Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2013
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 000-51132
Universal Capital Management, Inc.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of Incorporation or Organization) 2601 Annand Drive Suite 16 Wilmington, DE (Address of principal executive offices) | 20-1568059 (I.R.S. Employer Identification No.) ______19808____ (Zip Code) |
Registrant’s telephone number, including area code: (302) 998-8824 | |
Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one).
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller Reporting Company [X]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The number of shares of the registrant’s Common Stock outstanding as of March 14, 2013 was 26,452,156. Of this amount, 13,287,426 were issued and outstanding and 13,164,730 were subscribed but not issued. Additionally, the Company had issued 15,000,000 shares that were contingently returnable in accordance with specified conditions to be met in the future per an agreement. As a result, these 15,000,000 shares are not considered outstanding.
Universal Capital Management, Inc. (the “Company”) is filing this Quarterly Report on Form 10-Q for the quarterly period ended January 31, 2013 with the Securities and Exchange Commission without review by the Company’s principal auditors. As a result, the financial statements contained in this Quarterly Report may be subject to future adjustment. The Company intends to file an amendment to this Quarterly Report upon the Company’s principal auditor’s review of the Company’s financial statements and this Quarterly Report.
TABLE OF CONTENTS
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| PART I – FINANCIAL INFORMATION |
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Item 1. | Financial Statements | 1 |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 1 |
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Item 3. | Controls and Procedures | 3 |
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| PART II - OTHER INFORMATION |
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Item 1. | Legal Proceedings | 4 |
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Item 2. | Exhibits | 4 |
PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements
See Appendix
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Introduction
The following discussion contains forward-looking statements. The words “anticipate,” “believe,” “expect,” “plan,” “intend,” “estimate,” “project,” “will,” “could,” “may” and similar expressions are intended to identify forward-looking statements. Such statements reflect our Company’s current views with respect to future events and financial performance and involve risks and uncertainties. Should one or more risks or uncertainties occur, or should underlying assumptions prove incorrect, actual results may vary materially and adversely from those anticipated, believed, expected, planned, intended, estimated, projected or otherwise indicated. Readers should not place undue reliance on these forward-looking statements.
The following discussion is qualified by reference to, and should be read in conjunction with our Company’s unaudited financial statements and the notes thereto.
The Company’s business strategy is to identify, provide advice and market consumer products. Our strategy employs three primary channels: Direct Response Television (Infomercials), Television Shopping Networks and Retail Outlets. We seek to assist and enable entrepreneurs to introduce products to the consumer market. Entrepreneurs can leverage our experience and valuable business contacts in functions such as product selection, marketing development, media buying and direct response television production. Inventors and entrepreneurs submit products or business concepts for our input and advice. We generate revenues from two primary sources (i) management of the entire business cycle of the consumer product and (ii) sales of consumer products, for which we receive a share of net profits of consumer products sold. We do not manufacture any of our products. As of the date of this Form 10-Q, we have generated limited revenues and do not rely on any principal products. While the Company has received nominal revenues from management fees generated from the sales of several products, none of these fees have generated material revenues. We currently do not sell any internally developed or Company owned products.
On August 22, 2012 we entered into a memorandum of understanding (“MOU”) with New Bastion Development, Inc., a Florida corporation (“New Bastion”) to document the business terms of a deal to enter into a joint development relationship for the construction of a nitrogen fertilizer plant capable of producing approximately 4,000 MT of granulated urea on a daily basis. This project will be completed by New Bastion Regeneration, Inc. (“NBR”), which is a New Bastion subsidiary company that was formed by New Bastion for the sole purpose of completing the project. Pursuant to the terms of the MOU: (i) the Company agreed to purchase from New Bastion 100,000 issued and outstanding shares of NBR held by New Bastion, representing approximately 12.7% of the outstanding shares of NBR in exchange for 5,000,000 newly issued restricted shares of Universal issued upon the execution of the MOU and $500,000 pursuant to the following schedule: $100,000 within 15 days of execution of the memorandum of understanding; and $400,000 within 60 days of execution of the Agreement. We also received an option to purchase up to 240,000 additional shares of NBR currently owned by New Bastion, which will represent a total ownership of approximately 43% of NBR owned by Universal for an additional $4.8 million under terms to be mutually negotiated, assuming no additional shares of NBR are issued. Per the MOU, the Company also issued 15,000,000 shares of common stock to New Bastion on the execution date of the MOU. However, these shares of common stock are being held by the Company in accordance with the option discussed previously to acquire additional ownership in NBR for an additional $4.8 million. As a result, these shares of common stock are contingently returnable and not considered outstanding as of January 31, 2013.
1
The 5,000,000 shares specified in the MOU were issued to New Bastion and valued at $0.07 per share (closing bid price of Universal on August 21, 2012) or a total of $350,000. However, the $100,000 of cash consideration was not paid within the 15 day period specified.
On October 1, 2012, New Bastion provided a revised framework to Universal within the existing MOU. The revised framework included: $500,000 of cash consideration to be paid pursuant to the following schedule: a) $25,000 on or before October 31, 2012; b) $75,000 on or before December 15, 2012; and c) $400,000 on or before January 15, 2013. The revised framework provided that the dates for the cash consideration may be adjusted by mutual agreement and that New Bastion, at its sole discretion, may elect to accept additional shares of Universal common stock for all or part of the final $400,000 payment.
As of January 31, 2013, the Company fully paid the first scheduled payment of $25,000 the second scheduled payment of $75,000 and $10,000 of third scheduled payment of $400,000 to New Bastion. The Company recorded the balance of the unpaid third scheduled payment in the amount of $390,000 as an accrued liability – joint venture in the accompanying unaudited financial statements. Subsequently, in February 2013, the Company paid New Bastion $143,500, net of $3,500 of expenses paid, of the accrued liability – joint venture and as of the date of these unaudited financial statements, $250,000 remains outstanding and due to New Bastion.
