**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, 2004**

 

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                                                                                                                                              90-0114535

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

INCORPORATION OR ORGANIZATION)                                                                               IDENTIFICATION NO.)

 

17011 Beach Blvd., Suite 1230, Huntington Beach, California 92647

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)               (ZIP CODE)

(714) 843-5450

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 June 30,2004:$9,276,211
 

The aggregate market value of the voting andnon-voting equity held by non-affiliates computed by reference to the price atwhich the common equity was sold, or the average bid and asked price of suchcommon equity, as of November 15, 2004 was $13,388,303 based on a price of $0.10 per share.

 

The number of shares of Common Stock, $.04par value per share, outstanding as of June 30, 2004 was: 131,482,868 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**

 

Providential Holdings, Inc., ("PHI") a diversified holding company committed to increasingshareholder value through growth, focuses on selective technologies, financial services,international markets, and special situations. 

 

Products and services include mobile entertainment systems, information technology,identification technology, infrastructure development, telecommunications, trade commerce, andmergers and acquisitions, especially for companies in the U.S. and emerging overseas marketswith high potential for growth.
 
The company's objective is to develop, operate and participate in selected businesses chosen tostrategically utilize its existing and future distinctive competencies and generate attractiverisk-adjusted rates of return for its shareholders and investors.
 
**BACKGROUND**
 
Providential Holdings, Inc. ("PHI" or "Providential") was organized under the laws of the Stateof Nevada on June 8, 1982 under the name of JR Consulting, Inc. The company changed its nameto Providential Securities, Inc., a Nevada corporation, on January 12, 2000, and subsequentlychanged its name to Providential Holdings, Inc. on February 9, 2000. From its inception throughSeptember 7, 1995, the Company generated nominal revenues and did not actively engage inbusiness. Prior to the corporate combination agreement with Providential Securities, Inc., JRConsulting had an operating subsidiary, Diva Entertainment, Inc ("Diva"), which operated twomodeling agencies, one in New York and one in California.
 
Providential Securities, Inc., a California Corporation ("Providential Securities") wasincorporated in the State of California on October 8, 1992. It operated a securities brokerageservice in California, New York and Oregon. The principal markets for Providential Securities'services were individual investors who were located throughout the United States. ProvidentialSecurities bought and sold securities for its customers through a number of different markets,utilizing a brokerage clearinghouse to transact the trades. Due to the results of an NASDexamination, Providential Securities withdrew its membership and ceased its securities brokeragebusiness in October 2000.
 
Since November 2000, the Company has reorganized its primary scope of business to the presentform to focus on four main areas: (1) Technologies, (2) Financial services, (3 Internationalmarkets, 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 acquired all the outstandingshares of Providential Securities in exchange for 20,000,000 shares of JR Consulting (thenrenamed Providential) common stock. The transaction was consummated on January 14, 2000. Inaddition, as a covenant under the Agreement, Providential was required to enter into anagreement to sell to Havilland Limited all of the shares of Diva owned by Providential as well asto assign all of its rights, title and interest in an Option Agreement to Havilland Limited. JRConsulting's officers and directors resigned from their positions and the shareholders ofProvidential Securities assumed control of the two entities (together as "the Company"). Theshares issued in the merger are restricted against resale pursuant to the provisions of federal andstate securities laws. Providential Securities' shareholders of record as of the closing date ownedapproximately 75% of Providential's common stock. The acquisition has been treated as a capitaltransaction in substance, rather than a business combination, and was deemed a "reverseacquisition" for accounting purposes. Accordingly, Providential Securities was the accountingacquirer and the historical financial statements prior to January 14, 2000 were those ofProvidential Securities. In the accompanying financial statements, the capital structure and lossesper share of Providential Securities have been retroactively restated to reflect the acquisition as ifit occurred at the beginning 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 shares of Diva ownedby Providential 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 byProvidential to officers of the Company amounting to $617,781, the amounts due to Providentialfrom Diva amounting to $94,843 and the return of 135,000 shares of common stock ofProvidential owned by 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 the assets and liabilities ofProvidential. Included in the total gain of $1.2 million was Diva's net profit of $245,606 earnedduring the interim holding period from January 14, 2000 to June 30, 2000.
 
**BUSINESS RESTRUCTURING**
 
Since the discontinuance of its securities brokerage operations in October 2000, the Companyhas restructured its primary scope of business to include the following areas: (1) Technologies,(2) Financial services, (3) International markets, and (4) Special Situations. Events anddevelopments relating to these areas are described in more detail below.
 
**SUBSIDIARIES:**
 
**ATC TECHNOLOGY CORP.**

 

ATC Technology Corporation, established in 2001 as an Arizona corporation, manufacturesmobile entertainment products, including VidegoTM and GamegoTM. The VidegoTM, winnerof the prestigious 2001 Innovation Engineering and Design Award from IDSA (IndustrialDesigners Society of America), is one of the finest and affordable car theater systems available toconsumers. With its wireless viewing monitor, which attaches easily to the back of anyautomobile headrest, the patent-pending VidegoTM system provides consumers with the highestquality DVD and Video players and hours of entertainment while traveling. 

 

Launched in 2002, the GamegoTM allows people of all ages the opportunity to play video gamesin the car, RV, SUV, van or boat by connecting our product to an existing Microsoft X-BoxTM,Sony Playstation2TM, or Nintendo GamecubeTM. Like the VidegoTM, the GamegoTM also hasa viewing monitor which attaches easily to the back of any automobile headrest. ATCTechnology Corporation has sold both in the United States, Mexico, Canada, Denmark, Panama,and Great Britain. It is also selling direct to well-known car dealers such as: Land Rover,Mercedes Benz, Lexus, Ford, Honda and Toyota. 
 
On August 23, 2002, the Company entered into a purchase agreement with ATC TechnologyCorp. to purchase all issued and outstanding shares of ATC Technology Corp. For consideration,the Company agreed to deliver $250,000 in promissory note, non-interest bearing, payable 270days after closing, and $250,000 in promissory note, non-interest bearing, payable 18 monthsafter 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 did not reach $.30 , 1,000,000 shares ofrestricted stock of the Company with an option of additional shares to be issued after one year ifthe stock price does not reach $.30. 

 

This transaction was closed on October 17, 2003. Web site: www.atctechnologycorp.com
 
The above-mentioned notes were later amended to bear an interest rate of 12% per annum andmature on December 31, 2003, and March 31, 2004, respectively.  As of June 30, 2004, $215,941of the notes was paid with the 1,366,714 shares of the Company's common stock.
 
The Company declared and distributed 20% share dividends of ATC Technology Corp. to PHI'sshareholders of record as of June 30, 2004 and currently holds 80% equity ownership in ATC.ATC Technology Corp. is in the process of filing with the appropriate regulatory agencies tobecome a fully-reporting public company and intends to acquire a viable business in exchangefor a portion of its common shares.  On June 11, 2004, ATC Technology Corp. signed anagreement to acquire 96% of LifeTech Scientific, Inc., a Chinese corporation located inShenzhen, China, which is engaged in the manufacturing of medical products, in exchange for70% of the issued and outstanding shares of ATC at the time of closing. The closing date isscheduled to occur by December 31, 2004, subject to satisfactory due diligence review by bothATC and LifeTech Scientific, Inc. As of the date of this report, this transaction has not closed.

 

**PROVIMEX, INC.**
 
Provimex is a wholly-owned division of the Company originally formed on April 10, 2001 underthe name "Providential Imex", to focus on trade commerce with Vietnam. This division changedits name to Provimex on July 5, 2001.  Provimex began to generate revenues from its import andexport activities in August 2002. For the fiscal years ended June 30, 2003 and June 30, 2004,this division recorded $61,800 and $132,856 in sales, respectively. This subsidiary was laterincorporated as a Nevada corporation on September 23, 2004. Web site: www.provimex.us. TheCompany has declared a 15% stock dividend of Provimex, Inc. to shareholders of record as ofSeptember 15, 2004.
 
**PROVIDENTIAL CAPITAL, INC.**
 
In May 2003, the Company formed a new wholly-owned subsidiary under the name ofProvidential Capital, a DBA company, to provide financial products and services for themicro-small cap arenas and manage the Company's proprietary merger and acquisitionactivities. Providential Capital has mainly focused its attention on the underserved segment ofsmaller companies in the U.S. and abroad. This subsidiary was later incorporated as a Nevadacorporation on September 23, 2004.

 

Providential Capital has successfully managed merger plans for several publicly-tradedcompanies and is currently focusing on a number of target companies in the US, China, Korea,and Vietnam.
 
**CLEARPASS SYSTEMS, INC.**
 
On November 20, 2002 the Company entered into an agreement to acquire 51% of theoutstanding common stock of Clear Pass, Inc., a Nevada corporation, in exchange for $1,500,000and 3,000,000 shares of restricted common stock of the Company. Under an agreement withPASS21 Co, Ltd., a Korean corporation, Clear Pass had the licensing rights to distribute andmarket PASS21 Co.'s biometric products in the US, Canada and Europe. Besides a total of$175,500.00 investment into Clear Pass, the Company issued 3,000,000 shares of restrictedcommon stock of the Company and a promissory note in the amount of $1,324,500 to Clear Pass,Inc. This agreement between Clear Pass and the Company was rescinded on May 9, 2003. TheCompany has received 3,000,000 shares of the Company's restricted common stock back fromClear Pass, Inc. and cancelled the $1,324,500.00 promissory note. Concurrently, the Companyhas set up a new wholly-owned subsidiary under the name of ClearPass, a DBA of ProvidentialHoldings, Inc., to operate as a systems integrator and provider of total biometric security andaccess management solutions. On March 26, 2003 the Company signed a stock purchaseagreement to acquire up to 51% of Real ID Technology Co, Ltd., a Korean corporation, andplanned to market Real ID Technology's biometric products through the ClearPass subsidiary.The stock purchase agreement with Real ID Technology was rescinded on August 26, 2003. Thissubsidiary was later incorporated as a Nevada corporation under the name of ClearPass Systems,Inc. but has only generated nominal revenues to date.  Web site: www.clearpass.us
 
**TOUCHLINK COMMUNICATIONS, INC.**

 

A wholly-owned DBA of Providential Holdings, Inc, Touchlink Communications was formed onJuly 7, 2003 to provide point-of-sale (POS) terminals and prepaid calling cards to retailers,convenient storesand non-profit organizations across the US. Touchlink Communicationssigned an agreement with KAGRO (Korean American Grocer Association) to provide pre-paidservices to its member stores in the US and Canada. This subsidiary was later incorporated as aNevada corporation in February 2004 under the name of Touchlink Communications, Inc. toprovide long distance services to residential and business customers in the United States. As ofJune 30, 2004 this subsidiary has generated $2,967 in revenues. The Company has declared a15% stock dividend of Touchlink Communications, Inc. to shareholders of record as ofSeptember 15, 2004. Web site: www.touchlinkcom.com

PHI DIGITAL CORP.
 
On November 1, 2003, the Company formed PHI Video Corp., which was later renamed PHIDigital Corp. ("PHI Digital"), a Nevada corporation, to provide the sale of consumer electronics,including flat-screen television sets and monitors, as part of its distributorship agreement withXOCECO. During the fiscal year ended June 30, 2004, this subsidiary generated $3,566,407 insales with a cost of goods sold of $3,206,580 for a net gross profit of $359,827. Thedistributorship agreement with XOXECO was terminated in June 2004 and PHI Digital has beenrenamed "TULON INDUSTRIES, INC." to change its scope of business. 

 

**IRVINE COLLEGE OF MEDICAL SCIENCES, INC.**
 
On December 19, 2003, the entered into a Stock Purchase Agreement with Irvine College ofMedical Sciences, Inc., a California corporation, ("the College") to acquire 51% of the College'scommon stock for an aggregate purchase price of $314,437, which was paid with $80,000 in cashand 1,116,369 shares of the Company's common stock.  The shares were issued in August 2004.During the fiscal year ended June 30, 2004, this subsidiary generated $167,049 in tuition and aminority expense of $43,065 was recorded. The Company has declared 15% stock dividends ofIrvine College of Medical Sciences, Inc. to shareholders of record as of August 31, 2004. As ofthe date of this report, these dividend shares have not been distributed to the referencedshareholders of records.  

 

Web site: www.atlantiscareercollege.net
 
**MINORITY INTERESTS:**
 
**NETTEL HOLDINGS, INC.**

 

On March 13, 2002 the Company entered into a Letter of Intent to acquire a 51% common stockof Nettel Global Communication Corp. ("Nettel"), a Delaware corporation, for a combination of$2,250,000 in cash and $250,000 in common stock of Providential Holdings, Inc. In addition, ifNettel's aggregate net profits for the twelve-month period commencing the closing of thistransaction were equal or greater than the threshold amount of $2,500,000 then Nettel would beentitled to a dividend payment of fifty percent (50%) of any and all profits in excess of saidthreshold amount for the above-mentioned period.

 

On December 3, 2002 the Company entered into a Stock Purchase Agreement with Nettelwhereby the Company would acquire 46.5% of common stock of Nettel in exchange for a total of$2,500,000 in non-interest bearing notes, $500,000 of which would be due 60 days after theclosing of the transaction and $2,000,000 would be due 90 days after closing. On January 17,2003 an Amendment to Stock Purchase Agreement was entered into by and between theCompany and Nettel which called for the $500,000 note to be due on April 15, 2003 and the$2,000,000 note to be due on June 15, 2003. The Company also agreed to pay Nettel 2% penaltyper month on any unpaid balances of the notes for a maximum period of 60 days after therespective maturity dates. If the notes were not liquidated in their entirety after the penaltyperiods, the Company would surrender any unpaid portions of Nettel's stock back to Nettel. Theclosing of the transaction occurred and became effective on January 17, 2003, at which time theCompany issued and delivered these notes to Nettel. This agreement was later rescinded on May19, 2003.

 

On May 19, 2003 the Company entered into an agreement to provide merger and acquisitionconsulting services to Nettel and to assist Nettel in its business combination plan with a fullyreporting publicly-traded company. On May 23, 2003 Nettel consummated a merger plan withBio Standard Corp, a Florida corporation, and changed the name of the combined company toNettel Holdings, Inc., a Florida corporation. The Company has received 2,250,000 shares ofcommon stock of Nettel Holdings, Inc. as compensation for its advisory and consulting services.

 

Nettel provides long-distance telephony and VoIP (Voice-Over-Internet-Protocol) services toover 40 countries, owns a software development company (Entec Software) and operates anexport and import division (Nettel Trading). Web site www.nettelholdings.com

**LEXOR HOLDINGS, INC.**

 

On October 9, 2001, the Company entered into an agreement to provide merger and acquisitionconsulting services to Lexor International, Inc., a Maryland corporation, and to assist Lexor in itsbusiness combination plan with Pan American Automotive Corporation, a Delaware corporation.According to the agreement, the Company will be receiving 10% equity interest in the resultingcompany as compensation for its advisory and consulting services. On October 22, 2001, PanAmerican signed a definitive agreement to acquire 100% of Lexor in exchange for stock in PanAmerican. This transaction was closed on November 5, 2001. The Company has received2,476,191 restricted shares of Lexor International Inc.'s common stock (after a seven-to-onereverse split and a subsequent ten-to-one reverse split) as a fee for its service.

 

The transaction between Pan American and Lexor was rescinded on October 23, 2002, afterwhich Pan American changed its name to Grayling Wireless USA Inc. and effected aone-for-two-hundred reverse split. The Company currently holds 12,381 shares of common stockof Grayling Wireless (GRYW.PK) but has not recognized the value of these shares on its booksas of the date of this report.

 

OnSeptember 26, 2003, Providential Capital, a wholly-owned DBA of the Company,entered into a new agreement to provide merger and acquisition consultingservices to Lexor International, Inc., a Maryland corporation, and to assistLexor in its business combination plan with Western Silver-Lead Corp, a Floridacorporation. On September 29, 2003, Western Silver-Lead Corp. signed adefinitive agreement to acquire 100% of Lexor in exchange for stock in WesternSilver-Plead Corp. This transaction was closed on September 29, 2003 and WesternSilver-Lead Corp's corporate name was changed to Lexor Holdings, Inc., a Floridacorporation. According to the consulting agreement, Providential Capitalreceived 1,500,000 shares of common stock of Lexor Holdings, Inc. (approximately10% of the issued and outstanding shares) as compensation for its advisory andconsulting services. 

 

Lexor International, Inc. is a leading manufacturer and supplier of premium pedicure spaproducts.  Headquartered in Baltimore, Maryland, Lexor International, Inc. also operates its ownmanufacturing facilities in Vietnam, an emerging market with high potential for growth. Website: www.lexorholdings.com
 
**E-CHECK RECOVERY, INC.**

 

On June 16, 2004, the Company signed an agreement to acquire a 20% ownership of E-CheckRecovery, Inc. (www.echeckrecover.com), a Texas corporation, in exchange for $25,000 worthof the Company's restricted common stock. 

 

The Company distributed one-half of its holding in E-Check Recovery (10%) as a specialdividend to PRVH shareholders of record as of July 30, 2004 and currently holds 10% equityownership in E-Check Recovery, Inc. E-Check Recovery, Inc. is in the process of filing thenecessary documents with the appropriate regulatory agencies to become a fully-reportingpublicly-traded company. (Web site: www.echeckrecover.com) 

 

**AGREEMENTS AND STRATEGIC ALLIANCES:**

 

**AGREEMENT WITH DATALOGIC INTERNATIONAL, INC.**

 

Datalogic Consulting, Inc., a Texas corporation, is an IT consulting firm and a SAS InstituteQuality Partner. The Company has assisted Datalogic in connection with its merger plan withTopclick International, Inc. and other development strategies. On April 25, 2001, but effectiveApril 18, 2001, Datalogic Consulting, Inc. and the Company entered into an agreement wherebythe Company would receive 10 percent equity in the new company that would result from theconsummation of the proposed merger between Datalogic Consulting, Inc. and TopclickInternational, Inc. The merger plan between Datalogic and Toplick was consummated on July 20,2001. The fee for the merger and acquisition consulting services the Company performedresulted in 2,666,922 shares of Datalogic International, Inc. (the new name for TopclickInternational, Inc.). The Company received and subsequently disposed of 1.2 million shares ofDatalogic International in fiscal year ended June 30, 2003.  During the fiscal year ended June 30,2004, the Company received 250,000 shares of Datalogic International, Inc. in connection withthis merger plan.

**AGREEMENT WITH INTERNATIONAL CENTER FOR TRAINING AND CONSULTING,VIETNAM'S MINISTRY OF TRADE**
 
International Center for Training and Consulting (ICTC) is an organization under the Ministry ofTrade of Vietnam that promotes economics, trade, investment and training activities betweenVietnam and foreign entities. PHI and ICTC signed an agreement in March 2001 to cooperate inthe areas of trade, economics, and technology. ICTC is responsible for representing PHI inconnection with appropriate Vietnamese organizations, businesses, and individual businessmenand investors in Vietnam. ICTC will also perform consulting services and provide information onvarious economic, trade and investment projects as may be required by PHI. Fees between theparties will be negotiated on an as project basis. As of the date of this report, there have been noprojects completed.  . However, PHI and ICTC are in the process of cooperating to providemanagement consulting and Merger and Acquisition advisory services in Vietnam beginningDecember 2004.
 
