-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qw+585v4UbLoo0ZMIqIRA8UwZM1HtFYrt/Skw/qUb9K7NLLdwFgVOaAkEXFGnDe5 FEH4IgnmZ65/7N5jFhaefQ== 0001144204-06-047186.txt : 20061114 0001144204-06-047186.hdr.sgml : 20061114 20061114125532 ACCESSION NUMBER: 0001144204-06-047186 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060930 FILED AS OF DATE: 20061114 DATE AS OF CHANGE: 20061114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED COMPANIES CORP CENTRAL INDEX KEY: 0001166708 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 300024898 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 333-99393 FILM NUMBER: 061213032 BUSINESS ADDRESS: STREET 1: 940 N.W. 1 STREET CITY: FT. LAUDERDALE STATE: FL ZIP: 33311 BUSINESS PHONE: 954-462-5570 MAIL ADDRESS: STREET 1: 940 N.W. 1 STREET CITY: FT. LAUDERDALE STATE: FL ZIP: 33311 10QSB 1 v057270_10qsb.htm Unassociated Document

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
 
FORM 10-QSB
(MARK ONE)

þ Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934
 
For the quarterly period ended September 30, 2006
 
o Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from _______ to _______.
 
Commission File No. 000-28321
 
UNITED COMPANIES CORPORATION
(Name of Small Business Issuer in Its Charter)
 

Nevada
  
88-0374969
(State or Other Jurisdiction of Incorporation or Organization)
  
(I.R.S. Employer Identification No.)
     
940 N.W. 1st Street, Fort Lauderdale, Florida
  
33311
(Address of Principal Executive Offices)
  
(Zip Code)
     
 
(954) 462-5570
(Issuer’s Telephone Number, Including Area Code)

AVID SPORTSWEAR& GOLF CORP.
(Former Name)
 
 
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Yes  x No o
 
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).
Yes  o  No x
 
There were 155,687,722 shares of common stock outstanding as of November 1, 2006.
 
 
1
 
PART I
 
ITEM 1. FINANCIAL STATEMENTS
 
Financial Information
 





2

UNITED COMPANIES CORPORATION
CONSOIDATED BALANCE SHEET
SEPTEMBER 30, 2006
(UNAUDITED)
 
 
 
       
Current assets
      
Cash
  
$
167,734
  
Accounts receivable, net of $21,000 allowance for doubtful accounts
    
63,321
 
Inventory
    
542,972
 
Prepaid expenses and other current assets
    
59,215
 
Total current assets
    
833,242
 
         
Fixed assets, net
    
30,645
 
         
Other assets
    
6,968
 
         
Total assets
  
$
870,855
  
         
LIABILITIES AND STOCKHOLDERS' DEFICIT
         
Current liabilities
        
Accounts payable and accrued liabilities
  
$
295,766
  
Customer deposits
    
73,531
 
Royalties payable - related party
    
9,039
 
Loan payable
    
266,000
 
Income taxes payable
    
93,129
 
Other liabilities
    
43,685
 
Billings in excess of costs and estimated earnings on uncompleted contract
    
38,371
 
Notes payable - current portion
    
10,422
 
Notes payable - related parties - current portion
    
15,668
 
Total current liabilities
    
845,611
 
         
Long-term liabilities
        
Notes payable - long-term portion
    
5,430
 
Notes payable - related parties - long-term portion
    
642,619
 
         
Total liabilities
    
1,493,660
 
         
Commitments and contingencies
        
         
Stockholders' deficit
        
Common stock; $0.001 par value; 250,000,000 shares authorized
        
155,687,722 shares issued and outstanding
    
155,688
 
Additional paid-in capital
    
568,390
 
Accumulated deficit
    
(1,346,883
)
Total stockholders' deficit
    
(622,805
)
       
Total liabilities and stockholders' deficit
  
$
870,855
  

See Accompanying Notes to Consolidated Financial Statements

3

UNITED COMPANIES CORPORATION
CONSOIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

   
Three Months Ended September 30,
  
Nine Months Ended September 30,
  
   
2006
  
2005
  
2006
  
2005
  
                   
Net revenues
  
$
1,098,692
  
$
810,824
  
$
3,175,702
  
$
2,357,887
  
                           
Cost of revenues
    
778,546
   
536,742
   
2,006,033
   
1,523,092
 
                           
Gross profit
    
320,146
   
274,082
   
1,169,669
   
834,795
 
                           
Operating expenses
                          
Research and development costs
    
463
   
2,934
   
3,493
   
7,447
 
Selling, general and administrative
    
245,819
   
271,613
   
763,403
   
766,357
 
 Total operating expenses
    
246,282
   
274,547
   
766,896
   
773,804
 
                           
Income (loss) from operations
    
73,864
   
(465
)
  
402,773
   
60,991
 
                           
Other (income) expenses
                          
Other (income) expense
    
(44,863
)
  
(247
)
  
(129,763
)
  
23,027
 
Interest expense
    
16,376
   
20,935
   
55,183
   
65,520
 
 Total other (income) expenses
    
(28,487
)
  
20,688
   
(74,580
)
  
88,547
 
     
 
   
 
   
 
   
 
 
Net income (loss) before provision for income tax
    
102,351
   
(21,153
)
  
477,353
   
(27,556
)
                           
Provision for income tax
   
(153,442
)
  
--
   
(117,335
)
  
--
 
                           
Net (loss) income
  
$
(51,091
)
$
(21,153
)
$
360,018
  
$
(27,556
)
                           
Basic (loss) income per common share
  
$
(0.00
)
$
(0.00
)
$
0.00
  
$
(0.00
)
Diluted (loss) income per common share
  
$
(0.00
)
$
(0.00
)
$
0.00
  
$
(0.00
)
                           
Basic weighted average common
                         
shares outstanding
    
155,687,722
   
119,703,593
   
149,948,574
   
116,402,013
 
Diluted weighted average common
                         
shares outstanding
    
173,544,865
   
119,703,593
   
162,817,982
   
116,402,013
 

See Accompanying Notes to Consolidated Financial Statements

4

UNITED COMPANIES CORPORATION
CONSOIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

               
Commitment Fees
         
               
Related to
         
       
 
  
Additional
 
Standby Equity
     
Total
 
   
Common Stock
 
Paid-in
 
Distribution
 
Accumulated
 
Stockholders'
 
   
Shares
 
Amount
 
Capital
 
Agreement
  
Deficit
  
Deficit
  
                           
Balance, December 31, 2005
   
136,470,677
 
$
136,471
  
$
616,489
  
$
(86,205
)
$
(1,706,901
)
$
(1,040,146
)
                                       
Conversion of Secured Convertible Debenture to common stock pursuant to the Securities Purchase Agreement dated April 4, 2004
   
12,500,000
   
12,500
   
17,500
   
--
   
--
   
30,000
 
                                       
Amortization of commitment fees related to Standby Equity Distribution Agreement
   
--
   
--
   
(35,753
)
  
35,753
   
--
   
--
 
                                       
Consulting expense recognized for stock warrants issued in conjunction with the consulting agreement effective January, 2005
   
--
   
--
   
25,910
   
--
   
--
   
25,910
 
                                       
Net loss
   
--
   
--
   
--
   
--
   
(9,527
)
  
(9,527
)
                                       
Balance, March 31, 2006 (Unaudited)
   
148,970,677
   
148,971
   
624,146
   
(50,452
)
  
(1,716,428
)
  
(993,763
)
                                       
Conversion of Secured Convertible Debenture to common stock pursuant to the Securities Purchase Agreement dated April 4, 2004
   
6,717,045
   
6,717
   
52,393
   
--
   
--
   
59,110
 
                                       
Amortization of commitment fees related to Standby Equity Distribution Agreement
   
--
   
--
   
(50,452
)
  
50,452
   
--
   
--
 
                                       
Consulting expense recognized for stock warrants issued in conjunction with the consulting agreement effective January, 2005
   
--
   
--
   
25,910
   
--
   
--
   
25,910
 
 
                                      
Extinguishment of Secured Convertible Debentures on June 2, 2006
   
--
   
--
   
(109,517
)
  
--
   
--
   
(109,517
)
                                       
Net income
   
--
   
--
   
--
   
--
   
420,636
   
420,636
 
                                       
Balance, June 30, 2006 (Unaudited)
   
155,687,722
   
155,688
   
542,480
   
--
   
(1,295,792
)
  
(597,624
)
                                       
Consulting expense recognized for stock warrants issued in conjunction with the consulting agreement effective January, 2005
   
--
   
--
   
25,910
   
--
   
--
   
25,910
 
                                       
Net loss
   
--
   
--
   
--
   
--
   
(51,091
)
  
(51,091
)
                                       
Balance, September 30, 2006 (Unaudited)
   
155,687,722
 
$
155,688
  
$
568,390
  
$
--
  
$
(1,346,883
)
$
(622,805
)
 
See Accompanying Notes to Consolidated Financial Statements

5

UNITED COMPANIES CORPORATION
CONSOIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
 
   
Nine Months Ended September 30,
 
   
2006
  
2005
  
           
Cash flows from operating activities:
          
Net income (loss)
  
$
360,019
  
$
(27,556
)
Adjustments to reconcile net income (loss) to net
              
cash provided by operating activities:
              
Depreciation and amortization
    
21,660
   
40,339
 
Stock based compensation
    
77,730
   
77,731
 
Change in deferred tax asset
    
24,206
   
--
 
Gain on extinguishment of secured convertible debentures
    
(109,517
)
  
