**U.S. SECURITIES AND EXCHANGE COMMISSION**

WASHINGTON, D.C. 20549

FORM 10-KSB

(MARK ONE)
 

[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES

      EXCHANGE ACT OF 1934

      FOR THE FISCAL YEAR ENDED:**JUNE 30, 2002**

OR

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE

      SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD

              FROM _________ TO ________
 

COMMISSION FILE NO.

 

**PROVIDENTIAL HOLDINGS, INC.**

(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

NEVADA                                                                                                                                              13-3121128

(STATE OR OTHER JURISDICTION OF                                                                                   (I.R.S. EMPLOYER

INCORPORATION OR ORGANIZATION)                                                                               IDENTIFICATION NO.)

 

8700 WARNER AVENUE, SUITE 200, FOUNTAIN VALLEY, CA          92708

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)               (ZIP CODE)

(714) 596-0244

ISSUER'S TELEPHONE NUMBER

   SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:

NAME OF EACH EXCHANGE                TITLE OF EACH CLASS:

ON WHICH REGISTERED:

NONE                                                                       NONE

SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:  NONE

Check whether the issuer (1) has filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or for suchshorter period that the Company was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.

                         YES [X]            NO []

Check if disclosure of delinquent filers in response to Item 405 of RegulationS-B is not contained in this form, and no disclosure will be contained, to thebest of registrant's knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment tothis Form 10-KSB. [ ]

State the issuer's revenues for the fiscal year ended 6/30/2002:

 
None (except consulting income of $602,000).

The aggregate market value of the voting and non-voting equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of June 30, 2002 was $2,691,185 based on a price of $0.0585 per share.

 

The number of shares of  Common Stock, $.04 par value per share,

outstanding as of June 30, 2002 was: 46,003,157 shares (including 11,800,000 treasury shares).

 
Transitional Small Business Disclosure Format (check one):

YES [ ]      NO [X]

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

THIS REPORT CONTAINS  STATEMENTS THAT ARE  FORWARD-LOOKING AND ARE MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.  WHEN  USED  IN  THIS REPORT,   THE  WORDS  "BELIEVES,"  "PLANS," "ESTIMATES," "EXPECTS,"  "INTENDS,"  "ANTICIPATES,"  "MAY,"  "WILL," "SHOULD," "COULD," "FORTHCOMING,"  "UPCOMING" AND SIMILAR EXPRESSIONS, TO THE EXTENT USED, ARE INTENDED TO IDENTIFY FORWARD-LOOKING  STATEMENTS.  ALL FORWARD-LOOKING  STATEMENTS ARE BASED LARGELY ON CURRENT  EXPECTATIONS AND BELIEFS  CONCERNING FUTURE EVENTS THAT ARE SUBJECT  TO  SUBSTANTIAL  RISKS AND UNCERTAINTIES.  ACTUAL  RESULTS  MAY DIFFER MATERIALLY  FROM  THE

RESULTS  SUGGESTED  HEREIN.  FACTORS  THAT  MAY  CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES  INCLUDE,  BUT ARE NOT LIMITED TO, THE COMPANY'S ABILITY TO  DEVELOP AND SUCCESSFULLY  MARKET THE PRODUCTS AND SERVICES  DESCRIBED IN THIS REPORT (AND THE COSTS ASSOCIATED  THEREWITH);  THEIR  ACCEPTANCE IN THE MARKETPLACE; TECHNICAL  DIFFICULTIES OR ERRORS IN THE PRODUCTS AND/OR SERVICES; THE COMPANY'S CUSTOMER AND ACTIVE PROSPECT BASE CONTAINING ASUBSTANTIALLY LOWER NUMBER OF INTERESTED  CUSTOMERS THAN THE COMPANYANTICIPATES;  THE FAILURE TO CONSUMMATE THE PENDING JOINT VENTURES ANDACQUISITIONS AT ALL (OR ON A TIMELY BASIS) DUE TO VARIOUS REASONS; DIFFICULTY INTEGRATING OR MANAGING MULTIPLE COMPANIES FROM  TECHNOLOGY, OPERATIONAL  AND MARKETING  ASPECTS; THE SUCCESS (AND COST) OF NEW  MARKETING  STRATEGIES  AS A RESULT  OF MERGERS AND ACQUISITIONS; UNFAVORABLE  CRITICAL  REVIEWS;  INCREASED  COMPETITION (INCLUDING PRODUCT  AND PRICE COMPETITION); ENTRANCE  OF NEW  COMPETITORS  INTO  THE MARKET;  TIMING  AND  SIGNIFICANCE  OF ADDITIONAL  NEW  PRODUCT AND  SERVICE  INTRODUCTIONS  BY THE  COMPANY  AND  ITS COMPETITORS; GENERALECONOMIC  AND  MARKET  FACTORS,   INCLUDING CHANGES  IN SECURITIES AND FINANCIAL  MARKETS;  TECHNOLOGYOBSOLESCENCE, THE ADEQUACY OF WORKING CAPITAL,CASH FLOWS AND AVAILABLE FINANCING TO FUND THE COMPANY'S BUSINESS MODEL AND THE PROPOSED ACQUISITIONS OR INVESTMENTS ;  AND OTHER  RISKS AND UNCERTAINTIES INDICATED THROUGHOUT THIS REPORT AND FROM  TIME TO TIME IN THE  COMPANY'S RELEASES AND FILINGS  INCLUDING WITHOUT LIMITATION FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.

As  used in this  report,  the  terms  "we,"  "us,"  "our,"  the "Company"  and "Providential Holdings"  mean Providential Holdings,  Inc. and the term "common stock" means  Providential Holdings, Inc.'s  common  stock,  $.04 par  value  per share (unless context indicates a different meaning).

**PART I**

**ITEM 1. BUSINESS OVERVIEW**

**INTRODUCTION**
 

ProvidentialHoldings, Inc., ("PHI") a diversified holding company committed to increasingshareholder value through growth, focuses on selective technologies, financialservices, international markets, and special situations. Products and servicesinclude liquid crystal displays (LCD's), information technology, identificationtechnologies, mobile entertainment systems, industrial machinery and equipment,telecommunications, and computer hardware and software. PHI also providesexpertise on trade commerce, financial services, and mergers and acquisitions,especially for companies in the U.S. and emerging overseas markets with highpotential for growth.

The company's objective is to develop, operate and participate in selectedbusinesses chosen to strategically utilize its existing and future distinctivecompetencies and generate attractive risk-adjusted rates of return for itsshareholders and investors.

**BACKGROUND**

Providential Holdings, Inc. ("PHI" or “Providential") was organized under thelaws of the State of Nevada on June 8, 1982 under the name of JR Consulting,Inc. The company changed its name to Providential Securities, Inc., a Nevadacorporation, on January 12, 2000, and subsequently changed its name toProvidential Holdings, Inc. on February 9, 2000. From its inception throughSeptember 7, 1995, the Company generated nominal revenues and did not activelyengage in business. Prior to the corporate combination agreement withProvidential Securities, Inc., JR Consulting had an operating subsidiary, DivaEntertainment, Inc ("Diva"), which operated two modeling agencies, one in NewYork and one in California.

Providential Securities, Inc., a California Corporation ("ProvidentialSecurities") was incorporated in the State of California on October 8, 1992.  Itoperated a securities brokerage service in California, New York and Oregon.  The principal markets for Providential Securities' services were individualinvestors who were located throughout the United States. Providential Securitiesbought and sold securities for its customers through a number of differentmarkets, utilizing a brokerage clearinghouse to transact the trades. Due to theresults of an NASD examination, Providential Securities withdrew its membershipand ceased its securities brokerage business in October 2000.

Since November 2000, the Company has reorganized its primary scope of businessto the present form to focus on four main areas: (1)Technologies, (2) Financialservices, (3) International markets, and (4) Special Situations.

**REORGANIZATION**

On October 28, 1999 JR Consulting entered into a corporate combination agreement(the "Agreement") with Providential Securities, whereby JR Consulting acquiredall the outstanding shares of Providential Securities in exchange for 20,000,000

shares of JR Consulting (then renamed Providential) common stock. Thetransaction was consummated on January 14, 2000. In addition, as a covenantunder the Agreement, Providential was required to enter into an agreement tosell to Havilland Limited all of the shares of Diva owned by Providential aswell as to assign all of its rights, title and interest in an Option Agreementto Havilland Limited. JR Consulting's officers and directors resigned from theirpositions and the shareholders of Providential Securities assumed control of thetwo entities (together as "the Company"). The shares issued in the merger are restricted against resale pursuant to the provisions of federal and statesecurities laws. Providential Securities' shareholders of record as of theclosing date owned approximately 75% of Providential's common stock.  Theacquisition has been treated as a capital transaction in substance, rather thana business combination, and was deemed a "reverse acquisition" for accountingpurposes.   Accordingly, Providential Securities was the accounting acquirer andthe historical financial statements prior to January 14, 2000 were those ofProvidential Securities. In the accompanying financial statements, the capitalstructure and losses per share of Providential Securities have beenretroactively restated to reflect the acquisition as if it occurred at thebeginning of the period. The operations of Providential have been included withthose of Providential Securities from the acquisition date.

The sale of Diva was concluded on June 30, 2000, at which time all of the sharesof Diva owned by Providential as well as all of its rights, title and interestin the Option Agreement were exchanged for assignment to and assumption byHavilland Limited of the amounts due by Providential to officers of the Company amounting to $617,781, the amounts due to Providential from Diva amounting to$94,843 and the return of 135,000 shares of common stock of Providential ownedby Havilland.  The total gain resulting from the sale of Diva of approximately$1.2 million was considered in the allocation of the purchase price to theassets and liabilities of Providential.  Included in the total gain of $1.2million was Diva's net profit of $245,606 earned during the interim holdingperiod from January 14, 2000 to June 30, 2000.

**BUSINESS RESTRUCTURING**

Since the discontinuance of its securities brokerage operations in October 2000,the Company has restructured its primary scope of business to include thefollowing areas: (1)Technologies, (2) Financial services, (3) Internationalmarkets, and (4) Special Situations. Events and developments relating to theseareas are described in more detail below.

**SUBSIDIARIES:**

**ATC TECHNOLOGY CORP.**

 

ATC Technology Corporation, established in 2001 as an Arizona corporation,manufactures mobile entertainment products, including VidegoTM and GamegoTM.  The VidegoTM, winner of the prestigious 2001 Innovation Engineering and DesignAward from IDSA (Industrial Designers Society of America), is one of the finestand affordable car theater systems available to consumers.  With its wirelessviewing monitor, which attaches easily to the back of any automobile headrest,the patent-pending VidegoTM system provides consumers with the highest qualityDVD and Video players and hours of entertainment while traveling.  

 
Launched in 2002, the GamegoTM allows people of all ages the opportunity to playvideo games in the car, RV, SUV, van or boat by connecting our product to anexisting Microsoft X-BoxTM, Sony Playstation2TM, or Nintendo GamecubeTM.  Like theVidegoTM, the GamegoTM also has a viewing monitor which attaches easily to theback of any automobile headrest.  Its portability enables video-gamers to taketheir favorite videogames out of the home and to the places they want to be.  

ATC Technology Corporation currently sells both of these U.S. manufacturedexciting products in the United States, Mexico, Canada, Denmark, Panama, andGreat Britain. It is also selling direct to well-known car dealers such as: LandRover, Mercedes Benz, Lexus, Ford, Honda and Toyota. The company soon expects tosee its products on the shelves of major superstores throughout North America.  

 
On August 23, 2002, the Company entered into a purchase agreement with ATCTechnology Corp. to purchase all issued and outstanding shares of ATC TechnologyCorp. For consideration, the Company agreed to deliver $250,000 in promissorynote, non-interest bearing, payable 270 days after closing, and $250,000 inpromissory note, non-interest bearing, payable 18 months after closing,3,000,000 shares of restricted stock of the Company with an option of additionalshares to be issued after 270 days if the stock price does not reach $.30,1,000,000 shares of restricted stock of the Company with an option of additionalshares to be issued after one year if the stock price does not reach $.30. 

 

As a result of the closing of this transaction on September 12, 2002, ATCTechnology Corp has become a wholly-owned subsidiary of PHI.

**SLIMTECH**

SlimTech is a Nevada startup company that focuses on the distribution of liquidcrystal display (LCD) and consumer electronics products. Pursuant to a StockAcquisition purchase agreement (the "Acquisition Agreement") on April 30, 2002,the Company exchanged 3,000,000 shares of newly issued common stock for10,200,000 shares of the common stock of SlimTech, Inc., which constitutesapproximately 57% interest in SlimTech, Inc. The acquisition was approved by theunanimous written consent of the Board of Directors on June 14, 2002.

This company has received orders for 15" flat-panel computer monitors valued atmore than $300,000,000 from a Chinese government unit and a California-basedcomputer reseller. PHI has retained the London Manhattan Company as theexclusive investment banker to secure up to $21,750,000 purchase order financingto fulfill these orders.  As of the date of this report, SlimTech has notgenerated any revenues from these purchase orders.

**PROVIMEX DIVISION**

Provimex is a wholly-owned division of the Company originally formed on April10, 2001 under the name "Providential Imex", to focus on trade commerce withVietnam. This division changed its name to Provimex on July 5, 2001. Provimex isengaged in exporting and importing of industrial and consumer goods. The Companybelieves that its trade commerce business will grow substantially as a result ofthe ratification of the Trade Agreement between Vietnam and the United States.Provimex had no assets or operations as of June 30, 2002 and only began to generate revenues from its import and export activities sinceAugust 2002. The Company expects to register substantial revenue growth throughthis division in the fiscal year 2003.

**PROVIDENTIAL CLEARING, INC.**

During February 2000 the Company formed a California corporation, ProvidentialClearing, Inc. as a vehicle to effectuate the purchase of a self-clearingbroker-dealer and to operate a securities clearing firm. This subsidiary had nooperations and was dissolved in September 2002 by unanimous consent of the Boardof Directors of the Company.

**PROVIDENTIAL ADVISORY SERVICES, INC.**

Providential Advisory Services, Inc. (Providential Advisory Services) was formedin February 2000 as a California corporation. Its mission is to createdistinctive value and enrich client's lives by providing high quality investment

advisory services that help improve their asset value over time. ProvidentialAdvisory Service will seek to provide investment advisory services to individualand institutional clients for both short-term and long-term results.

The Company purchased 60 percent of the outstanding shares of this entity inJuly 2001 for $1,000. As of the date of this report this corporation has had nosales, cost of sales or gross profit.

**INVESTMENTS:**

**INVESTMENT IN PROVIDENTIAL TECHNOLOGY, INC.**

The Company purchased less than 10 percent of the outstanding shares ofProvidential Technology, Inc.  This corporation was engaged in softwaredevelopment for financial service providers. The Company provided the initialfunding of $165,000 for Providential Technology to develop a market-timingprogram and an online trading platform for equities. These projects were

discontinued in October 2000 due to lack of additional funding. This investmenthas been recorded at no value and any funds invested into this corporation havebeen written off in the previously reported financials.

**INVESTMENT IN CLEARPASS**

The Company entered into a letter of intent to provide funding of $10,000,000for minimum of 33% equity in ClearPass. ClearPass is a manufacturing company forsecurity systems and related equipment using an innovative biometricidentification technology. The Company invested $15,000 during the fiscal yearended June 30, 2002. This amount has been reflected as investment in thefinancial statements on June 30, 2002. 

**MINORITY INTEREST IN DATALOGIC INTERNATIONAL, INC.**

Datalogic Consulting, Inc., a Texas corporation, is an IT consulting firm and aSAS Institute Quality Partner. The Company has assisted Datalogic in connectionwith its merger plan with Topclick International, Inc. and other developmentstrategies. On April 25, 2001, but effective April 18, 2001, Datalogic Consulting, Inc. and the Company entered into an agreement whereby the Companywould receive 10 percent equity in the new company that would result from theconsummation of the proposed merger between Datalogic Consulting, Inc. andTopclick International, Inc. The merger plan between Datalogic and Toplick

was consummated on July 20, 2001.  The fee for the merger and acquisitionconsulting services the Company performed resulted in 2,666,922 shares ofDatalogic International, Inc. (the new name for Topclick International, Inc.).The Company has received 1.2 million shares as of the date of this report.

**MINORITY INTEREST IN LEXOR INTERNATIONAL, INC.**

On October 9, 2001, the Company entered into an agreement to provide merger andacquisition consulting services to Lexor International, Inc., a Marylandcorporation, and to assist Lexor in its business combination plan withPan American Automotive Corporation, a Delaware corporation. According to theagreement, the Company will be receiving 10% equity interest in the resultingcompany as compensation for its advisory and consulting services. On October 22,2001, Pan American signed a definitive agreement to acquire 100% of Lexor inexchange for stock in Pan American. This transaction was closed on November 5,2001. The Company has received 2,476,191 restricted shares of LexorInternational Inc.'s common stock (after a seven-to-one reverse split and asubsequent ten-to-one reverse split) as a fee for its service. 

Lexor International, Inc. is a leading manufacturer and supplier of premiumpedicure spa products. The Company is positioned to provide other product linesto the US and international beauty care industry. Headquartered in Baltimore,Maryland, Lexor International, Inc. also operates its own manufacturing facilities in Vietnam, an emerging market with high potential for growth.

As of the date of this Lexor has not begun the process of filing the requiredregistration statement to become a fully-reporting company.

**STRATEGIC ALLIANCES:**

**AGREEMENT WITH INTERNATIONAL CENTER FOR TRAINING AND CONSULTING,**

**VIETNAM'S MINISTRY OF TRADE AGREEMENT**

International Center for Training and Consulting (ICTC) is an organization underthe Ministry of Trade of Vietnam that promotes economics, trade, investment andtraining activities between Vietnam and foreign entities. PHI and ICTC signed anagreement in March 2001 to cooperate in the areas of trade, economics, andtechnology. ICTC is responsible for representing PHI in connection withappropriate Vietnamese organizations, businesses, and individual businessmen andinvestors in Vietnam. ICTC will also perform consulting services and provideinformation on various economic, trade and investment projects as may berequired by PHI. Fees between the parties will be negotiated on an as projectbasis
.  
As of the date of this report ICTC has introduced Vietnam-based DeltaElectromechanis Co., Ltd., a manufacturer of electric bicycles, and Nam HiepCo., Ltd., a manufacturer of organic fertilizer and construction company to PHIas potential joint venture partners; however, there have been no projectscompleted.
 