**AGREEMENT WITH CHU LAI OPEN ECONOMIC ZONE, QUANG NAM PROVINCE,VIETNAM**

 

The Company has entered into an agreement with Chu Lai Industrial Zone (the "Chu Lai Zone")Authority, Quang Nam Province, Central Vietnam, to develop this industrial and exportprocessing zone.

 

Chu Lai is centrally located near three Southeast Asian nations and is convenient to Vietnam'sHighway One, the Trans-Viet Railroad, an international port suitable for ocean-going ships and amajor airport. Part of the overall plan that includes 27,000 acres, the North Chu Lai IndustrialZone has set aside 740 acres for facilities engaged in paper products, agricultural, maritime andforest products, consumer electronics, leather and footwear manufacturing, food and beverageoperations and glassware and crystal fabrication.

 

Foreign investment entities approved for development projects in the Chu Lai Industrial Zoneenjoy opportunities to lease land at $0.001 per square foot/year, to secure 50-year leasesrenewable for 20 years, plus exemptions from national and provincial land use taxes, a 10-yearincome-tax holiday, and exemptions from export taxes from two to four years, based on the sizeof the investment made.

 

According to this agreement, the Chu Lai Zone will provide the necessary infrastructure and theCompany will be the manager organizing the different companies that will operate theirbusinesses at this location. The Company also intends to cooperate with CDI, Co., a Vietnamesecompany based in Tam Ky, Quang Nam Province, to co-develop certain sectors of the OpenEconomic Zone. 

 

**MEMORANDUM OF AGREEMENT AND PRINCIPLE CONTRACT WITH VIETNAM'SCENTER OF TELECOM TECHNOLOGY**

 

Center of Telecom Technology (CTT) is an organization under the National Center for NaturalScience and Technology of Vietnam. Established in 1990, CTT's mission is to recruit anddevelop professionals in the areas of electronics, telecommunications, and informationtechnology and to provide related products based on advanced technologies. One of CCT'slargest customers is the Vietnamese Postal and Telecommunications Services. CTT also focuseson rural telecommunications in Vietnam. 

 

On March 23, 2002, the Company entered into a Memorandum of Agreement and PrincipleContract with the Center of Telecom Technology (CTT), Vietnam to cooperate in the areas ofwireless access networks, consultancy services and other business ventures in Vietnam. The twoparties will collaborate to form a joint venture enterprise or strategic alliances with appropriateVietnamese entities to provide wireless access services to consumers, businesses and governmentorganizations throughout Vietnam.  The Company also expects  to gain business contracts forTouchlink Communications, Inc. and ClearPass Systems, Inc., both of which are subsidiaries ofthe Company, through relationship with CTT.

**BUSINESS CONSULTING AGREEMENT WITH ENTEC SOFTWARE, INC.**

 

On February 28, 2004, the Company entered into a business consulting agreement with EntecSoftware, Inc. ("Entec") to provide services in the identification, location, and facilitating amerger with a fully-reporting publicly-traded company. If a merger is successful, the Company isto receive common stock in the newly combined company equal to 20% of the then issued andoutstanding common shares of the new company. This agreement was cancelled in August 2004.
 
**MEMORANDUM OF UNDERSTANDING WITH HEFEI IRON & STEEL GROUPCOMPANY,  LTD., CHINA**

 

In June 2004, the Company reached a memorandum of understanding to acquire and restructureHefei Iron & Steel Group Company, Ltd., ("HISG") Hefei, Anhui Province, China.  According tothe memorandum, both parties have agreed on ten major guidelines leading to a definitiveagreement for the transaction, subject to further due diligence review, the approval ofshareholders and the board of directors of both companies and appropriate regulatory agencies.The Company is in the process of negotiations with HISG but has not reached a definitiveagreement between the two parties as of the date of this report.

 

**AGREEMENT WITH TANGSHAN YUTIAN SAW CORPORATION**
 
On June 7, 2004, Providential Holdings, Inc. (the "Company") entered into an agreement toacquire a sixty percent (60%) ownership interest in Tangshan Yutian Saw Corporation("TYSC"), a Chinese corporation which is a leading manufacturer of circular saw blades. (Website: www.ytsawblades.com) 

 

According to the terms of the transaction, which was closed on June 24, 2004, ProvidentialHoldings acquired 60% of the common stock of  Tangshan Yutian Saw Corporation in exchangefor a $45 million short-term note. As part of the agreement, Providential would assist TYSC inbecoming a publicly-traded company in the US and Europe within nine months following theclosing of the transaction. In addition, Providential would help market TYSC 's products outsideof China and facilitate TYSC's access to the Western capital markets.

Because of TYSC's delays in providing financial audits according to US GAAP to comply withthe Securities and Exchange Commission's requirement, as well as the Company's delays inproviding the earnest monies to TYSC, this transaction was cancelled as of November 19, 2004.The Company relinquished the 60% ownership interest in TYSC and simultaneously cancelledthe $45 million short-term note. 

 

**AGREEMENT WITH TULON PACIFIC, LLC**
 
On September 10, 2004 the Company signed an agreement to acquire a 70% ownership of TulonPacific, LLC, an Irvine, California-based company that provides precision cutting tools anddrilling solutions, for a $1.6 million combination of cash and a promissory note which may beconverted into common shares of the Company in six months. This transaction has not closed asof the date of this report and has been extended to December 17, 2004.  The Company has alsomade offers to acquire certain distribution assets from Bayview Financial and certainmanufacturing assets from GE Capital to grow the proposed cutting tool business. However, thefinal purchases of these assets are dependent on the closing of the transaction between theCompany and Tulon Pacific.
 
**JOINT VENTURES:**
 
**PROVIMEX-HTV JOINT VENTURE COMPANY, LTD.**

On October 18, 2004 the People's Committee of Ho Chi Minh City, Vietnam approved the jointventure application by the Company and HTV, Ltd., a Vietnam-based company, to form a JointVenture company under the name of "Provimex-HTV Joint Venture Company, Ltd."  This jointventure company will primarily focus on providing equipment and liquid gas to high risebuildings and premium residential housings in Vietnam. The Company will own 80% equity inthe joint venture company.  Operations are expected to begin in early 2005.
 
**PROVIDENTIAL JVC**

 

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 the agreement,the Company will contribute $140,000 to the initial required capital and own 70% of ProvidentialJVC 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 productsand accessories. The Company has terminated this agreement.
 
**SPECIAL NOTE ON ACQUISITIONS**

 

The Company is in the process of evaluating various opportunities and negotiating to acquireother companies and technologies. Acquisitions entail numerous risks, including difficulties inthe assimilation of acquired operations and products, diversion of management's attention fromother business concerns, amortization of acquired intangible assets and potential loss of keyemployees of acquired companies. We have limited experience in assimilating acquiredorganizations into our operations. Although potential synergy may be achieved by acquisitions ofrelated technologies and businesses, no assurance can be given as to the Company's ability tointegrate successfully any operations, personnel, services or products that have been acquired ormight be acquired in the future. Failure to successfully assimilate acquired organizations couldhave a material adverse effect on the Company's business, financial condition and operatingresults.

 

**STRATEGY**

 

Providential Holdings' strategy is to:

 

 1. Identify, build, acquire and deploy valuable resources with distinctive competitiveadvantages;

 

 2. Identify, evaluate, participate and compete in attractive businesses that 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 for investors through capitalappreciation or spin-offs of business units.

**ITEM 2.    DESCRIPTION OF PROPERTIES**

 

During the year ended June 30, 2004, the Company leased its office space at 8700 WarnerAvenue, Suite 200, Fountain Valley, CA, 92708 for $4,263 per month.  In August 2004, theCompany moved its offices and currently leases its office space at 17011 Beach Blvd., Suite1230, Huntington Beach, CA 92647 for $3,907 per month. The lease is due to expire on July 31,2007.

 
 
**ITEM 3.    LEGAL PROCEEDINGS AND ARBITRATIONS**

 

Other than as set forth below, the company is not a party to any material pending legalproceedings and, to the best of its knowledge, no such action by or against the company has beenthreatened. The majority of the legal proceedings and arbitration cases are related to thediscontinued operations of Providential Securities, Inc.

 

**LEGAL PROCEEDING SETTLED AND CLEARED AS OF YEAR END:**
 
IMPERIAL BUSINESS CREDIT, INC. VS. PROVIDENTIAL SECURITIES, INC., TINA T.PHAN, TIMOTHY DACK FAHMAN, THEODORE DACK FAHMAN, AND HENRY DACKFAHMAN

 

On or about November 20, 1997, Nara Bank, N.A. and Providential Securities, Inc. entered into aWritten Lease Agreement ("Agreement") wherein Nara Bank, N.A. agreed to lease certaincomputer equipment to Providential Securities, Inc. Thereafter, the Agreement was assignedfrom Nara Bank, N.A. to Claimant's Assignor Oak Financial Services. Thereafter, the Agreementwas assigned from Claimant's Assignor to Claimant. Pursuant to the terms of the Agreement,Providential Securities, Inc. agreed to pay Nara Bank, N.A. the sum of $1,187.40 per month forsixty months. On or about September 15, 2000, and subsequently,Providential Securities, Inc.was unable to make the monthly payments to Claimant due to the lack of revenues following theinterruption and subsequent closure of its securities brokerage operations.  Claimant filed acomplaint for money with the Superior Court of the State of California, County of Orange (CaseNo. 01CC07697) on June 14, 2001 seeking $30,873.40 plus interest thereon at the rate of tenpercent (10%) per annum from September 15, 2000. This case 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, on June 18, 2002,$12,000 was paid to Claimant. Then on May 24, 2004, the Company paid Claimant $30,000 forfull satisfaction of the judgment and an Acknowledgment of Satisfaction of Judgment was filedon June 30, 2004. A gain in litigation settlement in the amount of $41,417 was recognized andrecorded  for the period ended June 30, 2004.

 

**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 June 25, 1997, CaseNo. 781121, and subsequently moved to NASD Dispute resolution for arbitration. On or aboutAugust 24, 2000, the Company's legal counsel negotiated with the Claimant's counsel andunilaterally 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 Claimants filed arequest for arbitration hearing before the National Association of Securities Dealers on October4, 2000, Case No. 99-03160. Thereafter, the Claimants filed a complaint with the Orange CountySuperior Court, CA on October 31, 2000, Case No. 00CC13067 for alleged breach of contract fordamages in the sum of $75,000 plus pre-judgment interest, costs incurred in connection with thecomplaint, and other relief. Without admitting or denying any allegations, the Company reacheda settlement agreement with the Claimants whereby the Company would pay the Claimants atotal of $62,500 plus $4,500 in administrative costs. As the date of this report, the Company haspaid $2,500 and is subject to an entry of judgment for $79,000. The settlement amount has beenaccrued in the accompanying consolidated financial statements.

 

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

 

In September 1997 Providential Securities, Inc. entered into a written Lease Agreement to leasecertain items of equipment from Green Tree Vendor Services, in return for which ProvidentialSecurities, Inc. agreed to pay thirty-six monthly installments, each in the amount of $1,552. Onor about September 12, 2000, and subsequently, Providential Securities, Inc. was unable to makethe monthly payments to Claimant due to the lack of revenues following the interruption andsubsequent closure of its securities brokerage operations. (See Note 3) Claimant filed a complaintfor money with the Superior Court of the State of California, County of Orange (Case No.01CC02613) on February 23, 2001 seeking $39,102 plus interest thereon at the legal rate fromSeptember 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 ANDMARGARET HODSON VS. JERSEY TRANSFER & TRUST COMPANY ANDPROVIDENTIAL HOLDINGS, INC.

 

Claimants filed a complaint with the United States District Court, District of New Jersey (CaseNo. 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 legendsand register a total of 568,332 shares of Rule 144 stock held by Claimants. ProvidentialHoldings, Inc. and Jersey Transfer & Trust Company ("Defendants") relied on representation bythe former management of JR Consulting, Inc., later changed to Providential Holdings, Inc., thatthe captioned shares were not free of all encumbrances and were issued for invalid consideration.
 
On July 21, 2004 a settlement agreement was signed by Claimants and Defendants whereby theCompany agreed to pay Claimants $25,000 in cash and 2,500,000 shares of common stock of theCompany. The Company issued 2,500,000 shares of common stock to Claimants on July 26,2004 and paid Claimants $25,000 on August  12, 2004, resulting in $75,000 of gains in litigationsettlement.
 
**LEGAL PROCEEDING PENDING AS OF YEAR END:**
 
MARK TOW, ESQ. VS. PROVIDENTIAL HOLDINGS, INC.

 

This case is pre-arbitration. The Company hired Mark Tow, Esq. to prepare an SB-2 RegistrationStatement and prepaid him $25,000 in retainer. Because Mark Tow was unable to complete thework according to schedule, the Company hired another firm to replace Mark Tow. This newfirm completed the SB-2 Registration Statement and filed with the SEC on September  28, 2000.Mark Tow sent the Company a letter in June 2001 seeking a total of $75,000 for his allegedlyrendered service. The Company has accrued $50,000 relating to this case in Accrued Expensesin the accompanying consolidated financial statements since the original agreement with MarkTow was for a total service fee of $75,000 and the Company has already paid $25,000 as aretainer to be offset against the total fees. Since June 2001 there has been no filing for arbitrationby Mark Tow. 
 
NGON VU VS. PROVIDENTIAL SECURITIES, INC.
 
Claimant was a former employee of Providential Securities, Inc. who was laid off in 2000 due toclosure of business. The Claimant complained to the Department of Industrial Relations (DIR)for allegedly unpaid vacation and salaries. On June 13, 2001, the DIR filed a request to enter ajudgment against Providential Securities, Inc. for $9,074 including wages and interest, penalty,post hearing and filing fee. The sought amount of $9,074 has been accrued in the accompanyingconsolidated financial statements.
 
VERIO VS. PROVIDENTIAL SECURITIES, INC.
 
On or about April 1, 2003, Verio, Inc. filed a judgment against Providential Securities, Inc., awholly-owned subsidiary of the Company which was discontinued in October 2000, for a total of$9,141. This sum consists of $6,800 for services allegedly rendered by Verio, Inc. toProvidential Securities, Inc. in 2000 and $2,341 for legal costs. Both amounts have beenaccrued in the accompanying consolidated financial statements.
 
DOW JONES & COMPANY, INC. VS. PROVIDENTIAL SECURITIES, INC. ANDPROVIDENTIAL 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), against ProvidentialSecurities, Inc., the discontinued operations of the Company, and Providential Holdings, Inc. for$9,973 plus prejudgment interest at the rate of ten (10%) per annum from November 1, 2000,reasonable attorneys' fees and other and further relief. This claim is in connection with servicesallegedly rendered by the Plaintiff to Providential Securities, Inc. prior to November 2000. TheCompany intends to settle this case. The sought amount of $9,973 (excluding interest).

 

**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 Counter BulletinBoard (OTCBB) under the symbol "JRCI" until December 12, 1999. Since December 12, 1999,the Common Stock was trading under the symbol "JRCIE." Following the corporate combinationwith Providential Securities, Inc. that was consummated on January 14, 2000, the CommonStock traded under the symbol "PRVH," until October 20, 2000 when it traded under the symbol"PRVHE" due to the 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. Since October 20,2004 the Company's stock has been trading under the symbol "PRVHE" due to the delay in itsfiling of Form 10-KSB for the period ended June 30, 2004.
 
The Company's common stock is also listed on the Berlin, Frankfurt, and Munich StockExchanges in Germany under the symbol "PR7:WKN 935160" where it began trading on August15, 2003, October 27, 2003, and November 19, 2003, respectively.

 

The following sets forth the high and low prices of the Company's Common Stock in the US forthe most recent month, most recent quarter and each quarter during the preceding two fiscalyears.

 

Though there is a relatively wide following of the Company's stock in the US and in Europe,the prices for the Company's common stock quoted by brokers are not necessarily a reliableindication of the value of the Company's common stock.
 HighLow   Month Ended October 31, 20040.1250.065Quarter Ended September 30, 20040.2200.150   Per Share Common Stock Prices by Quarter		For the Fiscal Year Ended on June 30, 2004      HighLow   Quarter Ended June 30, 20040.2400.080Quarter Ended March 31, 20040.3750.125Quarter Ended December 31, 20040.3800.055Quarter Ended September 30, 20030.1100.040   Per Share Common Stock Prices by Quarter		For the Fiscal Year Ended on June 30, 2003      HighLow   Quarter Ended June 30, 20030.1150.035Quarter Ended March 31, 20030.1100.030Quarter Ended December 31, 20020.1550.030Quarter Ended September 30, 20020.1000.035   
 

**Holders of Common Equity:**

 

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

 

**Dividends:**

 

The Company has not declared or paid a cash dividend to common stock shareholders since theCompany's inception. The Board of Directors presently intends to retain any earnings to financecompany operations and does not expect to authorize cash dividends to common shareholders inthe foreseeable future. Any payment of cash dividends in the future will depend upon thecompany's earnings, capital requirements and other factors.

 

The Company has issued share dividends from ATC Technology Corp. and E-Check Recovery,Inc. to its shareholders and has declared additional share dividends from other Irvine College ofMedical Sciences, Inc., Provimex, Inc., and Touchlink Communications, Inc.

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

 

Except for the audited historical information contained herein, this report specifiesforward-looking statements of management of the Company within the meaning of Section 27aof the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934("forward-looking statements") including, without limitation, forward-looking statementsregarding the company's expectations, beliefs, intentions and future strategies. Forward-lookingstatements are statements that estimate the happening of future events and are not based onhistorical facts. Forward- looking statements may be identified by the use of forward-lookingterminology, such as "could", "may", "will", "expect", "shall", "estimate", "anticipate","probable", "possible", "should", "continue", "intend" or similar terms, variations of those termsor the negative of those terms. The forward-looking statements specified in this report have beencompiled by management of the Company on the basis of assumptions made by management andconsidered by management to be reasonable. Future operating results of the Company, however,are impossible to predict and no representation, guaranty, or warranty is to be inferred from thoseforward-looking statements. The assumptions used for purposes of the forward-lookingstatements specified in this report represent estimates of future events and are subject touncertainty as to possible changes in economic, legislative, industry, and other circumstances. Asa result, the identification and interpretation of data and other information and their use indeveloping and selecting assumptions from and among reasonable alternatives require theexercise of judgment. To the extent that the assumed events do not occur, the outcome may varysubstantially from anticipated or projected results, and, accordingly, no opinion is expressed onthe achievability of those forward-looking statements. In addition, those forward-lookingstatements have been compiled as of the date of this report and should be evaluated withconsideration of any changes occurring after the date of this report. No assurance can be giventhat any of the assumptions relating to the forward-looking statements specified in this report areaccurate and the company assumes no obligation to update any such forward-looking statements.

 

**RESULTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2004 AND JUNE 30,2003**

 

Revenues:

 

The Company generated $4,711,340 from consulting  and advisory services for the year endedJune 30, 2004, as compared to $$1,386,635  for the year ended June 30, 2003, which represented240% increase. This increase is mainly due to the completion of two merger and acquisitionactivities during the current year.  During the fiscal year ended June 30, 2004, the Company hadsales of $4,397,821 and tuition of $167,049 compared to $61,800 and $0 for the fiscal year endedJune 30, 2003.  This increase is due to the acquisition of two new subsidiaries which provided$695,171 in sales and $167,049 in tuition revenues.  In addition, new contracts were signedproviding $3,566,407 in revenues for the current year.

