Attached files
file | filename |
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EX-31.2 - CERTIFICATION - MAJOR LEAGUE FOOTBALL INC | ucmt_ex31z2.htm |
EX-32.2 - CERTIFICATION - MAJOR LEAGUE FOOTBALL INC | ucmt_ex32z2.htm |
EX-32.1 - CERTIFICATION - MAJOR LEAGUE FOOTBALL INC | ucmt_ex32z1.htm |
EX-31.1 - CERTIFICATION - MAJOR LEAGUE FOOTBALL INC | ucmt_ex31z1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-K/A
(Amendment No. 1)
(Mark One) |
|
ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended April 30, 2011
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 | 20-1568059 |
(State or other jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
2601 Annand Drive, Suite 16 Wilmington, DE (Address of principal executive offices) | ______19808____ (Zip Code) |
Registrants telephone number, including area code: (302) 998-8824 : | |
Securities registered pursuant to Section 12(b) of the Act | |
Title of each class None | Name of each Exchange on which registered None |
Securities registered pursuant to Section 12(g) of the Act: | |
Common Stock, par value $.001 per share | |
(Title of Class) |
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ý
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No ý
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 ý.
Cover Page (continued)
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 ý
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer ¨ Accelerated Filer ¨ Non-Accelerated filer ý Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act of 1934). Yes ¨ No ý
As of the last business day of the registrants most recently completed second fiscal quarter, the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $281,428. Such aggregate market value was computed by reference to the closing price of $0.08 per share for the registrants common stock on the OTC Pink Sheets on that date. For purposes of making this calculation only, the registrant has defined affiliates as including all directors, executive officers and beneficial owners of more than five percent of the common stock of the Company.
The number of shares of the registrants Common Stock issued as of May 24, 2013 was 43,187,426. Of this amount, 28,187,426 were outstanding and 15,000,000 were contingently returnable in accordance with specified conditions to be met in the future per a joint venture agreement.
Universal Capital Management, Inc. (the Company, our or we) filed an Annual Report on Form 10-K for the fiscal year ended April 30, 2011 (the Original Report) with the Securities and Exchange Commission (SEC) on August 15, 2011. The Financial Statements contained in the Original Report were not audited by the Companys independent registered public accounting firm and a note to that effect was inserted at the beginning of the Original Report. We are filing this Amendment No. 1 to Annual Report on Form 10-K/A (the Amended Report) to include Financial Statements audited by the Companys independent registered public accounting firm and to amend the Original Report as follows:
1.
The note inserted at the beginning of the Original Report stating that the Financial Statements contained in the Original Report were not audited by the Companys independent registered public accounting firm is deleted. As a result of the audit, there were several adjustments to the Companys April 30, 2011 Financial Statements included in the Original Report including the following principal items:
a)
$1,674,000 income tax provision as the result of a valuation allowance against deferred tax assets.
b)
$188,000 income tax provision as the result of a valuation allowance against current tax assets
c)
$309,008 bad debt expense related to affiliate investments.
d)
$338,325 loss on impairment of portfolio stock.
e)
$78,000 for net unrealized depreciation on investments.
f)
$20,613 gain on settlement of investments
g)
$16,637 realized gain on investments
h)
$18,293 increase in various other expenses
The resulting effect of the restatement in 2011 is: (1) a reduction of total assets of $2,460,454 from $3,072,008 to $611,554, (2) an increase in total liabilities of $145,173 from $1,302,372 to $1,447,545 (3) a decrease in net assets of $2,605,627 from a net asset amount of $1,769,636 to a net liability amount of ($835,991), (4) an increase in the net decrease of net assets resulting from operations of $2,568,376 from ($2,384,564) to ($4,952,940), and (5) an increase in the net decrease in net assets from operations per share of ($0.40) from ($0.38) to ($0.78) per share Certain applicable portions of Notes 1, 3, 4, 6, 10, 11, 12, 13 and 14 have also been revised accordingly.
2.
The information contained in Part I. Item 1 Business of the Original Report is revised only as specifically described in this Amended Report. All other information contained in Part I. Item 1 Business of the Original Report speaks as of the filing date of the Original Report and it has not been amended, updated or modified in any way.
3.
The information contained in Part I. Item 1.A. Risk Factors of the Original Report is revised only as specifically described in this Amended Report. All other information contained in Part I. Item 1.A. Risk Factors of the Original Report speaks as of the filing date of the Original Report and it has not been amended, updated or modified in any way.
4.
The Selected Financial Information contained in Part II. Item 6 of the Original Report is deleted in its entirety and replaced with Selected Financial Information contained in Item 6 of this Amended Report.
5.
The Managements Discussion and Analysis of Financial Condition and Results of Operations contained in Part II. Item 7 of the Original Report is deleted in its entirety and replaced with the Managements Discussion and Analysis of Financial Condition and Results of Operations contained in Part II. Item 7 of this Amended Report.
6.
The Financial Statements contained in Part II. Item 8 of the Original Report are deleted in their entirety and replaced with the Financial Statement contained in Part II. Item 8 of this Amended Report.
7.
The Principal Accounting Fees and Services contained in Part III. Item 14 of the Original Report are deleted in their entirety and replaced with the Principal Accounting Fees and Services contained in Part III. Item 14 of this Amended Report.
8.
The information contained in Part IV. Item 15 Exhibits of the Original Report is revised only to reflect the filing of currently dated certifications of our principal executive officer and our principal financial officer, which are attached to this Amended Report. All other information contained in Part IV. Item 15 Exhibits of the Original Report speaks as of the filing date of the Original Report and it has not been amended, updated or modified in any way.
Except as described above, this Amended Report does not modify or update any other disclosures in, or exhibits to, the Original Report and this Amended Report continues to speak as of the date of the Original Report. Accordingly, this Amended Report should be read in conjunction with the Original Report and all of our filings made with the SEC subsequent to the filing of the Original Report, as information in such filings may update or supersede certain information contained in this Amended Report and the Original Report.
Table of Contents
Forward-Looking Statements
Some of the information presented in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are included throughout the report, including the section titled Risk Factors, and relate to our business strategy, our prospects and our financial position. These statements can be identified by the use of forward-looking terminology such as believes, estimates, expects, intends, may, will, should or anticipates or the negative or other variation of these or similar words, or by discussions of strategy or risks and uncertainties. Specifically, forward-looking statements may include, among others, statements concerning:
·
our expectations of future results of operations or financial condition;
·
the timing, cost and expected impact on our market share and results of operations of our planned capital expenditures and;
·
expectations of the continued availability of capital resources.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, they are inherently subject to risks, uncertainties and assumptions about our Company, and accordingly, our forward-looking statements are qualified in their entirety by reference to the factors described below under the section titled Risk Factors and in the information incorporated by reference herein.
All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report may not occur.
PART I
Item 1.
Business.
1.
The sentence under the heading Organization that reads: Companys fiscal year ends April 30. At April 30, 2011, we had investments of $981,217 at fair value in seven companies is deleted in its entirety and replaced with: The Companys fiscal year ends April 30 and at April 30, 2011, we had investments of $564,892 at fair value in seven companies.
2.
The chart under the heading Investments Portfolio Securities is deleted in its entirety and replaced with the following:
The Companys investments at April 30, 2011, were as follows:
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| Approximate |
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| Number of |
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| Common Stock, Warrants and Promissory Notes |
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| % of Class | % of |
| Securities |
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| - United States | Business |
| Owned |
| Portfolio | Held | Fair Value | |||
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Affiliated Securities * |
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| PR Specialists, Inc. |
| Shell |
| 19.59% |
| 0.00% |
| 2,500,000 |
| $ - |
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| BF Acquisition Group V, Inc. |
| Shell |
| 34.94% |
| 0.00% |
| 2,000,000 |
| - |
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| Vystar Corporation Common Stock |
| Natural rubber latex products | 2.38% |
| 29.42% |
| 369,300 |
| 166,185 | |
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| Warrant to purchase 500,000 shares of Vystar Corporation | Natural rubber latex products |
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| 500,000 shares of common stock, expiring April 2013 |
| 3.22% |
| 0.00% |
| 500,000 |
| - | ||
| 50,000 shares of common stock, expiring April 2012 |
| 0.32% |
| 0.00% |
| 50,000 |
| - | ||
| 50,000 shares of common stock, expiring May 2012 |
| 0.32% |
| 0.00% |
| 50,000 |
| - | ||
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| Innovation Industries - Promissory Note | Direct sales |
| n/a |
| 0.00% |
| n/a |
| - | |
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| SIVOO Holdings, Inc. Common Stock |
| High speed internet media | 2.30% |
| 0.00% |
| 664,501 |
| - | |
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| Warrants to purchase 400,000 shares of SIVOO Holdings, Inc. | High speed internet media |
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| 200,000 warrants expiring November 14, 2011 |
| 0.67% |
| 0.00% |
| 200,000 |
| - | ||
| 405,000 warrants expiring February 28, 2013 |
| 1.40% |
| 0.00% |
| 405,000 |
| - | ||
| 4% of fully diluted common stock at time of exercise - TBD |
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| 0.00% |
| TBD |
| - | ||
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Total Affiliated Securities |
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| 29.42% |
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| 166,185 | |
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Non-affiliated Securities |
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| Lightwave Logic, Inc. common stock |
| Plastics engineering | 0.23% |
| 15.88% |
| 100,817 |
| 89,707 | |
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| Warrant to purchase 357,500 shares of Lightwave Logic, Inc. | Plastics engineering | 0.81% |
| 54.70% |
| 357,500 |
| 309,000 | ||
| common stock, expiring February 2012 |
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| Warrant to purchase 1,000,000 shares of iVolution Medical | Medical billing and medical | 2.93% |
| 0.00% |
| 1,000,000 |
| - | ||
| Group common stock, expiring July 2013 | records software |
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| Warrant to purchase 500,000 shares of iVolution Medical | Medical billing and medical | 1.47% |
| 0.00% |
| 500,000 |
| - | ||
| Group common stock, expiring July 2013 | records software |
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| Other common stock |
| Other various investments | 0.00% |
| 0.00% |
| 3,000 |
| - | |
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Total Non-Affiliated Securities |
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| 70.58% |
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| 398,707 | |
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Total Securities |
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| 100.00% |
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| $ 564,892 |
1
3.
The chart under the heading Investments Valuation is deleted in its entirety and replaced with:
The net asset value and net asset value per share of common stock of our Company at the end of each fiscal quarter is as follows:
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| Net Asset Value |
Date |
| Net Asset Value |
| Per Share |
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April 30, 2011 |
| $(835,991) |
| $(0.14) |
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January 31, 2011 |
| $2,332,625 |
| $0.36 |
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October 31, 2010 |
| $2,756,658 |
| $0.43 |
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July 31, 2010 |
| $3,688,672 |
| $0.58 |
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April 30, 2010 |
| $4,174,316 |
| $0.65 |
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January 31, 2010 |
| $3,551,085 |
| $0.55 |
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October 31, 2009 |
| $3,500,248 |
| $0.55 |
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July 31, 2009 |
| $4,323,332 |
| $0.67 |
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April 30, 2009 |
| $4,268,861 |
| $0.67 |
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January 31, 2009 |
| $3,341,565 |
| $0.55 |
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October 31, 2008 |
| $2,218,331 |
| $0.38 |
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July 31, 2008 |
| $4,959,096 |
| $0.84 |
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April 30, 2008 |
| $5,599,232 |
| $0.98 |
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January 31, 2008 |
| $3,217,402 |
| $0.57 |
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October 31, 2007 |
| $3,323,505 |
| $0.61 |
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July 31, 2007 |
| $2,667,599 |
| $0.49 |
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April 30, 2007 |
| $4,097,464 |
| $0.75 |
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January 31, 2007 |
| $3,873,969 |
| $0.71 |
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October 31, 2006 |
| $4,052,654 |
| $0.75 |
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July 31, 2006 |
| $2,426,652 |
| $0.45 |
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April 30, 2006 |
| $2,243,790 |
| $0.46 |
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January 31, 2006 |
| $2,304,214 |
| $0.48 |
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October 31, 2005 |
| $2,164,418 |
| $0.43 |
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July 31, 2005 |
| $1,921,122 |
| $0.39 |
At April 30, 2011, approximately all of our Companys investments were recorded at fair value.
2
4.
The sentence under the heading Taxation that reads: At April 30, 2011, our Company had current year taxable loss of $466,486 with a carry forward net operating loss of $218,496 from April 30, 2010. is deleted in its entirety and replaced with: At April 30, 2011, our Company had current year taxable loss of $479,870 with a carry forward net operating loss of $218,496 from April 30, 2010.
Item 1A.
Risk Factors
2.
Each of the Risk Factors titled below are deleted and replaced with the following:
Our cash expenses are very large relative to our cash resources and cash flow which requires us to continually sell new shares of common stock or securities of portfolio companies.
As of April 30, 2011, we had cash resources of $15,445. In the year ended April 30, 2011 we had revenues of $37,541, virtually all of which were received in the form accounting services provided to our clients. Consequently, we have been required either to sell new shares of our common stock or securities of portfolio companies to raise the cash necessary to pay ongoing expenses and to make new investments and could lead to continuing dilution in the interest of existing Company stockholders. Moreover, we cannot assure you the launch of any products will be successful and provide the necessary revenues to sustain the business.