**AGREEMENT WITH CHU LAI INDUSTRIAL ZONE, QUANG NAM PROVINCE, VIETNAM**

 

The Company has entered into an agreement with Chu Lai Industrial Zone (the "ChuLai Zone") Authority, Quang Nam Province, Central Vietnam, to develop thisindustrial and export processing zone. On May 4, 2001, the government of Vietnamapproved a $50 million infrastructure development program targeting the Chu LaiZone. Construction began on May 18, 2001.

 

Chu Lai is centrally located near three Southeast Asian nations and isconvenient to Vietnam's Highway One, the Trans-Viet Railroad, an internationalport suitable for ocean-going ships and a major airport. Part of the overallplan that includes 27,000 acres, the North Chu Lai Industrial Zone has set aside740 acres for facilities engaged in paper products, agricultural, maritime andforest products, consumer electronics, leather and footwear manufacturing, foodand beverage operations and glassware and crystal fabrication.

 

Foreign investment entities approved for development projects in the Chu LaiIndustrial Zone enjoy opportunities to lease land at $0.001 per squarefoot/year, to secure 50-year leases renewable for 20 years, plus exemptions fromnational and provincial land use taxes, a 10-year income-tax holiday, andexemptions from export taxes from two to four years, based on the size of the

investment made.

 

According to this agreement, the Chu Lai Zone will provide the necessaryinfrastructure and the Company will be the manager organizing the differentcompanies that will operate their businesses at this location.

 

**MEMORANDUM OF AGREEMENT AND PRINCIPLE CONTRACT WITH VIETNAM'S CENTER OF TELECOMTECHNOLOGY**

 

Center of Telecom Technology (CTT) is an organization under the National Centerfor Natural Science and Technology of Vietnam.  Established in 1990, CTT'smission is to recruit and develop professionals in the areas of electronics,telecommunications, and information technology and to provide related productsbased on advanced technologies. One of CCT's largest customers is the VietnamesePostal and Telecommunications Services. CTT also focuses on ruraltelecommunications in Vietnam. 

 

On March 23, 2002, the Company entered into a Memorandum of Agreement andPrinciple Contract with the Center of Telecom Technology (CTT), Vietnam tocooperate in the areas of wireless access networks, consultancy services andother business ventures in Vietnam. The two parties will collaborate to form ajoint venture enterprise or strategic alliances with appropriate Vietnameseentities to provide wireless access services to consumers, businesses andgovernment organizations throughout Vietnam.

**JOINT VENTURES:**

 

**JOINT VENTURE AGREEMENT WITH HTV CO., LTD - MANNA TECHNOLOGIES**

 

The Company entered into a Joint Venture Agreement with HTV Co., Ltd. of Ho ChiMinh City, Vietnam in January 2001 to form Manna Technologies for the purpose ofmanufacturing LCD products. Manna Technologies received its permit from theVietnamese government in March 2001. The manufacturing plant is to be located inDong Nai Province, Vietnam. The Company is committed to assist in funding the cost of the plant, which is expected to be approximately $35 million.Management estimates that, once established, the plant may generate up to $500million in revenues by its third year of operation. The construction has notstarted and is expected to take at least nine months to complete after fundingis available.

 

**JOINT VENTURE AGREEMENT WITH MIMI BAN**

 

On November 27, 2001 by effective November 23, 2001, the Company signed a jointventure agreement with Mimi Ban, an individual, whereby Mimi Ban would transferthe liquid crystal display (LCD) technologies to Providential for the purpose ofsetting up and operating one or more LCD manufacturing plants in Vietnam.  According to the joint venture agreement, Mimi Ban will share 30%, ProvidentialHoldings, Inc. will share 60% and other business partners and investors,including HTV Co., Ltd., will share 10% of the net profits that will begenerated from any and all LCD plant(s) that will be established in Vietnam and

elsewhere as a result of this agreement. This joint venture agreement supersedesall prior agreements, arrangements and covenants, including but not limited tothe Joint Venture Agreement between Boxo, Inc. and the Company dated January 4,

2001 and the Letter of Intent between Boxo, Inc. and the Company dated December20, 2000 and any amendment thereof. As of the date of this report there havebeen no manufacturing plants set up or operating.

 

**JOINT VENTURE WITH MINH HIEU COMPANY**

 

On January 1, 2002 the Company entered into an agreement with Minh Hieu JointStock Company of Ho Chi Minh City, Vietnam to form "Providential JVC," a jointventure company under the laws of the Socialist Republic of Vietnam. Accordingto the terms of the agreement, the Company will contribute $140,000 to theinitial required capital and own 70% of Providential JVC while Minh Hieu Company will contribute $60,000 for 30% of the joint venture enterprise.Providential JVC's main line of business will include industrial garments,packaging products and accessories. No capital contribution has been made todate.

 

**LETTERS OF INTENT:**

 

**LETTER OF INTENT WITH VINET COMMUNICATIONS, INC.**

 

Established in 1996, Vinet Communications is a leading full-service IT solutionsprovider that furnishes web hosting, web design, software programming, projectmanagement and other IT services to both the ethnic and mainstream markets.  TheCompany entered into a Letter of Intent in January 2001 to acquire a majorityinterest and ultimately 100% of Vinet Communications for a combination of cashand stock.  No agreement has been consummated as of the date of this report.
 

**LETTER OF INTENT WITH XMS EQUIPMENT, LLC**

 

XMS Equipment, an Arizona Limited Liability Corporation, specializes inproviding repair and manufacturing services for the mining industry locatedthroughout the United States and in other foreign countries including, but notlimited to, Canada, Chile, and Australia.

 

On November 27, 2001 the Company signed a Letter of Intent to acquire 75% of theoutstanding capital stock of XMS Equipment, LLC, an Arizona limited liabilitycompany, for $1,200,000 in cash. 

 

The Company is in the process of proposing a revised offer to acquire 100% ofXMS, subject to availability of funds and other conditions.

 

**LETTER OF INTENT WITH NETTEL GLOBAL COMMUNICATIONS CORP.**

 

Nettel Global Communication Corporation, a Delaware corporation with principalbusiness address in Portland, Oregon, provides long-distance telephony and VoIP(Voice-Over-Internet-Protocol) services to over 40 countries and operates anexport and import division under the name of Nettel Trading. Besides, Nettel isalso engaged in information technology services. Based on existing and pendingcontracts, Nettel expects combined revenues of the long-distance business,Nettel Trading and other divisions to exceed $150 million over the next twelvemonths.

 

On March 13, 2002 the Company entered into a Letter of Intent to acquire a 51%common stock of Nettel Global Communication Corp. (“Nettel") for a combinationof $2,250,000 in cash and $250,000 in common stock of Providential Holdings,Inc. In addition, if Nettel's aggregate net profits for the twelve-month periodcommencing the closing of this transaction are equal or greater than thethreshold  amount of $2,500,000 then Nettel shall be entitled to a dividendpayment of fifty percent (50%) of any and all profits in excess of saidthreshold amount for the above-mentioned period.

 

The consummation of this transaction is subject to the signing of a definitiveagreement between Nettel and the Company after a satisfactory due diligencereview by the Company and the availability of funds.

 

**SPECIAL NOTE ON ACQUISITIONS**

 

The Company is in the process of evaluating various opportunities andnegotiating to acquire other companies and technologies. Acquisitions entailnumerous risks, including difficulties in the assimilation of acquiredoperations and products, diversion of management's attention from other businessconcerns, amortization of acquired intangible assets and potential loss of keyemployees of acquired companies. We have limited experience in assimilating acquired organizations into our operations. Although potential synergy may beachieved by acquisitions of related technologies and businesses, no assurancecan be given as to the Company's ability to integrate successfully anyoperations, personnel, services or products that have been acquired or might beacquired in the future. Failure to successfully assimilate acquiredorganizations could have a material adverse effect on the Company's business,financial condition and operating results.

 

**STRATEGY**

 

Providential Holdings' strategy is to:

 

      1. Identify, build, acquire and deploy valuable resources with distinctivecompetitive advantages;

 

      2. Identify, evaluate, participate and compete in attractive businessesthat have large, growing market potential;

 

      3. Design and implement best-of-breed management systems; and

 

      4. Build an attractive investment that includes points of exit forinvestors through capital appreciation or spin-offs of business units.

**ITEM 2. DESCRIPTION OF PROPERTIES**

 

Property and equipment at June 30, 2002 consist of the following:

 

    Furniture and equipment:                     $107,005

    Automobiles:                                              81,103

                                                                     -----------

                                                                      $188,108

    Less: Accumulated depreciation          (135,650)

                                                                    ------------

    Net:                                                            $ 52,458

                                                               ==========
 

The Company depreciates its furniture, equipment and automobiles on a straight-line basis over an estimated useful life of 5 years.

 

Depreciation and amortization expense was $30,317 and $132,950 for the twelveended June 30, 2002 and June 30, 2001, respectively.

 

On June 22, 2001 the Company completed sale of its corporate office building.The Company recognized a gain, net of broker and escrow fees, of $551,179 on thesale.  The Company currently leases its office space from the new owners at$4,263 per month. 

**ITEM 3. LEGAL PROCEEDINGS AND ARBITRATIONS**

 

Other than as set forth below, the company is not a party to any materialpending legal proceedings and, to the best of its knowledge, no such action byor against the company has been threatened. The majority of the legalproceedings and arbitration cases are related to the discontinued operations ofProvidential Securities, Inc.

 

**LEGAL PROCEEDING SETTLED AND UNPAID AS OF YEAR-END:**

 

QUANG VAN CAO AND NHAN THI NGUYEN CAO VS. PROVIDENTIAL SECURITIES, INC. ET AL.

 
This case was originally submitted to Orange County Superior Court, CA on June25, 1997, Case No. 781121, and subsequently moved to NASD Dispute resolution forarbitration. On or about August 24, 2000, the Company's legal counsel negotiatedwith the Claimant's counsel and unilaterally reached a settlement that had notbeen approved by the Company. While the Company was in the process of re-negotiating the terms of said settlement, the Claimants filed a request forarbitration hearing before the National Association of Securities Dealers onOctober 4, 2000, Case No. 99-03160. Thereafter, the Claimants filed a complaint

with the Orange County Superior Court, CA on October 31, 2000, Case No.00CC13067 for alleged breach of contract for damages in the sum of $75,000.00plus pre-judgment interest, costs incurred in connection with the complaint, andother relief. Without admitting or denying any allegations, the Company reacheda settlement agreement with the Claimants whereby the Company would pay theClaimants a total of $62,500.00 plus $4,500.00 in administrative costs. As thedate of this report, the Company has paid $2,500 and is subject to an entry ofjudgment for $79,000.  The settlement amount has been accrued in theaccompanying consolidated financial statements.

 

CONSECO FINANCE VENDOR SERVICES CORPORATION FKA GREEN TREE VENDOR SERVICES CORPORATION VS. PROVIDENTIAL SECURITIES, INC., HENRY D. FAHMAN AND TINA T. PHAN

 

InSeptember 1997 Providential Securities, Inc. entered into a written LeaseAgreement to lease certain items of equipment from Green Tree Vendor Services,in return for which Providential Securities, Inc. agreed to pay thirty-sixmonthly installments, each in the amount of $1,552. On or about September 12,2000, and subsequently, Providential Securities, Inc. was unable to make themonthly payments to Claimant due to the lack of revenues following theinterruption and subsequent closure of its securities brokerage operations. (SeeNote 3) Claimant filed a complaint for money with the Superior Court of theState of California, County of Orange (Case No. 01CC02613) on February 23, 2001seeking $39,102 plus interest thereon at the legal rate from September 12, 2000.The claimant entered a judgment against Providential Securities, Inc., Henry Fahman and Tina Phan for $48,933. The judgment amount has been accrued in theaccompanying consolidated financial statements.

FRANCIS VAUSE, MARK VAUSE, FRANCIS VAUSE, JR., IAN VAUSE AND MARGARET HODSON VS.JERSEY TRANSFER & TRUST COMPANY AND PROVIDENTIAL HOLDINGS, INC.

 

Claimants filed a complaint with the United States District Court, District ofNew Jersey (Case No. 00-4353(JAGF) on September 6, 2000 seeking damages of$500,000 against Jersey Transfer & Trust Company and Providential Holdings, Inc.for refusing to remove the restrictive legends and register a total of 568,332shares of Rule 144 stock held by Claimants. Providential Holdings, Inc. andJersey Transfer & Trust Company ("Defendants") relied on representation by theformer management of JR Consulting, Inc., later changed to ProvidentialHoldings, Inc., that the captioned shares were not free of all encumbrances andwere issued for invalid consideration. Defendants are vigorously defending thecase and have cross-claimed against the appropriate former management of JRConsulting, Inc. The sought amount of $500,000 has been accrued in theaccompanying consolidated financial statements. 

 

JAMES C.HU VS. MINGMAN HU AND PROVIDENTIAL SECURITIES, INC.

 

Mingman Hu was a registered representative with Providential Securities, Inc.who served Claimant's investment account. Claimant filed a complaint with theLos Angeles County Superior Court, Northeast District on April 27, 2001 (CaseNo. G0027156) seeking compensatory damages in the amount of $11,609.11 plus 12% interest and emotional distress damages in excess of $50,000.00 for Mingman Hu'sfailure to honor her written agreement with Claimant. Mingman Hu was anindependent contractor with Providential Securities, Inc. and was responsiblefor any alleged claims by Claimant. Providential Securities, Inc. willvigorously defend this case.  The sought amount of $61,609 has been accrued in the accompanying consolidated financial statements.

 

LAWRENCE NGUYEN VS. HENRY D. FAHMAN, PROVIDENTIAL HOLDINGS, INC. AND HUNG NGUYEN aka TONY NGUYEN

 

On December 19, 2000 Henry D. Fahman executed a Demand Promissory Note andpledged 1,049,600 shares of common stock of Providential Holdings, Inc. for apersonal loan in the amount of $150,000 from Claimant. This note was amended onFebruary 22, 2001 to mature on March 19, 2001. Henry D. Fahman repaid $25,000 toClaimant and requested an extension for repayment of said note to July 15, 2001, which was agreed by Claimant and guaranteed by Mr. Derek Nguyen, a mutualfriend of both Claimant's and Henry D. Fahman's. On May 31, 2001, Claimant fileda complaint with the Superior Court of California, County of Orange, CentralJustice Center (Case No. 01CC07055) seeking $125,000 plus interest at the highest rate allowed by law from and after December 19, 2000, attorney fees andcosts, exemplary and punitive damages, and ownership of the pledged shares ofcommon stock of Providential Holdings, Inc. To date, Henry D. Fahman has repaida total of $45,000 toward the note and has expressed commitment to repay thebalance to the Claimant. The Company has not accrued any amount relating to thiscase in the accompanying consolidated financial statements.

 

IMPERIAL BUSINESS CREDIT, INC. VS. PROVIDENTIAL SECURITIES, INC., TINA T. PHAN, TIMOTHY DACK FAHMAN, THEODORE DACK FAHMAN, AND HENRY DACK FAHMAN

 

On or about November 20, 1997, Nara Bank, N.A. and Providential Securities, Inc.entered into a Written Lease Agreement ("Agreement") wherein Nara Bank, N.A.agreed to lease certain computer equipment to Providential Securities, Inc.Thereafter, the Agreement was assigned from Nara Bank, N.A. to Claimant's Assignor Oak Financial Services. Thereafter, the Agreement was assigned fromClaimant's Assignor to Claimant. Pursuant to the terms of the Agreement,Providential Securities, Inc. agreed to pay Nara Bank, N.A. the sum of $1,187.40per month for sixty months. On or about September 15, 2000, and subsequently,

Providential Securities, Inc. was unable to make the monthly payments toClaimant due to the lack of revenues following the interruption and subsequentclosure of its securities brokerage operations.  (See Note 3) Claimant filed acomplaint for money with the Superior Court of the State of California, Countyof Orange (Case No. 01CC07697) on June 14, 2001 seeking $30,873.40 plus interestthereon at the rate of ten percent (10%) per annum from September 15, 2000. Thiscase was settled on December 17, 2001. However, since Providential Securities,Inc. was unable to pay the settlement amount, Claimant entered a judgment for$79,681 on January 23,2002. Subsequently, $12,000 was paid by Mr. Fahman. Theunpaid judgment amount has been accrued in the accompanying consolidatedfinancial statements.

 

NGON VU VS. PROVIDENTIAL SECURITIES, INC.

 

Claimant was a former employee of Providential Securities, Inc. who was laid offin 2000 due to closure of business. The Claimant complained to the Department ofIndustrial Relations (DIR) for allegedly unpaid vacation and salaries. On June13, 2001, the DIR filed a request to enter a judgment against Providential Securities, Inc. for $9,074 including wages and interest, penalty, post hearingand filing fee. The sought amount of $9,074 has been accrued in the accompanyingconsolidated financial statements.

 

MARK TOW, ESQ. VS. PROVIDENTIAL HOLDINGS, INC.

 

This case is pre-arbitration. The Company hired Mark Tow, Esq. to prepare an SB-2 Registration Statement and prepaid him $25,000 in retainer. Because Mark Towwas unable to complete the work according to schedule, the Company hiredStradling Yocca Carson & Rauth to replace Mark Tow. Stradling Yocca Carson &Rauth completed the SB-2 Registration Statement and filed with the SEC on9/28/2000. Mark Tow sent the Company a letter in June 2001 seeking a total of$75,000.00 for his allegedly rendered service.    The Company has accrued$50,000 relating to this case in Accrued Expenses in the accompanyingconsolidated financial statements since the original agreement with Mark Tow wasfor a total service fee of $75,000 and the Company has already paid $25,000 as aretainer to be offset against the total fees. As of the date of this reportthere has been no filing for arbitration by Mark Tow. 