 

Operating Expenses:

 

The Company incurred total operating expenses of $8,447,892 for the year ended June 30, 2004as compared to $1,914,208 for the year ended June 30, 2003. The increase in operating expenseswas primarily due to the increase professional services, including non-cash compensation and theaddition of new subsidiaries during the current fiscal year.  Also included in operating expensesis the impairment of assets of $3,039,706 and $180,500 for the years ended June 30, 2004 and2003, respectively.  The current year impairment is for the goodwill from the acquisition ofsubsidiaries.

 

Loss from operations:

 

The Company had income from operations of $76,163 for the year ended June 30, 2004 ascompared to a loss from operations of $341,901 for the year ended June 30, 2003. This wasmainly due to the increases in revenues, professional services, including non-cash compensationand in general and administrative expenses as well as the addition of new subsidiaries during thecurrent fiscal year.

 

Net loss from continuing operations:

 

The Company had a loss from continuing operations of $3,803,960 for the yearended June 30, 2004 as compared to a loss of $1,251,499 for the year ended June30, 2003. Included in the current year amount are non-cash expenses of $711,331of beneficial conversion feature expense for notes converted during the currentyear, $221,174 of redemption premium and penalties on the conversion ofconvertible notes and $521,372 gain on the conversion of debt and $864 net gainon the settlement of short-term notes. The current year also includes anadd-back of $43,065 for the 49.9% minority interest in the College owned byanother party. 
 
Net loss:

 

The Company had a net loss of $3,853,160 for the year ended June 30, 2004 as compared to a netloss of $1,056,939 for the year ended June 30, 2003.  Fiscal year ended June 30, 2003 included again on the disposal of a subsidiary of $248,560.  The net loss based on the basic and dilutedweighted average number of common shares outstanding for the year ended June 30, 2004 was($0.05) as compared to that of ($.02) for the year ended June 30, 2003.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our business plan was restructured in November 2000 and has been updated to its now-currentform. We must continue to raise capital to fulfill our plan of acquiring other companies andassisting in the development of those internally. The Company expects that the working capitalcash requirements over the next 12 months will be generated from operations and additionalfinancing.

 

We had cash and cash equivalents of $29,791 and $96,474 as of June 30, 2004 and June 30,2003, respectively.  
 
Our operating activities used $2,220,876 in the year ended June 30, 2004 and $767,219 in theyear ended June 30, 2003. The largest use of cash in the 2004 was the increase in other assets andprepaid expenses and the decrease of accounts payable and accrued expenses. The largest use ofcash in the 2003 period was from net loss from continued operations, offset by the net effect ofnormal fluctuations in operating asset and liability accounts was from the net loss from continuedoperations, the increase in prepaid expenses and other assets, offset by the net effect of normalfluctuations in operating asset and liability accounts.

 

Cash provided by investing activities was $47,613, and $24,243 in the year ended June 30, 2004and 2003, respectively.  During the current year, the Company purchased $14,210 in fixed assetsand $125,050 of marketable securities.  The Company sold $153,684 of marketable securities inthe fiscal year ended June 30, 2004 compared to $24,243 in the prior period.
 
Cash provided by financing activities was $2,106,307 and $835,010 for the years ended June 30,2004 and 2003, respectively.  This was primarily from proceeds from sale of common stock,proceeds from exercise of stock options, and borrowings on notes payable offset by payments onnotes payable and payments on advances from officer.

 

LOANS AND PROMISSORY NOTES

 

CONVERTIBLE PROMISSORY NOTES

 

During the year ended June 30, 2003, $425,000 of convertible promissory notes and accruedinterest and other fees of $447,494, totaling $872,494, were converted to 363,637 shares ofCompany's common stock. The market value of the stock issued for the conversion wascalculated and a gain of $472,420 resulted from this note conversion was recorded as a gain onconversion of notes in the accompanying financial statements. In addition, 8,726,425 shares ofthe Company's common stock were issued to exercise the repricing warrants relating to the notesconverted.
 
During the year ended June 30, 2004, $1,100,000 of the notes and accrued interest of $2,558,156totaling $3,658,156, were converted to 21,019,177 shares of Company's common stock valued at$3,138,833. The market value of the stock issued for the conversion was calculated and a gainof $519,323 resulted from this note conversion was recorded as a gain on conversion of notes inthe accompanying consolidated financial statements. Other fees generated from the conversionof these notes of $47,363 were recorded as penalty and premium expense in these consolidatedfinancial statements.  In addition, 536,636 shares of the Company's common stock were issued toexercise the repricing warrants relating to the notes converted.  As of June 30, 2004, all of theconvertible notes and related interest had been converted.
 
PROMISSORY NOTES:

 

As of June 30, 2004, the Company has notes payable to International Mercantile Holdingamounting $196,111. The notes are due in the year ended June 30, 2006. The Notes carries aninterest rate equal to Labor plus 1%. 
 
In connection with the acquisition of Atlantis Career College, the company assumed two notespayable to the former owner of the College. The notes are unsecured, interest free and are dueone year and one day from demand. As of June 30, 2004, the balance of these notes totals$154,303.

 

As of June 30, 2004, the Company has notes payable amounting $3,087 against acquisition of anautomobile. The note is secured by the auto, carry interest rate of 8.5%. The entire note is due byDecember 31, 2004.

SHORT TERM NOTES PAYABLE:

 

As of June 30, 2004, the Company has consolidated short term notes payable amounting$1,224,857 and accrued interest of $209,994. The notes are due to various parties, payable in theyear ended June 30, 2005 and bear interest rate ranging from 6% to 34% per annum.  Included inthis amount is the note payable to the former owners of ATC Technology Corp. amounting to$284,059.
 
DUE TO PREFERRED STOCKHOLDERS AND OTHER CURRENT LIABILITIES:

 

The Company has classified $215,000 of preferred stock subscribed as a current liability payableto holders of preferred stock due to non compliance of preferred shares subscription agreement.

 

The dividend amount payable to holders of preferred stock amounting $108,655 at June 30, 2004has been classified as other current liabilities.

 

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

 

After the divestiture of its Diva subsidiaries in June 2000 and the discontinuance of its securitiesbrokerage operations in October 2000, we have restructured and updated our primary scope ofbusiness to focus on the following areas: (1) PHI Technologies, (2) PHI Financial services, (3)PHI International markets, and (4) PHI Special Situations.
 
**1) PHI Technologies:**

 

**ATC TECHNOLOGY CORP.**

 

On October 6, 2003, the Company completed the acquisition of 100% of ATC Technology Corp.in exchange for $500,000 non-interest bearing notes and 4,000,000 shares of restricted commonstock of the Company. ATC Technology Corporation, established in 2001 as an Arizonacorporation, manufactures mobile entertainment products, including VidegoTM, GamegoTM andMoviegoTM. The VidegoTM, winner of the prestigious 2001 Innovation Engineering andDesign Award from IDSA (Industrial Designers Society of America), is one of the finest andaffordable car theater systems available to consumers. With its wireless viewing monitor, whichattaches easily to the back of any automobile headrest, the patent-pending VidegoTM systemprovides consumers with the highest quality DVD and Video players and hours of entertainmentwhile traveling. 

 

Launched in 2002, the GamegoTM gives people of all ages the opportunity to play video gamesin the car, RV, SUV, van or boat by connecting our product to an existing Microsoft X-BoxTM,Sony Playstation2TM, or Nintendo GamecubeTM. Like the VidegoTM, the GamegoTM also hasa viewing monitor which attaches easily to the back of any automobile headrest.  ThoughATC's products were sold through major retailer chains such as Wal-Mart, Sears, KB Toys, thiscompany has decided to change its focus of business to a more attractive industry.
 
PHI declared and distributed 20% share dividends of ATC Technology Corp. to PHI'sshareholders of record as of June 30, 2004 and currently holds 80% equity ownership in ATC.ATC Technology Corp. is in the process of filing with the appropriate regulatory agencies tobecome a fully-reporting public company and intends to acquire a viable business in exchangefor a portion of its common shares. 
 
On June 11, 2004, ATC Technology Corp. signed an agreement to acquire 96% of LifeTechScientific, Inc., a Chinese corporation located in Shenzhen, China, which is engaged in themanufacturing of medical products, in exchange for 70% of the issued and outstanding shares ofATC at the time of closing. The closing date is targeted to occur by December 31, 2004, subjectto satisfactory due diligence review by both ATC and LifeTech Scientific, Inc. As of the date ofthis report, this transaction has not closed. ATC may seek another acquisition candidate besidesLifeTech Scientific.

 

**CLEARPASS SYSTEMS,  INC.**
 
On November 20, 2002 the Company entered into an agreement to acquire 51% of theoutstanding common stock of Clear Pass, Inc., a Nevada corporation, in exchange for $1,500,000and 3,000,000 shares of restricted common stock of the Company. Under an agreement withPASS21 Co, Ltd., a Korean corporation, Clear Pass had the licensing rights to distribute andmarket PASS21 Co.'s biometric products in the US, Canada and Europe. Besides a total of$175,500.00 investment into Clear Pass, the Company issued 3,000,000 shares of restrictedcommon stock of the Company and a promissory note in the amount of $1,324,500 to Clear Pass,Inc. This agreement between Clear Pass and the Company was rescinded on May 9, 2003. TheCompany had received 3,000,000 shares of the Company's restricted common stock back fromClear Pass, Inc. and cancelled the $1,324,500.00 promissory note. Concurrently, the Company setup a new wholly-owned subsidiary under the name of ClearPass, a DBA of ProvidentialHoldings, Inc., to operate as a systems integrator and provider of total biometric security andaccess management solutions. On March 26, 2003 the Company signed a stock purchaseagreement to acquire up to 51% of Real ID Technology Co, Ltd., a Korean corporation, andplanned to market Real ID Technology's biometric products through the ClearPass subsidiary.The stock purchase agreement with Real ID Technology was rescinded on August 26, 2003. Thissubsidiary was later incorporated as a Nevada corporation in February 2004 under the name ofClearPass Systems, Inc. but has only generated nominal revenues to date.  ClearPass Systemsintends to pursue a new merger or acquisition candidate by the end of FY 2005. Web site:www.clearpass.us
 
**TOUCHLINK COMMUNICATIONS, INC.**

 

A wholly-owned DBA of Providential Holdings, Inc, Touchlink Communications was formed onJuly 7, 2003 to provide point-of-sale (POS) terminals and prepaid calling cards to retailers,convenient storesand non-profit organizations across the US. Touchlink Communicationssigned an agreement with KAGRO (Korean American Grocer Association) to provide pre-paidservices to its member stores in the US and Canada. This subsidiary was later incorporated as aNevada corporation in February 2004 under the name of Touchlink Communications, Inc. toprovide long distance services to residential and business customers in the United States. As ofJune 30, 2004 this subsidiary has generated $2,967 in revenues. The Company has declared a15% stock dividend of Touchlink Communications, Inc. to shareholders of record as ofSeptember 15, 2004. Touchlink intends to expand its business among the ethnic markets in theUS, enter into joint venture or strategic agreements with overseas partners, and acquire growingcompanies with strong potential for revenues and profitability in the communications andtelecommunications industries. Web site: www.touchlinkcom.com

 

TULON INDUSTRIES, INC.
 
On September 10, 2004 the Company signed an agreement to acquire a 70% ownership of TulonPacific, LLC, an Irvine, California-based company that provides precision cutting tools anddrilling solutions, for a $1.6 million combination of cash and a promissory note which may beconverted into common shares of the Company in six months. This transaction has not closed asof the date of this report and has been extended to December 20, 2004. The Company plans touse Tulon Industries, Inc. as the new parent for Tulon Pacific, LLC. to grow the cutting tools anddrilling solutions business both through internal growth and acquisition of profitable targetcompanies in this industry.  The Company has also made offers to acquire certain distributionassets from Bayview Financial and manufacturing assets from GE Capital to position TulonIndustries, Inc. as a major player in this industry.
 
SMART BATTERY INTERNATIONAL, LTD.
 
The Company has entered into a Memorandum of Intent Agreement with Smart Technologies &Investments, Ltd., a Hong Kong-based company with subsidiary factories located in mainlandChina, to acquire an interest in Smart Battery International, Ltd. ("SBI").
 
The principals of  SBI, which manufactures the key chemical for an environmental remediationprocess that renders heavy metal non-leachable, have started a lead acid battery plant to producefull range of advanced AGM (absorbent glass mat), GEL (gel matrix) and liquid electric lead acidbatteries. SBI will pioneer the application this unique heavy metal remediation process to themaking of lead acid batteries to make them environmentally friendly.
 
SBI has received 27x 40-foot container loads of advanced lead acid battery manufacturingequipment, which has a replacement value of over US$4,000,000 from the US, as part of thetechnology transfer process brought about by its US based partner. The highly automatedequipment enables complete control of the battery making process from start to finish. This givesSBI an advantage over many of its local Chinese competitors who apply manual techniques,which can not guarantee quality specification consistently on some key battery making processes.
 
The combination of the advanced US equipment and technology provides SBI the capability ofproducing top quality batteries at a competitive Chinese manufacturing cost base. The plant isdesigned to have a monthly production capacity of 25,000 pieces of 100Ah sized batteries. Moredetails on our Plant Capacity are described at the end of this document.

The new plant is located on 400,000 square feet of plant property, conveniently situated  in theindustrial city of Dong Guan, which boards the Hong Kong metropolitan. SBI factory hasreceived the extremely coveted environmental permit to allow us fully integrated productionfrom lead plate casting to final battery assemblies, on site. Its advanced waste water treatmentfacilities and bag house air filtering systems are part of our measures to be an environmentallyresponsible manufacturer. 
 
This vertically integrated process allows complete control of the battery production qualityaccording the most efficient logistic flow within the same production premise.
 
SBI plant is also completed with its own power generators, production water purification centeras back up to power and water outages now frequent in most part of China. This self sufficiencyis critical in ensuring reliable production schedule in meeting customers' demands.

The Company intends to start investing into SBI in early 2005 and take SBI public in the future.
 
** 2) PHI Financial services:**

 

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

 

**PROVIDENTIAL CAPITAL, INC.**

 

In May 2003, the Company formed a wholly-owned subsidiary under the name of ProvidentialCapital, a DBA company, to provide merger and acquisition advisory services for themicro-small cap arenas and manage the Company's proprietary merger and acquisitionactivities. Providential Capital has mainly focused its attention on the underserved segment ofsmaller companies in the U.S. and abroad. This subsidiary was later incorporated as a Nevadacorporation on September 23, 2004.

 

Providential Capital has successfully managed merger plans for several private andpublicly-traded companies.  This subsidiary currently works with a number of target companiesin the US, China, Korea, and Vietnam.

 

** 3) PHI International markets:**

 

We currently focus on opportunities in  China, Korea, and Vietnam. These are the areas wherewe have most intimate knowledge and working relationships.

 

**PROVIMEX, INC.**

 

Provimex is a wholly-owned division of the Company originally formed on April 10, 2001 underthe name "Providential Imex", to focus on trade commerce with Vietnam. This division changedits name to Provimex on July 5, 2001.  Provimex only began to generate revenues from its importand export activities since August 2002. For the fiscal years ended June 30, 2003 and June 30,2004, this division recorded $61,800 and $101,855.70 in sales, respectively. This subsidiary waslater incorporated as a Nevada corporation on September 23, 2004. Web site: www.provimex.us.The Company has declared a 15% stock dividend of Provimex, Inc. to shareholders of record asof September 15, 2004.
 
**PROVIMEX-HTV JOINT VENTURE COMPANY, LTD.**
 
On October 18, 2004 the People's Committee of Ho Chi Minh City, Vietnam approved the jointventure application by the Company and HTV, Ltd., a Vietnam-based company, to form a JointVenture company under the name of "Provimex-HTV Joint Venture Company, Ltd."  This jointventure company will primarily focus on providing equipment and liquid gas to high risebuildings and premium residential housings in Vietnam. The Company will own 80% equity inthe joint venture company.  Operations are expected to begin in early 2005.
 
**INTERNATIONAL CENTER FOR TRAINING AND CONSULTING, VIETNAM'SMINISTRY OF TRADE**
 
International Center for Training and Consulting (ICTC) is an organization under the Ministry ofTrade of Vietnam that promotes economics, trade, investment and training activities betweenVietnam and foreign entities. PHI and ICTC signed an agreement in March 2001 to cooperate inthe areas of trade, economics, and technology. ICTC is responsible for representing PHI inconnection with appropriate Vietnamese organizations, businesses, and individual businessmenand investors in Vietnam. ICTC will also perform consulting services and provide information onvarious economic, trade and investment projects as may be required by PHI. Fees between theparties will be negotiated on an as project basis. PHI intends to maintain its relationship andexplore new business opportunities with ICTC.  PHI plans to work closely with ICTC beginningDecember 2004 to provide management consulting and Merger and Acquisition advisoryservices to various companies in Vietnam.
 
**CHU LAI OPEN ECONOMIC ZONE, QUANG NAM PROVINCE, VIETNAM**

 

The Company has entered into an agreement with Chu Lai Open Economic Zone (the "Chu LaiZone") Authority, Quang Nam Province, Central Vietnam, to develop this industrial and exportprocessing zone. 

 

Chu Lai is centrally located near three Southeast Asian nations and is convenient to Vietnam'sHighway One, the Trans-Viet Railroad, an international port suitable for ocean-going ships and amajor airport. Part of the overall plan that includes 27,000 acres, the North Chu Lai IndustrialZone has set aside 740 acres for facilities engaged in automobile parts, paper products,agricultural, maritime and forest products, consumer electronics, leather and footwearmanufacturing, food and beverage operations and glassware and crystal fabrication.

 

Foreign investment entities approved for development projects in the Chu Lai Industrial Zoneenjoy opportunities to lease land at $0.001 per square foot/year, to secure 50-year leasesrenewable for 20 years, plus exemptions from national and provincial land use taxes, a 10-yearincome-tax holiday, and exemptions from export taxes from two to four years, based on the sizeof the investment made.

 

The Company plans to be the manager organizing the different companies that will operate theirbusinesses at this location. The Company plans to cooperate with CDI, Co., a Vietnamesecompany based in Tam Ky, Quang Nam Province, to co-develop housing projects within theOpen Economic Zone.

 

**CENTER OF TELECOM TECHNOLOGY, VIETNAM**

 

Center of Telecom Technology (CTT) is an organization under the National Center for NaturalScience and Technology of Vietnam. Established in 1990, CTT's  mission is to recruit anddevelop professionals in the areas of electronics, telecommunications, and informationtechnology and to provide related products based on advanced technologies. One of CCT'slargest customers is the Vietnamese Postal and Telecommunications Services. CTT also focuseson rural telecommunications in Vietnam. 

 

On March 23, 2002, the Company entered into a Memorandum of Agreement and PrincipleContract with the Center of Telecom Technology (CTT), Vietnam to cooperate in the areas ofwireless access networks, consultancy services and other business ventures in Vietnam. The twoparties will collaborate to form a joint venture enterprise or strategic alliances with appropriateVietnamese entities to provide wireless access services to consumers, businesses and governmentorganizations throughout Vietnam. The Company intends to capitalize on this relationship andseeks new business opportunities for ClearPass Systems and Touchlink Communications as well.

       

**4) PHI Special situations:**

 

By Special Situations we mean special opportunities that may generate significant value for ourshareholders. The Company will continue to identify, evaluate and participate in suchopportunities in the near term. Transactions falling under this category do not necessary fit intoour technologies, financial services or international market initiatives.
 
