U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ____________.
Commission file number 001-15665
UC HUB GROUP, INC.
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(Exact name of registrant as specified in its charter)
NEVADA 88-0389393
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(State or jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
10390 COMMERCE CENTER DRIVE, SUITE 250 RANCHO CUCAMONGA, CA 91730
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(Address of Principal Executive Offices)
Registrant's telephone number: (909) 945-8653
EXPERTISE TECHNOLOGY INNOVATION, INC.
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9 Forest Road
Kirkland, Quebec H9J3A2
Canada
Former Fiscal Year End: December 31, 2003
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock: $ .001 Par Value
As of June 16, 2004, the Registrant had 3,537,635 shares of common
stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
UC HUB GROUP, INC.
(FORMERLY EXPERTISE TECHNOLOGY INNOVATION, INC. )
Quarterly Report on Form 10-QSB for the
Quarterly Period Ending April 30, 2004
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet:
April 30, 2004
Condensed Consolidated Statements of Losses:
Three and Nine Months Ended April 30, 2004 and 2003
Condensed Consolidated Statements of Cash Flows:
Nine Months Ended April 30, 2004 and 2003
Notes to Condensed Consolidated Financial Statements:
April 30, 2004
Item 2. Management Discussion and Analysis of Interim
Financial Condition and Results of Operations
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Condensed Consolidated Financial Statements as of April
30, 2004 and for the three months and nine months ended April 30, 2004 and 2003
have been prepared by UC Hub Group, Inc. (formerly Expertise Technology
Innovation, Inc.), a Nevada corporation.
UC HUB GROUP, INC.
(Formerly Expertise Technology Innovation, Inc)
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED) April 30, 2004
ASSETS
Current Assets
Cash And Cash Equivalents $ 270,269
Accounts Receivable 319,584
Other Current Assets 34,615
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Total Current Assets 624,468
Property and Equipment - net 86,901
Other Assets 32,425
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Total Assets $ 743,794
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LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and accrued expenses $ 2,642,870
Notes Payable 291,925
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Total Current Liabilities 2,934,795
Deficiency in Stockholders' Equity
Preferred stock, par value $.001 per share;
authorized 5,000,000 shares; 4,188,375 issued and
outstanding shares 4,188
Common stock, par value $.001 per share; authorized
100,000,000 shares; 1,987,734 issued and outstanding
shares 1,988
Additional Paid In Capital 13,056,938
Retained Deficit (15,254,115)
------------
Total Deficiency in Stockholders Equity (2,191,001)
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Total Liabilities and Stockholders Equity $ 743,794
============
See accompanying notes to unaudited condensed consolidated financial statements
UC HUB GROUP, INC.
(Formerly Expertise Technology Innovation, Inc)
CONDENSED CONSOLIDATED STATEMENT OF LOSSES
(UNAUDITED)
For The Three Months Ended For The Nine Months Ended
April 30, April 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenue $ 615,487 $ 760,705 $ 1,843,777 $ 1,813,822
Cost of Sales 384,299 535,902 1,349,683 1,616,919
----------- ----------- ----------- -----------
Gross Profit 231,188 224,803 494,094 196,904
Operating Expenses:
Selling 68,229 58,973 244,178 428,613
General and Administrative 172,393 392,780 550,765 1,037,371
Loss On Sale Of Assets -- -- -- 56,024
Depreciation And Amortization 3,757 3,000 11,271 8,117
----------- ----------- ----------- -----------
Total Operating Expenses 244,380 454,753 806,213 1,530,125
----------- ----------- ----------- -----------
Loss From Operations (13,192) (229,950) (312,119) (1,333,221)
Income tax (benefit) -- -- -- --
Other Income and Expenses
Interest Expenses 4,046 2,454 16,102 24,832
Interest Income -- (249) -- (249)
----------- ----------- ----------- -----------
Total Other Income and Expenses 4,046 2,205 16,102 24,583
----------- ----------- ----------- -----------
Net Loss $ (17,237) $ (232,155) $ (328,221) $(1,357,804)
=========== =========== =========== ===========
Net Loss per share (basic and assuming dilution) $ (0.00) $ (0.06) $ (0.18) $ (0.32)
=========== =========== =========== ===========
Weighted Average Common Shares Outstanding 1,987,734 4,188,375 1,812,734 4,188,375
=========== =========== =========== ===========
See accompanying notes to unaudited condensed consolidated financial statements
UC HUB GROUP, INC.