We do not choose investments based on a strategy of diversification and the value of our business is subject to greater volatility than the value of companies with more broadly diversified investments.
We do not choose investments based on a strategy of diversification. Therefore, we may be more vulnerable to events affecting a single sector or industry and therefore subject to greater volatility than a company that follows a diversification strategy. Accordingly, an investment in our common stock may present greater risk to you than an investment in a diversified company. We attempt to allocate our investments among the securities of several different portfolio companies. However, a significant amount of our equity could be invested in the securities of only a few companies. This risk is particularly acute during our early stages of operations, which could result in significant concentration with respect to a particular issuer or industry. Any such concentration would also be worse during any time when we had a limited amount of available investment capital for the same reasons. The concentration of our portfolio in any one issuer or industry would subject us to a greater degree of risk with respect to the failure of one or a few issuers or with respect to economic downturns in such industry than would be the case with a more diversified portfolio. At April 30, 2011, 100% of the Companys investments were with two portfolio companies with 71% from one and 29% from the other.
We do not choose investments based on a strategy of diversification and the value of our business is subject to greater volatility than the value of companies with more broadly diversified investments.
We do not choose investments based on a strategy of diversification. Therefore, we may be more vulnerable to events affecting a single sector or industry and therefore subject to greater volatility than a company that follows a diversification strategy. Accordingly, an investment in our common stock may present greater risk to you than an investment in a diversified company. We attempt to allocate our investments among the securities of several different portfolio companies. However, a significant amount of our equity could be invested in the securities of only a few companies. This risk is particularly acute during our early stages of operations, which could result in significant concentration with respect to a particular issuer or industry. Any such concentration would also be worse during any time when we had a limited amount of available investment capital for the same reasons. The concentration of our portfolio in any one issuer or industry would subject us to a greater degree of risk with respect to the failure of one or a few issuers or with respect to economic downturns in such industry than would be the case with a more diversified portfolio. At April 30, 2011, approximately 55% of the Company's investment value resulted from a single holding.
3
PART II
Item 6.
Selected Financial Information.
Reference is made to the Companys financial statements included elsewhere in this Amended Report. The following selected information is taken from those financial statements:
Financial Position as of:
| April 30, 2011 | April 30, 2010 | April 30, 2009 | April 30, 2008 | April 30, 2007 | April 30, 2006 |
Total assets | $ 611,554 | $ 5,375,880 | $ 5,497,085 | $ 8,265,499 | $ 6,736,345 | $ 3,546,337 |
Total Liabilities | $ 1,447,545 | $ 1,201,564 | $ 1,228,224 | $ 2,266,267 | $ 2,638,881 | $ 1,302,547 |
Net assets(1) | $ (835,991) | $ 4,174,316 | $ 4,268,861 | $ 5,599,232 | $ 4,097,464 | $ 2,243,790 |
Net asset value per outstanding share | $ (0.14) | $ 0.65 | $ 0.67 | $ 0.98 | $ 0.75 | $ 0.46 |
Cash dividend paid | $ - | $ - | $ - | $ - | $ - | $ - |
Cash dividends paid per outstanding shares | $ - | $ - | $ - | $ - | $ - | $ - |
Shares outstanding, end of year(1) | 5,912,426 | 6,412,426 | 6,412,426 | 5,702,720 | 5,438,274 | 4,917,634 |
Operating Data for the Year Ending:
| April 30, 2011 | April 30, 2010 | April 30, 2009 | April 30, 2008 | April 30, 2007 | April 30, 2006 |
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Total investment income | $ 37,541 | $ 55,239 | $ 960,424 | $ 3,845,715 | $ 3,294,637 | $ 894,745 |
Total expenses(2) | $ 858,594 | $ 846,861 | $ 2,038,412 | $ 1,164,201 | $ 2,246,754 | $ 990,802 |
Income (loss) before taxes | $ (821,053) | $ (791,622) | $ (1,077,988) | $ 2,681,514 | $ 1,047,883 | $ (96,057) |
Total tax benefit (expense) | $ (921,500) | $ 953,000 | $ 949,000 | $ (838,000) | $ (214,000) | $ 585,000 |
Other income (expense) | $ (18,044) | $ (40,992) | $ (112,524) | $ (26,300) | $ 267,924 | $ - |
Net realized (loss) income from | $ (504,576) | $ (153,277) | $ (2,154,786) | $ (2,069,152) | $ (644,342) | $ - |
Unrealized appreciation (depreciation) on investments | $ (2,386,692) | $ (218,492) | $ (323,709) | $ 1,498,262 | $ (406,953) | $ (1,376,456) |
Net (decrease) increase in net | $ (4,952,940) | $ (251,383) | $ (2,720,007) | $ 1,246,324 | $ 50,512 | $ (887,513) |
Net Increase (Decrease) in | $ (0.78) | $ (0.04) | $ (0.45) | $ 0.23 | $ 0.29 | $ 0.07 |
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(1) | We completed offerings of our common stock as follows: No shares during the year ending April 30, 2011 and 2010; 709,706 shares during the year ending April 30, 2009; 264,446 shares during the year ending April 30, 2008; 520,640 shares during the year ending April 30, 2007; and 109,434 shares during the year ending April 30, 2006. In March 2011, the Company settled the McCrae lawsuit and received 500,000 shares of its common stock back in return for a warrant to purchase 42,500 shares of LWLG common stock at an exercise price of $0.25 per share, exercisable until February 2012. | |||||
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(2) | Included in total expenses is non-cash, stock-based, compensation expense of $7,633 for the year ending April 30, 2011; $5,088 for the year ending April 30, 2010; $1,051,136 for the year ending April 30, 2009; $9,336 for the year ending April 30, 2008; $634,946 for the year ending April 30, 2007; and $0 for the year ending April 30, 2006. |
4
Item 7.
Managements 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 Companys 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 Companys financial statements and the notes thereto.
The income that our Company derives from investments consists of management fees, interest income, and appreciation (net of depreciation) in the values of the Company holdings and management revenue from the management and marketing of the direct response products.
Consequently, our Companys success or failure will depend on the ability to properly manage and market the products in the direct response market. There is no assurance that we will be able to do so.
Pursuant to the requirements of the Investment Company Act of 1940, as amended, our Board of Directors is responsible for determining in good faith the fair value of the securities and assets held by our Company for which market quotations are not readily available. In making its determination, our Board of Directors may consider valuation appraisals provided by independent financial experts. We expect to pay a professional fee each time such a valuation is provided. With respect to private equity securities, each investment is valued using industry valuation benchmarks, and then the value may be assigned a discount reflecting the particular nature of the investment.
Our Board of Directors bases its determination of value on, among other things, applicable quantitative and qualitative factors. These factors may include, but are not limited to, the type of securities, the nature of the business of the portfolio company, the marketability of the securities, the market price of unrestricted securities of the same issue (if any), comparative valuation of securities of publicly traded companies in the same or similar industries, current financial conditions and operating results of the portfolio company, sales and earnings growth of the portfolio company, operating revenues of the portfolio company, competitive conditions, and current and prospective conditions in the overall economy and the equity markets.
Without a readily recognized market value, the estimated value of some portfolio securities may differ significantly from the values that would be placed on the portfolio if there existed a ready market for such equity securities.
Until December 2010, our Company was primarily a publicly traded business development company in which our primary business was to invest in emerging growth companies. Our Company assisted companies in strategic and financial planning, in market strategies and in trying to achieve prudent and profitable growth. Management had devoted most of its efforts to general business planning, raising capital, and seeking appropriate investments.
In December 2010, our Companys primary business structure began to change due to economic factors and new opportunities and we now also 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 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.
5
Financial Condition
Our Companys total assets, net assets, net asset value per share, unrealized appreciation or depreciation are set forth in the following table:
| At and for the Year Ending | At and for the Year Ending |
|
|
|
Total Assets | $ 611,554 | $5,375,880 |
Net Assets | $ (835,991) | $4,174,316 |
Net Asset Value Per Share | $ (0.14) | $ 0.65 |
Net Unrealized Appreciation/(Depreciation) on Investments | ($2,386,692) | ($218,492) |
The changes in total assets, net assets and net asset value per share for the year ended April 30, 2011 were primarily attributable to:
·
$2,386,692 net unrealized depreciation on investments.
·
$921,500 income tax provision as the result of a valuation allowance against
deferred tax assets.
·
$309,008 bad debt expense related to affiliate investments.
·
$504,576 loss on disposal of portfolio stock.
·
$338,325 loss in impairment of portfolio stock.
At April 30, 2011 and April 30, 2010, $564,892 or approximately 92% and $4,179,222 or approximately 78% of our assets, respectively, consisted of investments, of which cumulative net unrealized appreciation (depreciation) before the income tax effect were $(1,045,564) and $1,341,128, respectively.
Results of Operations
Our financial statements have been prepared in conformity with the United States generally accepted accounting principles. On this basis, the principal measure of a Companys financial performance is the net increase in net assets. Net assets comprise (i) income from operations, (ii) net realized gain or loss on investment, which is the difference between the proceeds received from dispositions of portfolio securities and their stated cost, (iii) other than temporary impairment of securities and (iv) increase (decrease) in unrealized appreciation on investments.
Our Company expenses primarily include salaries and wages, professional fees, insurance expense, interest expense and depreciation. General and administrative costs primarily include rent, office, travel and entertainment and other overhead costs.
Year ended April 30, 2011 compared to the year ended April 30, 2010 and April 30, 2009
For the year ended April 30, 2011 we had revenue for services in the amount of $37,541 compared to $55,239 for the year ended April 30, 2010 and $960,424 for the year ended April 30, 2009. Approximately 4% of our revenue for services was received in the form of equity securities for the year ended April 30, 2011 compared to approximately 13% for the year ended April 30, 2010 and approximately 96% for the year ended April 30, 2009.
Total operating expenses for the year ended April 30, 2011 were $858,594, the principal components of which were bad debt expense of $309,008 related to the impairment of affiliate investments, $252,373 of salaries and wages (which includes $7,633 of share based compensation expense) and professional fees of $115,585, of which $49,561 represents audit fees and approximately $37,389 of legal expense. Additional principal components of operating expenses includes $94,096 of insurance expense, $31,554 of interest expense and $54,178 of general and administrative expense. By comparison, total operating expenses for the year ended April 30, 2010 were $846,861, the principal components of which were professional fees of $138,769, payroll expense of $388,995 ($5,088 was share based compensation expense), bad debt expense of $98,667, insurance expense of $104,133, and general and administrative expenses of $81,274. By comparison, total operating expenses for the year ended April 30, 2009 were $2,038,412, the principal components of which were payroll of $1,208,229, professional fees of $458,263, insurance of $97,172, bad debt expense of $140,765, $27,625 of interest expense and general and administrative expenses of $104,458.
6
We had a loss from operations before taxes, penalties and interest of $821,053 for the year ended April 30, 2011 compared to a loss of $791,622 for the year ended April 30, 2010 and a loss of $1,077,988 for the year ended April 30, 2009.
Our Company had net unrealized depreciation of $2,386,692 for the year ended April 30, 2011, compared to a net unrealized depreciation of $218,492 for the year ended April 30, 2010 and a net unrealized appreciation of $323,709 at year end April 30, 2009.
For the year ending April 30, 2011, we had a loss on disposal and sale of several of our portfolio company investments of $504,576. Additionally, we had a loss of $338,325 for the impairment of several of our portfolio company investments. For the year ending April 30, 2010, we had a recognized loss on disposal and sale of several of our portfolio company investments of $153,277. Our Company had a recognized loss on disposal and sale of investments of $2,154,786 for the year ended April 30, 2009.
Liquidity and Capital Resources
From inception, our Company has relied upon the infusion of capital through capital share transactions to obtain liquidity. We had $15,445 of cash at April 30, 2011. Consequently, payment of operating expenses will have to come similarly from equity capital to be raised from investors, from borrowed funds or from the success of our direct response products we are managing. There is no assurance that we will be successful in raising such additional equity capital or additional borrowings or if we can, that we can do so at a price that management believes to be appropriate. Under the Investment Company Act of 1940, as amended, our Company may not sell shares of common stock at less than our net asset value except in certain limited circumstances.
Recently, it was necessary for us to dispose of some of our current portfolio securities to meet our operational needs. In the future, we may be forced to continue to dispose of portfolio securities if it ever becomes short of cash. Any such dispositions may have to be made at inopportune times.
Critical Accounting Policies
Security Valuations
Investments in securities traded on a national securities exchange (or reported on the NASDAQ national market) are stated at the last reported sales price on the day of valuation; other securities traded in the over-the-counter market (such as OTC BB, Pink Sheets, etc.) and listed securities for which no sale was reported on that date are stated at the last quoted bid price. Restricted securities and other securities (small, privately-held companies) for which quotations are not readily available are valued at fair value as determined by the board of directors.
Investment securities are exposed to various risks, such as overall market volatility. Due to the level of risk associated with the securities of certain portfolio companies, it is likely that changes in their values will occur in the near term and that such changes could materially affect the amounts reported in the statement of assets and liabilities at future dates.
Stock-Based Compensation
On May 1, 2006, the Company adopted ASC 718 formerly, Statement of Financial Accounting Standard of Financial Accounting Standard No. 123(R) (SFAS 123(R)), Share-Based Payment (as amended), using the modified prospective method as permitted under SFAS 123(R). Under this transition method, compensation cost recognized in the first quarter of fiscal 2007 includes compensation cost for all share-based payments granted prior to but not yet vested as of April 30, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123. In accordance with the modified prospective method of adoption, the Companys results of operations and financial position for the prior periods have not been restated.
