Attached files
file | filename |
---|---|
EXCEL - IDEA: XBRL DOCUMENT - MAJOR LEAGUE FOOTBALL INC | Financial_Report.xls |
EX-32.2 - CERTIFICATION - MAJOR LEAGUE FOOTBALL INC | ucmt_ex32z2.htm |
EX-32.1 - CERTIFICATION - MAJOR LEAGUE FOOTBALL INC | ucmt_ex32z1.htm |
EX-31.2 - CERTIFICATION - MAJOR LEAGUE FOOTBALL INC | ucmt_ex31z2.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. 2)
(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, 2012
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 registrant’s 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 registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $348,743. Such aggregate market value was computed by reference to the closing price of $0.09 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 June 27, 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 with the Securities and Exchange Commission (SEC) on August 14, 2012 an Annual Report on Form 10-K for the fiscal year ended April 30, 2012 and a subsequent amendment to its Annual Report on Form 10-K/A , which was filed solely for the purpose of adding Exhibit 32.2 which was inadvertently omitted from the original Form 10-K when submitted to the SEC. Both of these reports filed on August 14, 2012 are referred to herein as the Original Report. 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. 2 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:
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, 2012 Financial Statements, primarily related to investments valuation, accruals and income taxes and presenting the Company as an operating commercial company rather than as a Business Development Company. The following tables provide the change from the Original Report as compared to the Amended Report for the balance sheet, statement of operations and comprehensive income (loss) and cash flows.
i
BALANCE SHEET
|
| At April 30, 2012 |
| |||||||||
|
| As Reported |
|
| Adjustments |
|
| As Restated |
| |||
ASSETS |
|
|
|
|
|
|
|
|
| |||
CURRENT ASSETS |
|
|
|
|
|
|
|
|
| |||
Cash and cash equivalents |
| $ | 9,435 |
|
| $ | - |
|
| $ | 9,435 |
|
Available-for-sale marketable equity securities |
|
| - |
|
|
| 387,025 |
|
|
| 387,025 |
|
Prepaid expenses |
|
| 2,181 |
|
|
| - |
|
|
| 2,181 |
|
TOTAL CURRENT ASSETS |
|
| 11,616 |
|
|
| 387,025 |
|
|
| 398,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Non-marketable equity securities, at cost |
|
| - |
|
|
| 19,845 |
|
|
| 19,845 |
|
Investments |
|
| 548,008 |
|
|
| (548,008 | ) |
|
| - |
|
Deferred income tax |
|
| 1,561,000 |
|
|
| (1,561,000 | ) |
|
| - |
|
Long-term loans |
|
| 153,670 |
|
|
| (153,670 | ) |
|
| - |
|
Rent deposit |
|
| 1,100 |
|
|
| - |
|
|
| 1,100 |
|
TOTAL LONG-TERM ASSETS |
|
| 2,263,778 |
|
|
| (2,242,833 | ) |
|
| 20,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 2,275,394 |
|
| $ | (1,855,808 | ) |
| $ | 419,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 327,583 |
|
| $ | 12,264 |
|
| $ | 339,847 |
|
Accounts payable, related parties |
|
| 10,802 |
|
|
| (10,802 | ) |
|
| - |
|
Accrued expenses |
|
|
|
|
|
| 201,204 |
|
|
| 201,204 |
|
Current state income taxes payable |
|
| - |
|
|
| 128,000 |
|
|
| 128,000 |
|
Advances from shareholders |
|
| - |
|
|
| 7,000 |
|
|
| 7,000 |
|
Notes payable |
|
| 10,100 |
|
|
| - |
|
|
| 10,100 |
|
Notes payable, related parties |
|
| - |
|
|
| 298,497 |
|
|
| 298,497 |
|
Accrued payroll and payroll taxes |
|
| - |
|
|
| 130,926 |
|
|
| 130,926 |
|
Accrued interest |
|
| - |
|
|
| 92,050 |
|
|
| 92,050 |
|
Accrued interest, related parties |
|
| - |
|
|
| 97,316 |
|
|
| 97,316 |
|
TOTAL CURRENT LIABILITIES |
|
| 348,485 |
|
|
| 956,455 |
|
|
| 1,304,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses |
|
| 195,097 |
|
|
| (195,097 | ) |
|
| - |
|
Advances from shareholders |
|
| 7,000 |
|
|
| (7,000 | ) |
|
| - |
|
Notes payable, related parties |
|
| 287,696 |
|
|
| (287,696 | ) |
|
| - |
|
Accrued interest |
|
| 92,050 |
|
|
| (92,050 | ) |
|
| - |
|
Deferred income tax |
|
| 33,000 |
|
|
| (33,000 | ) |
|
| - |
|
Accrued interest, related parties |
|
| 97,316 |
|
|
| (97,316 | ) |
|
| - |
|
TOTAL LONG-TERM LIABILITIES |
|
| 712,159 |
|
|
| (712,159 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
| 1,060,644 |
|
|
| 244,296 |
|
|
| 1,304,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY (DEFICIENCY) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 60,000,000 shares authorized;13,287,426 and 5,912,426 issued and outstanding at April 30, 2012 and April 30, 2011, respectively |
|
| 13,287 |
|
|
| - |
|
|
| 13,287 |
|
Additional paid-in capital |
|
| 8,076,242 |
|
|
| 64,968 |
|
|
| 8,141,210 |
|
Accumulated income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated net operating loss |
|
| 24,061 |
|
|
| (24,061 | ) |
|
| - |
|
Dividends paid |
|
| (448,596 | ) |
|
| 448,596 |
|
|
| - |
|
Net realized loss on investments |
|
| (6,122,296 | ) |
|
| 6,122,296 |
|
|
| - |
|
Net realized gain on dividend of portfolio stock |
|
| 343,924 |
|
|
| (343,924 | ) |
|
| - |
|
Net unrealized depreciation of investments |
|
| (671,871 | ) |
|
| 671,871 |
|
|
| - |
|
Accumulated deficiency |
|
| - |
|
|
| (9,091,001 | ) |
|
| (9,091,001 | ) |
Accumulated other comprehensive income (loss) |
|
| - |
|
|
| 51,150 |
|
|
| 51,150 |
|
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) |
|
| 1,214,751 |
|
|
| (2,100,105 | ) |
|
| (885,354 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY) |
| $ | 2,275,395 |
|
| $ | (1,855,808 | ) |
| $ | 419,586 |
|
ii
STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
| Year Ended |
| |||||||||
|
| April 30, 2012 |
| |||||||||
|
| As Reported |
|
| Adjustments |
|
| As Restated |
| |||
Revenue |
|
|
|
|
|
|
|
|
| |||
Management services |
|
|
|
|
|
|
|
|
| |||
Affiliates |
| $ | 160,101 |
|
| $ | - |
|
| $ | 160,101 |
|
Total Management Services |
|
| 160,101 |
|
|
| - |
|
|
| 160,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
| 160,101 |
|
|
| - |
|
|
| 160,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Bad debt |
|
| 150,838 |
|
|
| (150,838 | ) |
|
| - |
|
Salaries and wages |
|
| 966,030 |
|
|
| 1,050,976 |
|
|
| 2,017,006 |
|
Professional fees |
|
| 1,013,983 |
|
|
| (987,791 | ) |
|
| 26,192 |
|
Insurance |
|
| 61,913 |
|
|
| - |
|
|
| 61,913 |
|
Interest expense |
|
| 51,332 |
|
|
| 2 |
|
|
| 51,334 |
|
General and administrative |
|
| 58,769 |
|
|
| (21 | ) |
|
| 58,748 |
|
Depreciation |
|
| 682 |
|
|
| (1 | ) |
|
| 681 |
|
Total Operating Expenses |
|
| 2,303,547 |
|
|
| (87,673 | ) |
|
| 2,215,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss |
|
| (2,143,446 | ) |
|
| 87,673 |
|
|
| (2,055,773 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Tax penalties and interest |
|
| - |
|
|
| (8,197 | ) |
|
| (8,197 | ) |
Miscellaneous Income |
|
| 184,531 |
|
|
| (135,797 | ) |
|
| 48,734 |
|
Unrealized gain (loss) on available-for-sale marketable equity securities |
|
| 295,898 |
|
|
| (295,898 | ) |
|
| - |
|
Loss on sale of available-for-sale marketable equity securities |
|
| (596,163 | ) |
|
| - |
|
|
| (596,163 | ) |
Total Other Income (Expense) |
|
| (115,734 | ) |
|
| (439,892 | ) |
|
| (555,626 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss before Income Taxes |
|
| (2,259,180 | ) |
|
| (352,219 | ) |
|
| (2,611,399 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision) |
|
| (205,000 | ) |
|
| 205,000 |
|
|
| - |
|
Penalties and interest |
|
| (7,000 | ) |
|
| 7,000 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| (2,471,180 | ) |
|
| (140,219 | ) |
|
| (2,611,399 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income ( Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale marketable equity securities |
|
| - |
|
|
| 570,785 |
|
|
| 570,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income (Loss) |
|
| (2,471,180 | ) |
|
| 430,566 |
|
|
| (2,040,614 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss Per Share |
| $ | (0.36 | ) |
| $ | (0.02 | ) |
| $ | (0.38 | ) |
iii
STATEMENT OF CASH FLOWS
|
| Year Ended |
| |||||||||
|
| April 30, 2012 |
| |||||||||
|
| As Reported |
|
| Adjustments |
|
| As Restated |
| |||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
| |||
Net loss |
| $ | (2,471,180 | ) |
| $ | (140,219 | ) |
| $ | (2,611,399 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale and impairment of available-for-sale marketable equity securities |
|
| 596,163 |
|
|
| - |
|
|
| 596,163 |
|
Sale (Purchase) of investment securities |
|
| 132,944 |
|
|
| (132,944 | ) |
|
| - |
|
Depreciation expense |
|
| 681 |
|
|
| - |
|
|
| 681 |
|
Stock based compensation expense |
|
| 1,917,500 |
|
|
| 73,750 |
|
|
| 1,991,250 |
|
Net unrealized appreciation (depreciation) of investments |
|
| (295,898 | ) |
|
| 295,898 |
|
|
| - |
|
Deferred income taxes |
|
| 197,000 |
|
|
| (197,000 | ) |
|
| - |
|
Current income taxes |
|
| 60,000 |
|
|
| (60,000 | ) |
|
| - |
|
(Increase) decrease in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Due from affiliates |
|
| 98,948 |
|
|
| (98,948 | ) |
|
| - |
|
Prepaid expenses |
|
| 27,255 |
|
|
| (0 | ) |
|
| 27,255 |
|
Accounts payable |
|
| (39,067 | ) |
|
| 1 |
|
|
| (39,066 | ) |
Accounts payable, related parties |
|
| 7,976 |
|
|
| (15,189 | ) |
|
| (7,213 | ) |
Accrued expenses |
|
| (129,419 | ) |
|
| 1,197 |
|
|
| (128,222 | ) |
Accrued payroll and payroll taxes |
|
| - |
|
|
| 130,926 |
|
|
| 130,926 |
|
Accrued interest |
|
| 25,853 |
|
|
| - |
|
|
| 25,853 |
|
Net cash provided by (used in) operating activities |
|
| 128,756 |
|
|
| (142,528 | ) |
|
| (13,772 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of available-for-sale marketable equity securities |
|
| - |
|
|
| 293,646 |
|
|
| 293,646 |
|
Exercise of warrant for available-for-sale marketable equity securities |
|
| - |
|
|
| (89,375 | ) |
|
| (89,375 | ) |
Purchase of available-for-sale marketable equity securities |
|
| - |
|
|
| (51,781 | ) |
|
| (51,781 | ) |
Purchase of non-marketable securities |
|
| - |
|
|
| (19,845 | ) |
|
| (19,845 | ) |
Net cash provided by investing activities |
|
| - |
|
|
| 132,645 |
|
|
| 132,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of advance from shareholder - related party |
|
| (12,000 | ) |
|
| 6,000 |
|
|
| (6,000 | ) |
Repayment of debt |
|
| (14,510 | ) |
|
| - |
|
|
| (14,510 | ) |
Proceeds (repayment) from issuance of promissory note - related parties |
|
| (109,377 | ) |
|
| 5,004 |
|
|
| (104,373 | ) |
Net cash used in financing activities |
|
| (135,887 | ) |
|
| 11,004 |
|
|
| (124,883 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
| (7,131 | ) |
|
| 1,121 |
|
|
| (6,010 | ) |
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR |
|
| 16,566 |
|
|
| (1,121 | ) |
|
| 15,445 |
|
CASH AND CASH EQUIVALENTS - END OF YEAR |
| $ | 9,435 |
|
| $ | - |
|
| $ | 9,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR INCOME TAXES |
| $ | 12,000 |
|
| $ | - |
|
| $ | 12,000 |
|
CASH PAID FOR INTEREST |
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale marketable equity securities |
| $ | - |
|
| $ | 629,536 |
|
| $ | 629,536 |
|
Advance converted to promissory note |
| $ | - |
|
| $ | 6,000 |
|
| $ | 6,000 |
|
iv
1. | 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. |
2. | 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. |
3. | 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. |
4. | 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. |
5. | 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. |
6. | The Controls and Procedures information contained in Part II, Item 9A of the Original Report are deleted in their entirety and replaced with the Controls and Procedures contained in Part II, Item 9A 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.
v
Table of Contents
|
|
| Page |
PART I |
|
|
|
| Item 1. | Business | 1 |
| Item 1A. | Risk Factors | 1 |
|
|
|
|
PART II |
|
|
|
| Item 6 | Selected Financial Information | 2 |
| Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 3 |
| Item 8. | Financial Statements and Supplementary Data. | 5 |
| Item 9A. | Controls and Procedures | 5 |
|
|
|
|
PART III |
|
|
|
| Item 14. | Principal Accounting Fees and Services | 7 |
|
|
|
|
PART IV |
|
|
|
| Item 15. | Exhibits and Financial Statement Schedules | 8 |
vi
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.
vii
PART I
Item 1. Business.
1. The section heading Determination of Net Asset Value and Taxation are deleted in their entirety because effective November 1, 2011, the Company elected to no longer operate as a Business Development Company (BDC).
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, 2012, we had cash resources of $9,435. In the year ended April 30, 2012 we had revenues of $160,101, all of which were received in the form of management services provided to affiliate clients. Consequently, we have been required either to sell new shares of our common stock or available-for-sale marketable equity securities 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.
The value of our investments is subject to high volatility.
Our company possesses shares of stock which are not diverse, and therefore may be more vulnerable to events affecting a single sector or industry and therefore our investments are subject to greater volatility. At April 30, 2012, approximately 92% of the Company's asset value consists of available-for-sale marketable equity securities in one stock. 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.
3. Each of the Risk Factors titled below are added:
We have previously had and could have future losses, deficits and deficiencies in liquidity, which could impair our ability to continue as a going concern. Our independent registered public accounting firm has indicated that certain factors raise substantial doubt about our ability to continue as a going concern and these factors are discussed in Note 1 to our audited financial statements. Since its inception, the Company has suffered recurring losses from operations and has been dependent on existing stockholders, new investors and the sale of available-for-sale marketable equity securities to provide the cash resources to sustain its operations.
As reflected in the accompanying financial statements, the Company had a net loss of $2,611,399 for the year ended April 30, 2012. Additionally, at April 30, 2012, the Company has minimal cash and has a working capital deficit of $906,299, an accumulated deficiency of $9,091,001 and a stockholders deficiency of $885,354, which could have a material impact on the Companys financial condition and operations. As a result of the significant working capital deficit at April 30, 2012, the Company does not have sufficient cash resources or current assets to pay its obligations.
This is a significant risk to our business and stockholders and results in:
| · | making it more difficult for us to satisfy our obligations; |
| · | impeding us from obtaining additional financing in the future for working capital, capital expenditures and general corporate purposes; and |
| · | making us more vulnerable to a downturn in our business and limit our flexibility to plan for, or react to, changes in our business. |
The time required for us to become profitable is highly uncertain, and we cannot assure you that we will achieve or sustain profitability or generate sufficient cash flow from operations to meet our planned capital expenditures, working capital and debt service requirements. If required, our ability to obtain additional financing from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects for our business. The necessary additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.
1
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. In view of the matters discussed above, 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 and the sale of available-for-sale marketable equity securities. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities and the sale of available-for-sale marketable equity securities, until such time that funds provided by operations, if ever, are sufficient to fund working capital requirements. The accompanying 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.
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, 2012 |
|
| April 30, 2011 |
|
| April 30, 2010 |
|
| April 30, 2009 |
|
| April 30, 2008 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total assets |
| $ | 419,586 |
|
| $ | 552,804 |
|
| $ | 5,375,880 |
|
| $ | 5,497,085 |
|
| $ | 8,265,499 |
|
Total Liabilities |
| $ | 1,304,940 |
|
| $ | 1,447,545 |
|
| $ | 1,201,564 |
|
| $ | 1,228,224 |
|
| $ | 2,266,267 |
|
Total Stockholders' Equity (Deficiency) |
| $ | (885,354 | ) |
| $ | (894,741 | ) |
| $ | 4,174,316 |
|
| $ | 4,268,861 |
|
| $ | 5,599,232 |
|
Shares outstanding, end of year(1) |
|
| 13,287,426 |
|
|
| 5,912,426 |
|
|
| 6,412,426 |
|
|
| 6,412,426 |
|
|
| 5,702,720 |
|
Operating Data for the Year Ending:
|
| April 30, 2012 |
|
| April 30, 2011 |
|
| April 30, 2010 |
|
| April 30, 2009 |
|
| April 30, 2008 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Revenue |
| $ | 160,101 |
|
| $ | 37,541 |
|
| $ | 55,239 |
|
| $ | 960,424 |
|
| $ | 3,845,715 |
|
Total Operating Expenses(2) |
| $ | 2,215,874 |
|
| $ | 858,594 |
|
| $ | 846,861 |
|
| $ | 2,038,412 |
|
| $ | 1,164,201 |
|
Operating Income (Loss) |
| $ | (2,055,773 | ) |
| $ | (821,053 | ) |
| $ | (791,622 | ) |
| $ | (1,077,988 | ) |
| $ | 2,681,514 |
|
Other Income (Expense) |
| $ | (555,626 | ) |
| $ | (823,695 | ) |
| $ | (194,269 | ) |
| $ | (2,267,310 | ) |
| $ | (2,095,452 | ) |
Net Income (Loss) before Income Taxes |
| $ | (2,611,399 | ) |
| $ | (1,644,748 | ) |
| $ | (985,891 | ) |
| $ | (3,345,298 | ) |
| $ | 586,062 |
|
Total tax benefit (expense) |
| $ | - |
|
| $ | (921,500 | ) |
| $ | 953,000 |
|
| $ | 949,000 |
|
| $ | (838,000 | ) |
Net Income (Loss) |
| $ | (2,611,399 | ) |
| $ | (2,566,248 | ) |
| $ | (32,891 | ) |
| $ | (2,396,298 | ) |
| $ | (251,938 | ) |
Comprehensive (Income (Loss) |
| $ | 570,785 |
|
| $ | (2,386,692 | ) |
| $ | (218,492 | ) |
| $ | (323,709 | ) |
| $ | 1,498,262 |
|
Total Comprehensive (Income (Loss) |
| $ | (2.040,614 | ) |
| $ | (4,952,940 | ) |
| $ | (251,383 | ) |
| $ | (2,720,007 | ) |
| $ | 1,246,324 |
|
Basic and Diluted Earnings (Loss) Per Share |
| $ | (0.38 | ) |
| $ | (0.40 | ) |
| $ | (0.01 | ) |
| $ | (0.37 | ) |
| $ | (0.04 | ) |
(1) | We completed offerings of our common stock as follows: 7,375,000 shares during the year ending April 30, 2012, zero for 2011 and 2010; 709,706 shares during the year ended April 30, 2009; and 264,446 shares during the year ended April 30, 2008. In March 2011, the Company settled a lawsuit and received 500,000 shares of its common stock in return. |
|
|
(2) | Included in total expenses is non-cash, stock-based, compensation expense of $1,991,250 for the year ending April 30, 2012; $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; and $9,336 for the year ending April 30, 2008. |
2
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.
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 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.
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.
Financial Condition
As reflected in the accompanying financial statements, the Company had a net loss of $2,611,399 for the year ended April 30, 2012. Additionally, at April 30, 2012, the Company has minimal cash and has a working capital deficit of $906,299, an accumulated deficiency of $9,091,001 and a stockholders deficiency of $885,354, which could have a material impact on the Companys financial condition and operations. As a result of the significant working capital deficit at April 30, 2012, the Company does not have sufficient cash resources or current assets to pay its obligations.
Results of Operations
Year ended April 30, 2012 compared to the year ended April 30, 2011
For the year ended April 30, 2012 we had revenue for services in the amount of $160,101 compared to $37,541 for the year ended April 30, 2011. For 2012, all of our revenue was comprised of management services provided to affiliates. For 2011, all of our revenue was comprised of accounting services provided to affiliates.
3
Total operating expenses for the year ended April 30, 2012 were $2,215,874, the principal component of which was $2,017,006 of salaries and wages (which includes $1,991,250 of share based compensation expense for stock issued to employees and directors). Additional components of operating expenses includes professional fees of $26,192, $61,913 of insurance expense, $51,334 of interest expense, $58,747 of general and administrative expense and $682 of depreciation. By comparison, 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 components of operating expenses include $94,096 of insurance expense, $31,554 of interest expense, $54,178 of general and administrative expense and $1,900 of depreciation.
Other Income (Expense) for the year ended April 30, 2012 was $555,626 of expense compared to $823,695 of expense for the year ended April 30, 2011. The 2012 amount was consisted primarily of an expense of $596,163 for loss on the sale of available-for-sale marketable equity securities. Additionally, there was $8,197 of expense for tax penalties and interest and $48,734 of miscellaneous income related to the reversal of previously recorded accrued expenses. The 2011 amount consisted primarily of an expense of $504,576 for loss on sale of marketable equity securities and a $338,325 expenses from the impairment of available-for-sale marketable equity securities. Additionally, there was $18,044 of expense for tax penalties and interest, $20,613 of income for a gain on settlement of investments and $16,637 of income for a realized gain on investments.
We had a net loss before income taxes of $2,611,339 and $1,644,748 for the years ended April 30, 2012 and 2011, respectively. For the year ended April 30, 2012, we had no income tax provision as compared to a $921,500 income tax provision for the year ended April 30, 2011. As a result, the Company had a net loss of $2,611,399 and $2,566,248 for the years ended April 30, 2012 and 2011, respectively.
For the year ended April 30, 2012, we had a $570,785 unrealized gain on available-for-sale marketable equity securities resulting in a total comprehensive loss of $2,040,614. For the year ended April 30, 2011, we had a $2,386,692 unrealized loss on available-for-sale marketable equity securities resulting in a total comprehensive loss of $4,952,940.
Liquidity and Capital Resources
From inception, our Company has relied upon the infusion of capital through capital share transactions to obtain liquidity. We had $9,435 of cash at April 30, 2012 and a working capital deficit of $906,299. 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.
Recently, it was necessary for us to dispose of some of our available-for-sale marketable equity securities to meet our operational needs. In the future, we may be forced to continue to dispose of these securities if it ever becomes short of cash. Any such dispositions may have to be made at inopportune times.
Critical Accounting Policies
Investments
The Company invests in various marketable equity instruments and accounts for such investments in accordance with ASC 320 Investments Debt and Equity Securities.
Certain securities that the Company may invest in may be determined to be non-marketable. Non-marketable securities where the Company owns less than 20% of the investee are accounted for at cost pursuant to ASC topic 323-10 Investments - Equity Method and Joint Ventures.
Management determines the appropriate classification of its investments at the time of acquisition and reevaluates such determination at each balance sheet date. Trading securities that the Company may hold are treated in accordance with ASC 320 with any unrealized gains and losses included in earnings. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported as a separate component of stockholders' equity. Investments classified as held-to-maturity are carried at amortized cost. In determining realized gains and losses, the cost of the securities sold is based on the specific identification method.
4
The Company periodically reviews its investments in marketable and non-marketable securities and impairs any securities whose value is considered non-recoverable. The Company's determination of whether a security is other than temporarily impaired incorporates both quantitative and qualitative information. GAAP requires the exercise of judgment in making this assessment for qualitative information, rather than the application of fixed mathematical criteria. The Company considers a number of factors including, but not limited to, the length of time and the extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, the reason for the decline in fair value, changes in fair value subsequent to the balance sheet date, and other factors specific to the individual investment. The Company's assessment involves a high degree of judgment and accordingly, actual results may differ materially from the Company's estimates and judgments. The Company recorded zero and $338,325 of impairment charges for securities during the years ended April 30, 2012 and 2011, respectively.
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.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, our Company evaluated the effectiveness and design and operation of its disclosure controls and procedures. Our Companys disclosure controls and procedures are the controls and other procedures that we designed to ensure that our Company records, processes, summarizes, and reports in a timely manner the information that it must disclose in reports that our Company files with or submits to the Securities and Exchange Commission. Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of April 30, 2012 and concluded that the disclosure controls and procedures were not effective, because certain deficiencies involving internal controls over financial reporting constituted a material weakness as discussed below. The material weakness identified resulted in the restatement of the financial statements for the year ended April 30, 2012. The restatement primarily related to investments valuation, accruals and income taxes. Additionally, the Companys previously reported unaudited financial statements for the year ended April 30, 2012 were erroneously reported under Business Development Company (BDC) requirements instead of under operating company requirements.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
Based on its evaluation, our management concluded that there is a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Companys annual or interim financial statements will not be prevented or detected on a timely basis.
5
The material weakness identified is:
| · | The Company does not have a full time Accounting Controller or Chief Financial Officer and utilizes a part time consultant to perform these critical responsibilities. This lack of full time accounting staff results in a lack of segregation of duties and accounting technical expertise necessary for an effective system of internal control. |
In order to mitigate this material weakness, to the fullest extent possible, the Company has recently engaged a financial consultant with significant accounting and reporting experience to assist the Company in becoming and remaining current with its reporting responsibilities. Additionally, as soon as our finances allow, we will hire sufficient accounting staff and implement appropriate procedures to further mitigate this weakness.
The Company's internal control over financial reporting should include policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
This annual report does not include an attestation report of the Companys independent registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only managements attestation in this annual report.
Changes in Company Internal Controls
No change in our Companys internal control over financial reporting occurred during our fourth fiscal quarter of our 2012 fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
6
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, 2012 and 2011.
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 April 30, |
| |||||
Description of Fees |
| 2012 |
|
| 2011 |
| ||
|
|
|
|
|
|
| ||
Audit Fees |
| $ | 30,000 |
|
| $ | 30,000 |
|
Audit-Related Fees |
|
| - |
|
|
| - |
|
Tax Fees |
|
| - |
|
|
| - |
|
All Other Fees |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| $ | 30,000 |
|
| $ | 30,000 |
|
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.
7
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:
Balance Sheets as of April 30, 2012 and April 30, 2011
Statements of Operations for the years ended April 30, 2012 and April 30, 2011
Statement of Changes in Stockholders Deficiency for the years ended April 30, 2012 and 2011
Statements of Cash Flows for the years ended April 30, 2012 and 2011
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
8
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) | |
|
|
|
June 27, 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 |
| Sole Director, Chief Executive Officer, Chief Financial Officer |
| June 27, 2013 |
Michael D. Queen |
| (principal executive officer and principal financial officer) |
|
|
9
APPENDIX A
UNIVERSAL CAPITAL MANAGEMENT, INC.
FINANCIAL STATEMENTS
APRIL 30, 2012 AND 2011
10
CONTENTS
| PAGE |
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-2 |
|
|
BALANCE SHEETS | F-3 |
|
|
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | F-4 |
|
|
STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIENCY | F-5 |
|
|
STATEMENTS OF CASH FLOWS | F-6 |
|
|
NOTES TO FINANCIAL STATEMENTS | F-7 F-24 |
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of:
Universal Capital Management, Inc.
We have audited the accompanying balance sheets of Universal Capital Management, Inc as of April 30, 2012 and 2011 and the related statements of operations and comprehensive loss, changes in stockholders deficiency, and cash flows for each of the two years in the period ended April 30, 2012. 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.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Universal Capital Management, Inc as of April 30, 2012 and 2011 and the results of its operations and its cash flows for each of the two years in the period ended April 30, 2012 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 2012 financial statements have been restated to correct misstatements.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company had a net loss and net cash used in operations of $2,611,399 and $13,772, respectively, in 2012, and has an accumulated deficit and stockholders deficiency of $9,091,001 and $885,354, respectively, at April 30, 2012 and has minimal revenues. These matters raise substantial doubt about the Companys ability to continue as a going concern. Managements plans as to these matters are 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
June 27, 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.
BALANCE SHEETS
|
| At April 30, |
| |||||
|
| 2012 |
|
| 2011 |
| ||
|
| (As Restated - Note 15) |
|
|
|
| ||
ASSETS |
|
|
|
|
|
| ||
CURRENT ASSETS |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 9,435 |
|
| $ | 15,445 |
|
Available-for-sale marketable equity securities |
|
| 387,025 |
|
|
| 89,707 |
|
Available-for-sale marketable equity securities - affiliates |
|
| - |
|
|
| 166,185 |
|
Prepaid expenses |
|
| 2,181 |
|
|
| 29,436 |
|
TOTAL CURRENT ASSETS |
|
| 398,641 |
|
|
| 300,773 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS |
|
|
|
|
|
|
|
|
Non-marketable equity securities, at cost |
|
| 19,845 |
|
|
| 250,250 |
|
Rent deposit |
|
| 1,100 |
|
|
| 1,100 |
|
Property and equipment, net |
|
| - |
|
|
| 681 |
|
TOTAL LONG-TERM ASSETS |
|
| 20,945 |
|
|
| 252,031 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 419,586 |
|
| $ | 552,804 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 339,847 |
|
| $ | 378,913 |
|
Accounts payable, related parties |
|
| - |
|
|
| 7,213 |
|
Accrued expenses |
|
| 201,204 |
|
|
| 329,426 |
|
Current state income taxes payable |
|
| 128,000 |
|
|
| 128,000 |
|
Advances from shareholders |
|
| 7,000 |
|
|
| 19,000 |
|
Notes payable |
|
| 10,100 |
|
|
| 24,610 |
|
Notes payable, related parties |
|
| 298,497 |
|
|
| 396,870 |
|
Accrued payroll and payroll taxes |
|
| 130,926 |
|
|
| - |
|
Accrued interest |
|
| 92,050 |
|
|
| 92,050 |
|
Accrued interest, related parties |
|
| 97,316 |
|
|
| 71,463 |
|
TOTAL CURRENT LIABILITIES |
|
| 1,304,940 |
|
|
| 1,447,545 |
|
|
|
|
|
|
|
|
|
|
CONTINGENCIES (NOTE 13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS DEFICIENCY |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 60,000,000 shares authorized;13,287,426 and 5,912,426 issued and outstanding at April 30, 2012 and April 30, 2011, respectively |
|
| 13,287 |
|
|
| 5,912 |
|
Additional paid-in capital |
|
| 8,141,210 |
|
|
| 6,157,335 |
|
Accumulated deficiency |
|
| (9,091,001 | ) |
|
| (6,479,602 | ) |
Accumulated other comprehensive income (loss) |
|
| 51,150 |
|
|
| (578,386 | ) |
TOTAL STOCKHOLDERS DEFICIENCY |
|
| (885,354 | ) |
|
| (894,741 | ) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIENCY |
| $ | 419,586 |
|
| $ | 552,804 |
|
See accompanying notes to these financial statements.
F-3
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
|
| For the Year Ended |
| |||||
|
| April 30, |
| |||||
|
| 2012 |
|
| 2011 |
| ||
|
| (As Restated Note 15) |
|
|
|
| ||
Revenue |
|
|
|
|
|
| ||
Management services |
|
|
|
|
|
| ||
Non-affiliates |
| $ | - |
|
| $ | 1,458 |
|
Affiliates |
|
| 160,101 |
|
|
| - |
|
Total Management Services |
|
| 160,101 |
|
|
| 1,458 |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| - |
|
|
| - |
|
Accounting services |
|
|
|
|
|
|
|
|
Non-affiliates |
|
| - |
|
|
| - |
|
Affiliates |
|
| - |
|
|
| 13,200 |
|
Total Accounting Services |
|
| - |
|
|
| 13,200 |
|
|
|
|
|
|
|
|
|
|
Other Income |
|
|
|
|
|
|
|
|
Affiliates |
|
| - |
|
|
| 22,883 |
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
| 160,101 |
|
|
| 37,541 |
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
Bad debt |
|
| - |
|
|
| 309,008 |
|
Salaries and wages |
|
| 2,017,006 |
|
|
| 252,273 |
|
Professional fees |
|
| 26,192 |
|
|
| 115,585 |
|
Insurance |
|
| 61,913 |
|
|
| 94,096 |
|
Interest expense |
|
| 51,334 |
|
|
| 31,554 |
|
General and administrative |
|
| 58,748 |
|
|
| 54,178 |
|
Depreciation |
|
| 681 |
|
|
| 1,900 |
|
Total Operating Expenses |
|
| 2,215,874 |
|
|
| 858,594 |
|
|
|
|
|
|
|
|
|
|
Operating Loss |
|
| (2,055,773 | ) |
|
| (821,053 | ) |
|
|
|
|
|
|
|
|
|
Other Income (Expense) |
|
|
|
|
|
|
|
|
Tax penalties and interest |
|
| (8,197 | ) |
|
| (18,044 | ) |
Miscellaneous Income |
|
| 48,734 |
|
|
| - |
|
Loss on impairment of available-for-sale marketable equity securities |
|
| - |
|
|
| (338,325 | ) |
Gain on settlement of investments |
|
| - |
|
|
| 20,613 |
|
Realized gain on investments |
|
| - |
|
|
| 16,637 |
|
Loss on sale of available-for-sale marketable equity securities |
|
| (596,163 | ) |
|
| (504,576 | ) |
Total Other Income (Expense) |
|
| (555,626 | ) |
|
| (823,695 | ) |
|
|
|
|
|
|
|
|
|
Net Loss before Income Taxes |
|
| (2,611,399 | ) |
|
| (1,644,748 | ) |
|
|
|
|
|
|
|
|
|
Income tax provision |
|
| - |
|
|
| (921,500 | ) |
|
|
|
|
|
|
|
|
|
Net Loss |
|
| (2,611,399 | ) |
|
| (2,566,248 | ) |
|
|
|
|
|
|
|
|
|
Comprehensive Loss |
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale marketable equity securities |
|
| 570,785 |
|
|
| (2,386,692 | ) |
|
|
|
|
|
|
|
|
|
Total Comprehensive Loss |
| $ | (2,040,614 | ) |
| $ | (4,952,940 | ) |
|
|
|
|
|
|
|
|
|
Basic and Diluted Net Loss Per Share |
| $ | (0.38 | ) |
| $ | (0.40 | ) |
|
|
|
|
|
|
|
|
|
Weighted Average Shares - Basic and Diluted |
|
| 6,839,339 |
|
|
| 6,360,371 |
|
See accompanying notes to these financial statements.
F-4
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIENCY
FOR THE YEARS ENDED APRIL 30, 2012 AND 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
| Total |
| ||||||
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Other |
|
| Stockholders' |
| ||||||
|
| Common Stock |
|
| Paid-In |
|
| Accumulated |
|
| Comprehensive |
|
| Equity |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficiency |
|
| Income (Loss) |
|
| (Deficiency) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance at April 30, 2010 |
|
| 6,412,426 |
|
| $ | 6,412 |
|
| $ | 6,214,202 |
|
| $ | (3,913,354 | ) |
| $ | 1,095,330 |
|
| $ | 3,402,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale securities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,023,030 | ) |
|
| (2,023,030 | ) |
Reclassification of other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 349,314 |
|
|
| 349,314 |
|
Share based compensation expense |
|
| - |
|
|
| - |
|
|
| 7,633 |
|
|
| - |
|
|
| - |
|
|
| 7,633 |
|
Settlement of lawsuit |
|
| - |
|
|
| (500,000 | ) |
|
| (500 | ) |
|
| (64,500 | ) |
|
| - |
|
|
| (65,000 | ) |
Net loss, year ended April 30, 2011 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,566,248 | ) |
|
| - |
|
|
| (2,566,248 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 30, 2011 |
|
| 5,912,426 |
|
| $ | 5,912 |
|
| $ | 6,157,335 |
|
| $ | (6,479,602 | ) |
| $ | (578,386 | ) |
| $ | (894,741 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale securities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 51,150 |
|
|
| 51,150 |
|
Reclassification of other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 578,386 |
|
|
| 578,386 |
|
Issuance of common stock for officer and director services - $0.27 per share |
|
| 7,375,000 |
|
|
| 7,375 |
|
|
| 1,983,875 |
|
|
|
|
|
|
|
|
|
|
| 1,991,250 |
|
Net loss, year ended April 30, 2012 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,611,399 | ) |
|
| - |
|
|
| (2,611,399 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 30, 2012 As Restated Note 15 |
|
| 13,287,426 |
|
| $ | 13,287 |
|
| $ | 8,141,210 |
|
| $ | (9,091,001 | ) |
| $ | 51,150 |
|
| $ | (885,354 | ) |
See accompanying notes to these financial statements.
F-5
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
|
| For the |
| |||||
|
| Year Ended April 30, |
| |||||
|
| 2012 |
|
| 2011 |
| ||
|
| (As Restated Note 15) |
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| ||
Net loss |
| $ | (2,611,399 | ) |
| $ | (2,566,248 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Loss on sale and impairment of available-for-sale marketable equity securities |
|
| 596,163 |
|
|
| 805,651 |
|
Available-for-sale marketable equity securities received in exchange for management services |
|
| - |
|
|
| (1,458 | ) |
Bad debt expense |
|
| - |
|
|
| 309,008 |
|
Depreciation expense |
|
| 681 |
|
|
| 1,900 |
|
Stock based compensation expense |
|
| 1,991,250 |
|
|
| 7,633 |
|
Deferred income taxes |
|
| - |
|
|
| 920,000 |
|
Current state income taxes |
|
| - |
|
|
| (4,000 | ) |
(Increase) decrease in assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables - affiliates |
|
| - |
|
|
| 11,601 |
|
Receivables - non-affiliates |
|
| - |
|
|
| (80,330 | ) |
Prepaid expenses |
|
| 27,255 |
|
|
| 21,296 |
|
Accounts payable |
|
| (39,066 | ) |
|
| 58,128 |
|
Accounts payable, related parties |
|
| (7,213 | ) |
|
| - |
|
Accrued expenses |
|
| (128,222 | ) |
|
| 135,624 |
|
Accrued payroll and payroll taxes |
|
| 130,926 |
|
|
| - |
|
Accrued interest |
|
| 25,853 |
|
|
| - |
|
Accrued interest, related parties |
|
| - |
|
|
| 29,733 |
|
Net cash used in operating activities |
|
| (13,772 | ) |
|
| (351,462 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from sale of available-for-sale marketable equity securities |
|
| 293,646 |
|
|
| 381,987 |
|
Exercise of warrant for available-for-sale marketable equity securities |
|
| (89,375 | ) |
|
| (25,000 | ) |
Purchase of available-for-sale marketable equity securities |
|
| (51,781 | ) |
|
| - |
|
Purchase of non-marketable securities |
|
| (19,845 | ) |
|
| - |
|
Net cash provided by investing activities |
|
| 132,645 |
|
|
| 356,987 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Repayment of advance from shareholder - related party |
|
| (6,000 | ) |
|
| (3,000 | ) |
Repayment of debt |
|
| (14,510 | ) |
|
| (23,145 | ) |
Proceeds (repayment) from issuance of promissory note - related parties |
|
| (104,373 | ) |
|
| 29,498 |
|
Net cash provided by (used in) financing activities |
|
| (124,883 | ) |
|
| 3,353 |
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
| (6,010 | ) |
|
| 8,878 |
|
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR |
|
| 15,445 |
|
|
| 6,567 |
|
CASH AND CASH EQUIVALENTS - END OF YEAR |
| $ | 9,435 |
|
| $ | 15,445 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS |
|
|
|
|
|
|
|
|
CASH PAID FOR INCOME TAXES |
| $ | 12,000 |
|
| $ | 7,000 |
|
CASH PAID FOR INTEREST |
| $ | - |
|
| $ | 1,023 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale marketable equity securities |
| $ | 629,536 |
|
| $ | (2,386,692 | ) |
Settlement of lawsuit - exchange of warrant for Company's common stock |
| $ | - |
|
| $ | 65,000 |
|
Advance converted to promissory note |
| $ | 6,000 |
|
| $ | - |
|
See accompanying notes to these financial statements.
F-6
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
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) 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.
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.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying financial statements, the Company had a net loss and cash used in operating activities of $2,611,399 and $13,772, respectively for the year ended April 30, 2012. Additionally, at April 30, 2012, the Company has minimal cash and has a working capital deficit of $906,299 and an accumulated deficiency of $9,091,001, which could have a material impact on the Companys financial condition and operations. As a result, the Company has a stockholders deficiency of $885,354 at April 30, 2012. The Company does not have sufficient cash resources or current assets to pay its obligations.
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 and from loans. 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.
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.
Accounting Changes
The withdrawal of the Company's election to be regulated as a BDC resulted in a change in reporting entity and a change in accounting principle. BDC financial statement presentation and accounting use the fair value method of accounting, which requires BDCs to value certain of their investments at market value as opposed to historical cost and to recognize all unrealized gains or losses in operations. As an operating company, the Company will use either the fair-value or historical-cost method (ASC 320 Investments Debt and Equity Securities) of accounting for financial statement presentation and accounting for securities held, depending on how the investment is classified and how long the Company intends to hold the investment and will recognize unrealized gains or losses as a component of stockholders equity (deficiency). Also certain financial statements or schedules which are required
F-7
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 1 NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
to be presented for a BDC are not required for an operating company and the presentation and classification of items in the balance sheets, statements of operations and statements of cash flows will differ from that in a BDC. In accordance with ASC 250 Accounting Changes and Error Corrections, the change from a BDC to an operating company has been retrospectively applied to all periods presented in the accompanying financial statements.
As a BDC, the balance sheet was unclassified and presented with investment securities as the primary asset, a composition of net assets and an equivalent net asset value per share. As an operating company, assets and liabilities are classified as current and long-term, stockholders equity (deficiency) is presented instead of net assets, unrealized gains (losses) on securities is included as a component of accumulated other comprehensive income (loss). As a BDC, the statement of operations included unrealized appreciation (depreciation) on investments, and presented net increase (decrease) in net assets resulting from operations and as a per share amount. As an operating company, unrealized gains and losses on investments is excluded from net income and classified as a component of comprehensive income (loss). Additionally, net loss and net loss per share are reported.
Investments
The Company invests in various marketable equity instruments and accounts for such investments in accordance with ASC 320 Investments Debt and Equity Securities.
Certain securities that the Company may invest in may be determined to be non-marketable. Non-marketable securities where the fair market value is not readily determinable and the Company owns less than 20% of the investee are accounted for at cost pursuant to ASC topic 325-20 Cost Method Investments. Non-marketable securities where the Company owns greater than 20% of the investee are accounted for pursuant to ASC topic 323-10 Investments - Equity Method and Joint Ventures. Non-marketable securities for investments in joint ventures are accounted for pursuant to ASC topic 323-30 Partnerships, Joint Ventures, Limited Liability Entities
Management determines the appropriate classification of its investments at the time of acquisition and reevaluates such determination at each balance sheet date. Trading securities that the Company may hold are treated in accordance with ASC 320 with any unrealized gains and losses included in earnings. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported as a separate component of stockholders' equity. Investments classified as held-to-maturity are carried at amortized cost. In determining realized gains and losses, which are included in earnings in the period of disposal, the cost of the securities sold is based on the specific identification method.
