U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended October 31, 2006.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
COMMISSION FILE NUMBER: 001-15665
UC HUB GROUP, INC.
(Name of small business issuer in its charter)
NEVADA 88-0389393
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
285 EAST WARM SPRINGS ROAD, SUITE 1058 89119
LAS VEGAS, NEVADA (Zip Code)
(Address of principal executive offices)
(888) 883-5893
(Issuer's telephone number)
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 (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of October 31, 2006, the
issuer had 25,130,753 shares of its common stock issued and outstanding.
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . 1
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis, and Plan of Operation 9
Item 3. Controls and Procedures . . . . . . . . . . . . . . . . . . 11
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . 13
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . 13
Item 4. Submission of Matters to a Vote of Security Holders . . . . 13
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
UC HUB GROUP, INC.
Consolidated Balance Sheet
October 31,
2006
-------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 300
Accounts Receivable, net of allowance of $74,042
323,543
Other current assets 62,106
-------------
Total current assets 385,949
Property and equipment, net of accumulated
depreciation of $49,935 28,658
-------------
Total assets $ 414,607
=============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,042,502
Notes payable 342,132
-------------
Total current liabilities 1,384,634
-------------
Notes Long Term 354,965
Total Liabilities 1,739,599
Deferred Comp (146,137)
Common Stock Issued In Advance (435)
Stockholders' (deficit)
Convertible Preferred stock, 5,000,000 shares authorized, $0.001 par value
per share; 3,654,932 shares issued and outstanding at October 31, 2006 2,704
Common stock, .001 par value 50,000,000 shares authorized,
25,130,753 shares issued and outstanding at October 31, 2006 25,131
Stock subscription receivable 18,900
Additional paid-in capital 15,910,838
Accumulated (deficit) (17,135,993)
-------------
Total stockholder's (deficit) 1,324,992
Total liabilities and stockholders' (deficit) $ 414,607
The accompanying notes are an integral part of these financial statements.
1
UC HUB GROUP, INC.
Consolidated Statement of Losses
For the Three Months Ended October 31, 2005 and 2006
2005 2006
------------ ------------
Revenues $ 300,583 $ 0
Cost of Sales 139,256 0
------------ ------------
Gross Profit 161,327 0
Selling, general, and administrative expenses 456,236 172,882
Acquisition costs - -
------------ ------------
Total operating expenses 465,236 172,882
------------ ------------
Loss before other income and expense (303,909) (172,882)
Other income (expense):
Interest income (expense) - -
------------ ------------
Income (loss) before income taxes (303,909) (172,882)
Income tax benefit - -
------------ ------------
Net Loss $ (303,909) $ (172,882)
============ ============
NET LOSS PER COMMON SHARE
Profit (Loss) from operations
Loss from discontinued operations
Net loss $ (0.03) $ (0.01)
============ ============
PER SHARE INFORMATION -
BASIC AND FULLY DILUTED
Weighted average shares outstanding 10,500,000 25,130,753
============ ============
The accompanying notes are an integral part of these financial statements.
2
UC Hub Group, Inc
Addendum to Consolidated Stockholder's Equity
For The Period Feb 22, 1999 (Inception) to October 31, 2006
Preferred Common Stock
Preferred Stock Common Stock APIC Accum Common Deferred Total
Shares Amount Shares Amount Capital Deficit Stock Comp
Balance
July 31, 2004 3,654,932 3,655 4,312,471 4,313 13,758,880 (10,000) (15,202,216) - - (1,445,368)
Shown in Prior
Filings
(8/1/04-4/30/05) (754,081) (754) 9,674,139 9,674 1,027,975 28,900 (1,864,386) (435) (146,137) (995,163)
- --------------------------------------------------------------------------------------------------------------------------------
Balance
April 30, 2005 2,900,851 2,901 13,986,610 13,987 14,786,855 18,900 (17,066,602) (435) (146,137) (2,390,531)
Net Income 514,397 514,397
Conversion (Pref
to Common) (197,524) (197) 592,573 592 395
Adjust 23,339,149 2,339 2,339
- --------------------------------------------------------------------------------------------------------------------------------
Balance
July 31, 2005 2,703,327 2,704 16,918,322 161,918 14,786,855 18,900 (16,555,205) (435) (146,137) (1,876,400)
- --------------------------------------------------------------------------------------------------------------------------------
7/31/06 Balance 3,654,932 2,704 25,130,753 25,131 15,910,838 18,900 (16,963,111) (435) (146,137) (1,152,110)
- --------------------------------------------------------------------------------------------------------------------------------
Balance
10/31/06 3,654,932 2,704 25,130,753 25,131 15,910,838 18,900 (17,135,993) (435) (146,137) (1,324,992)
See accompanying notes to financial statements
3
UC HUB GROUP, INC.