(Formerly Expertise Technology Innovation, Inc)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED APRIL 30,
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (328,221) $(1,357,804)
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation and Amortization 11,271 8,117
Common stock issued for services rendered 164,000
(Increase) decrease in assets
Accounts receivable -- 343,565
Other assets (4,200) (2,712)
Increase (decrease) in Operating Liabilities
Accounts payable 125,088 267,296
Accrued expenses 141,078 1,843
Contingent liabilities -- 79
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NET CASH (USED IN) OPERATING ACTIVITIES (54,984) (575,616)
CASH FLOWS FROM INVESTING ACTIVITIES
Security Deposit (25,000) (27,113)
Asset purchase (37,331) (69,026)
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NET CASH (USED IN) INVESTING ACTIVITIES (62,331) (96,139)
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft -- (35,892)
Cash from stock subscription 100,000 21,000
Cash from sale of common stock 180,000 222,999
Cash from convertible loan proceeds -- 530,000
Cash from loan proceeds (22,975) 20,000
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NET CASH PROVIDED BY FINANCING ACTIVITIES 257,025 758,107
Net increase (decrease) in cash 139,710 86,353
Cash, beginning of period 130,559 139,388
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Cash, ending of period $ 270,269 $ 225,741
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Supplemental Disclosures:
Cash paid for interest $ -- $ --
=========== ===========
Cash paid for taxes $ -- $ --
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Non-Cash Investing and Financing Activities
Common stock issued for services $ -- $ 164,000
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Loans converted to Common Stock $ 93,567
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Stock subscriptions fulfilled $ 1,984,272
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Preferred stock converted to common stock $ 820,000
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See accompanying notes to unaudited condensed consolidated financial statements
UC HUB GROUP, INC.
(FORMERLY EXPERTISE TECHNOLOGY INNOVATION, INC.)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
GENERAL
The accompanying unaudited condensed financial statements have been prepared in
accordance with the instructions to Form 10-QSB, and therefore, do not include
all the information necessary for a fair presentation of financial position,
results of operations and cash flows in conformity with accounting principles
generally accepted in the United States of America for a complete set of
financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. The
results from operations for the nine-month period ended April 30, 2004 are not
necessarily indicative of the results that may be expected for the year ended
July 31, 2004. The unaudited condensed consolidated financial statements should
be read in conjunction with the July 31, 2003 financial statements and footnotes
thereto included in the Company's Securities and Exchange Commission Form 8-K,
as amended.
BUSINESS AND BASIS OF PRESENTATION
UC HUB Group, Inc., formerly known as Expertise Technology Innovation, Inc. (the
"Company") was formed under the laws of the State of Nevada in 1998. The
Company, through its wholly-owned subsidiary, AllCom USA, Inc. ("Allcom") is a
reseller of telecommunications services (see Note B). The consolidated financial
statements include the accounts of the Company, and its wholly-owned
subsidiaries, AllCom USA, Inc. and United Communications Hub, Inc. Significant
inter-company transactions have been eliminated in consolidation.
RECLASSIFICATION
Certain reclassifications have been made to conform to prior periods' data to
the current presentation. These reclassifications had no effect on reported
losses.
LIQUIDITY
As shown in the accompanying financial statements, the Company incurred a net
loss of $328,221 and $1,357,804 during the nine months ended April 30, 2004 and
2003, respectively. The Company's current liabilities exceeded its current
assets by $2,310,327 as of April 30, 2004 (see Note D).
STOCK BASED COMPENSATION
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in APB
Opinion No. 25 and related interpretations. Accordingly, compensation expense
for stock options is measured as the excess, if any, of the fair market value of
the Company's stock at the date of the grant over the exercise price of the
related option. The Company has adopted the annual disclosure provisions of SFAS
No. 148 in its financial reports for the year ended December 31, 2002 and for
the subsequent periods.
