10-Q 1 f10q4302008.htm 10Q-4-30-2008 UNITED STATES

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549

_______________________________


FORM 10Q

_______________________________


[mark one]

 

x

QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

  

For the quarterly period ended: April 30, 2008

 

o

TRANSITION REPORT UNDER 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.

(Exact name of registrant as specified in its charter)


Nevada

88-0389393

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification Number)


285 East Warm Springs Road, Suite 105, Las Vegas, NV 89119

(Address of principal executive offices including zip code)  


(800) 278-8870

(Registrant’s telephone number, including area code)  



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 o  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o    No x

 


Number of shares outstanding of the issuer’s common stock as of the latest practicable date: 29,112,804 shares of common stock, $.001 par value per share, as of June 12, 2008.

 


Transitional Small Business Disclosure Format (check one): Yes o  No x

 

1





UC HUB Group, Inc.


Index

 

PART I. FINANCIAL INFORMATION

Page

  

  

  

  

Item 1.

  

Financial Statements

 

3

  

  

Consolidated Balance Sheet as of April 30, 2008 (unaudited)

 

3

  

  

Consolidated Statement of Operations for the three months ended April 30, 2008 and 2007 (unaudited)

 

4

  

  

Consolidated Statements of Cash Flows for the three months ended April 30, 2008 and 2007 (unaudited)

 

5

  

  

Notes to Consolidated Financial Statements (unaudited)

6

  

  

  

  

Item 2.

  

Management's Discussion and Analysis or Plan of Operation

12

  

  

  

  

Item 3.

  

Controls and Procedures

15

  

  

  

  

PART II. OTHER INFORMATION

  

  

  

  

Item 1.

  

Legal Proceedings

17

  

  

  

  

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

17

  

  

  

  

Item 3.

  

Defaults Upon Senior Securities

17

  

  

  

  

Item 4.

  

Submission of Matters to a Vote of Security Holders

17

  

  

  

  

Item 5.

  

Other Information

17

  

  

  

  

Item 6.

  

Exhibits

18

 

2





UC HUB Group & Subsidiaries, Inc.

Consolidated Balance Sheet

for the Quarter Ended April 30,

  

 

 

 

 

 

 

  

 

 

 

 

 

 

  

 

2008

 

 

2007

 

ASSETS

 

 

 

 

 

 

  

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

   Cash and cash equivalents

 

$

9,409

 

 

$

0

 

   Accounts Receivable, net of allowance

 

$

-

 

 

$

-

 

   Other current assets

 

$

-

 

 

$

218,809

 

Total current assets

 

$

9,409

 

 

$

218,809

 

  

 

 

 

 

 

 

 

 

Inventory

 

$

105,900

 

 

$

-

 

  

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated

 

 

 

 

 

 

 

 

   depreciation

 

$

19,588

 

 

$

128,658

 

Licenses an Software

 

$

297,000

 

 

$

-

 

Total assets

 

$

431,897

 

 

$

347,467

 

  

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS'  (DEFICIT)

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accrued Interest

 

 

 

 

 

 

49,636

 

Accrued Expenses

 

 

 

 

 

 

468

 

Accounts payable

 

$

554,336

 

 

$

61,686

 

  Accrued Officer Salary

 

$

466,282

 

 

$

913,900

 

  Short Term Notes

 

$

1,138,594

 

 

$

-

 

  Settlements

 

$

90,963

 

 

$

39,033

 

      Total current liabilities

 

$

2,250,175

 

 

$

1,064,723

 

  

 

 

 

 

 

 

 

 

Convertible Debenture

 

$

905,000

 

 

$

918,000

 

  Long term notes

 

$

476,472

 

 

$

390,000

 

Total Liabilities

 

$

3,631,647

 

 

$

1,2,372,723

 

  

 

 

 

 

 

 

 

 

Stockholders' (deficit)

 

 

 

 

 

 

 

 

Convertible Preferred stock, 10,000,000 shares authorized,

.001 par value per share; 4,292,291 shares issued and outstanding at April 30, 2008

 

$

4,292

 

 

$

4,733

 

Common stock, .001 par value 500,000,000 shares

authorized, 29,112,804 shares issued and outstanding at April 30, 2008

 

$

29,113

 

 

$

27,695

 

   Additional paid-in capital

 

$

15,980,139

 

 

$

15,960,134

 

   Accumulated (deficit)

 

$

(19,213,294

)

 

$

(18,017,418

)

  

 

 

 

 

 

 

 

 

      Total stockholder's (deficit)

 

$

(3,199,752

)

 

$

(2,024,856

)

  

 

 

 

 

 

 

 

 

Total liabilities and stockholders' (deficit)

 

$

431,897

 

 

$

347,467

 


The accompanying notes are an integral part of these consolidated financial statements.

