UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

FORM 10-Q

(Mark One)

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

For the quarterly period ended July 31, 2009

OR

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

For the transition period from _______ to _______

Commission File Number 000-51132

Universal Capital Management, Inc.

(Exact name of registrant as specified in its charter)

|                                                                                                                                                           |                                                                            
|---------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------
|Delaware
(State or other jurisdiction of
Incorporation or Organization)
2601 Annand Drive
Suite 16
Wilmington, DE
(Address of principal executive offices) | 20-1568059
(I.R.S. Employer
Identification No.)

______19808____
(Zip Code)
|Registrants telephone number, including area code: (302) 998-8824                                                                                        



Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  ý No  ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý.  No  ̈.

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

Large accelerated filer  ̈ Accelerated filer  ̈  Non-accelerated filer ý  Smaller Reporting Company  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ̈  No ý

The number of shares of the registrants Common Stock outstanding as of September 11, 2009 was 6,412,426









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TABLE OF CONTENTS



|                                                                                                                                                                                                                                                                                   
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Page                                                                                                                                                                                                                                                                               
|PART I  FINANCIAL INFORMATION                                                                                                                                                                                                                                                     
|Item 1
Financial Statements
1
Item 2
Managements Discussion and Analysis of Financial Condition and Results of Operations
1
Item 3
Quantitative and Qualitative Disclosures About Market Risk
6
Item 4.T
Controls and Procedures.
6
PART II  OTHER INFORMATION
Item 6
Exhibits.
7











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PART I  FINANCIAL INFORMATION

Item 1

Financial Statements

See Appendix

Item 2

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

Introduction

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

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

Our Company is a public venture capital company whose primary business is to invest in emerging growth companies. Our Company assists these companies in strategic and financial planning, in market strategies and to assist them in trying to achieve prudent and profitable growth.

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

The income that our Company derives from investments in portfolio companies consists of management fees, interest income, and appreciation (net of depreciation) in the values of portfolio companies. At the time of disposition, the disposition proceeds of these portfolio securities will most likely make up most of our Companys cash revenues.

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

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

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



1





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

Financial Condition

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



|                                           |                                     |                                  
|------------------------------------------ | ----------------------------------- | ---------------------------------
|                                           | At the Quarter Ending
July 31, 2009 | At the Year Ending
April 30, 2009
|TOTAL ASSETS                               | $5,784,447                          | $5,497,085                       
|NET ASSETS                                 | $4,323,332                          | $4,268,861                       
|NET ASSET VALUE PER SHARE                  | $0.67                               | $0.67                            
|NET UNREALIZED APPRECIATION ON INVESTMENTS | $1,813,613                          | $1,559,620                       



The changes in total assets, net assets and net asset value per share for the three months ending July 31, 2009 were primarily attributable to:

·

Vystar Corporation (VYSTAR), average valuation on restricted and unrestricted shares was $2.00 per share at July 31, 2009. During the three months ending July 31, 2009, the Company exercised a warrant to purchase 400,000 shares for $0.01 per share or $4,000. These shares were valued at $800,000 at July 31, 2009. At April 30, 2009, these shares were included in the valuation of our warrants. Our Companys investment in Vystar warrants were valued at $1,477,000 at July 31, 2009 compared to $2,268,000 at April 30, 2009. This decrease is due to the exercise of warrants that cost $800,000 and a net unrealized depreciation of $9,000 for the three months ending July 31, 2009.

·

Our Companys investment in iVolution Medical Systems (IMS) warrants were valued at $647,000 at July 31, 2009 compared to $646,000 at April 30, 2009 for an unrealized appreciation of $1,000 for the three months ending July 31, 2009.

·

Lightwave Logic, Inc. (LWLG), average valuation on restricted and unrestricted shares increased from $0.42 to $0.66 per share during the three months ending July 31, 2009. During the three months ending July 31, 2009, our Company sold 292,750 shares for a sales price of $184,485 with a cost of $169,790 for a realized gain of $14,695. We bought 32,022 shares of LWLG common stock for a cost of $25,184 during the three months ending July 31, 2009. Our Companys investment in LWLG common stock had a net unrealized appreciation of $5,741 for the three months ending July 31, 2009. Our Companys investment in LWLG warrants were valued at $297,000 at July 31, 2009 compared to $209,000 at April 30, 2009, for a net unrealized appreciation of $88,000 for the three months ending July 31, 2009.