**IRVINE COLLEGE OF MEDICAL SCIENCES, INC.**
 
On December 19, 2003, the entered into a Stock Purchase Agreement with Irvine College ofMedical Sciences, Inc., a California corporation, ("the College") to acquire 51% of the College'scommon stock for an aggregate purchase price of $314,437, which was paid with $80,000 in cashand 1,116,369 shares of the Company's common stock. The Company has declared 15% stockdividends of Irvine College of Medical Sciences, Inc. to shareholders of record as of August 31,2004. As of the date of this report, these dividend shares have not been distributed to thereferenced shareholders of records. The Company plans to assist the College in its acquisitionplan in the US and also to establish its presence in other parts of the world.

 

FINANCIAL PLANS

 

Management has taken action and is formulating additional plans to strengthen the Company'sworking capital position and generate sufficient cash to meet its operating needs through June 30,2005 and beyond. Among the actions to be taken, the Company intends to raise additional capitalfrom the US and international markets and is currently in the process of attaining additionalfinancing. In addition, the Company also anticipates generating more revenue through itsproposed mergers and acquisitions. No assurances can be made that management will besuccessful in achieving its plan.

**ITEM 7.    FINANCIAL STATEMENTS**

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Board of Directors and Stockholders

Providential Holdings, Inc.
 
We have audited the accompanying consolidated balance sheet of Providential Holdings, Inc. (aNevada corporation) and subsidiaries as of June 30, 2004 and the related consolidated statementsof operations, stockholders' deficit, and cash flows for the years ended June 30, 2004 and 2003.These consolidated financial statements are the responsibility of the Company's management.Our responsibility is to express an opinion on these consolidated financial statements based onour audits. 

 

We conducted our audit of these statements in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are freeof material misstatement.  An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluatingthe overall financial statement presentation. We believe that our audits provide a reasonable basisfor our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Providential Holdings, Inc. andsubsidiaries as of June 30, 2004, and the results of its consolidated operations and its cash flowsfor the years ended June 30, 2004 and 2003 in conformity with accounting principles generallyaccepted in the United States of America.

 

The Company's financial statements are prepared using the generally accepted accountingprinciples applicable to a going concern, which contemplates the realization of assets andliquidation of liabilities in the normal course of business. The Company has a negativeaccumulated deficit and incurred losses in the years ended June 30, 2004 and 2003. These factorsas discussed in Note 17 to the consolidated financial statements, raises substantial doubt aboutthe Company's ability to continue as a going concern. Management's plans in regard to thesematters are also described in Note 17. The consolidated financial statements do not include anyadjustments that might result from the outcome of this uncertainty.

 

As discussed on note 3 and 11 to the financial statements, the Company is subject to various lawsuits and during most recent NASD examination (July - August, 2000) of Providential Securities,Inc. (the wholly owned subsidiary), the NASD declared a net capital deficiency violationpursuant to conduct rules section 17 (a) 3 and 17 (a) 4. As a result of which, ProvidentialSecurities, Inc. withdrew the membership from the NASD in October 2000 and ceased itssecurities brokerage operations.
 
/s/ KABANI & COMPANY, INC.
 
CERTIFIED PUBLIC ACCOUNTANTS

Huntington Beach, California

November 18, 2004

**PROVIDENTIAL HOLDINGS,INC.**

**CONSOLIDATED BALANCESHEET**

**JUNE30****, 2004**

 

**ASSETS** 
 **Current assets:**      	Cash and cash equivalents $      	29,791    	Marketable securities 1,610,955    	Accounts receivable, net 10,799    	Prepaid expenses 7,757     Other	current assets 84,267             Total Current Assets 1,743,569   **Property and	equipment,** net of    accumulated depreciation of $223,579 124,523         	**Total assets** $  1,868,092   
**LIABILITIES AND STOCKHOLDERS'    DEFICIT**  **Current liabilities:**      	Accounts payable and accrued    expenses $ 	2,855,679    	Short-term notes payable 1,224,857    	Current portion of notes payable 3,087    	Due to officer 658,743    	Due to preferred stockholders 215,000     Other current    liabilities 530,972             Total Current Liabilities 5,488,338   **Notes payable** 350,414                **Total liabilities** 5,838,752   **Minority Interest** -   **Commitments & Contingencies** -   **Stockholders'	deficit**       Preferred    stock (Series I, Class A), $5.00 par value, 10,000,000               shares authorized, 90,000 shares issued and outstanding (Note 3) -     Common stock,    $.04 par value, 300,000,000 shares authorized           	131,482,868 shares issued and outstanding 5,259,314     Treasury    stock, 14,805,200 shares, $0.04 par value common stock (772,312)    	Additional paid-in capital 	11,226,320    	Shares to be issued 1,036,267    	Other comprehensive income 	(4,464,434)     Accumulated    deficit (16,255,815)             **Total stockholders' deficit** (3,970,660)            	**Total liabilities and stockholders' deficit** $   1,868,092   
SEE THE ACCOMPANYING NOTES TO THESECONSOLIDATED FINANCIAL STATEMENTS.

**PROVIDENTIAL HOLDINGS,INC.**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

 
 **For the Years Ended June 30,****,** **2004** **2003****Net revenues**       	Consulting and advisory fee income$     4,711,340 $         1,386,635    	Sales4,397,822 61,800    	Tuition167,049 -             Total net revenues9,276,211 1,448,435**Cost of Sales**3,725,262 56,628**Gross profit**5,550,949 1,391,807    **Operating expenses:**       	Depreciation and amortization38,245 28,830    	Bad debt expense384,693 277,414    	Salaries and wages284,866 -    	Professional services, including non-cash compensation3,556,207 1,221,054        Directors fees22,500 -        Impairment of assets3,039,706 180,500        General and administrative1,121,675 206,410             Total operating expenses8,447,892 1,914,208**Loss from operations**	(2,896,943) (522,401)    **Other income and	(expenses)**           Interest expense(426,810) (691,120)        Loss on sale of marketable securities(50,566) (432,775)        Gain (loss) on legal settlement(66,600) 81,850        Gain on debt settlement - net864 -    	Gain on conversion of notes521,372 467,212        Beneficial conversion feature expense(711,331) -        Redemption premium and penalties(221,174) (152,009)        Other income (expense)4,163 (2,256)         	Net other income and expenses(950,082) (729,098)    	Minority interest43,065 -**Loss from continuing	operations**	(3,803,960) 	(1,251,499)**Gain on disposal of	a subsidiary**- 248,560**Net loss**(3,803,960) (1,002,939)**Dividend requirement	of preferred stock**(49,200) (54,000)**Net income (loss)	applicable to common shareholders**(3,853,160) (1,056,939)**Other comprehensive	(loss)/gain:**       	Unrealized loss on marketable securities(4,056,430) (262,995)**Comprehensive loss**$   (7,909,590) $       (1,319,934)            **Net income (loss)	per share - basic and diluted**       	Continued operations$             	(0.05) $               	(0.03)    	Discontinued operations$                      	- $                  	0.01    	Dividends for preferred stock$             	(0.00) $               	(0.00)    	Net loss per share$            	(0.05) $                	(0.02)                   Weighted average number	of shares outstanding - basic and diluted83,523,306 42,858,502    
SEE THE ACCOMPANYING NOTES TO THESECONSOLIDATED FINANCIAL STATEMENTS.

**PROVIDENTIAL HOLDINGS,INC.**

**STATEMENTS OF STOCKHOLDERS' DEFICIT**

**FORTHE YEARS ENDED JUNE 30, 2003 AND 2004**

 
 **Common Stock****Treasury Stock****Additional Paid-In Capital****Stock Subscriptions Receivable****Prepaid Consulting Fees****Shares to be Cancelled****Shares to be Issued****Other Comprehensive Income/(Loss)****Accumulated Deficit****Total Stockholders' deficit** **Shares****Amount****Shares****Amount**Balance at June 30, 200246,003,157$1,840,126(15,175,000)($800,875)$5,167,979$0($1,451,249)--($517,009)($11,345,716)($7,106,744)             Issuance of treasury stock--380,90029,229-------29,229Shares issued under repricing warrants8,726,425349,057--(349,057)-------Shares received from officer--(11,100)(666)-------(666)Shares issued for note conversion363,53714,541--385,532------400,073Shares issued for services1,160,00046,400--8,600------55,000Stock options exercised8,000,000320,000--180,000(244,660)-----255,340Amortization of prepaid consulting fees------860,060----860,060Dividends declared on preferred stock----------(54,000)(54,000)Unrealized loss on marketable securities---------109,005-109,005Cancellation of shares-------(120,000)---(120,000)Net loss for the year----------(1,002,939)(1,002,939)             Balance at June 30, 200364,253,1192,570,124(14,805,200)(772,312)5,393,054(224,660)(591,189)(120,000)-(408,004)($12,402,655)(6,575,642)             Shares sold for cash300,00012,000--44,000------56,000Shares issued under repricing warrants536,63621,465--(21,465)-------Shares issued for payment of notes5,040,268201,611--650,929---657,750--1,510,290Shares issued for debt conversion14,613,217584,528--1,979,565------2,564,093Shares issued for accrued interest8,176,650327,066--436,098------763,164Shares issued for debt conversion		penalties2,224,59588,984--298,010------386,994Shares issued for services and salaries27,206,7211,088,269--1,403,185------2,491,454Shares issued for legal settlement375,00015,000--51,600------66,600Shares issued for distribution agreement461,39118,456--5,932------24,388Shares issued for preferred stock                 conversion and		related interest2,195,27187,811--275,472---144,079--507,362Stock options exercised6,100,000244,000--448,940244,660-----937,600Acquisition of subsidiary4,000,000160,000--200,000---234,438--594,438Dividends declared on preferred stock----------(49,200)(49,200)Amortization of prepaid consulting fees------591,189----591,189Fair market value of options granted----21,000------21,000Unrealized loss on marketable securities---------(4,056,430)-(4,056,430)Cancellation of shares(4,000,000)(160,000)--40,000--120,000----Net loss for the year----------(3,803,960)(3,803,960)             Balance at June 30, 2004131,482,868$5,259,314(14,805,200)($772,312)$11,226,320---$1,036,267($4,464,434)($16,255,815)($3,970,660)             
SEE THE ACCOMPANYING NOTES TO THESECONSOLIDATED FINANCIAL STATEMENTS.

**PROVIDENTIAL HOLDINGS,INC.**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

 
 **For the Year Ended June 30,** **2004** **2003****Cash flows from	operating activities:**       	Net loss from continuing operations$ 	(3,853,160) $   	(1,002,938)     Adjustments    to reconcile net loss from continued operations                to net cash used in operating activities:                     Depreciation38,245 28,831              	Allowance for bad debt384,693 217,577                  (Gain) loss on legal settlement66,600 (81,850)              	(Gain) loss on debt settlement - net(864) -                  Amortization of deferred revenue- (11,552)                  Amortization of prepaid consulting fees591,190 619,772                  Securities received for consulting and advisory services	(4,644,250) 	(1,436,884)              	Shares issued for services and salaries2,491,454 55,000                  Gain on conversion of notes(521,372) (472,420)                  Loss on sale of marketable securities50,566 432,775                  Shares issued for distribution agreement24,388 -                  Shares issued for interest on convertible note763,164 61,340                  Shares issued for preferred stock and related dividends507,362 -                  Beneficial conversion and registration penalty711,331 400,073              	Fair market value of options granted21,000 -                  Minority interest in subsidiary(43,065) -                  Impairment of assets3,039,706 -              	Loss on investment- 180,500              	Gain on disposal of subsidiary- (248,560)             	**Changes in operating assets and liabilities:**                      	(Increase) decrease in accounts receivable108,992 -                   	(Increase) decrease in other assets and prepaid expenses(43,819) 29,371                   	Increase (decrease) in accounts payable(761,872) 55,442                   	Increase (decrease) in accrued expenses	(1,502,817) 292,856                       Increase (decrease) in other liabilities351,653 113,448              	**     Net cash used in operating activities**	(2,220,876) (767,219)    **Cash flows from	investing activities:**       	Purchase of fixed assets(14,210) -     Purchase	of marketable securities(125,050) -    	Cash brought in at acquisition33,189 -     Proceeds    from sale of marketable securities153,684 24,243                       **Net cash used by investing activities**47,613 24,243    **Cash flows from	financing activities:**       	Proceeds from sale of common stock56,000 657,908    	Proceeds from exercise of stock options937,600 125,000    	Borrowings on notes payable1,171,524 147,908    	Payments on notes payable(208,362) (70,225)    	Borrowings from officer419,258 -    	Payments on advances from officer(269,713) (25,581)                       **Net cash provided by financing activities**2,106,307 835,010    **Net increase	(decrease) in cash**(66,956) 92,034Cash and cash	equivalents, beginning of period96,747 4,713**Cash and cash	equivalents, end of period**$         29,791 $        96,747    SUPPLEMENTARY DISCLOSURES    OF CASH FLOW INFORMATION           Cash paid    during the period for:                Interest$      155,477 $        35,585             Taxes$          1,111 $                	-        	Non-cash Financing Activities:            	Shares issued for payment of notes$     1,510,290 $                	-         	Shares issued for debt conversion$     2,564,093 $      400,073         	Shares issued for interest and penalties$     1,150,157 $                	-         	Shares issued for services$     2,491,454 $                	-         	Shares issued for distribution agreement$          24,388 $       55,000         	Shares issued for acquisition of subsidiaries$        594,438 $                	-         	Shares issued for legal settlement$          66,600 $                	-         	Shares issued for payment of preferred stock and interest$        507,362 $                	-    
SEE THE ACCOMPANYING NOTES TO THESECONSOLIDATED FINANCIAL STATEMENTS.

**PROVIDENTIAL 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 on June8, 1982 under the name of JR Consulting, Inc. The company changed its name to ProvidentialSecurities, Inc., a Nevada corporation, on January 12, 2000, and subsequently on February 9,2000 it changed 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 tothe corporate combination agreement with Providential Securities, Inc. PHI had an operatingsubsidiary, Diva Entertainment, Inc ("Diva"). Diva operated two modeling agencies, one in NewYork and one in California. 

 

Providential Securities, Inc. ("Providential") was incorporated in the State of California onOctober 8, 1992. It operated a securities brokerage service in Fountain Valley, CA and NewYork City, NY. The principal markets for Providential's services were individual investors whowere located throughout the United States. Providential bought and sold securities for itscustomers through a number of different markets, utilizing a brokerage clearinghouse to transactthe trades. Due to the results of a NASD examination, Providential Securities withdrew itsmembership and ceased its securities brokerage business in October 2000. (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 in exchangefor 20,000,000 shares of PHI common stock. The transaction was consummated on January 14,2000. In addition, as a covenant under the Agreement, PHI was required to enter into anagreement to sell to Havilland Limited, all of the shares of Diva owned by PHI as well as toassign all of its rights, title and interest in an Option Agreement to Havilland Limited. (TheOption Agreement gave PHI the option to purchase additional shares of Diva's common stock atits $.001 par value in order for PHI to maintain at least a 65% interest in Diva's outstandingcommon shares.) PHI's officers and directors resigned their positions and the shareholders ofProvidential assumed control of the two entities (together as "the Company"). The PHI shares arerestricted against resale pursuant to the provisions of federal and state securities laws.Providential's shareholders of record as of the closing date owned approximately 75% of PHI'scommon stock. The acquisition has been treated as a capital transaction in substance, rather thana business combination, and was deemed a "reverse acquisition" for accounting purposes.Accordingly, Providential was the accounting acquirer and the historical financial statementsprior to January 14, 2000 were those of Providential. In the accompanying financials statements,the capital structure and losses per share of Providential have been retroactively restated to reflectthe acquisition as if it occurred at the beginning of the period. The operations of PHI have beenincluded 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 were exchanged forassignment to and assumption by Havilland Limited of the amounts due by PHI to officers ofDiva amounting to $617,781, the amounts due to PHI from Diva amounting to $94,843 and thereturn of 135,000 shares of common stock of PHI owned by Havilland. The total gain resultingfrom the sale of Diva of approximately $1.2 million was considered in the allocation of thepurchase price to the assets and liabilities of PHI. Included in the total gain of $1.2 million wasDiva's net profit of $245,606 earned during the holding period from January 14, 2000 to June 30,2000. 
 
A wholly owned division of the Company, Provimex was formed on April 10, 2001 under thename "Providential Imex", to focus on trade commerce with Vietnam. This division changed itsname to Provimex on July 5, 2001. 

 

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 to operate a securitiesclearing firm. As of June 30, 2004 this subsidiary has had no operations.

 

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 planned to be a distributor of LCD (liquid crystal display)computer flat screens and other consumer electronics. Since SlimTech is a dormant entity withinsignificant assets or liabilities, no pro forma information is presented. This agreement wasrescinded on May 6, 2003. The Company has received back the 3,000,000 shares previouslyissued to SlimTech and has cancelled them.

 

On August 23, 2002, the Company entered into a purchase agreement with ATC TechnologyCorporation ("ATC"), an Arizona corporation, to purchase all the issued and outstanding sharesof ATC. For consideration, the Company agreed to deliver $250,000 in promissorynotes, non-interest bearing, payable 270 days after closing, and $250,000 inpromissory notes, non-interest bearing, payable 180 days 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 $0.30,1,000,000 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 $0.30. Thepurchase transaction with ATC was consummated on October 17, 2003, (see Note17). 

 

On November 20, 2002 the Company entered into an agreement to acquire 51% of theoutstanding common stock of Clear Pass, Inc. ("ClearPass"), a Nevada corporation, in exchangefor $1,500,000 and 3,000,000 shares of restricted stock of the Company. Under an agreementwith PASS21 Co., Ltd., ("Pass21") a Korean corporation, Clear Pass had the licensing rights todistribute and market PASS21's biometric products in the United States, Canada, and Europe.Besides a total of $175,500 investment into Clear Pass, the Company issued 3,000,000 shares ofrestricted common stock of the Company and a promissory note in the amount of $1,324,500 toClear Pass. This agreement was rescinded on May 9, 2003. The Company has received backthe 3,000,000 shares previously issued to Clear Pass and subsequently cancelled the shares andthe promissory note. Concurrently, the Company has set up a new wholly-owned subsidiaryunder the name of ClearPass, a DBA of PHI, to operate as a systems integrator and provider oftotal biometric security and access management solutions. To-date, this subsidiary has notgenerated any revenue.
 
On March 26, 2003, the Company entered into a Stock Purchase Agreement with Real IDTechnology Co, Ltd., a Korean corporation, ("Real ID") to acquire up to 51% of Real ID'scommon stock, in exchange for up to $1 million in cash and the balance in two short-termpromissory notes totaling $4 million. This Stock Purchase Agreement was amended on April 29,2003 to allow for the closing of the transaction on May 26, 2003, subject to satisfactory duediligence investigation and review of Real ID's business, legal matters, and accounting by theCompany. The proposed Closing was postponed to June 30, 2003 due to additional duediligence requirements. This transaction was mutually rescinded on August 1, 2003.

 

In May 2003, the Company formed a new subsidiary under the name of Providential Capital toprovide financial products and services for the micro-small cap arenas and to manage theCompany's proprietary merger and acquisition activities. Providential Capital will focus itsattention on the underserved segment of smaller companies in the United States and abroad.Providential Capital began providing merger and acquisition advisory services to its clients sincethe fourth quarter of the fiscal year ended June 30, 2003. 
 