 

**ARBITRATION CASES**

 
The Company has several arbitration cases that are either pending or inpreliminary stages against Providential Securities, Inc. relating to the dailytrading operations of the Company.  The Company intends to defend each of thematters vigorously but may enter into a settlement where appropriate based onthe specific allegations involved and the potential cost to defend the matter.The total amount of damages sought by all the claimants of these cases is$131,850.  This amount has been accrued in the accompanying consolidatedfinancial statements.

 

 

**ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

          None.

**PART II**

**ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

 

On June 29, 1995 Company's Common Stock began trading on the Over the CounterBulletin Board (OTCBB) under the symbol "JRCI." Until December 12, 1999.  SinceDecember 12, 1999, the Common Stock was trading under the symbol "JRCIE." Following the corporate combination with Providential Securities, Inc. that was consummated on January 14, 2000, the Common Stock traded under the symbol"PRVH," until October 20, 2000 when it traded under the symbol "PRVHE" due tothe delay in its filing of Form 10-KSB for the period ended June 30, 2000. TheCompany's stock was trading under the symbol "PRVH" on the OTC Pink Sheets fromNovember 21, 2000 until April 3, 2002 when it was re-listed on the OTCBB.  Thefollowing sets forth the high and low prices of the Company's Common Stock forthe most recent month, most recent quarter and each quarter during the precedingtwo fiscal years.

 

The market for the Company's common stock is extremely limited and the pricesfor the Company's common stock quoted by brokers are not necessarily a reliableindication of the value of the Company's common stock.

Per Share Common Stock Prices by Quarter

For the Most Recent Month and Quarter

                                                                                                      High                        Low

 

     Month Ended September 30, 2002                                       0.090                        0.040

     Quarter Ended September 30, 2002                                                  0.100                            0.035

Per Share Common Stock Prices by Quarter

     For the Fiscal Year Ended on June 30, 2002

                                                 
                                                                                                      High                         Low

 

    Quarter Ended June 30, 2002                                                 0.850                          0.055

    Quarter Ended March 31, 2002                                              1.300                          0.050

    Quarter Ended December 31, 2001                                        1.000                          0.010

    Quarter Ended September 30, 2001                                       0.500                              0.010

 Per Share Common Stock Prices by Quarter

     For the Fiscal Year Ended on June 30, 2001

 

                                                                                                      High                           Low

 

     Quarter Ended June 30, 2001                                                0.500                                0.001

     Quarter Ended March 31, 2001                                             0.500                                0.001

     Quarter Ended December 31, 2000                                       0.312                            0.010

     Quarter Ended September 30, 2000                                      0.687                            0.312

**Holders of Common Equity:**

 

There are approximately 1,200 shareholders of record of the Company's commonstock.

 

**Dividends:**

 

The Company has not declared or paid a cash dividend to common stockshareholders since the Company's inception.  The Board of Directors presentlyintends to retain any earnings to finance company operations and does not expectto authorize cash dividends to common shareholders in the foreseeable future.Any payment of cash dividends in the future will depend upon the company'searnings, capital requirements and other factors.

 

The Company intends to issue share dividends from ATC Technology Corp. toshareholders of record in the quarter ending June 30, 2003, subject to certainconditions.

 

**ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.**

 

Except for the audited historical information contained herein, this reportspecifies forward-looking statements of management of the Company within themeaning of Section 27a of the Securities Act of 1933 and Section 21e of theSecurities Exchange Act of 1934 ("forward-looking statements") including,without limitation, forward-looking statements regarding the company's

expectations, beliefs, intentions and future strategies. Forward-lookingstatements are statements that estimate the happening of future events and arenot based on historical facts. Forward- looking statements may be identified bythe use of forward-looking terminology, such as "could", "may", "will","expect", "shall", "estimate", "anticipate", "probable", "possible", "should","continue", "intend" or similar terms, variations of those terms or the negativeof those terms.  The forward-looking statements specified in this report havebeen compiled by management of the Company on the basis of assumptions made bymanagement and considered by management to be reasonable. Future operatingresults of the Company, however, are impossible to predict and norepresentation, guaranty, or warranty is to be inferred from those forward-looking statements.  The assumptions used for purposes of the forward-lookingstatements specified in this report represent estimates of future events and aresubject to uncertainty as to possible changes in economic, legislative,industry, and other circumstances.  As a result, the identification andinterpretation of data and other information and their use in developing andselecting assumptions from and among reasonable alternatives require theexercise of judgment. To the extent that the assumed events do not occur, theoutcome may vary substantially from anticipated or projected results, and,accordingly, no opinion is expressed on the achievability of those forward-looking statements.  In addition, those forward-looking statements have beencompiled as of the date of this report and should be evaluated withconsideration of any changes occurring after the date of this report.  Noassurance can be given that any of the assumptions relating to the forward-looking statements specified in this report are accurate and the companyassumes no obligation to update any such forward-looking statements.

 

**RESULTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2002 AND JUNE 30, 2001**

 

**Revenues:**

 

Except for $602,000 of consulting fee income, we had no revenues for the twelvemonths ended June 30, 2002, as compared to $659,547 for the year ended June 30,2001.  The decrease in revenues is due to the discontinuance of the securitiesbrokerage operations of Providential Securities Inc. in 2001. 

 

**Operating Expenses:**

 

We incurred total operating expenses of $1,066,365 for the year ended June 30,2002 as compared to $2,291,245 for the year ended June 30, 2001. The decrease inoperating expenses is primarily the result of the discontinuance of thesecurities brokerage operations, the reduction of employees and the decrease inlitigation costs.

 

**Loss from operations:**

 

We incurred a loss from operations of $1,066,365 for the year ended June 30,2002 as compared to a loss from operations of $1,631,698 for the year ended June30, 2001. As mentioned above, this was mainly due to the result of thediscontinuance of the securities brokerage operations, the reduction ofemployees and the decrease in litigation costs.

 

**Net loss before income taxes:**

 

We had a loss before taxes of $1,622,198

for the year ended June 30, 2002 ascompared to a loss of $1,944,215 for the year ended June 30, 2001. The decreasein net loss before income taxes is due to the decrease in operating expenses.

 

**Net loss:**

 

We had a net loss of $1,239,543 for the year ended June 30, 2002 as compared toa net loss of $2,015,644 for the year ended June 30, 2001. The net loss based onthe basic and diluted weighted average number of common shares outstanding forthe year ended June 30, 2002 was ($0.04) as compared to that of ($.07) for theyear ended June 30, 2001.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

Our business plan was restructured in November 2000 and has been updated to itsnow-current form. We must continue to raise capital to fulfill our plan ofacquiring other companies and assisting in the development of those internally.The Company expects that the working capital cash requirements over the next 12months will be generated from operations and additional financing.

 

We had cash and cash equivalents of $4,700 and $14,000 as of June 30, 2002 andJune 30, 2001, respectively.  Our operating activities used $711,600 in the yearended June 30, 2002 and $1.4 million in the year ended June 30, 2001.  Thelargest use of cash in the 2002 period was from the net loss from continuedoperations, the increase in prepaid expenses and other assets, offset by the neteffect of normal fluctuations in operating asset and liability accounts. Thelargest use of cash in the 2001 period was from the net loss from continuedoperations, the adjustment for the gain on disposal of land and property offsetby the net effect of normal fluctuations in operating asset and liabilityaccounts.

 

Cash provided in the 2002 period by financing activities of $678,795 wasprimarily from borrowings on notes payable offset by payments on notes payable.

 

Our notes payable at June 30, 2002 consisted of the following:
 

(i) convertible promissory notes of $1.525 million, of which $1.35 million wasdue September 28, 2000 and $400,000 was due October 21, 2000 (principal andinterest), (of which $225,000 was paid as of the date of this report) with aneffective default interest rate of 12 percent, plus a 20% redemption premium ifpaid after 181 days from original issuance and an additional 2% monthly penalty if the registration statement is not declared effective as of September 28, 2000(As the date of this report, a registration statement is no longer neededbecause the holders of these notes can rely on Rule 144K exemption to convert

these notes into common stock of the company);  (ii) note payable of $125,000 toan individual, due June 30, 2001 (principal and interest) (which has not beenpaid as of the date of this report), with an interest rate of 8 percent;  (iii)a short-term note payable of $100,000 to a corporation due on demand, with aninterest rate of 12%, plus a 5% premium accrued each month the loan isoutstanding, secured by 500,000 of restricted shares of an officer;  (iv) threeshort-term notes payable totaling $165,000 to a corporation due on demand, withan interest rate of 12%, plus a 5% premium accrued each month the loan isoutstanding, each secured by 500,000 restricted shares of the Company andconvertible into common stock of the Company;  (v) a short-term note payable of$150,000 to an individual, secured by one million restricted shares of theCompany, with an attached fee of $15,000 due upon maturity of May 8, 2001 and anadditional fee of $15,000 due if paid after maturity, (this loan has not beenpaid as of the date of this report);  (vi) short-term loans to individuals for$115,000, due in July 2001 (unpaid as of the date of this report); (vii) short-term loans to individuals for $571,915 with open due dates; and (viii) two autoloans totaling $29,650.

 

The previously-reported $20 million equity line of credit from Boston-basedDutchess Private Equities Fund, L.P. was terminated in June 2002 because theCompany was unable to file a registration statement on time to draw down on theline. 

 

In July 2002, the Company secured a new $10 million equity line of credit fromLos Angeles-based Mercator Momentum Fund, L.P.  The line of credit's term isthree years.  The amount we can receive is dependent on the amount of freetrading shares put in an escrow account or an effective registration statement.We can draw down up to 90 percent of the market price (as defined in theagreement) of the registered shares or the free-trading shares deposited inescrow. The Company agrees to pay a 2 percent fee on the total value of theequity line, 1 percent of which will be payable in cash on the gross proceedsfrom the first drawdown and the remaining 1 percent fee payable in shares of theCompany's common stock.  As of the date of this report, no funds have beenreceived against this line of credit.

 

Our operations are currently financed through various loans. Management hastaken action and is formulating additional plans to strengthen the Company'sworking capital position and generate sufficient cash to meet its operatingneeds. Among the actions taken, we will be filing a Form SB-2 RegistrationStatement to raise additional capital and to draw down on the equity line ofcredit noted above.  We have also engaged the services of certain investmentbanking groups to arrange for senior debts, mezzanine financing and purchaseorder financing. In addition, the Company also anticipates generating morerevenue through its proposed merger and acquisition activities. No assurance canbe made that management will be successful in achieving its plan or thatadditional capital will be available on a timely basis or at acceptable terms.

 

**COMPANY'S PLAN OF OPERATION FOR NEXT 12 MONTHS**

 

After the divestiture of its Diva subsidiaries in June 2000 and thediscontinuance of its securities brokerage operations in October 2000, we haverestructured and updated our primary scope of business to focus on the followingareas: (1) PHI Technologies, (2) PHI Financial services, (3) PHI Internationalmarkets, and (4) PHI Special Situations.

 

    **1)  PHI Technologies:**

 

ATC TECHNOLOGY CORP.

 

On September 12, 2002, the Company acquired 100% of ATC Technology Corp. inexchange for $500,000 non-interest bearing notes and 4,000,000 shares ofrestricted common stock of the Company. ATC Technology Corporation, established in 2001 as an Arizona corporation,manufactures mobile entertainment products, including VidegoTM and GamegoTM.  The VidegoTM, winner of the prestigious 2001 Innovation Engineering and DesignAward from IDSA (Industrial Designers Society of America), is one of the finestand affordable car theater systems available to consumers.  With its wirelessviewing monitor, which attaches easily to the back of any automobile headrest,the patent-pending VidegoTM system provides consumers with the highest qualityDVD and Video players and hours of entertainment while traveling. 

 
Launched in 2002, the GamegoTM allows people of all ages the opportunity to playvideo games in the car, RV, SUV, van or boat by connecting our product to anexisting Microsoft X-BoxTM, Sony Playstation2TM, or Nintendo GamecubeTM.  Like theVidegoTM, the GamegoTM also has a viewing monitor which attaches easily to theback of any automobile headrest.  Its portability enables video-gamers to taketheir favorite videogames out of the home and to the places they want to be.

 
ATC Technology Corp. currently sells both of these U.S. manufactured products inthe United States, Mexico, Canada, Denmark, Panama, and Great Britain. It isalso selling direct to well-known car dealers such as: Land Rover, MercedesBenz, Lexus, Ford, Honda and Toyota. 

 
ATC Technology Corp. has recently received orders from FAO Schwarz, K-B Toys,and other domestic and foreign customers. The Company expects ATC TechnologyCorp. to increase its sale of these Gamego and Vidego products as well as addingnew products in the near future. 

 
SLIMTECH
 

SlimTech is a Nevada startup company that focuses on the distribution of liquidcrystal display (LCD) and consumer electronics products. PHI currently owns 56.7% of SlimTech. This company has received orders for flat-panel computer monitorsvalued at more than $300,000,000 from a Chinese government unit and aCalifornia-based computer reseller. The company has entered into an agreementwith the London Manhattan Company (“LMC") and appoints LMC as its exclusiveinvestment banker to secure a purchase order finance facility in the amount ofup to $21,750,000 to fulfill these orders. SlimTech plans to distribute theflat-panel monitors under three different brands: SlimTech, SlimView and 3View.No assurances can be made that management will be successful in achieving itsplan or that financing will be available on a timely basis or at acceptableterms.

 

CLEARPASS

 

ClearPass is a manufacturing and marketing company for security systems andrelated equipment using an innovative biometric identification technology. TheCompany invested $15,000 during the fiscal year ended June 30, 2002 and is inthe process of raising additional capital to implement the business plan ofClearPass. 

 

NETTEL GLOBAL COMMUNICATION CORP

 

Nettel Global Communication Corporation, a Delaware corporation with principalbusiness address in Portland, Oregon, provides long-distance telephony and VoIP(Voice-Over-Internet-Protocol) services to over 40 countries and operates anexport and import division under the name of Nettel Trading. Besides, Nettel isalso engaged in information technology services. Based on existing and pendingcontracts, Nettel expects combined revenues of the long-distance business,Nettel Trading and other divisions to exceed $150 million over the next twelvemonths.

 

On March 13, 2002 the Company entered into a Letter of Intent to acquire a 51%common stock of Nettel Global Communication Corp. (“Nettel") for a combinationof $2,250,000 in cash and $250,000 in common stock of Providential Holdings,Inc. In addition, if Nettel's aggregate net profits for the twelve-month periodcommencing the closing of this transaction are equal or greater than thethreshold  amount of $2,500,000 then Nettel shall be entitled to a dividendpayment of fifty percent (50%) of any and all profits in excess of saidthreshold amount for the above-mentioned period.

 

The consummation of this transaction is subject and the availability of fundsand the signing of a definitive agreement between Nettel and the Company after asatisfactory due diligence review by the Company.

 

MANNA TECHNOLOGIES

 

The Company entered into a Joint Venture Agreement with HTV Co., Ltd. of Ho ChiMinh City, Vietnam in January 2001 to form Manna Technologies for the purpose ofmanufacturing liquid crystal display (LCD) products. Manna Technologies hasreceived its permit from the Vietnamese government but the construction has notbegun due to funding delays. 

 

     
    **2)   PHI Financial services:**

 

The Company will continue to develop its financial services portfolio bybuilding, acquiring and investing into companies that operate in this area,including M&A consulting services, investment advisory services, and banking andinsurance services. 

 

MERGER AND ACQUISITION CONSULTING SERVICES

 

The Company manages its own M&A activities and provides M&A advisory andconsulting services for a fee or an equity interest in certain transactions. TheCompany expects to increase revenues from M&A consulting activities in the nexttwelve months.

     
    **3)  PHI International markets:**

 

We currently focus on opportunities in and with Vietnam, China and Taiwan. Theseare the areas where we have most intimate knowledge and working relationships.

 

PROVIMEX DIVISION
 

Provimex is a wholly-owned division of the Company originally formed on April10, 2001 under the name "Providential Imex", to focus on trade commerce withVietnam. This division changed its name to Provimex on July 5, 2001. Provimex isengaged in exporting and importing of industrial and consumer goods. The Companybelieves that its trade commerce business will grow substantially as a result ofthe ratification of the Trade Agreement between Vietnam and the United States.Provimex had no assets or operations as of June 30,2 002 and only began to generate revenues from its import and export activities sinceAugust 2002. The Company expects to register substantial revenue growth throughthis division in the fiscal year 2003.

 

PROVIDENTIAL JVC

 

On January 1, 2002 the Company entered into an agreement with Minh Hieu JointStock Company of Ho Chi Minh City, Vietnam to form "Providential JVC," a jointventure company under the laws of the Socialist Republic of Vietnam. Accordingto the terms of the agreement, the Company will contribute $140,000 to theinitial required capital and own 70% of Providential JVC while Minh Hieu Company will contribute $60,000 for 30% of the joint venture enterprise.Providential JVC's main line of business will include industrial garments,packaging products and accessories. 

 

INTERNATIONAL CENTER FOR TRAINING AND CONSULTING, VIETNAM'S MINISTRY OF TRADE

 

International Center for Training and Consulting (ICTC) is an organization underthe Ministry of Trade of Vietnam that promotes economics, trade, investment andtraining activities between Vietnam and foreign entities. PHI and ICTC signed anagreement in March 2001 to cooperate in the areas of trade, economics, andtechnology. ICTC is responsible for representing PHI in connection withappropriate Vietnamese organizations, businesses, and individual businessmen andinvestors in Vietnam. ICTC will also perform consulting services and provideinformation on various economic, trade and investment projects as may berequired by PHI. Fees between the parties will be negotiated on an as projectbasis. ICTC has introduced Vietnam-based Delta Electromechanis Co., Ltd., amanufacturer of electric bicycles, and Nam Hiep Co., Ltd., a manufacturer oforganic fertilizer and construction company to PHI as potential joint venturepartners.