--
 
Loss on disposal of fixed assets
    
--
   
2,941
 
Changes in operating assets and liabilities:
              
Change in accounts receivable, net
    
(10,703
)
  
(30,729
)
Change in inventory
    
(114,289
)
  
2,451
 
Change in prepaid expenses and other current assets
    
(40,045
)
  
(32,211
)
Change in other assets
    
--
   
8,199
 
Change in accounts payable and accrued liabilities
    
(151,092
)
  
(75,618
)
Changes in income taxes payable
    
93,129
   
--
 
Change in lease payable - related party
    
(18,950
)
  
--
 
Change in customer deposits
    
(55,600
)
  
82,261
 
Change in billings in excess of costs and estimated
             
 earnings on uncompleted contract
    
38,371
   
--
 
Change in other liabilities
    
11,025
   
31,297
 
Change in royalties payable - related parties
    
(8,526
)
  
--
 
 Net cash provided by operating activities
    
117,418
   
79,105
 
               
Cash flows from investing activities:
              
Proceeds from sale of fixed asset
    
--
   
17,434
 
Purchase of fixed assets
    
(4,587
)
  
(4,154
)
 Net cash provided (used) by investing activities
   
(4,587
)
  
13,280
 
               
Cash flows from financing activities:
              
Change in due to related parties
    
--
   
4,484
 
Proceeds from borrowings on notes payable - related parties
    
--
   
8,013
 
Proceeds from borrowings on loan payable
   
266,000
   
--
 
Principal payments on notes payable
    
(7,425
)
  
(28,240
)
Principal payments on notes payable - related parties
    
(23,517
)
  
(17,810
)
Principal payments on secured convertible debentures
    
(210,500
)
  
--
 
 Net cash provided (used) by financing activities
   
24,558
   
(33,553
)
               
Net change in cash
    
137,389
   
58,832
 
               
Cash, beginning of period
    
30,345
   
2,328
 
               
Cash, end of period
  
$
167,734
  
$
61,160
  
               
Supplemental disclosure of cash flow information:
              
Cash paid for interest
  
$
87,300
  
$
35,996
  
               
Cash paid for income taxes
  
$
--
  
$
--
  
               
Supplemental disclosure of non-cash financing activities
              
Conversion of Convertible Debenture into Stock as provided
              
in Stock Purchase Agreement
 
$
89,110
  
$
50,000
  
               
Amortization of loan fees related to Standby Equity
             
Distribution Agreement
  
$
86,205
  
$
108,452
  
               
Common stock issued/revalued/redeemed for other receivable
  
$
--
  
$
(207,143
)

See Accompanying Notes to Consolidated Financial Statements

6
UNITED COMPANIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business - United Companies Corporation (hereinafter referred to as the “Company”) designs, tests, manufactures and distributes recreational hookah diving, yacht based scuba air compressor and Nitrox Generation Systems, and scuba and water safety products through its wholly owned subsidiary Trebor Industries, Inc. The Company sells its products both on a wholesale and retail basis, and does so from its headquarters and manufacturing facility in Fort Lauderdale, Florida. The Company does business as (dba) Brownie’s Third Lung, the dba name of Trebor Industries, Inc.

The results of operations for the interim periods shown in this report are not necessarily indicative of the results to be expected for the full year. In the opinion of management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature.

History - United Companies Corporation (UCC) was incorporated under the laws of Nevada on November 26, 2001, with authorized common stock of 250,000,000 shares with a par value of $0.001.

On March 23, 2004, UCC consummated an agreement to acquire all of the outstanding capital stock of Trebor Industries, Inc., dba Brownies Third Lung, in exchange for 95,000,000 shares of the Company’s common stock. Prior to the UCC Transaction, UCC was a non-operating public shell company with no operations, nominal assets, accrued liabilities totaling $224,323 and 14,483,718 shares of common stock issued and outstanding; and Trebor Industries, Inc., dba Brownies Third Lung, was a manufacturer and distributor of hookah diving, and yacht based scuba air compressor and Nitrox Generation Systems from its factory in Ft. Lauderdale, Florida. The UCC Transaction is considered to be a capital transaction in substance, rather than a business combination. Inasmuch, the UCC Transaction is equivalent to the issuance of stock by Trebor Industries, Inc., dba Brownies Third Lung, for the net monetary assets of a non-operational public shell company (UCC), accompanied by a recapitalization. UCC issued 95,000,000 shares of its common stock for all of the issued and outstanding common stock of Trebor Industries, Inc., dba Brownies Third Lung. The accounting for the UCC Transaction is identical to that resulting from a reverse acquisition, except goodwill or other intangible assets will not be recorded. Accordingly, these financial statements are the historical financial statements of Trebor Industries, Inc., dba Brownies Third Lung. Trebor Industries, Inc., dba Brownies Third Lung, was incorporated in September 17, 1981. Therefore, these financial statements reflect activities from September 17, 1981 (Date of Inception for Trebor Industries, Inc., dba Brownies Third Lung) and forward.

Definition of fiscal year - The Company’s fiscal year end is December 31.

Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications - Certain reclassifications have been made to the 2005 financial statement amounts to conform to the 2006 financial statement presentation.

Inventory - Inventory is stated at the lower of cost or market. Cost is principally determined by using the average cost method that approximates the First-In, First-Out (FIFO) method of accounting for inventory. Inventory consists of raw materials as well as finished goods held for sale. The Company’s management monitors the inventory for excess and obsolete items and makes necessary valuation adjustments when required.

7
UNITED COMPANIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT POLICIES (continued)

Fixed assets - Fixed assets are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which is primarily 3 to 5 years. The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income (expense).

The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful lives of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.
 
Revenue recognition - Revenues from product sales are recognized when the Company’s products are shipped or when service is rendered. Revenues from fixed-price contracts are recognized on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost of each contract. This method is used because management considers the percentage of cost incurred to date to estimated total cost to be the best available measure of progress on the contracts.

Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation costs. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Change in job performance, job conditions, and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

Revenue and costs incurred for time and material projects are recognized currently as the work is performed.
 
Product development costs - Product development expenditures are charged to expenses as incurred.

Advertising and marketing costs - The Company recognizes advertising expenses in accordance with Statement of Position 93-7 “Reporting on Advertising Costs.” Accordingly, the Company expenses the costs of producing advertisements at the time production occurs, and expenses the costs of communicating advertisements in the period in which the advertising space or airtime is used. Advertising and trade show expense incurred for the three months ended September 30, 2006 and 2005 was $12,596, and $7,050, respectively. Advertising and trade show expense incurred for the nine months ended September 30, 2006 and 2005 was $33,414, and $31,838, respectively.


8
UNITED COMPANIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT POLICIES (continued)
 
Income taxes - The Company accounts for its income taxes in accordance with Statement of Financial Accounting Standards No. 109, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

As of September 30, 2006, the Company has available a net operating loss carryforward that will expire in 2024.

Comprehensive income (loss) - The Company has no components of other comprehensive income. Accordingly, net loss equals comprehensive loss for all periods.
 
Stock-based compensation - The Company accounts for stock based compensation in accordance with Statement of Financial Accounting Standards No. 123 revised that requires that the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period the employee is required to provide service in exchange for the award.
 
The Company did not issue any stock, warrants or options to employees for compensation for the three or nine months ended September 30, 2006.

Fair value of financial instruments - The carrying amounts and estimated fair values of the Company’s financial instruments approximate their fair value due to the short-term nature.

Earnings (loss) per common share - Basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Basic earnings per share is computed using the weighted-average number of outstanding common shares during the applicable period. Diluted earnings per share is computed using the weighted average number of common and common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. All common stock equivalent shares were included in the computation at September 30, 2006 since their effect was dilutive.
 
New accounting pronouncements - In September 2006, the Financial Accounting Standards Board ("FASB") issued Financial Accounting Statement (“FAS”) 157, Fair Value Measurements. The Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. The provisions of FAS 157 are effective for the Company on or before January 1, 2008. The provisions of this Statement shall be applied prospectively as of the date of adoption with a limited form of retrospective application to certain financial instruments that will result in cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of FAS 157 on its financial statements.
 
In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109, (“FIN 48”) which clarifies the accounting for uncertainty in tax positions. This interpretation requires the recognition of a tax position when it is more likely than not that the tax position will be sustained upon examination by relevant taxing authorities, based on the technical merits of the position. The provisions of FIN 48 are effective for the Company on January 1, 2007, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on its financial statements.

9
UNITED COMPANIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT POLICIES (continued)

In May 2005, the FASB issued FAS No. 154, Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3. The statement changes the requirements for the accounting for and reporting of a voluntary change in accounting principle. The Statement requires retrospective application of prior periods’ financial statement of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one of more individual periods presented, this Statement requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, this Statement requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. The Statement carries forward the without change the guidance contained in APB opinion No. 20 for reporting the correction of an error in previously issued financial statements, a change in accounting estimate, and guidance regarding justification of a change in accounting principle on the basis of preferability. The Statement is effective for all fiscal years beginning after December 31, 2005. As allowed by the Statement, the Company adopted early application in June 2005 with no significant financial impact.