·

Our Companys investment in MICCO Group (MG) warrants were valued at $606,000 at July 31, 2009 compared to $605,000 at April 30, 2009 for an unrealized appreciation of $1,000 for the three months ending July 31, 2009.

·

Multi-View Technologies, Inc. (MVT) average valuation on restricted shares remained the same at $0.50 per share for the three months ending July 31, 2009. Our Companys investment in MVT common stock had a cumulative net unrealized appreciation as of July 31, 2009 of $980,000. Our Companys investment in MVT warrants were valued at $245,000 at July 31, 2009, which did not change from April 30, 2009.



2





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·

Our Companys investment in Dominion Capital Management, Inc. (DCM) warrants were valued at $6,000 at July 31, 2009 compared to $5,500 at April 30, 2009 for an unrealized appreciation of $500 for the three months ending July 31, 2009.

·

SIVOO Holdings, Inc. (SIVOO) average valuation on restricted and unrestricted shares decreased from $0.02 to $0.01 per share during the three months ending July 31, 2009. Out Companys investment in SIVOO common stock has a cumulative net unrealized depreciation as of July 31, 2009 of $313,080. Our Companys investment in SIVOO warrants were valued at $22,000 at July 31, 2009 compared to $10,800 at April 30, 2009 for a net unrealized appreciation of $11,200 for the three months ending July 31, 2009.

·

During the three months ending July 31, 2009, our Company sold 1,220 shares of other investments for a sales price of $795 with a cost of $1,086 for a realized loss of $291.

·

The decrease in cash of $8,106.

·

The decrease in accounts payable and accrued expenses of $34,905.

·

The decrease in net deferred tax liability of $212,000.

·

The increase in current income taxes payable of $237,000.

·

The decrease in deferred revenue and increase in revenue of approximately $4,088, which was earned during the three months ending July 31, 2009 for iVolution ($3,588), MVT ($250) and DCM ($250).

·

The addition to Net Capital of $1,272 which consists of share-based compensation expense.

Our Companys unrealized appreciation (depreciation) varies significantly from period to period as a result of the wide fluctuation in the value of our Companys portfolio securities, as well as the acquisition and sale of shares during any given period.

Our Company had unrealized appreciation on investments of $253,993 for the three months ending July 31, 2009 compared to unrealized depreciation of $1,308,344 for the three months ending July 31, 2008 and unrealized depreciation of $323,709 for the year ending April 30, 2009.



Our Companys financial condition is dependent on a number of factors including the ability of each portfolio company to effectuate its respective strategies with our Companys help. Our Company has invested a substantial portion of its assets in development stage or start-up companies. These 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 July 31, 2009, $5,423,573 or 94% of our Company's assets consisted of investments, of which net unrealized gains before the income tax effect were $1,813,614. A deferred tax liability on account of unrealized gains has been estimated at approximately $721,000. At July 31, 2009, our Companys holdings of Vystar Corporation and Multi-View Technologies, Inc. were valued at $2,277,000 and $1,245,000, respectively, which represented in the aggregate approximately 65% of the total Company portfolio at that date. Multi-View Technologies, Inc. is a privately held company. Vystar Corporation recently completed its registration with the Securities and Exchange Commission and FINRA. Vystar Corporations valuation was determined by an independent valuation firm. Multi-View Technologies, Incs valuation was determined in good faith by our Companys Board of directors.

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, our Company may find it difficult to liquidate any of its investments in the near future. See Liquidity and Capital Resources below.



3





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Results of Operations

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

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

Three months ending July 31, 2009 compared to the three months ended July 31, 2008

For the three months ending July 31, 2009 our Company had revenue for services in the amount of $4,088 compared to $248,500 for the three months ending July 31, 2008. During the three months ending July 31, 2009, 54% of our Companys revenue for services was received in the form of equity securities compared to 95% for the three months ending July 31, 2008.

