UGHL Union Bridge Holdings Ltd (CE)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in this Quarterly Report. The discussion highlights the Company’s results of operations and the principal factors that have affected the Company’s financial condition, as well as its liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on the Company’s unaudited financial statements contained in this Quarterly Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read this discussion and analysis together with such financial statements and the related notes thereto.

Overview

We were incorporated under the laws of the State of Nevada on May 6, 2014 under the name Costo, Inc. to engage in the business of distributing automobile parts and components necessary for the maintenance and repair of automobiles and specialty equipment, including construction and road machinery, principally in China, Europe and certain Commonwealth of Independent States countries. We changed our name to Union Bridge Holdings Limited on May 23, 2016 in connection with our expanded business plan under which we determined to expand operations into the health care industry. We never achieved any revenues from our automobile and specialty equipment business and during the fourth quarter of 2017 we determined to discontinue that area of business.

Since May 23, 2016 we have taken steps to position our company to operate in two segments of the health care industry: (i) as a distributor in Asia of technologically advanced medical equipment devices and other lifestyle products and services for the elderly, including, but not limited to wheelchairs and telemedic devices, and (ii) as an operator of senior care facilities in Asia, including, but not limited to Hong Kong, China and Thailand. For the telemedic devices, we are applying to the Taiwan Food and Drug Administration. We will require additional capital to finance our proposed operations, including our proposed Chang Mai, Thailand senior care facility project. No assurance can be given that we will successfully negotiate definitive agreements with respect to our various projects, successfully distribute products and services, achieve revenues or profitability, or raise capital as and when needed or that we will be able to do so on reasonable terms. We will also need to develop a sales force and engage qualified project partners to develop our business as presently contemplated.

RESULTS OF OPERATIONS

We are a development stage company and have not generated any material revenue to date. We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

The following comparative analysis on results of operations was based on the comparative financial statements, footnotes and related information for the three and nine months ended September 30, 2018 and 2017. This analysis should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report.

Three and Nine Month Periods Ended September 30, 2018 Compared to the Three and Nine Month Periods Ended September 30, 2017

Revenue

During the three and nine months ended September 30, 2018, we generated other income amounting to $1,274 for provision of services to a related party. We did not generate any revenues during the three and nine-months ended September 30, 2017.

Operating Expenses

Total operating expenses for the three and nine months ended September 30, 2018 were $75,620 and $170,571, an increase of $59,824 and $118,351, respectively, compared to the three and nine months ended September 30, 2017 when total operating expenses were $15,796 and $52,220 respectively. The increase was primarily due to increased SEC reporting and professional fees.

Net Loss

The net loss for the three and nine months ended September 30, 2018 was $74,719 and $239,701, an increase of $58,923 and $187,481, respectively, compared to the three and nine months ended September 30, 2017 when the net loss was $15,796 and $52,220. The increase was primarily the result of increased operating expenses and a tax penalty of $70,424, resulting from our failure to timely file certain foreign ownership tax forms, which amount includes interest. We have appealed the penalties as excessive.

Liquidity and Capital Resources

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of September 30, 2018, we had a working capital deficit of $435,406, an increase of $239,763 compared to our working capital deficit of $195,643 on December 31, 2017. The increase is primarily a result of the net loss in this period.

Cash Flows From Operating Activities

Net cash used in operating activities for the nine month period ended September 30, 2018 was $157,476, compared to $25,530 for the nine month period ended September 30, 2017. The increase of $131,946 was primarily a result of increased SEC reporting and professional fees.

Cash Flows From Financing Activities

We have financed our operations primarily with advances from shareholders. Net cash provided by financing activities was $180,522 during the nine month period ended September 30, 2018 compared to $141,736 in the nine month period ended September 30, 2017. The increase of $38,786 in cash provided by financing activities consisted of advances from shareholders.

Plan of Operation and Funding

We expect that working capital requirements will continue to be funded through further issuances of our securities and loans from our executive officers and principal shareholders, including Joseph Ho. Our working capital requirements are expected to increase in line with the growth of our business.

Existing working capital, further advances and debt instruments, and anticipated cash flow are not expected to be adequate to fund our operations and potential acquisitions over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) the acquisition of businesses in the health-related industry; (ii) acquisition of inventory; (iii) developmental expenses associated with a start-up business; and (iv) marketing expenses. We intend to finance these expenses with further issuances of equity securities and debt instruments. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

Material Commitments

On March 23, 2018, our subsidiary, Windsor Honour Limited (“WHL”) entered into a Binding Heads of Agreement with the owner of a land parcel for a senior care facility to be established in Chang Mai, Thailand. The parties will negotiate in good faith toward definitive agreements regarding the project. WHL would lease the land and be the developer of the project and would own the buildings on the site. WHL would have full control of the design and supervision of the construction of the project, as well as daily operations and management of the project. The land owner would be responsible for obtaining necessary construction, operation and other permits for the project and would provide necessary liaison with government officials. Total investment in the project for development and construction is estimated to be approximately 200 million Thai Baht (approximately US$6.4 million at current exchange rates), for which WHL would be responsible to obtain financing. WHL would also be responsible for arranging financing of operating costs until they can be funded from operations. The project would lease the land for 90 years with automatic renewals, each for 30 years. The total rent for the first 90 years would be 10 million Thai Baht (approximately US$320,000 at current exchange rates). In addition to the rent, WHL may consider a discretionary bonus to the land owner (with details to be agreed in the definitive agreements).