In March, 2005, the FASB issued Summary of Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143. The Interpretation clarifies that the term “conditional asset retirement obligation” as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations, refers to legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within control of the entity. The Interpretation directs that the entity is required to recognize a liability for the fair value of the conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. The fair value of a liability for the conditional asset retirement obligation should be recognized when incurred - generally upon acquisition, construction, or development and (or) through the normal operation of the asset. The Interpretation further clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation acknowledging that in some cases this information may not be available. The Interpretation is effective no later than the end of the fiscal years ending after December 15, 2005 (December 31, 2005 for calendar year enterprises). As encouraged by the FASB, the Company elected early application of this Interpretation in the year ended December 31, 2005 without significant financial impact.

10
UNITED COMPANIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
2.
INVENTORY

Inventory consists of the following as of September 30, 2006:

Raw materials
 
$
239,785
  
Work in process
    
--
  
Finished goods
    
303,187
  
         
   
$
542,972
  
 
3.
PREPAID EXPENSE AND OTHER CURRENT ASSETS

Prepaid expense and other current assets totaling $59,215 at September 30, 2006, consists of $24,357 of prepaid insurance, tradeshow, advertising and software maintenance expenses, and $34,858 of prepaid deposits on inventory.
 
4.
FIXED ASSETS
 
Fixed assets consists of the following as of September 30, 2006:
 
Furniture, vehicles, and equipment
  
$
216,911
  
Leasehold improvements
    
7,000
  
     
223,911
  
Less: accumulated depreciation and amortization
    
(193,266
)
         
   
$
30,645
  
 
5.
CUSTOMER CREDIT CONCENTRATIONS

Sales to Brownie’s Southport Diver’s, Inc. for the three months ended September 30, 2006 and 2005 represented 11.46% and 9.92%, respectively, of total Company net revenues. Sales to Holiday Diver Inc. for the three months ended September 30, 2006 and 2005 represented 13.53% and 10.06%, respectively, of total Company net revenues. Sales to Marlena Shadow for the three months and nine months ended September 30, 2006 represented 19.57% and 20.31%, respectively, of total Company net revenues. Sales to Brownie’s Southport Diver’s, Inc. for the nine months ended September 30, 2006 and 2005 represented 14.87% and 18.82%, respectively, of total Company net revenues. Sales to no other customer represented greater than 10% of net revenues for the three and nine months ended September 30, 2006 and 2005. Brownie’s Southport Diver’s Inc. is owned by the brother of Robert Carmichael, the Company’s Chief Executive Officer, as further discussed in Note 6 - RELATED PARTY TRANSACTIONS.


11
UNITED COMPANIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
6.
RELATED PARTY TRANSACTIONS

Notes payable - related parties - Notes payable - related parties consist of the following as of September 30, 2006:

Promissory note payable to the Chief Executive Officer of the Company,
      
unsecured, bearing interest at 10% per annum, due in monthly principal
     
and interest payments of $3,924, maturing on March 1, 2010, with a
     
balloon payment of $431,795 due. The note will be discounted 15% of
      
the outstanding principal balance if it is paid in full by April, 1 2007.
  
$
443,288
  
         
Promissory note payable to an entity owned by the Company’s Chief
       
Executive Officer, unsecured, bearing interest at 10% per annum, due
       
in monthly principal and interest payments of $1,802, maturing on
       
March 1, 2010, with a balloon payment of $198,264 due. The note
        
will be discounted 15% of the outstanding principal balance if it
      
is paid in full by April 1, 2007.
    
203,541
  
         
Promissory note payable due an entity owned by the Company’s Chief
       
Executive Officer, unsecured, bearing 0% interest per annum, due in
       
monthly principal only payments of $2,292, maturing on February 15,
        
2007.
   
11,458
  
         
     
658,287
  
         
Less amounts due within one year
    
15,688
  
         
Long-term portion of notes payable - related parties
  
$
642,619
  

As of September 30, 2006, principal payments on the notes payable - related parties are as follows:

2006
  
$
12,471
  
2007
    
4,317
  
2008
    
4,769
  
2009
   
5,268
  
2010
    
631,462
  
         
   
$
658,287
  
 

12
UNITED COMPANIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
6.
RELATED PARTY TRANSACTIONS (continued)

Revenues - The Company sells products to two entities owned by the brother of the Company’s Chief Executive Officer, Brownie’s Southport Divers, Inc. and Brownie’s Palm Beach Divers. Terms of sale are no more favorable than those extended to any of the Company’s other customers. Combined revenue from these entities for the three months ended September 30, 2006 and 2005, was $169,438 and $113,326, respectively. Combined revenue from these entities for the nine months ended September 30, 2006 and 2005, was $569,212 and $543,010, respectively. Accounts receivable from Brownie’s SouthPort Diver’s, Inc. and Brownie’s Palm Beach Divers at September 30, 2006 was $519 and $364, respectively.

Royalties - The Company has Non-Exclusive License Agreements with an entity that the Company’s Chief Executive Officer has an ownership interest to license product patents it owns. Based on the agreements with the entity, the Company pays royalties ranging from $1.00 to $50.00 per licensed products sold, with rates increasing 5% annually. With the same entity, the Company has a Non-Exclusive License Agreement to license a trademark of products owned by the entity. Based on the agreement, the Company will pay the entity $0.25 per licensed product sold, with rates increasing $0.05 annually.

The Company has Non-Exclusive License Agreements with an entity owned by the Company’s Chief Executive Officer to license product patents it owns. Previous agreements in effect with this entity were renegotiated and new agreements were entered into effective January 1, 2006. Under the terms of the agreements, the Company pays the other related entity $2.00 per licensed product sold, with rates increasing 5% annually. With the same entity, the Company has an Exclusive License Agreement to license the trademark “Brownies Third Lung”, “Tankfill”, “Brownies Public Safety” and various other related trademarks as listed in the agreement. Based on the agreement, the Company pays the entity 2.5% of gross revenues per quarter, with a 66% royalty fee discount period through December 31, 2006, after which time the royalty rate will return to 100%. In addition, the agreement provides for a $600 advertising credit per month against the royalties due quarterly. At December 31, 2006, whatever cumulative portion of the advertising credit the Company has not used for advertising, if any, will become due and payable to the related party entity as a royalty.

Total royalty expense for the above agreements for the three months ended September 30, 2006 and 2005, was $11,926 and $7,334, respectively. Total royalty expense for the above agreements for the nine months ended September 30, 2006 and 2005, was $30,078 and $16,444, respectively.

Lease Expense - The Company leases its facility from an entity in which the Chief Executive Officer has an ownership interest. For the three months ended September 30, 2006 and 2005, lease expense was $30,475, and $30,475, respectively. For the nine months ended September 30, 2006 and 2005, lease expense was $60,950, and $60,950, respectively.
 
7.
BILLINGS IN EXCESS OF COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACT

Billings in excess of costs and estimated earnings on uncompleted contract consists of the following as of September 30, 2006:

Costs incurred on uncompleted contract
  
$
342,469
  
Estimated earnings
    
264,280
  
     
606,749
  
Less: billings to date
    
645,120
  
         
Billings in excess of costs and estimated earnings on uncompleted contract
  
$
(38,371
)

13
UNITED COMPANIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
8.
CUSTOMER DEPOSITS AND RETURN POLICY

The Company takes a minimum 50% deposit against custom and large tankfill systems prior to ordering and/or building the systems. The remaining balance due is payable upon delivery, shipment, or installation of the system. There is no provision for cancellation of custom orders once the deposit has been accepted, nor return of the custom ordered product. Additionally, returns of all other merchandise are subject to a 20% restocking fee as stated on each sales invoice.
 
9.
LOAN PAYABLE

On June 2, 2006 the Company borrowed $266,000 from a customer. The proceeds of the loan were used to satisfy the outstanding balance due under the secured convertible debentures. The terms of the loan are pending negotiation and formalization. No payments have been made toward the outstanding balance on the loan.
 
10.
OTHER LIABILITIES

On line training liability as of September 30, 2006 was $43,685.

Effective July 1, 2005, the Company began including on-line training certificates with all hookah units sold. The training certificates entitle the holder to an on-line interactive course at no additional charge to the holder. The number of on-line training certificates issued per unit is the same as the number of divers the unit as sold is designed to accommodate (i.e., a three diver unit configuration comes with three on-line training certificates). The certificates have an eighteen-month redemption life after which time they expire. The eighteen-month life of the certificates begins at the time the customer purchases the unit. The Company owes the on-line training vendor the agreed upon negotiated rate for all on-line certificates redeemed payable at the time of redemption. For certificates that expire without redemption, no amount is due the on-line training vendor. The Company has no historical data with regard to the percentage of certificates that will be redeemed versus those that will expire. Therefore, until the Company accumulates historical data related to the certificate redemption ratio, it will assume that 100% of certificates issued with unit sales will be redeemed. Accordingly, at the time a unit is sold, the related on-line training liability is recorded. The same liability is reduced as certificates are redeemed and the related payments are made to the on-line training vendor.
 
11.
NOTES PAYABLE

Notes payable consist of the following as of September 30, 2006:

Promissory note payable secured by a vehicle of the Company having a
     
carrying value of $5,188 at September 30, 2006, bearing interest at
     
10.16% per annum, due in monthly principal and interest payments of
     
$553, maturing on October 28, 2007.
  
$
6,781
  
         
Promissory note payable secured by a vehicle of the Company having a
        
Carrying value of $8,899 at September 30, 2006, bearing no interest,
        
due in monthly principal and interest payments of $349, maturing
        
on November 14, 2008.
    