On July 7, 2003 a wholly-owned DBA of Providential Holdings, Inc, Touchlink Communicationswas formed to provide point-of-sale (POS) terminals and prepaid calling cards to retailers,convenient storesand non-profit organizations across the US. This POS system enablesmerchants and participating partners to offer prepaid products without purchasing or storing anyinventory in advance. This company was later incorporated as a Nevada corporation in February2004 under the name of Touchlink Communications, Inc. to provide long distance services toresidential and business customers in the United States. 

 

On November 1, 2003, the Company formed PHI Video Corp., which was later renamed PHIDigital Corp. ("PHI Digital"), a Nevada corporation, to provide the sale of consumer electronics,including flat-screen television sets and monitors, as part of its distributorship agreement withXOCECO (see Note 16).  The distributorship agreement with XOXECO was terminated in June2004 and PHI Digital has been renamed "TULON INDUSTRIES, INC." to change its scope ofbusiness.

 

On December 19, 2003, the Company entered into a Stock Purchase Agreement with IrvineCollege of Medical Sciences, Inc., a California corporation, ("the College") to acquire 51% ofthe College's common stock for an aggregate purchase price of $314,437.  This amount is to bepaid with $80,000 in cash and 1,116,369 shares of the Company's common stock.  As of thedate of this report, the common stock has not been issued and is reflected as shares to be issuedin the accompanying financial statements. 

 

**NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

PRINCIPLES OF CONSOLIDATION
 
The consolidated financial statements include the accounts of Providential Holdings, Inc., and itssubsidiaries, Providential Securities, Inc., PHI Digital Inc., ("PHI Digital") ATC Technology,Inc. ("ATC") (from the date of its acquisition) and Irvine College of Medical Sciences, Inc.,("College") (from the date of its acquisition), collectively referred to as the "Company". Allsignificant inter-company transactions have been eliminated in consolidation.
 
USE OF ESTIMATES
 
The preparation of consolidated financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period.  Actual results could differ from those estimates.
 
CASH AND CASH EQUIVALENTS

 

The Company considers all liquid investments with a maturity of three months or less from thedate 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 at fairvalue. Securities classified as available-for-sale may be sold in response to changes in interestrates, liquidity needs, and for other purposes. 
 
Each investment in marketable securities represents less than twenty percent (20%) of theoutstanding common stock and stock equivalents of the investee, and each security is nationallyquoted on the National Association of Securities Dealers OTC Bulletin Board ("OTC:BB").  Assuch, each investment is accounted for in accordance with the provisions of SFAS No. 115.

 

Unrealized holding gains and losses for available-for-sale securities are excluded from earningsand reported as a separate component of stockholder's equity. Realized gains and losses forsecurities classified as available-for-sale are reported in earnings based upon the adjusted cost ofthe specific security sold.  . On June 30, 2004, the marketable securities have been recorded at$1,610,955 based upon the fair value of the marketable securities. (note 6)
 
ACCOUNTS RECEIVABLE
 
The Company maintains reserves for potential credit losses on accounts receivable.  Managementreviews the composition of accounts receivable and analyzes historical bad debts, customerconcentrations, customer credit worthiness, current economic trends and changes in customerpayment patterns to evaluate the adequacy of these reserves.  Reserves are recorded primarily ona specific identification basis.
 
IMPAIRMENT OF LONG-LIVED ASSETS

 

Effective January 1, 2002, the Company adopted Statement of Financial Accounting StandardsNo.  144,  "Accounting  for  the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"),which addresses financial accounting and reporting for the impairment  or  disposal  oflong-lived  assets  and  supersedes SFAS No. 121, "Accounting for the Impairment ofLong-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  for  aDisposal of a Segment of a Business."  The Company periodically evaluates the carrying value oflong-lived assets to be held and used in accordance with SFAS 144.  SFAS 144 requiresimpairment losses to be recorded on long-lived assets used in operations when indicators ofimpairment are present and the undiscounted cash flows estimated to be generated by those assetsare less than the assets' carrying amounts.  In that  event,  a  loss  is  recognized  based on theamount by which the carrying amount  exceeds  the  fair  market  value  of  the  long-livedassets.  Loss on long-lived assets to be disposed of is determined in a similar manner, except thatfair market values are reduced for the cost of disposal.  

 

PROPERTY AND EQUIPMENT

 

Property and equipment are stated at cost. Maintenance and repair costs are charged to expenseas incurred; costs of major additions and betterments are capitalized. When property andequipment are sold or otherwise disposed of, the cost and related accumulated depreciation areeliminated from the accounts and any resulting gain or loss is reflected in income.  Depreciationis computed using the straight-line method over the estimated useful lives of the assets, rangingfrom three to ten years. 

 

INTANGIBLE ASSETS
 
Intangible assets consisted of goodwill.  The Company evaluates intangible assets, goodwill andother long-lived assets for impairment, at least on an annual basis and whenever events orchanges in circumstances indicate that the carrying value may not be recoverable from itsestimated future cash flows.  Recoverability of intangible assets, other long-lived assets and,goodwill is measured by comparing their net book value to the related projected undiscountedcash flows from these assets, considering a number of factors including past operating results,budgets, economic projections, market trends and product development cycles.  If the net bookvalue of the asset exceeds the related undiscounted cash flows, the asset is considered impaired,and a second test is performed to measure the amount of impairment loss.  Potential impairmentof goodwill after July 1, 2002 is being evaluated in accordance with SFAS No. 142.  The SFASNo. 142 is applicable to the financial statements of the Company beginning July 1, 2002.
 
DEPRECIATION AND AMORTIZATION

 

The cost of property and equipment is depreciated over the estimated useful lives of the relatedassets. Depreciation and amortization of fixed assets are computed on a straight-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 primary andfully diluted earnings per share ("EPS") and requires presentation of basic and diluted EPS. BasicEPS is computed by dividing income (loss) available to common stockholders by theweighted-average number of common shares outstanding for the 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 endof the period. Common stock equivalents have been excluded from the calculationof weighted-average shares for purposes of calculating diluted earnings pershare for 2004 and 2003; as such inclusion is anti-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-based compensationplans, including employee stock options, restricted stock, employee stock purchase plans andstock appreciation rights. SFAS No. 123 requires compensation expense to be recorded (i) usingthe new fair value method or (ii) using the existing accounting rules prescribed by AccountingPrinciples Board Opinion No. 25, "Accounting for stock issued to employees" (APB 25) andrelated interpretations with proforma disclosure of what net income and earnings per share wouldhave been had the Company adopted the new fair value method. The Company uses the intrinsicvalue method prescribed by APB 25 and has opted for the disclosure provisions of SFAS No.123.As of December 31, 2003, the Company has not granted any stock options.
 
InDecember 2002, the FASB issued SFAS No. 148, "Accounting for Stock-BasedCompensation-Transition and Disclosure - An Amendment of SFAS No. 123" ("SFAS148"). SFAS 148 provides alternative methods of transition for a voluntarychange to the fair value-based method of accounting for stock-based employeecompensation. SFAS 148 amends the disclosure requirements of SFAS No. 123 torequire prominent disclosures in both annual and interim financial statementsabout the method of accounting for stock-based employee compensation and theeffect of the method used on reported results. The Company has concluded it isin compliance with these required prominent disclosures.
 
The pro-forma information regarding net loss and loss per share, pursuant to the requirements ofFASB 123 for the year end June 30, 2003 has been presented in the note 15.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS

 

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

 

REVENUE RECOGNITION

 

The Company's revenue recognition policies are in compliance with Staff accounting bulletin(SAB) 104. Sales revenue is recognized at the date of shipment to customers when a formalarrangement exists, the price is fixed or determinable, the delivery is completed, no othersignificant obligations of the Company exist and collectibility is reasonably assured. Paymentsreceived before all of the relevant criteria for revenue recognition are recorded as unearnedrevenue.  The Company recognized commission and fee revenue when the security transactionwas complete and the commission or fee had been earned. The Company recognizes otherservice income when the service has been completed. Expenses are recognized in the period inwhich the corresponding liability is incurred. 

 

ADVERTISING

 

The Company expenses advertising costs as incurred.  Advertising costs for the years ended June30, 2004 and 2003 were $112,919 and $15,967 respectively.

 

COMPREHENSIVE INCOME

 

Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income("SFAS No. 130"), establishes standards for reporting and display of comprehensive income, itscomponents and accumulated balances. Comprehensive income is defined to include all changesin equity, except those resulting from investments by owners and distributions to owners. Amongother disclosures, SFAS No. 130 requires that all items that are required to be recognized undercurrent accounting standards as components of comprehensive income be reported in a financialstatement that is displayed with the same prominence as other financial statements. During theyear ended June 30, 2004 and 2003, comprehensive loss included unrealized loss on marketablesecurities of $4,056,430 and $262,995, respectively.  Other comprehensive loss, as presented onthe accompanying consolidated balance sheet in the stockholders' equity section amounted to$4,464,434 as of June 30, 2004.

 

INCOME TAXES

 

Deferred income tax assets and liabilities are computed annually for differences between thefinancial statements and tax basis of assets and liabilities that will result in taxable or deductibleamounts in the future based on enacted laws and rates applicable to the periods in which thedifferences are expected to affect taxable income (loss). Valuation allowance is established whennecessary to reduce deferred tax assets to the amount 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 of FinancialAccounting Standards No. 14, Financial Reporting for Segments of a Business Enterprise,establishes standards for the way that public enterprises report information about operatingsegments in annual financial statements and requires reporting of selected information aboutoperating segments in interim financial statements regarding products and services, geographicareas and major customers. SFAS No. 131 defines operating segments as components of anenterprise about which separate financial information is available that is evaluated regularly bythe chief operating decision maker in deciding how to allocate resources and in assessingperformance.

 

PENSION AND OTHER BENEFITS 
 
In February 1998, the Financial Accounting Standards Board issued Statement of FinancialAccounting Standards No. 132, Employers' Disclosures about Pensions and OtherPost-retirement Benefits ("SFAS No. 132"), which standardize the disclosure requirements forpensions and other post-retirement benefits. The Company adopted this standard in fiscal year1999 and the implementation of this standard did not have any impact on its financial statements.

 

RISKS AND UNCERTAINTIES

 

In the normal course of business, the Company is subject to certain risks and uncertainties. TheCompany provides its product on unsecured credit to most of its customers. Consequently, theCompany's ability to collect the amounts due from customers is affected by economicfluctuations and each customer's ability to pay.

 

RECLASSIFICATIONS
 
For comparative purposes, prior year's consolidated financial statements have been reclassifiedto conform with report classifications of the current year.
 
ACCOUNTING DEVELOPMENTS

 

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instrumentswith Characteristics of Both Liabilities and Equity, ("SFAS No. 150"). SFAS No. 150establishes standards for how an issuer classifies and measurers in its statement of financialposition certain financial instruments with characteristics of both liabilities and equity. Inaccordance with SFAS No. 150, financial instruments that embody obligations for the issuer arerequired to be classified as liabilities. SFAS No. 150 shall be effective for financial instrumentsentered into or modified after May 31, 2003, and otherwise shall be effective at the beginning ofthe first interim period beginning after June 15, 2003. The adoption of SFAS 150 does not havea material effect on the earnings or financial position of the Company. 
 
In December 2003, the Financial Accounting Standards Board (FASB) issued a revisedInterpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46R). FIN 46Raddresses consolidation by business enterprises of variable interest entities and significantlychanges the consolidation application of consolidation policies to variable interest entities and,thus improves comparability between enterprises engaged in similar activities when thoseactivities are conducted through variable interest entities. The Company does not hold anyvariable interest entities.
 
In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No.03-1, "The Meaning of Other-Than-Temporary Impairment and its Application to CertainInvestments."  The EITF reached a consensus about the criteria that should be used to determinewhen an investment is considered impaired, whether that impairment is other-than-temporary,and the measurement of an impairment loss and how that criteria should be applied toinvestments accounted for under SFAS No. 115, ACCOUNTING IN CERTAININVESTMENTS IN DEBT AND EQUITY SECURITIES."  EITF 03-01 also includedaccounting considerations subsequent to the recognition of other-than-temporary impairment andrequires certain disclosures about unrealized losses that have not been recognized asother-than-temporary impairments.  Additionally, EITF 03-01 includes new disclosurerequirements for investments that are deemed to be temporarily impaired.  In September 2004,the Financial Accounting Standards Board (FASB) delayed the accounting provisions of EITF03-01; however, the disclosure requirements remain effective for annual reports ending after June15, 2004.  The Company will evaluate the impact of EITF 03-01 once final guidance is issued.
 
In April of 2004, the EITF reached consensus on the guidance provided in EITF Issue No. 03-6,"Participating Securities and the Two-Class Method under SFAS No. 128 Earnings Per Share"("EITF 03-6"). EITF 03-6 clarifies whether a security should be considered a "participatingsecurity" for purposes of computing earnings per share ("EPS") and how earnings should beallocated to a "participating security" when using the two-class method for computing basicEPS.  The adoption of EITF 03-6 does not have a significant impact on the Company's financialposition or results of operations.
 
 In May of 2004, the FASB revised FASB Staff Position ("FSP") No. 106-1,"Accounting andDisclosure Requirements Related to the Medicare Prescription Drug, Improvement andModernization Act of 2003" and issued FSP No. 106-2, "Accounting and DisclosureRequirements Related to the Medicare Prescription Drug, Improvement and Modernization Actof 2003" ("FSP No. 106-2").  FSP 106-2 provides accounting guidance to the employers whosponsor post retirement health care plans that provide prescription drug benefits; and theprescription drug benefit provided by the employer is "actuarially equivalent" to Medicare Part Dand hence qualifies for the subsidy under the Medicare amendment act. The adoption of FSP106-2 does not have a significant impact on the Company's financial position or results ofoperations.
 
SEC Staff Accounting Bulletin (SAB) No. 105,"APPLICATION OF ACCOUNTINGPRINCIPLES TO LOAN COMMITMENTS," summarizes the views of the staff of the SECregarding the application of generally accepted accounting principles to loan commitmentsaccounted for as derivative instruments. SAB No.105 provides that the fair value of recordedloan commitments that are accounted for as derivatives under SFAS No. 133, "ACCOUNTINGFOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," should not incorporatethe expected future cash flows related to the associated servicing of the future loan.  In addition,SAB No. 105 requires registrants to disclose their accounting policy for loan commitments.  Theprovisions of SAB No. 105 must be applied to loan commitments accounted for as derivativesthat are entered into after March 31, 2004.  The adoption of this accounting standard does nothave a material impact on the Company's financial statements.
 
**NOTE 3 - NASD EXAMINATION AND DISCONTINUANCE OF PROVIDENTIALSECURITIES, INC.**

 

After the completion of a routine audit of Providential Securities, Inc. ("Providential") in Julyand August 2000, the National Association of Securities Dealers, Inc. alleged that Providentialviolated certain provisions of the NASD's Conduct Rules 2120, 2330, 2110 and 3010, and Rules15c2-4, 10b-5, 10b-9 and 15c3-3 of the Securities and Exchange Commission. ProvidentialSecurities, Inc. and Henry Fahman voluntarily submitted a Letter of Acceptance, Waiver andConsent ("AWC",), which was accepted by NASD Regulation, Inc. on October 27, 2000, asfollows:

 

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, through itsPrivate Placement Memorandum, offered and sold one hundred three thousand (103,000) sharesof Series I Class A Convertible Cumulative Preferred Stock in Providential Securities, Inc. forfive hundred fifteen thousand dollars ($515,000) to twenty-two (22) customers. In connectionwith the Private Placement Memorandum, Providential Securities made certainmisrepresentations or omissions in soliciting investments from public customers, such as: failureto disclose that an officer of Providential Securities could make contributions to help meet theminimum requirement; failure to disclose Providential Securities, Inc.'s disciplinary historywhereby Providential Securities, Inc. and Henry Fahman, jointly and severally, were fined$28,500 for net capital deficiencies and for failing to send the requisite written notification orconfirmation in fifty eight (58) securities transactions to public customers; and failure to disclosethat Henry Fahman was ordered to requalify by examination as a financial and operationalprincipal. 

 

That Providential's use of the private placement funds mainly for Providential's own operationalpurposes (more than for those represented in the private placement memorandum) amounted toconversion or improper use of those funds thus violating the Conduct Rules 2110 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 investment fundsreceived, (b) by not retaining the private placement funds until the minimum requirement wasmet, and (c) by not refunding these funds to the customers when the minimum was not met, ornot met in a timely manner.

 

That by receiving and controlling funds from public customers in connection with the privateplacement, Providential became obligated to comply with the full provisions of SEC Rule 15c3-3(during the period of January through at least March, 1999, Providential Securities, throughHenry Fahman, and Providential's financial and operations principal, Theodore Fahman, failed tocompute the reserve requirements, and set aside appropriate reserves 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 limited thefirm's branch activities to two branches, there were at least seven full-service satellite locations,thereby violating Conduct Rule 2110 and Membership and Registration Rule 1014.

 

That both Providential and Henry Fahman also violated Membership and Registration Rule 1030for failing to enforce Membership and Registration Rule 1031(a) by allowing four individualswith deficiencies in license registration to conduct a securities business during much of 1998 and1999.

 

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 the capacity ofequity 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, while hisstatus was "inactive" as a result of his failing to complete his continuing education requirements.

 

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 a maximum,of the following sanctions:

 

Providential shall be censured, fined $115,000.00 and shall offer rescission to those publiccustomers who participated in the Providential Private Placement. Providential shall provideproof in form satisfactory to NASDR's District 2 staff of its offer of rescission to the customerswho participated in the Providential Private Placement. In addition, to the extent the offer ofrescission is accepted by any investors, Providential is ordered to provide proof of payment of therestitution in a form satisfactory to the District 2 NASDR staff, no later than 120 days afteracceptance of the Letter of Acceptance, Waiver and Consent. Henry Fahman shall be banned, inall capacities, from associating 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. Thefine of $115,000 is included in accrued expenses in the accompanying consolidated financialstatements. The Company has offered all Preferred Stock holders rescission on theirinvestment. During the year ended June 30, 2004, $235,000 from the amount due to PreferredStock Holders  plus $105,600 in related dividends payable totaling $340,600 was paid either incash or with the issuance of common stock.  (See note 9) The balance of unredeemed preferredshares has been included in current liabilities on the accompanying consolidated financialstatements.

 

**NOTE 4 - IMPAIRMENT OF ASSETS**

 

In May 2003, the Company wrote-off its investment in Clear Pass (see Note 5) and recorded aloss on impairment of $180,500.
 
OnDecember 31, 2003, the Company evaluated its investment and goodwill onacquisition of the College and ATC according to FASB 144 and recognized animpairment loss equal to the book value of these intangible assets amounting$3,039,706.

**NOTE 5- INVESTMENTS**

 

INVESTMENT IN CLEARPASS

 

On November 20, 2002 the Company entered into an agreement to acquire 51% of theoutstanding common stock of Clear Pass, Inc. ("ClearPass"), a Nevada corporation, in exchangefor $1,500,000 and 3,000,000 shares of restricted stock of the Company. Under an agreementwith PASS21 Co., Ltd., ("Pass21") a Korean corporation, Clear Pass had the licensing rights todistribute and market PASS21's biometric products in the United States, Canada, and Europe.The Company invested $165,500 and $15,000 during the fiscal years ended June 30, 2003 and2002. On May 9, 2003, the agreement with Clear Pass was rescinded and accordingly the balanceof the investment of $180,500 was written off as an impairment of asset.