NEW ACCOUNTING PRONOUNCEMENTS
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
Statement amends Statement 133 for decisions made (1) as part of the Derivatives
Implementation Group process that effectively required amendments to Statement
133, (2) in connection with other Board projects dealing with financial
instruments, and (3) in connection with implementation issues raised in relation
to the application of the definition of a derivative, in particular, the meaning
of an initial net investment that is smaller than would be required for other
types of contracts that would be expected to have a similar response to changes
in market factors, the meaning of underlying, and the characteristics of a
derivative that contains financing components. The Company does not anticipate
that the adoption of this pronouncement will have a material effect on the
financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This Statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
were previously classified as equity. Some of the provisions of this Statement
are consistent with the current definition of liabilities in FASB Concepts
Statement No. 6, Elements of Financial Statements. The remaining provisions of
this Statement are consistent with the Board's proposal to revise that
definition to encompass certain obligations that a reporting entity can or must
settle by issuing its own equity shares, depending on the nature of the
relationship established between the holder and the issuer. While the Board
still plans to revise that definition through an amendment to Concepts Statement
6, the Board decided to defer issuing that amendment until it has concluded its
deliberations on the next phase of this project. That next phase will deal with
certain compound financial instruments including puttable shares, convertible
bonds, and dual-indexed financial instruments. The Company does not anticipate
that the adoption of this pronouncement will have a material effect on the
financial statements
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." Interpretation 46 changes the criteria by which one
company includes another entity in its financial statements. Previously, the
criteria were based on control through voting interest. Interpretation 46
requires a variable interest entity to be by a company if that company is
subject to a majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual returns or
both. A company that consolidates a variable interest entity is called the
primary beneficiary of that entity. The consolidation requirements of
Interpretation 46 apply immediately to variable interest entities created after
January 31, 2003. The consolidation requirements apply to older entities in the
first fiscal year or interim period beginning after June 15, 2003. Certain of
the disclosure requirements apply in all financial statements issued after
January 31, 2003, regardless of when the variable interest entity was
established. The Company does not expect the adoption to have a material impact
to the Company's financial position or Results of operations.
During October 2003, the FASB issued Staff Position No. FIN 46 deferring the
effective date for applying the provisions of FIN 46 until the end of the first
interim or annual period ending after December 31, 2003, if the variable
interest was created prior to February 1, 2003, and the public entity has not
issued financial statements reporting that variable interest entity in
accordance with FIN 46. The FASB also indicated it would be issuing a
modification to FIN 46 prior to the end of 2003. Accordingly, the Company has
deferred the adoption of FIN 46 with respect to VIE's created prior to February
1, 2003. Management is currently assessing the impact, if any, FIN 46 may have
on the Company; however, management does not believe there will be any material
impact on its financial statements, results of operations or liquidity resulting
from the adoption of this interpretation.
NOTE B - ACQUISITION AND CAPITAL RESTRUCTURE
On March 5, 2004, the Company completed an Agreement and Plan of Merger
("Merger") with United Communications Hub, Inc. ("UCI"). Prior to the Merger,
the Company was an inactive corporation with no significant assets or
operations. For accounting purposes, UCI is the surviving entity. In accordance
with SFAS No. 141, UCI was the acquiring entity. While the transaction is
accounted for using the purchase method of accounting, in substance the
Agreement is a recapitalization of UCI's capital structure
For accounting purposes, UCI has accounted for the transaction as a reverse
acquisition and UCI is the surviving entity. The total purchase price and
carrying value of net assets acquired was approximately $45,764. From March,
1998 until the date of the Merger, ETI was an inactive corporation with no
significant assets and liabilities. UCI did not recognize goodwill or any
intangible assets in connection with the transaction.