9,071
  
         
     
15,852
  
         
Less amounts due within one year:
    
10,422
  
         
Long-term portion of Notes payable
  
$
5,430
  


14
UNITED COMPANIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
11.
NOTES PAYABLE (continued)

As of September 30, 2006, principal payments on the notes payable are as follows:

2006
  
$
2,547
  
2007
    
9,471
  
2008
    
3,834
  
         
   
$
15,852
  
 
12.
SECURED CONVERTIBLE DEBENTURES
 
On April 2, 2004, the Company issued a Secured Convertible Debenture to Cornell Capital Partners, LP in the principal amount of $250,000. The Secured Convertible Debenture was convertible into shares of the Company’s common stock at a price per share that was equal to the lesser of: (i) an amount equal to 120% of the closing bid price of our common stock as of the date of the convertible debenture or (ii) an amount equal to 80% of the average of the lowest daily volume weighted average price of our common stock for the five trading days immediately preceding the conversion date. The Secured Convertible Debenture accrued interest at a rate of 5% per year and was convertible at the holder’s option. The Secured Convertible Debenture had a term of two (2) years. At the Company’s option, the Secured Convertible Debenture was payable in cash or convertible into shares of common stock unless converted earlier by the holder.

On July 23, 2004, the Company issued a second Secured Convertible Debenture to Cornell Capital Partners, L.P. in the principal amount of $125,000. The Secured Convertible Debenture had a term of 2 years with all the same terms and conditions of the first secured convertible debenture issued on April 2, 2004.

On June 2, 2006, the Company fully satisfied the outstanding balance of the Secured Convertible Debentures. As part of the redemption, Cornell Capital Partners, L.P. waived its right to issuance of warrants and reduced the redemption fee from 20% to 10.21%. In addition, the Redemption Agreement retired the Standby Equity Distribution Agreement. The total amount paid Cornell Capital Partners, L.P. under the Redemption Agreement was $266,777 that included $210,500 redemption amount (principal amount), $34,777 accrued interest, and $21,500 redemption fee (10.21%) of principal amount. The Company recorded a $109,517 gain on extinguishment of the Secured Convertible Debentures attributable to the intrinsic value of the embedded conversion feature.


15
UNITED COMPANIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
12.
SECURED CONVERTIBLE DEBENTURES

The following table represents conversions by Cornell Capital Partners, L.P. under the terms of the Secured Convertible Debentures from inception through September 30, 2006 for free-trading common stock, which shares were registered with the Securities and Exchange Commission in a registration statement on Form SB-2:

Conversion Notice Date
Date of Conversion
Conversion $ Amount
Conversion $ Per Share Price
Number of Shares
February 15, 2005
March 3, 2005
$10,000
0.0128
781,250
March 8, 2005
March 24, 2005
10,000
0.0082
1,219,512
June 21, 2005
July 15, 2005
10,000
0.0028
3,571,429
August 3, 2005
September 13, 2005
10,000
0.0025
4,000,000
September 19, 2005
September 19, 2005
10,000
0.0046
2,173,913
October 19,2005
October 19, 2005
10,000
0.0026
3,773,585
November 14, 2005
November 14, 2005
10,000
0.0023
4,347,826
December 7, 2005
December 7, 2005
5,390
0.0018
2,994,444
         
   
$75,390
  
22,861,959

The following table represents conversions by Cornell Capital Partners, L.P. under the terms of the Secured Convertible Debentures from inception through September 30, 2006 for restricted common stock:

Conversion Notice Date
Date of Conversion
Conversion $ Amount
Conversion $ Per Share Price
Number of Shares
January 6, 2006
February 2, 2006
$10,000
0.0016
6,250,000
February 10, 2006
March 7, 2006
10,000
0.0032
3,125,000
March 1, 2006
March 7,2006
10,000
0.0032
3,125,000
May 3, 2006
May 24,2006
59,110
0.0088
6,717,045
         
   
$89,110
  
19,217,045
 
13.
STANDBY EQUITY DISTRIBUTION AGREEMENT
 
On April 2, 2004, the Company entered into a Standby Equity Distribution Agreement with Cornell Capital Partners, L.P. In addition, the Company issued 3,625,000 shares of the Company’s common stock in April 2004 for commitment fees totaling $290,000 related to the Standby Equity Distribution Agreement. The commitment fees were amortized to additional paid in-capital over the term of the Standby Equity Distribution Agreement. As part of the redemption of the Secured Convertible Debentures, the Company terminated on June 2, 2006 the Standby Equity Distribution Agreement that was not due to retire until August 6, 2005.
 

16
UNITED COMPANIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 
14.
COMMITMENTS AND CONTINGENCIES

Consulting Agreement - The Company entered into a two-year consulting agreement effective January 1, 2005, for management and strategic services. The consulting agreement calls for payments of $6,000 per month and provides for warrants to purchase 28,571,428 shares of the Company’s common stock. The exercise price of the warrants is $.007 per share, which equaled the bid/ask price of the Company’s common stock on January 1, 2005, the effective date of the agreement. The right to exercise the warrants shall vest in four equal tranches of 7,142,857 common shares at six months, twelve months, eighteen months, and twenty-four months. The warrants expiration date is twenty-four months after the vest date. Further, the warrants have “piggy-back” registration rights and provide for either a cash or cashless exercise. The cashless exercise provision provides for a discount in the amount of shares provided at exercise based on a formula that takes into account as one of its factors the average of the closing sale price on the common stock for five trading days immediately prior to but not including the date of exercise. The Company can terminate the consulting agreement at any time for “Cause” as defined in the consulting agreement. The consultant may terminate the consulting agreement at any time for non-payment of monies due, and such condition remains uncured for a period of sixty days. If the Company terminates the consultant during the term of the agreement without “Cause”, the right to exercise all warrants will vest immediately. The Company calculated the total fair value of the stock options as $198,643 using the Black-Scholes model. For the three and nine months ended September 30, 2006, the Company recognized $25,910 and $77,730, respectively, as compensation expense related to the stock options. As of September 30, 2006, the rights to exercise 21,428,571 warrants had vested under the consulting agreement and none of the warrants had been exercised.

Property Lease Agreement - The Company operates from a leased facility in which the Company’s Chief Executive Officer has an ownership interest. The lease is non-cancelable and calls for an annual base rent of approximately $115,000 plus sales tax with a 10% base rent increase every 5 years. The lease expires in April 2013, and has three 5-year renewal options. In addition, up to $15,000 in real estate taxes is provided for in the base rental payment. Any real estate taxes over and above $15,000 are billed as additional rent to the Company and included in rent expense. For the three months ended September 30, 2006, and 2005, total rent expense for the leased facility was $30,475 and $30,475, respectively. For the nine months ended September 30, 2006, and 2005, total rent expense for the leased facility was $91,425 and $91,425, respectively. Additionally, the Company is responsible for all other operating expenses on the property such as insurance, repairs and maintenance, etc. as the lease is termed a triple net lease. The triple net expenses are recorded to the applicable expense accounts on the Company’s statement of operations.

Equipment Lease Agreement - The Company leases various office equipment under either a month-to-month basis or under an operating lease. Currently there is one non-cancelable operating lease for an office copier at a rate of $313 per month plus sales tax. The lease expires in August 2009.

Future minimum lease payments required under the property lease and the equipment lease as of September 30, 2006, are as follows:
 
2006
  
$
31,423
  
2007
    
125,690
  
2008
    
125,690
  
2009
    
124,427
  
2010
   
121,900
  
Thereafter
    
406,333
  
         
   
$
935,463
  
 
15. INCOME TAXES

Income tax expense of $117, 335 for the nine months September 30, 2006 consists of $93,129 of federal income taxes and $24,206 related to full utilization of the deffered tax asset related to federal net operating loss carryforward during the period. At June 30, 2006, the Company had a federal net operating loss carryforward of $315,057. This operating loss carryforward was available to offset future taxable income over the next nineteen years. The Company anticipates utilization of approximately $42,000 of the net operating loss carryforward for the year ended 2005 and $273,057 for the year ended 2006. Based on higher than anticipated results, Management accelerated its estimate of the utilization of the net operating loss carryforward. Accordingly, the 50% or $24,206 valuation reserve against the net deferred tax asset was adjusted from $24,206 or 25%, to $20,104 or 25%, to $0 or 100%, at December 31, 2005, June 30, 2006, and September 30, 2006, respectively. The change of the net deferred tax asset from June 30, 2006 to September 30, 2006 was a decrease of $60,313.


17
 
ITEM 2. MANAGEMENT’S PLAN OF  OPERATION AND DISCUSSION AND ANALYSIS
 
Introductory Statements
 
Information included or incorporated by reference in this filing may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology.
 
This filing contains forward-looking statements, including statements regarding, among other things, (a) our projected sales and profitability, (b) our Company’s growth strategies, (c) our Company’s future financing plans and (d) our Company’s anticipated needs for working capital. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this prospectus generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this filing generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur.
 
Overview
 
United Companies Corporation, (referred to herein as “United” or “the Company”), a Nevada corporation, entered into a Share Exchange Agreement, dated March 23, 2004, by and among United, Trebor Industries, Inc., d/b/a Brownie’s Third Lung, a Florida corporation (referred to herein as “Trebor”), and Robert Carmichael. Pursuant to the Share Exchange Agreement, Mr. Carmichael exchanged 377 shares of common stock, par value $1.00 per share, of Trebor, which constituted all of the issued and outstanding shares of capital stock of Trebor, for 95,000,000 shares of common stock, par value $0.001 per share, of United. Pursuant to the Share Exchange Agreement, Trebor became a wholly owned subsidiary of United.
 