 

INVESTMENT IN SLIMTECH

 

On April 30, 2002, the Company consummated an agreement to acquire 51% equity interest inSlimTech, Inc., a Nevada corporation, in exchange for 3,000,000 shares of the Company'srestricted common stock. On May 6, 2003, the agreement was rescinded and the shares werereturned and cancelled, (see Note 1). As a result, the Company wrote off its minority interest inthe Company of $128,560 and cancelled the shares of common stock, a gain from disposal ofsubsidiary in the amount of $248,560 was recorded in the year ended June 30, 2003.

 

**NOTE 6- MARKETABLE EQUITY SECURITIES AVAILABLE FOR SALE**
 
Each investment in marketable securities represents less than twenty percent (20%) of theoutstanding common stock and stock equivalents of the investee, and each security is nationallyquoted on the National Association of Securities Dealers OTC Bulletin Board ("OTC:BB").  Assuch, each investment is accounted for in accordance with the provisions of SFAS No. 115.
 
Unrealized holding gains and losses for marketable securities are excluded from earnings andreported as a separate component of stockholder's equity. Realized gains and losses forsecurities classified as available-for-sale are reported in earnings based upon the adjusted cost ofthe specific security sold.  On June 30, 2004, the investments have been recorded at $1,610,955based upon the fair value of the marketable securities. 

Following is a summary of marketable equity securities classified as available for sale as of June30, 2004:

            
 
Investee Name (Symbol)Cost at June 30, 2004
Market Value at    

June 30, 2004Accumulated Unrealized Gain (Loss)Number of Shares Held at June 30, 2004Jockey Club (JKCL)$             3,768$                   15$         	(3,768)          1,500Tri Kal Int'l (TRIKF)           141,241                     15       	(141,241)        15,165Nettel Holdings (NTTL)        1,365,330        	718,875       	(646,425)2,250,000Lexor Holdings (LXRH)           4,565,050            	892,050      	(3,673,000)   1,900,000           $  6,075,359$    1,610,955$   (4,464,434)       
The changes in net unrealized holding loss on securities available for sale that has been includedas a separate component of stockholders' equity for the fiscal years ended June 30, 2004 and2003 was a loss of $4,056,430 and $262,995, respectively.

 

During the fiscal year ended June 30, 2003, the Company sold 1,322,606 shares of DatalogicInternational which it held as marketable securities for $24,243 and recorded a realized loss of$432,775.

 

On June 9, 2003, the Company received 2,250,000 shares of Nettel Corporation as payment foradvisory services and has been classified as consulting and advisory fee in the accompanyingconsolidated financial statements. The stock was valued at $1,365,300 or $0.61 per share.
 
On September 23, 2003, the Company purchased 400,000 shares of Lexor Holdings for $125,050or $0.31 per share.  In November 2003, the Company received 1,500,000 shares of LexorHoldings as payment for management and advisory services.  The shares were valued at$4,440,000 or $2.96 per share.
 
In May 2004, the Company received 250,000 shares of Datalogic International, Inc. as paymentfor management and advisory services.  The shares were valued at $204,250 or $0.82 per share.In May and June 2004, the Company sold the 250,000 shares for $153,684 and recorded arealized loss on the sale of $50,566.

 

**NOTE 7- PROPERTY AND EQUIPMENT**

 

Property and equipment at June 30, 2004 consists of the following:

 
Equipment$ 		199,173Furniture and Fixtures		57,936Automobiles		81,103Leasehold Improvements9,890    		Subtotal		348,102Less Accumulated Depreciation(223,579)     Total		net fixed assets$  124,523  

            
Depreciation expense was $38,245 and $28,830 for the fiscal years ended June 30, 2004 and2003, respectively. 
 
**NOTE 8- DUE TO OFFICER**

 

Due to officer, represents advances made by an officer of the Company, which are non-interestbearing, unsecured and due on demand. As on June 30, 2003, the total amount due to officerwas $146,916.
 
During the current year, the officer loaned an additional $419,258 in cash to the Company andreceived payments of $269,713.  In addition, the officer gave the Company shares he privatelyheld to make payments to holders of notes payable.  The market value of these shares wasrecorded as an addition to his loan and amounted to $354,247.  In January 2004, the officerconverted $133,488 of these notes into 2,480,268 shares of the Company's common stock.  Theconversion rate was less than the market rate of the shares at the time of issuance and a beneficialconversion expense was recorded of $346,692.

As of June 30, 2004, the total amount due to the officer was $534,730.
 
In addition, two officers of one of the subsidiaries advanced the subsidiary a total of $124,013 asof June 30, 2004.  These notes are non-interest bearing, unsecured and due on demand.

 

**NOTE 9 - LOANS AND PROMISSORY NOTES**
 
A summary of loans and promissory notes payable at June 30, 2004 is as follows:
 
TYPEParentSubsidiariesTotal*Current:*   Convertible promissory notes---Short-term notes payable917,215307,6421,224,857Current portion of notes payable3,087-3,087 920,302307,6421,227,944    Long Term (Promissory Notes)196,111154,303350,414    
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 on October21, 2000. These notes are essentially demand notes that have a six-month term and bear interestat 8% annually, unless the notes are in default, in which instance the interest rate will increase to12% annually. Further, the notes bear a redemption premium, based upon the date ofredemption equal to: 5% if within the first 60 days; 10% if within the second 60 days; 15% ifwithin the third 60 day-period, and 20% if redeemed after 181 days. On the 180th day, theCompany can require the holders to convert (if a registration statement is in effect) the notes intocommon stock. After the 180th day, only the holders can elect to convert - no right of theCompany to force conversion after that time. On the second anniversary, any remaining noteswill automatically covert into common stock (if a registration statement is in effect).If the conversion is at the direction of the Company, then, in addition to theredemption amount, the Company would also owe a 20% per annum rate of return onthe redemption amount. 

 

The notes may be paid by tender of common stock of the Company, with the conversion rate forthe issuance of the common stock equal to the "closing price" on the date of the initial purchaseof the notes, which is the average of the closing bid price for the five previous trading days.Repricing warrants have also been issued in contemporaneous amounts, such that any decrease inthe trading price of the stock will entitle the note holders to reset the exercise price to a lowerprice than that which existed on the closing date. The number of shares issued under therepricing warrants is directly linked to the Company's stock price on the conversion date of thenotes. As the stock price decreases, the number of shares to be issued pursuant to the repricingwarrants increase. The note purchasers are also entitled to a separate set of warrants, equal to20% of the total purchase amounts of the notes acquired, allowing for an exercise price of 110%of the closing price and having a 5-year term.

 

In accepting these subscriptions for these convertible notes, the Company had agreed to file aregistration statement with respect to the Company's common stock to be issued upon conversionof the notes and any exercise of the warrants, with the initial filing to occur within 60 days of the"first closing", which occurred on March 28, 2000. A 2% per month penalty will accrue if theregistration statement is not declared effective on or prior to the 181st day following the firstclosing. The holders have the right to require repayment in cash if no registration statement is ineffect on the 181st day. Since this registration statement was not filed withinthe first 60 days of the first closing, nor has it been declared effectivewithin 181 days after the first closing, the note holders have the right to the2% penalty and repayment in cash.

 

During the year ended June 30, 2003, $425,000 of the notes and accrued interest and other fees of$447,494, totaling $872,494, were converted to 363,637 shares of Company's common stock.The market value of the stock issued for the conversion was calculated and a gain of $472,420resulted from this note conversion was recorded as a gain on conversion of notes in theaccompanying consolidated financial statements. In addition, 8,726,425 shares of theCompany's common stock were issued to exercise the repricing warrants relating to the notesconverted.
 
During the year ended June 30, 2004, $1,100,000 of the notes and accrued interest of $2,558,156totaling $3,658,156, were converted to 21,019,177 shares of Company's common stock valued at$3,138,833. The market value of the stock issued for the conversion was calculated and a gainof $519,323 resulted from this note conversion was recorded as a gain on conversion of notes inthe accompanying consolidated financial statements. Other fees generated from the conversionof these notes of $47,363 were recorded as penalty and premium expense in these consolidatedfinancial statements.  In addition, 536,636 shares of the Company's common stock were issued toexercise the repricing warrants relating to the notes converted.  As of June 30, 2004, all of theconvertible notes and related interest had been converted.

PROMISSORY NOTES:

 

As of June 30, 2003, the Company has notes payable to International Mercantile Holdingamounting $196,111. The notes are due in the year ended June 30, 2006. The Notes carries aninterest rate equal to Labor plus 1%.  
 
In connection with the acquisition of Atlantis Career College, the company assumed two notespayable to the former owner of the College. The notes are unsecured, interest free and are dueone year and one day from demand. As of June 30, 2004, the balance of these notes totals$154,303.
 
The consolidated total of promissory notes is $350,414.

 

As of June 30, 2004, the Company has notes payable amounting $3,087 against acquisition of anautomobile. The note is secured by the auto, carry interest rate of 8.5%. The entire note is due byDecember 31, 2004. 
 
The Company had a note payable to a financial institution amounting $125,000. The note bearsan interest rate of 8%.  In March 2004, the Company issued 1,000,000 shares of its commonstock as payment on this note and the related accrued interest of $35,000.  The market value ofthe stock issued for the conversion was calculated and a gain of $19,200 resulted from this noteconversion was recorded as other income.

Following is the maturity schedule of notes payable:

 
Year ending June 30  2005
$           		-2006
$ 350,414  
SHORT TERM NOTES PAYABLE:

 

As of June 30, 2004, the Company has short term notes payable amounting $904,193 withaccrued interest of $46,051. The notes are due to various parties, payable in the year ended June30, 2005 and bear interest rate ranging from 6% to 20% per annum.  Included in this amount isthe payable to the former owners of ATC of $284,059.  In addition, the subsidiaries have$307,642 in short term notes payable and $163,943 in accrued interest for a consolidated total of$1,224,857 and $209,994, respectively.  
 
During the year ended June 30, 2004, the Company converted certain of these notes and relatedaccrued interest amounting to $315,341 into 3,995,285 shares of the Company's common stockvalued at $668,855.  The conversion rate was less than the market rate of the shares at the time ofissuance and a beneficial conversion expense was recorded of $353,514.
 
In addition, during the year ended June 30, 2004, the Company settled the balance owing ofseveral of the note holders.  The amount of principal and interest settled was $444,771.  Themarket value of the stock given as consideration was less than the amount of the notes; therefore,a loss of $257,647 was recorded on the settlement of these notes.
 
The Company paid notes payable and related accrued interest of $211,660 and $8,775 with1,560,000 shares of the Company's common stock valued at $231,560.  A beneficial conversionexpense of $11,125 was recorded on these transactions.
 
DUE TO PREFERRED STOCKHOLDERS AND OTHER CURRENT LIABILITIES:
 
PREFERRED STOCKHOLDERS AND DIVIDEND PAYABLE
 
At June 30, 2003, the Company has classified $450,000 of preferred stock subscribed as a currentliability payable to holders of preferred stock due to non compliance of preferred sharessubscription agreement.  During the year ended June 30, 2004, $235,000 plus $105,600 in relateddividends payable totaling $340,600 was paid with either cash or through the issuance ofcommon stock.  The conversion rate was less than the market rate of the shares at the time ofissuance and a redemption premium expense was recorded of $173,812.  Total amount due topreferred stockholders at June 30, 2004 was $215,000.

 

The dividend amount payable to holders of preferred stock amounting $108,655 at June 30, 2004has been classified as other current liabilities.

OTHER CURRENTLIABILITIES
 
During the year ended June 30, 2004, the Company received as a deposit on a businessconsulting agreement in the amount of $270,000.  As the conditions of the agreement have notbeen met at June 30, 2004, the amount has been classified as unearned revenues and is shown inthe consolidated financial statement in "other current liabilities" (see Note 16).
 
During the year ended June 30, 2004, the Company received an overpayment of $89,691 for theexercise of stock options receivable.  This amount has been classified as other payable and isshown on the consolidated financial statement in "other current liabilities".
 
In addition, the subsidiaries have other liabilities consisting of unearned tuition fees in theamount of $23,210, income tax provision of $7,165, and other payables of $32,251.

**NOTE 10 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES**

 

The accounts payable and accrued expenses at June 30, 2004 consist of the following:

 
Accounts Payable$  1,296,113Accrued salaries and payroll taxes418,062Accrued interest209,994Accrued legal874,208Accrued expenses - other57,302 2,855,679  
**NOTE 11 - LITIGATION**

 

**LEGAL PROCEEDING SETTLED AND CLEARED AS OF YEAR END:**
 
IMPERIAL BUSINESS CREDIT, INC. VS. PROVIDENTIAL SECURITIES, INC., TINA T.PHAN, TIMOTHY DACK FAHMAN, THEODORE DACK FAHMAN, AND HENRY DACKFAHMAN

 

On or about November 20, 1997, Nara Bank, N.A. and Providential Securities, Inc. entered into aWritten Lease Agreement ("Agreement") wherein Nara Bank, N.A. agreed to lease certaincomputer equipment to Providential Securities, Inc. Thereafter, the Agreement was assignedfrom Nara Bank, N.A. to Claimant's Assignor Oak Financial Services. Thereafter, the Agreementwas assigned from Claimant'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 per month forsixty months. On or about September 15, 2000, and subsequently, Providential Securities, Inc.was unable to make the monthly payments to Claimant due to the lack of revenues following theinterruption and subsequent closure of its securities brokerage operations.  Claimant filed acomplaint for money with the Superior Court of the State of California, County of Orange (CaseNo. 01CC07697) on June 14, 2001 seeking $30,873 plus interest thereon at the rate of tenpercent (10%) per annum from September 15, 2000. This case 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, on June 18, 2002,$12,000 was paid to Claimant. Then on May 24, 2004, the Company paid Claimant $30,000 forfull satisfaction of the judgment and an Acknowledgment of Satisfaction of Judgment was filedon June 24, 2004.  A gain in litigation settlement in the amount of $41,417 was recognized andrecorded for the year ended June 30, 2004.

 

**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 June 25, 1997, CaseNo. 781121, and subsequently moved to NASD Dispute resolution for arbitration. On or aboutAugust 24, 2000, the Company's legal counsel negotiated with the Claimant's counsel andunilaterally 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 Claimants filed arequest for arbitration hearing before the National Association of Securities Dealers on October4, 2000, Case No. 99-03160. Thereafter, the Claimants filed a complaint with the Orange CountySuperior Court, CA on October 31, 2000, Case No. 00CC13067 for alleged breach of contract fordamages in the sum of $75,000 plus pre-judgment interest, costs incurred in connection with thecomplaint, and other relief. Without admitting or denying any allegations, the Company reacheda settlement agreement with the Claimants whereby the Company would pay the Claimants atotal of $62,500 plus $4,500 in administrative costs. As the date of this report, the Company haspaid $2,500 and is subject to an entry of judgment for $79,000. The settlement amount has beenaccrued in the accompanying consolidated financial statements.

 

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

 

In September 1997 Providential Securities, Inc. entered into a written Lease Agreement to leasecertain items of equipment from Green Tree Vendor Services, in return for which ProvidentialSecurities, Inc. agreed to pay thirty-six monthly installments, each in the amount of $1,552. Onor about September 12, 2000, and subsequently, Providential Securities, Inc. was unable to makethe monthly payments to Claimant due to the lack of revenues following the interruption andsubsequent closure of its securities brokerage operations. (See Note 3) Claimant filed a complaintfor money with the Superior Court of the State of California, County of Orange (Case No.01CC02613) on February 23, 2001 seeking $39,102 plus interest thereon at the legal rate fromSeptember 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 ANDMARGARET HODSON VS. JERSEY TRANSFER & TRUST COMPANY ANDPROVIDENTIAL HOLDINGS, INC.

 

Claimants filed a complaint with the United States District Court, District of New Jersey (CaseNo. 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 legendsand register a total of 568,332 shares of Rule 144 stock held by Claimants. ProvidentialHoldings, Inc. and Jersey Transfer & Trust Company ("Defendants") relied on representation bythe former management of JR Consulting, Inc., later changed to Providential Holdings, Inc., thatthe captioned shares were not free of all encumbrances and were issued for invalid consideration.

On July 21, 2004 a settlement agreement was signed by Claimants and Defendants whereby theCompany agreed to pay Claimants $25,000 in cash and 2,500,000 shares of common stock of theCompany. The Company issued 2,500,000 shares of common stock to Claimants on July 26,2004 at the average price of $0.16 per share on that date and paid Claimants $25,000 on August12, 2004, resulting in $75,000 of gains in litigation settlement.
 
**LEGAL PROCEEDING PENDING AS OF YEAR END:**
 
MARK TOW, ESQ. VS. PROVIDENTIAL HOLDINGS, INC.
 
This case is pre-arbitration. The Company hired Mark Tow, Esq. to prepare an SB-2 RegistrationStatement and prepaid him $25,000 in retainer. Because Mark Tow was unable to complete thework according to schedule, the Company hired another law firm to replace Mark Tow. This newfirm completed the SB-2 Registration Statement and filed with the SEC on September 28, 2000.Mark Tow sent the Company a letter in June 2001 seeking a total of $75,000.00 for his allegedlyrendered service. The Company has accrued $50,000 relating to this case in Accrued Expensesin the accompanying consolidated financial statements since the original agreement with MarkTow was for 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 report there has been no filing forarbitration by Mark Tow. 
 
NGON VU VS. PROVIDENTIAL SECURITIES, INC.

 

Claimant was a former employee of Providential Securities, Inc. who was laid off in 2000 due toclosure of business. The Claimant complained to the Department of Industrial Relations (DIR)for allegedly unpaid vacation and salaries. On June 13, 2001, the DIR filed a request to enter ajudgment against Providential Securities, Inc. for $9,074 including wages and interest, penalty,post hearing and filing fee. The sought amount of $9,074 has been accrued in the accompanyingconsolidated financial statements.

 

VERIO VS. PROVIDENTIAL SECURITIES, INC.

 

On or about April 1, 2003, Verio, Inc. filed a judgment against Providential Securities, Inc., awholly-owned subsidiary of the Company which was discontinued in October 2000, for a total of$9,141. This sum consists of $6,800 for services allegedly rendered by Verio, Inc. toProvidential Securities, Inc. in 2000 and $2,341 for legal costs. Both amounts have beenaccrued in the accompanying consolidated financial statements.
 
DOW JONES & COMPANY, INC. VS. PROVIDENTIAL SECURITIES, INC. ANDPROVIDENTIAL 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), against ProvidentialSecurities, Inc., the discontinued operations of the Company, and Providential Holdings, Inc. for$9,973 plus prejudgment interest at the rate of ten (10%) per annum from November 1, 2000,reasonable attorneys' fees and other and further relief. This claim is in connection with servicesallegedly rendered by the Plaintiff to Providential Securities, Inc. prior to November 2000. TheCompany intends to settle this case. The sought amount of $9,973 (excluding interest) has beenaccrued in Accrued Expenses in the accompanying consolidated financial statements.

 

**NOTE 12- INCOME TAXES**

 

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

 

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

 
 June 30, 2004June 30, 2003Tax at U.S. Federal statutory		rates:$ 		(1,283,000)$ 		(359,000)   State income taxes, net of		federal effect:$    		(226,000)$   		(63,400)   Change in valuation allowance:$     1,509,000$     422,400 $                  		-$                		-   
 

As of June 30, 2004 the Company's deferred tax asset amounted to approximately $6.2 million,which relates primarily to NOL carryforwards. The deferred tax asset for the year had a relatedvaluation allowance in the same amount.