Effective with the Merger, all previously outstanding common stock owned by
UCI's stockholders was exchanged for an aggregate of 4,188,375 shares newly
issued Series-A Preferred Stock of the Company. The value of the stock issued
will be the historical cost of the Company's net tangible assets, which did not
differ materially from their fair value. Outstanding options and warrants of UCI
became options and warrants of the Company based upon the same exchange ratio,
as used in the Merger. Each share of Series-A Preferred Stock is convertible at
any time at the option of the holders into three shares of common stock. The
Series-A Preferred Stock has a voting preference of 60 votes per share on all
matters requiring a vote of the stockholders.
Following the Merger, the Company changed its name to UC Hub Group, Inc.
NOTE C - CAPITAL STOCK
The Company is authorized to issue 5,000,000 shares of preferred stock, $0.001
par value per share and 100,000,000 shares of common stock, $0.001 par value
per share.
Pursuant to the Merger with UCI (see Note B), the Company issued an aggregate of
4,188,375 shares of Series-A Preferred Stock in exchange for all previously
outstanding common stock owned by UC Hub stockholders. The value of the stock
that will be issued was the historical cost of ETI net tangible assets, which
did not differ materially from their fair value.
NOTE D - GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the accompanying
financial statements, the Company incurred a net loss of $328,221 and $1,357,804
during the nine months ended April 30, 2004 and 2003, respectively. The
Company's current liabilities exceeded its current assets by $2,310,327 as of
April 30, 2004. These factors among others may indicate that the Company will be
unable to continue as a going concern for a reasonable period of time.
The Company's existence is dependent upon management's ability to develop
profitable operations. The accompanying statements do not include any
adjustments that might result should the Company be unable to continue as a
going concern.
In order to improve the Company's liquidity, the Company's management is
actively pursing additional equity financing through discussions with investment
bankers and private investors. There can be no assurance the Company will be
successful in its effort to secure additional equity financing.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations
should be read together with the financial statements and related notes included
in this Report. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from those
anticipated in those forward-looking statements as a result of certain factors,
including, but not limited to, those contained in the discussion on
forward-looking statements that follows this section.
OVERVIEW
The Company is a holding company comprised of software solutions for cities and
conducts its operations through its wholly-owned subsidiaries or divisions, UCI,
OurTown2, AllCom USA, Inc. ("AllCom") and eSAFE Inc. UCI's existing revenue has
been generated by AllCom which is a reseller of long-distance telecommunications
services to business and individuals in various states throughout the United
States.
Separately, UCI is seeking to broaden the nature of the Company's services which
will be centered around a "Digital City" concept as described below.
UCI is a distributor of digital, bundled services and software solutions for
small to medium sized cities and affinity groups. The services presently being
offered today include banking, communications, and government management. It is
the strategic plan to offer additional bundled services to the Digital City and
its inhabitants in the future. However, today's focus is on the passive
recurring revenue of transactional-based banking services that lie at the
nucleus of one of the new operating divisions along with the traditional
communications revenue.
AllCom
AllCom is the telecommunications subsidiary that has been in existence since
1991 and has been the primary source of revenue to date. Allcom has recently
completed an update of its own proprietary software code that will be compliment
and interface with both the software used by the other subsidiaries discussed
below. AllCom has developed "OnTrac" - a real-time online management software
for sales channels. The sales agent or master distributor can log on, and with
various levels of security, review individual customers' telecommunications
requests, reports, projections of revenue, and operational issues. AllCom has
also completed the "My eAccount," which is a user friendly interface for the
customer to monitor his billing, usage, and budget or projections. In addition
to OnTrac, and My eAccount, the Company has just completed audit reconciliation
software that reviews the CDR (Call Detail Records) submitted by larger,
wholesale telecommunication carriers, while comparing and auditing the billing
invoices to make sure there is true reconciliation, and thus, profit. The
combination of these software codes will now interface in part or in whole with
eSafe (our new business described below) and will allow for transactional-based
billing. The flexibility of these codes will now allow AllCom to add or delete
line items in real time for billing, collection and customer service, all of
which are in house. This flexibility allows for the Company to add
entertainment, health services, government services, banking services,
educational services and other such line items easily. The significant part of
the flexibility of these line items is the ability to increase profit quickly
per customer by simply adding more services and not incurring more costs.
The sales and marketing of the additional bundled services to affinity groups
and municipalities will begin to take place in June, 2004. The Company is
cautiously optimistic about the growth potential of its financial services,
government services and communications products and the infrastructure in place,
although no assurances can be given that the Company will be successful.
Subsequent to the end of the third quarter, the Company reached a favorable
settlement of litigation which had a potential liability of $1,070,000. This
material adjustment will be reflected in the financial statements in the fourth
quarter.
eSafe, Cards, Inc.
The Company offers its proprietary cash card management and processing software
and created a new subsidiary - eSafe Cards, Inc. The Company plans to utilize
its cash cards in conjunction with its direct and indirect strategic
relationships with banking software companies, e.g., eCelerity, National
Merchant Centers, Concorde EFS, Star and the Cirrus Networks, Visa and
MasterCard to introduce our own "eSafe Cash Card." It is our intent to focus on
an aggressive sales and marketing campaign to expand the customer base and
install the transaction-based Digital City solutions.
eSafe Cards, is the transaction-based platform that intends to provide credit
and debit card processing services to merchants and deliver specialized
processing services related to the creation and delivery of, processing and
servicing of payroll cards and gift cards to Digital Cities. In addition, by
bundling these services an individual will be offered a community eSafe Card
referred to as a "Pocket Bank". eSafe Cards intends to, by managing the
switching, authorization and settlement functions along with servicing
cardholders related to these services, generate passive recurring revenue. The
Company has hired a former senior manager from Concord EFS, recently acquired by
First Data Corporation, to run this eSAFE Cards beginning in June 2004 The
Company will offer its own proprietary software through eSafe processing. With
the requisite software and banking strategic alliances in place eSafe
Processing, expects to have or offer the ability to:
o Visa and MasterCard support,
o Customer and cardholder on-line reporting,
o Customer and cardholder multi-lingual live agent and
Interactive Voice Response support 24 hours a day, seven days
a week,
o Manage risk using custom developed proprietary software which
is intended to comply with a variety of federal laws relating
to banking and credit transactions,
o Customer implementation and ongoing servicing with web based
tools and strategic employees, and
o Manage the communication channels between the key parties
including financial institutions, data processors and the
Company.
OurTown2
OurTown-2 is the citizen relationship management software code that has been
sold and/or licensed to multiple cities throughout the United States to
facilitate the interface between residents and the government. The software
assets were purchased out of the bankruptcy of govt.com for $25,000 in cash and
250,000 shares of R144 common stock. This government based software code ("OT2")
has been updated and enhanced to include expanded transactional-based services
for a municipality to increase revenue while maintaining the audit requirements
it needs to comply with state and federal funding programs. OT2's companion
product, i311 helps governments reduce the burden on their 911 call centers by
providing online answers to citizens' frequently asked questions. The
value/benefit to the municipality is convenient communications and decision
making and improved workflow on a 24 hour seven day basis. The new and improved
OT-2 software can schedule, track, manage, report, query, do costing analysis,
budget and allocate resources. The Company recently entered into a contract with
a New York community to provide licensing for the OT2 product. The Company has
hired the two founders and senior programmers of the OT2 software company to
launch this subsidiary and brand it as, OurTown2, a UCHub company.
Conclusion
Management is focusing its attention on the roll out and successful
implementation of the sales and marketing phase for eSafe and OurTown2 with a
focus on e-banking and financial related transactional services. It believes
that its experience in operating AllCom with process intensive software while
providing customer service, billing and collection, complimented by what we
believe is robust and bundled proprietary software, should significantly
differentiate our future Digital City markets, although no assurances can be
given.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements requires our management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and revenue and expenses
during the applicable period. Future events and their effects cannot be
determined with certainty; therefore, the determination of estimates requires
the exercise of judgment. Actual results inevitably will differ from those
estimates, and such differences may be material to our financial statements. Our
management continually evaluates its estimates and assumptions, which are based
on historical experience and other factors that we believe to be reasonable
under the circumstances. These estimates and our actual results are subject to
known and unknown risks and uncertainties. There have been no material changes
in our critical accounting estimates or our application of these estimates in
2004.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED APRIL 30, 2004 TO THE THREE MONTHS ENDED
APRIL 30, 2003
Revenue
The Company's total revenue was $615,487 for the three-month period ended April
30, 2004 compared to $760,705 for the same period ended April 30, 2003, a
decrease of 19.09%. UCI consolidated its telecommunications businesses in the
spring of 2003 by closing one office, reducing duplication in its operations
including billing companies, streamlining its regulatory filings, and
eliminating unnecessary employees. At the same time, UCI ceased servicing
customers which were not paying promptly. This had the effect of reducing
revenue but improving the overall results of operations. UCI now operates all of
its telecommunications business through AllCom.
Gross Profit
The Company's gross profit was $231,188 or 37.6% for the three months ended
April 30, 2004 versus $224,803 or 29.6% for the three months ended April 30,
2003. The increase in gross profit during the period resulted from the
elimination of marginal business, and improved results from ongoing division.
Costs and Expenses
Selling, general and administrative ("SG&A") expenses excluding depreciation and
amortization which were minimal, for the three-month period ended April 30, 2004
decreased $211,130 from $451,753 to $240,623, or 46.74%. The decrease is
attributable to expense savings from discontinued customers with bad credit
ratings, along with UC Hub's operating efficiencies.
Interest Expense
The Company incurred $4,046 of interest expense during the three months ended
April 30, 2004 versus $2,454 during the three months ended April 30, 2003, which
is an increase of $1,591 or a 64.83% increase. The increase is a result of the
Company having less debentures in the prior three month period.
Net Income (Loss)
Our net loss for the quarter ended April 30, 2004 was $17,237 in contrast to a
loss of $232,155 for the quarter ended April 30, 2003. The improvement and
generation of net income was due primarily to a significant decrease in that was
being duplicated by both operating companies throughout most of the fiscal year
July 31, 2003, a diminished bad debt quotient and improved margins from on going
business.
Our net income per common share (basic and diluted) was $0.00 for the three
months ended April 30, 2004 and $(0.06) for the three months ended April 30,
2003.
The weighted average number of outstanding shares was 1,987,738 and 4,188,375
for the three months ended April 30, 2004 and 2003, respectively.
COMPARISON OF THE NINE MONTHS ENDED APRIL 30, 2004 TO THE NINE MONTHS ENDED
APRIL 30, 2003
Revenue
The Company's total revenue was $1,843,777 for the nine-month period ended April
30, 2004 compared to $1,813,822 for the same period ended April 30, 2003, an
increase of $29,955, or 1.65%. The nominal increase is a result of competitive
pressures in the telecommunications marketplace.
Gross Profit
The Company's gross profit was $494,094 or 26.8% for the nine months ended April
30, 2004 versus $196,904 or 10.86% for the nine months ended April 30, 2003. The
$297,190 increase in gross profit is a result of the Company eliminating
marginal business and improved margins from the remaining core clients.
Costs and Expenses
SG&A expenses for the nine-month period ended April 30, 2004 decreased $671,041
from $1,465,984 to $794,943, or 45.77%. The decrease is primarily attributable
for the reasons expressed above. The nine months numbers do not reflect a
$56,024 loss the Company incurred from the disposition of assets.
Interest Expense
The Company incurred $16,102 of interest expense during the nine months ended
April 30, 2004 versus $24,832 during the nine months ended April 30, 2003, which
is a 35.16% decrease. The decrease is a result of the Company having converted
all of its convertible debentures.
Net Loss
Our net loss for the nine months ended April 30, 2004 was $328,221 in contrast
to $1,357,804 for the nine months ended April 30, 2003. The $1,029,583 decrease
in net loss was due primarily to the Company consolidating its expenses and
ceasing non-producing operations.
Our net loss per common share (basic and diluted) was $(0.18) for the nine
months ended April 30, 2004 and $(0.32) for the nine months ended April 30,
2003.
The weighted average number of outstanding shares was 1,812,734 and 4,188,375
for the nine months ended April 30, 2004 and 2003, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of April 30, 2004, the Company had a working capital deficit of $2,310,327.
The Company generated a deficit in cash flow from operations of $54,984 for the
nine-month period ended April 30, 2004. The deficit in cash flow from operating
activities for the nine-month period ended April 30, 2004 is primarily
attributable to the Company's net loss from operations of $328,221, adjusted for
depreciation and amortization of $11,271 a decrease in prepaid expenses of
$4,200 and an increase in operating liabilities of $266,166.
Cash flows used in investing activities for the nine-month period ended April
30, 2004 consisted of the acquisition of $37,331 of equipment used in operations
and an additional $25,000 used to secure assets used by the Company.
The Company met its cash requirements during the period through proceeds from
the issuance of common stock of $180,000, stock subscription of $100,000, net of
repayment of $22,975 of loan principal. This resulted in net cash provided by
financing activities of $257,025.
While we have raised capital to meet our working capital and financing needs in
the past, additional financing is required in order to meet our current and
projected cash flow deficits from operations and development. We are seeking
financing in the form of equity in order to provide the necessary working
capital. We currently have no commitments for financing. There is no guarantee
that we will be successful in raising the funds required.
By adjusting its operations and development to the level of capitalization,
management believes it has sufficient capital resources to meet projected cash
flow deficits through the next twelve months . However, if thereafter, we are
not successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, on terms acceptable to us, this could have a
material adverse effect on our business, results of operations, liquidity and
financial condition.
The effect of inflation on the Company's revenue and operating results was not
significant. The Company's operations are located in North America and there are
no seasonal aspects that would have a material effect on the Company's financial
condition or results of operations.
Trends, Risks and Uncertainties
We have sought to identify what we believe to be the most significant risks to
our business, but we cannot predict whether, or to what extent, any of such
risks may be realized nor can we guarantee that we have identified all possible
risks that might arise. Investors should carefully consider all of such risk
factors before making an investment decision with respect to our Common Stock.
Capital Expenditures and Commitments
We do not anticipate the sale of any material property, plant or equipment
during the next 12 months. Without substantial financial resources we do not
anticipate the acquisition of any material property, plant or equipment during
the next 12 months.
Off-balance Sheet Arrangements
The Company has not entered into any off-balance sheet arrangements. We do not
anticipate entering into any off-balance sheet arrangements during the next 12
months.
FORWARD-LOOKING STATEMENTS The statements in this Report relating to our
expectations, including those relating to implementation of our new business
model, our commencing new operations, our expected success in launching our new
lines of business , our ability to raise capital and the adequacy of our working
capital, are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Act"). Additionally, words such
as "expects", "anticipates", "intends", "believes", "will" and similar words are
used to identify forward-looking statements within the meaning of the Act.
The results anticipated by any or all of these forward-looking statements might
not occur. Important factors, uncertainties and risks that may cause actual
results to differ materially from these forward-looking statements include (1)
general domestic and international economic and business conditions including
political unrest, currency fluctuations and tariffs, (2) increased competition
in our markets and products, (3) our investment bankers' ability to sell our
securities and (4) our ability to commercialize our new services and attract
customers for them.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as the result of new information, future events or
otherwise.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures
We carried out an evaluation required by Rule 13a-15(b) of the Securities
Exchange Act of 1934 under the supervision and with the participation of our
management, including our chief executive officer and chief financial officer,
of the effectiveness of the design and operation of our "disclosure controls and
procedures" as of the end of the period covered by this Report.
Disclosure controls and procedures are designed with the objective of ensuring
that (i) information required to be disclosed in an issuer's reports filed under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC rules and forms and (ii)
information is accumulated and communicated to management, including our chief
executive officer and chief financial officer, as appropriate to allow timely
decisions regarding required disclosures.
The evaluation of our disclosure controls and procedures included a review of
our objectives and processes and effect on the information generated for use in
this Report. This type of evaluation will be done quarterly so that the
conclusions concerning the effectiveness of these controls can be reported in
our periodic reports filed with the SEC. We intend to maintain these controls as
processes that may be appropriately modified as circumstances warrant.
Based on this evaluation, Mr. Larry Wilcox, our chief executive officer and
chief financial officer, has concluded that our disclosure controls and
procedures are effective in timely alerting management to material information
relating to the Company required to be included in our periodic reports filed
with the SEC as of the end of the period covered by this Report. There were no
changes in our internal control over financial reporting that occurred during
our last fiscal quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting. However, a
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Management necessarily applied its judgment in assessing the benefits
of controls relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have been
detected. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions, regardless of how remote. Because of the inherent limitations
in a control system, misstatements due to error or fraud may occur and may not
be detected.
(b) Changes in Internal Controls
There were no significant changes in our internal controls or in other factors
that could significantly affect these controls subsequent to the evaluation
date.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Subsequent to April 30, 2004, we reached a favorable settlement of the
litigation with Qwest Communications, Inc. and the dispostion of the previously
incurred $1,070,000 obligtion to Qwest Communications, Inc. More information
will be supplied in our Form 10-KSB for the year ended July 31, 2004.
In the ordinary course of business, the Company may be involved in legal
proceedings from time to time. Although occasional adverse decisions or
settlements may occur, management believes that the final disposition of such
matters will not have material adverse effect on its financial position, results
of operations or liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) Not applicable.
(b) Not applicable.
(c) Effective with the Company's Merger on March 5, 2004, all previously
outstanding shares of common stock owned by UCI's stockholders were exchanged
for an aggregate of 4,188,375 shares newly issued Series-A Preferred Stock of
the Company.
(d) The following table provides information about purchases by us and our
affiliated purchasers during the quarter ended April 30, 2004 of equity
securities that are registered by us pursuant to Section 12 of the Securities
Exchange Act of 1934:
ISSUER PURCHASES OF EQUITY SECURITIES
- ------------------------- ----------------------- ----------------------- ----------------------- -----------------------
(d)
Maximum Number (or
(a) (b) (c) Approximate Dollar
Total Number of Average Price Paid Shares (or Units) Value) of Shares (or
Period Total Number of per Share (or Unit) Purchased as Part of Units) that May Yet
Shares (or Units) Publicly Announced Be Purchased Under
Purchased) or Plans or Programs (1) the Plans Programs (1)
- ------------------------- ----------------------- ----------------------- ----------------------- -----------------------
02/01/04-02/29/04 0 $0 0 0
- ------------------------- ----------------------- ----------------------- ----------------------- -----------------------
03/01/04-03/31/04 0 $0 0 0
- ------------------------- ----------------------- ----------------------- ----------------------- -----------------------
04/01/04-4/30/04 0 $0 0 0
- ------------------------- ----------------------- ----------------------- ----------------------- -----------------------
(1) We have not entered into any plans or programs under which we may repurchase
its common stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
We mailed to our stockholders an Information Statement on Schedule 14C filed
with the Securities and Exchange Commission on April 23, 2004 which was sent in
connection with the change of control occurring as a result of the reverse
merger. No vote or consent occurred.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger (1)
2.2 Amendment to the Agreement and Plan of Merger (1)
2.3 Second Amendment to the Agreement and Plan of Merger(1)
3.2 Certificate of Amendment filed on January 16, 2004 (2)
10.1 Employment Agreement with Larry Wilcox
31.1 Certification of CEO and CFO
32.1 Section 1350 Certification by CEO and CFO
- ---------
(1) Contained in Form 8-K filed on March 9, 2004.
(2) Contained in Form 10-KSB filed on February 5, 2004.
(b) Reports filed on Form 8-K during the three months ended April 30, 2004
On March 9, 2004, the Company filed a Current Report on Form 8-K dated March 5,
2004 reporting under items 2 and 7, the Company's merger with UCI.
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
UC Hub Group, Inc.
(formerly Expertise Technology
Innovation, Inc.)
(Registrant)
Date: June 21, 2004 /s/ Larry Wilcox
----------------
Larry Wilcox
Chief Executive Officer and Chief
Financial Officer