Total operating expenses for the three months ending July 31, 2009 were $192,215, the principal components of which were professional fees of $74,854, consisting primarily of $44,000 for accounting and auditing expense, $19,525 for legal fees and $5,000 for consulting expense, payroll of $61,612 (which includes $1,272 of share based compensation expense), $28,471 of insurance expense, $8,585 of interest expense and $18,218 of other general and administrative expense. By comparison, total operating expenses for the three months ending July 31, 2008 were $419,563, the principal components of which were professional fees of $211,406, payroll of $145,168, insurance of $24,359, interest of $5,009 and other general and administrative expenses of $33,146.

Our Company realized a loss from operations of $215,198 for the three months ending July 31, 2009 compared to a gain from operations of $371,515 for the three months ending July 31, 2008.

Liquidity and Capital Resources

From inception, our Company has relied upon the infusion of capital through capital share transactions for liquidity. Our Company had $7,325 of cash at July 31, 2009. Consequently, payment of operating expenses and cash with which to make investments will similarly have to come from equity capital to be raised from investors or from borrowed funds. There is no assurance that our Company will be successful in raising such additional equity capital or additional borrowings or if it can, that it can do so at a price that management believes to be appropriate. Under the Investment Company Act of 1940, as amended (1940 Act), our Company may not sell shares of common stock at less than its net asset value except in certain limited circumstances.

At July 31, 2009, $5,101,925 or 94% of our investments are illiquid securities that do not have a market or they are restricted and therefore cannot be traded or sold.

Our Company may be forced to dispose of a portion of its current portfolio securities if it ever becomes short of cash. Any such dispositions may have to be made at inopportune times, which may have a material adverse effect on our overall revenue.



4





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Critical Accounting Estimates

Valuation

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

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

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

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

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

Private Market: The private market method uses actual, executed, historical transactions in a companys securities by 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.

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

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

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



5





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Item 3

Quantitative and Qualitative Disclosures About Market Risk

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

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

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

Item 4.T

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures: As of the end of the period covered by this report, 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 Exchange Act). The evaluation revealed to the Company's principal executive officer and financial officer that the Companys disclosure controls and procedures were not effective due to its inability to allocate a sufficient amount of its capital resources to adequately review its financial statements, which occurred as a result of the Companys limited cash position during the period covered by this report.

Changes in Internal Control Over Financial Reporting: In our opinion, there were no material changes in our Company's internal controls over financial reporting during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.





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PART II  OTHER INFORMATION

Item 6

Exhibits.

The following exhibits are included herein:

31.1

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

31.2

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

32.1

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

32.2

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





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SIGNATURES

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



|                   |                                                |                        
|------------------ | ---------------------------------------------- | -----------------------
|                   | Universal Capital Management, Inc.            
|                   |                                                |                        
|September 11, 2009 | By:                                            | /s/ Michael D. Queen   
|                   | Michael D. Queen, CEO                         
|                   | Principal Executive Officer                   
|                   |                                                |                        
|                   |                                                |                        
|September 11, 2009 | By:                                            | /s/ Theresa Q. Hoffmann
|                   | Theresa Q. Hoffmann, Vice President of Finance
|                   | Principal Financial Officer                   









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UNIVERSAL CAPITAL MANAGEMENT, INC.



FINANCIAL STATEMENTS



JULY 31, 2009 AND 2008



(UNAUDITED)



























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UNIVERSAL CAPITAL MANAGEMENT, INC.









CONTENTS





|                                             |     
|-------------------------------------------- | ----
|                                             | PAGE
|                                             |     
|STATEMENTS OF ASSETS AND LIABILITIES         | 1   
|                                             |     
|STATEMENTS OF OPERATIONS                     | 2   
|                                             |     
|STATEMENTS OF CASH FLOWS                     | 3   
|                                             |     
|STATEMENT OF CHANGES IN NET ASSETS           | 4   
|                                             |     
|FINANCIAL HIGHLIGHTS                         | 5   
|                                             |     
|SCHEDULE OF INVESTMENTS AS OF JULY 31, 2009  | 6   
|                                             |     
|SCHEDULE OF INVESTMENTS AS OF APRIL 30, 2009 | 7   
|                                             |     
|NOTES TO FINANCIAL STATEMENTS                | 8-20























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UNIVERSAL CAPITAL MANAGEMENT, INC.