 

As of June 30, 2004, the Company estimated the available NOL carryforwards to beapproximately $16.2 million, subject to certain limitations, which will expire on various datesthrough 2024. 

 

**NOTE 13 - BASIC AND DILUTED NET LOSS PER SHARE**

 

Net loss per share is calculated in accordance with SFAS No. 128, "Earnings per Share". Underthe provision of SFAS No. 128, basic net loss per share is computed by dividing the net loss forthe period 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 stockoutstanding for the period and common stock equivalents outstanding at the endof the period. Common stock equivalents have been excluded from the calculationof weighted-average shares for purposes of calculating diluted net loss pershare for 2004 and 2003 periods, as such inclusion is anti-dilutive. 

 
 2004 2003Basic and diluted net loss per share:   Numerator:        Net loss$  (3,853,160) $  (1,056,939)    Denominator:        Basic and		diluted weighted average number of common shares outstanding83,523,306 42,858,502    Basic and diluted net loss per share$          		(0.05) $          		(0.02)    
 

**NOTE 14 - STOCKHOLDER'S DEFICIT**

 

Treasury Stock:

 

During November and December 2000, the Company issued 11.8 million shares of commonstock to its treasury. These shares were issued at their par value of $.04 per share for a totalamount of $472,000. During fiscal year 2002, an additional 3,375,000 shares were added at avalue of $328,875. During fiscal year 2003, an additional 11,100 shares were added at a value of$666. During the year ended June 30, 2003, the Company settled a loan payable amount of$24,021 in exchange of 380,900 shares issued out of treasury with a value of $29,229 resulting inloss on settlement of debts of $5,208.  There was no activity in the Treasury Shares during thefiscal year ended June 30, 2004.

 

**Common Stock:**

 

**Fiscal year ended June 30, 2003:**

 

During the year ended June 30, 2003, the Company issued 1,160,000 shares of common stock forservices valued at $55,000. The Company also issued stock options for 3,000,000 shares ofcommon stock, at exercise price $0.05 per shares during the year ended June 30, 2003. TheCompany received $125,000 for exercise of 2,500,000 options of common stock at $0.05 pershare. The Company recorded $25,000 as receivable for exercise of 500,000 options of commonstock at $0.05 per share. 

 

The Company also issued stock options for 5,000,000 shares of common stock, at exercise price$0.07 per shares during the year ended June 30, 2003. The Company received $130,340 forexercise of 1,862,000 options of common stock at $0.07 per share. The Company recorded$219,660 as receivable for exercise of 3,138,000 options of common stock at $0.07 per share.

 

The Company issued 8,726,425 shares of common stock for exercise of the repricing warrants forthe notes converted during the years ended June 30, 2003. 

 

During the year ended June 30, 2003, $425,000 of the notes and accrued interest and other fees of$447,494, totaling $872,494 were converted into 363,537 shares of common stock valued at$400,073 resulting in a gain of $472,420 from conversions of these notes.

 

In addition, the Company received back 3,000,000 shares of common stock valued at $120,000from SlimTech when the agreement was rescinded in May. As of June 30, 2003, the shares werenot cancelled and classified as shares to be cancelled in the accompanying consolidated financialstatements. These shares were subsequently cancelled on October 1, 2003.
 
**Fiscal year ended June 30, 2004:**
The Company issued 300,000 shares of common stock for cash valued at $56,000.  TheCompany received $937,600, including $244,660 in stock subscription receivable from the prioryear, for 6,100,000 shares of stock options ranging between $0.07 and $0.32 per share whichwere exercised.  The Company also issued 27,206,721 shares of common stock for services andsalaries amounting $2,2491,454. 
During the year ended June 30, 2004, 536,636 shares of Company's common stock were issued toexercise the re-pricing warrants for the notes converted during the period.
 
During the year ended June 30, 2004, $1,100,000 of the convertible debenture notes and accruedinterest of $2,558,156, totaling $3,658,156 were converted to 21,019,177 shares of commonstock valued at $3,138,833.  A loss of $519,323 resulted from these note conversions, which isincluded in other expenses in the accompanying consolidated financial statements.
 
During the year ended June 30, 2004, the Company converted notes payable and related interestof $315,341 into 3,995,285 shares of the Company's common stock valued at $668,855.  Abeneficial conversion expense of $353,514 was recorded, which is included in other expenses inthe accompanying consolidated financial statements.
 
During the year ended June 30, 2004, 2,560,000 shares of the Company's common stock valuedat $372,360 were issued as payment on short-term notes payable valued at $336,660 and relatedaccrued interest of $43,775.  A beneficial conversion expense of $11,125 and a gain of $19,200resulted from these note conversions, which is included in other expenses in the accompanyingconsolidated financial statements.  In addition, loan repayments of 4,000,000 shares valued at$657,750 have not been issued as of June 30, 2004 and are included in "Shares to Be Issued" onthe accompanying consolidated financial statements.
 
During the year ended June 30, 2004, 2,480,268 shares of the Company's common stock wereissued as payment on short-term notes payable - officers valued at $133,488.  A beneficialconversion expense of $346,692 resulted from these note conversions, which is included in otherexpenses in the accompanying consolidated financial statements.
 
The Company issued 2,195,271 shares of common stock valued at $507,363 for the conversionof preferred stock payable of $235,000 and related dividend payable of $105,600.  A redemptionexpense of $173,812 resulted from these conversions, which is included in other expenses in theaccompanying consolidated financial statements.  As of June 30, 2004, 1,211,968 shares valuedat $144,079 related to the conversion of these preferred stock payable have not been issued andare included in "Shares to Be Issued" on the accompanying consolidated financial statements.

 

In September 2003, the Company signed a letter of intent with Xiamen Overseas ChineseElectronic Co., Ltd to enter into a distribution agreement.  As part of this agreement, 461,391shares of the Company's common stock valued at $24,388 were issued.
 
In September 2003, the Company cancelled 3,000,000 shares previously issued to Clear Pass Inc.as the agreements were terminated during the year ended June 30, 2003.  In addition, in March2004, the Company cancelled 1,000,000 shares previously issued as collateral to a note holderwhen the note was settled.
In November 2003, the Company issued 375,000 shares of the Company's common stockvalued at $66,600 for litigation settlement. 
During the year ended June 30, 2004, the Company acquired two subsidiaries.  4,000,000 sharesof the Company's common stock valued at $360,000 were issued to ATC.  1,116,369 shares ofthe Company's common stock valued at $234,437 are to be issued to Irvine College of MedicalSciences.  As of the date of this report, these shares have not been issued and are included in"Shares to Be Issued" on the accompanying consolidated financial statements.
 
**Prepaid Consulting:**

 

On April 15, 2002, the Company signed an agreement with an unrelated third-party forconsulting services. The consultant will consult with the Company in identifying, locating andacquiring various business opportunities for the Company over a two year period. The Companyissued 3,000,000 shares of common stock to the consultant valued at $1,620,000 based upon themarket value of the stock at the time of consummation of the agreement. The Company hasrecorded the shares issued as a contra-equity account.

 

During the years ended June 30, 2004 and 2003, the Company has amortized $591,189 and$860,060 and has recorded these as an operating expense.  The balance of the prepaid consultingfees at June 30, 2004 is $0.

 

**NOTE 15 - STOCK BASED COMPENSATION PLAN**

 

On July 10, 2000 the Company adopted a Stock Option and Incentive Plan (the "Plan") whichprovides for the issuance of up to a maximum of 16 million shares of the Company's commonstock to officers, employees and non-employee directors at the sole discretion of the board ofdirectors. On August 10, 2000 the Company granted 14 million options under the Plan toofficers, directors and employees at an exercise price of $.50 per share. All the options wereexercisable on July 1, 2001 and expire on December 31, 2005. As of the date of this report therehave been no options exercised and seven million of these options have been forfeited.

 

During the year ended June 30, 2003, the Company granted stock options for 8,000,000 shares ofcommon stock, at exercise price in range of $0.05 - $0.07. All 8,000,000 options were exercisedduring the year ended June 30, 2003. 
 
As of June 30, 2004, the Company has 1,000,000 in stock options outstanding which weregranted during the three month period ended September 30, 2003.

In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock BasedCompensation-Transition and Disclosure".  SFAS No. 148 amends SFAS No. 123, "Accountingfor Stock Based Compensation", to provide alternative methods of transition for a voluntarychange to the fair value based method of accounting for stock-based employee compensation.  Inaddition, this Statement amends the disclosure requirements of Statement 123 to requireprominent disclosures in both annual and interim financial statements about the method ofaccounting for stock-based employee compensation and the effect of the method used, onreported results.  The Statement is effective for the Companies' interim reporting period endingJanuary 31, 2003. In compliance with FAS No. 148, the Company has elected to continue tofollow the intrinsic value method in accounting for its stock-based employee compensation planas defined by APB No. 25 and has made the applicable disclosures below.
 
Had the Company determined employee stock-based compensation cost based upon the fair valueat the grant date consistent with Statement of Financial Accounting Standards No. 123 (SFASNo. 123), "Accounting for Stock-Based Compensation," the Company's net loss and loss pershare as of June 30, 2003 would have been as follows ($ in thousands, except per shareamounts):

 
 2003Net loss as		reported$  (1,056,938)
Stock-based employeecompensation expense included inreported 
     net loss, net of tax   -  
Total stock-basedemployee compensation expensedetermined under
     fair-value-based method for all rewards, net of tax (3,040,000)  Pro forma net loss$  (4,096,938)  Earnings per share:     		Basic and diluted, as reported$         		(0.02)    		Basic and diluted, pro forma$         		(0.10)
 

 

The weighted average fair value of options granted for the year ended June 30, 2003 is $0.38,respectively. 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 in fiscalyear 2003: risk-free rate of 6.0 percent; no expected dividend yield; expected volatility of 540percent; and an expected life of 5.4 years.
 
As of June 30, 2004, the Company had no outstanding stock options.

 

**NOTE 16 - CONTRACTS AND COMMITMENTS**

 

**AGREEMENT WITH DATALOGIC CONSULTING, INC.**

 

DataLogic Consulting, Inc., a Texas corporation, is an IT consulting firm and a SAS InstituteQuality Partner. The Company has assisted Datalogic in connection with its merger plan withTopclick International, Inc. and other development strategies. On April 25, 2001, but effectiveApril 18, 2001, Datalogic Consulting, Inc. and the Company entered into an agreement wherebythe Company would receive 10% equity in the new company that would result from theconsummation of the proposed merger between Datalogic Consulting, Inc. and TopclickInternational, Inc. The merger plan between Datalogic and Toplick was consummated on July 20,2001. The Company received 2,666,922 shares of Datalogic International, Inc. (the new name forTopclick International, Inc.) as the fee for the merger and acquisition consulting services it hasperformed. This investment in Datalogic International, Inc. is carried on the financial statementsof Providential Holdings, Inc. at its market value as of June 30, 2002 as a marketable security.The Company received and subsequently disposed of 1.2 million shares of DatalogicInternational in fiscal year ended June 30, 2003.  During the fiscal year ended June 30, 2004, theCompany received 250,000 shares of Datalogic International, Inc. in connection with this mergerplan and recorded $204,250 in advisory fees.  The shares were sold and a loss of $50,566 wasrecorded.   (See Note 6).

 

**INTERNATIONAL CENTER FOR TRAINING AND CONSULTING, VIETNAM'SMINISTRY OF TRADE**

 

International Center for Training and Consulting (ICTC) is an organization under the Ministry ofTrade of Vietnam that promotes economics, trade, investment and training activities betweenVietnam and foreign organizations. Providential Holdings, Inc. and ICTC signed an agreement inMarch 2001 to cooperate in the areas of trade, economics, and technology. ICTC is responsiblefor representing Providential Holdings in connection with appropriate Vietnamese organizations,businesses, and individual businessmen and investors in Vietnam. ICTC will also performconsulting services and provide information on various economic, trade and investment projectsas may be required by Providential. Fees between the parties will be negotiated on an as projectbasis. As of the date of this report there have been no projects completed and none are inprocess. 

 

**CHU LAI OPEN ECONOMIC 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 projects inChu Lai by the end of 2002. As of the date of this report the Company has not assisted in fundingthis project. The Company expects its main role in this project to be the manager organizing thedifferent companies that will operate their business at this location. As the date of this report, theCompany has not assisted in funding this project.

 

**PROVIMEX, INC.**

 

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 its nameto Provimex on July 5, 2001. The Company believes that its trade commerce business will growsubstantially as a result of the imminent ratification of the Trade Agreement between Vietnamand the United States. During the year ended June 30, 2004 the Company generated $132,856 inrevenue and $117,430 of cost of sales for a gross profit of $15,426 from this operation.

**AGREEMENT WITH LEXOR INTERNATIONAL, INC.**

 

On October 9, 2001, the Company entered into an agreement to provide merger and acquisitionconsulting services to Lexor International, Inc. ("Lexor"), a Maryland corporation, and to assistLexor in its business combination plan with in its business combination plan with Pan-AmericanAutomotive Corporation ("Pan-American"), 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 the Companyreceived 24,761,900 restricted shares of Pan-American's common stock, (after the 7 to 1 reversesplit). Pan-American changed its name to Lexor International, Inc. and again effectuated a 10:1reverse split of its common stock on December 19, 2001. This business combination planbetween Lexor and Pan-American was later rescinded. Pan-American changed its name toGrayling Wireless USA, Inc. ("Grayling".) On January 16, 2003, Grayling effected a 200:1reverse split of its common stock. As a result the Company currently owns 12,380 shares ofGrayling but will not record any value for the shares until a trading market value has beenestablished for this stock.
 
On September 26, 2003, Providential Capital, a wholly-owned DBA of the Company, enteredinto a new agreement to provide merger and acquisition consulting services to LexorInternational, Inc., a Maryland corporation, and to assist Lexor in its business combination planwith Western Silver-Lead Corp, a Florida corporation.  On September 29, 2003, WesternSilver-Lead Corp. signed a definitive agreement to acquire 100% of Lexor in exchange for stockin Western Silver-Plead Corp. This transaction was closed on September 29, 2003 and WesternSilver-Lead Corp's corporate name was changed to Lexor Holdings, Inc., a Florida corporation.According to the consulting agreement, Providential Capital was entitled to 1,500,000 shares ofcommon stock of Lexor Holdings, Inc. (approximately 10% of the issued and outstanding shares)as compensation for its advisory and consulting services. The stock was valued at $4,440,000 or$2.90 per share.  This amount has been included as consulting and advisory income in theaccompanying financial statements.  The stock was received by the Company on October 31,2003.
 
**AGREEMENTS WITH NETTEL GLOBAL COMMUNICATION CORP.**
 
On December 3, 2002, the Company entered into a Stock Purchase Agreement with NettelGlobal Communication Corp. ("Nettel"), a Delaware corporation, whereby the Company wouldacquire 46.5% of the common stock of Nettel in exchange for a total of $2,500,000 innon-interest bearing notes, $500,000 of which would be due 60 days after the closing of thetransaction and $2,000,000 would be due in 90 days after closing.  On January 17, 2003, anAmendment to Stock Purchase Agreement was entered into between Nettel and the Companywhich called for the $500,000 note to be due on April 15, 2003 and the $2,000,000 note to be dueon June 15, 2003.  The Company also agreed to pay Nettel a 2% penalty per month on anyunpaid balances of the notes for a maximum period of 60 days after the respective maturity dates.The closing of the transaction occurred and became effective on January 17, 2003, at which timethe Company issued and delivered these notes to Nettel.  This agreement was rescinded on May19, 2003.  As of June 30, 2003, the Company had paid $57,348 to Nettel and has written thisamount off as bad debt expense.
 
On May 19, 2003, the Company entered into an agreement to provide merger and acquisitionconsulting services to Nettel and to assist Nettel in its business combination plans with a fullyreporting publicly-traded company.  As of June 30, 2003, the Company received 2,250,000restricted common shares of Nettel, and recorded consulting income of $1,365,300 on thistransaction.  During the year ended June 30, 2004, the Company did not generate any incomebased on this agreement..
 
**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 the agreement,the Company will contribute $140,000 to the initial required capital and own 70% of ProvidentialJVC while Minh Hieu Company will contribute $60,000 for 30% of the joint venture enterprise.Providential JVC's main line of business includes industrial garments, packaging products andaccessories. To date, no funds have been contributed towards the joint venture.  This agreementhas been cancelled.
 
**DISTRIBUTORSHIP AGREEMENT WITH XIAMEN OVERSEAS CHINESE**
 
On October 28, 2003, the Company entered into an agreement with Xiamen Overseas ChineseElectronics Company ("Xoceco") to establish a new majority-owned subsidiary to distributeconsumer electronics products for Xoceco. The Company will own 95% of the new subsidiary.
 
According to the agreement, Xoceco will be granted options to acquire up to 4,300,000 shares ofcommon of the Company with exercise prices ranging from $0.10 to $.35 per share untilDecember 31, 2005, subject to a minimum level of annual revenues not less than $5,000,000 andprofit of sales not less than 10%.  In December 2003, the Company established PHI Digital Corp.under this agreement.  During the year ended June 30, 2004, the Company recognized $3,566,407in sales from this venture with $3,206,580 in cost of goods sold for a gross profit of $359,827.Xoceco charged PHI Digital $359,827 in management fees, resulting in a zero net income.  InJune 2004, the Company terminated the agreement with Xoceco and PHI Digital has beenrenamed "TULON INDUSTRIES, INC." to change its scope of business.
 
**AGREEMENT WITH MEDICAL CAREER COLLEGE AND ATLANTIS CAREERCOLLEGE**

 

In May 2003, Providential Capital ("ProCap") entered into a business consulting agreement withMedical Career College ("MCC") to provide Merger and Acquisition advisory services to MCC.According to this agreement, ProCap will be entitled to 15% equity interest in the combinedcompany when and only if a merger between MCC and a fully reporting publicly-traded companyis consummated. As of the date of this report, no merger has been completed for MCC.
 
**STOCK PURCHASE AGREEMENT**
 
On February 5, 2004 an unrelated private investment company signed an agreement with theCompany to purchase $3,000,000 worth of the Company's restricted common stock based upona price equal to 20% discount from the average 10 day "Bid" price when the Company's stockis traded for at least One Dollar ($1.00) per share and there is average daily trade volume of atleast thirty thousand (30,000) shares of volume per day. In addition, the purchaser will be giventhe option to purchase up to one million shares of the Company's restricted common stock at aprice equal to 30% discount from the market price or thirty (30) cents per share, whichever islower. This option shall be for a period of one year from the close of the proposed transaction. Asof the date of this report, the conditions of the agreement have not been met and therefore theagreement has not been consummated.
 
**BUSINESS CONSULTING AGREEMENT WITH ENTEC SOFTWARE, INC.**
 
On February 28, 2004, the Company entered into a business consulting agreement with EntecSoftware, Inc. ("Entec") to provide services in the identification, location, and facilitating amerger with a fully-reporting publicly-traded company.  If a merger is successful, the Company isto receive common stock in the newly combined company equal to 20% of the then issued andoutstanding common shares of the new company.  As of the date of this report, a successfulmerger has not been completed.  In connection with this agreement, the Company has received$270,000 as a deposit for expenses and has recorded this as "other liabilities" in theaccompanying consolidated financial statements (see Note 10). 
 
**OFFICE SPACE LEASE**

 

The Company leased its office space at $4,263 per month during the year ended June 30, 2004,.This lease was expired on March 31, 2004 and the Company paid the rent on a month to monthbasis.  In August 2004, the Company moved to a new office with a lease at $3,907 per month.The lease for subsidiary expires December 31, 2006. 
 