Through Trebor, the Company designs, tests, manufactures and distributes recreational hookah diving, yacht based scuba air compressor and Nitrox Generation Systems, and scuba and water safety products through its wholly owned subsidiary Trebor Industries, Inc. United sells its products both on a wholesale and retail basis, and does so from its headquarters and manufacturing facility in Fort Lauderdale, Florida. The Company does business as (dba) Brownie’s Third Lung, the dba name of Trebor.
 
Since April 16, 2004, Mr. Carmichael has served as President, Acting Principal Accounting Officer and Acting Chief Financial Officer of the Company. From March 23, 2004 to April 26, 2004, Mr. Carmichael served as United’s Executive Vice-President and Chief Operating Officer. Mr. Carmichael has operated Trebor as its President since 1986. He is the holder or co-holder of numerous patents that are used by Trebor and several other major players in the diving industry. Prior to the share exchange transaction with Trebor, United had no on-going operations. United had been seeking potential operating businesses and business opportunities, with the intent to acquire or merge with such businesses.
 
On February 12, 2002, United filed with the Securities and Exchange Commission a Form S-4 Proxy Statement and Registration Statement in conjunction with Avid Sportswear & Golf Corp., a Nevada corporation (“Avid”), describing a proposed merger of Avid with and into Merger Co., a wholly-owned subsidiary of United (“Merger Co.”). On January 28, 2003, the Commission declared the Form S-4 Proxy Statement and Registration Statement effective. At a special meeting of Avid shareholders held on February 20, 2003, the shareholders approved (i) the Merger Agreement, dated June 18, 2002, by and among Avid, United and Merger Co. and (ii) the related Articles of Merger. Merger Co. became the surviving entity and assumed all of Avid’s assets and liabilities. At the time of the merger, outstanding shares of Avid common stock were converted automatically into shares of United common stock on a one (1) for fifty (50) basis. In the opinion of Avid’s management, the excess of Avid’s liabilities over its assets and the lack of available funding made any other acquisition or merger, other than the merger with Merger Co., unlikely.
 
Effective March 23, 2004, United sold all of its ownership interest in its wholly-owned subsidiary, Merger Co., to Gateway Connections Limited, an international business company formed under the laws of Belize.
 

18

On April 2, 2004, we issued a Secured Convertible Debenture to Cornell Capital Partners, LP in the principal amount of $250,000. On April 2, 2004, we also entered into a Standby Equity Distribution Agreement with Cornell Capital Partners, LP. On July 23, 2004, we issued a second Secured Convertible Debenture to Cornell Capital Partners, LP. in the principal amount of $125,000. On April 2, 2006, the first Secured Convertible Debenture having an outstanding principal balance of $144,610 matured.

On June 2, 2006, the Company entered into a Redemption Agreement with Cornell Capital Partners, LP. whereby the Company fully satisfied the outstanding balance of the Secured Convertible Debentures and terminated the Standby Equity Distribution Agreement. The total amount paid Cornell Capital Partners, LP. under the Redemption Agreement was $266,777 that included $210,500 redemption amount (principal amount), $34,777 accrued interest, and $21,500 redemption fee (10.21% of principal amount). The Company recorded a $109,517 gain on extinguishments of the Secured Convertible Debentures attributable to the intrinsic value of the embedded conversion feature.
 
Financial Performance
 
United has a history of losses. Trebor acquired by share exchange on March 23, 2004, has historically had both profitable and unprofitable years. For the years ended December 31, 2005 and 2004, United sustained losses of $96,310 and $510,922, respectively, which includes United’s wholly-owned subsidiary Trebor. For the three and nine months ended September 30, 2006, United had a net loss of $51,091 and net income of $360,019, respectively.
 
Results Of Operations For The Three Months Ended September 30, 2006, As Compared To The Three Months Ended September 30, 2005
 
Net revenues. For the three months ended September 30, 2006, we had net revenues of $1,098,692 as compared to net revenues of $810,824 for the three months ended September 30, 2005, an increase of $287,868 or 35.50%. This increase is primarily attributable to several factors occurring in the third quarter of 2006: we recognized approximately $215,000 of a contract sale for a dive system with hyperbaric support, there was an overall increase in both tankfill system and hookah system sales, and price increases and material cost savings instituted in the fourth quarter of 2005 carried over into the third quarter of 2006. The Company attributes its hookah system sales increases to expanding its market beyond the scuba dive retailer and into sporting goods and boating retailers, its web-based training program that was rolled out in July 2005, and to concerted marketing and sales efforts, including a release in July 2005 of a brand new catalog featuring all our products. Non-custom tankfill system increases are mainly attributed to our standalone presence at several boat shows toward the end of 2005 where many new and old contacts were made and renewed (in earlier years shared booth space with a Brownie dealer resulted in shared tankfill revenues), three new OEM relationships with yacht-builders, and the release of the new catalog in July 2005 featuring all our products. In addition, we believe that the Brownie’s Third Lung name continues to grow in brand recognition, and in addition to gaining new customers each year, we see repeat business through brand loyal customers.
 
Cost of net revenues. For the three months ended September 30, 2006, we had cost of net revenues of $778,546 as compared with cost of net revenues of $536,742 for the three months ended September 30, 2005, an increase of $241,804 or 45.05%. This increase during the three months ended September 30, 2006 over the same period in 2005 is consistent with the increase in sales volume that included the custom tankfill project in progress, and the increase in hookah and other tankfill system sales. The increase is comprised of an increase in contract and material costs of $183,758, an increase in subcontract expenses of $19,325, an increase in factory payroll of $13,782, an increase in freight in expense of $9,177, and a net increase in other cost of revenues of $15,762.
 
Gross profit. For the three months ended September 30, 2006, we had a gross profit of $320,146 as compared to gross profit of $274,082 for the three months ended September 30, 2005, an increase of $46,064 or 16.81%. This increase is primarily attributable to an increase in net revenues for the three months ended September 30, 2006.
 
Operating expenses. For the three months ended September 30, 2006, we had total operating expenses of $246,282, as compared to total operating expenses of $274,547 for the three months ended September 30, 2005, a decrease of $28,265 or 10.30%.
 
Other (income) expenses. For the three months ended September 30, 2006, we had other income of $28,487 as compared to other expenses of $20,688 for the three months ended September 30, 2005, an increase in other income of $49,175 or 237.70%. This increase is primarily attributable to the approximate $35,000 gain on the extinguishments of two payables that were no longer deemed due and payable at September 30, 2006.
 

19
 
Provision for income tax. For the three months ended September 30, 2006, we had provision for income tax of $153,442, as compared to $0 for the three months ended September 30, 2005, an increase of $153,442. The increase is primarily attributable to federal income tax expense for the period of $95,072 and $53,370 related to full utilization of the existing deferred tax asset in the third quarter of 2006 that related to a net operating loss carryforward. The period expense provides for the cumulative effect of change in accounting estimate for income tax expense. Since the Company had been experiencing net losses, there was no provision for income tax expense. Instead, the company had a provision for tax benefit for the net operating loss carryforward. As of second quarter the loss trend reversed, and the income trend is carrying forward. Accordingly, Management revised its estimate in the third quarter of 2006 to provide for a reserve for income tax expense.
 
Net income (loss) before provision for income tax. For the three months ended September 30, 2005, we had net income before provision for income taxes of $102,351 as compared to a $21,153 net loss before provision for income taxes for the three months ended September 30, 2005. This represents an increase in net income before provision for income taxes of $123,504 or 583.86%. The net increase is primarily attributable to an increase in net revenues, a decrease in operating expenses, and an increase in other income for the three months ended September 30, 2006.
 
Net (loss) income. For the three months ended September 30, 2006, we had a net loss of $51,091, as compared to a net loss of $21,153 for the three months ended September 30, 2005, an increase in loss of $29,938 or 141.53%. The increase is primarily attributable to the cumulative effect of the change in accounting estimate for income tax expense. Without the effect of this change in estimate, the Company would have shown net income for the period.
 
Results Of Operations For The Nine Months Ended September 30, 2006, As Compared To The Nine Months Ended September 30, 2005.
 
Net revenues. For the nine months ended September 30, 2006, we had net revenues of $3,175,702 as compared to net revenues of $2,357,887 for the nine months ended September 30, 2005, an increase of $817,815 or 34.68%. This increase is primarily attributable to several factors occurring during the nine months ended September 30, 2006: we recognized approximately $615,000 of a contract sale for a dive system with hyperbaric support, there was an overall increase in both tankfill system and hookah system sales, and price increases and cost reductions instituted in the third and fourth quarter of 2005 carried over into the nine months ended September 30, 2006. The Company attributes its hookah system sales increases to expanding its market beyond the scuba dive retailer and into sporting goods and boating retailers, its web-based training program that was rolled out in July 2005, and to concerted marketing and sales efforts, including a release in July 2005 of a brand new catalog featuring all our products. Non-custom tankfill system increases are mainly attributed to our standalone presence at several boat shows in late 2005 where many new and old contacts were made and renewed (in earlier years shared booth space with a Brownie dealer resulted in shared tankfill revenues), three new OEM relationships with yacht-builders, and the release of the new catalog in July 2005 featuring all our products. In addition, we believe that the Brownie’s Third Lung name continues to grow in brand recognition, and in addition to gaining new customers each year, we see repeat business through brand loyal customers.
 