 

CHU LAI INDUSTRIAL ZONE, QUANG NAM PROVINCE, VIETNAM

 

The Company has entered into an agreement with Chu Lai Industrial Zone (the "ChuLai Zone") Authority, Quang Nam Province, Central Vietnam, to develop thisindustrial and export processing zone. On May 4, 2001, the government of Vietnamapproved a $50 million infrastructure development program targeting the Chu LaiZone. Construction began on May 18, 2001.

 

Chu Lai is centrally located near three Southeast Asian nations and isconvenient to Vietnam's Highway One, the Trans-Viet Railroad, an internationalport suitable for ocean-going ships and a major airport. Part of the overallplan that includes 27,000 acres, the North Chu Lai Industrial Zone has set aside740 acres for facilities engaged in paper products, agricultural, maritime andforest products, consumer electronics, leather and footwear manufacturing, foodand beverage operations and glassware and crystal fabrication.

 

Foreign investment entities approved for development projects in the Chu LaiIndustrial Zone enjoy opportunities to lease land at $0.001 per squarefoot/year, to secure 50-year leases renewable for 20 years, plus exemptions fromnational and provincial land use taxes, a 10-year income-tax holiday, andexemptions from export taxes from two to four years, based on the size of the

investment made.

 

According to this agreement, the Chu Lai Zone will provide the necessaryinfrastructure and the Company will be the manager organizing the differentcompanies that will operate their businesses at this location.

 

CENTER OF TELECOM TECHNOLOGY, VIETNAM

 

Center of Telecom Technology (CTT) is an organization under the National Centerfor Natural Science and Technology of Vietnam.  Established in 1990, CTT'smission is to recruit and develop professionals in the areas of electronics,telecommunications, and information technology and to provide related productsbased on advanced technologies. One of CCT's largest customers is the VietnamesePostal and Telecommunications Services. CTT also focuses on ruraltelecommunications in Vietnam. 

 

On March 23, 2002, the Company entered into a Memorandum of Agreement andPrinciple Contract with the Center of Telecom Technology (CTT), Vietnam tocooperate in the areas of wireless access networks, consultancy services andother business ventures in Vietnam. The two parties will collaborate to form ajoint venture enterprise or strategic alliances with appropriate Vietnameseentities to provide wireless access services to consumers, businesses andgovernment organizations throughout Vietnam.

 

Special situations:

 

By Special Situations we mean special opportunities that may generatesignificant value for our shareholders. The Company will continue to identify,evaluate and participate in such opportunities in the near term. Transactionsfalling under this category do not necessary fit into our technologies,financial services or international market initiatives.

 

**FINANCIAL PLANS**

 

Management has taken action and is formulating additional plans to strengthenthe Company's working capital position and generate sufficient cash to meet itsoperating needs through June 30, 2003 and beyond. Among the actions to be taken,the Company intends to file a Form SB-2 Registration Statement to raiseadditional capital and is currently in the process of attaining additionalfinancing. In addition, the Company also anticipates generating more revenuethrough its proposed mergers and acquisitions. No assurances can be made thatmanagement will be successful in achieving its plan.

 

**ITEM 7. FINANCIAL STATEMENTS**

 

**INDEPENDENT AUDITORS' REPORT**

 

To the Board of Directors and Stockholders

Providential Holdings, Inc.

We have audited the accompanying consolidated balance sheet of ProvidentialHoldings, Inc. (a Nevada corporation) and subsidiaries as of June 30, 2002 andthe related consolidated statements of operations, stockholders' deficit, andcash flows for the years ended June 30, 2002 and 2001. These consolidatedfinancial statements are the responsibility of the Company's management. Ourresponsibility is to express an opinion on these consolidated financialstatements based on our audits. 

 

We conducted our audits in accordance with auditing standards generally acceptedin the United States of America.  Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement.  An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the consolidatedfinancial statements.  An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating theoverall financial statement presentation.  We believe that our audits provide areasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the consolidated financial position ofProvidential Holdings, Inc. and subsidiaries as of June 30, 2002, and the resultsof its consolidated operations and its cash flows for the years ended June 30,2002 and 2001 in conformity with accounting principles generally accepted in theUnited States of America.

 

The Company's financial statements are prepared using the generally acceptedaccounting principles applicable to a going concern, which contemplates therealization of assets and liquidation of liabilities in the normal course ofbusiness.  The Company has a negative accumulated deficit and incurred losses inthe years ended June 30, 2002 and 2001. These factors as discussed in Note 19 tothe consolidated financial statements, raises substantial doubt about theCompany's ability to continue as a going concern. Management's plans in regard tothese matters are also described in Note 19.  The consolidated financialstatements do not include any adjustments that might result from the outcome ofthis uncertainty.

 

As discussed on note 3 and 13 to the financial statements, the Company is subjectto various law suits and during most recent NASD examination (July - August,2000) of Providential Securities, Inc. (the wholly owned subsidiary), the NASDdeclared a net capital deficiency violation pursuant to conduct rules section 17(a) 3 and 17 (a) 4. As a result of which, Providential Securities, Inc. withdrewthe membership from the NASD in October 2000 and ceased its securities brokerageoperations.

/s/ KABANI & COMPANY, INC.

CERTIFIED PUBLIC ACCOUNTANTS

Fountain Valley, California

October 8, 2002

**PROVIDENTIAL HOLDINGS, INC.**

**CONSOLIDATED BALANCE SHEET**

**JUNE 30,2002**

ASSETS

 

 

CURRENT ASSETS

 

 

Cash and cash equivalents

 $  4,713

 

Other assets

                    37,671 

 

 

Total Current Assets

                    42,384 

 

 

 

 

PROPERTY & EQUIPMENT

 

 

Furniture and equipment

                  107,005 

 

Automobiles

                   81,103 

 

 

 

                  188,108 

 

Less: Accumulated Depreciation

                 (135,650)

 

 

Total Property & Equipment

                    52,458

 

 

 

 

OTHER ASSETS

 

 

 

 

Prepaidexpenses

 

              1,451,249

 

Investments 

                 135,000

                                                       TotalOther Assets

               1,586,249 

 

 

 

 $1,681,091

 

 

 

 

LIABILITIES AND SHAREHOLDERS' DEFICIT

 

CURRENT LIABILITIES

 

 

Accrued expenses

 $3,696,172 

 

Accounts payable

                    22,156 

 

Convertible promissory notes

               1,525,000 

 

Short-term notes payable

               1,064,943 

 

Current portion of notes payable

                  137,671 

 

Due to officer

                  172,497

 

Other current liabilities

                  122,607 

 

 

Total Current Liabilities

               6,741,046 

 

 

 

 

NOTES PAYABLE

                   16,979 

 

 

Total liabilities

               6,758,025 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

                          -   

MINORITY INTEREST

 

 

                  128,560

 

 

STOCKHOLDERS' DEFICIT

 

 

Preferred stock (Series I, Class A), $5.00 parvalue, 10,000,000 shares authorized, 90,000 sharesissued and outstanding

                  450,000

 

 

 

                  

 

Common stock, $.04 par value, 100,000,000 sharesauthorized, 46,003,157 shares issued

               1,840,127

 

 

 

                

 

Treasury stock, 11.8 million shares, $.04 par valuecommon stock

                 (800,875)

 

Additional paid-in capital

               5,167,979 

 

Accumulated other comprehensive loss

                 (517,009)

 

Accumulated deficit

            (11,345,716)

 

 

Total shareholders' deficit

              (5,205,494)

 

 

 

 $1,681,091

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

**PROVIDENTIAL HOLDINGS, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

 

 

 

The Years Ended June 30,

 

 

 

2002

 

2001

REVENUES

 

 

 

 

Commissions and fees 

 $         -   

 

 $631,134  

 

Other income

                          - 

 

                28,413  

 

 

Total Revenues

                          -

 

              659,547   

 

 

 

 

OPERATING EXPENSES

 

 

 

 

Commissions

                         -  

 

              124,843  

 

Clearing charges and assessments

                         -   

 

              182,002

 

Quote service and market fees

                         -

 

              131,456

 

Litigation

                         -

 

                  8,192

 

Professional and consulting fees

                 626,878 

 

1,013,309 

 

Salaries

                     7,280

 

168,913 

 

Other general and administrative expenses

                 432,207 

 

662,530 

 

 

Total Operating Expenses

              1,066,365 

 

2,291,245 

LOSS FROM OPERATIONS

(1,066,365)

 

(1,631,698)

OTHER INCOME (EXPENSE)

 

 

 

      Gain on disposal of land and property

                         -

 

             551,179 

 

Interest expense

 (922,282)

 

(958,593)

 

Interest income

                          73   

 

3,262 

 

Rental income

                     3,900

 

      98,861 

 

Consulting fee income

                 602,000

 

        114,584

 

Loss on sale of marketable securities

                   (9,155)

 

             (44,156)

 

Impairment of assets

              (381,560)

 

           (109,886)

 

Gain on sale of fixed assets

                     3,768

 

                -

 

Gain on legal settlement

                 140,000 

 

                -

 

Other income 

                    7,423 

 

32,232

 

 

Total Other (Expense)

(555,833)

 

(312,517)

NET LOSS BEFORE INCOME TAX , DISCONTINUEDOPERATIONS AND EXTRAORDINARY ITEMS

(1,622,198)

 

(1,944,215)

PROVISION FOR INCOME TAX

                       800

 

5,523 

NET LOSS BEFORE DISCONTINUED OPERATIONS ANDEXTRAORDINARY ITEMS

(1,622,998)

 

(1,949,738)

DISCONTINUED OPERATIONS, Loss on disposal

                          -   

 

(65,906)

NET LOSS BEFORE EXTRAORDINARY ITEM

(1,622,998)

 

(2,015,644)

      Extraordinary item-Gain on conversion ofnotes

                 383,455

 

                -

NET LOSS

(1,239,543)

 

(2,015,644)

DIVIDEND REQUIREMENT OF PREFERRED STOCK

(54,000)

 

(61,800)

NET LOSS APPLICABLE TO COMMON SHAREHOLDERS

(1,293,543)

 

(2,077,444)

 

OTHER COMPREHENSIVE LOSS

 

 

 

 

      Unrealized loss on investmentsavailable for sale

(366,820)

 

               (28,869)

TOTAL COMPREHENSIVE LOSS

(1,660,363)

 

          (2,106,313)

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER 

 

 

 

 

OF COMMON SHARES OUTSTANDING

28,648,000 

 

     27,323,000 

BASIC AND DILUTED NET LOSS PER SHARE

 $   (0.04)

 

 $  (0.07)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

PROVIDENTIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

For the years ended June 30, 2002 and June 30, 2001

 

 

PREFERRED STOCK

COMMON STOCK

 TREASURY STOCK

 

 

 

 

 

RETAINED

 

 

 

SHARES

 

AMOUNT

SHARES

 

AMOUNT

SHARES

 

AMOUNT

 

ADDITIONALPAID-IN-CAPITAL

 

ACCUMULATEDCOMPRE-HENSIVE LOSS

 

EARNINGS(ACCUMULATEDDEFICIT)

 

TOTALSHAREHOLDERS'EQUITY(DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE - June 30,2000

        103,000 

$

       515,000 

               27,322,869 

$

         

 1,092,915

                     - 

$

                  - 

$

     3,317,651 

$

             (121,320)

$

           (7,974,729)

$

             (3,170,483)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of commonstock to treasury

              - 

 

                  - 

  11,800,000 

 

         472,000 

  (11,800,000)

 

     (472,000)

 

                     - 

 

                            -

 

                             -

 

                              - 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase andretirement of 

preferred stock

       (13,000)

 

      (65,000)

                    - 

 

                     - 

                     - 

 

                  - 

 

                     - 

 

                            -

 

                             -

 

                   (65,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared onpreferred stock

              - 

 

                  - 

                    - 

 

                     - 

                     - 

 

                  - 

 

                     - 

 

                            -

 

                 (61,800)

 

                         (61,800)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

             - 

 

                  - 

                    - 

 

                     - 

                     - 

 

                  - 

 

                     - 

 

                            -

 

    (2,015,644)

 

   (2,015,644)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss onmarketable securities

              - 

 

                  - 

                    - 

 

                     - 

                     - 

 

                  - 

 

                     - 

 

                 (28,869)

 

                             -

 

                   (28,869)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE - June 30,2001

    90,000 

 

  450,000 

  39,122,869 

 

   1,564,915 

  (11,800,000)

 

  (472,000)

 

   3,317,651 

 

      (150,189)

 

     (10,052,173)

 

       (5,341,796)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued forservices

 

 

 

    3,710,000

 

148,400

 

 

 

 

1,655,200

 

 

 

 

 

1,803,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for noteconversion

 

 

 

170,288

 

6,812

 

 

 

 

18,428

 

 

 

 

 

25,240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share issued onacquisition

 

 

 

3,000,000

 

120,000

(3,000,000)

 

(300,000)

 

176,700

 

 

 

 

 

(3,300)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares received fromofficer

 

 

 

 

 

 

(375,000)

 

(28,875)

 

 

 

 

 

 

 

(28,875)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared onpreferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(54,000)

 

(54,000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,239,543)

 

(1,239,543)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss onmarketable

 

 

 

 

 

 

 

 

 

 

 

 

(366,820)

 

 

 

(366,820)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE - June 30,2002

90,000

$

450,000

46,003,157

$

1,840,127

(15,175,000)

$

(800,875)

$

5,167,979

$

(517,009)

$

(11,345,716)

$

(5,205,494)

 

 

 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIALSTATEMENTS.

 

PROVIDENTIAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 30, 2002 and 2001
 

 

 

 

 

 

 

 

 

2002

2001

CASH FLOWS FROMOPERATING ACTIVITIES

 

 

 

Net loss fromcontinued operations 

$ (1,622,998)

   $ (1,949,738)

 

Adjustments toreconcile net loss from continued operations to

 

 

 

  net cash used incontinued operating activities:

 

 

 

 

Discontinuedoperations

                                  -

           (65,906)

 

 

Gain on sale ofproperty

    (3,768) 

         ( 551,179)

 

 

Legal settlement

              (140,000)

                      -

 

 

Shares issued forservice

1,803,600

                      -

 

 

Loss on sale ofmarketable securities

9,155 

              44,156 

 

 

Depreciation 

30,317 

            132,950

 

 

Amortization ofdeferred revenue

(125,000)

          (114,584)

 

 

Impairment ofassets

381,560 

            109,886

 

 

Payment ofconsulting expense with marketable securities

103,000 

           392,200

 

 

Securities receivedfor consulting services

(486,820)

                      -

 

 

(Increase) decreasein accounts receivable 

                        -

           119,482

 

 

(Increase) decreasein prepaid expenses and other assets 

(1,761,168)

            (64,798) 

 

 

Increase inaccounts payable

(506,868) 

           230,460

 

 

Increase (decrease)in accrued expenses

1,548,700 

           393,138

 

 

Minority interest

128,560

                     -

 

 

Decrease in otherliabilities 

(69,864) 

           (38,931)

 

 

 

NET CASH USED INOPERATING OPERATIONS 

(711,594)

        (1,362,864)

 

 

 

 

 

 

CASH FLOWS FROMINVESTING ACTIVITIES

 

 

 

Sale of propertyand equipment

4,268 

                      -

 

Proceeds receivedfrom sale of residential property

                          -

          2,174,761

 

Purchase ofproperty & equipment

                          -

                      -

 

Purchases ofmarketable securities

                          -

          (350,014)

 

Proceeds receivedfrom sale of marketable securities 

19,024 

           349,042

 

 

 

NET CASH PROVIDEDBY (USED IN) INVESTING ACTIVITIES 

23,292

          2,173,789

 

 

 

 

 

 

CASH FLOWS FROMFINANCING ACTIVITIES

 

 

 

Borrowings on notespayable

594,277

           820,336

 

Payments on notespayable 

                 (13,337)

       (1,821,292)

 

Advances fromofficer

97,855 

            147,142

 

Payments onadvances from officer

                     -

          (146,500)

 

Redemption ofpreferred stock

                     -

           (65,000)

 

Issuance of commonstock

                    -

                      -

 

Shareholderdividends and distributions

                    -

           (23,300)

 

 

 

NET CASH PROVIDEDBY FINANCING ACTIVITIES 

678,795

       (1,088,614)

NET DECREASE INCASH AND CASH EQUIVALENTS

                              (9,507) 

         (277,689)

 

 

 

 

 

 

CASH AND CASHEQUIVALENTS, beginning of period

14,220 

           291,909

 

 

 

 

 

 

CASH AND CASHEQUIVALENTS, end of period

$ 4,713

 $ 14,220 

 

 

 

 

 

 

SUPPLEMENTARYDISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

Cash paid duringthe period for:

 

 

 

 

 

Interest

     $ 15,394

 $ 163,252 

 

 

 

Income taxes

     $ 800

 $ 5,523 

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATEDFINANCIAL STATEMENTS.
 

 

 

 P**ROVIDENTIAL HOLDINGS, INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

 

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

NATURE OF BUSINESS AND REORGANIZATION 

 

Providential Holdings, Inc. (“PHI") was organized under the laws of the State of Nevada onJune 8, 1982 under the name of JR Consulting, Inc.; subsequently on February 9, 2000 itchanged its name to Providential Holdings, Inc. From its inception through September 7,1995, the Company generated nominal revenues and did not actively engage in business.Prior to the corporate combination agreement with Providential Securities, Inc. PHI had anoperating subsidiary, Diva Entertainment, Inc (“Diva").  

 

 

Providential Securities, Inc. (“Providential") was incorporated in the State of Californiaon October 8, 1992.  It operated a securities brokerage service in Fountain Valley, CA andNew York City, NY.  The principal markets for Providential's services were individualinvestors who were located throughout the United States. Providential bought and soldsecurities for its customers through a number of different markets, utilizing a brokerageclearinghouse to transact the trades.  Subsequent to year-end, due to the results of aNASD examination, Providential has ceased its operations in the securities brokeragebusiness.  (See Note 3)

 

REORGANIZATION

 

On October 28, 1999 PHI entered into a corporate combination agreement (the “Agreement")with Providential, whereby PHI acquired all the outstanding shares of Providential inexchange for 20,000,000 shares of PHI common stock.  The transaction was consummated onJanuary 14, 2000. In addition, as a covenant under the Agreement, PHI was required toenter into an agreement to sell to Havilland Limited, all of the shares of Diva owned byPHI as well as to assign all of its rights, title and interest in an Option Agreement toHavilland Limited.  (The Option Agreement gave PHI the option to purchase additionalshares of Diva's common stock at its $.001 par value in order for PHI to maintain at leasta 65% interest in Diva's outstanding common shares.) PHI's officers and directorsresigned their positions and the shareholders of Providential assumed control of the twoentities (together as “the Company"). The PHI shares are restricted against resalepursuant to the provisions of federal and state securities laws. Providential'sshareholders of record as of the closing date owned approximately 75% of PHI's commonstock.  The acquisition has been treated as a capital transaction in substance, ratherthan a business combination, and was deemed a “reverse acquisition" for accountingpurposes.   Accordingly, Providential was the accounting acquirer. The operations of PHIhave been included with those of Providential from the acquisition date. 

 

The sale of Diva was consummated on June 30, 2000, whereby all of the shares of Diva ownedby PHI as well as all of its rights, title and interest in the Option Agreement wereexchanged for assignment to and assumption by Havilland Limited of the amounts due by PHIto officers of Diva amounting to $617,781, the amounts due to PHI from Diva amounting to$94,843 and the return of 135,000 shares of common stock of PHI owned by Havilland.  

 

During February 2000 the Company formed a California corporation, Providential Clearing,Inc. as a vehicle to effectuate the purchase of a self-clearing broker-dealer and tooperate a securities clearing firm.  As of June 30, 2002 this subsidiary has had nooperations.

 

On April 30, 2002, the Company consummated an agreement to acquire 56.67% equity interestin SlimTech, Inc., a Nevada corporation, in exchange for 3,000,000 shares of the Company'srestricted common stock. SlimTech plans to be a distributor of LCD (liquid crystaldisplay) computer flat screens and other consumer electronics. Since SlimTech is a dormantentity with insignificant assets or liabilities, no pro forma information is presented.  

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

PRINCIPLES OF CONSOLIDATION

 

The consolidated financial statements include the accounts of Providential Holdings, Inc.,Providential Securities, Inc., Providential Clearing, Inc., and SlimTech, Inc.,collectively referred to as the "Company". All significant inter-company transactions havebeen eliminated in consolidation.

 

CASH AND CASH EQUIVALENTS

 

The Company considers all liquid investments with a maturity of three months or less fromthe date of purchase that are readily convertible into cash to be cash equivalents.

 

MARKETABLE SECURITIES

 

The Company's securities are classified as available-for-sale and, as such, are carried atfair value. Securities classified as available-for-sale may be sold in response to changesin interest rates, liquidity needs, and for other purposes. The Company does not currentlyhave any held-to-maturity or trading securities.

 

Unrealized holding gains and losses for available-for-sale securities are excluded fromearnings and reported as a separate component of stockholder's equity. Realized gains andlosses for securities classified as available-for-sale are reported in earnings based uponthe adjusted cost of the specific security sold.

 

IMPAIRMENT OF LONG-LIVED ASSETS

 

Long-lived assets are reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amount may not be recoverable. If the sum of the expectedundiscounted cash flows is less than the carrying value of the related asset or group ofassets, a loss is recognized for the difference between the fair value and carrying valueof the asset or group of assets.

         

PROPERTY AND EQUIPMENT

 

Property and equipment are stated at cost. Maintenance and repair costs are charged toexpense as incurred; costs of major additions and betterments are capitalized. Whenproperty and equipment are sold or otherwise disposed of, the cost and related accumulateddepreciation are eliminated from the accounts and any resulting gain or loss is reflectedin income.

 

DEPRECIATION AND AMORTIZATION

 

The cost of property and equipment is depreciated over the estimated useful lives of therelated assets.  Depreciation and amortization of fixed assets are computed on astraight-line basis.

 

 

NET EARNINGS (LOSS) PER SHARE

 

The Company adopted the provisions of Statement of Financial Accounting Standards No. 128,Earnings per Share ("SFAS No. 128"). SFAS No. 128 eliminates the presentation of primaryand fully diluted earnings per share ("EPS") and requires presentation of basic anddiluted EPS. Basic EPS is computed by dividing income (loss) available to commonstockholders by the weighted-average number of common shares outstanding for the period.Diluted EPS is based on the weighted-average number of shares of common stock outstandingfor the period and common stock equivalents outstanding at the end of the period. Commonstock equivalents have been excluded from the calculation of weighted-average shares forpurposes of calculating diluted earnings per share for 2002 and 2001; as such inclusion isanti-dilutive.  

 

 

STOCK-BASED COMPENSATION

 

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation".SFAS No. 123 prescribes accounting and reporting standards for all stock-basedcompensation plans, including employee stock options, restricted stock, employee stockpurchase plans and stock appreciation rights. SFAS No. 123 requires compensation expenseto be recorded (i) using the new fair value method or (ii) using the existing accountingrules prescribed by Accounting Principles Board Opinion No. 25, "Accounting for stockissued to employees" (APB 25) and related interpretations with proforma disclosure of whatnet income and earnings per share would have been had the Company adopted the new fairvalue method. The Company has elected to account for stock-based compensation plans underthe intrinsic value method and to disclose the pro forma amounts using the fair valuemethod.  

 

FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Statement of financial accounting standard No. 107, Disclosures about fair value offinancial instruments, requires that the Company disclose estimated fair values offinancial instruments. The carrying amounts reported in the statements of financialposition for current assets and current liabilities qualifying as financial instrumentsare a reasonable estimate of fair value. 

 

REVENUE RECOGNITION

 

The Company recognized commission and fee revenue when the security transaction wascomplete and the commission or fee had been earned.  The Company recognizes other serviceincome when the service has been completed. The Company's revenue recognition policies arein compliance with Staff accounting bulletin (SAB) 101. Expenses are recognized in theperiod in which the corresponding liability is incurred. 

 

ADVERTISING

 

The Company expenses advertising costs as incurred.

 

COMPREHENSIVE INCOME

 

Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFASNo. 130"), establishes standards for reporting and display of comprehensive income, itscomponents and accumulated balances. Comprehensive income is defined to include allchanges in equity, except those resulting from investments by owners and distributions toowners. Among other disclosures, SFAS No. 130 requires that all items that are required tobe recognized under current accounting standards as components of comprehensive income bereported in a financial statement that is displayed with the same prominence as otherfinancial statements. 

 

INCOME TAXES

 

Deferred income tax assets and liabilities are computed annually for differences betweenthe financial statements and tax basis of assets and liabilities that will result intaxable or deductible amounts in the future based on enacted laws and rates applicable tothe periods in which the differences are expected to affect taxable income (loss).Valuation allowance is established when necessary to reduce deferred tax assets to theamount expected to be realized.

 

REPORTING OF SEGMENTS

 

Statement of Financial Accounting Standards No. 131, Disclosures about Segments of anEnterprise and Related Information ("SFAS No. 131"), which supersedes Statement ofFinancial Accounting Standards No. 14, Financial Reporting for Segments of a BusinessEnterprise, establishes standards for the way that public enterprises report informationabout operating segments in annual financial statements and requires reporting of selectedinformation about operating segments in interim financial statements regarding productsand services, geographic areas and major customers. SFAS No. 131 defines operatingsegments as components of an enterprise about which separate financial information isavailable that is evaluated regularly by the chief operating decision maker in decidinghow to allocate resources and in assessing performance. Currently, SFAS 131 has no effecton the Company's consolidated financial statements as substantially all of the Company'soperations are conducted in one industry segment.

    

RISKS AND UNCERTAINTIES

 

In the normal course of business, the Company is subject to certain risks anduncertainties. The Company provides its product on unsecured credit to most of itscustomers. Consequently, the Company's ability to collect the amounts due from customersis affected by economic fluctuations and each customer's ability to pay.

 

ACCOUNTING DEVELOPMENTS 

 

 

In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangibles." SFAS No. 142addresses the initial recognition, measurement and amortization of intangible assetsacquired individually or with a group of other assets (but not those acquired in abusiness combination) and addresses the amortization provisions for excess cost over fairvalue of net assets acquired or intangibles acquired in a business combination. Thestatement is effective for fiscal years beginning after December 15, 2001, and iseffective July 1, 2001 for any intangibles acquired in a business combination initiatedafter June 30, 2001. The Company had evaluated any accounting effect arising from therecently issued SFAS No. 142, "Goodwill and Other Intangibles" on the Company's financialposition. As a result, the Company wrote off the Goodwill of $ 128,560 that was derivedfrom the business acquisition during the fiscal year ended June 30, 2002.

 

 

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," was issuedin August 2001. SFAS No. 144 is effective for fiscal years beginning after December 15,2001, and addresses financial accounting and reporting for the impairment or disposal oflong-lived assets. This statement supersedes SFAS No. 121 "Accounting for the Impairmentof Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting andreporting provisions of APB Opinion No. 30, "Reporting the Results of Operations -Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusualand Infrequently Occurring Events and Transactions," for the disposal of a segment of abusiness. The Company is evaluating any accounting effect, if any, arising from therecently issued SFAS No. 144, "Goodwill and Other Intangibles" on the Company's financialposition or results of operations.

 

In May 2002, the Board issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"). SFAS 145rescinds the automatic treatment of gains or losses from extinguishments of debt asextraordinary unless they meet the criteria for extraordinary items as outlined in APBOpinion No. 30, Reporting the Results of Operations, Reporting the Effects of Disposal ofa Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions. SFAS 145 also requires sale-leaseback accounting for certain leasemodifications that have economic effects that are similar to sale-leaseback transactionsand makes various technical corrections to existing pronouncements. The provisions of SFAS145 related to the rescission of FASB Statement 4 are effective for fiscal years beginningafter May 15, 2002, with early adoption encouraged. All other provisions of SFAS 145 areeffective for transactions occurring after May 15, 2002, with early adoption encouraged.The Company does not anticipate that adoption of SFAS 145 will have a material effect onits earnings or financial position.

 

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit orDisposal Activities."  This statement addresses financial accounting and reporting forcosts associated with exit or disposal activities and nullifies Emerging Issues Task Force("EITF") Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefitsand Other Costs to Exit an Activity (including Certain Costs Incurred in aRestructuring)."  This statement requires that a liability for a cost associated with anexit or disposal activity be recognized when the liability is incurred.  Under EITF Issue94-3, a liability for an exit cost, as defined, was recognized at the date of an entity'scommitment to an exit plan.  The provisions of this statement are effective for exit ordisposal activities that are initiated after December 31, 2002 with earlier applicationencouraged.  The Company does not expect adoption of SFAS No. 146 to have a materialimpact, if any, on its financial position or results of operations.

 

RECLASSIFICATIONS

 

Certain amounts in the 2001 financial statements have been reclassified to conform to the2002 presentation.

 

 

NOTE 3 - NASD EXAMINATION AND DISCONTINUANCE OF PROVIDENTIAL SECURITIES, INC.

 

After the completion of a routine audit of Providential Securities, Inc. ("Providential")in July and August 2000, the National Association of Securities Dealers, Inc. alleged thatProvidential violated certain provisions of the NASD's Conduct Rules 2120, 2330, 2110 and3010, and Rules 15c2-4, 10b-5, 10b-9 and 15c3-3 of the Securities and Exchange Commission.Providential Securities, Inc. and Henry Fahman voluntarily submitted a Letter ofAcceptance, Waiver and Consent (“AWC",), which was accepted by NASD Regulation, Inc. onOctober 27, 2000, as follows:

 

Providential and Henry Fahman accepted and consented, without admitting or denying thealleged violations, to the entry of the following findings by NASD Regulation, Inc.:

 

From in or about December 15, 1998 through June 15, 1999, Providential Securities, throughits Private Placement Memorandum, offered and sold one hundred three thousand (103,000)shares of Series I Class A Convertible Cumulative Preferred Stock in ProvidentialSecurities, Inc. for five hundred fifteen thousand dollars ($515,000) to twenty-two (22)customers. In connection with the Private Placement Memorandum, Providential Securitiesmade certain misrepresentations or omissions in soliciting investments from publiccustomers, such as: failure to disclose that an officer of Providential Securities couldmake contributions to help meet the minimum requirement; failure to disclose ProvidentialSecurities, Inc.'s disciplinary history whereby Providential Securities, Inc. and Henry Fahman, jointly and severally, were fined $28,500 for net capital deficiencies and forfailing to send the requisite written notification or confirmation in fifty eight (58)securities transactions to public customers; and failure to disclose that Henry Fahman wasordered to requalify by examination as a financial and operational principal.

 

That Providential's use of the private placement funds mainly for Providential's ownoperational purposes (more than for those represented in the private placement memorandum)amounted to conversion or improper use of those funds thus violating the Conduct Rules2110 and 2330.

 

That Providential, acting through Henry Fahman, violated SEC Rule 15c2-4, SEC Rule 10b-9,and Conduct Rule 2110 (a) by not utilizing a proper escrow account for the investmentfunds received, (b) by not retaining the private placement funds until the minimumrequirement was met, and (c) by not refunding these funds to the customers when theminimum was not met, or not met in a timely manner.

 

That by receiving and controlling funds from public customers in connection with theprivate placement, Providential became obligated to comply with the full provisions of SECRule 15c3-3 (during the period of January through at least March, 1999, ProvidentialSecurities, through Henry Fahman, and Providential's financial and operations principal,Theodore Fahman, failed to compute the reserve requirements, and set aside appropriatereserves for customer protection.

 

That Providential, acting through Henry Fahman, in violation of Conduct Rule 3010(a) andMembership and Registration Rule 1018, was operating three non-registered supervisoryjurisdiction branch offices, and that while Providential's membership agreement limitedthe firm's branch activities to two branches, there were at least seven full-servicesatellite locations, thereby violating Conduct Rule 2110 and Membership and RegistrationRule 1014.

 

That both Providential and Henry Fahman also violated Membership and Registration Rule1030 for failing to enforce Membership and Registration Rule 1031(a) by allowing fourindividuals with deficiencies in license registration to conduct a securities businessduring much of 1998 and 1999.

 

That Providential and Henry Fahman failed to comply with Membership and Registration Rule1030 by failing to enforce Rule 1032(f) by allowing five individuals to act in thecapacity of equity trader with deficiency in registration as Limited Representative-EquityTraders.                                        

 

That Providential and Henry Fahman also violated Membership and Registration Rule 1120 andConduct Rule 2110 by permitting a broker to conduct business and earn commissions, whilehis status was "inactive" as a result of his failing to complete his continuing educationrequirements.

 

That from on or about May 2, 2000 through May 30, 2000, Providential Securities, Inc.distributed biased communications to the public regarding its ProTimer service through theWorld Wide Web.

 

Providential Securities, Inc. and Henry Fahman also consented to the imposition, at amaximum, of the following sanctions:

 

Providential shall be censured, fined $115,000.00 and shall offer rescission to thosepublic customers who participated in the Providential Private Placement. Providentialshall provide proof in form satisfactory to NASDR's District 2 staff of its offer ofrescission to the customers who participated in the Providential Private Placement. Inaddition, to the extent the offer of rescission is accepted by any investors, Providentialis ordered to provide proof of payment of the restitution in a form satisfactory to theDistrict 2 NASDR staff, no later than 120 days after acceptance of the Letter ofAcceptance, Waiver and Consent.  Henry Fahman shall be banned, in all capacities, fromassociating with any NASD member. 

 

Based upon the above-mentioned circumstances, Providential Securities, Inc. withdrew itsmembership from the NASD in October 2000 and ceased its securities brokerage operation.The fine of $115,000 is included in accrued expenses in the accompanying consolidatedfinancial statements.  The Company has offered all Preferred Stock holders rescission ontheir investment.  As of the date of this report the Company has redeemed $65,000 of thepreferred stock plus accrued interest. 

 

NOTE 4 – IMPAIRMENT OF ASSETS

 

The Company wrote off the fixed asset amounting $80,000 and receivables of $172,868 thatdeemed to be unrecoverable during the year ended June 31, 2002. The Company also wrote off$128,560 of goodwill, which was resulted from a business acquisition.  These were recordedas a loss on impairment of assets in the financial statement.

 

NOTE 5 – PREPAID EXPENSE

 

On April 15, 2002, the Company signed an agreement with Min Duk Hyun (consultant) forconsulting service. The consultant will consult the Company in identifying, locating andacquiring various business opportunities for the Company for a period of two years throughApril 15, 2004. The Company issued 3,000,000 shares of common stock to the consultantvalued at $1,620,000 based upon market value of the stock at the time of consummation ofthe agreement. The Company has recorded the shares issued to the consultant as prepaidfees, net of amortization of $168,751 for the period from April 15, 2002 through June 30,2002.

 

NOTE 6 - INVESTMENTS

 

INVESTMENT IN CLEARPASS

 

The Company entered into a letter of intent to provide funding of $10,000,000 for minimumof 33% equity in ClearPass. ClearPass is manufacturing company for the bio sensor mousepads and related equipment. The Company invested $15,000 during the fiscal year ended June30, 2002. This amount has been reflected as investment in the financial statements on June30, 2002. 

 

INVESTMENT IN SLIMTECH

 

Pursuant to a Stock Acquisition purchase agreement (the "Acquisition Agreement") on April30, 2002, the Company exchanged 3,000,000 shares of newly issued common stock, in exchangefor 10,200,000 shares of the common stock of SlimTech, Inc., a Nevada corporation, whichconstitutes approximately 57% interest in SlimTech, Inc. The Acquisition was approved bythe unanimous written consent of the Board of Directors on June 14, 2002. The investment was recorded at the market value of the shares issued by theCompany resulting in goodwill of $128,560.  On June 30, 2002, the Companywrote off the recorded value of goodwill based upon the reevaluation at June 30,2002.

 

 

INVESTMENT IN PROVIDENTIAL TECHNOLOGY, INC.

 

The Company purchased less than 10 percent of the outstanding shares of ProvidentialTechnology, Inc.  This corporation was engaged in software development for financialservice providers. The Company provided the initial funding of $165,000 for ProvidentialTechnology to develop a market-timing program and an online trading platform for equities.These projects were discontinued in October 2000 due to lack of additional funding.  Thisinvestment has been recorded at no value and any funds invested into this corporation havebeen written off in the accompanying financials.

 

**NOTE 7 - MARKETABLE EQUITY SECURITIES AVAILABLE FOR SALE**

 

Following is a summary of marketable equity securities classified as available for sale:

                      
                                                             Cost Basis              Fair Value                 Gross

                                                                                                                             Unrealized Loss

                                                                 ----------                   ----------                  ----------------

Marketable securities                          $637,009                 $120,000                     $517,009

 

The changes in net unrealized holding loss on securities available for sale that has beenincluded as a separate component of stockholders' equity for the twelve months ended June30, 2002 and for the year ended June 30, 2001 were $366,820 and $28,869, respectively.

 

 

NOTE 8 - PROPERTY AND EQUIPMENT

 

Property and equipment at June 30, 2002 consist of the following:

     

     Furnitureand equipment:                           $107,005

     Automobiles:                                                     81,103
                                                                             -----------

                                                                              $188,108

    Less: Accumulated depreciation:                     (135,650)

                                                                             -----------

    Net:                                                                   $ 52,458

                                                                        =========

 

The Company depreciates its furniture, equipment and automobiles on a straight-line basisover an estimated useful life of 5 years.

 

Depreciation and amortization expense was $30,317 and $132,950 for the twelve ended June30, 2002 and 2001, respectively. 

 

On June 22, 2001 the Company completed sale of its corporate office building.  The Companyrecognized a gain, net of broker and escrow fees, of $551,179 on the sale.  The Companycurrently leases its office space from the new owners at $4,263 per month.  

 

**NOTE 9 - DUE TO OFFICER**

 

Due to officer, represents advances made by an officer of the Company, which arenon-interest bearing, unsecured and due on demand.

 

NOTE 10 - CONVERTIBLE PROMISSORY NOTES

 

The Company issued convertible promissory notes in March and April 2000 amounting$1,350,000 plus interest due on September 28, 2000 and $400,000 plus interest due onOctober 21, 2000. These notes are essentially demand notes that have a six-month term andbear interest at 8% annually, unless the notes are in default, in which instance theinterest rate will increase to 12% annually.  Further, the notes bear a redemptionpremium, based upon the date of redemption equal to: 5% if within the first 60 days; 10%if within the second 60 days; 15% if within the third 60 day-period, and 20% if redeemedafter 181 days.  On the 180th day, the Company can require the holders to convert (if aregistration statement is in effect) the notes into common stock.  After the 180th day,only the holders can elect to convert - no right of the Company to force conversion afterthat time.  On the second anniversary, any remaining notes will automatically covert intocommon stock (if a registration statement is in effect).  If the conversion is at thedirection of the Company, then, in addition to the redemption amount, the Company wouldalso owe a 20% per annum rate of return on the redemption amount.  

 

The notes may be paid by tender of common stock of the Company, with the conversion ratefor the issuance of the common stock equal to the “closing price" on the date of theinitial purchase of the notes, which is the average of the closing bid price for the fiveprevious trading days.  Re-pricing warrants have also been issued in contemporaneousamounts, such that any decrease in the trading price of the stock will entitle the noteholders to reset the exercise price to a lower price than that which existed on theclosing date.  The number of shares issued under the re-pricing warrants is directly linkedto the Company's stock price on the conversion date of the notes.  As the stock pricedecreases, the number of shares to be issued pursuant to the re-pricing warrants increase.The note purchasers are also entitled to a separate set of warrants, equal to 20% of thetotal purchase amounts of the notes acquired, allowing for an exercise price of 110% ofthe closing price and having a 5-year term.

 

In accepting these subscriptions for these convertible notes, the Company had agreed tofile a registration statement with respect to the Company's common stock to be issued uponconversion of the notes and any exercise of the warrants, with the initial filing to occurwithin 60 days of the “first closing", which occurred on March 28, 2000.  A 2% per monthpenalty will accrue if the registration statement is not declared effective on or prior tothe 181st day following the first closing.  The holders have the right to require repaymentin cash if no registration statement is in effect on the 181st day.  Since thisregistration statement was

not filed within the first 60 days of the first closing, norhas it been declared effective within 181 days after the first closing, the note holdershave the right to the 2% penalty and repayment in cash.  The Company has not paid thesenotes as of the date of this report and will also owe the note holders the 12% defaultrate and the 20% redemption premium noted above.  

 

During the year ended June 30, 2002, $225,000 of the notes and accrued interest and otherfees of $183,695, totaling $408,695, were converted to 170,288 shares of Company's commonstock. The market value of the stock issued for the conversion was calculated at $25,240and the gain of $383,455 resulted from this note conversion was recorded as anextraordinary gain in the financial statements.

 

**NOTE 11 – ACCRUED EXPENSES**

 

The accrued expenses at June 30, 2002 consist of the following:

 

    Accrued accounts payable                           $   560,193

   Accrued salaries & payroll tax                     $        31,508

    Accrued interest                                             $1,863,374

    Accrued legal                                                  $1,116,077

    Accrued expenses –other                            $    125,020

    Total                                                                $3,696,172

 

 

 

NOTE 12 – MINORITY INTEREST

 

The minority interest in SlimTech was computed as follows:

 

    Total assets – shares in PHI                                   $300,000

    Totalliabilities                                                                   (3,300)

    Net worth                                                                    296,700

   

Minority shares 43.33%                                              $128,560

 

NOTE 13 – LITIGATION

 

**LEGAL PROCEEDINGS SETTLED AND UNPAID AS OF JUNE 30, 2002:**

 

QUANG VAN CAO AND NHAN THI NGUYEN CAO VS. PROVIDENTIAL SECURITIES, INC. ET AL.

 

This case was originally submitted to Orange County Superior Court, CA on June 25, 1997,Case No. 781121, and subsequently moved to NASD Dispute resolution for arbitration. On orabout August 24, 2000, the Company's legal counsel negotiated with the Claimant's counseland unilaterally reached a settlement that had not been approved by the Company. While theCompany was in the process of re-negotiating the terms of said settlement, the Claimantsfiled a request for arbitration hearing before the National Association of SecuritiesDealers on October 4, 2000, Case No. 99-03160. Thereafter, the Claimants filed a complaintwith the Orange County Superior Court, CA on October 31, 2000, Case No. 00CC13067 foralleged breach of contract for damages in the sum of $75,000.00 plus pre-judgmentinterest, costs incurred in connection with the complaint, and other relief. Withoutadmitting or denying any allegations, the Company reached a settlement agreement with theClaimants whereby the Company would pay the Claimants a total of $62,500.00 plus $4,500.00in administrative costs. As the date of this report, the Company has paid $2,500 and issubject to an entry of judgment for $79,000.  The settlement amount has been accrued inthe accompanying consolidated financial statements.

 

CONSECO FINANCE VENDOR SERVICES CORPORATION FKA GREEN TREE VENDOR SERVICES CORPORATION VS.PROVIDENTIAL SECURITIES, INC., HENRY D. FAHMAN AND TINA T. PHAN

 

In September 1997 Providential Securities, Inc. entered into a written Lease Agreement tolease certain items of equipment from Green Tree Vendor Services, in return for whichProvidential Securities, Inc. agreed to pay thirty-six monthly installments, each in theamount of $1,552.01. On or about September 12, 2000, and subsequently, ProvidentialSecurities, Inc. was unable to make the monthly payments to Claimant due to the lack ofrevenues following the interruption and subsequent closure of its securities brokerageoperations. Claimant filed a complaint for money with the Superior Court of the State ofCalifornia, County of Orange (Case No. 01CC02613) on February 23, 2001 seeking $39,102.50plus interest thereon at the legal rate from September 12, 2000. The claimant entered ajudgment against Providential Securities, Inc., Henry Fahman and Tina Phan for $48,933.The judgment amount has been accrued in the accompanying consolidated financialstatements.

 

IMPERIAL BUSINESS CREDIT, INC. VS. PROVIDENTIAL SECURITIES, INC., TINA T. PHAN, TIMOTHYDACK FAHMAN, THEODORE DACK FAHMAN, AND HENRY DACK FAHMAN

 

On or about November 20, 1997, Nara Bank, N.A. and Providential Securities, Inc. enteredinto a Written Lease Agreement ("Agreement") wherein Nara Bank, N.A. agreed to leasecertain computer equipment to Providential Securities, Inc. Thereafter, the Agreement wasassigned from Nara Bank, N.A. to Claimant's Assignor Oak Financial Services. Thereafter,the Agreement was assigned from Claimant's Assignor to Claimant. Pursuant to the terms ofthe Agreement, Providential Securities, Inc. agreed to pay Nara Bank, N.A. the sum of$1,187.40 per month for sixty months. On or about September 15, 2000, and subsequently,Providential Securities, Inc. was unable to make the monthly payments to Claimant due tothe lack of revenues following the interruption and subsequent closure of its securitiesbrokerage operations.  (See Note 16) Claimant filed a complaint for money with theSuperior Court of the State of California, County of Orange (Case No. 01CC07697) on June14, 2001 seeking $30,873.40 plus interest thereon at the rate of ten percent (10%) perannum from September 15, 2000. This case was settled on December 17, 2001. However, sinceProvidential Securities, Inc. was unable to pay the settlement amount, Claimant entered ajudgment for $79,681 on January 23,2002. Subsequently, $12,000 was paid by Mr. Fahman. Theunpaid judgment amount has been accrued in the accompanying consolidated financialstatements.

 

TIME WARNER COMMUNICATIONS VS. PROVIDENTIAL SECURITIES, INC.

 

The case filed in the superior Court in California for County of Orange by the claimantfor amounts due in connection with advertising performed on behalf of ProvidentialSecurities, Inc. The case was settled for $7,500 on July 12, 2001. The settled amount hasbeen accrued in the accompanying consolidated financial statements.

 

**ARBITRATION CASES**

 

The arbitration case brought by Richard Shaffer against Providential Securities, Inc., wasclosed in the year ended June 30, 2002.  The total claim requested by the claimant of$100,000 plus interest was denied. This amount was recorded as a gain on legal settlementin the financial statements since this amount has been accrued in the prior period.

 

The arbitration case for Tam was never filed. The prior year's accrued expense of $40,000was reversed and the amount was recorded as a gain on legal settlement.

 

**PENDING LITIGATION:**

 

COFFIN COMMUNICATIONS GROUP VS. PROVIDENTIAL HOLDINGS, INC.

 

On February 19, 2002 Coffin Communications Group filed a complaint with Superior Court ofCalifornia, County of Los Angeles Limited Jurisdiction, against the Company (Case No.02E01535) for $8,500 plus prejudgment interest, attorney's fees and costs, and other andfurther relief. This claim is in connection with investor relations' services rendered byCoffin Communications Group. The Company intends to settle this case. The sought amount of$8,500 (excluding interest) has been accrued in the accompanying consolidated financialstatements. 

 

DOW JONES & COMPANY, INC. VS. PROVIDENTIAL SECURITIES, INC. AND PROVIDENTIAL HOLDINGS,INC.

 

On March 19, 2002 Dow Jones & Company filed a complaint with the Superior Court ofCalifornia, County of Orange, West Justice Center (Case No. 02WL1633), againstProvidential Securities, Inc., the discontinued operations of the Company, andProvidential Holdings, Inc. for $9,973.10 plus prejudgment interest at the rate of ten(10%) per annum from November 1, 2000, reasonable attorneys' fees and other and furtherrelief. This claim is in connection with services allegedly rendered by the Plaintiff toProvidential Securities, Inc. prior to November 2000. The Company intends to settle thiscase. The sought amount of $9,973.10 (excluding interest) has been accrued in AccruedExpenses in the accompanying consolidated financial statements.

 

FRANCIS VAUSE, MARK VAUSE, FRANCIS VAUSE, JR., IAN VAUSE AND MARGARET HODSON VS. JERSEYTRANSFER & TRUST COMPANY AND PROVIDENTIAL HOLDINGS, INC.

 

Claimants filed a complaint with the United States District Court, District of New Jersey(Case No. 00-4353(JAGF) on September 6, 2000 seeking damages of $500,000.00 against JerseyTransfer & Trust Company and Providential Holdings, Inc. for refusing to remove therestrictive legends and register a total of 568,332 shares of Rule 144 stock held byClaimants. Providential Holdings, Inc. and Jersey Transfer & Trust Company ("Defendants")relied on representation by the former management of JR Consulting, Inc., later changed toProvidential Holdings, Inc., that the captioned shares were not free of all encumbrancesand were issued for invalid consideration. Defendants are vigorously defending the caseand have cross-claimed against the appropriate former management of JR Consulting, Inc.The sought amount of $500,000 has been accrued in the accompanying consolidated financialstatements. 

 

JAMES C. HU VS. MINGMAN HU AND PROVIDENTIAL SECURITIES, INC.

 

Mingman Hu was a registered representative with Providential Securities, Inc. who servedClaimant's investment account. Claimant filed a complaint with the Los Angeles CountySuperior Court, Northeast District on April 27, 2001 (Case No. G0027156) seekingcompensatory damages in the amount of $11,609.11 plus 12% interest and emotional distressdamages in excess of $50,000.00 for Mingman Hu's failure to honor her written agreementwith Claimant. Mingman Hu was an independent contractor with Providential Securities, Inc.and was responsible for any alleged claims by Claimant. Providential Securities, Inc. willvigorously defend this case.  The sought amount of $61,609 (excluding interest) has beenaccrued in the accompanying consolidated financial statements.

 

LAWRENCE NGUYEN VS. HENRY D. FAHMAN, PROVIDENTIAL HOLDINGS, INC. AND HUNG NGUYEN aka TONYNGUYEN

 

On December 19, 2000 Henry D. Fahman executed a Demand Promissory Note and pledged1,049,600 shares of common stock of Providential Holdings, Inc. for a personal loan in theamount of $150,000.00 from Claimant. This note was amended on February 22, 2001 to matureon March 19, 2001. Henry D. Fahman repaid $25,000.00 to Claimant and requested anextension for repayment of said note to July 15, 2001, which was agreed by Claimant andguaranteed by Mr. Derek Nguyen, a mutual friend of both Claimant's and Henry D. Fahman's.On May 31, 2001, Claimant filed a complaint with the Superior Court of California, Countyof Orange, Central Justice Center (Case No. 01CC07055) seeking $125,000.00 plus interestat the highest rate allowed by law from and after December 19, 2000, attorney fees andcosts, exemplary and punitive damages, and ownership of the pledged shares of common stockof Providential Holdings, Inc. Henry Fahman is committed to repaying his personalobligation to Claimant.  The Company has not accrued any amount relating to this case inthe accompanying consolidated financial statements.

 

NGON VU VS. PROVIDENTIAL SECURITIES, INC.

 

Claimant was a former employee of Providential Securities, Inc. who was laid off in 2000due to closure of business. The Claimant complained to the Department of IndustrialRelations (DIR) for allegedly unpaid vacation and salaries. On June 13, 2001, the DIRfiled a request to enter a judgment against Providential Securities, Inc. for $9,073.64including wages and interest, penalty, post hearing and filing fee. ProvidentialSecurities, Inc. is appealing the request for judgment.  The sought amount of $9,074 hasbeen accrued in the accompanying consolidated financial statements.

 

MARK TOW, ESQ. VS. PROVIDENTIAL HOLDINGS, INC.

 

This case is pre-arbitration. The Company hired Mark Tow, Esq. to prepare an SB-2Registration Statement and prepaid him $25,000 in retainer. Because Mark Tow was unable tocomplete the work according to schedule, the Company hired Stradling Yocca Carson & Rauthto replace Mark Tow. Stradling Yocca Carson & Rauth completed the SB-2 RegistrationStatement and filed with the SEC on 9/28/2000. Mark Tow sent the Company a letter in June2001 seeking a total of $75,000.00 for his allegedly rendered service. The Company intendsto vigorously defend this case.  The Company has accrued $50,000 relating to this case inAccrued Expenses in the accompanying consolidated financial statements since the originalagreement with Mark Tow was for a total service fee of $75,000 and the Company has alreadypaid $25,000 as a retainer to be offset against the total fees. 

 

**ARBITRATION CASES**

 

The Company has several arbitration cases that are either pending or in preliminary stagesagainst Providential Securities, Inc. relating to the day trading operations of theCompany.  The Company intends to defend each of the matters vigorously but may enter intoa settlement where appropriate based on the specific allegations involved and thepotential cost to defend the matter.  The total amount of damages sought by all theclaimants of these cases is $131,850.  This amount has been accrued in the accompanyingconsolidated financial statements.

 

**NOTE 14 - INCOME TAXES**

 

The Company's income tax provision in the current year represents mandatory state taxesfor each corporation and some penalties and interest relating to late payments.

 

The reconciliation of income tax expense (benefit) computed at the U.S. Federal statutoryrate to income tax expense (benefit) is as follows:

                                                                                                       June 30, 2002                         June 30,2001

 
Tax at U.S. Federal statutory rates:                                               $ (421,400)                             $   (683,600)

 

State income taxes, net of federal effect:                                           (74,400)                                (120,600)

 

Change in valuation allowance:                                                        495,800                                              809,723 

                                                                                                             $                  -                                         $           5,523      

                                                                                                    ==============                 ==============

 

The income tax of $800 for the year ended June 30, 2002 represents minimum franchise taxfor State of California. As of June 30, 2002 the Company's deferred tax asset amounted toapproximately $4.5 million, which relates primarily to NOL carryforwards.  The deferredtax asset for the year had a related valuation allowance in the same amount.

 

The Company had no significant deferred tax liabilities as of June 30, 2002.

 

As of June 30, 2002, the Company estimated the available NOL carryforwards to beapproximately $11.3 million, subject to certain limitations, which will expire on variousdates through 2022. 

 

The Company has failed to file its federal and state tax returns for June 30, 2002 andJune 30, 2001.  

 

**NOTE 15 – BASIC AND DILUTED NET LOSS PER SHARE**

 

Net loss per share is calculated in accordance with SFAS No. 128, “Earnings per Share".Under the provision of SFAS No. 128, basic net loss per share is computed by dividing thenet loss for the period by the weighted-average number of common shares outstanding forthe period.  Diluted EPS is based on the weighted-average number of shares of common stockoutstanding for the period and common stock equivalents outstanding at the end of theperiod. Common stock equivalents have been excluded from the calculation of weighted-average shares for purposes of calculating diluted net loss per share for 2002 and 2001periods, as such inclusion is anti-dilutive.  

                                                  
                                                                                                            2002                                   2001

                                     

    Basic and diluted net loss per share:

    Numerator:

          Net Loss                                                                            $(1,239,543)                        $(2,015,644)

 

    Denominator:

             Basic and diluted weighted average

          number of common shares outstanding

          during the period:                                                             28,648,000                          27,323,000

                                       

    Basic and diluted net loss per share:                                           $   (0.04)                                 $    (0.07)

                                                                                                ============                    ===========

 

**NOTE 16 – ISSUANCE OF STOCK**

 

SERIES I CLASS A CONVERTIBLE CUMULATIVE PREFERRED STOCK:

 

During the year ended December 31, 1999 Providential Securities, Inc. placed asubscription offering for its newly authorized Series I, Class A Preferred Stock.  Therewere 10,000,000 shares authorized, of which 103,000 shares were issued at $5.00 per share.Holders of the Series I Class A Convertible Cumulative Preferred Stock are entitled toreceive a cumulative cash dividend at a rate of 12% per year, accrued quarterly.Dividends, including any accumulated and unpaid dividends, shall be paid on the PreferredStock before any dividends are paid to the holders of the Company's Common Stock.  Eachshare of the Preferred Stock is convertible into one share of Common Stock of the Companyat any time after two years from the date of issue or immediately prior to the Company'sinitial public offering, whichever event occurs first. The Company may redeem thePreferred Stock for a price equal to 120 percent of the par value of said Preferred Stock(plus accumulated and unpaid dividends) at any time after two years from the date ofissuance, but only after giving the investor the opportunity through written notice toconvert his or her investment to Common Stock.  Accrued dividends, which is included inother current liabilities at June 30, 2002 and June 30, 2001 was $111,055 and $57,055,respectively.  

 

During the year ending June 30, 2001 the Company redeemed 13,000 outstanding shares ofPreferred Stock in exchange for principal plus any unpaid dividends as required by theNASD settlement and the litigation settlement.  

 

 

**COMMON STOCK:**

 

During November and December 2000 the Company issued 11.8 million shares of common stockto its treasury. The stocks were issued at their par value of $.04 per share for a totalamount of $472,000.

 

During the year ended June 30, 2002, the Company issued 170,288 shares of common stock forconversion of notes. The difference of $383,455 from the notes amounting $225,000 andaccrued interest and other fees of $183,695 exchanged for the stock valued at market priceof $25,240 was recorded as an extraordinary gain.  The stock were valued atthe market price of the stock at the time of conversion of the notes.

 

During the year ended June 30, 2002, the Company issued 3,000,000 shares of common stockfor consulting service amounting $1,620,000 valued at the price of the stock atthe time of issuance of the stock.  In addition, 710,000 shares of common stockwere issued for consulting services amounting $183,600.

 

The Company issued 3,000,000 shares of common stock for acquisition of SlimTech, recordedat $300,000. The shares issued to this subsidiary have been reflected as treasury stock inthe financial statements.

 

**NOTE 17 - STOCK BASED COMPENSATION PLAN**

 

On July 10, 2000the Company adopted a Stock Option and Incentive Plan (the "Plan") whichprovides for the issuance of up to a maximum of 16 million shares of theCompany's common stock to officers, employees and non-employee directors at thesole discretion of the board of directors. On August 10, 2000 the Companygranted 14 million options under the Plan to officers, directors and employeesat an exercise price of $.50 per share. All the options were exercisable on July1, 2001 and expire on December 31, 2002. As of the date of this report, therehave been no options exercised and seven million of these options havebeen forfeited.

 

As the Company complies with Accounting Principles Board Opinion No. 25"Accounting forStock Issued to Employees" in accounting for options issued to employees no compensationexpense has been recorded.  Had compensation costs for the Company's stock option planbeen determined based upon fair value at the grant date consistent with Statement ofFinancial Accounting Standards No. 123 (SFAS No. 123), “Accounting for Stock-BasedCompensation," the Company's net loss and loss per share as of June 30, 2001 would havebeen as follows:

 

Net loss as reported                                               $ (2,015,644)

Net loss - proforma                                               $ (7,265,484)

Loss per share asreported                                    $          (0.07)

Loss per share - pro forma                                     $          (0.27)

 

The weighted average fair value of options granted for the year ending June 30, 2001 is$.37.  The fair value of each option grant is estimated on the date of grant using theBlack-Scholes option pricing model.  The following assumptions were used for grants infiscal year 2001: risk-free rate of 6.0 percent; no expected dividend yield; expectedvolatility of 540 percent; and an expected life of 2.4 years.

 

 

NOTE 18 – CONTRACTS AND COMMITMENTS

 

AGREEMENT WITH DATALOGIC CONSULTING, INC.

 

DataLogic Consulting, Inc., a Texas corporation, is an IT consulting firm and a SASInstitute Quality Partner. The Company has assisted Datalogic in connection with itsmerger plan with Topclick International, Inc. and other development strategies. On April25, 2001, but effective April 18, 2001, Datalogic Consulting, Inc. and the Company enteredinto an agreement whereby the Company would receive 10% equity in the new company thatwould result from the consummation of the proposed merger between Datalogic Consulting,Inc. and Topclick International, Inc. The merger plan between Datalogic and Toplick was

consummated on July 20, 2001. The Company was entitled to 2,666,922 shares of DatalogicInternational, Inc. (the new name for Topclick International, Inc.) as the fee for themerger and acquisition consulting services it performed. The company has received 1.2million shares as of June 30, 2002.  This investment in Datalogic International, Inc. iscarried on the financial statements of Providential Holdings, Inc. at its market value asof June 30, 2002. 

 

JOINT VENTURE AGREEMENT WITH MIMI BAN

 

On November 27, 2001 by effective November 23, 2001, the Company signed a joint ventureagreement with Mimi Ban, an individual, whereby Mimi Ban would transfer the liquid crystaldisplay (LCD) technologies to Providential for the purpose of setting up and operating oneor more LCD manufacturing plants in Vietnam. According to the joint venture agreement,Mimi Ban will share 30%, Providential Holdings, Inc. will share 60% and other businesspartners and investors, including HTV Co., Ltd., will share 10% of the net profits thatwill be generated from any and all LCD plant(s) that will be established in Vietnam andelsewhere as a result of this agreement. This joint venture agreement supersedes all prioragreements, arrangements and covenants, including but not limited to the Joint VentureAgreement between Boxo, Inc. and the Company dated January 4, 2001 and the Letter ofIntent between Boxo, Inc. and the Company dated December 20, 2000 and any amendmentthereof. As of the date of this report there have been no manufacturing plants operatingor has been set-up.

 

INTERNATIONAL CENTER FOR TRAINING AND CONSULTING, VIETNAM'S MINISTRY OF TRADE

 

International Center for Training and Consulting (ICTC) is an organization under theMinistry of Trade of Vietnam that promotes economics, trade, investment and trainingactivities between Vietnam and foreign organizations. Providential Holdings, Inc. and ICTCsigned an agreement in March 2001 to cooperate in the areas of trade, economics, andtechnology. ICTC is responsible for representing Providential Holdings in connection withappropriate Vietnamese organizations, businesses, and individual businessmen and investorsin Vietnam. ICTC will also perform consulting services and provide information on variouseconomic, trade and investment projects as may be required by Providential.  Fees betweenthe parties will be negotiated on an as project basis.  As of the date of this report ICTChas introduced Vietnam-based Delta Electromechanis Co., Ltd., a manufacturer of electricbicycles, and Nam Hiep Co., Ltd., a manufacturer of organic fertilizer and constructioncompany to PHI as potential joint venture partners; however, there have been no projectscompleted.

 

       CHU LAI INDUSTRIAL ZONE, QUANG NAM PROVINCE, VIETNAM

 

Providential Holdings has entered into an agreement with Chu Lai Industrial Zone (CLIZ)Authority, Quang Nam Province, Central Vietnam, to develop this industrial and exportprocessing zone, to upgrade a paper mill, and to implement two to five investment projectsin Chu Lai by the end of 2002. As of the date of this report the Company has not assistedin funding this project.  The Company expects its main role in this project to be themanager organizing the different companies that will operate their business at thislocation. As the date of this report, the Company has not assisted in funding thisproject.

 

PROVIMEX

 

A wholly owned division of the Company originally formed on April 10, 2001 under the name“Providential Imex", to focus on trade commerce with Vietnam. This division changed itsname to Provimex on July 5, 2001. The Company believes that its trade commerce businesswill grow substantially as a result of the ratification of the Trade Agreement betweenVietnam and the United States. The Company has only begun to generate revenues throughthis division since August 2002.

 

PROVIDENTIAL ADVISORY SERVICES, INC.

 

Providential Advisory Services, Inc. (PAS) was formed in February 2000 as a Californiacorporation. Its mission is to create distinctive value and enrich client's lives byproviding high quality investment advisory services that will help improve their assetvalue over time. The Company purchased 60 percent of the outstanding shares of this entityin July 2001 for $1,000.  As of the date of this report this corporation has had no sales,cost of sales or gross profit.

 

AGREEMENT WITH LEXOR INTERNATIONAL, INC.

 

On October 9, 2001, the Company entered into an agreement to provide merger andacquisition consulting services to Lexor International, Inc., a Maryland corporation, andto assist Lexor in its business combination plan with in its business combination planwith Pan-American Automotive Corporation, a Delaware corporation. According to theagreement, the Company will be receiving 10% equity interest in the resulting company ascompensation for its advisory and consulting services.  On October 22, 2001, Pan-Americansigned a definitive agreement to acquire 100% of Lexor in exchange for stock in Pan-American. This transaction was closed on November 5, 2001 and on November 15, 2001 theCompany received 24,761,900 restricted shares of Pan-American Automotive Corporation'scommon stock, (after the 7 to 1 reverse split). The Company has recorded these shares atno value.

 

EQUITY LINE OF CREDIT

 

The Company received a $20 million equity line of credit at the beginning of November 2001with Boston-based Dutchess Private Equities Fund, L.P. The line of credit's term was threeyears. This equity line of credit was terminated in June 2002 because the Company wasunable to file a registration statement in a timely manner and no funds were been receivedagainst this line of credit.

 

         JOINT VENTURE WITH MINH HIEU COMPANY

 

On January 1, 2002 the Company entered into an agreement with Minh Hieu Joint StockCompany of Ho Chi Minh City, Vietnam to form “Providential JVC," a joint venture companyunder the laws of the Socialist Republic of Vietnam. According to the terms of theagreement, the Company will contribute $140,000 to the initial required capital and own70% of Providential JVC while Minh Hieu Company will contribute $60,000 for 30% of thejoint venture enterprise. Providential JVC's main line of business includes industrialgarments, packaging products and accessories. To date no amount has been contributedtowards the joint venture. 

 

OFFICE SPACE LEASE

 

The Company currently leases its office space from PAUB ENTERPRISES, LLC at $4,263 permonth.  This lease commenced on April 1, 2001 and expires on March 31, 2004.

 

         EQUIPMENT LEASES

 

The Company also has been unable to make all their monthly payments on other equipmentleases due to the lack of revenues following the interruption and subsequent closure ofits securities brokerage operations. The Company is in litigation with some of theequipment lessors and is negotiating additional payoffs with other equipment lessors. 

 

**NOTE 19- GOING CONCERN UNCERTAINTY**

 

As shown in the accompanying consolidated financial statements, the Company incurred a netloss of $1.2 million for the year ended June 30, 2002. As of June 30, 2002, the Companyhad a negative working capital of $6.7 million and a shareholder deficit of $5.2 million.Since the main operating subsidiary Providential Securities, Inc. ceased its securitiesbrokerage operations in October 2000, there has been no significant revenue stream for theCompany. The Company is in default of the terms of convertible notes at June 30,2002.  These factors, as well as the uncertain conditions that the Company faces in itsday-to-day operations, create an uncertainty as to the Company's ability to continue as agoing concern. The financial statements do not include any adjustments that might benecessary should the Company be unable to continue as a going concern.

 

Management has taken action and is formulating additional plans to strengthen theCompany's working capital position and generate sufficient cash to meet its operatingneeds through June 30, 2003 and beyond. Among the actions to be taken, the Company intendsto file a Form SB-2 Registration Statement to raise additional capital and is currently inthe process of attaining additional financing. In addition, the Company also anticipatesgenerating more revenue through its proposed mergers and acquisitions (See Notes 18). Noassurances can be made that management will be successful in achieving its plan.

 

**NOTE 20 – SUBSEQUENT EVENT**

 

Subsequent to June 30, 2002, the Company issued 2,532,057 shares of common stock forconverted notes to exercise re-pricing warrants.

 

In July 2002, the Company received the decision on NASD arbitration for MohammadBagherabadi. The case was dismissed without prejudice. The Company is only liable for thefee of $3,100. As of June 30, 2002, the Company has accrued $81,850.

 

In July 2002, the Company secured a $10 million equity line of credit from Los Angeles-based Mercator Momentum Fund, L.P.  The line of credit's term is three years.  The amountthe company can receive is dependent on the amount of free trading shares put in an escrowaccount or an effective registration statement. The company can draw down up to 90 percentof the market price (as defined in the agreement) of the registered shares or the free-trading shares deposited in escrow. The Company agrees to pay a 2 percent fee on the totalvalue of the equity line, 1 percent of which will be payable in cash on the gross proceedsfrom the first drawdown and the remaining 1 percent fee payable in shares of the Company'scommon stock.  As of the date of this report, no funds have been received against thisline of credit. 
 

On August 23, 2002, the Company entered into a purchase agreement with ATC TechnologyCorporation, an Arizona corporation to purchase all issued and outstanding shares of ATCTechnology Corporation. For consideration, the Company agreed to deliver $250,000 inpromissory note, non-interest bearing, payable 270 days after closing, and $250,000 inpromissory note, non-interest bearing, payable 18 months after closing, 3,000,000 sharesof restricted stock of the Company with an option of additional shares to be issued after270 days if the stock price does not reach $.30, 1,000,000 shares of restricted stock ofthe Company with an option of additional shares to be issued after one year if the stockprice does not reach $.30.  
 

**ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**
 

    None.
 

 

**PART III** 
 

**ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT**
 

The following table sets forth certain information as of June 30, 2002, with respect tothe Directors and Executive Officers of the Company. 
               

NAME                                                   AGE                                         POSITION

Henry D. Fahman                                           49                         Chairman of the Board, President

      Tina T. Phan                                                      35                         Director, Secretary and Treasurer 

Gene Bennett                                               48                         Chief Financial Officer

Tam T. Bui                                                 42                         Chief Technology Officer

Thorman Hwinn                                                53                         Director

 

Directors are elected at the annual meeting of shareholders and hold office until thefollowing annual meeting and until their successors are elected and qualified. AllExecutive Officers serve at the discretion of the Board of Directors.

 

Henry D. Fahman has been President and Chairman of the Board of Providential Holdings,Inc. since January 14, 2000.  Mr. Fahman served as President and Chairman of the Board ofProvidential Securities, Inc. from  its inception in October 1992 to October 2000. Heholds a B.S., magna cum laude, in business  administration from the University ofCalifornia at Berkeley, with emphasis in finance and economic analysis and  policy, and has alsoattended Executive Education at Harvard Business School and Stanford University.Previously, he served as a Resettlement Coordinator for the United Nations HighCommissioner for Refugees.  Mr. Fahman is currently a member of the Board of Trustees ofUnion College of California and President of Providential Foundation, Inc., both of whichare non-profit organizations. Mr. Fahman is the husband of Tina T. Phan, our Secretary andTreasurer and a member of our Board of Directors.

 

Tina T. Phan has been a Director and Secretary of the Company since January 2000 and wasVice President of Operations of Providential Securities, Inc. from 1995 to 2000. Mrs. Phanholds a B.S. in management information system from California State University, LosAngeles. Currently Mrs. Phan also serves as Treasurer of the Company and President ofProvidential Advisory Services, Inc., a California corporation. Mrs. Phan was employed bythe World Relief Corporation from 1992 to 1995. Mrs. Phan is the wife of Henry D. Fahman.

 

Gene M. Bennett has been serving as Chief Financial Officer of the Company since November2001.  Bennett, a CPA, has more than 20 years of experience as a chief financial officer,controller, professor and consultant and holds an MBA with honors from Michigan StateUniversity. He also attended law school at the University of Michigan and Coolidge. He hasassisted firms in going public, in participating in mergers and acquisitions, and informing strategic partnerships. He has served as Chief Financial Officer of many companiesoperating in various fields, including, ProCFO, Ltd., BBI Holdings, Inc., Argonaut NetworkSystems, Inc. He has served as Vice President of Finance for National Automobile Club of California, Certified Public Accountant for Gerbel&Butz Baugh,CPA in Michigan and also has been a professor of law and business, quantitative methods,audit, tax and cost accounting at University of Honolulu, California State University,Fullerton, and Chapman University. 
 

Tam Bui has been serving as Chief Technology Officer of the Company since May 2002.  Mr.Bui holds Bachelor and Master of Science degrees from the University of Minnesota and hasattended continuing Education at the University of California, Los Angeles. He has over 18years of experience with Honeywell, Inc. and TRW as Senior Production Engineer/ComputerApplication Engineer, Project Manager, Department Manager, Program Manager andImplementation Manager. His most recent responsibility has been the implementation of LAPDEmergency Command Control Communications Systems. He has a broad knowledge and experiencein the areas of information technology, intranet/internet technology, inventorymanagement, material resource planning, enterprise resource planning, human resourcemanagement, and international business.   
 