STATEMENTS OF ASSETS AND LIABILITIES





|                                                                             |   |               |   |               
|---------------------------------------------------------------------------- | - | ------------- | - | --------------
|                                                                             |   | July 31, 2009 |   | April 30, 2009
|                                                                             |   | (Unaudited)   |   |               
|ASSETS                                                                       |   |               |   |               
|Investments, at fair value                                                   |   |               |   |               
|Non-affiliate investments (cost: $3,055,407 and $3,196,799)                  | $ | 4,142,303     | $ | 4,038,079     
|Affiliate investments (cost: $554,552 and $554,552)                          |   | 1,281,270     |   | 1,272,893     
|Total Investments                                                            |   | 5,423,573     |   | 5,310,972     
|                                                                             |   |               |   |               
|Cash and cash equivalents                                                    |   | 7,325         |   | 15,431        
|Receivables                                                                  |   |               |   |               
|Notes receivable  non-affiliates (net of allowance: $123,755 and $123,755)  |   | -             |   | -             
|Note receivable  affiliates                                                 |   | 29,510        |   | 29,005        
|Accounts receivable  non-affiliates (net of allowance: $15,000 and $15,000) |   | 10,580        |   | 7,385         
|Due from affiliates                                                          |   | 124,778       |   | 123,720       
|Total Receivables                                                            |   | 164,868       |   | 160,110       
|                                                                             |   |               |   |               
|Prepaid expenses                                                             |   | 4,576         |   | 4,992         
|Property and equipment, net                                                  |   | 4,005         |   | 4,480         
|Deferred income tax                                                          |   | 179,000       |   | -             
|Rent deposit                                                                 |   | 1,100         |   | 1,100         
|                                                                             |   |               |   |               
|TOTAL ASSETS                                                                 | $ | 5,784,447     | $ | 5,497,085     
|                                                                             |   |               |   |               
|LIABILITIES                                                                  |   |               |   |               
|LIABILITIES                                                                  |   |               |   |               
|Accounts payable                                                             | $ | 338,567       | $ | 370,472       
|Accrued expenses                                                             |   | 144,224       |   | 147,224       
|Current income taxes payable                                                 |   | 375,000       |   | 139,000       
|Advances from shareholders                                                   |   | 6,000         |   | 6,000         
|Notes payable                                                                |   | 116,000       |   | 24,177        
|Note payable, related party                                                  |   | 375,372       |   | 375,372       
|Accrued interest                                                             |   | 85,475        |   | 116,087       
|Accrued interest, related party                                              |   | 20,477        |   | 12,804        
|                                                                             |   | 1,461,115     |   | 1,191,136     
|Deferred revenue                                                             |   |               |   |               
|Non-affiliates                                                               |   | -             |   | 3,588         
|Affiliates                                                                   |   | -             |   | 500           
|Total Deferred Revenue                                                       |   | -             |   | 4,088         
|                                                                             |   |               |   |               
|Deferred income taxes                                                        |   | -             |   | 33,000        
|                                                                             |   |               |   |               
|TOTAL LIABILITIES                                                            |   | 1,461,115     |   | 1,228,224     
|                                                                             |   |               |   |               
|CONTINGENCIES (NOTE 10)                                                      |   | -             |   | -             
|                                                                             |   |               |   |               
|NET ASSETS                                                                   | $ | 4,323,332     | $ | 4,268,861     
|                                                                             |   |               |   |               
|COMPOSITION OF NET ASSETS                                                    |   |               |   |               
|Common stock, $0.001 par value, 50,000,000 shares authorized;                |   |               |   |               
|6,412,426 and 6,412,426 shares issued and outstanding at                     |   |               |   |               
|July 31, 2009 and April 30, 2009                                             | $ | 6,412         | $ | 6,412         
|Additional paid-in capital                                                   |   | 6,058,636     |   | 6,057,364     
|Accumulated income                                                           |   |               |   |               
|Accumulated net operating income                                             |   | 1,403,219     |   | 1,618,417     
|Dividends paid                                                               |   | (448,596)     |   | (448,596)     
|Net realized loss on investments                                             |   | (4,853,876)   |   | (4,868,280)   
|Net realized gain on dividend of portfolio stock                             |   | 343,924       |   | 343,924       
|Net unrealized appreciation of investments                                   |   | 1,813,613     |   | 1,559,620     
|                                                                             |   |               |   |               
|Net Assets                                                                   | $ | 4,323,332     | $ | 4,268,861     
|                                                                             |   |               |   |               
|Equivalent per share value based on 6,412,426 shares of capital stock        |   |               |   |               
|outstanding as of July 31, 2009 and April 30, 2009                           | $ | 0.67          | $ | 0.67          



