2.4.0.8101 - Disclosure - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIEStruefalsefalse1false falsefalsefrom-2012-05-01-to-2012-07-31.226.0.0.0.0.0.0.0http://www.sec.gov/CIK0001308569duration2012-05-01T00:00:002012-07-31T00:00:001true 1us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsAbstractus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse0NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]2false 2us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureAndSignificantAccountingPoliciesTextBlockus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalseterseLabel1falsefalsefalse00<div> <div> NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES History and Nature of Business and Going Concern Universal Capital Management, Inc. (the "Company", "we", "us", "our") identifies, advises in development and markets consumer products. Our strategy employs three primary channels: Direct Response Television (Infomercials), Television Shopping Networks and Retail Outlets. We seek to assist and enable entrepreneurs to introduce products to the consumer market. Entrepreneurs can leverage our experience and valuable business contacts in functions such as product selection, marketing development, media buying and direct response television production. Inventors and entrepreneurs submit products or business concepts for our input and advice. We generate revenues from two primary sources (i) management of the entire business cycle of the consumer product and (ii) sales of consumer products, for which we receive a share of net profits of consumer products sold. We do not manufacture any of our products. As of the date of this filing we have generated limited revenues, do not rely on any principal products and do not sell any internally developed or Company owned products. On November 1, 2011, the Company filed Form N-54C notification of withdrawal of election to be regulated as a Business Development Company ("BDC"). The withdrawal was effective upon receipt of the Form N-54C notification by the SEC, and our Company is no longer subject to regulation as a BDC. The Company determined that the one day of operations as a BDC (November 1, 2011) was not material and is utilizing that date as the commencement of operations as an operating company. We have no intention to invest in securities or meet the definition of an investment company, as described in Section 3 of the 1940 Act. Our Company will be managed so it will not be deemed to be an investment company as defined in the 1940 Act. Our company will maintain its registration under the 1934 Act and we will continue to be obligated to file regular reports as required thereunder. The accompanying unaudited financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying unaudited financial statements, at July 31, 2012, the Company has minimal cash and has a working capital deficit of $990,389, an accumulated deficiency of $9,089,467 and a stockholders' deficiency of $969,444, which could have a material impact on the Company's financial condition and operations. As a result of the significant working capital deficit at July 31, 2012, the Company does not have sufficient cash resources or current assets to pay its obligations. In view of these matters, recoverability of any asset amounts shown in the accompanying unaudited financial statements is dependent upon the Company's ability to achieve a level of profitability. These matters raise substantial doubt about the Company's ability to continue as a going concern. Since inception, the Company has financed its activities from the sale of equity securities and from loans. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities, until such time that funds provided by operations, if ever, are sufficient to fund working capital requirements. The accompanying unaudited financial statements do not include any adjustments relating to the recoverability or classification of recorded assets and liabilities that might result should the Company be unable to continue as a going concern. We are currently positioning our Company to expand its business and become a diversified holding company that is engaged in different businesses through the operation of equity method investees. We plan to accomplish this expansion through acquisition, merger or the formation of newly created subsidiaries. We are currently in various stages of talks with several target companies that could further the company's goal to become a diversified holding company, but no agreements have been reached to date. Accounting Changes The withdrawal of the Company's election to be regulated as a BDC resulted in a change in reporting entity and a change in accounting principle. BDC financial statement presentation and accounting use the "fair value" method of accounting, which requires BDCs to value certain of their investments at market value as opposed to historical cost and to recognize all unrealized gains or losses in operations. As an operating company, the Company will use either the fair-value or historical-cost method (Accounting Standards Codification "ASC" 320 - "Investments - Debt and Equity Securities") of accounting for financial statement presentation and accounting for securities held, depending on how the investment is classified and how long the Company intends to hold the investment and will recognize unrealized gains or losses as a component of stockholders' equity (deficiency). Also certain financial statements or schedules which are required to be presented for a BDC are not required for an operating company and the presentation and classification of items in the balance sheets, statements of operations and statements of cash flows will differ from that in a BDC. In accordance with ASC 250 "Accounting Changes and Error Corrections", the change from a BDC to an operating company has been retrospectively applied to all periods presented in the accompanying unaudited financial statements. As a BDC, the balance sheet was unclassified and presented with investment securities as the primary asset, a composition of net assets and an equivalent net asset value per share. As an operating company, assets and liabilities are classified as current and long-term, stockholders' equity (deficiency) is presented instead of net assets and unrealized gains (losses) on securities is included as a component of accumulated other comprehensive income (loss). As a BDC, the statement of operations included unrealized appreciation (depreciation) on investments, and presented net increase (decrease) in net assets resulting from operations and as a per share amount. As an operating company, unrealized gains and losses on investments is excluded from net income and classified as a component of comprehensive income (loss). Additionally, net loss and net loss per share are reported. Basis of Presentation The accompanying unaudited interim period financial statements of the Company are unaudited pursuant to certain rules and regulations of the Securities and Exchange Commission and include, in the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary for a fair statement of the results of the periods indicated. Such results, however, are not necessarily indicative of results that may be expected for the full year. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. The accompanying unaudited financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K-A and 10-K for the fiscal year ended April 30, 2012, as filed with the Securities and Exchange Commission on August 14, 2013 and June 27, 2013, respectively. The interim operating results for the three months ending July 31, 2012 are not necessarily indicative of operating results expected for the full year. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Investments The Company invests in various marketable equity instruments and accounts for such investments in accordance with ASC 320 "Investments - Debt and Equity Securities". Certain securities that the Company may invest in may be determined to be non-marketable. Non-marketable securities where the fair market value is not readily determinable and the Company owns less than 20% of the investee are accounted for at cost pursuant to ASC topic 325-20 "Cost Method Investments". Non-marketable securities where the Company owns greater than 20% of the investee are accounted for pursuant to ASC topic 323-10 "Investments - Equity Method and Joint Ventures". Non-marketable securities for investments in joint ventures are accounted for pursuant to ASC topic 323-30 "Partnerships, Joint Ventures, Limited Liability Entities" Management determines the appropriate classification of its investments at the time of acquisition and reevaluates such determination at each balance sheet date. Trading securities that the Company may hold are treated in accordance with ASC 320 with any unrealized gains and losses included in earnings. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported as a separate component of stockholders' equity. Investments classified as held-to-maturity are carried at amortized cost. In determining realized gains and losses, which are included in earnings in the period of disposal, the cost of the securities sold is based on the specific identification method. The Company periodically reviews its investments in marketable and non-marketable securities and impairs any securities whose value is considered non-recoverable. The Company's determination of whether a security is other than temporarily impaired incorporates both quantitative and qualitative information. Generally Accepted Accounting Principles ("GAAP") requires the exercise of judgment in making this assessment for qualitative information, rather than the application of fixed mathematical criteria. The Company considers a number of factors including, but not limited to, the length of time and the extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, the reason for the decline in fair value, changes in fair value subsequent to the balance sheet date, and other factors specific to the individual investment. The Company's assessment involves a high degree of judgment and accordingly, actual results may differ materially from the Company's estimates and judgments. The Company recorded no impairment charges for securities during the three months ended July 31, 2012 and 2011, respectively. Investments in securities of affiliates represent holdings of more than 5% of the issuer's voting common stock. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Although these estimates are based on management's best knowledge of current events and actions the Company may undertake in the future, actual results could differ from the estimates. Cash Equivalents For the purposes of the statement of cash flows, the Company considers all investment instruments purchased with maturity of three months or less to be cash and cash equivalents. Concentration of Credit Risk Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash. At July 31, 2012 the Company did not have deposits with a financial institution that exceeded the FDIC deposit insurance coverage. Notes Receivable Notes receivable consist of monies loaned to its portfolio companies evidenced by a note specifying a specific term, and interest rate and are reported at fair value. Notes receivable are presented as due from affiliated and non-affiliated issuers. Notes receivables from unaffiliated issuers represent notes from companies where we hold less than 5% of the issuer's voting common stock. Notes receivables from affiliated issuers represent notes from companies where we hold 5% or more of the issuer's voting common stock. The Company provides an allowance for losses on notes receivable based on a review of the current status of existing receivables and management's evaluation of periodic aging of accounts. The Company charges off notes receivable against the allowance for losses when an account is deemed to be uncollectible. The provision for doubtful accounts was approximately $30,014 as of July 31, 2012 and April 30, 2012, respectively. Accounts Receivable Accounts receivable consist of fees for services provided by the Company and are reported at fair value. Accounts receivable are presented as due from affiliated and non-affiliated issuers. Accounts receivable from unaffiliated issuers represent receivables from companies where we hold less than 5% of the issuer's voting common stock. Accounts receivable from affiliated issuers represent receivables from companies where we hold 5% or more of the issuer's voting common stock. The Company provides an allowance for losses on trade receivables based on a review of the current status of existing receivables and management's evaluation of periodic aging of accounts. The Company charges off accounts receivable against the allowance for losses when an account is deemed to be uncollectible. It is not the Company's policy to accrue interest on past due receivables. Due from Affiliates and Non-Affiliates Due from affiliates and non-affiliates represent fees that the Company has paid on behalf of a portfolio company and is reported at fair value. Due from non-affiliated issuers represent due from companies where we hold less than 5% of the issuer's voting common stock. Due from affiliated issuers represent due from companies where we hold 5% or more of the issuer's voting common stock. There was no provision for doubtful receivables for the three months ended July 31, 2012 and 2011, respectively. 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: <table style="FONT-SIZE: 10pt; MARGIN-TOP: 0px" cellspacing="0" cellpadding="0" width="100%"> <tr style="FONT-SIZE: 0px"> <td width="248"> </td> <td> </td> </tr> <tr> <td style="MARGIN-TOP: 0px" valign="top" width="248"> Furniture and fixtures </td> <td style="MARGIN-TOP: 0px" valign="top"> 5 to 7 years </td> </tr> <tr> <td style="MARGIN-TOP: 0px" valign="top" width="248"> Computer and office equipment </td> <td style="MARGIN-TOP: 0px" valign="top"> 3 to 7 years </td> </tr> </table> Fair Value of Financial Instruments The Company's financial instruments consist of cash, receivables, accounts payable and accrued expenses. The carrying values of cash, receivables, accounts payable and accrued expenses approximate fair value because of their short maturities. The carrying value of the notes payable approximates fair value since the interest rate associated with the debt approximates the current market interest rates. Revenue Recognition Product revenue We recognize revenue from product sales in accordance with ASC 605 - Revenue Recognition. Following agreements or orders from customers, we ship product to our customers often through a third party facilitator. Revenue from product sales is only recognized when substantially all the risks and rewards of ownership have transferred to our customers, the selling price is fixed and collection is reasonably assured. Typically, these criteria are met when our customers order is received by them and we receive acknowledgment of receipt by a third party shipper. We also offer our customers services consisting of managing, marketing and accounting to aid in the Direct Response marketing of their product or service. In these instances, revenue is recognized when the contracted services have been provided and accepted by the customer. Deposits, if any, on these services are recognized as deferred revenue until earned. Management Services for Equity Investments The Company recognizes management services revenue for equity investments received as payment in accordance with the ASC 505-50-05, Accounting by a Grantee for an Equity Instrument to be Received in Conjunction with Providing Goods or Services. The Company enters into a management service agreement with a portfolio company to provide services defined in a contract for equity instruments in the form of the portfolio company's common stock or warrants to purchase common stock. The fair value of the common stock is the portfolio company's current fair market value and the fair value of the warrant is determined using the Black-Scholes method of valuation. The fair value of the equity instruments is also the Company's cost basis in the portfolio company's securities and the income that is recognized for management services. The Company recognizes management services revenue for which payment is to be received in cash as services are provided and in accordance with the revenue recognition criteria of the Securities and Exchange Commission. If persuasive evidence of an arrangement exists, the price is fixed or determinable and collectability is reasonably assured, revenue is deferred and recognized evenly as services are provided over the life of the contract unless otherwise stated in the contract. Accounting Services The Company provides accounting and other administrative services to its companies. Upon entering into a contract with the company, the Company provides services as defined in the contract and revenue is recognized as incurred or as otherwise stated in the contract based on similar criteria as for management services discussed above. Stock Based Compensation The Company accounts for stock based compensation in accordance with ASC 718, Compensation - Share Based Compensation. This statement requires the recognition of compensation expense measured at fair value when the Company obtains employee services in stock-based payment transactions. Interest Income The Company loans monies to its portfolio companies from time to time. These loans, which are evidenced by a note, are subject to interest accrued on a monthly basis. This interest income is recognized when accrued. Income Taxes We account for income taxes in accordance with FASB ASC 740 - Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the "more likely than not" criteria of FASB ASC 740 - Income Taxes. FASB ASC 740 requires that we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the "more-likely-than-not" threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Deferred tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Deferred income taxes arise principally from the recognition of unrealized gains or losses from appreciation or depreciation in investment value for financial statements purposes, while for income tax purposes, gains or losses are only recognized when realized (disposition). When unrealized gains and losses result in a net unrealized loss, provision is made for a deferred tax asset. When unrealized gains and losses result in a net unrealized gain, provision is made for a deferred tax liability. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable to refundable for the period plus or minus the change during the period in deferred tax assets or liabilities. Recoverability of Long Lived Assets The Company follows ASC-360-10-20, Property, Plant and Equipment - Overall. This standard states that long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the excess of the asset's carrying amount over the estimated fair market value. Reclassifications Certain reclassifications were made to the July 31, 2011 unaudited financial statements in order to conform to the July 31, 2012 unaudited financial statement presentation. These changes relate primarily to the discussion of Accounting Changes in Note 1 above. Recently Issued Pronouncements The Company follows ASC 805, Business Combinations. This standard establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. It also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. This statement is effective for the Company beginning May 1, 2009 and will change the accounting for business combinations on a prospective basis. The Company follows ASC 820-10, Fair Value Measurements and Disclosure, that was adopted on May 1, 2008. This position provides additional guidance for fair value measures under ASC 820-10 in determining if the market for an assets or liability is inactive and, accordingly, if quoted market prices may not be indicative of fair value. In January 2010, there was an amendment to ASC 820-10 which the Company adopted on February 1, 2010. The adoption of this amendment did not have a material impact on the Company's financial statements. ASC 825-10-65, Interim Disclosures About Fair Value of Financial Instruments, extends the existing disclosure requirements related to the fair value of financial instruments, which were previously only required in annual financial statements, to interim periods. Given that ASC 825-10-65 provides for additional disclosures, its adoption did not have any impact on the Company's financial statements. The disclosure requirements under ASC 825-10-65 are included in Note 3 to the financial statements. ASC 855, Subsequent Events, sets forth principles and requirements for subsequent events, specifically (1) the period during which management should evaluate events or transactions that may occur for potential recognition and disclosure, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date, and (3) the disclosures that an entity should make about events and transactions occurring after the balance sheet date. ASC 855 was effective for interim reporting periods ending after June 15, 2009. This standard was amended in February 2010, Amendments to Certain Recognition and Disclosure Requirements. The Company has adopted ASC 855 and its amendment, and this adoption did not have a material impact on its financial statements. In June 2009, the FASB issued ASC 105-10-65, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB No. 162, which will become the source of authoritative U.S. GAAP recognized by the FASB to be applied to non-governmental entities. On its effective date, ASC 105-10-65 will supersede all then-existing, non-SEC accounting and reporting standards. ASC 105-10-65 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company has adopted ASC 105-10-65, and this adoption did not have a material impact on its financial statements. </div> </div>falsefalsefalsenonnum:textBlockItemTypenaThe entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. 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