February 1, 1998 (date of inception) to
December 31, 1998 and the year ended December 31, 1999, respectively,
which is included in operating expenses in the accompanying combined
statements of operations. As of December 31, 1999, future minimum lease
commitments under this lease totaled approximately $2,000 for the year
ended December 31, 2000.
On January 12, 2000, the Company's lease with a shareholder of the Company
expired and the Company entered into a new operating lease agreement for
office space. The twenty-four month operating lease term began on February
1, 2000 and expires January 31, 2002. Monthly rental expense for this
operating lease is $700.
The Company paid approximately $31,100 in contract labor expenses in 1999,
which are included in operating expenses in the accompanying combined
statement of operations, to relatives of a shareholder of the Company.
Other Contingencies
The Company is involved in various legal proceedings. Management believes
based on advice of counsel that the outcome of such proceedings will not have
a materially adverse effect on the Company's financial position or future
results of operations and cash flows.
6. SUBSEQUENT EVENTS (UNAUDITED)
In June 2000, United American Comapnies, Inc., the predecessor to the Company
("UAC") was incorporated with the authorization of 100,000,000 shares of no
par value common stock and 50,000,000 shares of preferred stock.
In July 2000, approximately 7,000,000 shares of common stock were issued to
two directors and a relative of a director for approximately $700.
In August, 2000 immediately prior to the merger discussed below,
approximately 6,500,000 shares of UAC were issued to the members and
owners of The Craven Companies, LLC and Craven & Ruth, Inc., respectively, in
exchange for their interest in such entities.
Effective August 25, 2000, UAC was merged with and into Providence, an SEC
registrant. Pursuant to the plan of merger, UAC ceased to exist and the
surviving company, Providence, changed its name to United American
Companies, Inc. ("UACI"). The shareholders of UAC received 13,500,000
shares (or 90%) of $.001 par value common stock of UACI by converting each
share of UAC common stock into one share of UACI common stock. The
remaining 1,500,000 shares (or 10%) of UACI are held by the former
shareholders of Providence.
In September 2000, UACI adopted the 2000 Stock Incentive Plan (the "Plan").
The Plan permits a committee of the Board of Directors of UACI (the
"Committee") to award stock options as incentives to employees and
consultants of UACI. The Committee has sole discretion to determine the
exercise price, term and vesting schedule of options awarded under such
Plan. A total of 1,339,200 shares of UACI's common stock are authorized
to be issued under the Plan. Under the Plan, grants of nonqualified stock
options totaling 681,000 shares at an exercise price of $1.00 per share
were granted to certain executives and a consultant of UACI. The options
granted generally vest over a five year period in equal annual installments.
Subsequent to September 30, 2000, UACI issued approximately $235,000 of an
expected total of $500,000 of debentures in transactions facilitated by an
investment banking firm. Terms of the indebtedness include payment due in
six months from the date the debentures were signed, with interest at 10.0%,
payable each 90 days, an with each debenture holder also receiving common
stock of UACI in the ratio of 20,000 shares of stock per $100,000 of
indebtedness.
In November 2000, UACI entered into a placement agency agreement with an
investment banking firm for the placement of approximately $25 million of
equity securities and approximately $250 million of debt securities subject
to definitive documentation and other standard closing conditions and
approvals.
(b) Pro-Forma Financial Information
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION OF THE COMPANY
The following unaudited pro forma consolidated financial information
gives effect to the acquisition of United American Companies, Inc. and its
subsidiaries ("UAC") by Providence Capital I, Inc. ("PCI") as if it had occurred
on January 1, 1999 and January 1, 2000, respectively, in the case of the
unaudited pro forma consolidated statements of income of the company and
on June 30, 2000 in the case of the unaudited pro forma consolidated balance
sheet of the Company.
The acquisition will be accounted for as a reverse acquisition whereby
UAC will be treated as if it acquired PCI in an exchange of stock,
whereby PCI was the surviving organization, followed by a recapitalization. The
book values of the assets and liabilities of UAC remain the same and
carry forward, with no goodwill being recorded, Subsequent to the transaction,
PCI changed its name to United American Companies, Inc. (Newco).
The pro forma consolidated financial data is presented for illustrative purposes
only and is not necessarily indicative of what the Company's financial position
or results of operations would have been had the transaction occurred as
of the above referenced dates or of the financial position or results that may
be reported by the company in the future.
The pro forma consolidated financial information should be read in conjunction
with the historical statements of Craven and Ruth, Inc. and PCI and the related
notes thereto.