Upon signing the definitive agreement, WHL will pay 2 million Thai Baht (approximately US$64,300 at current exchange rates) as a deposit to the land owner within 90 days, which will be refundable if the development plan for the land as a senior nursing home facility has not been approved by the competent government authority within one year, or if before that date such authority has definitively denied the application for the development plan upon the request of WHL. Otherwise, the deposit will be applied to the rent for the land.

No assurance can be given, however, that the Chang Mai, Thailand senior facility project will be successfully developed and operated because, (i) WHL may not successfully negotiate definitive agreements for the project, (ii) required permits may not be obtained, and (iii) required financing may not be obtainable.

Through our subsidiary, Phoenix Creation Global Limited ("Phoenix"), on Apr 20, 2018 we entered into a Letter of Intent with Shenyang Shenhe Yixi Home Care Service Center ("Shenyang Yixi") to enter into a joint venture to promote the development of the elderly care business in China. After completing our due diligence and further discussion with Yixi, we have determined not to proceed with Yixi.

Through our subsidiary, Phoenix Creation Global Limited (“Phoenix”), on May 10, 2018 we signed a Memorandum of Understanding (“MOU”) with Beijing Yi Du Bai Shan Enterprise Management Limited (“Yi Du”) regarding the prospective development and operation of senior healthcare facilities in Beijing, China and the prospective purchase of 85% of the shares of Yi Du. After completing our due diligence and further discussion with Yi Du, we have determined not to proceed with Yi Du.

Through our agent, Union Glory Gold Holdings, on October 3, 2018, we signed a non-binding Beijing Elderly Satellites Cooperative Development Proposal (the “Proposal”) with Caroline Holding Group Co., Ltd. of China (“Caroline”) regarding cooperation on opportunities in developing satellite centers that provide home care services and community activities for the elderly and rehabilitation institutions for the elderly in Beijing, China. Through the Proposal, our subsidiary, Beijing Yihua Elderly Service Limited (“Yihua”), will be jointly owned by us and Caroline in a ratio of 70% and 30% respectively. Caroline would contribute the entitlement of the government project “"Research and Application of Common Technology for the Aged Services”" (part of the household pension management software and programme), obtain necessary government approvals for the facilities and provide management services. Caroline expects total investment in the venture over 2 years will not be less than RMB 50 million for at least 100 elderly satellite centers and 20 rehabilitation facilities by the end of 2020. We will be responsible for arranging the necessary financing. No assurance can be given that the proposed transactions under the Proposal will be successfully developed and completed because (i) we may not be able to successfully negotiate definitive agreements for the transactions with Caroline; (ii) we may not be able to obtain necessary financing for the Proposal; (iii) Caroline may not be able to obtain all necessary government permits for future facilities; and (iv) Caroline may not be able to successfully operate the existing facilities or manage the development, construction and operation of future facilities.

On November 6, 2018, our subsidiary, First Channel Limited (“First Channel”), signed a Memorandum of Understanding ("MOU") with APrevent Medical Inc. ("APrevent") regarding a potential share exchange between UGHL and APrevent. APrevent is a medical device company which designs, manufactures and distributes medical equipment and is currently developing two projects, including Vocal Implant System (VOIS). VOIS is a laryngeal implant used for glottis insufficiency (vocal fold paralysis). Medialization thyroplasty Type I (MT) is the standard treatment for glottis insufficiency, by inserting artificial or transplanted materials into the paraglottic space to achieve glottis closure. In patients with a large glottis gap or high vagal lesions, a surgical procedure, arytenoid adduction (AA), can be performed to reduce the posterior glottis gap and correct the vertical height difference between the vocal folds. Unlike existing products, APrevent’s VOIS implant combines the advantage of both MT and AA for optimized results. The prospective share exchange is subject to the results of each party’s due diligence, agreement on valuation (and therefore number of shares to be exchanged), negotiation of definitive agreements and approval of the board of directors of each party. Accordingly, no assurance can be given that the share exchange will be completed.

Inflation

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

Off-Balance Sheet Arrangements

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the accompanying condensed consolidated financial statements, the Company had an accumulated deficit at September 30, 2018 of $488,944, a net loss for the nine months ended September 30, 2018 of $239,701 and net cash used in operating activities for the nine months ended September 30, 2018 of $157,476. These conditions raise substantial doubt about our ability to continue as a going concern.

The Company is attempting to produce sufficient revenue; however, the Company’s cash position is not sufficient to support its daily operations. While the Company believes in the viability of its strategy to produce sufficient revenue and in its ability to raise additional funds, there can be no assurances that the Company will accomplish its goals. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds.

The condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The independent registered public accounting firm’s opinion accompanying our December 31, 2017 consolidated financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The consolidated financial statements have been prepared “assuming that we will continue as a going concern,” which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

On March 31, 2018, our chief executive officer, Joseph Ho, agreed to loan up to $1 million to the Company for investment and working capital purposes upon management’s request. Any such loans would be interest free, have no fixed repayment terms and would be repayable upon demand.

Critical Accounting Policies

We have identified the following policies below as critical to our business and results of operations. Our reported results are impacted by the application of the following accounting policies, certain of which require management to make subjective or complex judgments. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment. Specific risks associated with these critical accounting policies are described in the following paragraphs.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates.