MAJOR LEAGUE FOOTBALL INC - Quarter Report: 2009 December (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

FORM 10-Q

(Mark One)

ý  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ending January 31, 2010

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)

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    ý No ¨

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  ý.    No ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one).

Large accelerated filer  ¨ Accelerated filer ¨   Non-accelerated filer 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).  Yes¨    No ý

The number of shares of the registrant’s Common Stock outstanding as of March 16, 2010 was 6,412,426

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Item 1

Financial Statements

See Appendix

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

 The following discussion contains forward-looking statements.  The words “anticipate,” “believe,” “expect,” “plan,” “intend,” “estimate,” “project,” “will,” “could,” “may” and similar expressions are intended to identify forward-looking statements.  Such statements reflect our Company’s current views with respect to future events and financial performance and involve risks and uncertainties.  Should one or more risks or uncertainties occur, or should underlying assumptions prove incorrect, actual results may vary materially and adversely from those anticipated, believed, expected, planned, intended, estimated, projected or otherwise indicated.  Readers should not place undue reliance on these forward-looking statements.

The following discussion is qualified by reference to, and should be read in conjunction with our Company’s unaudited financial statements and the notes thereto.

Our Company is a non-diversified, close-ended management investment company that has elected to be treated as a business development company (BDC) under the 1940 Act.  We are a diversified, aggressive investment tool that assists early stage development companies in all aspects of the planning process from inception to entering the public marketplace.  This includes assisting with the preparation of financial statements, capitalization tables, valuations, business plans and coordinating public/investor relations efforts.  Our niche is to assist young companies prepare themselves for introduction to a diversified group of accredited investors in order to assist them with obtaining private debt and/or equity financing.  Since we have differing clients in varied industries, our overall portfolio is extremely diversified, which we believe enables us to offer investors who invest in us a potentially higher return with less risk.  For our management services we receive a block of common stock which could result in a financial windfall for us and our shareholders.

Our primary business objective is to generate both current income and capital appreciation primarily through equity and debt instruments by investing in emerging growth companies.  Our Company assists these companies in strategic and financial planning, in market strategies and to assist them in trying to achieve prudent and profitable growth.  

Our Company’s primary investment objective is to increase its net assets by adding value to our portfolio companies and thus, increasing our stock value. In order to achieve this objective, we focus on investments in companies that are most likely to benefit from our management's expertise in finance, strategic planning, operations, and technology.

The income that our Company derives from investments in portfolio companies consists of management fees (which are generally non-cash), accounting fees, proceeds from the sale of these investments, interest income, and appreciation (net of depreciation) in the values of portfolio companies.

Our Company’s success depends on us investing in more companies that appreciate in value rather than companies that depreciate in value. We cannot assure you that our Company will be successful in doing so.

Pursuant to the requirements of the Investment Company Act of 1940, as amended (“1940 Act”), our Board of Directors, the majority of which are independent directors, is responsible for determining in good faith the fair value of the securities and assets held by our Company for which market quotations are not readily available. In making its determination, our Board of Directors may consider valuation appraisals provided by Company’s management and possibly independent financial experts.  Our Company expects to pay a professional fee each time such an independent valuation is provided.  With respect to private equity securities, each investment is valued using industry valuation benchmarks, and then the value may be assigned a discount reflecting the particular nature of the investment.

1

Our Board of Directors bases its determination of value on, among other things, applicable quantitative and qualitative factors. These factors may include, but are not limited to, the type of securities, the nature of the business of the portfolio company, the marketability of the securities, the market price of unrestricted securities of the same issue (if any), comparative valuation of securities of publicly traded companies in the same or similar industries, current financial conditions and operating results of the portfolio company, sales and earnings growth of the portfolio company, operating revenues of the portfolio company, competitive conditions, and current and prospective conditions in the overall economy and the equity markets.

Without a readily recognized market value, the estimated value of some portfolio securities may differ significantly from the values that would be placed on the portfolio if there existed a ready market for such equity securities.

Financial Condition

Our Company’s total assets, net assets, net asset value per share and unrealized appreciation are set forth in the following table:

The changes in total assets, net assets and net asset value per share for the nine months ending January 31, 2010 were primarily attributable to:

·

Vystar Corporation (“VYSTAR”), average valuation on restricted and unrestricted shares decreased from $2.00 to $1.65 per share during the nine months ending January 31, 2010.  In May 2009, the Company exercised a warrant to purchase 400,000 shares for $0.01 per share or $4,000. At April 30, 2009, these shares were included in the valuation of our warrants.   During the nine months ending January 31, 2010, the Company issued promissory notes in the amount of $106,000 that were settled with 106,000 shares of Vystar Corporation common stock.  During the nine months ending, our Company sold 27,505 shares for a sales price of $48,177 with a cost of $55,010 for a realized loss of $6,833.  Our Company’s investment in Vystar common stock was $457,042 at January 31, 2010, with a net unrealized appreciation of $457,042 for the nine months then ending.  This increase is due to the exercise of warrants in May 2010.  Our Company’s investment in Vystar warrants were valued at $1,145,000 at January 31, 2010 compared to $2,268,000 at April 30, 2009, for a net unrealized depreciation of $1,123,000.  This decrease is due to the exercise of warrants that cost $800,000 and a net unrealized depreciation of $4,000 for the nine months ending January 31, 2010.

·

Lightwave Logic, Inc. (“LWLG”), average valuation on restricted and unrestricted shares increased from $0.42 to $1.50 per share during the nine months ending January 31, 2010.  During the nine months ending January 31, 2010, our Company sold 710,825 shares for a sales price of $521,062 with a cost of $505,743 for a realized gain of $15,319.  We bought 32,022 shares of LWLG common stock for a cost of $25,184 during the nine months ending January 31, 2010.  Our Company’s investment in LWLG common stock was $104,193 at January 31, 2010 and had a net unrealized appreciation of $130,154 for the nine months ending January 31, 2010.  Our Company’s investment in LWLG warrants were valued at $677,000 at January 31, 2010, compared to $209,000 at April 30, 2009, for a net unrealized appreciation of $468,000 for the nine months ending January 31, 2010.

2

·

Our Company’s investment in iVolution Medical Systems (“IMS”) warrants was valued at $645,000 and $646,000 at January 31, 2010 and April 30, 2009.

·

Innovation Industries (“Innovation”) investment was valued at $10,000 at January 31, 2010.  During the nine months ending January 31, 2010, the Company loaned Innovation $10,000 in exchange for a promissory note and profit sharing of future revenue.  The Company also entered into a two (2) year contract to provide management services to Innovation for $500,000.  In addition to the monthly fee, UCM will receive a 5% profit share in the future revenue of the product Innovation is producing.

·

BFAG V, Inc. /Incredible 3D, Inc. (“I3D”) average valuation on restricted and unrestricted shares increased from $0.001 to $0.32 per share during the nine months ending January 31, 2010.  The Company’s total investment at January 31, 2010 is valued at $32,000 for a net unrealized appreciation of $30,375 for the nine months ending January 31, 2010.

·

Mediavix, Inc. /PR Specialists, Inc. (“Mediavix”) average valuation on restricted and unrestricted shares increased from $0.00 to $0.50 per share during the nine months ending January 31, 2010.  In December 2009 the Company received 1,000,000 shares of PR Specialists, Inc. common stock in exchange for management services over a one year period for a cost of $1,000 and a warrant to purchase 500,000 shares of the company’s common stock at an exercise price of $0.001 for a cost of $500.  The Company’s total investment at January 31, 2010 is valued at $750,000 for a net unrealized appreciation of $748,500 for the nine months ending January 31, 2010.

·

SIVOO Holdings, Inc. (“SIVOO”) average valuation on restricted and unrestricted shares decreased from $0.02 to $0.00 per share during the nine months ending January 31, 2010.  In October 2009, the Company received a warrant to purchase 4% of the fully diluted outstanding common stock upon its exercise in exchange for management services relating to identifying and possibly implementing strategic alternatives.  Our Company’s investment in SIVOO common stock has a cumulative net unrealized depreciation as of January 31, 2010 of $319,725.  Our Company’s investment in SIVOO warrants were valued at $0 at January 31, 2010 compared to $10,800 at April 30, 2009 for a net unrealized depreciation of $10,800 for the nine months ending January 31, 2010.  

·

Our Company’s investment in Dominion Capital Management, Inc. (“DCM”) warrants were valued at $5,500 at January 31, 2010 and April 30, 2009.

·

During the nine months ending January 31, 2010, our Company sold 1,220 shares of other investments for a sales price of $795 with a cost of $1,086 for a realized loss of $291.

·

Multi-View Technologies, Inc. (“MVT”) average valuation on restricted shares decrease from $0.50 to $0.00 during the nine months ending January 31, 2010.  The company was dissolved in December 2009.  The cost of $21,000 of this investment was written off during the nine months ending January 31, 2010, for a net realized loss of $21,000.

·

The increase in cash of $5,699.

·

The decrease in accounts payable and accrued expenses of $72,783.

·

The decrease in net deferred tax liability of $554,000.

·

The decrease in net current income taxes payable of $45,500.

3

·

The decrease in deferred revenue of $2,776 which consists mainly of revenue recognized on management contracts ($188 for Mediavix, $1,900 for Incredible 3D, $2,588 for iVolution, $250 for MVT and $250 for DCM) which was earned during the nine months ending January 31, 2010.

·

The addition to Net Capital of $3,816 which consists of share-based compensation expense.

Our Company’s unrealized appreciation (depreciation) can change significantly from period to period as a result of the wide fluctuation in the value of our Company’s portfolio securities, the addition of new portfolio companies, and the acquisition and sale of shares during any given period.

Our Company had unrealized appreciation (depreciation) on investments of $72,290 and ($751,904) for the three and nine months ending January 31, 2010 compared to unrealized appreciation (depreciation) of $927,587 and ($2,431,803) for the three and nine months ending January 31, 2009 and unrealized depreciation of $323,709 for the year ending April 30, 2009.

Our Company’s financial condition is dependent on a number of factors including the ability of each portfolio company to achieve its respective strategies and goals with our Company’s help.  Our Company has invested a substantial portion of its time and assets in development stage or start-up companies.  Because these businesses are unproven small companies that may lack management depth, may be dependent on new or commercially unproven technologies, and may have no operating history, they are high risk investments, but could yield high returns.

At January 31, 2010, $3,830,535 or 83% of our Company's assets consisted of investments, of which net unrealized gains before the income tax effect were $807,716. A deferred tax liability on account of unrealized gains has been estimated at approximately $321,000.  At January 31, 2010, our Company’s holdings of Vystar Corporation, Lightwave Logic, Inc., Mediavix and iVolution were valued at $1,602,042, $781,193, $750,000 and $645,000 respectively, which represented in the aggregate approximately 98.6% of the total Company portfolio at that date. Vystar Corporation’s trades under the symbol VYST.OB.  Lightwave Logic, Inc. trades under the symbol LWLG.OB.  Mediavix, Incredible 3D and iVolution are in the process of raising capital through the private offering of its securities.

Our Company currently has several liquid investments that it could liquidate if necessary.  The remaining portfolio companies are at early stages of their business development, and do not presently have a market for the securities of these portfolio companies.  Therefore, our Company may find it difficult to liquidate any of these investments in the near future. See “Liquidity and Capital Resources” below.

Results of Operations

Our Company’s unaudited financial statements have been prepared in conformity with the United States generally accepted accounting principles.  On this basis, the principal measure of an investment company's financial performance during a time period is the net change in net assets during such period. Such change results from (i) income from operations, net of operating expenses, (ii) net realized gain or loss on investment, which is the difference between the proceeds received from dispositions of portfolio securities and their stated cost, and (iii) increase (decrease) in unrealized appreciation or depreciation on investments.

The Company recognizes its management revenue through a management service contract with its portfolio company to provide services in exchange for equity in that portfolio company.  These services are typically non-cash and are generally for a one-year term, but can be extended with both parties in agreement.  It is not uncommon for a contract to expire, but for the Company to continue to provide services until a goal is reached.  Each contract renewal is examined on an individual basis.

Company expenses include salaries and wages, professional fees, office expenses and supplies, rent, travel, and other normal business expenses. General and administrative costs include depreciation, investor relations and other overhead costs.

4

Three months ending January 31, 2010 compared to the three months ending January 31, 2009

For the three months ending January 31, 2010 our Company’s revenues for services were $9,588 compared to $276,753 for the three months ending January 31, 2009. During the three months ending January 31, 2010, our Company had 22% of revenue in the form of securities and approximately 97% of the Company’s revenue was in the form of securities for the three months ending January 31, 2009.

Total operating expenses for the three months ending January 31, 2010 were $134,679, the principal components of which were salaries and wages of $62,972 (which includes $1,272 of share based compensation expense), insurance expense of $22,399, professional fees of $20,212, consisting primarily of $6,957 for investor relations expense, $8,664 for accounting and auditing expense and $3,580 for transfer agent fees, $7,346 of interest expense and $21,275 of other general and administrative expense. By comparison, total operating expenses for the three months ending January 31, 2009 were $151,594, the principal components of which were professional fees of $38,200, payroll of $62,054, insurance of $23,141, interest of $8,059 and other general and administrative expenses of $19,665.

Our Company realized a loss from operations of $74,091 for the three months ending January 31, 2010 compared to a gain from operations of $94,584 for the three months ending January 31, 2009.

Nine months ending January 31, 2010 compared to the nine months ending January 31, 2009

For the nine months ending January 31, 2010 our Company’s revenues for services were $17,684 compared to $870,263 for the nine months ending January 31, 2009. During the nine months ending January 31, 2010, approximately 35% of the Company’s revenue was in the form of securities and approximately 96% of the Company’s revenue was in the form of securities for the nine months ending January 31, 2009.  

Total operating expenses for the nine months ending January 31, 2010 were $516,116, the principal components of which were salaries and wages of $178,418 (which includes $3,816 of share based compensation expense) professional fees of $138,140, consisting primarily of $26,591 for investor relations expense, $20,000 for consulting expense, $58,362 for accounting and auditing expense and $21,183 in legal expense, $33,514 of bad debt expense, $75,872 of insurance expense, $23,627 of interest expense and $65,120 of other general and administrative expense. By comparison, total operating expenses for the nine months ending January 31, 2009 were $1,446,383, the principal components of which were professional fees of $372,270, payroll of $763,758, bad debt expense of $138,755, insurance of $71,629, interest of $18,648 and other general and administrative expenses of $79,898.

Our Company realized a loss from operations of $149,118 for the nine months ending January 31, 2010 compared to a gain from operations of $460,931 for the nine months ending January 31, 2009.

Liquidity and Capital Resources

From inception, our Company has relied upon the liquidation of our investments for liquidity, which is our business model, and relied upon equity capital raises or borrowed funds to invest in our portfolio companies.  Our Company had $21,130 of cash at January 31, 2010.  In the future, payment of operating expenses and cash with which to make investments will similarly have to come from liquidating our investments, future revenue streams, equity capital to be raised from investors or from borrowed funds.  There is no assurance that our Company will be successful in liquidating our investments, raising such additional equity capital, generating revenue streams or additional borrowings or if it can, that it can do so at a price that management believes to be appropriate.  Any disposition of our investments may have to be made at inopportune times, which may have a material adverse affect on our overall revenue.  Under the Investment Company Act of 1940, as amended (“1940 Act”), our Company may not sell shares of common stock at less than its net asset value except in certain limited circumstances.

At January 31, 2010, $3,269,300 or 92% of our investments are illiquid securities that do not have a market or they are restricted and therefore cannot be traded or sold.

5

Contractual Obligations

Management Agreement - On October, 31, 2009, our Company entered into a management agreement with Innovation Industries for a fee of $500,000 over the next 24 months, and a part of a net profit sharing of 5% of future revenue of its GetaGrip™ product.  We are assisting Innovation to bring the GetaGrip™ product to the market.  Innovation has been raising capital through promissory notes at $100,000 increments for one point or one percent (1%) of net profits.  We anticipate the revenue generated from this agreement will be sufficient for payment of operating expenses, provide the company with cash to make additional investments and expand into new geographical areas.  Should this product not succeed, we would be entitled to the $500,000 base fee from Innovation.

Management Agreement - In October 2009, the Company entered into a letter of understanding with SIVOO Holdings, Inc. for 120 days for the general purpose of identifying and possibly implementing strategic alternatives.  The compensation received was a warrant to purchase 4% of the fully-dilutive outstanding common shares at $0.001 per share of SIVOO at the time of the exercise.

Management Agreement – In November 2009, the Company entered into a management agreement with Incredible 3D, Inc. /BF Acquisition Group V, Inc. for three months to provide management services in exchange for 1,900,000 shares of BFAG V, Inc. common stock at par value, $0.001.  The Company also entered into an accounting services agreement with Incredible 3D to provide accounting services for $1,200 per month.

Management Agreement – In December 2009, the Company entered into a management agreement with Mediavix, Inc./PR Specialists, Inc. for twelve months to provide management services in exchange for 1,000,000 shares of PR Specialists, Inc. common stock and a warrant to purchase 500,000 shares of common stock at $0.001.  The Company also entered into an accounting services agreement with Mediavix to provide accounting services at $1,200 per month.

Critical Accounting Estimates

Valuation

The 1940 Act requires periodic valuation of each investment in our Company’s portfolio to determine our Company’s net asset value. Under the 1940 Act, unrestricted securities with readily available market quotations are to be valued at the current market value; all other assets must be valued at “fair value” as determined in good faith by or under the direction of the Board of Directors, the majority of which are independent directors.

The Board of Directors is responsible for (1) determining overall valuation guidelines and (2) ensuring the valuation of investments within the prescribed guidelines.

Fair value is generally defined as the amount for which an investment could be sold in an orderly disposition over a reasonable time. Generally, to increase objectivity in valuing assets, external measures of value, such as public markets or third-party transactions, are used whenever possible. Valuation is not based on long-term work-out value, nor immediate liquidation value, nor incremental value for potential changes that may take place in the future.  The values assigned to Company investments are based on available information and do not necessarily represent amounts that might ultimately be realized, as such amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated.

6

Our Company’s valuation policy and methodology with respect to its portfolio companies are as follows:

Cost: The cost method is based on our Company’s original cost. This method is generally used in the early stages of a portfolio company’s development until significant events occur subsequent to the date of the original investment that dictate a change to another valuation method. Some examples of these events are: (1) a major recapitalization; (2) a major refinancing; (3) a significant third-party transaction; (4) the development of a meaningful public market for such company’s common stock; and (5) significant changes in such company’s business.

Private Market: The private market method uses actual, executed, historical transactions in a company’s securities by reasonable third parties as a basis for valuation. The private market method may also use, where applicable, unconditional firm offers by reasonable third parties as a basis for valuation.

Public Market: The public market method is used when there is an established public market for the class of the portfolio company’s securities held by our Company and the shares held by our Company bear no legal or contractual restrictions. Securities for which market quotations are readily available are carried at market value as of the time of valuation. Market value for securities traded on securities exchanges is the last reported sales price on the day of valuation. For other securities traded in the over-the-counter market and listed securities for which no sale was reported on a day, market value is the last quoted bid price on such day.

Public Market/Restricted Securities: When our Company holds securities which are publicly traded but under significant legal or contractual restrictions, the Board of Directors starts with the public market value of the shares as set forth in the paragraph above and applies an appropriate discount based on the nature and remaining duration of the restrictions.

Analytical Method: The analytical method is generally used to value an investment position when there is no established public or private market in our Company’s securities or when the factual information available to our Company dictates that an investment should no longer be valued under either the cost or private market method. This valuation method is inherently imprecise and, ultimately, the result of reconciling the judgments of our directors based on the data available to them. The resulting valuation, although stated as a precise number, is necessarily within a range of values that vary depending upon the significance attributed to the various factors being considered. Some of the factors considered may include the financial condition and operating results of the portfolio company, the long-term potential of the business of our Company, the values of similar securities issued by companies in similar businesses, the proportion of the portfolio company’s securities owned by our Company and the nature of any rights to require the portfolio company to register restricted securities under applicable securities laws.

Item 3

Quantitative and Qualitative Disclosures About Market Risk

Our Company’s business activities contain elements of risk.  Neither our Company’s investments nor an investment in our Company is intended to constitute a balanced investment program.

A substantial portion of our assets is comprised of private development stage or start-up companies. These private businesses tend to be thinly capitalized, unproven, small companies that lack management depth and have not attained profitability or have no history of operations. Because of the speculative nature and the lack of a public market for these investments, there is significantly greater risk of loss than is the case with traditional investment securities. We expect that some of our investments will be a complete loss or will be unprofitable and that some will appear to be likely to become successful but never realize their potential. Even when our private equity investments become publicly traded, the market for the unseasoned publicly traded securities may be relatively illiquid.

7

Because there is typically no public market for our interests in the small privately held companies in which we invest, the valuation of the equity interests in that portion of our portfolio is determined in good faith by or under the direction of our Board of Directors, in accordance with our valuation procedures. In the absence of a readily ascertainable market value, the determined value of our portfolio of equity interests may differ significantly from the values that would be placed on the portfolio if a ready market for the equity interests existed. Any changes in valuation are recorded in our statements of operations as "Net increase (decrease) in unrealized appreciation on investments." Changes in valuation of any of our investments in privately held companies from one period to another may be volatile.

Item 4.T

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.  As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of our Company’s principal executive officer and principal financial officer of the effectiveness of the design and operation of our Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934).  Based on that evaluation, our principal executive officer and our principal financial officer have determined that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report Form 10-Q.

Changes in Internal Control Over Financial Reporting.  No change in our Company’s internal control over financial reporting occurred during our Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our Company’s internal control over financial reporting.

8

PART II – OTHER INFORMATION

Item 6

Exhibits.

The following exhibits are included herein:

10.1

Innovation Industries Management Agreement

31.1

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Principal Executive Officer of the Company.

31.2

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Principal Financial Officer of the Company.

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Principal Executive Officer of the Company.

32.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Principal Financial Officer of the Company.

9

SIGNATURES

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

Universal Capital Management, Inc.

March 16, 2010

By:  /s/ Michael D. Queen                    

Michael D. Queen, CEO

Principal Executive Officer

March 16, 2010

By:  /s/ Theresa Q. Hoffmann           

Theresa Q. Hoffmann, Vice President of Finance

Principal Financial Officer

10

UNIVERSAL CAPITAL MANAGEMENT, INC.

FINANCIAL STATEMENTS

JANUARY 31, 2010 AND 2009

(UNAUDITED)

UNIVERSAL CAPITAL MANAGEMENT, INC.

CONTENTS

UNIVERSAL CAPITAL MANAGEMENT, INC.

STATEMENTS OF ASSETS AND LIABILITIES

See accompanying unaudited notes to these financial statements.

F-1

UNIVERSAL CAPITAL MANAGEMENT, INC.

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDING JANUARY 31, 2010 AND 2009

(UNAUDITED)

See accompanying unaudited notes to these financial statements.

F-2

UNIVERSAL CAPITAL MANAGEMENT, INC.

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDING JANUARY 31, 2010 AND 2009

(UNAUDITED)

See accompanying unaudited notes to these financial statements.

F-3

UNIVERSAL CAPITAL MANAGEMENT, INC.

STATEMENT OF CHANGES IN NET ASSETS

FOR THE NINE MONTHS ENDING JANUARY 31, 2010

 (UNAUDITED)

See accompanying unaudited notes to these financial statements.

F-4

UNIVERSAL CAPITAL MANAGEMENT, INC.

FINANCIAL HIGHLIGHTS

FOR THE NINE MONTHS ENDING JANUARY 31, 2010 AND 2009

(UNAUDITED)

See accompanying unaudited notes to these financial statements.

F-5

UNIVERSAL CAPITAL MANAGEMENT, INC.

SCHEDULE OF INVESTMENTS

AS OF JANUARY 31, 2010

(UNAUDITED)

See accompanying unaudited notes to these financial statements.

F-6

UNIVERSAL CAPITAL MANAGEMENT, INC.

SCHEDULE OF INVESTMENTS

AS OF APRIL 30, 2009