The Company periodically reviews its investments in marketable and non-marketable securities and impairs any securities whose value is considered non-recoverable. The Company's determination of whether a security is other than temporarily impaired incorporates both quantitative and qualitative information. Generally Accepted Accounting Principles ("GAAP") requires the exercise of judgment in making this assessment for qualitative information, rather than the application of fixed mathematical criteria. The Company considers a number of factors including, but not limited to, the length of time and the extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, the reason for the decline in fair value, changes in fair value subsequent to the balance sheet date, and other factors specific to the individual investment. The Company's assessment involves a high degree of judgment and accordingly, actual results may differ materially from the Company's estimates and judgments. The Company recorded zero and $338,325 of impairment charges for securities during the years ended April 30, 2012 and 2011, respectively.
Investments in securities of affiliates represent holdings of more than 5% of the issuer's voting common stock.
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.
F-8
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 1 NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Significant estimates in the accompanying financial statements include the allowance for receivables, 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, 2012 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 the receivables. 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 as of April 30, 2012 and 2011, respectively.
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. There was no allowance for doubtful accounts as of April 30, 2012 and 2011.
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 zero and $312,508 at April 30, 2012 and 2011.
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 |
F-9
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 1 NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
F-10
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 1 NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
We account for income taxes in accordance with FASB ASC 740 Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the more likely than not criteria of FASB ASC 740 Income Taxes.
FASB ASC 740 requires that we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.
Deferred tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Deferred income taxes arise principally from the recognition of unrealized gains or losses from appreciation or depreciation in investment value for financial statements purposes, while for income tax purposes, gains or losses are only recognized when realized (disposition). When unrealized gains and losses result in a net unrealized loss, provision is made for a deferred tax asset. When unrealized gains and losses result in a net unrealized gain, provision is made for a deferred tax liability. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable to refundable for the period plus or minus the change during the period in deferred tax assets or liabilities.
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, 2011 financial statements in order to conform to the April 30, 2012 financial statement presentation. These changes relate primarily to the discussion of Accounting Changes in Note 1 above.
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.
F-11
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 1 NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Company has adopted ASC 855 and its amendment, and this adoption did not have a material impact on its financial statements.
In June 2009, the FASB issued ASC 105-10-65, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB No. 162, which will become the source of authoritative U.S. GAAP recognized by the FASB to be applied to non-governmental entities. On its effective date, ASC 105-10-65 will supersede all then-existing, non-SEC accounting and reporting standards. ASC 105-10-65 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company has adopted ASC 105-10-65, and this adoption did not have a material impact on its financial statements.
NOTE 2 BUSINESS RISKS AND UNCERTAINTIES
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-12
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
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, 2012, 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, 2012 |
|
| (Level 1) |
|
| (Level 2) |
|
| (Level 3) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investments |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Available-for-sale marketable equity securities |
| $ | 387,025 |
|
| $ | 387,025 |
|
| $ | - |
|
| $ | - |
|
Non-marketable equity securities, at cost |
|
| 19,845 |
|
|
| - |
|
|
| - |
|
|
| 19,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in securities |
| $ | 406,870 |
|
| $ | 387,025 |
|
| $ | - |
|
| $ | 19,845 |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Available-for-sale marketable equity securities |
| $ | 89,707 |
|
| $ | 89,707 |
|
| $ | - |
|
| $ | - |
|
Available-for-sale marketable equity securities - affiliates |
|
| 166,185 |
|
|
| 166,185 |
|
|
| - |
|
|
| - |
|
Non-marketable equity securities, at cost |
|
| 250,250 |
|
|
| - |
|
|
| - |
|
|
| 250,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investments in securities |
| $ | 506,142 |
|
| $ | 255,892 |
|
| $ | - |
|
| $ | 250,250 |
|
The following chart shows the components of change in the financial assets categorized as Level 3, for the year ending April 30, 2012:
|
| Fair Value Measurement Using |
|
| |
|
| Significant Unobservable Inputs |
|
| |
|
| (Level 3) |
|
| |
|
|
|
|
| |
Beginning Balance, April 30, 2011 |
| $ | 250,250 |
|
|
Transfers into Level 3 |
|
| 19,845 |
| (1) |
Transfers out of Level 3 |
|
| (250,250 | ) | (2) |
Ending Balance, April 30, 2012 |
| $ | 19,845 |
|
|
(1) Transfer in of New Bastion Development at cost |
(2) Transfer out for Lightwave Logic at cost |
F-13
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 4 INCOME TAXES
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, 2012 was $92,050. The change in unrecognized tax provisions during the year ending April 30, 2012 amounted to zero and the accrual at April 30, 2012 amounted to $92,050, which is classified as accrued interest in the accompanying balance sheet. The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense and the accrual is included on the Companys balance sheet in accrued interest.
Tax years from 2005 (initial tax year) through 2012 remain subject to examination by major tax jurisdictions.
The income tax benefit for the years ending April 30, 2012 and 2011 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, |
| |||||
|
| 2012 |
|
| 2011 |
| ||
|
|
|
|
|
|
| ||
Income taxes at U.S. Federal Income Tax rate |
| $ | 640,000 |
|
| $ | 1,018,000 |
|
State income taxes, net of federal benefit |
|
| 157,000 |
|
|
| 256,000 |
|
Non-deductible share based compensation |
|
| - |
|
|
| - |
|
Exercise of warrant |
|
| - |
|
|
| - |
|
Worthless warrants |
|
| - |
|
|
| - |
|
Realized losses |
|
| (236,000 | ) |
|
| (319,000 | ) |
Change in valuation allowance |
|
| (561,000 | ) |
|
| (1,876,500 | ) |
|
|
|
|
|
|
|
|
|
Net Income tax (provision) benefit |
| $ | - |
|
| $ | (921,500 | ) |
The income tax (provision) benefit consists of the following:
|
| For the Year Ended April 30, |
| |||||
|
| 2012 |
|
| 2011 |
| ||
|
|
|
|
|
|
| ||
Current: |
|
|
|
|
|
| ||
Federal |
| $ | (27,000 | ) |
| $ | 149,000 |
|
State |
|
| (7,000 | ) |
|
| 42,000 |
|
|
|
|
|
|
|
|
|
|
Total Current |
| $ | (34,000 | ) |
| $ | 191,000 |
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
Federal |
| $ | 465,000 |
|
| $ | 597,000 |
|
State |
|
| 130,000 |
|
|
| 167,000 |
|
|
|
|
|
|
|
|
|
|
Total Deferred |
| $ | 595,000 |
|
| $ | 764,000 |
|
|
|
|
|
|
|
|
|
|
Total Income Tax Benefit (Provision) |
| $ | 561,000 |
|
| $ | 955,000 |
|
Change in Valuation Allowance |
|
| (561,000 | ) |
|
| (1,876,500 | ) |
Net Income Tax Benefit (Provision) |
| $ | - |
|
| $ | (921,500 | ) |
F-14
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 4 INCOME TAXES (CONTINIUED)
The components of deferred tax (assets) liabilities are as follows:
|
| April 30, |
| |||||
|
| 2012 |
|
| 2011 |
| ||
|
|
|
|
|
|
| ||
Deferred tax asset (liability) |
|
|
|
|
|
| ||
Deferred charges |
| $ | 57,000 |
|
| $ | 66,000 |
|
Net operating loss |
|
| 243,000 |
|
|
| 277,000 |
|
Unrealized gains (losses) |
|
| - |
|
|
| 416,000 |
|
Capital loss carryforward |
|
| 871,000 |
|
|
| 1,097,000 |
|
Stock-based compensation |
|
| 920,000 |
|
|
| 129,000 |
|
Amortization of deferred revenue from warrants |
|
| (276,000 | ) |
|
| (327,000 | ) |
Bad debt |
|
| 218,000 |
|
|
| 218,000 |
|
Adjustment for change in accumulated other comprehensive income |
|
| 405,000 |
|
|
| - |
|
Other |
|
| (500 | ) |
|
| 500 |
|
|
|
|
|
|
|
|
|
|
Total deferred tax asset, net |
| $ | 2,437,500 |
|
| $ | 1,876,500 |
|
Valuation allowance |
|
| (2,437,500 | ) |
|
| (1,876,500 | ) |
Net deferred tax asset |
| $ | - |
|
| $ | - |
|
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 $561,000 for the year ended April 30, 2012. Net operating loss carry-forwards aggregate approximately $612,000 and capital loss carry-forwards aggregate approximately $2,816,000 and expire in years through 2032. 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 $201,000, comprised of interest and penalties. The Company also owes the State of Delaware approximately $128,000 in state income taxes from a prior year. The interest and penalties are included as accrued expenses in the accompanying financial statements at April 30, 2012. The Company has agreements with both agencies to pay a minimum per month on the interest and penalties to avoid any collections or additional liens.
NOTE 5 NOTES RECEIVABLE
Notes receivable consists of the following:
|
| April 30, |
| |||||
|
| 2012 |
|
| 2011 |
| ||
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 |
| $ | - |
|
| $ | - |
|
NOTE 6 DUE FROM NON-AFFILIATED AND AFFILIATED COMPANIES
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.
F-15
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 7 DEFERRED 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. There was no deferred revenue at April 30, 2012 or 2011.
NOTE 8 NOTES PAYABLE
Notes payable consists of the following:
|
| April 30, |
| |||||
|
| 2012 |
|
| 2011 |
| ||
|
|
|
|
|
|
| ||
Notes payable |
|
|
|
|
|
| ||
Promissory notes payable. Principal due payable on demand. (NOTE 12) |
|
| 8,000 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Notes payable, D&O Insurance Premium. Interest accrued at 9.2%for a period of ten months. Payable in ten monthly installments of $2,414 per month. |
|
| 2,100 |
|
|
| 24,610 |
|
|
|
|
|
|
|
|
|
|
Notes payable |
| $ | 10,100 |
|
| $ | 24,610 |
|
|
|
|
|
|
|
|
|
|
Notes payable, related party |
|
|
|
|
|
|
|
|
Notes payable, related party. Interest accrued at 8.0%beginning on November 1, 2008. Principal and interest payable on demand. (NOTE 12) |
| $ | 237,696 |
|
| $ | 332,068 |
|
|
|
|
|
|
|
|
|
|
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 party. Interest accrued at 5.0% per annum. Principal and interest due payable on demand. (NOTE 12) |
|
| 10,802 |
|
|
| 14,802 |
|
|
|
|
|
|
|
|
|
|
Notes payable, related party |
| $ | 298,497 |
|
| $ | 396,870 |
|
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, 2012 and 2011, these advances totaled $7,000 and $19,000, 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.
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).
F-16
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 10 STOCK BASED COMPENSATION (CONTINUED)
During the year ending April 30, 2012 and 2011, the Company recognized $1,991,250, and $7,633, respectively, of stock-based compensation expense. The $1,991,250 of stock-based compensation expense for the year ended April 30, 2012 relates to common stock issued to employees and directors see Note 12.
As of April 30, 2012, 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.
The following tables summarize all stock option activity of the Company since April 30, 2010:
|
| Stock Options Outstanding |
| |||||||||||||
|
|
|
|
|
|
|
| Weighted |
|
|
|
| ||||
|
|
|
|
| Weighted |
|
| Average |
|
|
|
| ||||
|
|
|
|
| Average |
|
| Remaining |
|
| Aggregate |
| ||||
|
| Number of |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||
|
| Shares |
|
| Price |
|
| Life (Years) |
|
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Outstanding, April 30, 2010 |
|
| 650,000 |
|
| $ | 0.20 |
|
|
| 8.82 |
|
| $ | 130,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
| (50,000 | ) |
| $ | 0.20 |
|
|
| 7.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, April 30, 2011 |
|
| 600,000 |
|
| $ | 0.20 |
|
|
| 7.82 |
|
| $ | 120,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
| (400,000 | ) |
| $ | 0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, April 30, 2012 |
|
| 200,000 |
|
| $ | 0.20 |
|
|
| 6.82 |
|
| $ | 40,000 |
|
During the years ended April 30, 2012 and 2011, options to acquire 50,000 and 400,000 shares of common stock expired.
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, 2012 and 2011, 13,287,425 and 5,912,426 shares were issued and outstanding, respectively. See Note 14 Subsequent Events.
Common Stock
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.
On March 16, 2012, pursuant to a private offering, the Company 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 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 and recorded as share-based compensation expense.
F-17
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
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 $298,497 and $396,870 at April 30, 2012 and 2011, respectively See Note 8.
At April 30, 2012 and 2011, accounts payable, related parties are zero and $7,213.
For the years ended April 30, 2012 and 2011, the Company repaid $6,000 and $3,000 of advances from a related party shareholder, respectively. For the year ended April 30, 2012, the Company repaid $104,373 of promissory notes, related parties. For the years ended April 30, 2012 and 2011, the Company repaid $14,510 and $23,145 of debt, related parties, respectively. For the year ended April 30, 2011, the Company received $29,498 of proceeds from the issuance of promissory notes, related parties.
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.
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, 2012 and 2011, respectively.
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.
F-18
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 14 SUBSEQUENT EVENTS
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.
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.
F-19
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 14 SUBSEQUENT EVENTS (CONTINUED)
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.
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, 2012 (the Original Report) filed with the Securities and Exchange Commission (SEC) on August 14, 2012 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. 2 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, 2012 Financial Statements, primarily related to investments valuation, accruals and income taxes and presenting the Company as an operating commercial company rather than as a Business Development Company. The following tables provide the change from the Original Report as compared to the Amended Report for the balance sheet, statement of operations and comprehensive income (loss) and cash flows.
F-20
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 15 RESTATEMENT (CONTINUED)
BALANCE SHEET
|
| At April 30, 2012 |
| |||||||||
|
| As Reported |
|
| Adjustments |
|
| As Restated |
| |||
ASSETS |
|
|
|
|
|
|
|
|
| |||
CURRENT ASSETS |
|
|
|
|
|
|
|
|
| |||
Cash and cash equivalents |
| $ | 9,435 |
|
| $ | - |
|
| $ | 9,435 |
|
Available-for-sale marketable equity securities |
|
| - |
|
|
| 387,025 |
|
|
| 387,025 |
|
Prepaid expenses |
|
| 2,181 |
|
|
| - |
|
|
| 2,181 |
|
TOTAL CURRENT ASSETS |
|
| 11,616 |
|
|
| 387,025 |
|
|
| 398,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Non-marketable equity securities, at cost |
|
| - |
|
|
| 19,845 |
|
|
| 19,845 |
|
Investments |
|
| 548,008 |
|
|
| (548,008 | ) |
|
| - |
|
Deferred income tax |
|
| 1,561,000 |
|
|
| (1,561,000 | ) |
|
| - |
|
Long-term loans |
|
| 153,670 |
|
|
| (153,670 | ) |
|
| - |
|
Rent deposit |
|
| 1,100 |
|
|
| - |
|
|
| 1,100 |
|
TOTAL LONG-TERM ASSETS |
|
| 2,263,778 |
|
|
| (2,242,833 | ) |
|
| 20,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 2,275,394 |
|
| $ | (1,855,808 | ) |
| $ | 419,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 327,583 |
|
| $ | 12,264 |
|
| $ | 339,847 |
|
Accounts payable, related parties |
|
| 10,802 |
|
|
| (10,802 | ) |
|
| - |
|
Accrued expenses |
|
|
|
|
|
| 201,204 |
|
|
| 201,204 |
|
Current state income taxes payable |
|
| - |
|
|
| 128,000 |
|
|
| 128,000 |
|
Advances from shareholders |
|
| - |
|
|
| 7,000 |
|
|
| 7,000 |
|
Notes payable |
|
| 10,100 |
|
|
| - |
|
|
| 10,100 |
|
Notes payable, related parties |
|
| - |
|
|
| 298,497 |
|
|
| 298,497 |
|
Accrued payroll and payroll taxes |
|
| - |
|
|
| 130,926 |
|
|
| 130,926 |
|
Accrued interest |
|
| - |
|
|
| 92,050 |
|
|
| 92,050 |
|
Accrued interest, related parties |
|
| - |
|
|
| 97,316 |
|
|
| 97,316 |
|
TOTAL CURRENT LIABILITIES |
|
| 348,485 |
|
|
| 956,455 |
|
|
| 1,304,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses |
|
| 195,097 |
|
|
| (195,097 | ) |
|
| - |
|
Advances from shareholders |
|
| 7,000 |
|
|
| (7,000 | ) |
|
| - |
|
Notes payable, related parties |
|
| 287,696 |
|
|
| (287,696 | ) |
|
| - |
|
Accrued interest |
|
| 92,050 |
|
|
| (92,050 | ) |
|
| - |
|
Deferred income tax |
|
| 33,000 |
|
|
| (33,000 | ) |
|
| - |
|
Accrued interest, related parties |
|
| 97,316 |
|
|
| (97,316 | ) |
|
| - |
|
TOTAL LONG-TERM LIABILITIES |
|
| 712,159 |
|
|
| (712,159 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
| 1,060,644 |
|
|
| 244,296 |
|
|
| 1,304,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY (DEFICIENCY) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 60,000,000 shares authorized;13,287,426 and 5,912,426 issued and outstanding at April 30, 2012 and April 30, 2011, respectively |
|
| 13,287 |
|
|
| - |
|
|
| 13,287 |
|
Additional paid-in capital |
|
| 8,076,242 |
|
|
| 64,968 |
|
|
| 8,141,210 |
|
Accumulated income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated net operating loss |
|
| 24,061 |
|
|
| (24,061 | ) |