Item 8.
Financial Statements and Supplementary Data.
See attached Appendix A.
7
PART III
Item 14.
Principal Accounting Fees and Services.
Audit and Related Fees
Salberg & Company, P.A. is the independent registered public accounting firm and has audited the financial statements of the Company for the fiscal year ended April 30, 2011 and 2010 and has reaudited the Companys financial statements for fiscal years ended April 30, 2009.
The following table shows the aggregate fees billed to the Company by Salberg & Company, P.A. for professional services rendered relating to the fiscal years ended April 30:
|
| For the Year Ended |
| For the Year Ended |
| For the Year Ended |
Description of Fees |
| April 30, 2011 |
| April 30, 2010 |
| April 30, 2009 |
|
|
|
|
|
|
|
Audit Fees | $ | 30,000 | $ | 19,000 | $ | 15,000 |
Audit-Related Fees | $ | - | $ | - | $ | - |
Tax Fees | $ | - | $ | - | $ | - |
All Other Fees | $ | - | $ | - | $ | - |
|
|
|
|
|
|
|
| $ | 30,000 | $ | 19,000 | $ | 15,000 |
Morison Cogen LLP was the previous independent registered public accounting firm and had audited the financial statements of the Company for the fiscal year ended April 30, 2009.
The following table shows the aggregate fees billed to the Company by Morison Cogen LLP for professional services rendered for the fiscal years ended April 30:
|
| For the Year Ended |
Description of Fees |
| April 30, 2009 |
|
|
|
Audit Fees | $ | 30,000 |
Audit-Related Fees | $ | - |
Tax Fees | $ | 6,100 |
All Other Fees | $ | - |
|
|
|
| $ | 36,100 |
Audit Fees
Represents fees for professional services provided for the audit of the Companys annual financial statements and review of the Companys financial statements included in the Companys quarterly reports.
Audit-Related Fees
Represents fees for assurance and related services that are reasonably related to the performance of the audit or review of the Companys financial statements.
Tax Fees
Represents fees related to tax audit and other advisory services, tax compliance and tax return preparation.
Audit Committee Pre-Approval Policies
The Audit Committee pre-approves all work done by its outside independent registered public accounting firm.
8
PART IV
Item 15.
Exhibits and Financial Statement Schedules.
(a)(1)
The following financial statements are included in Item 8 of this Annual Report on Form 10-K:
Statement of Assets and Liabilities as of April 30, 2011 and April 30, 2010
Statement of Operations for the years ended April 30, 2011, April 30, 2010 and April 30, 2009.
Statement of Changes in Net Assets for the years ended April 30, 2011, April 30, 2010 and April 30, 2009
Schedule of Investments as of April 30, 2011 and April 30, 2010
Statement of Cash Flows for the years ended April 30, 2011, April 30, 2010 and April 30, 2009
Notes to Financial Statements
(2)
Schedules
None required.
(3)
Exhibits
The exhibits to this Amended Report are listed on the accompanying Index to Exhibits and are incorporated herein by reference or are filed as part of this Amended Report.
Number | Description of Documents |
31.1# | Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 executed by the Principal Executive Officer of the Company |
31.2# | Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 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 |
#
Filed herewith
9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| Universal Capital Management, Inc. |
| (Registrant) |
|
|
May 24, 2013 | By: /s/ Michael D. Queen |
| Michael D. Queen, Chief Executive Officer |
| (principal executive officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Title | Date |
|
|
|
s/ Michael D. Queen Michael D. Queen | Sole Director, Chief Executive Officer, Chief Financial Officer (principal executive officer and principal financial officer) | May 24, 2013 |
|
|
|
10
APPENDIX A
UNIVERSAL CAPITAL MANAGEMENT, INC.
FINANCIAL STATEMENTS
APRIL 30, 2011, 2010 AND 2009
CONTENTS
| PAGE |
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-2 |
|
|
STATEMENTS OF ASSETS AND LIABILITIES | F-3 |
|
|
STATEMENTS OF OPERATIONS | F-4 |
|
|
STATEMENTS OF CASH FLOWS | F-5 F-6 |
|
|
STATEMENT OF CHANGES IN NET ASSETS | F-7 |
|
|
FINANCIAL HIGHLIGHTS | F-8 |
|
|
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 2011 | F-9 F-10 |
|
|
SCHEDULE OF INVESTMENTS AS OF APRIL 30, 2010 | F-11 F-12 |
|
|
NOTES TO FINANCIAL STATEMENTS | F-13 F-32 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of:
Universal Capital Management, Inc.
We have audited the accompanying statements of assets and liabilities of Universal Capital Management, Inc. including the schedule of investments, as of April 30, 2011 and 2010, and the related statements of operations, and cash flows for the years ended April 30, 2011, 2010 and 2009 and the statement of changes in net assets and schedule of financial highlights for the years ended April 30, 2011, 2010 and 2009. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As more fully discussed in Notes 2 and 3 to the financial statements, securities amounting to $309,000 (51% of total assets and (37%) of net assets (liabilities) at April 30, 2011 and $3,790,300 (71% of total assets and 91% of net assets) at April 30, 2010 have been valued at fair value as determined by the Board of Directors. We have reviewed the procedures applied by the directors in valuing such securities and have inspected underlying documentation; while in the circumstances the procedures appear to be reasonable and the documentation appropriate, determination of fair values involves subjective judgment which is not susceptible to substantiation by auditing procedures.
In our opinion, subject to the effect on the financial statements of the valuation of securities determined by the Board of Directors as described in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Universal Capital Management, Inc. at April 30, 2011 and 2010, and the results of its operations and its cash flows for the years ended April 30, 2011, 2010 and 2009, and the statement of changes in net assets and schedule of financial highlights for the years ended April 30, 2011, 2010 and 2009 in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 15 to the financial statements, the previously unaudited 2011 financial statements have been restated to correct misstatements.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a net decrease in net assets resulting from operations and net cash used in operating activities in 2011 of $4,952,940 and $376,462, respectively, and has net liabilities of $835,991 at April 30, 2011. These matters raise substantial doubt about the Company's ability to continue as a going concern. Managements Plan in regards to these matters is also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Salberg & Company, P.A.
SALBERG & COMPANY, P.A.
Boca Raton, Florida
May 24, 2013
2295 NW Corporate Blvd., Suite 240 Boca Raton, FL 33431-7328
Phone: (561) 995-8270 Toll Free: (866) CPA-8500 Fax: (561) 995-1920
www.salbergco.com info@salbergco.com
Member National Association of Certified Valuation Analysts Registered with the PCAOB
Member CPAConnect with Affiliated Offices Worldwide Member AICPA Center for Audit Quality
F-2
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENTS OF ASSETS AND LIABILITIES
|
| April 30, 2011 (As Restated Note 15) |
|
| April 30, 2010 |
| ||
|
|
|
|
|
|
| ||
ASSETS |
|
|
|
|
|
| ||
Investments, at fair value |
|
|
|
|
|
| ||
Non-affiliate investments (cost: $345,928 and $525,951) |
| $ | 398,707 |
|
| $ | 1,052,042 |
|
Affiliate investments (cost: $738,600 and $2,312,143) |
|
| 166,185 |
|
|
| 3,127,180 |
|
Total Investments |
|
| 564,892 |
|
|
| 4,179,222 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
| 15,445 |
|
|
| 6,567 |
|
Receivables |
|
|
|
|
|
|
|
|
Due from non-affiliates |
|
| - |
|
|
| 11,601 |
|
Due from affiliates (net of $312,508 and $3,500 allowance) |
|
| - |
|
|
| 228,678 |
|
Total Receivables |
|
| - |
|
|
| 240,279 |
|
|
|
|
|
|
|
|
|
|
Prepaid expenses |
|
| 29,436 |
|
|
| 26,131 |
|
Property and equipment, net |
|
| 681 |
|
|
| 2,581 |
|
Deferred income tax |
|
| - |
|
|
| 920,000 |
|
Rent deposit |
|
| 1,100 |
|
|
| 1,100 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 611,554 |
|
| $ | 5,375,880 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 378,913 |
|
| $ | 320,785 |
|
Accounts payable, related parties |
|
| 7,213 |
|
|
| 7,213 |
|
Accrued expenses |
|
| 329,426 |
|
|
| 193,802 |
|
Income taxes payable |
|
| 128,000 |
|
|
| 132,000 |
|
Advances from shareholders |
|
| 19,000 |
|
|
| 22,000 |
|
Notes payable |
|
| 24,610 |
|
|
| 23,154 |
|
Notes payable, related parties |
|
| 396,870 |
|
|
| 367,372 |
|
Accrued interest |
|
| 92,050 |
|
|
| 92,050 |
|
Accrued interest, related parties |
|
| 71,463 |
|
|
| 41,730 |
|
|
|
| 1,447,545 |
|
|
| 1,200,106 |
|
Deferred revenue: |
|
|
|
|
|
|
|
|
Affiliates |
|
| - |
|
|
| 1,458 |
|
Total Deferred Revenue |
|
| - |
|
|
| 1,458 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
| 1,447,545 |
|
|
| 1,201,564 |
|
|
|
|
|
|
|
|
|
|
CONTINGENCIES (NOTE 13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS (LIABILITIES) |
| $ | (835,991 | ) |
| $ | 4,174,316 |
|
|
|
|
|
|
|
|
|
|
COMPOSITION OF NET ASSETS (LIABILITIES) |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 60,000,000 shares authorized;5,912,426 and 6,412,426 shares issued and outstanding at April 30, 2011 and April 30, 2010, respectively |
| $ | 5,912 |
|
| $ | 6,412 |
|
Additional paid-in capital |
|
| 6,157,335 |
|
|
| 6,214,202 |
|
Accumulated income: |
|
|
|
|
|
|
|
|
Accumulated net operating income (loss) |
|
| (21,794 | ) |
|
| 1,738,803 |
|
Dividends paid |
|
| (448,596 | ) |
|
| (448,596 | ) |
Net realized loss on investments |
|
| (5,827,208 | ) |
|
| (5,021,557 | ) |
Net realized gain on dividend of portfolio stock |
|
| 343,924 |
|
|
| 343,924 |
|
Net unrealized appreciation (depreciation) of investments |
|
| (1,045,564 | ) |
|
| 1,341,128 |
|
|
|
|
|
|
|
|
|
|
Net Assets (Liabilities) |
| $ | (835,991 | ) |
| $ | 4,174,316 |
|
|
|
|
|
|
|
|
|
|
Equivalent per share value based on 5,912,426 and 6,412,426 shares of capital stock outstanding as of April 30, 2011 and April 30, 2010 |
| $ | (0.14 | ) |
| $ | 0.65 |
|
See accompanying notes to these financial statements.
F-3
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
|
| For the |
|
|
|
|
|
|
| |||
|
| Year Ended |
|
|
|
|
|
|
| |||
|
| April 30, 2011 |
|
| For the |
|
| For the |
| |||
|
| (As Restated |
|
| Year Ended |
|
| Year Ended |
| |||
|
| Note 15) |
|
| April 30, 2010 |
|
| April 30, 2009 |
| |||
INCOME |
|
|
|
|
|
|
|
|
| |||
Management services |
|
|
|
|
|
|
|
|
| |||
Non-affiliates |
| $ | 1,458 |
|
| $ | 3,588 |
|
| $ | 888,328 |
|
Affiliates |
|
| - |
|
|
| 3,442 |
|
|
| 26,500 |
|
Total Management Services |
|
| 1,458 |
|
|
| 7,030 |
|
|
| 914,828 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| - |
|
|
| 1,009 |
|
|
| 9,596 |
|
Accounting services |
|
|
|
|
|
|
|
|
|
|
|
|
Non-affiliates |
|
| - |
|
|
| 1,500 |
|
|
| 30,000 |
|
Affiliates |
|
| 13,200 |
|
|
| 45,700 |
|
|
| 6,000 |
|
Total Accounting Services |
|
| 13,200 |
|
|
| 47,200 |
|
|
| 36,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income |
|
|
|
|
|
|
|
|
|
|
|
|
Affiliates |
|
| 22,883 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INCOME |
|
| 37,541 |
|
|
| 55,239 |
|
|
| 960,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
Bad debt |
|
| 309,008 |
|
|
| 98,667 |
|
|
| 140,765 |
|
Salaries and wages |
|
| 252,273 |
|
|
| 388,995 |
|
|
| 1,208,229 |
|
Professional fees |
|
| 115,585 |
|
|
| 138,769 |
|
|
| 458,263 |
|
Insurance |
|
| 94,096 |
|
|
| 104,133 |
|
|
| 97,172 |
|
Interest expense |
|
| 31,554 |
|
|
| 33,123 |
|
|
| 27,625 |
|
General and administrative |
|
| 54,178 |
|
|
| 81,274 |
|
|
| 104,458 |
|
Depreciation |
|
| 1,900 |
|
|
| 1,900 |
|
|
| 1,900 |
|
TOTAL OPERATING EXPENSES |
|
| 858,594 |
|
|
| 846,861 |
|
|
| 2,038,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING LOSS BEFORE INCOME TAXES |
|
| (821,053 | ) |
|
| (791,622 | ) |
|
| (1,077,988 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision) |
|
| (921,500 | ) |
|
| 953,000 |
|
|
| 949,000 |
|
Penalties and interest |
|
| (18,044 | ) |
|
| (27,842 | ) |
|
| (86,224 | ) |
Interest expense |
|
| - |
|
|
| (13,150 | ) |
|
| (26,300 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) FROM OPERATIONS |
|
| (1,760,597 | ) |
|
| 120,386 |
|
|
| (241,512 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on dividend |
|
| - |
|
|
| - |
|
|
| - |
|
Loss on disposal of portfolio stock |
|
| (504,576 | ) |
|
| (120,277 | ) |
|
| (2,154,786 | ) |
Loss on impairment of portfolio stock |
|
| (338,325 | ) |
|
| (33,000 | ) |
|
| - |
|
Gain on settlement of investments |
|
| 20,613 |
|
|
| - |
|
|
| - |
|
Realized gain on investments |
|
| 16,637 |
|
|
| - |
|
|
| - |
|
Net change in unrealized depreciation on investments |
|
| (2,386,692 | ) |
|
| (218,492 | ) |
|
| (323,709 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN NET ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
RESULTING FROM OPERATIONS |
| $ | (4,952,940 | ) |
| $ | (251,383 | ) |
| $ | (2,720,007 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets from operations per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | (0.78 | ) |
| $ | (0.04 | ) |
| $ | (0.45 | ) |
Diluted |
| $ | (0.78 | ) |
| $ | (0.04 | ) |
| $ | (0.45 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 6,360,371 |
|
|
| 6,412,426 |
|
|
| 6,025,951 |
|
Diluted |
|
| 6,360,371 |
|
|
| 6,412,426 |
|
|
| 6,025,951 |
|
See accompanying notes to these financial statements.