Results of Operations
Three months ending January 31, 2013 compared to the three months ended January 31, 2012
For the three months ending January 31, 2013 and 2012, the Company had no revenue for services.
Total operating expenses for the three months ending January 31, 2013 were $145,173, of which the principal components were professional fees of $10,723, $8,733 of insurance expense, $11,057 of interest expense, $25,073 of salaries & wages expense and $89,588 of other general and administrative expense. By comparison, total operating expenses for the three months ending January 31, 2012 were $56,032, of which the principal components were professional fees of $8,337, salaries & wages of $14,046, $18,175 of insurance expense, $6,289 of interest expense and $9,105 of other general and administrative expense.
The Company realized a loss from operations of $145,173 and a net loss of $283,815 for the three months ending January 31, 2013, compared to a loss from operations of $56,032 and a net income of $294,186 for the three months ending January 31, 2012. Included in the calculation of the Company’s Net Income (Loss) were net tax provisions of $85,000 and $242,000 for the three months ending January 31, 2013 and 2012, respectively.
Nine months ending January 31, 2013 compared to the nine months ended January 31, 2012
For the nine months ending January 31, 2013, the Company had revenue for services in the amount of $43,010 compared to $56,677 for the nine months ending January 31, 2012.
Total operating expenses for the nine months ending January 31, 2013 were $543,616, of which the principal components were professional fees of $287,914, salaries and wages expense of $37,598, insurance expense of $22,618, interest expense of $31,760, bad debt expense of $56,387, and other general and administrative expense of $107,339. By comparison, total operating expenses for the nine months ending January 31, 2012 were $165,543, of which the principal components were professional fees of $20,963, salaries and wages expense of $32,207, insurance expense of $51,233, interest expense of $20,482 and other general and administrative expense of $39,977.
2
The Company realized a loss from operations of $500,606 and a net loss of $515,750 for the nine months ending January 31, 2013, compared to a loss from operations of $108,866 and a net loss of $156,315 for the nine months ending January 31, 2012. Included in the calculation of the Company’s Net Loss were net tax provisions of $139,000 and $356,000 for the nine months ending January 31, 2013 and 2012, respectively.
Liquidity and Capital Resources
From inception, the Company has relied upon the infusion of funds through capital share transactions for liquidity. The Company had $197,475 of cash at January 31, 2013, of which $143,500 was utilized to reduce the Company’s debt with New Bastion in February, 2013. Consequently, payment of operating expenses will have to come from management fees, from sale of inventory, from borrowed funds, sale of investment securities or from the sale of our capital stock. There is no assurance that our Company will be successful in raising such additional funds or additional borrowings or if it can, that it can do so at a price that management believes to be appropriate.
At January 31, 2013, $881,279 or 74% of our investments are illiquid securities that do not have a market or they are restricted and therefore cannot be traded or sold.
The Company may be forced to dispose of a portion of its current investment securities if it ever becomes short of cash. Any such dispositions may have to be made at inopportune times, which may have a material adverse effect on our overall revenue.
Critical Accounting Policies
Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the Notes to the Financial Statements.
Off-Balance Sheet Arrangements
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 is material to investors.
Item 3.
Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of our Company’s principal executive officer and principal financial officer of the effectiveness of the design and operation of our Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, our principal executive officer and our principal financial officer have determined that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report Form 10-Q.
Changes in Internal Control Over Financial Reporting. No change in our Company’s internal control over financial reporting occurred during our Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our Company’s internal control over financial reporting.
3
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings.
MICCO World, Inc. Lawsuit
In July 2010, our Company filed a lawsuit against MICCO World, Inc. (formerly known as Constellation Group, Inc.) and its officers, Phil Lundquist, Steven Brisker and Tom Ridenour (collectively known as the “Defendants”). This lawsuit was filed in the Superior Court of Delaware in New Castle County. This lawsuit was filed in response to various activities by the Defendants that include misleading investors, making disparaging remarks about our Company, misrepresentation of capital structure, and misappropriation of funds.
We are seeking judgment in the amount of $611,000 plus costs, legal fees, pre- and post-judgment interest, plus other amounts and relief to be determined.
In March 2011 the Defendants filed a motion to dismiss, which was denied in June 2011.
Item 2.
Exhibits.
The following exhibits are included herein:
31.1
Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Principal Executive Officer of the Company.
31.2
Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Principal Financial Officer of the Company.
32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Principal Executive Officer of the Company.
32.2
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Principal Financial Officer of the Company.
4
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.
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UNIVERSAL CAPITAL MANAGEMENT, INC.
FINANCIAL STATEMENTS
JANUARY 31, 2013 AND 2012
(UNAUDITED)
UNIVERSAL CAPITAL MANAGEMENT, INC.
CONTENTS
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BALANCE SHEET | F-1 |
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STATEMENTS OF OPERATIONS | F-2 |
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STATEMENTS OF CASH FLOWS | F-3 |
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NOTES TO FINANCIAL STATEMENTS | F-4 – F-13 |
UNIVERSAL CAPITAL MANAGEMENT, INC.