Consolidated Statements of Cash Flows
Three months ended
October 31,
2005 2006
----------- -----------
OPERATING ACTIVITIES
Net (loss) $ (303,909) $ (172,882)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities:
Depreciation - -
Changes in:
Accounts receivable (147,879) -
Other current assets - 881,989
Deposits 207,752 -
Accounts payable (700) (873,252)
Accrued interest (42,706) -
Other Current Liabilities (20,835) -
----------- -----------
Net cash (used in) operating activities (12,519) -
----------- -----------
INVESTING ACTIVITIES
Net cash (used in) investing activities 1,100 -
----------- -----------
(11,419) -
FINANCING ACTIVITIES
Issuance of notes payable - -
Common stock subscribed for cash - -
Common Stock Subscribed for Services
----------- -----------
Net cash provided by financing activities 2,225 -
----------- -----------
Net increase (decrease) in cash (9,194) (33,740)
CASH AT BEGINNING OF YEAR 43,234 34,040
----------- -----------
CASH AT END OF YEAR $ 34,040 $ 300
=========== ===========
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash for paid for:
Interest $ - $ -
=========== ===========
Income taxes $ - $ -
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for services $ - $ -
=========== ===========
Preferred shares exchanged for common shares $ - $ -
=========== ===========
Issuance of stock and warrants for asset acquisition
and related costs value assigned to property and equipment $ - $ -
=========== ===========
Issuance of stock and warrants for asset acquisition,
Amount charged to acquisition costs $ - $ -
=========== ===========
4
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 three-month period ended October 31, 2006 are
not necessarily indicative of the results that may be expected for the year
ended July 31, 2007. The unaudited condensed consolidated financial statements
should be read in conjunction with the July 31, 2006 financial statements and
footnotes thereto included in the Company's Securities and Exchange Commission
Form 10-KSB.
BUSINESS AND BASIS OF PRESENTATION
BUSINESS AND BASIS OF PRESENTATION
- ----------------------------------
UC Hub Group Inc. ("Company" or "UC Hub") was formed on February 22, 1999 under
the laws of the State of California.
UC Hub is a communications software development and distribution company with
primary interests in digital communications and digitally based products and
services necessary to support the corporate vision of the "Digital City." At
October 31, 2006, we had a software division:
OurTown2, a municipal government software application designed to manage the
interface between a municipal government and its constituents or e-citizens.
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 $(172,882) and $(303,909) during the three months ended October 31, 2006
and 2005, respectively. The Company's current liabilities exceeded its current
assets by $998,685as of October 31, 2006 (see Note C).
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
5
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.
6
NOTE A - SEGMENT INFORMATION
The Company currently operates in one business segments: (1) reselling long
distance and related services through its subsidiary AllCom USA Inc.; (2)
telecommunications hardware sales and installation, a segment which was entered
during the three months ended October 31, 2004 when the Company purchased
certain assets of Integrated Communications (See Note B). Intercompany
receivables and payables are subtracted from total assets and liabilities for
the segments, which are eliminated in consolidation and therefore do not
themselves impact consolidated results.
NOTE B - CAPITAL STOCK
ETI transaction and preferred stock exchanged for common stock
- --------------------------------------------------------------
On March 5, 2004, the Company entered into an Agreement and Plan of Merger
('Agreement") with Expertise Technology Innovation, Inc("ETI") an inactive
publicly registered shell corporation with no significant assets or operations.
In accordance with SFAS No. 141, the Company was the acquiring entity. While the
transaction is accounted for using the purchase method of accounting, in
substance the Agreement is a recapitalization of the Company's capital structure
For accounting purposes, the Company has accounted for the transaction as a
reverse acquisition and the Company shall be the surviving entity. The total
purchase price was the fair value of the shares held by the ETI shareholders, or
$865,164. This amount was charged to operations during the twelve months ended
July 31, 2004. The Company did not recognize goodwill or any intangible assets
in connection with the transaction.
Effective with the Agreement, all previously outstanding common stock, preferred
stock, options and warrants owned by the Company's shareholders were exchanged
for an aggregate of 4,269,844 shares of ETI's convertible preferred stock (the
"ETI Preferred Stock"). The value of the ETI Preferred Stock that was issued was
the historical cost of the ETI's net tangible assets, which did not differ
materially from their fair value. In addition, holders of the Company's options
and warrants to acquire common stock exchanged their options for options to
acquire the ETI's common stock. The ETI Preferred Stock was exchangeable at the
option of the stockholder into shares of ETI Common Stock at the rate of one
share of ETI Preferred Stock for three shares of common stock. The exchange of
ETI Preferred Stock to common stock was restricted to one-twelfth of the total
number of shares held by each shareholder per month, beginning in January 2004.
During the three months ended October 31, 2004, 263,880 shares of ETI Preferred
Stock were exchanged for 791,639 shares of common stock. At October 31, 2004, a
cumulative total of 878,792 shares of ETI Preferred Stock had been exchanged for
2,636,376 shares of common stock, and 3,391,052 shares of ETI Preferred Stock
exchangeable for 10,173,156 shares of common stock remained outstanding.
INTEGRATED COMMUNICATIONS
- -------------------------
On August 12, 2004, UC HUB Group, Inc through its wholly owned subsidiary,
AllCom USA entered into a Binding Deal Memo to acquire certain assets of a
company located in Sparks, Nevada, Integrated Communications. AllCom has since
hired technicians and, as an interconnect telecommunications sales group, has
begun offering VoIP phone systems, engineering and cabling. AllCom provides
superior customer service installing: Altigen, Nortel, Siemens, NEC, and Comdial
telephone systems and refers to this division as AllCom Systems. The Company
issued 100,000 shares of common stock (valued at $60,000) and a warrant to
purchase 20,000 shares of the Company's common stock at $0.60 per share (valued
at $10,974) for total consideration valued at $70,974 in this transaction. The
aggregate fair market value of the tangible assets acquired, or $37,500, are
capitalized and are being depreciated over 24 months beginning at the date of
acquisition. The remainder of the acquisition cost, or $33,474, was charged to
acquisition costs in the financial statements for the three months ended October
31, 2004.
7
COMMON STOCK SUBSCRIBED
On September 17, 2004, we sold for $25,000 cash a subscription to buy shares of
our common stock at a 50% discount to market price at September 17, 2004 or
December 15, 2004, whichever price is less. These shares were not yet issued at
October 31, 2004, and the amount of $25,000 is shown as Common Stock Subscribed
in the financial statements for the three months ended October 31, 2004. In
conjunction with this sale of our common stock, we also issued a warrant to
purchase 4,100 shares of our common stock at a price equal to 20% of market
price at the date the subscription was funded, or September 20, 2004. We have
charged the fair value of this warrant, or $344, to operations during the three
months ended October 31, 2004.
On October 9, 2004, we sold 116,279 shares of our common stock at $0.43 per
share for a total of $50,000. These shares were not yet issued at October 31,
2004, and the amount of $50,000 is shown as Common Stock Subscribed in the
financial statements for the three months ended October 31, 2004. In conjunction
with the sale of this common stock subscription, we also issued a warrant to
purchase $50,000 of our common stock at a price equal to 25% of market price at
the time the warrant is exercised. We have charged the fair value of this
warrant, or $16,667, to operations during the three months ended October 31,
2004.
NOTE C - 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 $172,882 and $303,909
during the three months ended October 31, 2006 and 2005 respectively. The
Company's current liabilities exceeded its current assets by $998,665 as of
October 31, 2006. 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.
NOTE D - SUBSEQUENT EVENTS
In January 2005, the Company's Chief Executive Officer received options to
purchase 1,500,000 shares (post-split) of the Company's stock at a price of
$0.16. These options vest over a three-year period, and have a term of ten
years. The 946,875 options (post-split) previously held by the Chief Executive
Officer were cancelled.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
FORWARD-LOOKING INFORMATION
Much of the discussion in this Item is "forward looking." Actual operations
and results may materially differ from present plans and projections due to
changes in economic conditions, new business opportunities, changed business
conditions, and other developments. Other factors that could cause results to
differ materially are described in our filings with the Securities and Exchange
Commission.
The following are factors that could cause actual results or events to
differ materially from those anticipated, and include, but are not limited to
general economic, financial and business conditions, changes in and compliance
with governmental laws and regulations, including various state and federal
environmental regulations, our ability to obtain additional financing from
outside investors and/or bank and mezzanine lenders; and our ability to generate
sufficient revenues to cover operating losses and position us to achieve
positive cash flow.
Readers are cautioned not to place undue reliance on the forward-looking
statements contained herein, which speak only as of the date hereof. We believe
the information contained in this Form 10-QSB to be accurate as of the date
hereof. Changes may occur after that date. We will not update that information
except as required by law in the normal course of our public disclosure
practices.
Additionally, the following discussion regarding our financial condition
and results of operations should be read in conjunction with the financial
statements and related notes contained in Item 1 of Part I of this Form 10-QSB,
as well as the financial statements in Item 7 of Part II of our Form 10-KSB for
the fiscal year ended July 31, 2006.
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
2006.
COMPARISON OF THE THREE MONTHS ENDED OCTOBER 31, 2006 TO THE THREE MONTHS ENDED
OCTOBER 31, 2005
Revenue. Our total revenue was $0 for the three-month period ended October
31, 2006, a decrease of $300,583 or approximately 100 percent compared to
$300,583 for the same period ended October 31, 2005.
Gross Profit. Our gross profit was $0 or approximately 0 percent of sales
for the three months ended October 31, 2006, compared to a gross profit of
$161,327 or approximately 55 percent of sales for the three months ended October
31, 2005.
Costs and Expenses. Selling, general and administrative ("SG&A") expenses
for the three-month period ended October 31, 2006 were $172,882, a decrease of
$292,354 or approximately 63 percent compared to SG&A expenses of $465,236
during the three month period ended October 31, 2005.
Interest Expense. We incurred no interest expense during the three months
ended October 31, 2006 versus $0 during the three months ended October 31, 2005.
9
Net Loss. Our net loss for the three months ended October 31, 2006 was
$172,882, a decrease of $131,027 or approximately 43 percent compared to a net
loss of $303,909 for the three months ended October 31, 2005.
Our net loss per common share (basic and diluted) was ($0.01) for the three
months October 31, 2006 compared to a net loss per common share of ($0.03) for
the three months ended October 31, 2005.
The weighted average number of outstanding shares was 25,130,753 and
10,500,000 for the three months ended October 31, 2006 and 2005, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 2006, we had a working capital deficit of $998,685. We
generated a deficit in cash flow from operations of ($33,740) for the three
month period ended October 31, 2006. The deficit in cash flow from operating
activities is largely attributable to our net loss of $172,882, adjusted for
changes in the components of working capital amounting to a use of cash of
$33,740.
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 our operations and development to the level of capitalization,
we believe we have sufficient capital resources to meet projected cash flow
deficits through the next 12 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. Our net loss for the three months ended October 31, 2006
was $172,882, a decrease of $131,027 or approximately 43 percent compared to a
net loss of $303,909for the three months ended October 31, 2005. The improvement
in the generation of net income was due primarily to a significant decrease in
expenses that were being duplicated by our operating companies throughout most
of the fiscal year ended July 31, 2006.
The effect of inflation on our revenue and operating results was not
significant. Our operations are located in North America and there are no
seasonal aspects that would have a material effect on our financial condition or
results of operations.
Our independent certified public accountants have stated in their report
included in our July 31, 2006 Form 10-KSB, that we have incurred operating
losses in the last two years, and that we are dependent upon management's
ability to develop profitable operations. These factors among others may raise
substantial doubt about our ability to continue as a going concern.
HISTORICAL DEVELOPMENT
In February 1999, United Communications Hub, Inc., a California
corporation, was formed as a telecommunications company that initially began as
a switchless long distance reseller. It was our initial intent to also become a
certified local exchange carrier in order to provide a full range of local and
long distance vertical services. This was to be the foundation of our electronic
distributive concept of the "Digital City" where integrated services could be
distributed and billed from digital hubs over fiber and in the future, wireless
mediums. The original corporate strategy was to develop or acquire the
technologies as well as those products and services necessary to support the
"Digital City" concept which would subsequently drive electronic transactions.
In September 2002, we acquired AllCom USA, Inc., a Nevada corporation,
which is a licensed carrier that had approximately $2.6 million a year in
revenue. AllCom USA had a support infrastructure in place as a switchless
reseller of long distance and related services.
10
In September 2003, we formed a new wholly owned subsidiary, eSAFE, Inc, a
Nevada corporation, as our financial services arm to provide electronic
payments, cash cards and related custom transactional based services to local
communities.
In March 2004 we merged with a wholly owned subsidiary of Expertise
Technology Innovation, Inc., which resulted in a change of control of that
company as discussed below. See "Change of Control."
In July 2004, we acquired the assets and intellectual properties of
Govt.com and created an operating division to write, re-work and market
municipal government software under the name OurTown2. This acquisition helped
fill a void for software support in the Digital City vision.
In September 2005 the company sold its interest in AllCom USA to Qwest
Communications, Inc. The move was done to consolidate operations and focus on
more profitable business.
In April 2006, the company sold its interest in eSafe, Inc., a wholly-owned
subsidiary, to PSPP Holdings, Ltd.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
ITEM 3. CONTROLS AND PROCEDURES.
The term disclosure controls and procedures means controls and other
procedures of an issuer that are designed to ensure that information required to
be disclosed by the issuer in the reports that it files or submits under the
Exchange Act (15 U.S.C. 78a, et seq.) is recorded, processed, summarized and
reported, within the time periods specified in the Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the issuer's management, including its principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.
The term internal control over financial reporting is defined as a process
designed by, or under the supervision of, the issuer's principal executive and
principal financial officers, or persons performing similar functions, and
effected by the issuer's board of directors, management and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles and includes those policies and
procedures that:
- - Pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
issuer;
- - Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the
issuer are being made only in accordance with authorizations of management
and directors of the issuer; and
- - Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the issuer's assets that
could have a material effect on the financial statements.
Evaluation of Disclosure and Controls and Procedures. We carried out an
evaluation, 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. The evaluation
was undertaken in consultation with our accounting personnel. Based
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on that evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures are currently effective to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms. As we
develop new business or if we engage in an extraordinary transaction, we will
review our disclosure controls and procedures and make sure that they remain
adequate.
Changes in Internal Controls Over Financial Reporting. There were no
changes in the internal controls over our financial reporting that occurred
during the period covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
John A. Fee, Travis Horton, Park Cities Dental Associates vs. UC HUB; Case
No. RCV093990, In the Superior Court of the State of California, San Bernardino
County. Filed on March 21, 2006, the Plaintiff claims his shares should not have
been converted and that he didn't get notice of the merger or public hearing. He
did not show up at any meetings and it is unclear what the exact basis and
nature of his claim is at this point. We intend to defend against the lawsuits
vigorously.
We are not engaged in any other material litigation, and we are unaware of
any material other claims or complaints that could result in future litigation.
We will seek to minimize disputes with our customers but recognize the
inevitability of legal action in today's business environment as an unfortunate
price of conducting business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
EXHIBIT
NO. IDENTIFICATION OF EXHIBIT
- ------- ---------------------------------------------------------------------------------------------------
31.1* Certification of Larry Wilcox, Chief Executive Officer of UC Hub Group, Inc., pursuant to 18 U.S.C.
Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Larry Wilcox, Chief Financial Officer of UC Hub Group, Inc., pursuant to 18 U.S.C.
Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002.
32.1* Certification of Larry Wilcox, Chief Executive Officer of UC Hub Group, Inc., pursuant to 18 U.S.C.
Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002.
32.2* Certification of Larry Wilcox, Chief Financial Officer of UC Hub Group, Inc., pursuant to 18 U.S.C.
Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002.
- ----------
* Filed herewith.
** Previously filed.
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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.
UC HUB GROUP, INC.
Dated: January 12, 2007.
By /s/ Larry Wilcox
------------------------------------------
Larry Wilcox, Chief Executive Officer and
Chief Financial Officer
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