F-4
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
|
| For the |
|
|
|
|
|
|
| |||
|
| Year Ending |
|
|
|
|
|
|
| |||
|
| April 30, 2011 |
|
| For the |
|
| For the |
| |||
|
| (As Restated |
|
| Year Ending |
|
| Year Ending |
| |||
|
| Note 15) |
|
| April 30, 2010 |
|
| April 30, 2009 |
| |||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
| |||
Net decrease in net assets resulting from operations |
| $ | (4,952,940 | ) |
| $ | (251,383 | ) |
| $ | (2,720,007 | ) |
Adjustments to reconcile net decrease in net assets resulting from operations to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Write-off due from portfolio company deemed uncollectible |
|
| - |
|
|
| 97,087 |
|
|
| 138,755 |
|
Write-off accounts receivable |
|
| - |
|
|
| 1,580 |
|
|
| - |
|
Write-off loan deemed uncollectible |
|
| - |
|
|
| - |
|
|
| 2,010 |
|
Sale (purchase) of investment securities |
|
| - |
|
|
| (60,806 | ) |
|
| (3,496 | ) |
Exercise of warrants |
|
| (25,000 | ) |
|
| (10,000 | ) |
|
| - |
|
Loss on sale of portfolio stock |
|
| 805,651 |
|
|
| 153,277 |
|
|
| 2,154,786 |
|
Stock (received) granted for interest |
|
| - |
|
|
| - |
|
|
| - |
|
Investment securities received in exchange for management services |
|
| (1,458 | ) |
|
| (7,030 | ) |
|
| (914,828 | ) |
Cancellation of shares for services |
|
| - |
|
|
| - |
|
|
| - |
|
Bad debt expense |
|
| 309,008 |
|
|
| - |
|
|
| - |
|
Depreciation expense |
|
| 1,900 |
|
|
| 1,900 |
|
|
| 1,900 |
|
Stock based compensation expense |
|
| 7,633 |
|
|
| 5,088 |
|
|
| 983,288 |
|
Stock options granted for operating expense |
|
| - |
|
|
| - |
|
|
| 67,848 |
|
Officers' compensation contributed as capital |
|
| - |
|
|
| 151,750 |
|
|
| - |
|
Net unrealized (appreciation) depreciation on investments |
|
| 2,386,692 |
|
|
| 218,492 |
|
|
| 323,709 |
|
Deferred income taxes |
|
| 920,000 |
|
|
| (953,000 | ) |
|
| (708,000 | ) |
Current income taxes |
|
| (4,000 | ) |
|
| (7,000 | ) |
|
| (241,000 | ) |
(Increase) decrease in assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Notes receivable non-affiliates |
|
| - |
|
|
| - |
|
|
| (7,547 | ) |
Notes receivable affiliates |
|
| - |
|
|
| (1,009 | ) |
|
| (2,000 | ) |
Receivables non-affiliates |
|
| - |
|
|
| 5,805 |
|
|
| 5,031 |
|
Due from affiliates |
|
| (80,330 | ) |
|
| (162,272 | ) |
|
| (72,261 | ) |
Due from non-affiliates |
|
| 11,601 |
|
|
| (21,360 | ) |
|
| 190 |
|
Prepaid expenses |
|
| 21,296 |
|
|
| 2,015 |
|
|
| 5,165 |
|
Increase (decrease) in liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
| 58,128 |
|
|
| (48,276 | ) |
|
| 92,261 |
|
Accounts payable, related parties |
|
| - |
|
|
| 5,802 |
|
|
| 1,411 |
|
Accrued expenses |
|
| 135,624 |
|
|
| 46,578 |
|
|
| 76,224 |
|
Accrued interest |
|
| - |
|
|
| (24,037 | ) |
|
| 43,340 |
|
Accrued interest, related parties |
|
| 29,733 |
|
|
| 28,926 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| (376,462 | ) |
|
| (827,873 | ) |
|
| (773,221 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of securities |
|
| 381,987 |
|
|
| 651,186 |
|
|
| 548,824 |
|
Interest receivable on notes - non-affiliates |
|
| - |
|
|
| - |
|
|
| - |
|
Interest receivable on notes affiliates |
|
| - |
|
|
| - |
|
|
| - |
|
Loans for notes receivable |
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
| 381,987 |
|
|
| 651,186 |
|
|
| 548,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of promissory note |
|
| - |
|
|
| 126,000 |
|
|
| - |
|
Proceeds (Repayment) of advance from shareholder - related party |
|
| (3,000 | ) |
|
| 16,000 |
|
|
| - |
|
Repayment of debt |
|
| (23,145 | ) |
|
| (24,177 | ) |
|
| (119,451 | ) |
Proceeds from issuance of promissory note - related parties |
|
| 29,498 |
|
|
| 50,000 |
|
|
| - |
|
Proceeds from exercise of employee options |
|
| - |
|
|
| - |
|
|
| 75,000 |
|
Proceeds from issuance of common stock |
|
| - |
|
|
| - |
|
|
| 263,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 3,353 |
|
|
| 167,823 |
|
|
| 219,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
| 8,878 |
|
|
| (8,864 | ) |
|
| (5,348 | ) |
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR |
|
| 6,567 |
|
|
| 15,431 |
|
|
| 20,779 |
|
CASH AND CASH EQUIVALENTS - END OF YEAR |
| $ | 15,445 |
|
| $ | 6,567 |
|
| $ | 15,431 |
|
See accompanying notes to these financial statements.
F-5
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
|
| For the |
|
|
|
|
|
|
| |||
|
| Year Ending |
|
|
|
|
|
|
| |||
|
| April 30, 2011 |
|
| For the |
|
| For the |
| |||
|
| (As Restated |
|
| Year Ending |
|
| Year Ending |
| |||
|
| Note 15) |
|
| April 30, 2010 |
|
| April 30, 2009 |
| |||
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
CASH PAID FOR INCOME TAXES |
| $ | 7,000 |
|
| $ | 7,000 |
|
| $ | 10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR INTEREST |
| $ | 1,023 |
|
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities received in exchange for deferred revenue |
| $ | - |
|
| $ | 4,400 |
|
| $ | 332,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fin 48 for penalties and interest |
| $ | - |
|
| $ | - |
|
| $ | 26,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of lawsuit - exchange of warrant for Company's common stock |
| $ | 65,000 |
|
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing of insurance premium |
| $ | 24,610 |
|
| $ | - |
|
| $ | - |
|
See accompanying notes to these financial statements.
F-6
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENT OF CHANGES IN NET ASSETS (LIABILITIES)
|
| For the |
|
|
|
|
|
|
| |||
|
| Year Ending |
|
|
|
|
|
|
| |||
|
| April 30, 2011 |
|
| For the |
|
| For the |
| |||
|
| (As Restated |
|
| Year Ending |
|
| Year Ending |
| |||
|
| Note 15) |
|
| April 30, 2010 |
|
| April 30, 2009 |
| |||
|
|
|
|
|
|
|
|
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
| $ | (4,952,940 | ) |
| $ | (251,383 | ) |
| $ | (2,720,007 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL SHARE TRANSACTIONS |
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of lawsuit |
|
| (65,000 | ) |
|
| - |
|
|
| - |
|
Share-based compensation expense |
|
| 7,633 |
|
|
| 5,088 |
|
|
| 983,288 |
|
Exercise of employee options |
|
| - |
|
|
| - |
|
|
| 75,000 |
|
Stock options granted for operating expenses |
|
| - |
|
|
| - |
|
|
| 67,848 |
|
Officers' compensation contributed as capital |
|
| - |
|
|
| 151,750 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CAPITAL SHARE TRANSACTIONS |
|
| (57,367 | ) |
|
| 156,838 |
|
|
| 1,389,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL INCREASE (DECREASE) |
|
| (5,010,307 | ) |
|
| (94,545 | ) |
|
| (1,330,371 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS, BEGINNING OF YEAR |
|
| 4,174,316 |
|
|
| 4,268,861 |
|
|
| 5,599,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS (LIABILITIES), END OF YEAR |
| $ | (835,991 | ) |
| $ | 4,174,316 |
|
| $ | 4,268,861 |
|
See accompanying notes to these financial statements.
F-7
UNIVERSAL CAPITAL MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
|
| April 30, 2011 (As Restated Note 15) |
|
| April 30, 2010 |
|
| April 30, 2009 |
| |||
|
|
|
|
|
|
|
|
|
| |||
PER SHARE INFORMATION |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Net asset value, beginning of period |
| $ | 0.65 |
|
| $ | 0.67 |
|
| $ | 0.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from operations, net of taxes (1) |
|
| (0.28 | ) |
|
| (0.07 | ) |
|
| (0.10 | ) |
Net realized loss on investments, net of taxes (1) |
|
| (0.13 | ) |
|
| (0.01 | ) |
|
| (0.22 | ) |
Net unrealized appreciation (depreciation) on investments, net of taxes (1) |
|
| (0.38 | ) |
|
| 0.04 |
|
|
| (0.22 | ) |
Net increase (decrease) from stock transactions (2) |
|
| (0.01 | ) |
|
| 0.02 |
|
|
| 0.23 |
|
|
|
| (0.79 | ) |
|
| (0.02 | ) |
|
| (0.31 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value, end of period |
| $ | (0.14 | ) |
| $ | 0.65 |
|
| $ | 0.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share market value, end of period |
| $ | 0.20 |
|
| $ | 0.40 |
|
| $ | 0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment return, based on net asset value at end of period |
|
| -121.34 | % |
|
| -2.99 | % |
|
| -31.63 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
RATIO/SUPPLEMENTAL DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period |
| $ | (835,991 | ) |
| $ | 4,174,316 |
|
| $ | 4,268,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of expenses to average net assets |
|
| 51.44 | % |
|
| 20.06 | % |
|
| 41.31 | % |
Ratio of net income (loss) from operations to average net assets |
|
| -296.73 | % |
|
| 1.31 | % |
|
| 19.47 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of shares outstanding during the period |
|
| 6,360,371 |
|
|
| 6,412,426 |
|
|
| 6,025,951 |
|
(1) | Calculated based on diluted weighted average number of shares outstanding during the period. |
(2) | Calculated as a balancing amount necessary to reconcile the change in net assets value per share with the other per share information presented. This amount may not agree with the aggregate gains and losses for the period because the difference in the net asset value at the beginning and end of period does not inherently equal the per share changes of the line items disclosed. |
See accompanying notes to these financial statements.
F-8
UNIVERSAL CAPITAL MANAGEMENT, INC.