BALANCE SHEET
(UNAUDITED)
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| January 31, 2013 |
| April 30, 2012 |
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| (Unaudited) |
| (Unaudited) |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
| $ 197,475 |
| $ 9,435 |
Prepaid expenses |
| 850 |
| 2,181 |
Total Current Assets |
| 198,325 |
| 11,616 |
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Long Term Assets |
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Investments, net |
| 1,184,433 |
| 548,008 |
Deferred income tax |
| 1,667,000 |
| 1,528,000 |
Notes receivable, net |
| 97,341 |
| 153,670 |
Other long term assets |
| 1,100 |
| 1,100 |
Total Long Term Assets |
| 2,949,874 |
| 2,230,778 |
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TOTAL ASSETS |
| $ 3,148,199 |
| $ 2,242,394 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities |
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Accounts payable |
| $ 324,489 |
| $ 327,583 |
Notes payable, related parties |
| 18,000 |
| 18,802 |
Notes payable |
| 2,100 |
| 2,100 |
Accrued payable – joint venture |
| 390,000 |
| - |
Total Current Liabilities |
| 734,589 |
| 348,485 |
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Long Term Liabilities |
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Accrued expenses |
| 205,537 |
| 195,097 |
Note payable, related parties |
| 250,403 |
| 294,696 |
Accrued interest |
| 92,050 |
| 92,050 |
Accrued interest, related parties |
| 112,283 |
| 97,316 |
Total Long Term Liabilities |
| 660,273 |
| 679,159 |
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TOTAL LIABILITIES |
| 1,394,862 |
| 1,027,644 |
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COMMITMENTS AND CONTINGENCIES (NOTE 10) |
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STOCKHOLDERS’ EQUITY |
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Common stock, $0.001 par value, 50,000,000 shares authorized; |
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13,287,426 and 13,287,426 shares issued and outstanding at |
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January 31, 2013 and April 30, 2012, respectively |
| $ 13,287 |
| $ 13,287 |
Common stock – subscribed; 13,164,730 and -0- at January 31, 2013 |
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and April 30, 2012, respectively |
| 13,165 |
| - |
Additional paid-in capital |
| 9,117,150 |
| 8,076,242 |
Accumulated Deficiency |
| (6,874,515) |
| (4,431,332) |
Net Loss |
| (515,750) |
| (2,443,447) |
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TOTAL STOCKHOLDERS’ EQUITY |
| 1,753,337 |
| 1,214,750 |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ 3,148,199 |
| $ 2,242,394 |
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See accompanying unaudited notes to these financial statements.
F-1
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
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| For the Three |
| For the Three |
| For the Nine |
| For the Nine |
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| Months Ending |
| Months Ending |
| Months Ending |
| Months Ending |
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| January 31, 2013 |
| January 31, 2012 |
| January 31, 2013 |
| January 31, 2012 |
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REVENUES |
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Management services |
| $ - |
| $ - |
| $ 43,010 |
| $ 56,677 |
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TOTAL REVENUES |
| - |
| - |
| 43,010 |
| 56,677 |
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OPERATING EXPENSES |
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Salaries and wages |
| 25,073 |
| 14,046 |
| 37,598 |
| 32,207 |
Professional fees |
| 10,723 |
| 8,337 |
| 287,914 |
| 20,963 |
Insurance |
| 8,733 |
| 18,175 |
| 22,618 |
| 51,233 |
Interest expense |
| 11,057 |
| 6,289 |
| 31,760 |
| 20,482 |
General and administrative |
| 89,588 |
| 9,105 |
| 107,339 |
| 39,977 |
Bad Debt Expense |
| - |
| - |
| 56,387 |
| - |
Depreciation |
| - |
| 82 |
| - |
| 682 |
TOTAL OPERATING EXPENSES |
| 145,173 |
| 56,032 |
| 543,616 |
| 165,543 |
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LOSS FROM OPERATIONS |
| (145,173) |
| (56,032) |
| (500,606) |
| (108,866) |
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OTHER INCOME/(LOSS) |
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Refunds |
| - |
| (10,827) |
| - |
| - |
Realized loss on disposal of investments |
| (12,005) |
| (65,130) |
| (15,598) |
| (445,469) |
Unrealized appreciation (depreciation) on investments |
| (41,637) |
| 662,627 |
| (146,348) |
| 699,088 |
Other Income |
| - |
| 5,548 |
| 7,802 |
| 54,932 |
TOTAL OTHER INCOME/(LOSS) |
| (53,642) |
| 592,218 |
| (154,144) |
| 308,551 |
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Income (Loss) before income taxes |
| (198,815) |
| 536,186 |
| (654,750) |
| 199,685 |
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Income tax benefit (provision) |
| (85,000) |
| (242,000) |
| (139,000) |
| (356,000) |
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NET INCOME (LOSS) |
| $ (283,815) |
| $ 294,186 |
| $ (515,750) |
| $ (156,315) |
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Income/(loss) per common share: |
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Basic |
| $ (0.02) |
| $ 0.05 |
| $ (0.03) |
| $ (0.03) |
Diluted |
| $ (0.02) |
| $ 0.05 |
| $ (0.03) |
| $ (0.03) |
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Weighted-average number of common shares |
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Basic |
| 17,576,244 |
| 5,912,426 |
| 17,576,244 |
| 5,912,426 |
Diluted |
| 17,576,244 |
| 5,912,426 |
| 17,576,244 |
| 5,912,426 |
See accompanying unaudited notes to these financial statements.