 

3





UC HUB Group & Subsidiaries, Inc.

Consolidated Statement of Losses

for the Quarter Ended April 30,

  

 

 

 

 

 

 

  

 

 

 

 

 

 

  

 

 

2,008

 

 

 

2,007

 

  

 

 

 

 

 

 

 

 

Revenues

 

$

17,611

 

 

$

-

 

  

 

 

 

 

 

 

 

 

Cost of Sales

 

$

12,502

 

 

$

-

 

  

 

 

 

 

 

 

 

 

Gross Profit

 

$

5,109

 

 

$

-

 

  

 

 

 

 

 

 

 

 

Selling, general, and administrative expenses

 

$

36,500

 

 

$

140,580

 

  

 

 

 

 

 

 

 

 

Total operating expenses

 

$

36,500

 

 

$

140,580

 

  

 

 

 

 

 

 

 

 

Loss before other income and expense

 

$

(31,390

)

 

$

(140,580)

 

  

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

$

(31,390

)

 

$

(150,470

)

  

 

 

 

 

 

 

 

 

Other Income

 

$

0

 

 

$

(70,000)

 

  

 

 

 

 

 

 

 

 

Net Loss

 

$

(31,390

)

 

$

(210,580

)

Loss Per Share

 

 

-

 

 

 

(.01)

 

Weighted Average Shares Outstanding

 

 

29,112,804

 

 

 

25,672,457

 

      

        The accompanying notes are an integral part of these consolidated financial statements.

 

4






UC HUB Group & Subsidiaries, Inc.

Consolidated Statements of Cash Flows

for the Quarter Ended April 30,

  

 

 

 

 

 

 

  

 

2008

 

 

2007

 

  

 

 

 

 

 

 

OPERATING ACTIVITIES

 

 

 

 

 

 

Net (loss)

 

$

(31,390)

 

 

$

(210,580)

 

Adjustments to reconcile net (loss) to net cash

 

 

 

 

 

 

 

 

   (used in) operating activities:

 

 

 

 

 

 

 

 

Changes in:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

 

 

 

Other current assets

 

 

 

 

 

 

 

 

Loans Receivable

 

$

 

 

 

$

(208,924)

 

Accounts payable

 

$

(29,265)

 

 

$

6,864

 

Loans Payable

 

$

77,095

 

 

 

 

 

Loans Receivable

 

 

 

 

 

 

 

 

Accrued Interest Payable

 

 

 

 

 

 

 

 

Stock Payable

 

 

 

 

 

 

 

 

Accrued Officers Salary

 

 

 

 

 

$

(62,100)

 

Net cash (used in) operating activities

 

$

16,440

 

 

$

(488,468)

 

  

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Acquisition of property and equipment

 

$

(813)

 

 

$

(45,000)

 

Net cash (used in) investing activities

 

$

(813)

 

 

$

(45,000)

 

  

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

       Settlement

 

 

(20,150)

 

 

 

 

 

  

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

$

(20,150)

 

 

$

533,000

 

  

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

$

(4,523)

 

 

$

-

 

  

 

 

 

 

 

 

 

 

CASH AT BEGINNING OF QUARTER

 

$

13,932

 

 

$

-

 

  

 

 

 

 

 

 

 

 

CASH AT END OF QUARTER

 

$

9,409

 

 

$

-

 

 

The accompanying notes are an integral part of these consolidated financial statements

 

5





Note 1 — Basis of Presentation


The unaudited consolidated financial statements have been prepared by UC HUB Group, Inc., Inc. (the “Registrant”), in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these consolidated financial statements do not include all of the disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended July 31, 2007 included in the Registrant’s Form 10K-SB for the year ended July 31, 2007. In the opinion of management, the unaudited interim consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented. The results of the three months ended April 30, 2008 are not necessarily indicative of the results to be expected for the full year ending July 31, 2008.