SCHEDULE OF INVESTMENTS
AS OF APRIL 30, 2011
|
|
|
|
|
|
|
|
| Number of |
| Method of |
|
|
|
|
|
|
|
|
| |||||
|
|
|
| Date of |
| % of |
|
| Units Held at |
| Valuation |
|
|
|
| Value at |
|
| % of |
| |||||
|
| Business |
| Acquisition |
| Portfolio |
|
| April 30, 2011 |
| (1) |
| Cost |
|
| April 30, 2011 |
|
| Net Assets |
| |||||
Affiliate Investments (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
PR Specialists, Inc.(5)(6)(7) |
| Public shell |
| Dec-09 |
|
| 0.00 | % |
|
| 2,500,000 |
| (M) |
| $ | 2,500 |
|
| $ | - |
|
|
| 0.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BF Acquisition Group V, Inc.(5)(6)(7) |
| Public shell |
| April-05; |
|
| 0.00 | % |
|
| 100,000 |
| (M) |
|
| 1,625 |
|
|
| - |
|
|
| 0.00 | % |
|
|
|
| Nov-09 |
|
| 0.00 | % |
|
| 1,900,000 |
| (M) |
|
| 1,900 |
|
|
| - |
|
|
| 0.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vystar Corporation (4)(6) |
| Natural rubber latex products |
| Mar-10 |
|
| 29.41 | % |
|
| 369,300 |
| (M) |
|
| 738,600 |
|
|
| 166,185 |
|
|
| -19.88 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant to purchase 600,000 shares of Vystar Corporation |
| Natural rubber latex products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000 warrants expiring April 30, 2013(5)(6) |
|
|
| Jul-08 |
|
| 0.00 | % |
|
| 500,000 |
| (I) |
|
| 193,000 |
|
|
| - |
|
|
| 0.00 | % |
50,000 warrants expiring April 30, 2012(5)(6) |
|
|
| Oct-10 |
|
| 0.00 | % |
|
| 50,000 |
| (I) |
|
| - |
|
|
| - |
|
|
| 0.00 | % |
50,000 warrants expiring May 31, 2012(5)(6) |
|
|
| Nov-10 |
|
| 0.00 | % |
|
| 50,000 |
| (I) |
|
| - |
|
|
| - |
|
|
| 0.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innovation Industries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory note (6)(8) |
| Direct sales |
| Oct-09 |
|
| 0.00 | % |
|
|
|
| (C) |
|
| 10,000 |
|
|
| - |
|
|
| 0.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIVOO Holdings, Inc. (4)(6) |
| High speed internet media |
| Dec-05 to Nov-06 |
|
| 0.00 | % |
|
| 664,501 |
| (M) |
|
| 319,725 |
|
|
| - |
|
|
| 0.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants to purchase 605,000 shares of SIVOO Holdings, Inc. |
| High speed internet media |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 warrants expiring November 14, 2011 (5)(6) |
|
|
| Nov-06 |
|
| 0.00 | % |
|
| 200,000 |
| (I) |
|
| - |
|
|
| - |
|
|
| 0.00 | % |
405,000 warrants expiring February 28, 2013 (5)(6) |
|
|
| Feb-08 |
|
| 0.00 | % |
|
| 405,000 |
| (I) |
|
| 206,202 |
|
|
| - |
|
|
| 0.00 | % |
4% of fully diluted common stock at time of exercise - TBD (5)(6) |
|
|
| Oct-09 |
|
| 0.00 | % |
| TBD |
| (I) |
|
| - |
|
|
| - |
|
|
| 0.00 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Investments in Affiliates |
|
|
|
| 29.41 | % |
|
|
|
|
|
|
| 1,473,552 |
|
|
| 166,185 |
|
|
| -19.88 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Affiliate Investments (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lightwave Logic, Inc. (4)(6)(7) |
| Plastics engineering |
| Feb-07 to Jan-09 |
|
| 0.17 | % |
|
| 817 |
| (M) |
|
| 678 |
|
|
| 907 |
|
|
| -0.11 | % |
|
|
|
| Dec-10 |
|
| 15.72 | % |
|
| 100,000 |
| (M) |
|
| 95,000 |
|
|
| 88,800 |
|
|
| -10.62 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant to purchase 357,500 shares of Lightwave Logic, Inc. common stock, expiring February 2012 (5)(6)(7) |
| Plastics engineering |
| Feb-07 |
|
| 54.70 | % |
|
| 357,500 |
| (I) |
|
| 250,250 |
|
|
| 309,000 |
|
|
| -36.96 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant to purchase 1,000,000 shares of iVolution Medical Systems, Inc. (privately held) common stock, expiring July 2013 (5)(6) |
| Medical billing and medical records software |
| Jul-08 |
|
| 0.00 | % |
|
| 1,000,000 |
| (I) |
|
| 112,000 |
|
|
| - |
|
|
| 0.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant to purchase 500,000 shares of iVolution Medical Systems, Inc. (privately held) common stock, expiring July 2013 (5)(6) |
| Medical billing and medical records software |
| Jul-08 |
|
| 0.00 | % |
|
| 500,000 |
| (I) |
|
| 17,000 |
|
|
| - |
|
|
| 0.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (5)(6)(7) |
| Various |
| May-09 |
|
| 0.00 | % |
|
| 3,000 |
| (C ) |
|
| 300 |
|
|
| - |
|
|
| 0.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Investments in Non-Affiliates |
|
|
|
| 70.59 | % |
|
|
|
|
|
|
| 475,228 |
|
|
| 398,707 |
|
|
| -47.69 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Investments |
|
|
|
| 100.00 | % |
|
|
|
|
|
| $ | 1,948,780 |
|
| $ | 564,892 |
|
|
| -67.57 | % |
|
| Cash and other assets, less liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,400,883 | ) |
|
| 167.56 | % |
|
| Net assets at April 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | (835,991 | ) |
|
| 100.00 | % |
See accompanying notes to these financial statements.
F-9
UNIVERSAL CAPITAL MANAGEMENT, INC.
SCHEDULE OF INVESTMENTS
AS OF APRIL 30, 2011
Notes to Schedule of Investments
See accompanying notes to these financial statements.
F-10
UNIVERSAL CAPITAL MANAGEMENT, INC.
SCHEDULE OF INVESTMENTS
AS OF APRIL 30, 2010
|
|
|
|
|
|
|
|
|
| Number of |
|
|
|
| Method of |
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
| Date of |
| % of |
|
|
| Units Held at |
|
|
|
| Valuation |
|
|
|
| Value at |
|
|
| % of |
|
| ||||||
|
| Business |
| Acquisition |
| Portfolio |
|
|
| April 30, 2010 |
|
|
|
| (1) |
| Cost |
|
| April 30, 2010 |
|
|
| Net Assets |
|
| ||||||
Affiliate Investments (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
PR Specialists, Inc./Mediavix, Inc. (5)(6)(7) |
| Brand relationship management |
| Dec-09 |
|
| 29.91 | % |
|
|
| 2,500,000 |
|
|
|
| (M) |
| $ | 2,500 |
|
| $ | 1,250,000 |
|
|
|
| 29.95 | % |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
BF Acquisition Group V, Inc./Incredible 3D, Inc.(5)(6)(7) |
| 3D content production |
| April-05; |
|
| 0.77 | % |
|
|
| 100,000 |
|
|
|
| (M) |
|
| 1,625 |
|
|
| 32,000 |
|
|
|
| 0.77 | % |
| |
|
|
|
| Nov-09 |
|
| 14.55 | % |
|
|
| 1,900,000 |
|
|
|
| (M) |
|
| 1,900 |
|
|
| 608,000 |
|
|
|
| 14.57 | % |
| |
Vystar Corporation (4)(6) |
| Natural rubber latex products |
| May-09 |
|
| 7.41 | % |
|
|
| 193,238 |
|
|
|
| (M) |
|
| 376,191 |
|
|
| 309,180 |
|
|
|
| 7.41 | % |
| |
|
|
|
| Mar-10 |
|
| 18.38 | % |
|
|
| 600,000 |
| (5) |
|
|
| (M) |
|
| 1,201,000 |
|
|
| 768,000 |
|
|
|
| 18.40 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant to purchase 500,000 shares of Vystar Corporation common stock, expiring April 30, 2013 (5)(6) |
| Natural rubber latex products |
| Jul-08 |
|
| 3.59 | % |
|
|
| 500,000 |
|
|
|
|
| (I) |
|
| 193,000 |
|
|
| 150,000 |
|
|
|
| 3.59 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Innovation Industries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory note (6)(8) |
| Direct sales |
| Oct-09 |
|
| 0.24 | % |
|
|
|
|
|
|
|
|
| (C) |
|
| 10,000 |
|
|
| 10,000 |
|
|
|
| 0.24 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIVOO Holdings, Inc. (4)(6) |
| High speed internet media |
| Dec-05 to Nov-06 |
|
| 0.00 | % |
|
|
| 664,501 |
|
|
|
|
| (M) |
|
| 319,725 |
|
|
| - |
|
|
|
| 0.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants to purchase 805,000 shares of SIVOO Holdings, Inc. |
| High speed internet media |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 warrants expiring April 11, 2011 (5)(6) |
|
|
| Apr-06 |
|
| 0.00 | % |
|
|
| 200,000 |
|
|
|
|
| (I) |
|
| - |
|
|
| - |
|
|
|
| 0.00 | % |
|
200,000 warrants expiring November 14, 2011 (5)(6) |
|
|
| Nov-06 |
|
| 0.00 | % |
|
|
| 200,000 |
|
|
|
|
| (I) |
|
| - |
|
|
| - |
|
|
|
| 0.00 | % |
|
405,000 warrants expiring February 28, 2013 (5)(6) |
|
|
| Feb-08 |
|
| 0.00 | % |
|
|
| 405,000 |
|
|
|
|
| (I) |
|
| 206,202 |
|
|
| - |
|
|
|
| 0.00 | % |
|
4% of fully diluted common stock at time of exercise - TBD (5)(6) |
|
|
| Oct-09 |
|
| 0.00 | % |
|
|
| TBD |
|
|
|
|
| (I) |
|
| - |
|
|
| - |
|
|
|
| 0.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Investments in Affiliates |
|
|
|
| 74.85 | % |
|
|
|
|
|
|
|
|
|
|
|
| 2,312,143 |
|
|
| 3,127,180 |
|
|
|
| 74.93 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Affiliate Investments (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lightwave Logic, Inc. (4)(6)(7) |
| Plastics engineering |
| Feb-07 to Jan-09 |
|
| 1.91 | % |
|
|
| 52,462 |
|
|
|
|
| (M) |
|
| 48,651 |
|
|
| 79,742 |
|
|
|
| 1.91 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant to purchase 500,000 shares of Lightwave Logic, Inc. common stock, expiring February 2012 (5)(6)(7) |
| Plastics engineering |
| Feb-08 |
|
| 16.26 | % |
|
|
| 500,000 |
|
|
|
|
| (I) |
|
| 348,000 |
|
|
| 679,000 |
|
|
|
| 16.27 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant to purchase 1,000,000 shares of iVolution Medical Systems, Inc. (privately held) common stock, expiring July 2013 (5)(6) |
| Medical billing and medical records software |
| Jul-08 |
|
| 5.76 | % |
|
|
| 1,000,000 |
|
|
|
|
| (I) |
|
| 112,000 |
|
|
| 241,000 |
|
|
|
| 5.77 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant to purchase 500,000 shares of iVolution Medical Systems, Inc. (privately held) common stock, expiring July 2013 (5)(6) |
| Medical billing and medical records software |
| Jul-08 |
|
| 1.21 | % |
|
|
| 500,000 |
|
|
|
|
| (I) |
|
| 17,000 |
|
|
| 52,000 |
|
|
|
| 1.25 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (5)(6)(7) |
| Various |
| May-09 |
|
| 0.01 | % |
|
|
| 3,000 |
|
|
|
|
| (C) |
|
| 300 |
|
|
| 300 |
|
|
|
| 0.01 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Investments in Non-Affiliates |
|
|
|
| 25.15 | % |
|
|
|
|
|
|
|
|
|
|
|
| 525,951 |
|
|
| 1,052,042 |
|
|
|
| 25.21 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Investments |
|
|
|
| 100.00 | % |
|
|
|
|
|
|
|
|
|
|
| $ | 2,838,094 |
|
| $ | 4,179,222 |
|
|
|
| 100.14 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and other assets, less liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4,906 | ) |
|
|
| -0.14 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net assets at April 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 4,174,316 |
|
|
|
| 100.00 | % |
|
See accompanying notes to these financial statements.
F-11
UNIVERSAL CAPITAL MANAGEMENT, INC.
SCHEDULE OF INVESTMENTS
AS OF APRIL 30, 2010
Notes to Schedule of Investments
(1) | Investments are valued using the (M) Market Approach, (I) Income Approach, which includes the Black-Scholes Method, or (C) Cost. |
(2) | Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns at least 5% but not more than 25% of the voting securities. |
(3) | Non-affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns less than 5% of the voting securities. |
(4) | Unrestricted securities liquid securities. |
(5) | Restricted securities - illiquid securities; total illiquid securities of $3,780,300 make up 90.5% of total net assets as of April 30, 2010. |
(6) | Represents a non-income producing security. Equity investments that have not paid dividends within the last 12 months are considered to be non-income producing. |
(7) | These investments are development stage companies. A development stage company is defined as a company that is devoting substantially all of its efforts to establishing a new business, and either it has not yet commenced its planned principal operations, or it has commenced such operations but has not realized significant revenue from them. |
(8) | This represents a promissory note from Innovation Industries. Terms of the promissory note include a profit sharing on net profits. The promissory note is recorded at cost. |
See accompanying notes to these financial statements.
F-12
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History and Nature of Business and Going Concern
Universal Capital Management, Inc. (the Company, we, us, our) is a business development company see Subsequent Events Note 14. The Company is a closed-end, non-diversified management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. We are a diversified, aggressive investment tool that assists early stage development companies in all aspects of the planning process from inception to entering the public marketplace. This includes assisting with the preparation of financial statements, capitalization tables, valuations, business plans and coordinating public/investor relations efforts. Our niche is 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 have differing clients in varied industries, our overall portfolio is extremely diversified, which we believe enables us to offer investors who invest in us a potentially higher return with less risk. For our management services we receive 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 refers to companies in which it invests as portfolio companies.
