UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
Delaware 20-1568059
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(Sate or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so registered Each Class is to be Registered
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Securities to be registered pursuant to Section 12(g) of the Act:
INDEX
Page
Item 1. Business........................................................................................2
Item 2. Financial Information..........................................................................15
Item 3. Properties.....................................................................................19
Item 4. Security Ownership of Certain Beneficial Owners and Management.................................19
Item 5. Directors and Officers.........................................................................20
Item 6. Executive Compensation.........................................................................21
Item 7. Certain Relationships and Related Transactions.................................................22
Item 8. Legal Proceedings..............................................................................22
Item 9. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder
Matters........................................................................................22
Item 10. Recent Sales of Unregistered Securities........................................................23
Item 11. Description of Registrant's Securities to be Registered........................................23
Item 12. Indemnification of Directors and Officers......................................................24
Item 13. Financial Statements and Supplementary Data....................................................25
Item 14. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure...........35
Item 15. Financial Statements and Exhibits..............................................................35
Index to Exhibits
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Item 1. Business.
Introduction
Universal Capital Management, Inc. (the "Company") is a closed-end, non-diversified management investment company that expects to elect to be treated as a business development company under the Investment Company Act of 1940 (the "1940 Act"). The Company was formed on August 16, 2004. As a business development company, the Company is primarily engaged in the business of furnishing capital and making available managerial assistance to companies that do not have ready access to capital through conventional financial channels. The Company refers to the companies in which it invests as "portfolio companies."
The Company's investment objective is to generate capital appreciation, primarily through investments in equity securities.
A Delaware corporation, the Company occupies offices in Wilmington, Delaware (see Item 2, Properties). The Company's Internet website is located at: www.unicapman.com.
Investments
General
The Company has made five investments thus far and intends to make additional investments in companies that require capital for technology development or growth and which will probably require managerial assistance. The Company's primary focus will be on making non-control investments in small, privately-held companies or private companies with what management believes are valuable products, processes or franchises. Generally, the Company intends to limit total cash investments in any individual portfolio company to the lesser of $500,000 or an amount equal to 10% of Company net assets at the time of investment. Because of the Company's small size due to its recent formation, early investments may not always satisfy this criterion. For example, the acquisition of shares of GelStat, Inc. did not do so. See "Risk Factors - Company Risks - Concentration of Investments." To date, the Company's initial investment in each portfolio company has been significantly less than $500,000. By limiting the size of total investment in any one portfolio company, the Company hopes to reduce and diversify risk. In exchange for the Company's investment in a portfolio company, the Company will receive securities issued by such portfolio company. The Company expects that substantially all portfolio company securities to be acquired will be common stock.
As a venture capital company, the Company makes it possible for its investors to participate at an early stage in emerging fields. To the investor, the Company offers:
o a team of professionals including three full-time members of management who vote on all purchases and sales of portfolio company securities and prospective investments and who collectively have expertise in venture capital investing to evaluate and monitor investments; that is, officers and employees, rather than an investment adviser, manage operations under the general supervision of the board of directors; and
o the opportunity to benefit from experience in a new fields which management expects to permeate a variety of industries.
Applicable law requires that once the Company elects to be a business development company, it may invest 70% of its assets only in privately-held U.S. companies, thinly-traded U.S. public companies, certain high-quality debt, and cash. The Company will be able to invest excess cash in U.S. government securities and high-quality debt maturing in one year or less. The Company will be able to invest up to 30% of its assets in opportunistic situations which are not subject to the limitations referred to above, in an effort to enhance returns to stockholders. These investments may include, but are not limited to, notes and bonds, distressed debt, bridge loans, private equity or securities of public companies.
The Company expects to invest in development stage or start-up businesses. Substantially all of the Company's investments are in thinly capitalized, unproven, small companies focused on risky technologies. These businesses also tend to lack management depth, to have limited or no history of operations, and not to have attained profitability, and in some cases, not to have any revenue. Because of the speculative nature of these investments, these securities have a significantly greater risk of loss than traditional investment securities. Some of such venture capital investments are likely to be complete losses or unprofitable, and some will never realize their potential.
In connection with the Company's venture capital investments, it will participate in providing a variety of services to portfolio companies, including the following:
o recruiting management;
o formulating operating strategies;
o formulating intellectual property strategies;
o assisting in financial planning;
o providing management in the initial start-up stages; and
o establishing corporate goals.
The Company may assist in raising additional capital for these companies from other potential investors and may subordinate the Company's own investment to that of other investors. The Company may also find it necessary or appropriate to provide additional capital of its own. The Company may introduce its portfolio companies to potential joint venture partners, suppliers and customers. In addition, the Company may assist in establishing relationships between its portfolio companies and investment bankers and other professionals. The Company may also assist its portfolio companies with mergers and acquisitions. The Company expects to derive income from time to time from its portfolio companies for the performance of such services. Such income may be paid in cash or securities.
Portfolio Securities
The Company's investments at January 14, 2005 were as follows:
Percentage of
Name Approximate all Portfolio Valuation
of Interest Percentage of Original Fair Value Company Values Methodology(c)
Company(a) Owned(b) Class Owned Cost
--------------------- -------------- ------------------ ----------- ----------- ---------------- -------------------
GelStat Corporation 150,000 1.7% $250,000 $630,000 41.9% C
PSI-TEC Holdings, 187,500 0.9% $30,000 234,375 15.6% C
Inc.
PSI-TEC Holdings, 200,000 1.0% Services rendered 250,000 16.7% C
Inc.
PSI-TEC Holdings, 200,000 1.0% Contributed by 250,000 16.7% C
Inc. Founders
Fundraising Direct, 3,000 3.0% Services Rendered 5,000 0.3% A
Inc.
Fundraising Direct, 2,000 2.0% Contributed by 3,333 0.2%
Inc. Founders A
Neptune Industries, 285,714 0.3% $20,000 80,000 5.3%
Inc. C
Theater Xtreme, Inc. $50,000 --- $50,000 50,000 3.3%
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note A
receivable
TOTAL $1,502,708 100.0%
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(a) A brief description of each portfolio company appears on the following
pages.
(b) All interests are shares of common stock except where noted.
(c) The Company's valuation policy and methodology follows the descriptions of
the portfolio companies; the letter designation of valuation methodology in the
table corresponds to the designation on such methodology description.
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GelStat Corporation
GelStat Corporation is a healthcare company engaged in research, development and marketing of over-the-counter, non-prescription consumer healthcare products, targeted at the migraine and sleep therapy market segments. A Minnesota corporation founded in May, 2002, GelStat Corporation became a publicly traded company through a merger with Developed Technology Resource, Inc. on April 30, 2003. Shares of GelStat Corporation common stock trade under the symbol "GSAC."
GelStat Corporation believes it can improve efficacy, safety, and/or convenience. While the company engages in scientific, academic and clinical research, it is primarily a marketing driven company, dedicated to innovation and committed to building a portfolio of products with significant commercial potential.
The company's principal efforts center on developing products for migraine therapy and to improve sleep, both multi-billion dollar global markets. The company believes its first product, GelStat(TM) Migraine, will become an important addition to the treatment arsenal of 25 to 50 million Americans with migraine type headaches. GelStat(TM) Sleep, the second product in the company's development pipeline, is expected to benefit the approximately 70 million "problem sleepers" in the U.S. These products demonstrate GelStat's commitment and ability to get to market quickly and economically with products that address major unmet needs.
Additional information is available from:
GelStat Corporation
Southpoint Office Center
1650 West 82nd Street, Suite 1200
Minneapolis, Minnesota 55431
Phone: 952-881-4105
Fax: 952-881-4106
www.gelstat.com
PSI-TEC Holdings, Inc.
Established as a company in 1991 and incorporated in 1994, PSI-TEC Holdings, Inc. ("PSI-TEC") is focused on the design and synthesis of next-generation fiber-optic materials. With humble beginnings, PSI-TEC was started in the garage and basement of Dr. Frederick J. Goetz. In 1991, with a small amount of private funding, Dr. Goetz established a laboratory in Upland, PA. PSI-TEC was thereafter invited to move its operations to laboratory space provided by the U.S. Army on Aberdeen Proving Grounds in cooperation with a division of the Department of Defense for the advancement of ultra wide-bandwidth satellite telecommunications.
Today, PSI-TEC operates a fully functional organic synthesis and thin-films laboratory in Wilmington, DE. These facilities include all the state-of-the-art equipment necessary to produce next generation fiber-optic organic materials, including in-house NMR, IR, UV/VIS and HPLC analytical systems as well as the ability to fabricate Class 10 quality thin-films,
profilometry evaluation and electro-optic (r33) materials characterization. Shares of PSI-TEC common stock are quoted under the symbol "PTHO."
Additional information is available from:
PSI-TEC Holdings, Inc.
41A Germany Drive
Wilmington, DE 19804-1100
Fundraising Direct, Inc.
Fundraising Direct, Inc. offers personal representation, exclusive product lines, outstanding prize incentives and specially trained staff to help schools, clubs, and other organizations raise money. This portfolio company is nationally recognized as an innovative leader in the fundraising industry, and is the first company in the country to offer a "ship to seller" program for schools, sports leagues and non-profit product organizations.
Over the past sixteen years, this portfolio company has successfully assisted more than 10,000 schools, sports leagues and organizations with their fundraising goals. Headquartered in Newark, Delaware, this portfolio company has grown to a national operation with highly trained fundraising representative assisting customers from coast to coast.
Fundraising Direct, Inc. is a party to a merger agreement pursuant to which, at the effective time of the merger, each share of Fundraising Direct, Inc. will be exchanged for one hundred (100) shares of the common stock of ImprintPlus, Inc. d/b/a IPI Fundraising.
Additional information is available from:
Fundraising Direct, Inc.
4 Mill Park Court
Newark, DE 19713
Phone: 800-238-7916
Fax: 302-366-8995
Neptune Industries, Inc.
Neptune Industries, Inc. is a Florida corporation established in May, 1968 to engage in commercial fish farming and related production and distribution activities in the seafood and aquaculture industries.
The company's mission is to become a leading producer and supplier of fresh, farm raised seafood products through the establishment of a vertically integrated seafood production and distribution enterprise, encompassing multi-site fish farms, processing facilities, feed manufacturing, fingerling production and value-added product lines. Shares of Neptune Industries, Inc. common stock are quoted under the symbol "NPNI."
Additional information is available from:
Neptune Industries, Inc.
2234 N. Federal Hwy., #372
Boca Raton, FL 33431
Phone: 561-482-6408
Fax: 561-482-7821
www.neptuneindustries.net
Theater Xtreme, Inc.
Theater Xtreme, Inc. is a privately held Delaware corporation engaged in the design, sale, and installation of home theaters. This portfolio company has been operating since 2003 and has begun to franchise its concept in addition to operating two company stores.
Additional information is available from:
Theater Xtreme, Inc.
250 Corporate Boulevard
Suites E & F
Newark, DE 19702
Phone: (302) 455-1334
Fax: (302) 455-1612
www.theaterxtreme.com
Valuation
The 1940 Act requires periodic valuation of each investment in the Company's portfolio to determine the 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 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 that an investment could be sold for 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.
The Company's valuation policy and methodology with respect to its portfolio companies are as follows:
A. Cost: The cost method is based on the 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.
B. Private Market: The private market method uses actual, executed, historical transactions in a company's securities by responsible third parties as a basis for valuation. The private market method may also use, where applicable, unconditional firm offers by responsible third parties as a basis for valuation.
C. 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 the Company. The Company discounts market value for securities that are subject to significant legal and contractual restrictions. Other 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 or on the Nasdaq National Market 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.
D. Analytical Method: The analytical method is generally used to value an investment position when there is no established public, or private market in the company's securities or when the factual information available to the 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 the company, the values of similar securities issued by companies in similar businesses, the proportion of the portfolio company's securities owned by the Company and the nature of any rights to require the portfolio company to register restricted securities under applicable securities laws.
Competition
Competition in the investment and venture capital industries has become increasingly intense over the past several years, and many money managers, hedge funds, private equity funds, mutual funds, and other investment vehicles are actively competing for available investor capital and potentially profitable investments. To be successful in obtaining such capital, many competitors engage in expensive advertising and promotional campaigns which will
be unavailable to the Company. Moreover, many competitors have been in business for long periods of time - in some cases for as long as many decades - and have established reputations, brand names, track records, back office and managerial support systems, and other advantages which the Company will be unable to duplicate in the near term, if ever. In addition, many such competitors, by virtue of their longevity or capital resources, have established lines of distribution to which the Company does not have access, and is not reasonably likely to be able to duplicate in the near term, if ever. The Company will compete with firms, including many larger securities and investment banking firms, which have substantially greater financial resources and research staffs than the Company does and therefore, the number of potentially profitable investments which the Company finds may be fewer and such investments, more difficult to identify than will be the case for some Company competitors. The disparity of resources could put the Company at a competitive disadvantage in investigating prospective investments and in executing trades.
Management Fees
None currently, but the Company may institute such fees in the future.
Merger with BF Acquisition Group IV, Inc.
On November 10, 2004, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with BF Acquisition Group IV, Inc., a Florida corporation ("BF"), and William R. Colucci and David M. Bovi, principal shareholders of BF. Mr. Colucci and Mr. Bovi are also promoters and principal stockholders of the Company, and Mr. Colucci is also the Vice-President and Secretary of the Company. The Merger Agreement provides that at the Effective Time, BF will merge with and into the Company (the "Merger") and the Company shall become the surviving corporation. The Company's Certificate of Incorporation and By-laws at the Effective Time will become the Certificate of Incorporation and By-laws, respectively, of the surviving corporation. Similarly, the directors and officers of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, of the surviving corporation.
At the Effective Time, each shareholder of BF will receive one half (0.5) share of voting common stock of the Company in exchange for each share of BF common stock held by such shareholder. BF has 925,000 shares of common stock issued and outstanding and, therefore, at the Effective Time, the Company expects to issue 462,500 shares of its common stock as Merger consideration. Closing is scheduled to occur when the Company shall have not fewer than 300 stockholders of record. Either party can terminate the Merger Agreement if closing shall not have occurred on or before March 31, 2005.
BF and Messrs. Bovi and Colucci have made various customary representations and warranties in the Merger Agreement, including representations and warranties related to corporate standing and power; corporate authority to enter into, and carry out the obligations under, the Merger Agreement; the absence of certain changes or events; compliance with laws; employees and employee benefits; and contracts, leases or business arrangements, including with shareholders and their affiliates. In addition, the Company also made representations and warranties relating to its business.
The following unaudited pro forma financial statements for Universal Capital Management, Inc. have been prepared to illustrate the acquisition of BF Acquisition Group IV, Inc. in a transaction to be accounted for as a purchase with Universal Capital Management, Inc. becoming the surviving company. The unaudited pro forma financial information combines the historical financial information of Universal Capital Management, Inc. and BF Acquisition Group IV, Inc. as of and for the period from August 16, 2004 (date of inception) through October 31, 2004. The carrying value of the assets and liabilities of BF Acquisition Group IV, Inc. approximates the fair value of the assets and liabilities. The unaudited pro forma balance sheet as of October 31, 2004 assumes the merger was completed on that date. The unaudited pro forma statements of operations give effect to the Merger as if it had been completed on August 16, 2004 (date of inception).
These unaudited pro forma financial statements are for information purposes only. They do not purport to indicate the results that would have actually been obtained had the acquisition been completed on the assumed dates or for the periods presented, or which may be realized in the future. The accounting adjustments reflected in these unaudited pro forma consolidated financial statements included herein are preliminary and are subject to change. The accompanying notes are an integral part of these pro forma consolidated financial statements.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE PERIOD
AUGUST 16, 2004 (DATE OF INCEPTION) THROUGH OCTOBER 31, 2004
Universal
Historical Historical BF Capital
Universal Capital Acquisition Pro Forma Management, Inc.
Management, Inc. Group IV, Inc. Adjustments Pro Forma
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INCOME
Management services $ 10,000 - $ 10,000
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EXPENSES
Bank charges 55 - 55
Depreciation 350 - 350
Dues and subscriptions 250 - 250
Licenses and permits 19 - 19
Office expenses and supplies 8,524 8,557 17,081
Postage and delivery 236 - 236
Professional fees 13,905 - 13,905
Rent 5,020 - 5,020
Telephone 1,157 - 1,157
Travel and entertainment 2,001 - 2,001
Utilities 622 - 622
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32,139 8,557 40,696
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LOSS FROM OPERATIONS (22,139) (8,557) (30,696)
NET INCREASE IN UNREALIZED APPRECIATION ON
INVESTMENTS 1,204,196 - 1,204,196
INCOME TAXES - DEFERRED (470,000) - (470,000)
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NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 712,057 $ (8,557) $ 703,500
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UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
AS OF OCTOBER 31, 2004
Universal
Historical Historical BF Capital
Universal Capital Acquisition Pro Forma Management,
Management, Inc. Group IV, Inc. Adjustments Inc. Pro Forma
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ASSETS
Investment in securities, at fair
value (cost $310,000) $1,514,196 3,250 $ 1,517,446
Cash and cash equivalents 39,568 - - $ 39,568
Accounts receivables - Affiliates 47,829 - (47,829) B $ ---
Property and equipment - net 9,451 - $ 9,451
Due from Affiliates - 20,675 - $ 20,675
Goodwill - --- 173,885 $ 173,885
Rent deposit 1,100 --- --- $ 1,100
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TOTAL ASSETS 1,612,144 23,925 126,056 1,762,125
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LIABILITIES
Accounts payable and accrued expenses 10,487 13,931 $ 24,418
Due to Affiliates 49,454 (47,829) B $ 1,625
Loan from shareholders 300 $ 300
Deferred income taxes 470,000 $ 470,000
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TOTAL LIABILITIES 480,487 63,685 (47,829) $ 496,343
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NET ASSETS $ 1,131,657 (39,760) 173,885 $ 1,265,782
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ANALYSIS OF NET ASSETS
Net capital paid in on shares of
capital stock $ 419,600 5,116 129,009 A $ 553,725
Common stock $ 825 (825) A $
Distributable earnings 712,057 (45,701) 45,701 A $ 712,057
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Net assets (equivalent to $0.29 per
share based on shares of capital
stock outstanding) 1,131,657 (39,760) 173,885 1,265,782
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COMMON SHARES OUTSTANDING 3,844,600 825,000 4,307,100
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NET ASSET VALUE PER COMMON SHARE $ 0.29 $ (0.05) $ 0.29
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A To record the purchase of BF Acquisition Group IV, Inc. Purchase price
of $134,125 was calculated by valuing the 462,500 shares of Universal
Capital Management, Inc. common stock issued for BF Acquisition Group
IV, Inc. at the $0.29 per share, which was the valuation as of October
31, 2004. The purchase resulted in goodwill of $173,885. The carrying
value of the assets and liabilities of BF Acquisition Group IV, Inc.
approximates the fair value of the assets and liabilities.
B To eliminate the Due from BF Acquisition IV asset of $47,829 on
Universal Capital Management, Inc.'s books against the Due to Universal
Capital Management, Inc. liability of $47,829 on BF Acquisition Group
IV, Inc.'s books upon Merger.
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Risk Factors
The purchase of shares of capital stock of the Company involves many risks. A prospective investor should carefully consider the following factors before making a decision to purchase any such shares:
Market Risks
The Company's investment activities are inherently risky. The Company's investment activities involve a significant degree of risk. The performance of any investment is subject to numerous factors which are neither within the control of nor predictable by the Company. Such factors include a wide range of economic, political, competitive and other conditions which may affect investments in general or specific industries or companies.
Equity investments may lose all or part of their value, causing the Company to lose all or part of its investment in those companies. The equity interests in which the Company invests may not appreciate in value and may decline in value. Accordingly, the Company may not be able to realize gains from its investments and any gains that are realized on the disposition of any equity interests may not be sufficient to offset any losses experienced.
Competition in the investment and venture capital industries is intense and the Company may be unable to compete successfully. See "Competition."
There is no assurance of profits. There is no assurance that the Company will ever make a profit, or in fact that the Company will not lose all investors' subscriptions through operating expenses or capital losses.
Company Risks
The success of the Company will depend in part on its size, and in part on management's ability to make successful investments. If the Company is unable to select profitable investments, the Company will not achieve its objectives. Moreover, if the size of the Company remains small, operating expenses will be higher as a percentage of invested capital than would otherwise be the case, which increases the risk of loss (and reduces the chance for gain) for investors.
Limited regulatory oversight requires potential investors to fend for themselves. The Company is not registered as an investment company and is not subject to the provisions of the 1940 Act because of an available exemption for an entity which does not have more than 100 beneficial owners of its securities. Moreover, the Company intends to elect to be treated as business development company under the 1940 Act which would make the Company exempt from some provisions of that statute. The Company is not registered as a broker-dealer or investment advisor because the nature of its proposed activities does not require it to do so; moreover it is not registered as a commodity pool operator under the Commodity Exchange Act, based on its intention not to trade commodities or financial futures. The Company expects to become a reporting company under the Securities Exchange Act of 1934 but has not yet done so and there is no assurance that it will do so in the future. As a result of
this absence of regulatory oversight, the Company is not currently required to file reports or other information about its respective activities with any regulatory authority.
Concentration of investments. The Company will attempt to allocate its equity among the securities of several different companies. However, a significant amount of the Company's equity could be invested in the securities of only a few companies. This risk is particularly acute at the time the Company is first filing this registration statement which could cause significant concentration with respect to a particular issuer or industry. Any such concentration would also be worse during any time when the Company had a limited amount of available investment capital for the same reasons. The concentration of the Company's portfolio in any one issuer or industry would subject the Company 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.
Unlikelihood of cash distributions. Although the Company has the corporate power to make cash distributions, such distributions are not among the Company's objectives. Consequently, management does not expect to make any cash distributions in the immediate future. Moreover, even if cash distributions were made, they would depend on the size of the Company, its performance, and the expenses incurred by the Company.
The Company has a limited operating history. The Company was organized in the summer of 2004 for the sole purposes described in this registration statement and has only a brief history of operations.
Because many of the Company's portfolio investments will be recorded at values as determined in good faith by the Board of Directors, the prices at which the Company is able to dispose of these holdings may differ from their respective recorded values. Some of the Company's investments will be held in the form of securities that are not publicly traded. The fair value of securities and other investments that are not publicly traded may not be readily determinable. The Company will value these securities at fair value as determined in good faith by the Board of Directors. However, the Company may be required on a more frequent basis to value the securities at fair value as determined in good faith by the Board of Directors to the extent necessary to reflect significant events affecting the value of such securities. The Board of Directors may retain an independent valuation firm to aid it on a selective basis in making fair value determinations. The types of factors that may be considered in fair value pricing of an investment include the markets in which the portfolio company does business, comparison of the portfolio company to publicly traded companies, discounted cash flow of the portfolio company, and other relevant factors. Because such valuations, and particularly, valuations of private securities and private companies, are inherently uncertain, may fluctuate during short periods of time, and may be based on estimates, determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. As a result, the Company may not be able to dispose of its holdings at a price equal to or greater than the determined fair value. Net asset value could be adversely affected if the determination regarding the fair value of Company investments is materially higher than the values ultimately realized upon the disposal of such securities.