|
| - |
|
Dividends paid |
|
| (448,596 | ) |
|
| 448,596 |
|
|
| - |
|
Net realized loss on investments |
|
| (6,122,296 | ) |
|
| 6,122,296 |
|
|
| - |
|
Net realized gain on dividend of portfolio stock |
|
| 343,924 |
|
|
| (343,924 | ) |
|
| - |
|
Net unrealized depreciation of investments |
|
| (671,871 | ) |
|
| 671,871 |
|
|
| - |
|
Accumulated deficiency |
|
| - |
|
|
| (9,091,001 | ) |
|
| (9,091,001 | ) |
Accumulated other comprehensive income (loss) |
|
| - |
|
|
| 51,150 |
|
|
| 51,150 |
|
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) |
|
| 1,214,751 |
|
|
| (2,100,105 | ) |
|
| (885,354 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIENCY) |
| $ | 2,275,395 |
|
| $ | (1,855,808 | ) |
| $ | 419,586 |
|
F-21
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 15 RESTATEMENT (CONTINUED)
STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
| Year Ended |
| |||||||||
|
| April 30, 2012 |
| |||||||||
|
| As Reported |
|
| Adjustments |
|
| As Restated |
| |||
Revenue |
|
|
|
|
|
|
|
|
| |||
Management services |
|
|
|
|
|
|
|
|
| |||
Affiliates |
| $ | 160,101 |
|
| $ | - |
|
| $ | 160,101 |
|
Total Management Services |
|
| 160,101 |
|
|
| - |
|
|
| 160,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
| 160,101 |
|
|
| - |
|
|
| 160,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Bad debt |
|
| 150,838 |
|
|
| (150,838 | ) |
|
| - |
|
Salaries and wages |
|
| 966,030 |
|
|
| 1,050,976 |
|
|
| 2,017,006 |
|
Professional fees |
|
| 1,013,983 |
|
|
| (987,791 | ) |
|
| 26,192 |
|
Insurance |
|
| 61,913 |
|
|
| - |
|
|
| 61,913 |
|
Interest expense |
|
| 51,332 |
|
|
| 2 |
|
|
| 51,334 |
|
General and administrative |
|
| 58,769 |
|
|
| (21 | ) |
|
| 58,748 |
|
Depreciation |
|
| 682 |
|
|
| (1 | ) |
|
| 681 |
|
Total Operating Expenses |
|
| 2,303,547 |
|
|
| (87,673 | ) |
|
| 2,215,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss |
|
| (2,143,446 | ) |
|
| 87,673 |
|
|
| (2,055,773 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Tax penalties and interest |
|
| - |
|
|
| (8,197 | ) |
|
| (8,197 | ) |
Miscellaneous Income |
|
| 184,531 |
|
|
| (135,797 | ) |
|
| 48,734 |
|
Unrealized gain (loss) on available-for-sale marketable equity securities |
|
| 295,898 |
|
|
| (295,898 | ) |
|
| - |
|
Loss on sale of available-for-sale marketable equity securities |
|
| (596,163 | ) |
|
| - |
|
|
| (596,163 | ) |
Total Other Income (Expense) |
|
| (115,734 | ) |
|
| (439,892 | ) |
|
| (555,626 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss before Income Taxes |
|
| (2,259,180 | ) |
|
| (352,219 | ) |
|
| (2,611,399 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision) |
|
| (205,000 | ) |
|
| 205,000 |
|
|
| - |
|
Penalties and interest |
|
| (7,000 | ) |
|
| 7,000 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| (2,471,180 | ) |
|
| (140,219 | ) |
|
| (2,611,399 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income ( Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale marketable equity securities |
|
| - |
|
|
| 570,785 |
|
|
| 570,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income (Loss) |
|
| (2,471,180 | ) |
|
| 430,566 |
|
|
| (2,040,614 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss Per Share |
| $ | (0.36 | ) |
| $ | (0.02 | ) |
| $ | (0.38 | ) |
F-22
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 15 RESTATEMENT (CONTINUED)
STATEMENT OF CASH FLOWS
|
| Year Ended |
| |||||||||
|
| April 30, 2012 |
| |||||||||
|
| As Reported |
|
| Adjustments |
|
| As Restated |
| |||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
| |||
Net loss |
| $ | (2,471,180 | ) |
| $ | (140,219 | ) |
| $ | (2,611,399 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale and impairment of available-for-sale marketable equity securities |
|
| 596,163 |
|
|
| - |
|
|
| 596,163 |
|
Sale (Purchase) of investment securities |
|
| 132,944 |
|
|
| (132,944 | ) |
|
| - |
|
Depreciation expense |
|
| 681 |
|
|
| - |
|
|
| 681 |
|
Stock based compensation expense |
|
| 1,917,500 |
|
|
| 73,750 |
|
|
| 1,991,250 |
|
Net unrealized appreciation (depreciation) of investments |
|
| (295,898 | ) |
|
| 295,898 |
|
|
| - |
|
Deferred income taxes |
|
| 197,000 |
|
|
| (197,000 | ) |
|
| - |
|
Current income taxes |
|
| 60,000 |
|
|
| (60,000 | ) |
|
| - |
|
(Increase) decrease in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Due from affiliates |
|
| 98,948 |
|
|
| (98,948 | ) |
|
| - |
|
Prepaid expenses |
|
| 27,255 |
|
|
| (0 | ) |
|
| 27,255 |
|
Accounts payable |
|
| (39,067 | ) |
|
| 1 |
|
|
| (39,066 | ) |
Accounts payable, related parties |
|
| 7,976 |
|
|
| (15,189 | ) |
|
| (7,213 | ) |
Accrued expenses |
|
| (129,419 | ) |
|
| 1,197 |
|
|
| (128,222 | ) |
Accrued payroll and payroll taxes |
|
| - |
|
|
| 130,926 |
|
|
| 130,926 |
|
Accrued interest |
|
| 25,853 |
|
|
| - |
|
|
| 25,853 |
|
Net cash provided by (used in) operating activities |
|
| 128,756 |
|
|
| (142,528 | ) |
|
| (13,772 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of available-for-sale marketable equity securities |
|
| - |
|
|
| 293,646 |
|
|
| 293,646 |
|
Exercise of warrant for available-for-sale marketable equity securities |
|
| - |
|
|
| (89,375 | ) |
|
| (89,375 | ) |
Purchase of available-for-sale marketable equity securities |
|
| - |
|
|
| (51,781 | ) |
|
| (51,781 | ) |
Purchase of non-marketable securities |
|
| - |
|
|
| (19,845 | ) |
|
| (19,845 | ) |
Net cash provided by investing activities |
|
| - |
|
|
| 132,645 |
|
|
| 132,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of advance from shareholder - related party |
|
| (12,000 | ) |
|
| 6,000 |
|
|
| (6,000 | ) |
Repayment of debt |
|
| (14,510 | ) |
|
| - |
|
|
| (14,510 | ) |
Proceeds (repayment) from issuance of promissory note - related parties |
|
| (109,377 | ) |
|
| 5,004 |
|
|
| (104,373 | ) |
Net cash used in financing activities |
|
| (135,887 | ) |
|
| 11,004 |
|
|
| (124,883 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
| (7,131 | ) |
|
| 1,121 |
|
|
| (6,010 | ) |
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR |
|
| 16,566 |
|
|
| (1,121 | ) |
|
| 15,445 |
|
CASH AND CASH EQUIVALENTS - END OF YEAR |
| $ | 9,435 |
|
| $ | - |
|
| $ | 9,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR INCOME TAXES |
| $ | 12,000 |
|
| $ | - |
|
| $ | 12,000 |
|
CASH PAID FOR INTEREST |
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale marketable equity securities |
| $ | - |
|
| $ | 629,536 |
|
| $ | 629,536 |
|
Advance converted to promissory note |
| $ | - |
|
| $ | 6,000 |
|
| $ | 6,000 |
|
F-23
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2012 AND 2011
NOTE 16 COMPREHENSIVE INCOME
The following reflects the changes in Accumulated Other Comprehensive Income (Loss) for the years ended April 30, 2012 and 2011, respectively:
|
| Unrealized Gains |
|
| |
|
| and Losses on |
|
| |
|
| Available-For |
|
| |
|
| Sale |
|
| |
|
| Securities |
|
| |
|
|
|
|
| |
Beginning Balance April 30, 2010 |
| $ | 1,095,330 |
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications |
|
| (2,023,030 | ) |
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive Income |
|
| 349,314 |
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss) |
|
| (1,673,716 | ) |
|
|
|
|
|
|
|
Balance at April 30, 2011 |
| $ | (578,386 | ) |
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications |
|
| 51,150 |
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated other comprehensive Income |
|
| 578,386 |
|
|
|
|
|
|
|
|
Net current period other comprehensive income (loss) |
|
| 629,536 |
| (1) |
|
|
|
|
|
|
Balance at April 30, 2012 |
| $ | 51,150 |
|
|
(1)
The net period other comprehensive income of $629,536 is $58,750 greater than the $570,785 of unrealized gain on available-for-sale marketable equity securities reported as Comprehensive Income in the Statement of Operations and Comprehensive Income (Loss) for the year ended April 30, 2012. The $58,750 difference is for the accumulated appreciation of a non-marketable security (warrant to purchase stock) in 2011 that was not recorded (valued at cost). In 2012, the warrant was exercised and the security was reclassed to an available-for sale-marketable equity security. Accordingly, the accumulated appreciation not recorded in 2011 flowed through in 2012.
F-24