Cost of net revenues. For the nine months ended September 30, 2006, we had cost of revenues of $2,006,033 as compared with cost of revenues of $1,523,092 for the nine months ended September 30, 2005, an increase of $482,941 or 31.71%. This increase during the nine months ended September 30, 2006 over the same period in 2005 is consistent with the increase in net revenues. The increase is comprised of an increase in contract and material costs of $381,064, an increase in subcontract expenses of $29,696, an increase in shop supplies of $12,752, an increase in factory payroll of $26,596, an increase in freight in expense of $17,370, and an increase in other cost of revenues of $15,463.
 
Gross profit. For the nine months September ended 30, 2006, we had a gross profit of $1,169,669, as compared to gross profit of $834,795 for the comparable period in 2005, an increase of $334,874 or 40.11%. This increase is primarily attributable to an increase in net revenues and a modest decrease in cost of revenues as a percentage of sales for the nine months ended September 30, 2006.
 
Operating expenses. For the nine months ended September 30, 2006, we had total operating expenses of $766,896, as compared to total operating expenses of $773,804 for the nine months ended June 30, 2005, a decrease of $6,908 or 0.89%.
 
Other (income) expenses. For the nine months ended September 30, 2006, we had other income of $74,580, as compared to other expenses of $88,547 for the nine months ended September 30, 2005, an increase in other income of $163,127 or 184.23%. This increase is primarily attributable to the $109,517 gain on the extinguishments of the secured convertible debentures, and an approximate $35,000 gain on the extinguishments of two payables that are no longer deemed due and payable as of the third quarter of 2006.
 

20
 
Provision for income tax. For the nine months ended September 30, 2006, we had provision for income tax of $117,335, as compared to $0 for the nine months ended 30, 2005, an increase of $117,335. The increase is primarily attributable to federal income tax expense for the period of $95,072 and $22,263 related to full utilization of the existing deferred tax asset in the third quarter of 2006 that related to a net operating loss carryforward. The period expense provides for the cumulative effect of change in accounting estimate for income tax expense. Since the Company had been experiencing operating losses there was no provision for income tax expense. In the contrary, there was a provision for tax benefit for the net operating loss carryforward. As of second quarter the loss trend reversed, and the income trend is carrying forward. Accordingly, Management revised its estimate to provide for a reserve for income tax expense.
 
Net income (loss) before provision for income tax. For the nine months ended September 30, 2006, we had net income before provision for income taxes of $477,353 as compared to a $27,556 net loss before provision for income taxes for the nine months ended September 30, 2005. This represents an increase in net income before provision for income taxes of $504,909 or 1,832.30%. The increase is primarily attributable to the increase in net revenues for the nine months ended September 30, 2006.
 
Net (loss) income. For the nine months ended September 30, 2006, we had net income of $360,018, as compared to a $27,556 net loss for the nine months ended September 30, 2005, an increase of $387,574 or 1,406.50%. The increase is primarily attributable to the increase in net revenues and the modest decrease in cost of revenues as a percentage of sales for the nine months ended September 30, 2006. In addition, the increase in net income includes gain on the extinguishments of the secured convertible debentures of $109,517 during the nine months ended September 30, 2006.
 
Liquidity And Capital Resources
 
As of September 30, 2006, we had cash and other current assets of $833,242. As of September 30, 2006, we had current liabilities of $845,611, consisting of accounts payable and accrued liabilities of $295,766, loan payable of $266,000, customer deposits of $73,531, other liabilities of $43,685, royalties payable - related party of $9,039, billings in excess of costs and estimated earnings on uncompleted contracts of $38,371, notes payable - current portion of $10,422, notes payable - current portion - related parties of $15,668, and income taxes payable of $93,129. As of September 30, 2006, we had a working capital deficit of $12,369.
 
On April 2, 2004, we entered into a Standby Equity Distribution Agreement with Cornell Capital Partners, LP. As of June 30, 2006, we had not taken any advances under the Standby Equity Distribution Agreement. As part of the redemption of the Secured Convertible Debentures as discussed below, the Company terminated on June 2, 2006 the Standby Equity Distribution Agreement.
 
On April 2, 2004, we issued a Secured Convertible Debenture to Cornell Capital Partners, LP in the principal amount of $250,000. The Secured Convertible Debenture was convertible into shares of our common stock as a price per share that was equal to the lesser of: (i) an amount equal to 120% of the closing bid price of our common stock as of the date of the convertible debenture or (ii) an amount equal to 80% of the average of the lowest daily volume weighted average price of our common stock for the five trading days immediately preceding the conversion date. The Secured Convertible Debenture accrued interest at a rate of 5% per year and was convertible at the holder’s option. The Secured Convertible Debenture had a term of two (2) years. At United’s option, the Secured Convertible Debenture was payable in cash or convertible into shares of our common stock unless converted earlier by the holder.
 
On July 23, 2004, we issued a second Secured Convertible Debenture in the principal amount of $125,000, with the same terms and conditions as the Secured Convertible Debenture issued on April 2, 2004, as described above. On April 2, 2006, the first Secured Convertible Debenture having an outstanding principal balance of $144,610 matured and was neither redeemed in shares, nor paid off.

On June 2, 2006, the Company fully satisfied the outstanding balance of the Secured Convertible Debentures. The Redemption Agreement terminated the Standby Equity Distribution Agreement as discussed above. The total amount paid Cornell Capital Partners, LP under the Redemption Agreement was $266,777 that included $210,500 redemption amount (principal amount), $34,777 accrued interest, and $21,500 redemption fee (10.21% of principal amount). The Company recorded a $109,517 gain on extinguishments of the Secured Convertible Debentures attributable to the intrinsic value of the embedded conversion feature.


21

On June 2, 2006 the Company borrowed $266,000 from a customer. The proceeds of the loan were used to satisfy the outstanding balance due under the Secured Convertible Debentures. The terms of the loan are pending formalization.
 
Certain Business Risks
 
The Company is subject to various risks, which may materially harm its business, financial condition and results of operations. You should carefully consider the risks and uncertainties described below and the other information in this filing before deciding to purchase the Company’s common stock. These are not the only risks and uncertainties that the Company faces. If any of these risks or uncertainties actually occur, the Company’s business, financial condition or operating results could be materially harmed. In that case, the trading price of the Company’s common stock could decline and you could lose all or part of your investment.
 
We Have Historically Lost Money And Losses May Continue In The Future
 
On March 23, 2004, United entered into a share exchange transaction with Trebor Industries, Inc., d/b/a Brownie’s Third Lung and Robert Carmichael. Pursuant to this share exchange transaction, United acquired all of the issued and outstanding capital stock of Trebor and Trebor became a wholly owned subsidiary of United. Trebor Industries designs, manufactures and sells surface-supplied air units for the recreational diving industry. United has a history of losses. Historically, Trebor has had both profitable and unprofitable years. As of September 30, 2006, we had an accumulated deficit of $1,346,833. For the nine months ended September 30, 2006, we had net income of $360,019. For the year ended December 31, 2005 we incurred a net loss of $96,310. For the year ended December 31, 2004 we incurred a net loss of $510,922.
 
If we are not successful in maintaining profitable operations, we may not be able to attract sufficient capital to continue our operations. Our inability to obtain adequate financing may result in the need to curtail business operations and will likely result in a lower stock price.
 
We May Need To Raise Additional Capital To Finance Operations
 
As of September 30, 2006 we had $167,734 of cash on hand and our total current assets were $833,242. Our current liabilities were $845,611 as of September 30, 2006. We may need to raise additional capital to fund our anticipated operating expenses. Among other things, external financing may be required to cover our operating costs. Unless we obtain and maintain profitable operations, it is unlikely that we will be able to secure additional financing from external sources. As of August 1, 2006, we estimate that we will require $1 million to fund our anticipated operating expenses for the next twelve months if we maintain sales growth at the same rate. To step up sales growth at a more aggressive rate, we would require approximately $1.5 to $2.5 million to fund our anticipated operating expenses for the next twelve months. The sale of our common stock to raise capital may cause dilution to our existing shareholders. Our inability to obtain adequate financing will result in the need to curtail business operations. Any of these events would be materially harmful to our business and may result in a lower stock price. Our inability to obtain adequate financing will result in the need to curtail business operations and you could lose your entire investment. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
The Manufacture And Distribution Of Recreational Diving Equipment Could Result In Product Liability Claims
 
We, like any other retailer, distributor and manufacturer of products that are designed for recreational sporting purposes, face an inherent risk of exposure to product liability claims in the event that the use of our products results in injury. Such claims may include, among other things, that our products are designed and/or manufactured improperly or fail to include adequate instructions as to proper use and/or side effects, if any. We do not anticipate obtaining contractual indemnification from parties-supplying raw materials, manufacturing our products or marketing our products. In any event, any such indemnification if obtained will be limited by our terms and, as a practical matter, to the creditworthiness of the indemnifying party. In the event that we do not have adequate insurance or contractual indemnification, product liabilities relating to defective products could have a material adverse effect on our operations and financial conditions, which could force us to curtail or cease our business operations.
 
Our Common Stock May Be Affected By Limited Trading Volume And May Fluctuate Significantly
 
Our common stock is traded on the Over-the-Counter Bulletin Board. Prior to this offering, there has been a limited public market for our common stock and there can be no assurance that an active trading market for our common stock will develop. As a result, this could adversely affect our shareholders’ ability to sell our common stock in short time periods, or possibly at all. Thinly traded common stock can be more volatile than common stock traded in an active public market. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially.
 

22
 
Our Common Stock Is Deemed To Be “Penny Stock,” Which May Make It More Difficult For Investors To Sell Their Shares Due To Suitability Requirements
 
Our common stock is deemed to be “penny stock” as that term is defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. Penny stocks are stock:
 
· With a price of less than $5.00 per share;
 
· That are not traded on a “recognized” national exchange;
 
· Whose prices are not quoted on the Nasdaq automated quotation system (Nasdaq listed stock must still have a price of not less than $5.00 per share); or
 
· In issuers with net tangible assets less than $2.0 million (if the issuer has been in continuous operation for at least three years) or $5.0 million (if in continuous operation for less than three years), or with average revenues of less than $6.0 million for the last three years.
 
Broker/dealers dealing in penny stocks are required to provide potential investors with a document disclosing the risks of penny stocks. Moreover, broker/dealers are required to determine whether an investment in a penny stock is a suitable investment for a prospective investor. These requirements may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of them. This could cause our stock price to decline.
 
We Could Fail To Attract Or Retain Key Personnel
 
Our success largely depends on the efforts and abilities of Robert M. Carmichael, our President and Chief Executive Officer. Mr. Carmichael has been instrumental in securing our existing financing arrangements. Mr. Carmichael is primarily responsible for the development of our technology and the design of our products. The loss of the services of Mr. Carmichael could materially harm our business because of the cost and time necessary to recruit and train a replacement. Such a loss would also divert management attention away from operational issues. We do not presently maintain a key-man life insurance policy on Mr. Carmichael.
 
In addition, our continued growth depends on our ability to attract and retain a Chief Financial Officer, a Chief Operations Officer, and additional skilled associates. We are currently utilizing the services of two professional consultants in the absence of a Chief Financial Officer and Chief Operations Officer. The loss of the services of these consultants prior to our ability to attract and retain a Chief Financial Officer or Chief Operations Officer may have a material adverse effect upon us. Also, there can be no assurance that we will be able to retain our existing personnel or attract additional qualified associates in the future.
 
Effective January 1, 2005, the Company entered into a two-year consulting agreement with one of the consultants as referred to above for management and strategic services. The consulting agreement calls for a monthly consulting fee and provides for warrants to purchase 28,571,428 shares of the Company’s common stock. The exercise price of the warrants is $.007 per share, which equaled the closing price of the Company’s Common stock on January 1, 2005, the effective date of the agreement. The rights to exercise the warrants shall vest in four equal tranches of 7,142,857 current shares at six months, twelve months, eighteen months, and twenty-four months. The Company can terminate the consulting agreement at any time for “Cause” as defined in the consulting agreement. The consultant may terminate the consulting agreement at any time for non-payment of monies due, and such condition remains uncured for a period of sixty days. As of September 30, 2006, 21,428,571 warrants had vested with none being exercised.

23
 
Our Failure To Obtain Intellectual Property And Enforce Protection Would Have A Material Adverse Effect On Our Business
 
Our success depends in part on our ability, and the ability of our patent and trademark licensors, entities owned and controlled by Robert M. Carmichael, our President and Chief Executive Officer, to obtain and defend our intellectual property, including patent protection for our products and processes, preserve our trade secrets, defend and enforce our rights against infringement and operate without infringing the proprietary rights of third parties, both in the United States and in other countries. Despite our efforts to protect our intellectual proprietary rights, existing copyright, trademark and trade secret laws afford only limited protection.
 
Our industry is characterized by frequent intellectual property litigation based on allegations of infringement of intellectual property rights. Although we are not aware of any intellectual property claims against us, we may be a party to litigation in the future.
 
We May Be Unable To Manage Growth
 
Successful implementation of our business strategy requires us to manage our growth. Growth could place an increasing strain on our management and financial resources. If we fail to manage our growth effectively, our business, financial condition or operating results could be materially harmed, and our stock price may decline.
 
Reliance On Vendors And Manufacturers
 
We deal with suppliers on an order-by order basis and have no long-term purchase contracts or other contractual assurances of continued supply or pricing. In addition, we have no long-term contracts with our manufacturing sources and compete with other companies for production facility capacity. Historically, we have purchased enough inventory of products or their substitutes to satisfy demand. However, unanticipated failure of any manufacturer or supplier to meet our requirements or our inability to build or obtain substitutes could force us to curtail or cease operations.
 
Dependence On Consumer Spending
 
The success of the products in the Brownie’s Third Lung and Brownie’s Tank Fill lines depend largely upon a number of factors related to consumer spending, including future economic conditions affecting disposable consumer income such as employment, business conditions, tax rates, and interest rates. In addition our opportunities are highly dependent upon the level of consumer spending on recreational marine accessories and dive gear, discretionary spending items. There can be no assurance that consumer spending in general will not decline, thereby adversely affecting our growth, net sales and profitability or that our business will not be adversely affected by future downturns in the economy, boating industry, or dive industry. If consumer spending on recreational marine accessories and dive gear declines, we could be forced to curtail or cease operations.
 
Bad Weather Conditions Could Have An Adverse Effect On Operating Results
 
Our business is significantly impacted by weather patterns. Unseasonably cool weather, extraordinary amounts of rainfall, or unseasonably rough surf, may decrease boat use and diving, thereby decreasing sales. Accordingly, our results of operations for any prior period may not be indicative of results of any future period.
 
Investors Should Not Rely On An Investment In Our Stock For The Payment Of Cash Dividends
 
We have not paid any cash dividends on our capital stock and we do not anticipate paying cash dividends in the future. Investors should not make an investment in our common stock if they require dividend income. Any return on an investment in our common stock will be as a result of any appreciation, if any, in our stock price.


24
 
ITEM 3. CONTROLS AND PROCEDURES
 
(A) Evaluation Of Disclosure Controls And Procedures
 
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s Principal Executive Officer/Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of achieving the Company’s disclosure control objectives. The Company’s Principal Executive Officer/Principal Accounting Officer has concluded that the Company’s disclosure controls and procedures are, in fact, effective at this reasonable assurance level as of the of period covered.
 
(B) Changes In Internal Controls Over Financial Reporting
 
In connection with the evaluation of the Company’s internal controls during the Company’s last fiscal quarter, the Company’s Principal Executive Officer/Principal Financial Officer has determined that there are no changes to the Company’s internal controls over financial reporting that has materially affected, or is reasonably likely to materially effect, the Company’s internal controls over financial reporting.
 

25

PART II
 
ITEM 1. LEGAL PROCEEDINGS
 
None
 
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
 
None
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
On April 2, 2006, the first Secured Convertible Debenture due to Cornell Capital Partners, LP having an outstanding principal balance of $144,610 matured. On June 2, 2006, the Company fully satisfied the outstanding balance on the Secured Convertible Debentures. The Redemption Agreement also terminated the Standby Equity Distribution Agreement. The total amount paid Cornell Capital Partners, LP under the Redemption Agreement was $266,777 that included $210,500 redemption amount (principal amount), $34,777 accrued interest, and $21,500 redemption fee (10.21% of principal amount).
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
None.
 
ITEM 5. OTHER INFORMATION
 
Not applicable.
 

26
 
Item 6. Exhibits, Lists And Reports On Form 8-K
 
(a) Exhibits.

EXHIBIT NO.
  
DESCRIPTION
  
LOCATION
2.2
  
Merger Agreement, dated June 18, 2002 by and among United Companies Corporation, Merger Co., Inc. and Avid Sportswear & Golf Corp.
  
Incorporated by reference to Exhibit 2.02 to Avid Sportswear & Golf Corp.’s Amendment No. 1 to Form S-4 filed June 24, 2002
         
2.3
  
Articles of Merger of Avid Sportswear & Golf Corp. with and into Merger Co., Inc.
  
Incorporated by reference to Exhibit 2.03 to Avid Sportswear & Golf Corp.’s Amendment No. 1 to Form S-4 filed June 24, 2002
         
3.1
  
Articles of Incorporation
  
Incorporated by reference to Exhibit 3.05 to United Companies Corporation’s Amendment No. 1 to Form S-4 filed June 24, 2002
         
3.2
  
Bylaws
  
Incorporated by reference to Exhibit 3.04 to the Registration Statement on Form 10-SB
         
10.1
  
Share Exchange Agreement, dated March 23, 2004 by and among United, Trebor Industries, Inc. and Robert Carmichael
  
Incorporated by reference to Exhibit 16.1 to Current Report on From 8-K filed April 9, 2004
         
10.2
  
Securities Purchase Agreement, dated April 2, 2004 by and between United and Cornell Capital Partners, L.P.
  
Incorporated by reference to Exhibit 10.2 to United Companies Corporation’s Registration Statement on Form SB-2 filed July 16, 2004
         
10.3
  
Investor Registration Rights Agreement, dated April 2, 2004 by and between United and Cornell Capital Partners, L.P.
  
Incorporated by reference to Exhibit 10.3 to United Companies Corporation’s Registration Statement on Form SB filed July 16, 2004
         
10.4
  
Security Agreement, dated April 2, 2004 by and between United and Cornell Capital Partners, L.P.
  