The lack of liquidity in the Company's investments might prevent the Company from disposing of them at opportune times and prices, which may cause a loss and/or reduce a gain. The Company will frequently make investments in privately-held companies. Substantially all of these securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly-traded securities. The illiquidity of such investments may make it difficult to sell such investments at advantageous times and prices or in a timely manner. In addition, if the Company is required to liquidate all or a portion of its portfolio quickly, it may realize significantly less than the values recorded for such investments. The Company may also face other restrictions on its ability to liquidate an investment in a portfolio company to the extent that the Company has material non-public information regarding such portfolio company. If the Company is unable to sell its assets at opportune times, it might suffer a loss and/or reduce a gain.
Investing in privately-held companies may be riskier than investing in publicly-traded companies due to the lack of available public information. The Company will frequently invest in privately-held companies which may be subject to higher risk than investments in publicly-traded companies. Generally, little public information exists about privately-held companies, and the Company will be required to rely on the ability of management to obtain adequate information to evaluate the potential risks and returns involved in investing in these companies. If the Company is unable to uncover all material information about these companies, it may not make a fully-informed investment decision, and it may lose some or all of the money it invests in these companies. These factors could subject the Company to greater risk than investments in publicly-traded companies and negatively affect investment returns.
The market values of publicly traded portfolio companies are likely to be extremely volatile. Even portfolio companies the shares of which are quoted for public trading will generally be thinly traded and subject to wide and sometimes precipitous swings in value.
Regulations governing operations of a business development company will affect the Company's ability to raise, and the way in which the Company raises additional capital. Under the provisions of the 1940 Act, the Company will be permitted, as a business development company, to issue senior securities only in amounts such that asset coverage, as defined in the 1940 Act, equals at least 200% after each issuance of senior securities. If the value of portfolio assets declines, the Company may be unable to satisfy this test. If that happens, the Company may be required to sell a portion of its investments and, depending on the nature of the Company's leverage, repay a portion of its indebtedness at a time when such sales may be disadvantageous and result in unfavorable prices.
Applicable law requires that once the Company elects to be a business development company, it may invest 70% of its assets only in privately-held U.S. companies, thinly-traded U.S. public companies, certain high-quality debt, and cash.
The Company is not generally able to issue and sell common stock at a price below net asset value per share. The Company may, however, sell common stock, or warrants, options or rights to acquire common stock, at prices below the current net asset value of the common stock if the Board of Directors determines that such sale is in the best interests of the Company and its stockholders, and the stockholders approve such sale. In any such case, the
price at which the Company's securities are to be issued and sold may not be less than a price which, in the determination of the board of directors, closely approximates the market value of such securities (less any distributing commission or discount).
Item 2. Financial Information.
Selected Financial Information
The Company has only recently been formed and has less than a single year of operating history. Reference is made to the Company's financial statements included elsewhere in this Registration Statement. The following selected information is taken from those financial statements:
Period from August 16, 2004
(Inception Date)
to October 31, 2004
-------------
Net Sales $ 10,000
=============
Gross Profits(a) $ 10,000
=============
(Loss)(b) $ (22,139)
=============
Net Increase in Net Assets $ 712,057
=============
(Loss) Per Share(b) $ (0.01)
-------------
Net Increase in Net Assets Per Share $ 0.29
-------------
----------------------------------
|
(a) Sales less costs and expenses associated directly with or allocated to
products or services rendered.
(b) Before extraordinary items and cumulative effect of a change in accounting.
Management's Discussion and Analysis of Results of Operations and Financial Condition.
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 the 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 the Company's financial statements and the notes thereto included elsewhere in this Registration Statement.
The Company's primary business is to invest in emerging growth companies. The Company intends to assist these companies in strategic and financial planning, in market strategies and to assist them in trying to achieve prudent and profitable growth. Management is devoting most of its efforts to general business planning, raising capital, and seeking appropriate investments.
The Company's primary investment objective is to increase its net assets by adding value to the portfolio companies and thus, to shareholder value. Management believes that the Company will be able to achieve these objectives by concentrating on investments in companies which are most likely to benefit from management's expertise in finance, strategic planning, operations, and technology.
The income that the Company derives from investments in portfolio companies consists of management fees, interest income, and appreciation (net of depreciation) in the values of portfolio companies. At the time of disposition, the value of these securities of portfolio companies will most likely make up most of the Company's revenues. Consequently, the Company's success or failure will depend on investing in companies which appreciate in value more than other companies in which the Company invests depreciate in value.
Pursuant to the requirements of the 1940 Act, the Board of Directors is responsible for determining in good faith the fair value of the securities and assets held by the Company for which market quotations are not readily available. In making its determination, the Board of Directors may consider valuation appraisals provided by independent financial experts. 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.
The Board of Directors bases its determination 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 stock market.
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.
The Company may retain a professional valuation consulting firm to provide it with valuations of the securities of portfolio companies. The Company expects to pay a professional fee each time such a valuation is provided.
Financial Condition
The Company's total assets were $1,612,144, its net assets were $1,131,657 and its net asset value per share ("NAV") was $0.29 at October 31, 2004.
The Company's financial condition is dependent on a number of factors including the ability to effectuate each portfolio company's strategies. The Company has invested a substantial portion of its assets in development stage or start-up companies. These private businesses are frequently thinly capitalized, unproven, small companies that may lack management depth, and may
be dependent on new or commercially unproven technologies, and may have no operating history.
At October 31, 2004, $1,514,196 or 93.9% of the Company's assets consisted of investments, of which net unrealized gains before the income tax effect was $1,204,196. Deferred taxes have been estimated at approximately $470,000.
Because the portfolio companies tend to be at early stages of their business development, and because there are no markets for the securities of some portfolio companies (see, "Risk Factors"), the Company does not expect to liquidate any of its investments in the near future. Moreover, the Company had less than $40,000 of cash at October 31, 2004 with which to pay its operating expenses. Consequently, payout of future operating expenses and cash with which to make investments will have to come from equity capital to be raised from additional investors.
There is no assurance that the Company will be successful in raising such additional equity capital or if it can, that it can do so at a price that management believes to be appropriate. Under the 1940 Act, the Company may not sell shares of common stock at less than its NAV except in unusual circumstances.
To facilitate the raising of additional capital, the Company entered into an Agreement and Plan of Merger with BF Acquisition Group IV, Inc., a Florida corporation. See Item 1, "Business--Merger with BF Acquisition Group IV, Inc."
Results of Operations
The Company's financial statements have been prepared in conformity with the United States generally accepted accounting principles. The information for the period ended October 31, 2004 has been audited by the Company's independent certified public accountants. On this basis, the principal measure of a Company's financial performance is the net increase in net assets. Net assets comprise (i) income from operations, (ii) net realized gain 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 on investments.
Company expenses include salaries and wages (but salaries did not accrue until November 15, 2004), professional fees, office expenses and supplies, rent, travel, and other normal business expenses. General and administrative costs include rent, depreciation, office, investor relations and other overhead costs.
For the period ending October 31, 2004, the Company had cash revenues for services in the amount of $10,000 and operating expenses of $32,139 which resulted in an operational loss of $22,139. The Company's total asset value for this period, however, was $1,612,144.
The Company had unrealized appreciation of $734,196, net of taxes for the period ending October 31, 2004. This increase was primarily due to the market gains of GelStat Corporation and PSI-TEC. Both companies are thinly traded and both have declined in value since October 31, 2004.
After including certain accounts payable, accrued expenses and deferred income taxes in the amount of $470,000, the Company had a net asset value of $1,131,657.
On October 31, 2004, the Company had a net operating loss carry-forward of approximately $22,000, which if not used, will expire in 2024.
Liquidity and Capital Resources
From inception, the Company has relied for liquidity on the infusion of capital through capital share transactions. At January 14, 2005 the Company had approximately $100,000 in cash and liquid assets which the Company expects to be sufficient to meet its operational requirements for the foreseeable future. However, at some point the Company will need to issue new shares of common stock to finance ongoing operating expenses and to be able to make additional investments.
At this time, the Company does not plan to dispose of any of its current portfolio securities to meet operational needs. However, despite its plans, the Company may be forced to dispose of a portion of these securities if it ever becomes short of cash. Any such dispositions may have to be made at inopportune times. See Item 1, "Business - Risk Factors."
Management is confident that the Company will continue to be successful in its fund raising efforts and in attracting new portfolio companies.
Critical Accounting Estimates
There were no material estimates or assumptions for this reporting period.
Controls And Procedures
As of the date this report is filed, an evaluation was performed under the supervision and with the participation of the Company's principal executive officer and financial officer of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. During the period covered by this report, management believes that the Company has implemented adequate controls and procedures.
Market Risk Disclosure
The Company's business activities contain elements of risk. The Company considers a principal type of market risk to be a valuation risk. All assets are valued at fair market value as determined in good faith by or under the direction of the Board of Directors. See Item 1, "Business -- Risk Factors."
Neither the Company's investments nor an investment in the Company is intended to constitute a balanced investment program. The Company will be subject to exposure in the public-market pricing and the risks inherent therein.
The Company owns a single interest-bearing security which it did not purchase for trading purposes. See, Item 1, "Business--Investments." Management does not believe the Company has any quantifiable market risk from owning this security.
Item 3. Properties
The Company leases approximate 1,200 square feet of office space at 2601 Annand Drive, Suite 16, Wilmington, Delaware from which it conducts operations. The lease expires on July 15, 2005, and annual rent for the space is $13,200.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
..................The following table sets forth, as of December 31, 2004, the
number of shares and percentage of Company common stock beneficially owned by
each person who is known by the Company to own beneficially five percent or more
of the Company's outstanding common stock, each Company director, each Company
executive officer, and all executive officers and directors of the Company as a
group:
------------------------------------------ ------------------------------------ ---------------------------------
Name Shares of Common Stock Percentage of Common Stock
of Individual or
Identity of Group(a) Beneficially Owned Beneficially Owned
------------------------------------------ ------------------------------------ ---------------------------------
Michael D. Queen 0 (b) 0.0% (b)
------------------------------------------ ------------------------------------ ---------------------------------
Joseph Drennan 400,000 10.0%
------------------------------------------ ------------------------------------ ---------------------------------
Jeff Muchow 100,000 2.5%
------------------------------------------ ------------------------------------ ---------------------------------
Steven P. Pruitt, Jr. 100,000 2.5%
------------------------------------------ ------------------------------------ ---------------------------------
Thomas M. Pickard, Sr. 50,000 1.2%
------------------------------------------ ------------------------------------ ---------------------------------
L&B Partnership 300,000 7.5%
3128 New Castle Avenue
New Castle, DE 19720
------------------------------------------ ------------------------------------ ---------------------------------
William R. Colucci 250,000 (c) 6.2%
------------------------------------------ ------------------------------------ ---------------------------------
McCrae Associates LLC 300,000 7.5%
196 Fern Avenue
Litchfield, CT 06759
------------------------------------------ ------------------------------------ ---------------------------------
Liberator Holdings 200,000 5.0%
155 Mansfield Road
Ashford, CT 06278
------------------------------------------ ------------------------------------ ---------------------------------
David M. Bovi 100,000 (c) 2.5%
319 Climatis Street, #700
West Palm Beach, FL 33401
------------------------------------------ ------------------------------------ ---------------------------------
Zenith Holdings LLC 300,000 7.5%
------------------------------------------ ------------------------------------ ---------------------------------
All directors and officers as a group (6 900,000 (b) (c) 23.4%
persons)
-----------------------------------------------------------------------------------------------------------------
19
|
(a) The address of each person in the table where no other address is specified is c/o Universal Capital Management, Inc., 2601 Annand Drive, Suite 16, Wilmington, DE 19809. (b) Excludes 350,000 shares owned indirectly by Mr. Queen's wife (of which 300,000 shares are owned by Zenith Holdings LLC listed below) as to which he disclaims beneficial ownership. (c) Excludes 150,000 shares and 200,000 shares which Messrs. Colucci and Bovi, respectively, are expected to receive in the Merger, after which they will own 8.9% and 6.7 %, respectively, of the then outstanding shares of the Company. ----------------------------------------------------------------------------------------------------------------- |
Item 5. Directors and Officers.