<PAGE>
UNITED AMERICAN COMPANIES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED STATEMENT OF INCOME (FOR THE ACQUISITION)
FOR THE YEAR ENDED DECEMBER 31, 1999
(unaudited)
<TABLE>
United
Historical American
Craven & Providence Proforma Companies, Inc. (NEWCO)
Ruth, Inc. Capital I, Inc. adjustments Proforma
<S> <C> <C> <C> <C>
REVENUES $ 2,073,145 $ 2,073,145
COST OF REVENUES $ 1,493,441 $ 1,493,441
----------- --------------- ------------ ------------
GROSS PROFIT $ 579,704 579,704
OPERATING EXPENSES 487,758 18,414 506,172
DEPRECIATION 7,980 7,980
----------- --------------- ------------ ------------
OPERATING INCOME
(LOSS) 83,966 (18,414) 65,552
INTEREST EXPENSE 264 264
----------- --------------- ------------ ------------
INCOME (LOSS) BEFORE
INCOME TAXES 83,702 (18,414) 65,288
INCOME TAX PROVISION 15,117(1) 15,117
----------- --------------- ------------ ------------
NET INCOME (LOSS) 83,702 (18,414) (15,117) 50,171
</TABLE>
Notes to Unaudited Proforma Financial Statements
(1) To reflect federal and state income taxes due on taxable income based on
statutory rates if the Company, formerly an "S" corporation, were to be
liable for such taxes at the corporate level.
<PAGE>
UNITED AMERICAN COMPANIES, INC AND SUBSIDIARIES
PROFORMA CONSOLIDATED STATEMENT OF INCOME (FOR THE ACQUISITION)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
<TABLE>
Historical United
The Craven American
Craven & Companies, Providence Proforma Companies, Inc.
Ruth, Inc. LLC Capital I,Inc. adjustments (Newco)
Proforma
<S> <C> <C> <C> <C> <C>
REVENUES $1,141,908 $1,141,908
COST OF REVENUES 659,203 659,203
---------- ---------- --------- ------- ----------
GROSS PROFIT 482,705 482,705
OPERATING EXPENSES 425,231 $ 47,106(1) $ 5,371 477,708
DEPRECIATION 6,719 6,719
---------- ---------- ---------- --------- ----------
OPERATING INCOME
(LOSS) 50,755 $ (47,106) (5,371) (1,722)
INTEREST EXPENSE 355 355
INCOME (LOSS) BEFORE
TAXES 50,400 (47,106) (5,371) (2,077)
INCOME TAX PROVISION--------- ---------- ---------- ----------(2)-----------
NET INCOME (LOSS) $ 50,400 $ (47,106) $ (5,371) $ (2,077)
</TABLE>
Notes to Unaudited Proforma Financial Statements
(1) Reflects expenses for legal services provided during the six month period
ended June 30, 2000.
(2) No provision for income taxes in made due to absence of proforma
consolidated taxable income.
<PAGE>
<TABLE>
<CAPTION>
UNITED AMERICAN COMPANIES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED BALANCE SHEET (FOR THE ACQUISITION)
AS OF JUNE 30, 2000
(Unaudited)
Historical
United United American
Craven & The Craven American Providence Proforma Companies, Inc.
Ruth, Inc. Companies, LLC Companies,Inc. Capital I, Inc. Adjustments (Newco)
Proforma
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash equivalents $ 7,493 698 $ 8,191
Accounts receivable 49,134 49,134
Total Current Assets 56,627 57,325
PROPERTY AND EQUIPMENT, NET 39,654 39,654
Total Assets 96,281 698 96,979
LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES
Accounts Payable and other
accrued expenses 58,100 47,106(1) 17,325 (17,325)(2) 105,206
Curent maturities of long-
term debt 7,096 7,096
Total Current Liabilities 65,196 47,106 17,325 (17,325) 112,302
LONG TERM DEBT 15,303 15,303
SHAREHOLDERS' EQUITY
(DEFICIENCY)
Preferred stock, $.001 par
value, 50,000,000 shares
authorized and
outstanding: none
Common stock, $.001 par
value, 50,000,000 shares
authorized and 15,000,000
outstanding 1,000 698 1,500 11,802 (3) 15,000
Paid in Capital 4,960 (4,960) (3)
Receivable from shareholders (1,000) (1,000)
Retained earnings (deficit) 15,782 (47,106) (23,785) 10,483(3) (44,626)
Total shareholders' equity
(deficiency) 15,782 (47,106) 698 (17,325) 17,325 (30,626)
Total liabilities and
shareholders' equity
(deficiency) 96,281 698 96,979
</TABLE>
Notes to unaudited proforma financial statements
(1) Reflects accrual for legal services provided during the six months ended
June 30, 2000.
(2) Reflects the cancellation, as of the date of the merger, of the payable
recorded at PCI, pursuant to the agreement of merger.
(3) Reflects the adjustment to equity related to the accounting for the
exchange of shares of Craven & Ruth, Inc. for shares of UAC and in turn the
exchange of shares of UAC for shares of PCI in conjunction with the merger
transaction between UAC and PCI, such transaction being accounted for as a
reverse acquisition.
<PAGE>
(c) Exhibits.
1. Plan of Merger, dated as of August 16, 2000, by and among Providence
Capital I, Inc, and United American Companies, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED AMERICAN COMPANIES, INC.
By: /s/ Arnold E. Pitoniak
Arnold E. Pitoniak, Chief Executive Officer
Dated: November 8, 2000