Incorporated by reference to Exhibit 10.4 to United Companies Corporation’s Registration Statement on Form SB filed July 16, 2004
         
10.5
  
Irrevocable Transfer Agent Instructions, dated April 2, 2004, by and among United, Cornell Capital Partners, L.P. and First American Stock Transfer
  
Incorporated by reference to Exhibit 10.5 to United Companies Corporation’s Registration Statement on Form SB filed July 16, 2004
         
10.6
  
Escrow Agreement, dated April 2, 2004 by and among United, Cornell Capital Partners, L.P. and Butler Gonzalez, LP
  
Incorporated by reference to Exhibit 10.6 to United Companies Corporation’s Registration Statement on Form SB filed July 16, 2004
         
10.7
  
Form of Secured Convertible Debenture
  
Incorporated by reference to Exhibit 10.7 to United Companies Corporation’s Registration Statement on Form SB filed July 16, 2004
         
10.8
  
Form of Warrant
  
Incorporated by reference to Exhibit 10.8 to United Companies Corporation’s Registration Statement on Form SB filed July 16, 2004
         
10.9
  
Standby Equity Distribution Agreement, dated April 2, 2004 by and between United and Cornell Capital Partners, L.P.
  
Incorporated by reference to Exhibit 10.9 to United Companies Corporation’s Registration Statement on Form SB filed July 16, 2004
         
10.10
  
Registration Rights Agreement, dated April 2, 2004 by and between United and Cornell Capital Partners, L.P.
  
Incorporated by reference to Exhibit 10.10 to United Companies Corporation’s Registration Statement on Form SB filed July 16, 2004
 
27
 
EXHIBIT NO.
  
DESCRIPTION
  
LOCATION
10.11
  
Escrow Agreement, dated April 2, 2004 by and among United, Cornell Capital Partners, L.P. and Butler Gonzalez, LP
  
Incorporated by reference to Exhibit 10.11 to United Companies Corporation’s Registration Statement on Form SB filed July 16, 2004
         
10.12
  
Placement Agent Agreement, dated April 2, 2004, by and among United, Cornell Capital Partners, L.P. and Newbridge Securities Corporation
  
Incorporated by reference to Exhibit 10.12 to United Companies Corporation’s Registration Statement on Form SB filed July 16, 2004
         
10.13
  
Irrevocable Transfer Agent Instructions, dated April 2, 2004 by and among United, Cornell Capital Partners, L.P. and First American Stock Transfer
  
Incorporated by reference to Exhibit 10.13 to United Companies Corporation’s Registration Statement on Form SB filed July 16, 2004
         
10.14
  
Two Year Consulting Agreement with Jeff Morris effective January 1, 2005 for Manage-ment and Strategic Services and Warrants issued in conjunction with the same.
 
  
Incorporated by reference to Exhibit 10.14 to
Current Report on Form 8-K filed on March 11,
2005.
 
         
10.15
  
Promissory Note, dated February 15, 2005, principal amount of $54,998.00 payable to Robert M. Carmichael.
  
Incorporated by reference to Exhibit 10.15 to United Companies Corporation's 10QSB for the quarter ended March 31, 2005 filed May 13, 2005.
         
10.16
  
Promissory Note, dated March 7, 2005, in the principal amount of $205,296.53 payable to 940 Associates, Inc.
 
Incorporated by reference to Exhibit 10.16 to United Companies Corporation's 10QSB for the quarter ended March 31, 2005 filed May 13, 2005.
         
10.17
  
Promissory Note, dated March 7, 2005, in the principal amount of $447,111.13 payable to Robert M. Carmichael.
 
Incorporated by reference to Exhibit 10.17 to United Companies Corporation's 10QSB for the quarter ended March 31, 2005 filed May 13, 2005.
         
10.18
  
Non-Exclusive License Agreement -
BC Keel Trademark
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.19
  
Non-Exclusive License Agreement - Buoyancy
Compensator (and Dive Belt) Weight System
  
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.20
  
Exclusive License Agreement - Brownie's Third Lung, Brownie's Public Safety, Tankfill, and Related Trademarks and Copyrights
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.21
  
Non-Exclusive License Agreement -
Drop Weight Dive Belt
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.22
  
Non-Exclusive License Agreement -
Garment Integrated or Garment Attachable
Flotation Aid and/or PFD
 
  
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
 
28
 
EXHIBIT NO.
  
DESCRIPTION
  
LOCATION
10.23
  
Non-Exclusive License Agreement -
Inflatable Dive Market and Collection Bag
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.24
  
Non-Exclusive License Agreement - SHERPA
Trademark and Inflatable Flotation Aid/Signal
Device Technology
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.25
  
Non-Exclusive License Agreement - Tank-
Mounted Weight, BC or PFD-Mounted Trim Weight or Trim Weight Holding System
 
Incorporated by reference to Exhibit 10.18 to United Companies Corporation's 10QSB for the quarter ended June 30, 2005 filed August 15, 2005.
         
10.26
  
Exclusive License Agreement - Brownie’s Third Lung and Related Trademarks and Copyright
  
Incorporated by reference to Exhibit 10.26 to United Companies Corporation’s 10KSB for the year ended December 31, 2005 filed March 30, 2006.
         
10.27
  
Redemption Agreement - Cornell Capital Partners, LP Secured Convertible Debentures
  
Incorporated by reference to Exhibit 10.27 to
Current Report on Form 8-K filed on June 2,
2006.
         
31.1
  
Certification Pursuant to Section 302
  
Provided herewith
         
31.2
  
Certification Pursuant to Section 302
  
Provided herewith
         
32.1
  
Certification Pursuant to Section 1350
  
Provided herewith
         
32.2
  
Certification Pursuant to Section 1350
  
Provided herewith
 
(b) Reports On Form 8-K.
 
We filed a Current Report on Form 8-K on June 2, 2006 with respect to Item 1.01 - Entry into a Material Definitive Agreement as referenced to in Exhibit No. 10.27.


29
 
SIGNATURES
 
 
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date: November 14, 2006
UNITED COMPANIES CORPORATION
   
 
By: /s/ Robert M. Carmichael       
 
Robert M. Carmichael
 
President, Chief Executive Officer,
 
Chief Financial Officer/
 
Principal Accounting Officer
 
 
30
 
 EX-31.1 2 v057270_ex31-1.htm Unassociated Document
EXHIBIT 31.1
 
OFFICER’S CERTIFICATE
PURSUANT TO SECTION 302*
 
I, Robert Carmichael, Chief Executive Officer, certify that:
 
1. I have reviewed this form 10-QSB for the quarter ended September 30, 2006, of United Companies Corporation;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
 
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) for the small business issuer and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b) Omitted;
 
(c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and
 
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and
 
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.
 
Date:November 14, 2006
By:       /s/ Robert M. Carmichael
 
Name: Robert M. Carmichael
 
Title:   Chief Executive Officer

*The introductory portion of paragraph 4 of the Section 302 certification that refers to the certifying officers’ responsibility for establishing and maintaining internal control over financial reporting for the company, as well as paragraph 4(b), have been omitted in accordance with Release Nos. 33-8618 and 34-52492 (September 22, 2005) because the compliance period has been extended for small business issuers until the first fiscal year ending on or after July 15, 2007.
 

EXHIBIT 31.1
 
 EX-31.2 3 v057270_ex31-2.htm Unassociated Document
 
EXHIBIT 31.2
 
OFFICER’S CERTIFICATE
PURSUANT TO SECTION 302*
 
I, Robert Carmichael, Chief Financial Officer, certify that:
 
1. I have reviewed this form 10-QSB for the quarter ended September 30, 2006, of United Companies Corporation;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
 
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) for the small business issuer and have:
 
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b) Omitted;
 
(c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and
 
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):
 
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and
 
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.
 
Date:November 14, 2006
By:       /s/ Robert M. Carmichael
 
Name: Robert M. Carmichael
 
Title:   Chief Financial Officer

*The introductory portion of paragraph 4 of the Section 302 certification that refers to the certifying officers’ responsibility for establishing and maintaining internal control over financial reporting for the company, as well as paragraph 4(b), have been omitted in accordance with Release Nos. 33-8618 and 34-52492 (September 22, 2005) because the compliance period has been extended for small business issuers until the first fiscal year ending on or after July 15, 2007.
 

EXHIBIT 31.2
 
 EX-32.1 4 v057270_ex32-1.htm Unassociated Document
 
EXHIBIT 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 
In connection with the Quarterly Report of United Companies Corporation (the “Company”) on Form 10-QSB for the quarter ended September 30, 2006 as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
 
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
 
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
 
Date:November 14, 2006
By:       /s/ Robert M. Carmichael
 
Name: Robert M. Carmichael
 
Title:   Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to United Companies Corporation and will be retained by United Companies Corporation and furnished to the United States Securities and Exchange Commission or its staff upon request.
 

EXHIBIT 32.1
 EX-32.2 5 v057270_ex32-2.htm Unassociated Document
EXHIBIT 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 
In connection with the Quarterly Report of United Companies Corporation (the “Company”) on Form 10-QSB for the quarter ended September 30, 2006 as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
 
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
 
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
 
Date:November 14, 2006
By:       /s/ Robert M. Carmichael
 
Name: Robert M. Carmichael
 
Title:   Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authentications, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to United Companies Corporation and will be retained by United Companies Corporation and furnished to the United States Securities and Exchange Commission or its staff upon request.
 

EXHIBIT 32.2


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