Michael D. Queen, President and Director
Mr. Queen, age 49, served as President and a director of Pennexx Foods, Inc. from 1999 to 2003. From 1997 to 1999 Mr. Queen was the Vice President of Sales, Marketing, and Business Analysis at Prizm Marketing Consultants of Blue Bell, Pennsylvania. Prizm Marketing provided market research, pricing modules, and distribution and advertising plans for business clients. From 1995 to 1997 Mr. Queen served as the President of Ocean King Enterprises, Inc. in Folcroft, Pennsylvania. Ocean King was a specialty seafood appetizer supplier to supermarkets.
William R. Colucci, Vice-President and Secretary
Mr. Colucci, age 65, is an independent consultant who provides investment banking and business consulting services for emerging growth companies. From September 1997 to December 1999, Mr. Colucci served as a consultant with Harbor Town Management Group Inc., a privately held management firm that provided investment banking and business consulting services. From June 1996 to May 1997, Mr. Colucci served as Chief Operating Officer and SEC Compliance Officer for Physicians' Laser Services, Inc. From April 1991 to May 1996, he served as a senior partner of Decision Dynamics, Inc., a private business and real estate consulting firm, where he provided clients such as Alcoa Properties, the Branigar Corporation, and Mobil Land Development Corporation with consulting services that included market and investment analysis, property positioning and economic payback analysis.
Joseph Drennan, Director, Vice-President and Treasurer
Mr. Drennan, age 60, has more than 30 years of experience in management, marketing and finance in the financial services and information technology industries. He has directed and implemented business turnarounds, crisis management and strategic planning for customers and clients ranging in size from $5 million in revenue to Fortune 100 companies in a variety of industries. Since 2001 Mr. Drennan has been a partner in an a co-founder of Mulberry Consulting Group, LLC. Mulberry provides business and management consulting services to small and mid-market companies in a variety of industries with emphasis on operational analysis, strategic and operational planning and implementation solutions and processes.
From 1996 to 2000 Mr. Drennan served as Vice President and corporate secretary for CoreTech Consulting Group, Inc., a leading Information Technology consulting firm. His responsibilities included planning, marketing, finance, legal and facilities management.
Mr. Drennan currently serves on the Board of Directors of United Bank of Philadelphia and serves on its Audit and Capital and Planning Committees. He is a past Chairman of the Board of St. Joseph's Prep, the Jesuit high school in Philadelphia.
Jeff Muchow, Director
Mr. Muchow, age 58, is a veteran of the food and agricultural processing industries. Since 2001 he has served as an independent consultant in business startups, mergers and turnaround situations for food processing enterprises. From 2000 to 2001, he served as President of Vertia, Inc., a supply chain company engaged in supply chain services for perishable food companies, and from 1999 to 2000 he served as Vice President - - Business Development of Working Machines, Inc. Mr. Muchow received his Master's Degree in Agricultural Economics from the University of Missouri in 1970 and an MBA from the University of Northern Colorado in 1976.
Steven P. Pruitt, Jr., Director
Mr. Pruitt, age 28, is DuPont's Internal Control Coordinator and is responsible for implementing Sarbanes-Oxley compliance procedures on a global basis. Mr. Pruitt also assists in the development and implementation of critical internal controls and business processes throughout the company. Prior to business school, Mr. Pruitt worked for five years with the DuPont company in their Internal Audit Group. As a Senior Auditor, he helped to lead and train business teams on assessing and improving their business models. He also spent a year overseas focusing on educating DuPont's joint ventures and subsidiaries on better business practices.
Mr. Pruitt recently graduated with an MBA degree from The University of North Carolina Kenan-Flagler Business School. IN addition to his Master's Degree, he holds a BS in Accounting Degree from the University of Delaware and passed the CPA exam in 1999.
Thomas M. Pickard, Sr., Director
Mr. Pickard, age 66, is the founder and owner of Alpha Equipment Company. Established in August, 2003 as a distributor for CO2 Blasting Machines selling, leasing, and renting in ME, NH, VT, and all states south to MD, WVA, and D.C. Alpha Equipment Company developed an air operated chiller/dryer for cooling and removing moisture from compressor airlines for which there is a patent pending. From 1995 to 2003, Mr. Pickard served in various sales capacities for Alpheus Cleaning Technologies of Rancho Cucamonga, CA.
Item 6. Executive Compensation.
Messrs. Queen, Drennan, and Colucci began receiving salaries as of November 15, 2004 at the annual rates of $175,000, $125,000, and $125,000, respectively.
The summary compensation table required by Item 402 of Regulation S-K is omitted because the Company has not yet completed a full fiscal year of operations.
The Company does not currently have any stock option, pension plan, long-term incentive plan, or other compensation plan.
Directors are not compensated for their services as directors.
Item 7. Certain Relationships and Related Transactions.
Mr. Colucci will receive 150,000 Company shares and Mr. Bovi will receive 200,000 company shares at the Effective Time of the Merger in exchange for their shares of BF Acquisition Group IV, Inc.
The following are the promoters of the Company and each made the respective contribution to the Company indicated next to his name below in exchange for the receipt of the number of shares of common stock set forth next to his name below upon formation of the Company:
Shares of Company Common
Cash Contribution Other Contribution Stock Received in
Exchange
--------------------- -------------------------- --------------------------
Michael D. Queen -0- (a) 100,000 shares of common 0 (a)
stock of PSI-TEC and
1,000 shares of
Fundraising Direct, Inc.
Joseph Drennan $400 400,000
William Colucci $250 250,000 (b)
David Bovi $100 100,000 (b)
------------------------
(a) Indirectly through entities she controls, Mr. Queen's wife contributed $350
to the Company and received 350,000 shares of Company common stock. Mr. Queen
disclaims beneficial ownership of any such shares.
(b) Excludes 150,000 shares and 200,000 shares which Messrs. Colucci and Bovi,
respectively, are expected to receive in the Merger in exchange for their shares
of BF Acquisition Group IV, Inc.
|
None of such promoters received or will receive anything of value, directly or indirectly, from the Company except for the compensation arrangements described in Item 6 or except as set forth above.
Item 8. Legal Proceedings.
None.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters.
There is no established public trading market for the Company's securities. The approximate number of holders of the common stock of the Company is 51. The Company has not paid any cash dividends on or with
respect to its common stock and does not currently expect to do so for the foreseeable future.
Item 10. Recent Sales of Unregistered Securities.
Number of Shares Securities Act
Sold Consideration Paid Exemption
Securities Sold Date of Sale (a) Purchasers per Share (b) Claimed (c)
--------------- ------------ ------------------ ---------- --------- -----------
Common Stock, Par August 16, 2004 3,100,000 Founders $0.001 ss. 4(2)
Value $0.001 per
share
Common Stock, Par September 1, 2004 152,600 Seed Money $0.50 ss. 4(2)
Value $0.001 per Purchasers
share
Common Stock, Par October 1, 2004 300,000 Single $1.00 ss. 4(2)
Value $0.001 per Investor
share
Common Stock Fall, 458,500 16 Investors Various ss. 4(2)
2004
------------------
TOTAL 4,011,100
==================
--------------------------
(a) No underwriter or broker-dealer participated in the sale.
(b) All proceeds were used to invest in portfolio companies or to pay routine
operating expenses.
(c) All sales, even if aggregated, comply with the safe harbor of Rule 506
promulgated under the Securities Act of 1933.
|
Item 11. Description of Registrant's Securities to be Registered.
The authorized capital stock of the Company consists of 20,000,000 shares of Common Stock, $0.001 par value per share, each of which has the right to cast one vote on all matters presented to the stockholders. At December 31, 2004, 4,011,100 shares of Common Stock were issued and outstanding.
Holders of the Common Stock are entitled to receive dividends when and as declared by the Company's Board of Directors out of funds legally available therefor. Any such dividends may be paid in cash, property or shares of Common Stock. The Company has never paid any dividends and does not anticipate doing so in the foreseeable future.
Each holder of Common Stock is entitled to one vote per share on all matters, including the election of directors. Shareholders may not cumulate their votes for directors. The directors are elected each year. A majority of the shares entitled to vote, represented in person or by proxy, constitutes a quorum at a meeting of shareholders.
Shares of the Common Stock have no preemptive or conversion rights, no redemption or sinking fund provisions and are not liable to further call or assessment. The outstanding shares of Common Stock are fully paid and non-assessable. Each share of the Common Stock is entitled to share ratably in any assets available for distribution to holders of its equity securities upon liquidation of the Company.
Item 12. Indemnification of Directors and Officers.
Section 145(a) of the Delaware General Corporation Law describes the circumstances under which a business corporation incorporated in Delaware may or must indemnify its directors and officers and the circumstances under which it may not indemnify its officers and directors. This section provides that a business corporation may indemnify any director or officer against liabilities and expenses he or she may incur in connection with a threatened, pending or completed civil, criminal, administrative or investigative proceeding by reason of the fact he or she is or was a representative of the corporation or was serving at the request of the corporation as a representative of another enterprise, provided that the person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. Section 145(c) of the Delaware General Corporation Law provides that the Company must indemnify any director or officer against expenses he or she incurs in defending these actions if he or she is successful on the merits, or otherwise, in the defense of these actions.
Moreover, under Section 7 of the Company's by-laws and Article SEVENTH of the Company's Certificate of Incorporation, the Company, is obligated to indemnify any director or officer, to the fullest extent permitted under Delaware law. More particularly, each person who was or is a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative proceeding by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Company to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than such law permitted the Company to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or
her heirs, executors and administrators; provided, however, that, except as provided in Paragraph B of Article SEVENTH, the Company shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Company. The right to indemnification conferred in Article SEVENTH is a contract right and shall include the right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Company of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under Article SEVENTH or otherwise. The Company may, by action of its Board of Directors, provide indemnification to employees and agents of the Company with the same scope and effect as the foregoing indemnification of directors and officers.
Article SIXTH of the Company's Certificate of Incorporation provides that no director shall be personally liable to the Company or its stockholders. A director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of directors, then the liability of the directors of the Company, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware General Corporation Law. Any repeal or modification of this paragraph by the stockholders of the Company shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Company at the time of such repeal or modification.
Item 13. Financial Statements and Supplementary Data.
Independent Auditors' Report
To the Shareholders and Board of Directors Universal Capital Management, Inc.
We have audited the accompanying statement of assets and liabilities of Universal Capital Management, Inc., including the schedule of investments, as of October 31, 2004, and the related statements of operations, changes in net assets and cash flows, and the financial highlights (contained in Note 6 to the financial statements) for the period then ended. These financial statements and financial highlights are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Universal Capital Management, Inc. as of October 31, 2004, the results of its operations, its cash flows, changes in net assets and financial highlights for the period then ended, in conformity with accounting principles generally accepted in the United States.