Note 2 — Consolidation of eSafe, Inc.


On November 16, 2007 the Registrant entered into a rescission agreement (the “Rescission Agreement”) with PSPP Holdings, Inc. to rescind the April 10, 2006 acquisition of eSafe by PSPP Holdings, Inc.; accordingly, the Registrant has consolidated the books of eSafe into to Registrants financial statements as of November 16, 2007. For a detail of the terms of the Recession Agreement, please refer to our 8-K Current Report filing with the SEC, dated November 21, 2007.


Note 3 — Organization and Summary of Significant Accounting Policies


Organization


UC Hub Group Inc. (the "Registrant" or "UC HUB") (Previously E Channels Corp, previously: Expertise Technology Innovation Inc., previously: Make It Happen Management) was incorporated in the state of Nevada as on March 23, 1998.


In March 2004 the Registrant did a reverse merger with United Communications Hub, Inc. (“UCH”) a California Corporation, which resulted in a change of control of the Registrant. The Registrant changed its name to UC HUB Group, Inc.


In July 2004, the Registrant 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.


In September 2005 the Registrant sold substantially all the assets of AllCom USA (a subsidiary of UCH at the time of the merger).


In May 2006 the Registrant formed a new subsidiary Three, Inc., which was incorporated in the state of Nevada.


In February 2007 the Registrant formed a new subsidiary DCL Environmental Systems, Inc. which was incorporated in the state of Nevada.


On April 10, 2006 (the “Acquisition Agreement”), the Registrant sold its interest in eSafe, Inc., (a subsidiary of UCH at the time of the merger), to PSPP Holdings, Inc. Then in October 2007, the Registrant filed suit against PSPP for breaking the terms of the April 2006 Acquisition Agreement. On November 16, 2007 the Registrant and PSPP entered into a rescission agreement to rescind the original Acquisition Agreement again making eSafe, Inc. a wholly owned subsidiary of the Registrant.


Going Concern


The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplates the Registrant as a going concern. The Registrant has had minimal revenue for the period, and has incurred a net loss for the three months ended April 30, 2008 in the amount of ($31,390) and as of

 

6





April 30, 2008 had an accumulated deficit of $(19,213,294). These conditions raise substantial doubt as to the Registrant's ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Registrant be unable to continue as a going concern.


The Registrant’s ability to continue in business is dependent upon obtaining sufficient financing or attaining profitable operations.  The Registrant believes that it can raise additional funds through short-term borrowing or the additional sale of its debt or equity securities.  There is no assurance that the Registrant will be successful in raising this additional capital or in achieving profitable operations.  These consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.


Principles of consolidation


The consolidated financial statements include the accounts of the Registrant and its wholly owned subsidiaries. Significant inter-company transactions have been eliminated. All figures are shown in US Dollars.


Use of estimates


The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements. The Registrant bases its estimates on historical experience, management expectations for future performance, and other assumptions as appropriate. Key areas affected by estimates include the assessment of the recoverability of long-lived assets, which is based on such factors as estimated future cash flows. The Registrant re-evaluates its estimates on an ongoing basis. Actual results may vary from those estimates.


Cash and cash equivalents


All cash and short-term investments with original maturities of three months or less are considered cash and cash equivalents, since they are readily convertible to cash. These short-term investments are stated at cost, which approximates fair value.


Concentration of Credit Risk


Financial instruments, which potentially subject the Registrant to concentrations of credit risk, consist of cash and cash equivalents and accounts receivables. The Registrant places its cash with high quality financial institutions and at times may exceed the FDIC $100,000 insurance limit. The Registrant extends credit based on an evaluation of the customer’s financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer’s financial condition. The Registrant monitors its exposure for credit losses and maintains allowances for anticipated losses, as required. Accounts are “written-off” when deemed uncollectible.


Inventory

 

Inventory is stated at cost and is not depreciated.


Property and equipment

 

Property and equipment are stated at cost. Costs of replacements and major improvements are capitalized, and maintenance and repairs are charged to operations as incurred. Depreciation expense is provided primarily by the straight-line method over the estimated useful lives of the assets, five years for computer equipment, and ten years for office furnishings.