During the year ending April 30, 2011, we changed our business plan. 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 filing we have generated limited revenues, do not rely on any principal products and do not sell any internally developed or Company owned products.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the year ended April 30, 2011, the Company has had a net decrease in net assets from operations and net cash used in operating activities of $4,952,940 and $376,462, respectively, and as of April 30, 2011, has net liabilities of $835,991. In view of these matters, recoverability of any asset amounts shown in the accompanying financial statements is dependent upon the Companys ability to achieve a level of profitability. These matters raise substantial doubt about the Companys ability to continue as a going concern. Since inception, the Company has financed its activities from the sale of equity securities. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities, until such time that funds provided by operations, if ever, are sufficient to fund working capital requirements. The Financial Statements do not include any adjustments relating to the recoverability or classification of recorded assets and liabilities that might result should the Company be unable to continue as a going concern.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments
Investments in securities of unaffiliated issuers represent holdings of less than 5% of the issuer's voting common stock. Investments in and advances to affiliates are presented as (i) majority-owned, if holdings, directly or indirectly, represent over 50% of the issuer's voting common stock, (ii) controlled companies if the holdings, directly or indirectly, represent over 25% and up to 50% of the issuer's voting common stock and (iii) other affiliates if the holdings, directly or indirectly, represent 5% to 25% of the issuer's voting common stock. Investments - other than securities represent all investments other than in securities of the issuer.
Security Valuations
Investments in securities or other than securities of privately held entities are initially recorded at their original cost as of the date the Company obtained an enforceable right to demand the securities or other investments purchased and incurred an enforceable obligation to pay the investment price.
F-13
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Security Valuations (Continued)
For financial statement purposes, investments are recorded at their fair value. If at our reporting date, readily determinable fair values do not exist for our investments, such as restricted securities and other securities (small, privately-held companies), the fair value of these investments is determined in good faith by the Company's Board of Directors pursuant to a valuation policy and consistent valuation process. Due to the inherent uncertainty of these valuations, the estimates may differ significantly from the values that would have been used had a ready market for the investments existed and the differences may be material. Our valuation methodology includes the examination of among other things, the underlying portfolio company performance, financial condition and market changing events that impact valuation.
Investments in securities traded on a national securities exchange (or reported on the NASDAQ national market) are stated at the last reported sales price on the day of valuation; other securities traded in the over-the-counter market (such as OTC BB, Pink Sheets, etc.) and listed securities for which no sale was reported on that date are stated at the last quoted bid price.
Investment securities are exposed to various risks, such as overall market volatility. Due to the level of risk associated with the securities of certain portfolio companies, it is likely that changes in their values will occur in the near term and that such changes could materially affect the amounts reported in the statement of assets and liabilities at future dates.
Realized gains (losses) from the sale of investments and unrealized gains (losses) from the valuation of investments are reflected in operations during the period incurred.
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 managements 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 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 April 30, 2011 the Company did not have deposits with a financial institution that exceeded the FDIC deposit insurance coverage.
Notes Receivable
Notes receivable consist of monies loaned to its portfolio companies evidenced by a note specifying a specific term, and interest rate and are reported at fair value. Notes receivable are presented as due from affiliated and non-affiliated issuers. Notes receivable from non-affiliated issuers represent notes from companies where we hold less than 5% of the issuer's voting common stock. Notes receivable from affiliated issuers represent notes from companies where we hold 5% or more of the issuers voting common stock. The Company provides an allowance for losses on notes receivable based on a review of the current status of existing receivables and managements evaluation of periodic aging of accounts. The Company charges off notes receivable against the allowance for losses when an account is deemed to be uncollectible. The provision for doubtful accounts was approximately $30,014 and $30,014 as of April 30, 2011 and 2010, respectively.
F-14
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounts Receivable
Accounts receivable consist of fees for services provided by the Company and are reported at fair value. Accounts receivable are presented as due from affiliated and non-affiliated issuers. Accounts receivable from unaffiliated issuers represent receivables from companies where we hold less than 5% of the issuer's voting common stock. Accounts receivable from affiliated issuers represent receivables from companies where we hold 5% or more of the issuers voting common stock. The Company provides an allowance for losses on trade receivables based on a review of the current status of existing receivables and managements 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 Companys policy to accrue interest on past due receivables. During 2010, the Company charged a direct write-off of $1,580 to bad debt expense. There was no allowance for doubtful accounts as of April 30, 2011 and 2010.
Due from Affiliates and Non-Affiliates
Due from affiliates and non-affiliates represent fees that the Company has paid on behalf of a portfolio company and is reported at fair value. Due from non-affiliated issuers represent due from companies where we hold less than 5% of the issuer's voting common stock. Due from affiliated issuers represent due from companies where we hold 5% or more of the issuers voting common stock. The provision for doubtful receivables was $312,508 and $3,500 at April 30, 2011 and 2010.
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 Companys 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
Product revenue
We 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.
We also 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. Deposits, if any, on these services are recognized as deferred revenue until earned.
F-15
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Management Services for Equity Investments
The Company recognizes management services revenue for equity investments received as payment in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 505-50-05, Accounting by a Grantee for an Equity Instrument to be Received in Conjunction with Providing Goods or Services. The Company enters into a management service agreement with a portfolio company to provide services defined in a contract for equity instruments in the form of the portfolio companys common stock or warrants to purchase common stock. The fair value of the common stock is the portfolio companys current fair market value and the fair value of the warrant is determined using the Black-Scholes method of valuation. The fair value of the equity instruments is also the Companys cost basis in the portfolio companys securities and the income that is recognized for management services. The Company recognizes management services revenue for which payment is to be received in cash as services are provided and in accordance with the revenue recognition criteria of the Securities and Exchange Commission. If persuasive evidence of an arrangement exists, the price is fixed or determinable and collectability is reasonably assured, revenue is deferred and recognized evenly as services are provided over the life of the contract unless otherwise stated in the contract.
Accounting Services
The Company provides accounting and other administrative services to its companies. 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.
Stock Based Compensation
The Company accounts for stock based compensation in accordance with FASB ASC 718, Compensation Share Based Compensation. This statement requires the recognition of compensation expense measured at fair value when the Company obtains employee services in stock-based payment transactions.
Interest Income
The Company loans monies to its portfolio companies from time to time. These loans, which are evidenced by a note, are subject to interest accrued on a monthly basis. This interest income is recognized when accrued.
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
F-16
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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 Companys statement of operations for the period.
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 are recognized as other income on the Companys 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 assets carrying amount over the estimated fair market value.
Reclassifications
Certain reclassifications were made to the April 30, 2010 and 2009 financial statements in order to conform to the April 30, 2011 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 Companys 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 Companys 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
F-17
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company has adopted ASC 855 and its amendment, and this adoption did not have a material impact on its financial statements.
Recently Issued Pronouncements (Continued)
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.
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 Change in 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 year ending April 30, 2011, we have entered into a new business model. We do not manufacture any of our products. As of the date of this filing we have generated limited revenues, do not rely on any principal products and 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 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.
F-18
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 3 INVESTMENTS (CONTINUED)
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 does not have a material impact on its financial statements.
At April 30, 2010, 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 |
| ||||
|
| April 30, 2010 |
|
| (Level 1) |
|
| (Level 2) |
|
| (Level 3) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investments |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Affiliate investments |
| $ | 3,127,180 |
|
| $ | 2,977,180 |
|
| $ | - |
|
| $ | 150,000 |
|
Non-affiliate investments |
|
| 1,052,042 |
|
|
| 79,742 |
|
|
| - |
|
|
| 972,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in securities |
| $ | 4,179,222 |
|
| $ | 3,056,922 |
|
| $ | - |
|
| $ | 1,122,300 |
|
At April 30, 2011, 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 |
| ||||
|
| April 30, 2011 |
|
| (Level 1) |
|
| (Level 2) |
|
| (Level 3) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investments |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Affiliate investments |
| $ | 166,185 |
|
| $ | 166,185 |
|
| $ | - |
|
| $ | - |
|
Non-affiliate investments |
|
| 398,707 |
|
|
| 89,707 |
|
|
| - |
|
|
| 309,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in securities |
| $ | 564,892 |
|
| $ | 255,892 |
|
| $ | - |
|
| $ | 309,000 |
|
The following chart shows the components of change in the financial assets categorized as Level 3, for the year ending April 30, 2011:
|
| Fair Value Measurement Using Significant Unobservable Inputs |
|
|
| |
|
| (Level 3) |
|
|
| |
|
|
|
|
|
| |
Beginning Balance, April 30, 2010 |
| $ | 1,122,000 |
|
|
|
|
|
|
|
|
|
|
Transfers out of Level 3 |
|
| (97,750 | ) |
| (1) |
Transfers into Level 3 |
|
| 1,890,000 |
|
| (2) |
Total unrealized losses included in change in net assets |
|
| (2,605,250 | ) |
|
|
|
|
|
|
|
|
|
Ending Balance, April 30, 2011 |
| $ | 309,000 |
|
|
|
|
|
|
|
|
|
|
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. |
| $ | (819,000 | ) |
|
|
(1) | Transfer out of $25,000 for exercise of a warrant to purchase Lightwave Logic, Inc. common stock, $72,750 for exchange of warrant for UCMT common stock. |
(2) | Transfer in of $640,000 for BF Acquisition Group and $1,250,000 for PR Specialists. |
F-19
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 4 INCOME TAXES
As an investment company organized as a corporation, the Company is taxable as a corporation. 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 April 30, 2011 was $92,050. The change in unrecognized tax provisions during the year ending April 30, 2011 amounted to $0 and the accrual at April 30, 2011 amounted to $92,050. The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense and is included on the Companys 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 years ending April 30, 2011, 2010 and 2009 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%. The Companys income tax benefit differs from the expected income tax benefit for federal income tax purposes as follows:
|
| For the Year Ended April 30, 2011 |
|
| For the Year Ended April 30, 2010 |
|
| For the Year Ended April 30, 2009 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Income taxes at U.S. Federal Income Tax rate |
| $ | 1,018,000 |
|
| $ | 397,000 |
|
| $ | 1,145,000 |
|
State income taxes, net of federal benefit |
|
| 256,000 |
|
|
| 117,000 |
|
|
| 153,000 |
|
Non-deductible share based compensation |
|
| - |
|
|
| - |
|
|
| (373,000 | ) |
Exercise of warrant |
|
| - |
|
|
| 435,000 |
|
|
| 24,000 |
|
Worthless warrants |
|
| - |
|
|
| 114,000 |
|
|
| - |
|
Realized losses |
|
| (319,000 | ) |
|
| (110,000 | ) |
|
| - |
|
Change in valuation allowance |
|
| (1,876,500 | ) |
|
| - |
|
|
| - |
|
Net income tax (provision) benefit |
| $ | (921,500 | ) |
| $ | 953,000 |
|
| $ | 949,000 |
|
F-20
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 4 INCOME TAXES (CONTINUED)
The income tax (provision) benefit consists of the following:
|
| For the Year Ended April 30, 2011 |
|
| For the Year Ended April 30, 2010 |
|
| For the Year Ended April 30, 2009 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Current: |
|
|
|
|
|
|
|
|
| |||
Federal |
| $ | 149,000 |
|
| $ | (21,000 | ) |
| $ | 241,000 |
|
State |
|
| 42,000 |
|
|
| (6,000 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current |
| $ | 191,000 |
|
| $ | (27,000 | ) |
| $ | 241,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
| $ | 597,000 |
|
| $ | 765,000 |
|
| $ | 553,000 |
|
State |
|
| 167,000 |
|
|
| 215,000 |
|
|
| 155,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deferred |
| $ | 764,000 |
|
| $ | 980,000 |
|
| $ | 708,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income Tax Benefit |
| $ | 955,000 |
|
| $ | 953,000 |
|
| $ | 949,000 |
|
Change in Valuation Allowance |
|
| (1,876,500 | ) |
|
| - |
|
|
| - |
|
Net Income Tax Benefit (Provision) |
| $ | (921,500 | ) |
| $ | 953,000 |
|
| $ | 949,000 |
|
The components of deferred tax (assets) liabilities are as follows:
|
| April 30, 2011 |
|
| April 30, 2010 |
| ||
|
|
|
|
|
|
| ||
Deferred tax asset (liability) |
|
|
|
|
|
| ||
Deferred charges |
| $ | 66,000 |
|
| $ | 73,000 |
|
Net operating loss |
|
| 277,000 |
|
|
| 88,000 |
|
Unrealized gains (losses) |
|
| 416,000 |
|
|
| (533,000 | ) |
Capital loss carryforward |
|
| 1,097,000 |
|
|
| 1,418,000 |
|
Stock-based compensation |
|
| 129,000 |
|
|
| 126,000 |
|
Amortization of deferred revenue from warrants |
|
| (327,000 | ) |
|
| (347,000 | ) |
Bad debt |
|
| 218,000 |
|
|
| 95,000 |
|
Other |
|
| 500 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Total deferred tax asset, net |
| $ | 1,876,500 |
|
| $ | 920,000 |
|
Valuation allowance |
|
| (1,876,500 | ) |
|
| - |
|
Net deferred tax asset |
| $ | - |
|
| $ | 920,000 |
|
In assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The valuation allowance has been increased by $1,876,500 for the year ended April 30, 2011. Net operating loss carry-forwards aggregate approximately $3,458,000 and expire in years through 2028. The Companys federal tax returns for 2005 and beyond remain subject to examination by the Internal Revenue Service (IRS).