F-2
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
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| For the Nine |
| For the Nine |
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| Months Ending |
| Months Ending |
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| January 31, 2013 |
| January 31, 2012 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
| $ (515,750) |
| $ (156,315) |
Adjustments to reconcile net loss |
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to net cash provided by (used in) operating activities: |
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Stock issued for services |
| 216,800 |
| - |
Sale (purchase) of investment securities |
| (408,371) |
| 99,477 |
Loss on sale of investments |
| 15,598 |
| 445,469 |
Depreciation |
| - |
| 681 |
Net unrealized (appreciation) depreciation on investments |
| 146,348 |
| (699,293) |
Deferred income taxes |
| (139,000) |
| 382,000 |
Current income taxes |
| - |
| (26,000) |
(Increase) decrease in assets: |
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Notes receivable affiliates |
| - |
| (2,461) |
Receivable – non affiliates |
| 55,791 |
| - |
Prepaid Expenses |
| 1,331 |
| 26,611 |
Increase (decrease) in liabilities: |
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Accounts payable |
| (3,094) |
| 11,303 |
Accrued expenses |
| 10,440 |
| (10,910) |
Accrued interest, related parties |
| 14,967 |
| 20,398 |
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Net cash provided by (used in) operating activities |
| (604,940) |
| 90,959 |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Repayment of debt |
| - |
| (22,110) |
Issuance of common stock |
| 837,273 |
| - |
Repayment of notes payable - related parties |
| (44,293) |
| (83,302) |
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Net cash provided by (used in) financing activities |
| 792,980 |
| (105,412) |
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
| 188,040 |
| (14,453) |
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CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR |
| 9,435 |
| 16,566 |
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CASH AND CASH EQUIVALENTS - END OF YEAR |
| $ 197,475 |
| $ 2,113 |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOWS: |
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CASH PAID FOR INCOME TAXES |
| $ 3,000 |
| $ 8,000 |
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ACCRUED PAYABLE – JOINT VENTURE |
| $ 390,000 |
| $ - |
See accompanying unaudited notes to these financial statements.
F-3
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History and Nature of Business
Universal Capital Management, Inc. (the “Company,” “we,” “us,” “our”) was initially formed as a business development company. The Company had its beginning as a closed-end, non-diversified management investment company that had elected to be treated as a business development company under the Investment Company Act of 1940. We were a diversified, aggressive investment tool that assisted early stage development companies in all aspects of the planning process from inception to entering the public marketplace. This included assisting with the preparation of financial statements, capitalization tables, valuations, business plans and coordinating public/investor relations efforts. Our niche was to assist young companies preparing themselves for introduction to a diversified group of accredited investors in order to assist them with obtaining private debt and/or equity financing. Since we had differing clients in varied industries, our overall portfolio was extremely diversified, which we believed enabled us to offer investors who invest in us a potentially higher return with less risk. For our management services we received a block of common stock or warrants to purchase common stock which could result in a financial windfall for us and our shareholders. The Company referred to companies in which it invested as “portfolio companies.”
On November 1, 2011, the Company filed Form N-54C notification of withdrawal of election to be regulated as a BDC. The withdrawal was effective upon receipt of the Form N-54C notification by the SEC, and our Company is no longer subject to regulation as a Business Development Company (“BDC”).
We have no intention to invest in securities or meet the definition of an investment company, as described in Section 3 of the 1940 Act. Our Company will be managed so it will not be deemed to be an investment company as defined in the 1940 Act. Our company will maintain its registration under the 1934 Act and we will continue to be obligated to file regular reports as required thereunder.
Since we made our election to file Form N-54C notification of withdrawal of election to be regulated as a BDC on November 1, 2011, this Quarterly report on Form 10-Q for the quarterly period ended January 31, 2013 reflects our operations during the fifth quarterly period that we are not required to be regulated as a BDC.
Our Company identifies, advises in development and markets consumer products. Our strategy employs three primary channels: Direct Response Television (Infomercials), Television Shopping Networks and Retail Outlets. We seek to assist and enable entrepreneurs to introduce products to the consumer market. Entrepreneurs can leverage our experience and valuable business contacts in functions such as product selection, marketing development, media buying and direct response television production. Inventors and entrepreneurs submit products or business concepts for our input and advice. We generate revenues from two primary sources (i) management of the entire business cycle of the consumer product and (ii) sales of consumer products, for which we receive a share of net profits of consumer products sold. We do not manufacture any of our products. As of the date of this Form 10-Q, we have generated limited revenues and do not rely on any principal products. While the Company has received nominal revenues from management fees generated from the sales of several products, none of these fees have generated material revenues. We currently do not sell any internally developed or Company owned products.
We are currently positioning our Company to expand its business and become a diversified holding company that is engaged in different businesses through the operation of consolidated subsidiaries. We plan to accomplish this expansion through acquisition, merger or the formation of newly created subsidiaries. We are currently in various stages of talks with several target companies that could further the company's goal to become a diversified holding company, but no agreements have been reached to date.
F-4
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future, actual results could differ from the estimates. Significant estimates in the accompanying financial statements include the allowance for receivables, estimates of depreciable lives, valuation of property and equipment, valuation of securities, valuation of equity based instruments issued for other than cash, and the valuation allowance on deferred tax assets.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers all investment instruments purchased with maturity of three months or less to be cash and cash equivalents.
Concentration of Credit Risk
Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash. At January 31, 2013 the Company did not have deposits with a financial institution that exceeded the FDIC deposit insurance coverage of $250,000.
Accounts Receivable
Accounts receivable consist of fees for services provided by the Company and are reported at fair value. The Company provides an allowance for losses on trade receivables based on a review of the current status of existing receivables and management’s evaluation of periodic aging of accounts. The Company charges off accounts receivable against the allowance for losses when an account is deemed to be uncollectible. It is not the Company’s policy to accrue interest on past due receivables.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. For financial accounting purposes, depreciation is generally computed by the straight-line method over the following useful lives:
Furniture and fixtures |
| 5 to 7 years |
Computer and office equipment |
| 3 to 7 years |
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, receivables, accounts payable and accrued expenses. The carrying values of cash, receivables, accounts payable and accrued expenses approximate fair value because of their short maturities.
The carrying value of the notes payable approximates fair value since the interest rate associated with the debt approximates the current market interest rates.
Revenue Recognition
Management Services
We offer our customers services consisting of managing, marketing and accounting to aid in the Direct Response marketing of their product or service. In these instances, revenue is recognized when the contracted services have been provided and accepted by the customer.
F-5
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Accounting Services
The Company provides accounting and other administrative services to its clients. Upon entering into a contract with the company, the Company provides services as defined in the contract and revenue is recognized as incurred or as otherwise stated in the contract based on similar criteria as for management services discussed above.
Product Sales
We also recognize revenue from product sales in accordance with ASC 605 — Revenue Recognition. Following agreements or orders from customers, we ship product to our customers often through a third party facilitator. Revenue from product sales is only recognized when substantially all the risks and rewards of ownership have transferred to our customers, the selling price is fixed and collection is reasonably assured.
Typically, these criteria are met when our customers order is received by them and we receive acknowledgment of receipt by a third party shipper.
Income Taxes
We account for income taxes in accordance with FASB ASC 740 — Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of FASB ASC 740 — Income Taxes.
FASB ASC 740 requires that we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.
Deferred tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Deferred income taxes arise principally from the recognition of unrealized gains or losses from appreciation or depreciation in investment value for financial statements purposes, while for income tax purposes, gains or losses are only recognized when realized (disposition). When unrealized gains and losses result in a net unrealized loss, provision is made for a deferred tax asset. When unrealized gains and losses result in a net unrealized gain, provision is made for a deferred tax liability. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable to refundable for the period plus or minus the change during the period in deferred tax assets or liabilities.
Net Realized Gains or Losses and Net Changes in Unrealized Appreciation or Depreciation
Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the original cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized. The original cost basis of the securities we receive in connection with our management services is equal to the amount of revenue we recognize upon receipt of such securities. Net realized gains or losses are recognized as other income on the Company’s statement of operations for the period.
F-6
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Net change in unrealized appreciation or depreciation of investments reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. Net change in unrealized appreciation or depreciation is recognized as other income on the Company’s statement of operations for the period.
Recoverability of Long Lived Assets
The Company follows ASC-360-10-20, Property, Plant and Equipment – Overall. This standard states that long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the excess of the asset’s carrying amount over the estimated fair market value.
Reclassifications
Certain reclassifications were made to the January 31, 2012 financial statements in order to conform to the January 31, 2013 financial statement presentation.
Recently Issued Pronouncements
The Company follows ASC 805, Business Combinations. This standard establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. It also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination.
This statement is effective for the Company beginning May 1, 2009 and will change the accounting for business combinations on a prospective basis.
The Company follows ASC 820-10, Fair Value Measurements and Disclosure, that was adopted on May 1, 2008. This position provides additional guidance for fair value measures under ASC 820-10 in determining if the market for an assets or liability is inactive and, accordingly, if quoted market prices may not be indicative of fair value. In January 2010, there was an amendment to ASC 820-10 which the Company adopted on February 1, 2010. The adoption of this amendment did not have a material impact on the Company’s financial statements.
ASC 825-10-65, Interim Disclosures About Fair Value of Financial Instruments, extends the existing disclosure requirements related to the fair value of financial instruments, which were previously only required in annual financial statements, to interim periods. Given that ASC 825-10-65 provides for additional disclosures, its adoption did not have any impact on the Company’s financial statements. The disclosure requirements under ASC 825-10-65 are included in Note 3 to the financial statements.
ASC 855, Subsequent Events, sets forth principles and requirements for subsequent events, specifically (1) the period during which management should evaluate events or transactions that may occur for potential recognition and disclosure, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date, and (3) the disclosures that an entity should make about events and transactions occurring after the balance sheet date. ASC 855 was effective for interim reporting periods ending after June 15, 2009. This standard was amended in February 2010, Amendments to Certain Recognition and Disclosure Requirements. The Company has adopted ASC 855 and its amendment, and this adoption did not have a material impact on its financial statements.
In June 2009, the FASB issued ASC 105-10-65, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB No. 162, which will become the source of authoritative U.S. GAAP recognized by the FASB to be applied to non-governmental entities. On its effective date, ASC 105-10-65 will supersede all then-existing, non-SEC accounting and reporting standards. ASC 105-10-65 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company has adopted ASC 105-10-65, and this adoption did not have a material impact on its financial statements.
F-7
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU No. 2011-04 clarifies some existing concepts, eliminates wording differences between U.S. GAAP and International Financial Reporting Standards (“IFRS”), and in some limited cases, changes some principles to achieve convergence between U.S. GAAP and IFRS. ASU No. 2011-04 results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU No. 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. The provisions of ASU No. 2011-04 will become effective for us on April 1, 2012 and are to be applied prospectively. We do not expect the adoption of the provisions of ASU No. 2011-04 to have a material effect on our financial position, results of operations or cash flows and we do not expect to materially modify or expand our financial statement footnote disclosures.
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. ASU No. 2011-05 requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. ASU No. 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of stockholders’ equity. The presentation requirements will become effective for us on April 1, 2012. As ASU No. 2011-05 applies to financial statement presentation matters, the adoption of ASU No. 2011-05 will not affect our financial position, results of operations or cash flows and we believe our current presentation of comprehensive income complies with the new presentation requirements.
NOTE 2 – BUSINESS RISKS AND UNCERTAINTIES
A substantial portion of our assets are in privately held companies whose securities are inherently illiquid. These privately held companies tend to lack management depth, to have limited or no history of operations and to not have attained profitability. Because of the speculative nature and the lack of a public market for these investments, there is greater risk of loss than is the case with traditional investment securities.
Because there is typically no public market for our interest in these small privately held companies, the valuation of the equity in that portion of our portfolio is determined in good faith by our Valuation Committee, comprised of all the members of the Board of Directors, in accordance with our Valuation Procedures and is subject to significant estimates and judgments. In the absence of a readily ascertainable market value, the determined value of our portfolio equity interest may differ significantly from the values that would be placed on the portfolio if a ready market for the equity interests existed. Any changes in valuation are recorded in our Statement of Operations as “Unrealized appreciation (depreciation) on investments.” Changes in valuation of any of our investments in privately held companies from one period to another may be volatile.
During the nine months ending January 31, 2013, we did not manufacture any of our products. As of the date of this filing, we have generated limited revenues and do not rely on any principal products. While the Company has received nominal revenues from management fees generated from the sales of several products, none of these fees have generated material revenues. We currently do not sell any internally developed or Company owned products.
NOTE 3– INVESTMENTS
As described in Note 1, the Company adopted ASC 820-10 on May 1, 2008. ASC 820-10, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an
F-8
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
asset or liability. As a basis for considering such assumptions, ASC 820-10 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 - Observable inputs such as quoted prices in active markets;
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. As described in Note 1, an amendment to ASC 820-10 was issued in January 2010.
This amendment is effective for interim reporting periods beginning after December 15, 2009. The Company adopted this amendment on February 1, 2010 and it did not have a material effect on its financial statements.
At January 31, 2013, our financial assets were categorized as follows in the fair value hierarchy for ASC 820-10:
|
|
| Fair Value Measurement at Reporting Date Using: | ||||||
|
|
|
|
| Quoted Prices in |
| Significant Other |
| Significant |
|
|
|
|
| Active Markets for |
| Observable |
| Unobservable |
|
|
| Fair Value |
| Identical Assets |
| Inputs |
| Inputs |
|
|
| January 31, 2013 |
| (Level 1) |
| (Level 2) |
| (Level 3) |
|
|
|
|
|
|
|
|
|
|
Investments |
|
| $ 1,184,433 |
| $ 303,154 |
| $ - |
| $ 881,279 |
|
|
|
|
|
|
|
|
|
|
Total Investments in securities |
| $ 1,184,433 |
| $ 303,154 |
| $ - |
| $ 881,279 | |
The following chart shows the components of change in the financial assets categorized as Level 3, for the three months ending January 31, 2013:
|
|
| Fair Value Measurement Using |
|
|
| Significant Unobservable Inputs |
|
|
| (Level 3) |
|
|
|
|
Beginning Balance, October 31, 2012 |
|
| $ 901,221 |
|
|
|
|
Transfers into Level 3 |
|
| $ - |
|
|
|
|
Total unrealized gains/(losses) included in change in net assets |
|
| $ (19,942) |
|
|
|
|
Ending Balance, January 31, 2013 |
|
| $ 881,279 |
|
|
|
|
The amount of total gains or losses for the period included in changes |
| ||
in net assets attributable to the change in unrealized gains or losses |
| ||
relating to assets still held at the reporting date. |
|
| $ (19,942) |
F-9
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The following chart shows the components of change in the financial assets categorized as Level 3, for the nine months ending January 31, 2013:
|
|
| Fair Value Measurement Using |
|
|
| Significant Unobservable Inputs |
|
|
| (Level 3) |
|
|
|
|
Beginning Balance, April 30, 2012 |
|
| $ 548,008 |
|
|
|
|
Transfers into Level 3 |
|
| $ 548,600 |
|
|
|
|
Total unrealized gain/(losses)included in change in net assets |
|
| (212,329) |
|
|
|
|
Ending Balance, January 31, 2013 |
|
| $ 881,279 |
|
|
|
|
The amount of total gains or losses for the period included in changes |
| ||
in net assets attributable to the change in unrealized gains or losses |
| ||
relating to assets still held at the reporting date. |
|
| $ (212,329) |
NOTE 4 – INCOME TAXES
As discussed in Note 1, the Company utilizes the assets and liability method of accounting for income taxes in accordance with ASC 740-10 and ASC 740-30, Accounting for Income Taxes.
Under the provisions of ASC 740-10, Accounting for Income Taxes, the unrecognized tax provisions consisting of interest and penalties at January 31, 2012 was $205,537. The accrual of unrecognized tax provisions at January 31, 2013 amounted to $92,050. The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense and is included on the Company’s balance sheet in accrued interest.
Tax years from 2005 (initial tax year) through 2011 remain subject to examination by major tax jurisdictions.
The income tax benefit for the nine months ending January 31, 2013 and 2012 have been included in the accompanying financial statements on the basis of an estimated annual federal and state effective rate of 34.0% and 8.7%, respectively, resulting in a blended effective rate of 39.75%.
At January 31, 2013, the Company had a capital loss carry forward of approximately $3,691,726 which if not used will expire in 2015.
At January 31, 2013 there is a $205,537 accrual included in accrued expenses for estimated penalties and interest associated with the outstanding taxes payable for the year ended April 30, 2007.
Currently, the Company owes the IRS and the State of Delaware for taxes, penalties and interest from the tax year ending April 30, 2007 of approximately $297,587. The Company has agreements with both agencies to pay a minimum per month to avoid any collections or additional liens, with the understanding that if the Company has a liquidity event, they will be paid in full.
F-10
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 – NOTES RECEIVABLE
The following represents Notes Receivable classified as a long term asset:
Notes Receivable, net |
| January 31, 2013 |
| April 30, 2012 |
MedicaView |
| $ 49,221 |
| $ 49,221 |
BF Acquisition Group V, Inc. |
| 48,062 |
| 48,062 |
Innovation Industries, Inc. |
| 58 |
| - |
PR Specialists/Mediavix |
| - |
| 56,387 |
|
|
|
|
|
Total Long Term Loans |
| $ 97,341 |
| $ 153,670 |
NOTE 6 – NOTES PAYABLE
Notes payable consists of the following:
|
|
|
| January 31, 2013 |
| April 30, 2012 |
Current Liabilities: |
|
|
|
|
|
|
D&O Insurance Premium – no interest |
|
|
| $ 2,100 |
| $ 2,100 |
NOTE 7 – STOCKHOLDERS’ EQUITY
Capital Structure
The Company is authorized to issue up to 50,000,000 shares of common stock at $0.001 par value per share. As of January 31, 2013, 13,287,426 shares were issued and outstanding. Additionally, there were 13,164,730 shares of common stock subscribed and to be issued as of January 31, 2013. In total, there were 26,452,156 shares of common stock issued, outstanding and to be issued as of January 31, 2013. Additionally, the Company had 15,000,000 shares of common stock issued but contingently returnable in accordance with specified conditions to be met in the future per the revised MOU with New Bastion Development, as discussed below. As a result of the shares being contingently returnable, the Company has determined that these shares are not considered outstanding as of January 31, 2013. See further discussion below.
Common Stock
During the nine months ended January 31, 2013, there were no issuances of common stock.
Common Stock Subscribed
On August 21, 2012, the Company privately issued 2,840,000 shares of its restricted common stock, in exchange for $142,000 in services performed by the Company’s current and former employees and professional service providers. Three purchasers were accredited investors, six purchasers were non-accredited investors. The Company relied on Section 4(2) of the Securities Act of 1933 as amended, since the transaction did not involve any public offering. No underwriters were utilized and no commissions or fees were paid with respect to the transaction. As of January 31, 2013, the shares of common stock had not been issued by the transfer agent and are recorded as Common Stock-Subscribed in the accompanying unaudited financial statements.
On October 12, 2012, the Company privately issued 1,000,000 shares of its restricted common stock, in exchange for $70,000 in services performed by a consultant for the Company. The purchaser was an accredited investor. The registrant relied on Section 4(2) of the Securities Act of 1933 as amended, since the transaction did not involve any public offering. No underwriters were utilized and no commissions or fees were paid with respect to the transaction. As of January 31, 2013, the shares of common stock had not been issued by the transfer agent and are recorded as Common Stock-Subscribed in the accompanying unaudited financial statements.
F-11
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
On August 22, 2012, the Company entered into a memorandum of understanding (“MOU”) with New Bastion Development, Inc., a Florida corporation (“New Bastion”) to document the business terms of a deal to enter into a joint development relationship for the construction of a nitrogen fertilizer plant capable of producing approximately 4,000 MT of granulated urea on a daily basis. This project will be completed by New Bastion Regeneration, Inc. (“NBR”), which is a New Bastion subsidiary company that was formed by New Bastion for the sole purpose of completing the project. Pursuant to the terms of the MOU: (i) the Company agreed to purchase from New Bastion 100,000 issued and outstanding shares of NBR held by New Bastion, representing approximately 12.7% of the outstanding shares of NBR in exchange for 5,000,000 newly issued restricted shares of Universal issued upon the execution of the MOU and $500,000 pursuant to the following schedule: $100,000 within 15 days of execution of the memorandum of understanding; and $400,000 within 60 days of execution of the Agreement.
The Company also received an option to purchase up to 240,000 additional shares of NBR currently owned by New Bastion, which will represent a total ownership of approximately 43% of NBR owned by the Company for an additional $4.8 million under terms to be mutually negotiated, assuming no additional shares of NBR are issued. Per the MOU, the Company also issued 15,000,000 shares of common stock to New Bastion on the execution date of the MOU. However, these shares of common stock are being held by the Company in accordance with the option discussed previously to acquire additional ownership in NBR for an additional $4.8 million. As a result, the 15,000,000 shares of common stock are contingently returnable and not considered outstanding as of January 31, 2013.
The 5,000,000 shares specified in the MOU were valued at $0.07 per share (closing bid price of Universal on August 21, 2012) or a total of $350,000. As of January 31, 2013, the 5,000,000 shares of common stock had not been issued by the transfer agent and are recorded as Common Stock-Subscribed in the accompanying unaudited financial statements. Additionally, the $100,000 of cash consideration was not paid within the 15 day period specified.
On October 1, 2012, New Bastion provided a revised framework to Universal within the existing MOU. The revised framework included: $500,000 of cash consideration to be paid pursuant to the following schedule: a) $25,000 on or before October 31, 2012; b) $75,000 on or before December 15, 2012; and c) $400,000 on or before January 15, 2013. The revised framework provided that the dates for the cash consideration may be adjusted by mutual agreement and that New Bastion, at its sole discretion, may elect to accept additional shares of Universal common stock for all or part of the final $400,000 payment.
As of January 31, 2013, the Company fully paid the first scheduled payment of $25,000 the second scheduled payment of $75,000 and $10,000 of third scheduled payment of $400,000 to New Bastion. The Company recorded the balance of the unpaid third scheduled payment in the amount of $390,000 as an accrued payable – joint venture in the accompanying unaudited financial statements. See Note 9 – Subsequent Events.
On November 1, 2012, the Company issued 20,000 shares of common stock to a consultant for services provided. The shares of common stock were valued at $4,800 or $0.24 per share, the closing trading price of the Stock on November 1, 2012. As of January 31, 2013, the 20,000 shares of common stock had not been issued by the transfer agent and are recorded as Common Stock-Subscribed in the accompanying unaudited financial statements.
Effective September 10, 2012, the Company commenced a private offering of up to 7,500,000 shares of common stock contained within seventy-five (75) Units. Each Unit consists of 100,000 shares of common stock at an offering price of $10,000 per Unit. The total proposed proceeds from the private offering to the Company are $750,000. From November 19, 2012 through January 28, 2013, the Company received subscriptions of 4,304,730 shares of common stock for $430,473 of gross proceeds. The securities in the private offering were offered and sold only to (i) accredited Investors and (ii) persons who are not “U.S. Persons,” The securities offered and sold are intended to be exempt from securities law registration pursuant to the Securities Act of 1933, Regulation D, Regulation S and other regulatory exemptions, including the state securities laws and regulations where the securities are being offered. As of January 31, 2013, the common stock sold had not been issued to the investors and these subscriptions were not refundable. Thus, these amounts were reflected as Common Stock – Subscribed in the accompanying unaudited financial statements See Note 11 - Subsequent Events.
In total, during the nine months ended January 31, 2013, the Company recorded 13,164,730 shares of Common Stock – Subscribed in the accompanying unaudited financial statements.
F-12
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Stock Options
On May 8, 2006, the Company’s stockholders approved the 2006 Equity Incentive Plan for the benefit of our directors, officers, employees and consultants, and which reserved 2,000,000 shares of common stock for such persons pursuant to that plan. As of January 31, 2013, 1,000,000 stock options were approved for issuance and 600,000 stock options were outstanding and exercisable.
The following tables summarize stock option activity of the Company:
|
| Stock Options Outstanding | ||||||
|
|
|
| Weighted |
| Weighted Average |
|
|
|
|
|
| Average |
| Remaining Contractual |
| Aggregate |
|
| Number of Shares |
| Exercise Price |
| Life (Years) |
| Intrinsic Value |
|
|
|
|
|
|
|
|
|
Outstanding, April 30, 2012 | 600,000 |
| $ 0.20 |
| 6.08 |
| $ - | |
|
|
|
|
|
|
|
| |
Nine Months Ended Jan. 31, 2013 |
| - |
| - |
| - |
| $ - |
|
|
|
|
|
|
|
|
|
Outstanding and Exercisable, Jan. 31, 2013 | 600,000 |
| $ 0.20 |
| 6.08 |
| $ - | |
During the nine months ended January 31, 2013, the Company recognized no share-based compensation expense, compared to the nine months ended January 31, 2012, in which the Company recognized $7,634 of share-based compensation expense,
NOTE 8 – RELATED PARTY TRANSACTIONS
Notes payable, related parties were $250,403 and $294,696 at January 31, 2013 and April 30, 2012, respectively as detailed per the table below:
|
|
|
| January 31, 2013 |
| April 30, 2012 |
Current Liabilities: |
|
|
|
|
|
|
Interest accrued at 3% per month beginning October 17, 2012. |
|
|
|
|
|
|
Principal and Interest payable in November 2012 |
|
|
| $ 10,000 |
| $ - |
|
|
|
|
|
|
|
No interest accrued. Principal due on demand |
|
|
| $ 8,000 |
| $ 8,000 |
|
|
|
|
|
|
|
Interest accrued at 5% per annum. Principal and Interest |
|
|
|
|
|
|
due on demand. |
|
|
| $ - |
| $ 10,802 |
|
|
|
|
|
|
|
Total Notes payable – related parties |
|
|
| $ 18,000 |
| $ 18,802 |
|
|
|
|
|
|
|
Long Term Liabilities: |
|
|
|
|
|
|
Interest accrued at 8% beginning November 1, 2008. |
|
|
|
|
|
|
Principal and Interest payable on demand. |
|
|
| $ 200,403 |
| $ 237,696 |
|
|
|
|
|
|
|
Interest accrued at 8% beginning October 19, 2009 |
|
|
|
|
|
|
Principal and Interest payable on demand. |
|
|
| $ 50,000 |
| $ 50,000 |
|
|
|
|
|
|
|
Interest accrued at 5% per annum. |
|
|
|
|
|
|
Principal and Interest payable on demand. |
|
|
| $ - |
| $ 10,802 |
|
|
|
|
|
|
|
Advances from Shareholders |
|
|
| $ - |
| $ 7,000 |
|
|
|
|
|
|
|
Total Notes payable, related party |
|
|
| $ 250,403 |
| $ 294,696 |
F-13
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
For the nine months ended January 31, 2013, the Company recorded $14,967 of interest expense related to the related party notes payable detailed above. At January 31, 2013, the Company has accrued a total of $112,283 of accrued interest for the related party notes payable.
During the nine months ended January 31, 2013, the Company repaid $44,293 of principal related to the related party notes payable detailed above.
NOTE 10 – COMMITMENTS ABD CONTINGENCIES
MICCO World, Inc. Lawsuit
In July 2010, the Company filed a lawsuit against MICCO World, Inc. (formerly known as Constellation Group, Inc.) and its officers, Phil Lundquist, Steven Brisker and Tom Ridenour (collectively known as the “Defendants”). This lawsuit was filed in the Superior Court of Delaware in New Castle County. This lawsuit was filed in response to various activities by the Defendants that include misleading investors, making disparaging remarks about the Company, misrepresentation of capital structure, and misappropriation of funds. The Company sought judgment in the amount of $611,000 plus costs, legal fees, pre- and post-judgment interest, plus other amounts and relief to be determined. In March 2011, MICCO filed a motion to dismiss. In June 2011, the courts denied this motion to dismiss. On June 25, 2012, the Company dismissed the suit against the defendants with prejudice.
On May 9, 2009 the law firm of Stradley Ronon filed a lawsuit against the Company in the U.S. District Court for the District of Delaware for failure of the Company to pay legal fees owed in the amount of $166,129. On April 2, 2009, in order to avoid the cost of litigation, the Company agreed to a Consent of Judgment against it in the amount of $166,129.
NOTE 11 – SUBSEQUENT EVENTS
Subsequent to January 31, 2013 and through the issue date of these unaudited financial statements, the Company received $20,000of cash proceeds from the sale 200,000shares of common stock. The common stock sold was through a $750,000 private offering of up to 7,500,000 shares of common stock contained within seventy-five (75) Units. See Note 7 – Stockholders’ Equity.
In February 2013, the Company paid New Bastion $140,000, net of $3,500 of expenses paid, per the August 22, 2012 MOU against the $390,000 accrued payable – joint venture balance as of January 31, 2013. As a result of the payment, the accrued liability – joint venture balance as of the date of these unaudited financial statements is $250,000.
Management evaluated all activity of the Company through the issue date of the financial statements and concluded that no additional subsequent events have occurred that would require recognition in the financial statements.
F-14