7





Revenues


Revenues are recognized only when realized / realizable and earned, in accordance with GAAP.


Stock Based Compensation


The Registrant accounts for its stock-based compensation in accordance with SFAS No. 123R, “Share-Based Payment, an Amendment of FASB Statement No. 123.” The Registrant recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees. The Registrant did not grant any new employee options and no options were cancelled or exercised during the three months ended April 30, 2008. As of April 30, 2008, there were 9,780,000 options outstanding.


Income taxes


Income taxes are accounted for in accordance with SFAS 109, Accounting for Income Taxes, using the asset and liability method. Deferred tax assets and liabilities are recognized for the 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 carry forwards. 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.


The Registrant had a very large net operating loss carry forward for income tax reporting purposes that may be offset against future taxable income. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Accordingly, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements, because the Registrant is uncertain if they will ever be in a position to utilize the NOL carry forward. Accordingly, the potential tax benefits of the loss carry forward are offset by a valuation allowance of the same amount.


Earnings (loss) per share


In accordance with SFAS No. 128, “Earnings Per Share,” the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. At April 30, 2008, there were substantial potential dilutive securities, including, 12,920,000 shares reserved for conversion of outstanding Series A Preferred Stock and 18,100,000 shares reserved in case of conversion of the Debenture.  For the three months ended April 30, 2008, the Registrant incurred net losses; therefore the effect of any dilutive securities (if existing) would be anti-dilutive.


Derivative instruments

 

In February 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial Instruments, an Amendment of FASB Standards No. 133 and 140” (hereinafter “SFAS No. 155”). This statement established the accounting for certain derivatives embedded in other instruments. It simplifies accounting for certain hybrid financial instruments by permitting fair value re-measurement for any hybrid instrument that contains an embedded derivative that otherwise would require bifurcation under SFAS No. 133 as well as eliminating a restriction on the passive derivative instruments that a qualifying special-purpose entity (“SPE”) may hold under SFAS No. 140. This statement allows a public entity to irrevocably elect to initially and subsequently measure a hybrid instrument that would be required to be separated into a host contract and derivative in its entirety at fair value (with changes in fair value recognized in earnings) so long as that instrument is not designated as a hedging instrument pursuant to the statement. SFAS No. 140 previously prohibited a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for fiscal years beginning after September 15, 2007, with early adoption permitted

 

8





as of the beginning of an entity's fiscal year. Management believes the adoption of this statement has no impact on the Registrant's financial condition or results of operations.

 

If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. The Registrant has not entered into derivatives contracts to hedge existing risks or for speculative purposes. The Registrant has not engaged in any transactions that would be considered derivative instruments.


Special purpose entities


The Registrant does not have any off-balance sheet financing activities.


Impairment or Disposal of Long-Lived Assets


In August 2001, FASB issued Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“FAS 144”). FAS144 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to their estimated fair value based on the best information available.


Recently issued accounting pronouncements


In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement clarifies the definition of fair value, establishes a framework for measuring fair value and expands the disclosures on fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. Management has not determined the effect, if any, that the adoption of this statement will have on the Registrant’s financial statements.


In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans−An amendment of FASB Statements No. 87, 88, 106, and 132(R)." One objective of this standard is to make it easier for investors, employees, retirees and other parties to understand and assess an employer's financial position and its ability to fulfill the obligations under its benefit plans. SFAS No. 158 requires employers to fully recognize in their financial statements the obligations associated with single−employer defined benefit pension plans, retiree healthcare plans, and other postretirement plans. SFAS No. 158 requires an employer to fully recognize in its statement of financial position the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. This Statement also requires an employer to measure the funded status of a plan as of the date of its year−end statement of financial position, with limited exceptions. SFAS No. 158 requires an entity to recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost pursuant to SFAS No. 87. This Statement requires an entity to disclose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. The Registrant is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures for fiscal years ending after December 15, 2006. Management believes that this statement has no significant impact on the Registrant’s financial statements.

 

In February of 2007 the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115.”  The statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities

 

9





differently without having to apply complex hedge accounting provisions.  The statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007.  The Registrant is analyzing the potential accounting treatment.


FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No.109” Interpretation 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. The amount of tax benefits to be recognized for a tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax benefits relating to tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met or certain other events have occurred. Previously recognized tax benefits relating to tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. Interpretation 48 also provides guidance on the accounting for and disclosure of tax reserves for unrecognized tax benefits, interest and penalties and accounting in interim periods. Interpretation 48 is effective for fiscal years beginning after December 15, 2006. The change in net assets as a result of applying this pronouncement will be a change in accounting principle with the cumulative effect of the change required to be treated as an adjustment to the opening balance of retained earnings on January 1, 2007, except in certain cases involving uncertainties relating to income taxes in purchase business combinations. In such instances, the impact of the adoption of Interpretation 48 will result in an adjustment to goodwill. The adoption of this standard had no material impact on the Registrant’s consolidated financial statements.


Note 4 — Commitments


All activities of the Registrant have been conducted by corporate officers from either their homes or business offices. Currently, there are no outstanding debts owed by the Registrant for the use of these facilities and there are no commitments for future use of the facilities.


Note 5 — Convertible Debentures


Pursuant to a Securities Purchase Agreement, dated as of June 6, 2007 (the "Securities Purchase Agreement") and the January 2008 renegotiation of this Securities Purchase Agreement, UC Hub Group Inc. (the "Registrant") sold an Original Issue Discount Self-Liquidating Convertible Debenture having a principal amount of $378,000 (the "Debenture”).  The Debenture was sold for $350,000. Except to pay off certain liabilities of the Registrant totaling approximately $327,000, the proceeds of the offering was used for working capital purposes.  The Debenture does not bear interest. The principal sum of the Debenture must be paid by June 7, 2009 and is convertible at the Purchasers' option into 7,300,000 shares of the Registrant's common stock based on the current amount of $365,000 at a conversion price equal to $0.05 per share (subject to adjustment as provided in the Debenture). The full principal amount of the Debenture is due upon a default under the terms of the Debenture.   During the period covered by this report, $13,000 of the Debentures was converted into common stock.


Pursuant to a second Securities Purchase Agreement, dated as of February 16, 2007 (the "Securities Purchase Agreement") and the January 2008 renegotiation of this second Securities Purchase Agreement, UC Hub Group Inc. (the "Registrant") sold a second Original Issue Discount Self-Liquidating Convertible Debenture having a principal amount of $540,000 (the "Debenture”).  The Debenture was sold for $500,000 and the additional of $40,000 was expensed. Except to pay off certain liabilities of the Registrant the proceeds of the offering was used for working capital purposes.  The Debenture does not bear interest. The principal sum of the Debenture must be paid by June 7, 2009 and is convertible into 10,800,000 shares of the Registrant's common stock, at the Purchasers' option, at a conversion price equal to $0.05 per share (subject to adjustment as provided in the Debenture).  The full principal amount of the Debenture is due upon a default under the terms of the Debenture.


10





In the event that the Registrant breaches any representation or warranty of either of the two Securities Purchase Agreements, the outstanding principal amount of the Debenture(s), plus liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the holder's election, immediately due and payable in cash at the Mandatory Default Amount (as defined in the Debenture).The holder of the two Debentures, in aggregate,  many not to convert the Debentures such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise exceeds 4.9% of the then issued and outstanding shares of common stock. This limitation may be waived by the holder of the Debenture upon not less than 61 days' prior notice to the Registrant, to change the beneficial ownership limitation to 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this note. Upon such a change by a Holder of the Beneficial Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the beneficial ownership limitation may not be further waived by the holder of the notes.


Note 6 – Stockholders’ Deficit


At the three months ended April 30, 2008, the Registrant had 29,112,804 shares of its common stock issued and outstanding.


Note 7 – Securities


On April 10, 2006, the Registrant sold to PSPP Holdings, Inc. (PSPJ:OB) as an asset acquisition all of the Registrant's interest in eSafe, Inc., (a wholly owned subsidiary) pursuant to an Acquisition Agreement. As part of the sale the Registrant received 22,890,936 million shares of the common stock of PSPP Holdings, Inc. On November 16, 2007 the Registrant entered into the Rescission Agreement rescinding the Acquisition Agreement and returning these shares to PSPP.


Note 8 – Liabilities


On January 1, 2007 Larry Wilcox, an Officer and Director of the Registrant elected to work without current compensation. The amount show on these financial statements as Accrued Officer Salary is owed to Mr. Wilcox solely for salaries owed him to date.. Mr. Wilcox is also owed for certain expenses, per his employment agreement which some have yet to be paid; these expenses are tracked as normal payables. On November 16, 2007, concurrent with the Rescission Agreement, Mr. Wilcox began accruing salaries, but has not been paid. Payments made to Mr. Wilcox during the Period covered by this report were solely to reimburse him for loans made to the Registrant and past due and incurred expenses.


The Registrant carries Short Term Notes in the amount of $1,138,594 representing loans made to the Registrant by a group of investors, headed by First Global Securities. Subsequent to the end of the period covered by this report, First Global Securities agreed to convert these short term notes into an Original Issue Discount Self-Liquidating Convertible Debenture issued by the Registrant. See “Subsequent Events”.


The Registrant has nine (9) notes with various investors, which were originally Short Term Notes. However the Registrant carries these notes as Long Term Notes, because by mutual agreement between the investors and the Registrant these notes have been extended indefinitely. Some of these notes continue to incur interest. Currently the Registrant has $476,472 in Long Term Notes, plus interest.


Note 9 – Common Stock


At the three months ended April 30, 2008, the Registrant had 29,112,804 shares of its common stock issued and outstanding.


 

11





Item 2.  Management’s Discussion and Analysis of Plan of Operations


FORWARD-LOOKING STATEMENTS


This discussion and analysis should be read in conjunction with the accompanying Consolidated Financial Statements and related notes. Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis we review our estimates and assumptions. Our estimates are based on our historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations. Our critical accounting policies, the policies we believe are most important to the presentation of our financial statements and require the most difficult, subjective and complex judgments, are outlined below in ‘‘Critical Accounting Policies,’’ and have not changed significantly.

 

In addition, certain statements made in this report may constitute “forward-looking statements”. These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of the Registrant to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Specifically, 1) our ability to obtain necessary regulatory approvals for our products; and 2) our ability to increase revenues and operating income, is dependent upon our ability to develop and sell our products, general economic conditions, and other factors. You can identify forward-looking statements by terminology such as "may," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continues" or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected-in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.


General


The following discussion and analysis should be read in conjunction with the our consolidated financial statements and related footnotes for the year ended July 31, 2007 included in our Form 10K-SB for the year ended July 31, 2007 filed with the Securities and Exchange Commission.  The discussion of results, causes and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future.


Overview


Statements included in this Management's Discussion and Analysis or Plan of Operation, and in future filings by us with the Securities and Exchange Commission, in our press releases and in oral statements made with the approval of an authorized executive officer which are not historical or current facts are "forward-looking statements." We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect our actual results and could cause our actual financial performance to differ materially from that expressed in any forward-looking statement: (i) lack of resources to maintain our good standing status and requisite filings with the Securities and Exchange Commission. The foregoing list should not be construed as exhaustive and we disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.


12




RESULTS OF OPERATIONS


Comparison of the three (3) months ended April 30, 2008 to the three (3) months ended April 30, 2007:

Our total revenue was $17,611 for the 3 months ended April 30, 2008 compared to $0 for the same period ended April 30, 2007. Our gross profit was $5,109 for the 3 months ended April 30, 2008 versus $0 for the 3 months ended April 30, 2007. Selling, general and administrative expenses ("SG&A") for the 3 months ended April 30, 2008 were $36,500, as compared to SG&A of $140,580 for the 3 months ended April 30, 2007. The reduction is primarily attributable to the elimination of salaries and consulting fees.


Our net loss for the 3 months ended April 30, 2008 was ($31,390), compared to a loss of ($140,580) for the 3 months ended April 30, 2007.


Our Corporate History


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.


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.


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 we sold its interest in AllCom USA. The move was done to consolidate operations and focus on more profitable business.


In April 2006, we sold its interest in eSafe, Inc., a wholly-owned subsidiary, to PSPP Holdings, Inc; however on November 16, 2007, we rescinded the original Acquisition Agreement voiding the original April 2007 acquisition.


On February 18, 2008 the Registrant entered into an agreement with Unlimited Diversity, Inc  (“UDI”) a Florida corporation to  acquire most of UDI’s assets including certain patents, trademarks and other intellectual property, including but not limited Patent #7,334724 entitled “a system for operating a prepaid reloadable debit card having ancillary services” issued by the USPTO on February 22, 2008, the trademark name “PODER”, and all rights and title to three prepaid VISA approved websites including www.poderonline.com. Pursuant to the asset acquisition agreement, the Registrant will pay to UCI, upon the completion of all conditions precedent in the agreement, one million one hundred thousand shares of its common stock, which shall carry a restricted legend.


The Registrant has executed a binding term sheet with First Global Securities to convert short term notes in the amount of $1,088,222 (representing loans made to the Registrant by First Global Securities and a group of their investors) into an Original Issue Discount Self-Liquidating Convertible Debenture, issued by the Registrant.


Critical Accounting Policies and Estimates


Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.  On an ongoing basis, we evaluate our estimates, including assessment of the recoverability of long-lived assets, which is based on such factors as estimated future cash flows.  We base our estimates on historical experience and on

13




various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described items, are reasonable.

 

Revenues.  Revenues are recognized only when realized / realizable and earned, in accordance with accounting principles generally accepted in the United States.


Stock Based Compensation. We account for our stock-based compensation in accordance with SFAS No. 123R, “Share-Based Payment, an Amendment of FASB Statement No. 123.” We recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.


Long-Lived Assets.  We account for long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to their estimated fair value based on the best information available.


Our Plan of Operation


Our plan of operation calls for additional capital to facilitate growth and support our long-term development and acquisition strategy marketing programs. It is likely that we will have to seek additional financing through future public or private sales of our securities, including equity securities. We may also seek funding for the development and acquisitions marketing of our products through strategic partnerships and other arrangements with investment partners. There can be no assurance, however, that such collaborative arrangements or additional funds will be available when needed, or on terms acceptable to us, if at all. Any such additional financing may result in significant dilution to existing stockholders. If adequate funds are not available we may be required to curtail one or more of our future activates programs. We expect to incur significant capital expenses in pursuing our development and acquisition strategy plans to increase sales volume, expanding our product lines and obtaining additional financing through stock offerings, or licensing agreements or other feasible financing alternatives. In order for us to continue our operations, we will require additional funds over the coming months. While we hope we will be able to generate funds necessary to maintain our operations, without additional funds there will be a limitation to the number of new projects that we could take on, which may have an effect on our ability to maintain our operations. Additional financing may not be available on terms favorable to us, or at all. If additional funds are not available, we may not be able to execute our business model plan or take advantage of business opportunities. Our ability to obtain such additional financing and to achieve our operating goals is uncertain. In the event that we do not obtain additional capital or are not able to increase cash flow through the increase of in revenues, there is a substantial doubt of our being able to continue as a going concern.


Additionally, it should be noted that our independent auditors have included a going concern opinion and related discussion in the notes to our financial statements. The auditors have included the going concern provision because we have incurred significant and recurring losses and have a large working capital deficit that the auditors believe raises substantial doubt about our ability to continue as a going concern. Until such time we receive additional debt or equity financing, there is a risk that our auditors will continue to include a going concern provision in the notes to our financial statements.


Liquidity and Capital Resources


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 or debt 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.


14





We do not have sufficient capital resources to meet projected cash flow deficits through the next 12 months; if we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this will have a material adverse effect on our business, results of operations, liquidity and financial condition. Our independent certified public accountants have stated in their report included in our July 31, 2007 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.


Quarterly Developments


During the quarter ended January 31, 2008 the Registrant renegotiated the terms of both Original Issue Discount Self-Liquidating Convertible Debentures. Pursuant to the new agreement, all 17,280,000 of the holder’s warrants originally granted were cancelled. This resulted in a marked decrease of a potential dilutive event that could have been affected by the holders of the Debentures. In addition to the cancellation of the warrants, the holder of both Debentures agreed to make the due dates of the Debentures coterminous and extend the due date one year from the latter of the original due dates, or June 7, 2009.



Critical Accounting Policies


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make a wide variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and (ii) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements. Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increases, these judgments become even more subjective and complex. The most significant accounting policies that are most important to the portrayal of our current financial condition and results of operations are as follows:

 

Inflation: Our results of operations have not been affected by inflation and we do not expect inflation to have a significant effect on its operations in the future.


Revenues: The Registrant recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104 (“SAB 104”), “Revenue Recognition in Financial Statements”. Revenue consists of the sale of products and is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the product is shipped, and collectability is reasonably assured.


Stock Based Compensation. We account for our stock-based compensation in accordance with SFAS No. 123R, “Share-Based Payment, an Amendment of FASB Statement No. 123.” We recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.


Long-Lived Assets.  We account for long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to their estimated fair value based on the best information available.


Item 3 - Controls and Procedures


As required by SEC rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures at the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer, who is our principal executive officer and

 

15





principal financial officer.  Based on this evaluation, this officer has concluded that the design and operation of our disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Disclosure controls and procedures are our controls and other procedures that are designed 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. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 


Item 4 – Subsequent Events


On May 8, 2008 the Registrant signed a Non Binding LOI with Votecom that superseded the previous LOI of March 7, 2008.  The May 8, 2008 LOI included signatures of UC Hub Group Inc, and the two debenture holders, Crescent International and First Global. Securities.  Upon such reorganization, UC Hub Group Inc shall have no assets or liabilities remaining including all remaining subs which shall be sold or spun off.  Purchase price for all of the shares of Votecom will be 450 million shares of UC Hub Group Inc leaving no more than 50 million diluted shares outstanding for UC Hub.


On March 31, 2008 the Registrant acquired all of the assets of GreenZap Inc which included the software, backup, and code for online transactions, a 750,000 database, trademarks, and all such related intellectual properties per press release dated February 25, 2008.  The purchase price was 500,000 UC Hub common shares.

 

16





Part II.   OTHER INFORMATION


Item 1. Legal Proceedings


Currently there are two (2) active suits against one of the Registrants subsidiaries, Allcom USA. There are no suits directly against the Registrant and management knows of no pending or threatened suits. All other previous suits against the Registrant or one of its subsidiaries have been settled during the period covered by this report, including FEE v. UC HUB was settled for 30,000 shares of the Registrant’s common stock. The following are descriptions of the two (2) current suites against the Registrant and its subsidiaries.


SUTTON LAW CENTER, P.C. V. ALTIGEN COMMUNICATIONS, INC., ET AL. (INCLUDING ALLCOM)

Case No.: CV06-02167

Court: In the Second Judicial District Court of the State of Nevada, Washoe County

Date filed: September 5, 2006


Description: Plaintiff asserts claims against Integrated Communications Systems, Inc., Allcom USA, Inc. and Shawn Jones and Simon Eggington, former employees of Allcom USA, Inc., alleging that defendants installed a defective telephone system for plaintiff and falsely represented the performance of the phone system. Plaintiff seeks damages in the approximate amount of $70,000. Jones and Eggington have indicated that they believe that plaintiff's claims have little of no basis. Discovery has not yet commenced in the case and no trial date has been set.


EMBARQ LOGISTICS, INC. V. ALLCOM USA, INC., UCHUB GROUP, INC., AND VERNON BILL THOMPSON

Case No.: 06C-036007

Court: Justice Court, Las Vegas Township, Clark County, Nevada

Date Filed: November 2006


Description: Plaintiff claims damages of approximately $10,000 for unpaid telephone equipment sold to defendant Allcom USA. Claims are asserted against the remaining defendants on the allegations that they are alter egos of Allcom. No trial date has been set in the case.


The Registrant settled the lawsuit of FEE v. UC HUB for 30,000 shares of its common stock.



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.


17





Item 6.  Exhibits


Regulation

S Number

Exhibit

31.1

Certification of the Chief Executive Officer, as the principal executive officer and the principal financial officer, under 18 U.S.C. section 1350, as adopted in accordance with section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of the Chief Executive Officer, as the principal executive officer and the principal financial officer, under 18 U.S.C. Section 1350, as adopted in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.

 


SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 


DATE: June 14, 2008

UC HUB GROUP, INC., INC.

(Registrant)

 

By: /s/ Larry D. Wilcox

  

Larry D. Wilcox

Director and CEO

(Principal Executive Officer and Principal Financial Officer)

 

18