Future commitments under operating leases are as follows for the twelve months ending June 30:

                           
2005110,0102006103,134200775,68420083,907  Total minimum lease payment$  292,735  
The rent expenses were $149,919 and $51,156 for the year ended June 30, 2004 and 2003,respectively.

  

**NOTE 17- BUSINESS ACQUISITIONS**
 
On August 23, 2002, the Company entered into a purchase agreement with ATC TechnologyCorporation ("ATC"), an Arizona corporation, to purchase all the issued and outstanding sharesof ATC. For consideration, the Company agreed to deliver $250,000 in promissory notes,non-interest bearing, payable 270 days after closing, and $250,000 in promissory notes,non-interest bearing, payable 180 days after closing, 3,000,000 shares of restricted stock of theCompany with an option of additional shares to be issued after 270 days if the stock price doesnot reach $0.30, 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 $0.30. The Companyconsummated the purchase agreement with ATC on October 17, 2003 and delivered $500,000 inpromissory notes and 4,000,000 shares of the Company's common stock valued at approximately$360,000.
 
On December 19, 2003, the entered into a Stock Purchase Agreement with Irvine College ofMedical Sciences, Inc., a California corporation, ("the College") to acquire 51% of the College'scommon stock for an aggregate purchase price of $314,437. This amount is to be paid with$80,000 in cash and 1,116,369 shares of the Company's common stock.  As of June 30, 2004, thecommon stock has not been issued and is reflected as common stock to be issued in theaccompanying financial statements.  The stock was issued on August 19, 2004.  The Companyrecorded a loss of $43,065 relating to the income generated by the subsidiary after the purchaseby the Company.

 

The Company has accounted for above transactions under the purchase method of accounting forbusiness combinations. The assets and liabilities of ATC and the College are included in theconsolidated balance sheet as of June 30, 2004 and included in these statements of operations andcash flows from the date of acquisition through June 30, 2004.

 

The purchase price was allocated to the acquired assets and assumed liabilities based on the fairvalues as of the date of the acquisition. The excess of the fair value of the net identifiable assetsacquired over the purchase price paid represented goodwill for both transactions amounted to$3,039,706. The Company determined the value of goodwill at zero on December 31, 2003 andtherefore, has recorded $3,039,706 as an impairment of goodwill.

 

The preliminary purchase price was allocated as follows (in thousands):

 
 ATC COLLEGEGoodwill$   2,770 $  270Current assets19 206Non-current assets3 131Total assets2,792 607Less liabilities assumed(1,932) 293Consideration paid$      860 $  314    
**NOTE 18- GOING CONCERN UNCERTAINTY**
 
As shown in the accompanying consolidated financial statements, the Company incurred a netloss of $3,853,160 for the year ended June 30, 2004.  As of June 30, 2004, the Company had anegative working capital of $3.7 million and a shareholder deficit of $4.0 million. These factors,as well as the uncertain conditions that the Company faces in its day-to-day operations, create anuncertainty as to the Company's ability to continue as a going concern. The financial statementsdo not include any adjustments that might be necessary should the Company be unable tocontinue as a going concern.

 

Management has taken action to strengthen the Company's working capital position and generatesufficient cash to meet its operating needs through June 30, 2005 and beyond. The Company alsoanticipates generating more revenue through its proposed mergers and acquisitions. Noassurances can be made that management will be successful in achieving its plan.  The presidentand chairman of the Company has committed to funding the Company's operations for the next12 months.
 
**NOTE 19- GAIN ON SETTLEMENT OF DEBT AND LEGAL SETTLEMENT**

On March 18, 2004, the Company entered into a settlement agreement with DatalogicInternational, Inc. ("Datalogic") whereby Datalogic agreed to cancel $75,000 owed to it by theCompany.  The Company had recorded this liability in accrued expenses and as a result of thisagreement, during the year ended June 30, 2004, recorded a gain on settlement of debt of $75,000and is shown in other income in the accompanying consolidated financial statements.
 
In May 2004, the Company entered into an agreement with Imperial Business Credit (see Note11) to settle the amount owed.  As a result of this agreement the Company recorded a gain onlegal settlement of $41,417.
 
During the year ended June 30, 2004, the Company entered into settlement agreements withvarious short-term noteholders.  As a result of these agreements, the Company recorded a net lossof $257,647 (see Note 9).
 
In addition, the Company's subsidiary, ATC, entered into an agreement with the holder ofcertain equipment leases to settle the amount owing for $35,000.  As a result of this, theCompany recorded a gain of $137,654.  ATC also settled with a noteholder who agreed to accept60,000 shares of the Company's common stock valued at $10,560.  The market value was lessthan the amount due; therefore the Company recorded a gain of $4,440 on this transaction.
 
**NOTE 20- SEGMENT INFORMATION**

 

The following table presents a summary of operating information and certain year-end balancesheet information as of June 30:
  **2004** **2003**    Revenues from		unaffiliated customers:       		Consulting and advisory services$        		4,711,340 $        1,386,635    		Sales4,397,822 61,800    		Tuition167,049 -         		Consolidated$        		9,276,211 $        1,448,435    Operating loss:       		Consulting and advisory services$       (2,574,453) $        (347,073)    		Sales(66,265) 5,172    		Tuition(256,225) -         		Consolidated$       (2,896,943) $        (341,901)    Identifiable		assets:       		Consulting and advisory services$         		1,672,534 $         1,226,009    		Sales12,381 -    		Tuition183,177 -         		Consolidated$         		1,868,092 $         1,226,009    Depreciation and		amortization:       		Consulting and advisory services$            		22,508 $            		28,830    		Sales- -    		Tuition15,737 -         		Consolidated$              		38,245 $            		28,830    Capital		expenditures:       		Consulting and advisory services$                		7,743 $                      		-    		Sales- -    		Tuition6,467 -         		Consolidated$              		14,210 $                      		-    
 
**NOTE 21- RELATED PARTY TRANSACTIONS**
 
During the year ended June 30, 2004, the Company issued shares to various related parties inpayment for services and salaries.   These payments were as follows:
Related Party # Shares Market ValueHenry Fahman 13,562,807 $     		466,311Tina Phan 4,046,696 147,228Keith Wong 2,715,896 424,303Norm Klein 242,857 42,768Thorman Hwin 150,000 6,000       20,718,256 $  1,086,610     
        

In addition, Henry Fahman, an officer of the Company was issued 2,480,268 shares for theconversion of notes payable owed to him of $133,488.  The value of the stock at the time ofissuance was $480,180 and a beneficial conversion expense of $346,692 was recorded (See Note8).  Mr. Fahman also converted $181,250 in Preferred Stock Payable and related DividendPayable into 1,613,262 shares of the Company's common stock valued at $269,415.  Apremium expense of $88,165 was recorded as a result of this conversion. 

 

**NOTE 22 - SUBSEQUENT EVENT**
 
**SETTLEMENT OF LITIGATION BETWEEN FRANCIS VAUSE VS. JERSEY TRANSFERET AL.**

FRANCIS VAUSE, MARK VAUSE, FRANCIS VAUSE, JR., IAN VAUSE ANDMARGARET HODSON VS. JERSEY TRANSFER & TRUST COMPANY ANDPROVIDENTIAL HOLDINGS, INC.

 

Claimants filed a complaint with the United States District Court, District of New Jersey (CaseNo. 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 legendsand register a total of 568,332 shares of Rule 144 stock held by Claimants. ProvidentialHoldings, Inc. and Jersey Transfer & Trust Company ("Defendants") relied on representation bythe former management of JR Consulting, Inc., later changed to Providential Holdings, Inc., thatthe captioned shares were not free of all encumbrances and were issued for invalid consideration.
 
On July 21, 2004 a settlement agreement was signed by Claimants and Defendants whereby theCompany agreed to pay Claimants $25,000 in cash and 2,500,000 shares of common stock of theCompany. The Company issued 2,500,000 shares of common stock to Claimants on July  26,2004 and paid Claimants $25,000 on August 12, 2004, resulting in $75,000 of gains in litigationsettlement.
 
**BUSINESS CONSULTING AGREEMENT WITH ENTEC SOFTWARE, INC.**

 

On February 28, 2004, the Company entered into a business consulting agreement with EntecSoftware, Inc. ("Entec") to provide services in the identification, location, and facilitating amerger with a fully-reporting publicly-traded company. If a merger is successful, the Company isto receive common stock in the newly combined company equal to 20% of the then issued andoutstanding common shares of the new company. This agreement was cancelled in August 2004.
 
**TERMINATION OF AGREEMENT WITH TANGSHAN YUTIAN SAW CORPORATION**
 
On June 7, 2004, Providential Holdings, Inc. (the "Company") entered into an agreement toacquire a sixty percent (60%) ownership interest in Tangshan Yutian Saw Corporation("TYSC"), a Chinese corporation which is a leading manufacturer of circular saw blades. (Website: www.ytsawblades.com).  According to the terms of the transaction, which was closed onJune 24, 2004, Providential Holdings acquired 60% of the common stock of  Tangshan YutianSaw Corporation in exchange for a $45 million short-term note. As part of the agreement,Providential would assist TYSC in becoming a publicly-traded company in the US and Europewithin nine months following the closing of the transaction. In addition, Providential would helpmarket TYSC 's products outside of China and facilitate TYSC's access to the Western capitalmarkets.
 
Because of delays in TYSC's financial audits according to US GAAP to comply with theSecurities and Exchange Commission's requirement, this transaction was cancelled as ofNovember 19, 2004. The Company relinquished the 60% ownership interest in TYSC andcancelled the $45 million short-term note.   Due to the cancellation, the note is not reflected inthese consolidated financial statements.
 
**AGREEMENT WITH TULON PACIFIC, LLC**
 
On September 10, 2004 the Company signed an agreement to acquire a 70% ownership of TulonPacific, LLC, an Irvine, California-based company that provides precision cutting tools anddrilling solutions, for a $1.6 million combination of cash and a promissory note which may beconverted into common shares of the Company in six months. This transaction has not closed asof the date of this report and has been extended to December 17, 2004.

**PROVIMEX-HTV JOINT VENTURE COMPANY, LTD.**
 
On October 18, 2004 the People's Committee of Ho Chi Minh City, Vietnam approved the jointventure application by the Company and HTV, Ltd., a Vietnam-based company, to form a JointVenture company under the name of "Provimex-HTV Joint Venture Company, Ltd."  This jointventure company will primarily focus on providing equipment and liquid gas to high risebuildings and premium residential housings in Vietnam. The Company will own 80% equity inthe joint venture company. The Joint Venture did not have any operations through June 30, 2004.
 
**ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING 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, 2004, with respect to theDirectors and Executive Officers of the Company. 

 

NAME                                                   AGE                                         POSITION

Henry D. Fahman                                    51                         Chairman of the Board, President

      Tina T. Phan                                              37                         Director, Secretary and Treasurer 

Tam T. Bui                                                 44                         Chief Technology Officer

Thorman Hwinn                                                55                         Director
Robert W.Stevenson                             65                        Director

 

Directors are elected at the annual meeting of shareholders and hold office until the followingannual meeting and until their successors are elected and qualified. All Executive Officers serveat 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, and is currently Acting Financial Officer of the Company. Mr. Fahmanserved as President and Chairman of the Board of Providential Securities, Inc. from its inceptionin October 1992 to October 2000. He holds a B.S., magna cum laude, in business administrationfrom the University of California at Berkeley, with emphasis in finance and economic analysisand policy, and is a graduate of the Advanced Management Program from Harvard BusinessSchool. He has also attended other Executive Education programs at Harvard Business Schooland Stanford University, including Mergers and Acquisitions, Creating Competitive Advantage,and Advanced General Management. Previously, he served as a Resettlement Coordinator for theUnited Nations High Commissioner for Refugees. Mr. Fahman is currently Vice Chairman of theBoard of Trustees of Union College of California, Chairman of Apollos University, and Presidentof Providential Foundation, Inc., all of which are non-profit organizations. Mr. Fahman is thehusband of Tina T. Phan, our Secretary and Treasurer and a member of our Board of Directors.

 

Tina T. Phan has been a Director and Secretary of the Company since January 2000 and was VicePresident of Operations of Providential Securities, Inc. from 1995 to 2000. Mrs. Phan holds aB.S. in management information system from California State University, Los Angeles.Currently Mrs. Phan also serves as Treasurer of the Company and President of ProvidentialAdvisory Services, Inc., a California corporation. Mrs. Phan was employed by the World ReliefCorporation from 1992 to 1995. Mrs. Phan is the wife of Henry D. Fahman.

 

Tam Bui has been serving as Chief Technology Officer of the Company since May2002. Mr. Bui holds Bachelor and Master of Science degrees from the Universityof Minnesota and has attended continuing Education at the University ofCalifornia, Los Angeles. He has over 18 years of experience with Honeywell, Inc.and TRW as Senior Production Engineer/Computer Application Engineer, ProjectManager, Department Manager, Program Manager and Implementation Manager. Hismost recent responsibility has been the implementation of LAPD Emergency CommandControl Communications Systems. He has a broad knowledge and experience in theareas of information technology, intranet/internet technology, inventorymanagement, material resource planning, enterprise resource planning, humanresource management, 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's Office forEconomic Development and a banking specialist with the Agricultural Development Bank,Vietnam. Thorman holds an MBA, a Master's Degree in Economics and Bachelor's degrees inphilosophy, economics and mathematics.

 

Robert W. Stevenson has been a Director of the Company since June 2003. Mr. Stevenson is aretired industrial executive with more than 30 years of experience in the corporate office ofEsterline Technologies Corporation and its predecessors. He served for 25 years in the roles ofExecutive Vice President and Chief Financial Officer. Prior positions within the corporationincluded Controller, Secretary and Assistant Controller. Prior to joining Esterline, Mr.Stevenson worked in several finance positions for The Boeing Company, Aerospace Groupincluding as Chief, Financial Statements and Financials Planning for Aerospace.

 

Aside from business consulting, Mr. Stevenson spends most of his time supporting communityactivities. He has been a member of the Mercer Island Presbyterian Church since 1965. He hasserved on many boards and committees for the church including as a deacon and elder.Currently he is representing the Presbytery of Seattle on the chaplaincy oversight board (ThePastoral Care and Education Board) at Harborview Hospital in Seattle, Washington. In addition,he currently serves as a trustee of the Presbyterian Church (U.S.A.) Foundation and is a memberof its Investment Committee; Trustee and Treasurer for Union College of California (VietnameseTheological College, Westminster, CA); and he is Trustee and Treasurer of Sheldon JacksonCollege (in Sitka, Alaska). Also, he is on the board of the Pacific Association for TheologicalStudies and Prosthetics Outreach Foundation (also Treasurer) in Seattle, Washington. Over theyears, he has been active in other community organizations and currently participates on severalboards and committees of the YMCA of Greater Seattle.

 

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 file reportsunder 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 management personnelof the Company will be reimbursed for any out-of-pocket expenses incurred on behalf of theCompany. 

 

Except for non-cash payments mentioned in this report, there was no monetary compensationpaid to any officers of the Company during the year ended June 30, 2004.

 

 (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 asthere 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 ornot, may receive an amount yet to be determined annually for their participation in meetings ofthe Board and will be required to attend a minimum of four meetings per fiscal year. TheCompany reimburses all expenses for meeting attendance or out of pocket expenses connecteddirectly 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 the Company'scommon stock to officers, employees and non-employee directors at the sole discretion of theboard of directors. On August 10, 2000 the Company granted fully vested 14 million optionsunder the Plan to officers, directors and employees at an exercise price of $.50 per share. All theoptions were exercisable on July 1, 2001 and would expire on December 31, 2002. On June 15,2002, the Company extended the expiration date of these employee stocks to December 31, 2005.As of the date of this report, there have been no options exercised and 7 million of these optionshave 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 of 2005. Theyhave not been exercised by the date of this report. 

 

**ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT**

 

The following table sets forth information regarding the beneficial ownership of shares of thecompany's common stock as of November 15, 2004 (134,883,033 issued and outstanding,) by (i)all shareholders known to the company to be beneficial owners of more than 5% of theoutstanding common stock; and (ii) all directors and executive officers of the company, and as agroup:

 

                                                 NAME AND ADDRESS OF               AMOUNT OF BENEFICIAL                 PERCENT OF

TITLE OF CLASS                    BENEFICIAL OWNER(1)                            OWNERSHIP                                                 CLASS
 

Common Stock                                Henry D. Fahman,                                        21,943,129 (2)                                      16.29%

                                                           17011Beach Blvd., Suite 1230

                                                          Huntington Beach, CA 92647

 

Common Stock                                Tina T. Phan (4)                                             4,007,133                                             2.97%                 
                                                          17011 Beach Blvd., Suite 1230

                                                          Huntington Beach, CA 92647

 

Common Stock                              Thorman Hwinn                                                 150,000 (4)
                                                         655 W. Roberta Avenue
                                                         Fullerton, California 92832

 

Common Stock                                Shares of all directors and                            26,130,262                                          19.26%

                                                           executive officers as a group

                                                           (3 persons)

 

 

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

 

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

 

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

 

(4) Less than 1%.

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

 

Henry D. Fahman, Chairman and Chief Executive Officer of the Company, has from time to timemade cash advances to the Company. The advances are unsecured, interest free and payable ondemand

 

Certain of the officers and directors of the company are engaged in other businesses, eitherindividually or through partnerships and corporations in which they have an interest, hold anoffice, or serve on a board of directors. As a result, certain conflicts of interest may arise betweenthe company and its officers and directors. The company will attempt to resolve such conflicts ofinterest in favor of the company. The officers and directors of the company are accountable to itand its shareholders as fiduciaries, which requires that such officers and directors exercise goodfaith and integrity in handling the company's affairs. A shareholder may be able to institute legalaction on behalf of the company or on behalf of itself and other similarly situated shareholders torecover damages or for other relief in cases of the resolution of conflicts is in any mannerprejudicial 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) 
 
10.32                                                           Mutual Rescission of Stock Purchase Agreement with Nettel Global CommunicationCorp. (8).
 
10.33                                                           Business Consulting Agreement with Nettel Global Communication Corp. (8)
 
10.34                                                           Business Consulting Agreement with Medical Career College (8)
 
10.35                                                           Mutual Rescission of Stock Purchase Agreement with Slimtech (8).
 
10.36                                                           Mutual Rescission of Stock Purchase Agreement with Clear Pass, Inc. (8).
 
10.37                                                           Mutual Rescission of Joint Venture Agreement with HTV CO, Ltd. (8).
 
10.38                                                           Mutual Rescission of Stock Purchase Agreement with Real ID Technology (8).
 
10.39                                                           Business Consulting Agreement with Lexor Incorporated (8)
 
10.40                                                           Amended Closing Memorandum with ATC Technology Corp. (8)
 
10.41                                                           Stock Purchase Agreement with Tangshan Yutian Saw Corporation. (incorporated byreference to the Company's Current 
                                                                    Report on Form 8-K, filed June 15, 2004).
 

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)
 
17.2                                                              Resignation of Tam Bui as Director (incorporated by reference to the Company'sCurrent
                                                                     Report on Form 8-K, filed September 30, 2004).

 

21.1                                                              Subsidiaries of the Registrant 
                                                             31.1                                                          Rule 13a-14a/15d-14(a) Certification of Chief Executive/Financial Officer32.1Section 1350 Certification of Chief Executive/Financial Officer
 

          (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.