Thorman Hwinn has been a Director of the Company since June 30, 2001. Most recently he hasheld managerial positions for retailers catering to the Vietnamese-American community inCalifornia. From 1993 to 1994, he was Vice President of Vinusa Investment & HoldingCompany, a California corporation. From 1978 to 1987, he was a Professor with Vietnam'sUniversity of Finance, serving as Chief of the Mathematics Department.  From 1970 to 1975,Mr. Hwinn was an economic specialist at the Cabinet level for the Vice Prime Minister'sOffice for Economic Development and a banking specialist with the Agricultural DevelopmentBank, Vietnam. Thorman holds an MBA, a Master's Degree in Economics and Bachelor's degreesin philosophy, economics and mathematics.
 

The Company's securities are not registered under Section 12(g) of the Exchange Act.Accordingly, the Directors and Executive Officers of the Company are not required to filereports under Section 16(a) of that act.

 

 

**ITEM 10. EXECUTIVE COMPENSATION**

 

    (a) Any compensation received by officers, directors, and management personnel of theCompany will be determined and approved from time to time by the Board of Directors of theCompany as it deems appropriate and reasonable. Officers, directors, and managementpersonnel of the Company will be reimbursed for any out-of-pocket expenses incurred onbehalf of the Company. 

 

Except $20,000 paid to Gene M. Bennett, the Company's Chief Financial Officer, therewas no compensation paid to any other the Officers of the Company during the year endedJune 30, 2002. 
 

    (b) There are no annuity, pension or retirement benefits proposed to be paid to officers, directors, or employees of the Company in the event of retirement at normal retirement date as there is no existing plan provided for or contributed to by the Company. 
 

    (c) All members of the Company's Board of Directors, whether officers of the Company or not, may receive an amount yet to be determined annually for their participation in meetings of the Board and will be required to attend a minimum of four meetings per fiscal year. The Company reimburses all expenses for meeting attendance or out of pocket expenses connected directly with their Board participation.

 

   (d) On July 10, 2000 the Company adopted a Stock Option and Incentive Plan (the "Plan")which provides for the issuance of up to a maximum of 16 million shares of theCompany's common stock to officers, employees and non-employee directors at thesole discretion of the board of directors. On August 10, 2000 the Companygranted fully vested 14 million options under the Plan to officers, directorsand employees at an exercise price of $.50 per share. All the options wereexercisable on July 1, 2001 and would expire on December 31, 2002. On June 15,2002, the Company extended the expiration date of these employee stock to12/31/2005. As of the date of this report, there have been no options exercisedand 7 million of these options have been forfeited.
 

                                               NUMBER OF

                                               SECURITIES                    % OF TOTAL

                                               UNDERLYING                  OPTIONS

                                               OPTIONS                          GRANTED TO

                                               GRANTED                        EMPLOYEES                EXERCISE               EXERCISE              EXPIRATION

NAME                                  TO DATE                           TO DATE                      PRICE                       DATE                        DATE

      Henry D. Fahman

CEO and Chairman of          5,000,000                                 71.43%                           $.50                            7/01/2001                     12/31/2005

the Board 
 

Tina T. Phan

Director/Treasurer                2,000,000                               28.57%                           $.50                        7/01/2001                  12/31/2005

& Secretary 
 

The options contain no vesting provisions, but rather must be exercised by the end of2005.  They have not been exercised by the date of this report. 
 

**ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

 

        The following table sets forth information regarding the beneficial ownership ofshares of the company's common stock as of June 30, 2002 (34,203,157 issued andoutstanding, excluding 11,800,000 shares of treasury stock) by (i) all shareholders knownto the company to be beneficial owners of more than 5% of the outstanding common stock;and (ii) all directors and executive officers of the company, and as a group:

 

                                                     NAME AND ADDRESS OF                AMOUNT OF BENEFICIAL                  PERCENT OF

TITLE OF CLASS                    BENEFICIAL OWNER(1)                            OWNERSHIP(2)                                              CLASS
 

Common Stock                                Henry D. Fahman,                                         5,354,926(3)                                         11.64%

                                                           8700 Warner Ave.,

                                                           Fountain Valley, CA 92708

 

Common Stock                                Nhi T. Le,                                                        5,271,541                                              11.46%

                                                          11 Thunder Trail    
                                                           Irvine, CA 92614

 

Common Stock                                 SlimTech                                                       3,000,000                                                6.52%

                                                           8700 Warner Ave.,                 
                                                           Fountain Valley, CA 92708

 

Common Stock                                Tina T. Phan (4)                                              1,195,889                                               2.60%                 
                                                           8700 Warner Ave.,

                                                           Fountain Valley, CA 92708

 

Common Stock                                Shares of all directors and                             6,550,815                                             14.24%

                                                           executive officers as a group

                                                           (2 persons)

 

 

 

(1) Each person has sole voting power and sole dispositivepower as to all of the shares shown as beneficially owned by them
 

(2) Certain of these shares have been pledged to secure certain obligations of thecompany.
 

(3) Included within this total is 25,000 shares of convertible preferred shares ofProvidential Securities, Inc. which may be converted to common shares under the terms of aconvertible promissory note issued by the company. 
 

(4) Tina Phan is the wife of Henry Fahman. 
 

 

**ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

 

Henry D. Fahman, Chairman and Chief Executive Officer of the Company, has from time to time made cash advances to the Company. The advancesare unsecured, interest free and payable on demand
 

Certain of the officers and directors of the company are engaged in other businesses, either individually or through partnerships and corporations in which they have an interest, hold an office, or serve on a board of directors. As a result, certain conflicts of interest may arise between the company and its officers and directors. The company will attempt to resolve such conflicts of interest in favor of the company. The officers and directors of the company are accountable to it and its shareholders as fiduciaries, which requires that such officers and directors exercise good faith and integrity in handling the company's affairs. A shareholder may be able to institute legal action on behalf of the company or on behalf of itself and other

similarly situated shareholders to recover damages or for other relief in cases of the resolution of conflicts is in any manner prejudicial to the company.
 

 

**PART IV**

 

 

**ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-**K 
 

 

EXHIBIT NO.                                            DESCRIPTION

 

 2.1                                                               Plan of Exchange between the company and Prima Eastwest

                                                                     Model Management, Inc. (incorporated by reference to Exhibit

                                                                     2 to the Form 8-K filed on March 1, 1996)
 

 2.2                                                               Corporate Combination Agreement between the company and

                                                                     Providential Securities, Inc., effective on January 14, 2000

                                                                     (incorporated by reference to Exhibit 10.12 to the Form 10-

                                                                     KSB filed on January 10, 2000).
 

 3.1                                                               Articles of Incorporation (1)
 

 3.2                                                               Amendment to Articles of Incorporation (incorporated by

                                                                     reference to Exhibit 3.1 of the Form 10-KSB for the fiscal

                                                                     year ended June 30, 1995).
 

 3.3                                                               Amendment to Articles of Incorporation (6)
 

 3.4                                                               Certificate of Amendment to Articles of Incorporation (6)
 

 3.5                                                               Bylaws, as amended (6)
 

 4.1                                                               Form of Series 1 Bridge Notes Purchase and Security

                                                                     Agreement between the Company and investors, dated March 27,

                                                                     2000 (6)

 

 4.2                                                               Form of Series 1 Bridge Note executed by the Company issued

                                                                     by the Company to Investors. (6)

 

 4.3                                                               Form of Common Stock Purchase Warrant issued by the Company

                                                                     to investors. (6)

 

 4.4                                                               Form of Re-pricing Warrant issued by the Company to investors. (6)

 

 4.5                                                               Form of Registration Rights Agreement between the company

                                                                     and investors, dated March 27, 2000 (6)

 

 4.6                                                               Form of Common Stock Purchase Warrant to be issued by the

                                                                     company to Sovereign Capital Advisors, LLC (6)

 

 4.7                                                               Form of Convertible Promissory Note issued by the Company to

                                                                     preferred shareholders of Providential Securities, Inc. (6) 
 

 5.1                                                               Opinion Re Validity of Agreements (6) 
 

10.1                                                              Benatone Exchange Agreement, with Creditors (2)

 

10.2                                                              Benatone Share Acquisition Agreement (for Weldnow

                                                                     Enterprise, Ltd.) (2)

 

10.3                                                              Benatone Share Acquisition Agreement (Dynedeem Limited) (2) 
 

10.4                                                              Benatone Exchange Agreement (2) 
 

10.5                                                              Benatone Asset Sale Agreement (2)

 

10.6                                                              Benatone Royalty Agreement (2) 
 

10.7                                                              Benatone Consultancy Agreement (2) 
 

10.8                                                              Benatone Deed (2)

 

10.9                                                              Autokraft Stock Purchase Agreement (3)    
 

10.10                                                            Autokraft Stock Subscription Agreement (3)
 

10.11                                                            Prima Agreement and Plan of Merger (4)

 

10.12                                                            Escrow Agreement between the company and Warshaw Burstein

                                                                     Cohen Schelsinger & Kuh, LLP, dated March 28, 2000. (6)
 

10.13                                                             Placement Agency Agreement between the company and Sovereign

                                                                      Capital Advisors, LLC, dated March 28, 2000. (6)

 

10.14                                                             Guaranty Agreement between Henry Fahman and SovCap Equity

                                                                      Partners, Ltd, dated March 28, 2000. (6)

 

10.15                                                             Pledge Agreement between Henry Fahman and SovCap Equity

                                                                      Partners, Ltd, dated March 28, 2000. (6)

 

10.16                                                             Partnership Purchase Agreement between the company and Holt

                                                                      + Collins, dated May 31, 2000. (6)          

 

10.17                                                             Memorandum of Agreement between DataLogic Consulting, Inc.

                                                                      and Providential Holdings, Inc., dated April 25, 2001. (5)

 

10.18.1                                                          Letter of Intent between Providential Holdings, Inc. and

                                                                      Epicenter, Inc., dated October 30, 2000. (5)

 

10.18.2                                                          Amendment to Letter of Intent between Providential Holdings,

                                                                      Inc. and Epicenter, Inc., dated November 30, 2000. (5)

 

10.18.3                                                          Amendment to Letter of Intent between Providential Holdings,

                                                                      Inc. and Epicenter, Inc., dated January 12, 2001. (5)

 

10.18.4                                                            Amendment to Letter of Intent between Providential Holdings,

                                                                      Inc. and Epicenter, Inc., dated June 26, 2001. (5)

 

10.18.5                                                          Amendment to Letter of Intent between Providential Holdings,

                                                                      Inc. and Epicenter, Inc., dated October 02, 2001. (5)
 

10.19                                                              Joint Venture Agreement between Providential Holdings, Inc

                                                                       and Boxo, Inc., dated January 1, 2001. (5)

 

10.20                                                             License of Manna Technologies Joint Venture Company, dated

                                                                      March 21, 2001. (5)

 

10.21                                                             Memorandum of Agreement between International Consulting and

                                                                      Training Center, Ministry of Trade, Vietnam and the Company,

                                                                      dated March 24, 2001. (5)

 

10.22                                                             Memorandum of Agreement among General Transportation Company

                                                                      No. 5, Chu Lai Industrial Zone and the Company, dated March

                                                                      25, 2001. (5)

 

10.23                                                             Letter of Intent between Providential Holdings, Inc. and

                                                                      Global Systems and Technologies, Corp. dated October 18,

                                                                      2001. (6)

 

10.24                                                             Letter of Intent between Providential Holdings, Inc. and

                                                                      Estate Planning and Investment Company dated November 7,

                                                                      2001. (6)

 

10.25                                                             Joint Venture Agreement between Providential Holdings, Inc.

                                                                      and Mimi Ban dated November 23, 2001. (6)

 

10.26                                                             Plan of acquisition of Nettel Global Communication Corp.

                                                                     (incorporated by reference to the Company's Current Report          
                                                                      on Form 8-K filed May 3, 2002).

 

10.27                                                             Joint Venture Agreement with Vietnam's Minh Hieu Joint Stock

                                                                      Company. (7)

 

10.28                                                             Memorandum of Agreement with HDT Enterprises, LLC dated

                                                                      March 15, 2002. (7)
 

10.29                                                             Memorandum of Agreement and Principle Contract with Vietnam's

                                                                      Center of Telecom Technology. (7)

 

10.30                                                             Stock Purchase Agreement with SlimTech, Inc. (incorporated

                                                                      by reference to the Company's Current Report on Form 8-K, filed

                                                                      May 1, 2002).

 

10.31                                                             Stock Purchase Agreement with ATC Technology Corp. (incorporated

                                                                      By reference to the Company's Current Report on Form 8-K,

                                                                      Filed September 17, 2002) 
 

16.1                                                               Notification of Change of Accountants, Kabani & Co.

                                                                      appointed (incorporated by reference to exhibits filed with

                                                                      Form 8-K/A, filed September 10, 2001)

 

17.1                                                               Resignation of Nhi T. Le as director and officer and

                                                                      appointment of Thorman Hwinn as Director (incorporated by

                                                                      reference to exhibits filed with Form 8-K, filed July 9, 2001)

 

21.1                                                              Subsidiaries of the Registrant 
 

          (1)  Incorporated by reference to the company's Registration

          Statement on Form S-18, declared effective August 10, 1982

          (SEC File No. 2-78335-NY), and to the company's Annual

          Report on Form 10-K for the fiscal year ended June 30, 1995.

 

          (2)  Incorporated by reference to the company's Current

          Report on Form 8-K, dated September 7, 1995

 

          (3)  Incorporated by reference to the Company's Current

          Report on Form 8-K/A, dated September 12, 1995.

 

          (4)  Incorporated by reference to the Company's Current

          Report on Form 8-K, dated March 1, 1996.

 

          (5) Incorporated reference to Form 10KSB for the

          year ended June 30, 2000 filed October 16, 2001.

 

          (6) Incorporated by reference to Form 10KSB for the

          year ended June 30, 2001 filed December 17, 2001.

 

     
          (7) Incorporated by reference to Form 10QSB for the

          quarterended March 31, 2002 filed May 14, 2002. 
 
99.1                                                             Certifications in Accordance with Section 906 of theSarbanes-Oxley Act of 200
 

 

**SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS.**

 

 

No annual report or proxy material has been sent to security holders nor are such materials anticipated to be sent, with the exception ofthis Annual Report on Form 10-KSB
 
 

**SIGNATURES **
 

        In accordance with Section 13 or 15 (d) of the Exchange Act, the Company caused this report to be signed on its behalf by the

undersigned, thereunto duly authorized.

 

**PROVIDENTIAL HOLDINGS, INC.**

 

 

Date:  October 10,  2002                                                                                                By: /s/  Henry D. Fahman                    

                                                                                                                                         Henry D. Fahman, President

 

 

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

 

 

**SIGNATURE                                                                TITLE                                                                     DATE**

 

 

/s/ Henry D. Fahman
HENRY D. FAHMAN                                              President/Chairman                                                  October 10, 2002 
 

/s/ Thorman Hwinn

THORMAN HWINN                                                           Director                                                            October 10, 2002 
 

/s/ Tina T. Phan

TINA T. PHAN                                                           Secretary/Treasurer/Director                                  October 10, 2002 
 

/s/ Gene Bennett

GENE BENNETT                                              Chief Financial Officer                                             October 10, 2002 
 

 

 

 

**Exhibit No. 21.1**

 

 

**SUBSIDIARIES OF REGISTRANT**

** **

   1.    Providential Securities, Inc.

           A California corporation (discontinued).
 

   2.    Providential Clearing, Inc.

           A California corporation (discontinued).
 

   3.    Providential Advisory Services, Inc.

       A California corporation 
 

   4.    Manna Technologies

           A Vietnam-based joint venture company
 

   5.    Provimex

           A wholly-owned division of the Company
 

   6.    ATC Technology Corp.

           An Arizona corporation and wholly-owned subsidiary of the Company
 

   7.    SlimTech

          A Nevada corporation and majority-owned subsidiary of the Company
 
 
**Exhibit 99.1     Certifications in Accordance with Section 906 of theSarbanes-Oxley Act of 2002**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTEDPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Providential Holdings, Inc. (the"Company") on Form 10-KSB for the year ending June 30, 2002, as filedwith the Securities and Exchange Commission on the date hereof (the"Report'), I, Henry D. Fahman, President of the Company,certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002, that, to the best of myknowledge and belief:(1) The report fully complies with the requirements of Section13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, inall material respects, the financial condition and result of operations ofthe Company./s/ Henry D. FahmanPresidentDated: October 10, 2002

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTEDPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Providential Holdings, Inc. (the"Company") on Form 10-KSB for the year ending June 30, 2002, as filedwith the Securities and Exchange Commission on the date hereof (the"Report'), I, Thorman Hwinn, a Director of the Company,certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002, that, to the best of myknowledge and belief:(1) The report fully complies with the requirements of Section13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, inall material respects, the financial condition and result of operations ofthe Company./s/ Thorman HwinnDirector

Dated:October 10, 2002

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTEDPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Providential Holdings, Inc. (the"Company") on Form 10-KSB for the year ending June 30, 2002, as filedwith the Securities and Exchange Commission on the date hereof (the"Report'), I, Tina T. Phan, Secretary, Treasurer and Director of the Company,certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002, that, to the best of myknowledge and belief:(1) The report fully complies with the requirements of Section13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, inall material respects, the financial condition and result of operations ofthe Company./s/ Tina T. PhanSecretary/Treasurer/Director

Dated:October 10, 2002

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTEDPURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Providential Holdings, Inc. (the"Company") on Form 10-KSB for the year ending June 30, 2002, as filedwith the Securities and Exchange Commission on the date hereof (the"Report'), I, Gene Bennett, Chief Financial Officer of the Company,certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002, that, to the best of myknowledge and belief:(1) The report fully complies with the requirements of Section13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, inall material respects, the financial condition and result of operations ofthe Company./s/ Gene BennettChief Financial Officer

Dated:October 10, 2002