/s/ COGEN SKLAR LLP Bala Cynwyd, Pennsylvania January 7, 2005 |
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2004
ASSETS
Investment in securities, at fair value (cost $310,000) $1,514,196
Cash and cash equivalents 39,568
Accounts receivables - affiliates 47,829
Property and equipment - net 9,451
Rent deposit 1,100
----------------
TOTAL ASSETS 1,612,144
----------------
LIABILITIES
Accounts payable and accrued expenses 10,487
----------------
Deferred income taxes 470,000
----------------
TOTAL LIABILITIES 480,487
----------------
NET ASSETS $1,131,657
================
ANALYSIS OF NET ASSETS
Net capital paid in on shares of capital stock $419,600
Distributable earnings 712,057
----------------
Net assets (equivalent to $0.29 per share based on 3,844,600 shares of capital stock
outstanding) $1,131,657
================
|
The accompanying notes are an integral part of these financial statements.
UNIVERSAL CAPITAL MANAGEMENT, INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2004
Common Stocks - 100% Number of Shares Fair Value
--------------------------------------------------- ------------------- ----------------
Fundraising Direct, Inc. 3,000 $5,000
Gelstat Corporation 150,000 960,000
Neptune Industries, Inc. 285,714 108,571
PSI-TEC Holdings, Inc. 587,500 440,625
----------------
Total (aggregate cost $310,000) $1,514,196
================
|
The accompanying notes are an integral part of these financial statements.
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD AUGUST 16, 2004 (DATE OF INCEPTION)
TO OCTOBER 31, 2004
INCOME
Management services $10,000
------------------
EXPENSES
Bank charges 55
Depreciation 350
Dues and subscriptions 250
Licenses and permits 19
Office expenses and supplies 8,524
Postage and delivery 236
Professional fees 13,905
Rent 5,020
Telephone 1,157
Travel and entertainment 2,001
Utilities 622
------------------
32,139
------------------
LOSS FROM OPERATIONS (22,139)
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 1,204,196
INCOME TAXES - DEFERRED (470,000)
------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $712,057
==================
|
The accompanying notes are an integral part of these financial statements.
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD AUGUST 16, 2004 (DATE OF INCEPTION)
TO OCTOBER 31, 2004
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Loss from operations $ (22,139)
Unrealized appreciation on investments, net of taxes 734,196
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 712,057
CAPITAL SHARE TRANSACTIONS 419,600
-----------------
TOTAL INCREASE 1,131,657
NET ASSETS, BEGINNING OF PERIOD -
-----------------
NET ASSETS, END OF PERIOD $1,131,657
=================
|
The accompanying notes are an integral part of these financial statements.
UNIVERSAL CAPITAL MANAGEMENT, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD AUGUST 16, 2004 (DATE OF INCEPTION)
TO OCTOBER 31, 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations $ 712,057
Adjustment to reconcile net increase in net assets
from operations to net cash used in operating activities
Purchase of investment securities (300,000)
Investment securities received in exchange for (10,000)
management services
Depreciation expense 350
Net increase in unrealized appreciation on investments (1,204,196)
Deferred income taxes 470,000
Net changes in Affiliate receivables (47,829)
Accounts payable and accrued expenses 10,487
-----------------
Net cash used in operating activities (369,131)
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (9,801)
Lease deposit (1,100)
-----------------
Net cash used in investing activities (10,901)
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 419,600
-----------------
NET INCREASE IN CASH 39,568
CASH - BEGINNING OF PERIOD -
-----------------
CASH - END OF PERIOD $ 39,568
=================
|
The accompanying notes are an integral part of these financial statements.
UNIVERSAL CAPITAL MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Universal Capital Management, Inc., (the "Company"), is a closed-end, non-diversified management investment company that expects to elect to be treated as a business development company under the Investment Company Act of 1940. The Company was formed on August 16, 2004. The Company is primarily engaged in the business of furnishing capital and making available managerial assistance to companies that do not have ready access to capital through conventional channels. The Company refers to companies in which it invests as "portfolio companies."
Security Valuations
Investments in securities traded on a national securities exchange (or reported on the NASDAQ national market) are stated at the last reported sales price on the day of valuation; other securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are stated at the last quoted bid price (such as OTC BB, Pink Sheets, etc.). Restricted securities and other securities (small, privately-held companies) for which quotations are not readily available are valued at fair value as determined by the board of directors.
Investment securities are exposed to various risks, such as overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statement of assets and liabilities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from the estimates.
Cash and Equivalents
For purposes of the statements of cash flows, the Company considers all investment instruments purchased with maturity of three months or less to be cash and cash equivalents.
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
Income Taxes
Deferred tax assets and liabilities are computed annually for differences between the financial statement and tax basis 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 statement 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 or refundable for the period plus or minus the change during the period in deferred tax assets or liabilities.
Advertising Costs
Advertising and business promotion costs are charged to operations when incurred.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents. At times, the Company's balances with financial institutions may exceed the insured amount under the Federal Deposit Insurance Corporation.
NOTE 2 - INCOME TAXES
Presently, the Company, as an investment company organized as a corporation, is taxable as a corporation.
Deferred income taxes reflect the net effect of unrealized gains on investments and an operating loss carryforward. There are no other significant temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amount used for income tax purposes.
The components of the deferred assets (liabilities) are as follows:
Unrealized gains $(479,000)
Net operating loss 9,000
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$(470,000)
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On October 31, 2004, the Company had a net operating loss carryforward of approximately $22,000 which if not used will expire in 2024.
NOTE 3 - RECEIVABLE FROM AFFILIATE
BF Acquisition Group IV, Inc., related to the Company by common shareholders and management personnel, received and deposited funds for subscribers of the Universal Capital Management, Inc. common stock and disbursed funds to advance and/or invest in qualified companies for investment management purposes transacted through the bank account of BF Acquisition Group IV, Inc. as a temporary intermediary prior to the incorporation of Universal Capital Management, Inc. Accordingly, all activities attributable to Universal Capital Management, Inc. are reflected as a net receivable due from BF Acquisition Group IV, Inc. of $47,829.
NOTE 4 - CAPITAL SHARE TRANSACTIONS
As of October 31, 2004, 20,000,000 shares of $0.001 par value stock were authorized.
During the period ended October 31, 2004, 3,844,600 shares were issued for $419,600.
NOTE 5 - SUBSEQUENT EVENTS
On November 10, 2004, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with William R. Colucci and David M. Bovi (principal shareholders of the Company) and BF Acquisition Group IV, Inc. The Merger Agreement provides that at the effective time, BF Acquisition Group IV, Inc. will merge with and into Universal Capital Management, Inc., and Universal Capital Management, Inc. shall be the surviving corporation.
At the effective time, each shareholder of the company will receive one half share of voting common stock of Universal Capital Management, Inc. in exchange for each share of the BF Acquisition Group IV, Inc.'s stock held by such shareholder.
During November and December 2004, the Company raised capital of $166,500 through the issuance of 166,500 shares of its common stock.
NOTE 6 - FINANCIAL HIGHLIGHTS
Per Share Operating Performance $ -
Net asset value, beginning of period
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Loss from operations (0.01)
Unrealized appreciation on investment, net of taxes 0.19
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0.18
Add capital share transactions 0.11
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Net asset value, end of period $ 0.29
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Total Return (not annualized) 180%
Average Net Assets as a percentage of
expenses (annualized) 9.4%
Management income (annualized) 4.2%
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Item 14. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 15. Financial Statements and Exhibits.
Financial Statements
Balance Sheet at October 31, 2004 and related Statements of Operation, Changes in Net Assets, Cash Flows, and financial highlights (contained in Note 6 to the financial statements) for the period from August 16, 2004 (date of inception) to October 31, 2004.
Exhibits
2.1 Agreement and Plan of Merger dated November 10, 2004 by and among the Company, BF Acquisition Group IV, Inc., William R. Colucci, and David M. Bovi
3.1 Certificate of Incorporation
3.2 By-Laws
11.1 Statement re: computation of per share change in net assets
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
Universal Capital Management, Inc.
Date: January 20, 2005 By:/s/ Michael D. Queen
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Michael D. Queen, President
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2.1 Agreement and Plan of Merger dated November 10, 2004 by and
among the Company, BF Acquisition Group IV, Inc., William R.
Colucci, and David M. Bovi
3.1 Certificate of Incorporation
3.2 By-Laws
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11.1 Statement re: computation of per share change in net assets
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made this 10th day of November, 2004 by and among UNIVERSAL CAPITAL MANAGEMENT, INC., a Delaware corporation ("Universal"), BF ACQUISITION GROUP IV, INC., a Florida corporation ("BF"), WILLIAM R. COLUCCI ("Colucci"), and DAVID M. BOVI ("Bovi").
BACKGROUND
Universal and BF desire to merge and have entered into this Agreement to set forth the terms and conditions of the merger. This Agreement and Plan of Merger has been adopted and approved by the shareholders and directors of Universal in accordance with the Delaware General Corporation Law ("DGCL"), and the shareholders and directors of BF in accordance with the Florida Business Corporation Act.
NOW THEREFORE, in consideration of the premises and of the mutual covenants hereinafter contained, and intending to be legally bound, the parties each agree as follows:
1. Merger. Upon and subject to all of the terms and conditions set forth herein, BF shall merge (the "Merger") with and into Universal which shall survive and continue to do business under the name "Universal Capital Management Inc." as a Delaware corporation (the "Surviving Corporation").
2. Effective Time. The Merger shall become effective at such time (the "Effective Time") as (a) a Certificate of Merger is filed with the Secretary of State of the State of Delaware and (b) the Articles of Merger is filed with the Department of State of the State of Florida. Such filings shall be made simultaneously with or as soon as practicable after the closing of the transactions contemplated by this Agreement.
3. Certificate of Incorporation of Surviving Corporation. The Certificate of Incorporation of Universal as in effect at the Effective Time shall constitute, from and after the Effective Time, the Certificate of Incorporation of the Surviving Corporation until amended in accordance with the DGCL and the By-laws of the Surviving Corporation.
4. By-laws of Surviving Corporation. The By-laws of Universal as in effect at the Effective Time shall constitute, from and after the Effective Time, the By-laws of the Surviving Corporation until amended in accordance with the DGCL and such By-laws.
5. Directors and Officers of Surviving Corporation. The directors of Universal immediately prior to the Effective Time shall be the directors of the Surviving Corporation from and after the Effective Time until their respective successors have been duly elected and qualified. The officers of Universal immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of the Surviving Corporation, each holding the same respective position in the Surviving Corporation as such person held in
Universal immediately before the Effective Time, until such person's successor has been duly elected and qualified.
6. Exchange of Stock. As of the Effective Time by virtue of the Merger and without any further action on the part of the shareholders of BF, each such shareholder shall be entitled to receive, in exchange for each share of common stock of BF, One-Half (0.5) share of voting common stock of Universal, par value one-tenth of a cent ($0.001) per share. Notwithstanding the actual date of the delivery by any BF shareholder of physical possession of certificates for shares of capital stock of BF, the exchange and transfer of legal title and beneficial ownership of such shares shall for all purposes be deemed to occur as of the Effective Time. Each share of BF, if any, owned by BF immediately prior to the Effective Time shall be canceled and shall cease to exist from and after the Effective Time.
7. Representations and Warranties of BF. As a material inducement to Universal to enter into this Agreement and to close hereunder, BF hereby makes the following representations and warranties to and with Universal:
(a) Corporate Status; Outstanding Stock. BF is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida and has the power and authority to own its properties and to carry on its business as it is now being conducted. BF is not required to and has not qualified to do business as a foreign corporation in any jurisdiction. BF has an authorized capital consisting of (i) Five Million (5,000,000) shares of preferred stock none of which is issued or outstanding and (ii) Fifty Million (50,000,000) shares of common stock, par value one-tenth of a cent ($0.001) per share, of which nine hundred twenty-five thousand (925,000) shares are issued and outstanding. All outstanding shares of BF are validly issued, fully paid and non-assessable. There are no shares of BF's capital stock held in its Treasury. There are no options, warrants, rights, stockholder agreements or other instruments or agreements outstanding giving any person the right to acquire any shares of capital stock of BF nor are there any commitments to issue or execute any such option, warrants, rights, instruments or agreements. The minute books and stock records of BF are complete and accurate and all signatures included therein are the genuine signatures of the persons whose signatures are required. True, correct and complete copies of BF's Articles of Incorporation and By-Laws, and all amendments to both, shall have been delivered to Universal before the Effective Time.
(b) Officers; Directors; Bank Accounts. Schedule "B" is a correct and complete list of all directors and officers of BF, all bank accounts and safe deposit boxes of BF and all persons authorized to sign checks drawn on such accounts and to have access to such safe deposit boxes.
(c) Subsidiaries, Joint Ventures, and Investments. BF has no subsidiary and does not own any capital stock, security, partnership interest or other interest of any kind in any corporation, partnership, joint venture, association or other entity except for the investments made (or jointly made with Universal) set forth on Schedule "C".
(d) Financial Statements. The Balance Sheets of BF as at April 30, 2004 (the "Audited Balance Sheet") and July 31, 2004 (the "Warranted Balance Sheet") and the
related Statements of Income (Loss) for the year ended as of the date of the Audited Balance Sheet and for the quarter annual period ended as of the date of the Warranted Balance Sheet and all related Schedules and Notes to the foregoing, copies of all of which have been filed by BF with the Securities and Exchange Commission (the "SEC"), were prepared in accordance with generally accepted accounting principles and practices consistently applied throughout the periods reported upon and with past periods, and fairly and accurately present the financial position of BF as at each such date, and the results of the operations of BF for the respective periods reported upon.
(e) Real Estate. BF has no interest in any real estate.
(f) Personal Property. BF has good, valid and marketable title to all personal property, tangible and intangible, reflected on the Warranted Balance Sheet, and to all other personal property owned by it, free and clear of all liens, mortgages, pledges, security interests, restrictions, prior assignments, encumbrances and claims of every kind or character. No claim has been asserted against BF involving any conflict or claim of conflict of its corporate name, trade names, trademarks, or internet domain names, with the tradenames, trademarks, internet domain names, or corporate names of others, and no officer or director of BF has knowledge of any basis for any such claim of conflict. BF is the sole and exclusive owner of its corporate name, trade names, trademarks and internet domain names and has the sole and exclusive right to use such trade names, trademarks and internet domain names; provided, however, that Messrs. Colucci and Bovi have formed other corporations with names similar to but slightly different from BF's name. No process used by BF or any product manufactured or sold by BF infringes upon any patent, patent application, trademark or trade name of any other party.
(g) Liabilities. BF has no liabilities, except as and to the extent reflected in the Warranted Balance Sheet or in this Agreement or any Schedule to this Agreement.
(h) Contracts, Leases, Agreements and Other Commitments. BF is not a party to or bound by any written, oral or implied contract, agreement, lease, power of attorney, guaranty, surety arrangement, or other commitment, including but not limited to any contract or agreement for the purchase or sale of merchandise or for the rendition of services.
(i) Labor, Employment Contracts, and Employee Benefit Programs. BF is not a party to any collective bargaining agreement or employment agreement, and BF is not a party to any pending or threatened labor dispute. BF has complied with all applicable provisions of the Employee Retirement Income Security Act or 1974, as amended, ("ERISA") and all applicable Federal, state and local laws relating to the employment of labor, including but not limited to the provisions thereof relative to wages, hours, collective bargaining, contributions to pension or benefit plans, and payment of Social Security and other payroll taxes, and BF is not liable for any arrears of wages or any taxes or penalties for failure to comply with any of the foregoing. No "reportable event" (as that term is defined in Section 4043 of ERISA or regulations thereunder) has occurred and is continuing with respect to any employee benefit plan of BF, and the present value of all benefits vested under all of BF's "employee pension benefit plans" (as that term is defined in Section 3 of ERISA) do not exceed the value of the assets of
such plans allocable to such vested benefits. None of such plans nor any trusts created thereunder have incurred any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA since the effective date of Section 302. BF neither has currently nor during the past five (5) years has had written or oral retirement, pension, profit sharing, stock option, bonus, hospitalization, vacation or other employee benefit plan, practice, agreement or understanding. The Company has no employees other than its statutory officers listed on Schedule "B," and owes no remuneration to any such officer.
(j) Litigation. BF is not a party to or threatened with any suit, action, arbitration, administrative or other proceeding, or governmental investigation; there is no judgment, decree, award or order outstanding against BF; and BF is not contemplating the institution of any suit, action, arbitration, administrative or other proceeding.
(k) Conflicting Interests. No director, officer or employee
of BF or any relative or any affiliate of any of the foregoing (i) has any
pecuniary interest in any supplier or customer of BF or in any other business
enterprise with which BF conducts business or with which BF is in competition or
(ii) is indebted to BF for money borrowed.
(l) Compliance with Law and Regulations. BF is in compliance in all material respects with all requirements of law, Federal, state and local, and all requirements of all governmental bodies or agencies having jurisdiction over it, the conduct of its business, the use of its properties and assets, and all premises occupied by it. BF has properly filed all reports and other documents required to be filed with any Federal, state, local and foreign government or subdivision or agency thereof. BF has not received any notice, not heretofore complied with, from any Federal, state or municipal authority or any insurance or inspection body that any of its properties, facilities, equipment, or business procedures or practices, fails to comply with any applicable law, ordinance, regulation, building or zoning law, or requirement of any public authority or body. BF requires no licenses, permits, orders or approvals issued by any governmental body or agency to conduct its current business.
(m) Agreement Not in Breach of Other Instruments Affecting BF; Governmental Consent. The execution and delivery of this Agreement, the consummation of the transactions provided for herein, and the fulfillment of the terms hereof (i) will not result in the imposition of any lien, security interest or encumbrance on any asset of BF or in the breach of any of the terms and provisions of, or result in a termination or modification of or constitute a default under, or conflict with, or cause any acceleration of any obligation of BF under, or permit any other party to modify or terminate, any agreement or other instrument by which BF is bound, any judgment, decree, order, or award of any court, governmental body, or arbitrator, or any applicable law, rule or regulation, and (ii) do not require the consent of any governmental authority.
(n) Filing of Tax Returns. BF has filed all Federal, state, local and foreign tax returns required to be filed in accordance with provisions of law pertaining thereto and has paid all taxes and assessments (including, without limitation of the foregoing, income, withholding, excise, unemployment, Social Security, occupation, transfer, franchise, property, sales and use taxes, import duties or charges, and all penalties and interest in respect thereof) required to have been paid to date.
(o) Actions Since July 31, 2004. Since July 31, 2004, BF:
(i) has not taken any action outside of the ordinary and usual course of business other than as expressly authorized hereby;
(ii) has not borrowed any money or become contingently liable for any obligation or liability of others;
(iii) has paid all of its debts and obligations as they became due;
(iv) has not incurred any debt, liability or obligation of any nature to any party except for obligations relating to the purchase of goods or the rendition of services in the ordinary course of business;
(v) has not knowingly waived any right of substantial value;
(vi) has used its best efforts to preserve its business organization intact, to keep available the services of its employees, and to preserve its relationships with its customers, suppliers and others with whom it deals;
(vii) has not purchased or redeemed any shares of its capital stock, or transferred, distributed or paid, directly or indirectly, any money or other property or assets to any non-shareholder other than payment of liabilities shown on the Warranted Balance Sheet on or after the scheduled maturity or due date thereof, and payments in the ordinary course of business for goods and services in arm's length transactions; and
(viii) has not issued any shares of capital stock except for the issuance of One Hundred Thousand (100,000) shares of Common Stock to Nortia Capital Partners, Inc. ("Nortia"), in exchange for cancellation of a $1,625.00 debt obligation owed by BF to Nortia.
(p) No Material Adverse Change. Since July 31, 2004, there has not been and there is not threatened any material adverse change in the financial condition, business, prospects or affairs of BF or any material physical damage or loss to any of its properties or assets or to the premises occupied by it (whether or not such damage or loss is covered by insurance).
(q) Ownership of Capital Stock of BF. A true and correct list of the Shareholders of BF and their respective shareholdings are set forth on Schedule "Q."
(r) Filings with the SEC. BF has made all filings with the SEC that it has been required to make since June 1, 2004 under the Securities Act of 1933 (the "1933 Act") and the Securities Exchange Act of 1934 (the "1934 Act") (collectively the "Public Reports") in accordance and within the time requirements of the 1933 Act and the 1934 Act and the rules and regulations promulgated thereunder. Each of the Public Reports has complied with the 1933 Act and the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to such Public Reports in all material respects. None the Public Reports, as of its applicable date, contained any untrue statement of a material fact or omitted to state a material fact necessary in
order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
8. Representations and Warranties of Colucci and Bovi. As material inducement to Universal to enter into this Agreement and to close hereunder, Bovi and Colucci, severally and not jointly, hereby make the following representations and warranties to and with Universal:
(a) Agreement Not in Breach of Other Instruments Affecting Colucci and Bovi. The execution and delivery of this Agreement, the consummation of the transactions provided for herein, and the fulfillment of the terms hereof by Colucci or Bovi, will not result in the breach of any of the terms and provisions of, or constitute a default under, or conflict with, any agreement or other instrument by which Colucci or Bovi is bound, any judgment, decree, order, or award of any court, governmental body, or arbitrator, or any applicable law, rule or regulation;
(b) Valid and Binding Agreement. This Agreement constitutes the valid and binding obligation of BF, Colucci (as to the representation made by Colucci) and Bovi (as to the representation made by Bovi), and is enforceable against each in accordance with its terms; and
(c) Power and Authority. BF has the corporate power, legal right, and authority to enter into, execute, and deliver this Agreement and to consummate the transactions contemplated herein.
9. Representations and Warranties of Universal. Universal represents and warrants to BF, that as of the date hereof:
(a) Corporate Status; Outstanding Stock. Universal is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the power and authority to own its properties and to carry on its business as it is now being conducted. Universal has an authorized capital consisting of Twenty Million (20,000,000) shares of common stock, par value one-tenth of a cent ($0.001) per share, of which Three Million Eight Hundred Forty-Four Thousand Six Hundred (3,844,600) shares are issued and outstanding. All outstanding shares of Universal are validly issued, fully paid and non-assessable. There are no shares of Universal's capital stock held in its Treasury. There are no options, warrants, rights, stockholder agreements or other instruments or agreements outstanding giving any person the right to acquire any shares of capital stock of Universal nor are there any commitments to issue or execute any such option, warrants, rights, instruments or agreements; provided, however, Universal is currently offering shares of common stock for purchase.
(b) Litigation. Universal is not a party to or threatened with any suit, action, arbitration, administrative or other proceeding, or governmental investigation; there is no judgment, decree, award or order outstanding against Universal; and Universal is not contemplating the institution of any suit, action, arbitration, administrative or other proceeding.
(c) Conflicting Interests. No director, officer or employee of Universal or any relative or any affiliate of any of the foregoing (i) has any pecuniary interest in
any supplier or customer of Universal or in any other business enterprise with
which Universal conducts business or with which Universal is in competition or
(ii) is indebted to Universal for money borrowed.
(d) Compliance with Law and Regulations. Universal is in compliance and has at all times complied in all material respects with all requirements of law, Federal, state and local, and all requirements of all governmental bodies or agencies having jurisdiction over it, the conduct of its business, the use of its properties and assets, and all premises occupied by it. Universal has properly filed all reports and other documents required to be filed with any Federal, state, local and foreign government or subdivision or agency thereof. Universal has not received any notice, not heretofore complied with, from any Federal, state or municipal authority or any insurance or inspection body that any of its properties, facilities, equipment, or business procedures or practices, fails to comply with any applicable law, ordinance, regulation, building or zoning law, or requirement of any public authority or body. Universal requires no licenses, permits, orders or approvals issued by any governmental body or agency to conduct its current business.
(e) Agreement Not in Breach of Other Instruments Affecting Universal; Governmental Consent. The execution and delivery of this Agreement, the consummation of the transactions provided for herein, and the fulfillment of the terms hereof (i) will not result in the imposition of any lien, security interest or encumbrance on any asset of Universal or in the breach of any of the terms and provisions of, or result in a termination or modification of or constitute a default under, or conflict with, or cause any acceleration of any obligation of Universal under, or permit any other party to modify or terminate, any agreement or other instrument by which Universal is bound, any judgment, decree, order, or award of any court, governmental body, or arbitrator, or any applicable law, rule or regulation, and (ii) do not require the consent of any governmental authority.
(f) Power and Authority. Universal has the corporate power, legal right and authority to enter into, execute and deliver this Agreement and to consummate the transactions contemplated herein;
(g) Valid and Binding Agreement. This Agreement is a valid and legally binding obligation of Universal, enforceable in accordance with its terms.
10. Indemnification.
(a) BF, Colucci, and Bovi (hereinafter sometimes collectively referred to as the "Indemnitors") jointly and severally shall and hereby agree to indemnify and to hold harmless Universal and its successors and assigns, jointly and severally from, against and in respect of the amount of any and all Deficiencies (as hereinafter defined) in excess of Twenty Thousand Dollars ($20,000).
(b) As used in this Agreement, "Deficiencies" means any and all loss or damage resulting from:
(i) any misrepresentation, breach of warranty, or any non-fulfillment of any warranty, representation, covenant or agreement on any part of BF, Colucci or
Bovi contained in this Agreement or in any other document executed by BF in connection with the transactions contemplated by this Agreement. (This Agreement and each such other document is referred to individually as a "Transaction Document" and collectively, as the "Transaction Documents");
(ii) any error contained in any statement, report or certificate delivered to Universal by BF in any Transaction Document;
(iii) any claim, debt, liability or obligation or alleged claim, debt, liability or obligation of BF to any party, incurred prior to the date hereof or arising from any matter or thing occurring prior to the date hereof, including but not limited to claims made by governmental authorities for taxes or otherwise, except for liabilities shown on the Warranted Balance Sheet (as hereinafter defined) or incurred since the date of the Warranted Balance Sheet in the ordinary course of business in accordance with Section 7(o) of this Agreement; and
(iv) any and all acts, suits, proceedings, demands, assessments, judgments, reasonable attorneys' fees, costs and expenses incident to any of the foregoing or an investigation of any of the foregoing.
(c) For the avoidance of doubt,
(i) With respect to Bovi, "Deficiencies" shall not include and Bovi shall not be obligated under this Section 10 with respect to any claims or liability related to, arising from, or growing out of any event which occurred subsequent to April 30, 2004 (or any representation, warranty, covenant or agreement related thereto contained in this Merger Agreement) or the offer or sale of shares of capital stock of or by Universal subsequent to June 1, 2004; and
(ii) With respect to Colucci, "Deficiencies" shall not include and Colucci shall not be obligated under this Section 10 with respect to any claims or liability related to, arising from, or growing out of any event which occurred subsequent to April 30, 2004 (or any representation, warranty, covenant or agreement related thereto contained in this Merger Agreement) of which he did not have knowledge or the offer or sale of shares of capital stock of or by Universal subsequent to June 1, 2004 of which he did not have knowledge.
(d) In the event that any claim shall be asserted by any party against, Universal or BF which, if sustained, would result in a Deficiency, Universal, within a reasonable time after learning of such claim, shall notify the Indemnitors of such claim, and shall extend to the Indemnitors a reasonable opportunity to defend against such claim, at the Indemnitors' sole expense and through legal counsel reasonably acceptable to Universal, provided that the Indemnitors proceed in good faith, expeditiously and diligently. No determination shall be made pursuant to subparagraph (d) below while such defense is still being made until the earlier of (i) the resolution of such claim by the Indemnitors with the claimant, or (ii) the termination of the defense by the Indemnitors against such claim or the failure of the Indemnitors to prosecute such defense in good faith in an expeditious and diligent manner. Universal shall be entitled to rely on the opinion of their counsel as to the occurrence of either of such events. Universal shall, at its option and expense, have the right to participate in any defense undertaken by Indemnitors
with legal counsel of their own selection. No settlement or compromise of any
claim which may result in a Deficiency may be made by Indemnitors without the
prior written consent of Universal unless (i) prior to such settlement or
compromise Indemnitors acknowledge in writing their obligation to pay in full
the amount of the settlement or compromise any and all associated expenses and
(ii) Universal is furnished with security reasonably satisfactory to Universal
that Indemnitors will in fact pay such amount and expenses.
(e) In the event that Universal asserts the existence of any Deficiency, Universal shall give written notice to the Indemnitors of the nature and amount of the Deficiency asserted. If the Indemnitors, within a period of thirty (30) days after the giving of such notice, shall not have given written notice to Universal announcing their intent to contest such assertion (such notice by the Indemnitors being hereinafter called the "contest notice"), such assertion shall be deemed accepted and the amount of the Deficiency shall be deemed established. In the event, however, that a contest notice is given to Universal within such thirty-day period, then the contested assertion of a Deficiency shall be settled by arbitration to be held in Philadelphia, Pennsylvania in accordance with the rules of the American Arbitration Association then obtaining. The determination of the arbitrator(s) shall be delivered in writing to the Indemnitors and Universal and shall be final, binding and conclusive upon all of the parties hereto, and the amount of the Deficiency, if any, determined to exist, shall be deemed established.
(f) Universal and the Indemnitors may agree in writing, at any time, as to the existence and amount of a Deficiency, and upon execution of such agreement, such Deficiency shall be deemed established.
(g) The Indemnitors, jointly and severally, hereby agree to pay the amount of established Deficiencies to Universal within five (5) days after the establishment thereof in cash. Any amounts not paid by Indemnitors when due under the preceding sentence shall bear interest from the due date thereof until the date paid at a rate equal to the lesser of (i) ten percent (10%) per annum or (ii) the highest legal rate permitted by applicable law.
11. Effect of Merger. At the Effective Time:
(a) BF shall be merged with and into Universal, and Universal shall be the Surviving Corporation, and the separate existence of BF shall cease;
(b) All property (real, personal and mixed) of BF, all franchises of BF, and all debts due on whatever account to BF, shall be transferred to and vested in the Surviving Corporation without further act or deed.
(c) All liabilities and obligations of BF shall be vested in and shall be the liabilities and obligations of the Surviving Corporation. Liens upon the property of BF shall not be impaired by the Merger and any claim existing or action or proceeding pending by or against BF may be prosecuted to judgment as if such Merger had not taken place or the Surviving Corporation may be substituted in BF's place;
(d) All taxes, penalties, and other governmental accounts claimed against BF but not settled, assessed or determined prior to the Merger shall be settled, assessed or
determined against the Surviving Corporation and shall be a lien against the franchises and property, both real and personal, of the Surviving Corporation to the extent required by law.
12. Principal Office. The location of the principal office of the Surviving Corporation shall be 2601 Annand Drive, Suite 16, Wilmington, Delaware 19809.
13. Closing. The Closing of the transactions contemplated by this Agreement shall take place at the offices of Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, PA at 10:00 a.m. on the later to occur of November 30, 2004, or on such date when Universal shall have not fewer than Three Hundred (300) stockholders of record. Either party can terminate this Agreement if Closing shall not have occurred on or before March 31, 2005.
14. Survival. The representations and warranties made in this Agreement shall survive until the first anniversary of the Closing date except that all representations and warranties with respect to taxes, employee benefits plans and employment matters shall survive until sixty days (60) after the expiration of the applicable statute of limitations (including any extensions.)
15. Securities Laws Compliance Procedures. BF, Colucci and Bovi severally and not jointly acknowledge and confirm that each has been advised and understands as follows:
(a) the shares of common stock of the Surviving Corporation to be issued in the Merger will be "restricted securities" within the meaning of Rule 144 under the 1933 Act and have not (and will not have) been registered under the 1933 Act and therefore, must be held indefinitely unless they are subsequently registered under such statute or an exemption from registration is available;
(b) The Surviving corporation will be under no obligation to register such shares under the 1933 Act or to take any action which would make available an exemption from such registration;
(c) There shall be endorsed on the certificates evidencing the shares of common stock of the Surviving corporation to be issued in the Merger a restrictive securities legend. Except under certain limited circumstances, the above restrictions on the transfer of such shares will also apply to any and all shares of capital stock or other securities issued or otherwise acquired with respect to such shares including, without limitation, shares and securities issued or acquired as a result of any stock dividend, stock split or exchange or any distribution of shares or securities pursuant to any corporate reorganization, reclassification or similar event.
16. Covenants. Each party agrees to execute and deliver all such instruments and documents and to take all such other action as any other party may reasonably request from time to time, before or after the Effective Time, without payment of further consideration and without delay, in order to effectuate the transactions provided for herein. The parties shall cooperate fully with one another and with their respective counsel in connection with any steps required to be taken as part of their respective obligations under this Agreement. BF shall not and hereby agrees not to issue any shares of capital stock, purchase any shares of portfolio
companies, enter into any contracts or agreements, or otherwise engage in any business between the date of this Agreement and the Closing Date.
17. Conditions to Obligations to Close.
(a) Conditions to Obligations of Universal. The obligations of Universal set forth in this Merger Agreement (including, without limitation, the obligation to consummate the Merger) are subject to satisfaction of the following conditions:
(i) This Merger Agreement shall have been adopted and approved and the Merger shall have been approved by more than 50% of the stockholders of Universal and by more than 50% of the shareholders of BF;
(ii) The representations and warranties set forth in Sections 7 and 8 shall be true and correct at and as of the Closing Date;
(iii) BF shall have performed and complied with all of its covenants hereunder in all respects;
(iv) No action, suit, or proceeding shall be pending or threatened against BF before any court or quasi-judicial or administrative agency of any Federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Merger Agreement, or (B) cause of any of the transactions contemplated by this Merger Agreement to be rescinded following consummation;
(v) BF shall have delivered to Universal a certificate of BF's Secretary attaching, and certifying that each such attachment is true, correct, complete and in effect on the Closing Date: (A) resolutions of the Board of Directors of BF with respect to all transactions contemplated by this Agreement; (B) resolutions or minutes of meeting of BF shareholders adopting this Merger Agreement and approving the Merger; and (C) a good standing certificate for BF issued by the Secretary of State of the State of Florida dated not more than five days prior to the Closing Date; and
(vi) No State or Federal securities regulator (including the Securities and Exchange Commission) shall have issued a stop order with respect to the trading of any shares of BF capital stock or shall have commenced any inquiry with respect to any filing made by BF with any such regulator or shall have commenced any investigation with respect to BF.
Universal may waive any condition specified in this Section 17(a) if it executes a writing so stating at or prior to Closing.
(b) Conditions to Obligations of BF. The obligations of BF set forth in this Merger Agreement (including without limitation, the obligations to consummate the Merger) are subject to satisfaction of the following:
(i) This Merger Agreement shall have been adopted and approved and the Merger shall have been approved by more than 50% of the stockholders of Universal and by more than 50% of the shareholders of BF;
(ii) The representations and warranties set forth in
Section 9 shall be true and correct at and as of the Closing Date;
(iii) Universal shall have performed and complied with all of its covenants hereunder in all respects;
(iv) No action, suit, or proceeding shall be pending or threatened against Universal before any court or quasi-judicial or administrative agency of any Federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Merger Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation;
(v) Universal shall have delivered to BF a certificate of Universal's Secretary attaching, and certifying that each such attachment is true, correct, complete and in effect on the Closing Date: (A) resolutions of the Board of Directors of Universal with respect to all transactions contemplated by this Merger Agreement; (B) resolutions or minutes of meeting of Universal stockholders adopting this Merger Agreement and approving the Merger; and (C) a good standing certificate for Universal issued by the Secretary of State of the State of Delaware dated not more than five days prior to the Closing Date;
BF may waive any condition specified in this Section 17(b) if it executes a writing so stating at or prior to the Closing.
18. Miscellaneous.
(a) Indulgences, Etc. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
(b) Controlling Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the State of Delaware (other than to the extent, but only to the extent, required to satisfy the merger requirements of Florida law, Florida law), notwithstanding any conflict-of-laws doctrines of any jurisdiction to the contrary, and without the aid of any canon, custom or rule of law requiring construction against the draftsman.
(c) Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received only when delivered (personally, by courier service such FedEx or by other messenger) against receipt or upon actual receipt of registered or certified mail, postage prepaid, return receipt requested, addressed as set forth below:
If to Universal:
2601 Annand Drive
Suite 16
Wilmington, DE 19809
Attention: Michael D. Queen
If to Bovi:
319 Clematis Street
Suite 700
West Palm Beach, FL 33401
If to BF or Colucci:
2501 Turk Blvd.
San Francisco, CA 94118-4343
In addition, notice by mail shall be sent by a reputable international courier (such as FedEx) if posted outside of the continental United States. Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this subparagraph for the giving of notice.
(d) Schedules. All Schedules attached hereto are hereby incorporated by reference into, and made a part of, this Agreement.
(e) Binding Nature of Agreement; No Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns, except that no party may assign or transfer its rights nor delegate its obligations under this Agreement without the prior written consent of the other parties hereto.
(f) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.
(g) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
(h) Entire Agreement. This Agreement contains the entire understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.
(i) Paragraph Headings. The Paragraph and subparagraph headings in this Agreement have been inserted for convenience of reference only; they form no part of this Agreement and shall not affect its interpretation.
(j) Gender, Etc. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate.
(k) Number of Days. In computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and Holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or Holiday, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or Holiday. For purposes of this Agreement, the term "Holiday" shall mean a day, other than a Saturday or Sunday, on which national banks with branches in the Commonwealth of Pennsylvania are or may elect to be closed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
UNIVERSAL CAPITAL
MANAGEMENT, INC.
Attest: /s/ Joseph Drennan By: /s/ Michael D. Queen
----------------------------- --------------------------------
President
BF ACQUISITION GROUP IV, INC.
Attest: /s/ By: /s/ William R. Colucci
----------------------------- --------------------------------
President
|
Witness:
/s/ Margaret J. Colucci /s/ William R. Colucci (SEAL)
----------------------------- --------------------------------
William R. Colucci
|
Witness:
/s/ /s/ David M. Bovi (SEAL)
----------------------------- --------------------------------
David M. Bovi
|
AGREEMENT AND PLAN OF MERGER
List of Schedules
Schedule B - List of Officers, Directors, Bank Accounts
Schedule C - List of Investments
Schedule H - List of Corporation Agreements
Schedule Q - List of Shareholders and Shareholdings
Schedule "B"
President, Secretary, Treasurer - William R. Colucci
Directors
---------
William R. Colucci
Bank Accounts
-------------
Wachovia Bank checking account number 2000012136520 and
custodial account number 49973845
Safe Deposit Boxes
------------------
None
|
Schedule "C"
Name Number Type Approximate
of of of Percentage of
Company* Shares Owned Shares Class Owned Purchase Price
------------------- -------------- --------------- ---------------- -------------------------------------
GelStat Corporation 150,000 Common Stock 1.7% $250,000
PSI-TEC Corporation 187,500 Common Stock 0.9% $30,000
PSI-TEC Corporation 200,000 Common Stock 1.0% Services rendered
PSI-TEC Corporation 200,000 Common Stock 1.0% Contributed by Founders
ImprintsPlus, Inc. 300,000 Common Stock 3.0% Services rendered
ImprintsPlus, Inc. 200,000 Common Stock 2.0% Contributed by Michael Queen and
Stephen Funk
|
Schedule "H"
None
Schedule "Q"
--------------------------------------- ---------------------------------------
Name Number of Shares of BF Common Stock
--------------------------------------- ---------------------------------------
Paul Atanasio 10,000
--------------------------------------- ---------------------------------------
Anthony Asaro 10,000
--------------------------------------- ---------------------------------------
Mark Dubin 10,000
--------------------------------------- ---------------------------------------
Vincent Kistler 10,000
--------------------------------------- ---------------------------------------
Michael D. Burke 10,000
--------------------------------------- ---------------------------------------
Lino Gutierrez 10,000
--------------------------------------- ---------------------------------------
John W. & Barbara Bylsma Trust 10,000
--------------------------------------- ---------------------------------------
Jessica Adams 35,000
--------------------------------------- ---------------------------------------
Scott Mersky 10,000
--------------------------------------- ---------------------------------------
John Luce 10,000
--------------------------------------- ---------------------------------------
David M. Bovi 400,000
--------------------------------------- ---------------------------------------
William R. Colucci 300,000
--------------------------------------- ---------------------------------------
Nortia Capital Partners, Inc. 100,000
-------
--------------------------------------- ---------------------------------------
Total 925,000
=======
--------------------------------------- ---------------------------------------
|
CERTIFICATE OF INCORPORATION
OF
UNIVERSAL CAPITAL MANAGEMENT, INC.
First: The name of the Corporation is Universal Capital Management, Inc. (the "Corporation").
Second: The address of the Corporation's registered office in the State of Delaware is 2601 Annand Drive, Suite 16, City of Wilmington, County of New Castle, State of Delaware 19808. The name of the Corporation's registered agent at such address is Michael D. Queen.
Third: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
Fourth: The total number of shares of stock which the Corporation shall have authority to issue is Twenty Million (20,000,000) shares of Common Stock, one-tenth of one cent ($0.001) par value per share.
Fifth: The board of directors ("Board of Directors") is authorized to make, alter or repeal the by-laws of the Corporation. Election of directors need not be by written ballot.
Sixth: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the
Delaware General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of directors, then the liability of the directors of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Delaware General Corporation Law. Any repeal or modification of this paragraph by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation at the time of such repeal or modification.
Seventh: A. Each person who was or is a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Paragraph B hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Article SEVENTH shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article SEVENTH or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.
B. If a claim under Paragraph A of this Article SEVENTH is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of providing such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
C. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article SEVENTH shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise.
D. The Corporation may maintain insurance, at its expense, to protect itself and any person who is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability
or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.
Eighth: The name and mailing address of the incorporator is:
Michael D. Queen
2601 Annand Drive
Suite 16
Wilmington, DE 19808
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 16th day of August, 2004.
/s/ Michael D. Queen -------------------- Michael D. Queen |
B Y L A W S
OF
UNIVERSAL CAPITAL MANAGEMENT, INC.
ARTICLE I
OFFICES
Section 1. The registered office in the State of Delaware shall be as stated in the Certificate of Incorporation or at such other location in the State of Delaware to which the registered office shall be changed by action of the Board of Directors.
Section 2. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. Article II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors shall be held at such place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held on the second Monday of September at 10:00 a.m., at which they shall elect by a plurality vote a Board of Directors and transact such other business as may properly be brought before the meeting. If this
day is a legal holiday, then the annual meeting of stockholders shall be held on the next business day.
Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the President and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority of the stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not
less than ten nor more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the Certificate of Incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the Certificate of Incorporation each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by
proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
Article III
DIRECTORS
Section 1. The business and affairs of the Corporation shall be managed by or under the direction of its Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders.
Section 2. The number of directors which shall constitute the Board of Directors shall be set by resolution of the Board. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 3 of this Article, and each director
elected shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Directors need not be stockholders.
Section 3. Vacancies and newly created directorships resulting from any increases in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board.
Section 7. Special meetings of the Board may be called by the President on one day's notice to each director, either personally or by mail, telephone, telex, telecopier or telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two directors unless the Board consists of only one director, in which case special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of the sole director.
Section 8. At all meetings of the Board a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
Section 10. Unless otherwise restricted by the Certificate of Incorporation or these By-laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by law to be submitted to the stockholders for approval, or (ii) adopting, amending or repealing any bylaw. Such committee or committees
shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the Certificate of Incorporation or by law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares then entitled to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telephone, telex, telecopier or telegram.
Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Article V
OFFICERS
Section 1. The officers of the Corporation shall be a President, a Secretary and a Treasurer or persons who shall act as such, regardless of the name or title by which they may be designated, elected or appointed. The Corporation may also have one or more Vice Presidents and such other officers and assistant officers as the Board of Directors may choose. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise provide.
Section 2. The officers and assistant officers shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders and shall hold office until their successors are elected and qualified or until their earlier resignation or removal.
Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board.
Section 4. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors.
Section 5. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors.
THE PRESIDENT
Section 6. The President shall be the chief executive officer of the Corporation, shall preside at all meetings of the stockholders and the Board of Directors, shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.
Section 7. The President shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation.
THE VICE PRESIDENTS
Section 8. In the absence of the President or in the event of his inability or refusal to act, and if a Vice President has been appointed by the Board of Directors, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the Corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall have custody of the corporate seal of the Corporation and he, or an assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature.
Section 10. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors.
Section 12. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation.
Section 13. If required by the Board of Directors, he shall give the Corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of this office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
Section 14. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the Corporation shall be represented by a certificate, provided that the Board of Directors may provide, by resolution or resolutions, that some or all of any or all classes or series of its stock shall be uncertificated shares. Certificates shall be signed by, or in the name of the Corporation by, the chairman or vice-chairman of the Board
of Directors, or the President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation.
Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General Corporation Law of Delaware or a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on a certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or certificates or uncertificated shares to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates or uncertificated shares, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Upon receipt of proper transfer instructions from the registered owner of uncertificated shares, such uncertificated shares shall be cancelled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the Corporation.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the Corporation.
CHECKS
Section 4. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 7. The Corporation shall indemnify its officers and directors to the fullest extent permitted by the General Corporation Law of Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These Bylaws may be altered, amended or repealed or new bylaws may be adopted by the stockholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the Certificate of Incorporation, at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal bylaws is
conferred upon the Board of Directors by the Certificate of Incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal bylaws.
EXHIBIT 11.1
COMPUTATION OF PER SHARE CHANGE IN NET ASSETS
Per Share Operating Performance
Net asset value, beginning of period $ --
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Loss from operations (0.01)
Unrealized appreciation on investment, net of taxes 0.19
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0.18
Add capital share transactions 0.11
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Net asset value, end of period $0.29
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