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 $315,000, comprised of $128,000 of income taxes and $187,000 of interest and penalties. The interest and penalties are included as accrued expenses in the accompanying financial statements at April 30, 2011. The Company has agreements with both agencies to pay a minimum per month to avoid any collections or additional liens.
F-21
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 5 NOTES RECEIVABLE
Notes receivable consists of the following:
|
| April 30, 2011 |
|
| April 30, 2010 |
| ||
Note Receivable - affiliated companies |
|
|
|
|
|
| ||
SIVOO Holdings, Inc. ("SIVOO") - Principal of $25,000. This note bears interest at 8% per year beginning on May 1, 2007. This note is payable upon demand. |
| $ | 30,014 |
|
| $ | 30,014 |
|
|
|
|
|
|
|
|
|
|
Allowance for bad debt |
|
| (30,014 | ) |
|
| (30,014 | ) |
|
|
|
|
|
|
|
|
|
Notes Receivable- affiliated companies |
| $ | - |
|
| $ | - |
|
During 2010 the Company charged an allowance of $30,014 to bad debt expense.
NOTE 6 DUE FROM NON-AFFILIATED AND AFFILIATED COMPANIES
|
| April 30, 2011 |
|
| April 30, 2010 |
| ||
Due from Non-Affiliated Companies |
|
|
|
|
|
| ||
MedicaView |
| $ | - |
|
| $ | 11,601 |
|
|
|
|
|
|
|
|
|
|
Total Due from Non-Affiliated Companies |
| $ | - |
|
| $ | 11,601 |
|
|
|
|
|
|
|
|
|
|
Due from Affiliated Companies |
|
|
|
|
|
|
|
|
BF Acquisition Group V, Inc. |
| $ | - |
|
| $ | 53,962 |
|
Incredible 3D, Inc. |
|
| - |
|
|
| 89,248 |
|
SIVOO Holdings |
|
| - |
|
|
| 3,500 |
|
PR Specialists |
|
| - |
|
|
| 81,736 |
|
Innovation Industries |
|
| - |
|
|
| 3,732 |
|
|
|
|
|
|
|
|
|
|
Totals |
|
| - |
|
|
| 232,178 |
|
|
|
|
|
|
|
|
|
|
Allowance for bad debt |
|
| - |
|
|
| (3,500 | ) |
|
|
|
|
|
|
|
|
|
Total Due from Affiliated Companies |
| $ | - |
|
| $ | 228,678 |
|
During the year ended April 30, 2011, the Company determined that all due from non-affiliated and affiliated companies were probably uncollectible and as a result, recorded a direct write off as a bad debt expense of $309,008 in the accompanying financial statements and a wrote off the previous allowed $3,500 receivable.
During the year ended April 30, 2010, the Company charged an allowance of $3,500 and a direct write off of $63,572 to bad debt expense.
F-22
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 7 DEFERRED REVENUE AND MANAGEMENT SERVICE REVENUE
The deferred revenue represents unearned management fee income. Income is amortized and recognized evenly over the life of the contract unless otherwise stated in the contract. In accordance with ASC Subtopic 505-50, since the shares received by the Company are non-refundable, the value of the contract is determined by the number of shares the Company receives at the closing market price on the day of the contract (commitment date). Warrants are valued using the Black-Scholes method.
Deferred revenue consists of the following:
|
| April 30, 2011 |
|
| April 30, 2010 |
| ||
|
|
|
|
|
|
| ||
Affiliates |
|
|
|
|
|
| ||
PR Specialists, Inc.( PR") |
|
|
|
|
|
| ||
Received 2,500,000 shares of PR common stock for payment of services per a one year contract dated December 2009, valued at $2,500, fair value and amortized over the life of the contract. |
| $ | - |
|
| $ | 1,458 |
|
|
|
|
|
|
|
|
|
|
Total Affiliates |
|
| - |
|
|
| 1,458 |
|
|
|
|
|
|
|
|
|
|
Total Deferred Revenue |
| $ | - |
|
| $ | 1,458 |
|
F-23
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 7 DEFERRED REVENUE AND MANAGEMENT SERVICE REVENUE (CONTINUED)
Management service revenue recognized consists of:
|
| For the Year Ending April 30, 2011 |
|
| For the Year Ending April 30, 2010 |
|
| For the Year Ending April 30, 2009 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Non-Affiliates |
|
|
|
|
|
|
|
|
| |||
Vystar Corporation ("Vystar") |
|
|
|
|
|
|
|
|
| |||
Received a warrant to purchase 500,000 shares of Vystar Corporation common stock for payment of services per a one year contract dated April 2008, valued at $193,000, fair value. |
| $ | - |
|
| $ | - |
|
| $ | 193,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lightwave Logic, Inc. ("LWLG") |
|
|
|
|
|
|
|
|
|
|
|
|
Received a warrant to purchase 400,000 shares of LWLG common stock for payment of services per one year contract dated February 28, 2008, valued at $332,000, fair value and amortized over the life of the contract. |
|
| - |
|
|
| - |
|
|
| 276,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
iVolution Medical Systems ("iVolution") |
|
|
|
|
|
|
|
|
|
|
|
|
Received a warrant to purchase 1,000,000 shares of iVolution common stock for payment of services per a three month contract dated July 2008, valued at $112,000, fair value and amortized over the life of the contract. |
|
| - |
|
|
| - |
|
|
| 112,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Received a warrant to purchase 500,000 shares of iVolution common stock for payment of services per a one year contract dated July 2008, valued at $17,000, fair value and amortized over the life of the contract. |
|
| - |
|
|
| 3,588 |
|
|
| 13,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MICCO Group ("MICCO") |
|
|
|
|
|
|
|
|
|
|
|
|
Received a warrant to purchase 1,000,000 shares of MICCO common stock for payment of services per a three month contract dated July 2008, valued at $6,000, fair value and amortized over the life of the contract. |
|
| - |
|
|
| - |
|
|
| 6,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theater Xtreme Entertainment Group, Inc. ("TXEG") |
|
|
|
|
|
|
|
|
|
|
|
|
Received 650,000 shares of TXEG common stock for payment of services per one year contract dated July 2007, valued at $396,500, fair value and amortized over the life of the contract. |
|
| - |
|
|
| - |
|
|
| 66,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Received a warrant to purchase 500,000 shares of TXEG common stock for payment of services per one year contract dated July 2007, valued at $277,000, fair value and amortized over the life of the contract. |
|
| - |
|
|
| - |
|
|
| 46,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Received 2,500,000 shares of TXEG common stock for services per a one year contract dated July 2008, valued at $175,000, fair value and amortized over the life of the contract. |
|
| - |
|
|
| - |
|
|
| 175,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Affiliates |
| $ | - |
|
| $ | 3,588 |
|
| $ | 888,328 |
|
F-24
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 7 DEFERRED REVENUE AND MANAGEMENT SERVICE REVENUE (CONTINUED)
|
| For the Year Ending April 30, 2011 |
|
| For the Year Ending April 30, 2010 |
|
| For the Year Ending April 30, 2009 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Affiliates |
|
|
|
|
|
|
|
|
| |||
PR Specialists, Inc.("PR") |
|
|
|
|
|
|
|
|
| |||
Received 2,500,000 shares of PR common stock for payment of services per a one year contract dated December 2009, valued at $2,500, fair value and amortized over the life of the contract. |
| $ | 1,458 |
|
| $ | 1,042 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BFAG V, Inc. ("BFAG V") |
|
|
|
|
|
|
|
|
|
|
|
|
Received 1,900,000 shares of BFAG V common stock for payment of services per a three month contract dated November 2009 valued at $1,900, fair value and amortized over the life of the contract. |
|
| - |
|
|
| 1,900 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-View Technologies ("MVT") |
|
|
|
|
|
|
|
|
|
|
|
|
Received 2,000,000 shares of MVT common stock for payment of services per three month contract dated July 2008, valued at $20,000, fair value and amortized over the life of the contract. |
|
| - |
|
|
| - |
|
|
| 20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Received a warrant to purchase 500,000 shares of MVT common stock for payment of services per a one year contract dated July 2008, valued at $1,000, fair value and amortized over the life of the contract. |
|
| - |
|
|
| 250 |
|
|
| 750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dominion Capital Management ("DCMC") |
|
|
|
|
|
|
|
|
|
|
|
|
Received a warrant to purchase 1,000,000 shares of DCMC common stock for payment of services per a three month contract dated April 2008, valued at $5,000, fair value and amortized over the life of the contract. |
|
| - |
|
|
| - |
|
|
| 5,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Received a warrant to purchase 500,000 shares of DCMC common stock for payment of services per a one year contract dated July 2008, valued at $1,000, fair value and amortized over the life of the contract. |
|
| - |
|
|
| 250 |
|
|
| 750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Affiliates |
|
| 1,458 |
|
|
| 3,442 |
|
|
| 26,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Management Services Revenue |
| $ | 1,458 |
|
| $ | 7,030 |
|
| $ | 914,828 |
|
F-25
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 8 NOTES PAYABLE
Notes payable consists of the following:
|
| April 30, 2011 |
|
| April 30, 2010 |
| ||
Notes payable |
|
|
|
|
|
| ||
Notes payable. D&O Insurance Premium. Interest accrued at 9.2% for a period of ten (10) months. Payable in ten monthly Installments of $2,414 per month. |
| $ | 24,610 |
|
| $ | 23,154 |
|
|
|
|
|
|
|
|
|
|
Notes payable |
| $ | 24,610 |
|
| $ | 23,154 |
|
|
|
|
|
|
|
|
|
|
Notes payable, related parties |
|
|
|
|
|
|
|
|
Notes payable, related party. Interest accrued at 8.0%beginning on November 1, 2008. Principal and interest payable on demand. (NOTE 12) |
| $ | 332,068 |
|
| $ | 297,372 |
|
|
|
|
|
|
|
|
|
|
Notes payable, related party. Interest accrued at 8.0%beginning on October 19, 2009 Principal and interest payable on demand. (NOTE 12) |
|
| 50,000 |
|
|
| 50,000 |
|
|
|
|
|
|
|
|
|
|
Promissory notes payable, related parties. Interest accrued at 5.0% per annum. Principal and interest due September 30, 2010 In Default. (NOTE 12) |
|
| 14,802 |
|
|
| 20,000 |
|
|
|
|
|
|
|
|
|
|
Notes payable, related parties |
| $ | 396,870 |
|
| $ | 367,372 |
|
NOTE 9 ADVANCES FROM SHAREHOLDERS
Amount represents advances from shareholders to cover operating expenses. There are no stated interest rate or repayment terms. As of April 30, 2011 and 2010, these advances totaled $19,000 and $22,000, respectively.
NOTE 10 STOCK BASED COMPENSATION
In May 8, 2006, our Companys stockholders approved the 2006 Equity Incentive Plan (Plan) for the benefit of our directors, officers, employees and consultants, and which reserved 2,000,000 shares of our common stock for such persons pursuant to that plan. As of April 30, 2011, 1,000,000 are available for issuance under the Plan.
The Plan has a term of 10 years and no Option shall be exercisable more than 10 years after the date of grant, or such lesser period of time as is set forth in the Award Agreement. If for any reason other than death or disability, an Optionee of the Plan who at time of the grant of an Option under the Plan was an Employee ceases to be an Employee (such event being called a Termination), Options held at the date of Termination (to the extent then exercisable) may be exercised in whole or in part at any time within three months of the date of such Termination; provided, however, that if such exercise of the Option would result in liability for the Optionee under Section 16(b) of the Securities Exchange Act of 1934, then such three-month period automatically shall be extended until the tenth day following the last date upon which Optionee has any liability under Section 16(b) (but in no event after the expiration date of such Option).
During the year ending April 30, 2011, 2010 and 2009, the Company recognized $7,633, $5,088 and $1,051,136, respectively, of stock-based compensation expense. As of April 30, 2011, all compensation expense related to non-vested market-based share awards has been expensed. There were no employee stock options issued by the Company prior to May 1, 2006.
F-26
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 10 STOCK BASED COMPENSATION (CONTINUED)
The following tables summarize all stock option activity of the Company since April 30, 2008:
|
| Stock Options Outstanding |
| |||||||||||||
|
|
|
|
|
|
|
| Weighted |
|
|
|
| ||||
|
|
|
|
|
|
|
| Average |
|
|
|
| ||||
|
|
|
|
| Weighted |
|
| Remaining |
|
|
|
| ||||
|
| Number of |
|
| Average |
|
| Contractual |
|
| Aggregate |
| ||||
|
| Shares |
|
| Exercise Price |
|
| Life (Years) |
|
| Intrinsic Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Outstanding, April 30, 2008 |
|
| 125,000 |
|
| $ | 2.00 |
|
|
| 1.00 |
|
| $ | 31,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
| 1,925,000 |
|
| $ | 0.53 |
|
|
| - |
|
|
|
|
|
Rescinded |
|
| (925,000 | ) |
| $ | 1.05 |
|
|
|
|
|
|
|
|
|
Exercised |
|
| (375,000 | ) |
| $ | 0.20 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, April 30, 2009 |
|
| 750,000 |
|
| $ | 0.29 |
|
|
| 4.75 |
|
| $ | 217,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
| (100,000 | ) |
| $ | 0.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, April 30, 2010 |
|
| 650,000 |
|
| $ | 0.20 |
|
|
| 8.82 |
|
| $ | 130,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
| (50,000 | ) |
| $ | 0.20 |
|
|
| 7.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, April 30, 2011 |
|
| 600,000 |
|
| $ | 0.20 |
|
|
| 7.82 |
|
| $ | 120,000 |
|
In May 2008, the Company granted an option to purchase 300,000 shares of its common stock at a fair value of $273,180 to an executive officer. These options were included in the options that were rescinded in February 2009. Prior to the rescission, the Company recognized expense of $83,469.
In August 2008, the Company granted options to purchase 600,000 shares of its common stock at a fair value of $501,538 to executive officers and board members.
In February 2009, certain officers and advisors rescinded options to purchase 900,000 shares of its common stock. The unrecognized compensation relating to these stock options in the amount of $189,711 was expensed immediately.
In February 2009, the Company granted 10-year options to purchase 725,000 shares of its common stock at a fair value of $185,982 to executive officers, advisory board members and employees. The Company recognized expense of $173,260, $5,088 and $7,633 for the year ended April 30, 2009, 2010 and 2011, respectively.
In February 2009, an officer rescinded an option to purchase 25,000 shares of the Companys common stock at $2.00 per share and received an option to purchase 300,000 shares of the Companys common stock with an exercise price of $0.20 per share with 10 year expiration and vesting immediately. In accordance with SFAS 123R, the cancellation of the option and the issuance of the new option was deemed to be a modification of the original award. As such, $93,440 incremental cost of the modified option and the $9,718 of the remaining unamortized cost of the original option issuance was expensed.
In February 2009, an option to purchase 375,000 shares of the Companys common stock was exercised by an officer for proceeds of $75,000.
F-27
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 11 CAPITAL SHARE TRANSACTIONS
Capital Structure
The Company is authorized to issue up to 60,000,000 shares of common stock at $0.001 par value per share. As of April 30, 2011 and 2010, 5,912,426 and 6,412,426 shares were issued and outstanding, respectively. See Note 14 Subsequent Events.
Common Stock
During the year ended April 30, 2009, 334,706 shares of common stock were issued for proceeds of $263,500.
In February 2009, an officer exercised his option to purchase 375,000 shares of the Companys common stock at an exercise price of $0.20 for proceeds of $75,000.
During the year ended April 30, 2009, the Company recognized $1,051,136 of share-based compensation expense.
During the year ended April 30, 2010, the Company recognized $5,088 of share-based compensation expense.
During the year ended April 30, 2010, the Chief Executive Officer contributed wages valued at $151,750 to capital.
During the year ended April 30, 2011, the Company recognized $7,633 of share-based compensation expense.
In March 2011, the Company finalized a settlement of the McCrae (Plaintiff) lawsuit, whereby the Plaintiff would return 500,000 shares of Universal Capital Management, Inc. common stock to the Company in exchange for a warrant to purchase 42,500 shares of Lightwave Logic, Inc. at an exercise price of $0.25 per share, expiring in February 2012, which the Company held as an investment. The legal documents were executed and the transaction was complete in March 2011. The Company has determined that the settlement should be accounted for at fair value of instruments received and instruments paid with a resulting gain or loss on settlement. The Company utilized the Black-Scholes model and as a result, recorded a $65,000 gain on settlement and decrease of its common stock and additional paid in capital of $500 and $64,500, respectively in the accompanying financial statements for the year ended April 30, 2011 See Note 13 Contingencies.
NOTE 12 RELATED PARTY TRANSACTIONS
During the year ending April 30, 2011, an officer loaned the Company $24,696 for operating expenses and is included in the Notes payable, related parties.
Notes payable, related parties were $396,870 and $367,372 at April 30, 2011 and 2010, respectively See Note 8.
At the end of April 30, 2011 and 2010, accounts payable, related parties are $7,213 and $7,213 respectively.
In February 2009 the Companys brokerage accounts were frozen See Note 13 - Contingencies. At that time, the Companys operational activities were funded by the sale of its liquid portfolio company common stock in the open market. In order to continue Company operations, an officer agreed to sell personal shares of portfolio company common stock that he owned to fund the Companys operations until such time as the Companys brokerage accounts were un-frozen, with a stipulation that he would receive from the Company the same number of shares that he sold at a future time.
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UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 12 RELATED PARTY TRANSACTIONS (CONTINUED)
In September 2009, 164,070 shares owed to the officer were returned to him in repayment for a total of $78,000 that he loaned to the Company, from February to April 2009, from the sale of his personal portfolio company stock.
NOTE 13 CONTINGENCIES
McCrae Associates, LLC Lawsuit
In July 2006, McCrae Associates, LLC (McCrae) filed a lawsuit against the Company and its directors and officers in the United States District Court for the District of Connecticut. The lawsuit alleges that McCrae is the owner of 300,000 shares of the Companys common stock and that the Company did not deliver to and is wrongfully withholding such shares from McCrae. The lawsuit alleges that the directors and officers conspired with the Company to deprive McCrae of such shares, and that the directors and officers owed a fiduciary duty to McCrae that they violated by refusing to tender the shares to McCrae upon demand. The lawsuit also alleges that all of the defendants violated the Connecticut Unfair Trade Practices Act. McCrae seeks delivery of a stock certificate covering the shares, unspecified monetary damages, including treble damages, attorney fees and punitive damages. The Company is vigorously defending the action and has filed a counter-claim against McCrae and a third-party claim against Stephen Funk seeking to rescind the issuance of shares to McCrae and to recover monetary damages on fraud and breach of contract theories. The Company also filed similar claims in the Chancery Court in Wilmington, Delaware seeking to rescind the issuance of 200,000 shares of common stock to Liberator, LLC, and a company it believes is controlled by Stephen Funk. Recently, the parties agreed to the voluntary dismissal of the action in Delaware with the express understanding that Liberator would be bound by the decision of the Court in Connecticut with respect to the McCrae shares. Recent efforts by the Company and McCrae to settle the litigation have been unsuccessful and the parties have commenced discovery.
In February 2011, the Company agreed to a settlement regarding the McCrae Associates, LLC lawsuit. In exchange for settlement of the lawsuit, the Company exchanged a warrant to purchase 42,500 shares of Lightwave Logic, Inc. common stock at an exercise price of $0.25 per share, expiring February 2012 for 500,000 shares of the Companys common stock that McCrae holds. The legal documents were executed and the transaction was complete in March 2011. The Company has determined that the settlement should be accounted for at fair value of instruments received and instruments paid with a resulting gain or loss on settlement. As a result, the Company has recorded a $65,000 gain on settlement in the accompanying financial statements as of April 30, 2011 See Note 11 Capital Share Transactions.
Carlin and Wilson Lawsuit
During February 2008, Leo Carlin Jr. (Carlin) and Richard H. Wilson, III (Wilson) filed a lawsuit in New Castle County, Delaware, Superior Court. Carlin and Wilson are the Plaintiffs and UCM is the Defendant.
On or around June 2006, Carlin and Wilson loaned the Company a total of $175,000 which was evidenced by two promissory notes payable (Notes), due with interest, on or before October 15, 2006. These funds were for short-term financing for the Company. Carlin and Wilson sued demanding payment, claiming that three weeks after the Notes were executed and delivered, the Company failed to send the plaintiffs a subscription agreement for shares of the Companys common stock at $2.50 per share in exchange for the cancellation of the notes.
On or around March 2008, a judgment was placed on the Company for the amounts owed.
As of October 31, 2008, the outstanding notes payable balance was $155,000 and the accrued interest payable on those notes was $32,925.
In December 2008, the Company was served a notice to attend an additional discovery hearing on January 12, 2009. At this discovery hearing, additional documents were provided by the Company as requested.
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UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 13 CONTINGENCIES (CONTINUED)
Carlin and Wilson Lawsuit (Continued)
In February 2009, the judgment was ordered into effect and the Companys investment accounts were seized.
In March 2009, the Plaintiffs and the Company agreed to settle the Notes over a four month payment. The Company made a $100,000 payment in March 2009 and two additional payments of $30,823 in each April and May 2009. The final payment of $30,823 was made in June 2009, which was a complete settlement of all interest and principle. The investment trading accounts have since been released.
Stradley Ronon Stevens & Young, LLP
On May 9, 2009 the law firm of Stradley, Ronon Stevens & Young, LLP 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 and the Company has recorded this amount as accounts payable as of April 30, 2011 and 2010.
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 was 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, MICCO filed a motion to dismiss and in June 2011, the courts denied this motion to dismiss. See Note 14 Subsequent Events.
NOTE 14 SUBSEQUENT EVENTS
On November 1, 2011, the Company filed Form N-54C notification of withdrawal of election to be regulated as a Business Development Company (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 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.
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 equity method investees. 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.
On March 16, 2012, pursuant to a private offering, the registrant issued 7,375,000 shares of its restricted common stock, in exchange for officer and director services performed by the registrants current and former directors and officers, and professional services provided by the registrants service providers. The shares were valued at the quoted trade price on the grant date of $0.27 per share for a total expense of $1,991,250.
On August 12, 2012, the Company privately issued 1,500,000 shares of its restricted common stock, in exchange for services performed by two consultants for the Company. The shares were valued at the quoted trade price of $0.14 per share on the grant date resulting in an expense of $210,000.
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UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 14 SUBSEQUENT EVENTS (CONTINUED)
On August 21, 2012, the Company privately issued 2,200,000 shares of its restricted common stock, in exchange for services performed by the Companys current and former employees and professional service providers. The shares were valued at the quoted trade price of $0.07 per share on the grant date resulting in an expense of $154,000.
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 including the previous 12.7% ownership purchased of approximately 43% of NBR owned by the Company for an additional $4.8 million cash and 15,000,000 of common stock of the Company under terms to be mutually negotiated, assuming no additional shares of NBR are issued. These shares of common stock were issued and 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 May 24, 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. Additionally, the $100,000 of cash consideration was not paid within the 15 day period specified, nor was the $400,000 paid within the 60 day requirement.
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. Additionally, 1) in February 2013, the Company paid New Bastion $140,000, net of $3,500 of expenses paid, 2) in March 2013, the Company paid New Bastion $15,000, 3) in April 2013, the Company paid New Bastion $20,000, and 4) in May 2013, the Company paid New Bastion $20,000, net of $3,500 of expenses paid, all of these in accordance with the August 22, 2012 MOU. As a result of the payments, the original $500,000 balance owed to New Bastion has been reduced to $195,000 as of May 24, 2013.
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 or $0.10 per share. The total proposed proceeds from the private offering to the Company are $750,000. From November 19, 2012 through May 24, 2013, the Company received subscriptions of 6,200,000 shares of common stock for $620,000 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.
In relation to the MICCO World, Inc. lawsuit (See Note 13 Contingencies), on June 25, 2012, the Company dismissed the suit against the defendants with prejudice.
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UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2011, 2010 AND 2009
NOTE 14 SUBSEQUENT EVENTS (CONTINUED)
On May 3, 2013, the Company filed a Certificate of Amendment of Certificate of Incorporation with the Department of State of Delaware increasing the total number of shares of stock that the Company shall have authority to issue from Twenty Million (20,000,000) shares of Common Stock, one-tenth of one cent ($0.001) par value per share to Sixty Million (60,000,000) shares of Common Stock, one-tenth of one cent ($0.001) par value per share. As a result, these financial statements have been retroactively restated for this change in capital structure.
NOTE 15 RESTATEMENT
The Companys Financial Statements included in an Annual Report on Form 10-K for the fiscal year ended April 30, 2011 (the Original Report) filed with the Securities and Exchange Commission (SEC) on August 15, 2011 were not audited by the Companys Independent Registered Public Accounting Firm and a note to that effect was inserted at the beginning of the Original Report. This Amendment No. 1 to Annual Report on Form 10-K/A (the Amended Report) deletes the note inserted at the beginning of the Original Report stating that the Financial Statements contained in the Original Report were not audited by the Companys Independent Registered Public Accounting Firm.
As a result of the audit, there were several adjustments to the Companys April 30, 2011 Financial Statements included in the Original Report including the following principal items:
| a) | $1,674,000 income tax provision as the result of a valuation allowance against deferred tax assets. |
| b) | $188,000 income tax provision as the result of a valuation allowance against current tax assets |
| c) | $309,008 bad debt expense related to affiliate investments. |
| d) | $338,325 loss on impairment of portfolio stock. |
| e) | $78,000 for net unrealized depreciation on investments. |
| f) | $20,613 gain on settlement of investments |
| g) | $16,637 realized gain on investments |
| h) | $18,293 increase in various other expenses |
The resulting effect of the restatement in 2011 is: (1) a reduction of total assets of $2,460,454 from $3,072,008 to $611,gert554, (2) an increase in total liabilities of $145,173 from $1,302,372 to $1,447,545 (3) a decrease in net assets of $2,605,627 from a net asset amount of $1,769,636 to a net liability amount of ($835,991), (4) an increase in the net decrease of net assets resulting from operations of $2,568,376 from ($2,384,564) to ($4,952,940), and (5) an increase in the net decrease in net assets from operations per share of ($0.40) from ($0.38) to ($0.78) per share Certain applicable portions of Notes 1, 3, 4, 6, 10, 11, 12, 13 and 14 have also been revised accordingly.
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