See accompanying notes to these financial statements.



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UNIVERSAL CAPITAL MANAGEMENT, INC.

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDING JULY 31, 2009 AND 2008

(UNAUDITED)







|                                                                 |         |               |             |              
|---------------------------------------------------------------- | ------- | ------------- | ----------- | -------------
|                                                                 |         | For the Three |             | For the Three
|                                                                 |         | Months Ending |             | Months Ending
|                                                                 |         | July 31, 2009 |             | July 31, 2008
|                                                                 |         |               |             |              
|INCOME                                                           |         |               |             |              
|Management services                                              |         |               |             |              
|Non-affililiates                                                 | $       | 3,588         | $           | 243,500      
|Affiliates                                                       |         | 500           |             | 5,000        
|Total Management Services                                        |         | 4,088         |             | 248,500      
|                                                                 |         |               |             |              
|Interest income                                                  |         | 504           |             | 5,153        
|Accounting services                                              |         |               |             |              
|Non-affililiates                                                 |         | -             |             | 9,000        
|Affiliates                                                       |         | 3,000         |             | -            
|Total Accounting Services                                        |         | 3,000         |             | 9,000        
|                                                                 |         |               |             |              
|                                                                 |         | 7,592         |             | 262,653      
|                                                                 |         |               |             |              
|COST AND EXPENSE                                                 |         |               |             |              
|Salaries and wages                                               |         | 61,612        |             | 145,168      
|Professional fees                                                |         | 74,854        |             | 211,406      
|Insurance                                                        |         | 28,471        |             | 24,359       
|Interest expense                                                 |         | 8,585         |             | 5,009        
|General and administrative                                       |         | 18,218        |             | 33,146       
|Depreciation                                                     |         | 475           |             | 475          
|                                                                 |         | 192,215       |             | 419,563      
|                                                                 |         |               |             |              
|Income (loss) before income taxes and interest                   |         | (184,623)     |             | (156,910)    
|                                                                 |         |               |             |              
|Income tax benefit (provision)                                   |         | (24,000)      |             | 535,000      
|Interest expense                                                 |         | (6,575)       |             | (6,575)      
|                                                                 |         |               |             |              
|NET INCOME (LOSS) FROM OPERATIONS                                |         | (215,198)     |             | 371,515      
|                                                                 |         |               |             |              
|Net realized and unrealized gains (losses):                      |         |               |             |              
|Gain on disposal of portfolio stock                              |         | 14,404        |             | 51,545       
|Unrealized appreciation (depreciation) on investments            | 253,993 |               | (1,308,344)
|                                                                 |         |               |             |              
|                                                                 |         |               |             |              
|NET INCREASE (DECREASE) IN NET ASSETS                            |         |               |            
|RESULTING FROM OPERATIONS                                        | $       | 53,199        | $           | (885,284)    
|                                                                 |         |               |             |              
|                                                                 |         |               |             |              
|Net increase (decrease) in net assets from operations per share: |         |              
|Basic                                                            | $       | 0.01          | $           | (0.15)       
|Diluted                                                          | $       | 0.01          | $           | (0.15)       
|                                                                 |         |               |             |              
|Weighted average shares:                                         |         |               |             |              
|Basic                                                            |         | 6,412,426     |             | 5,861,511    
|Diluted                                                          |         | 6,412,426     |             | 5,861,511    



See accompanying notes to these financial statements.



-2-



---

UNIVERSAL CAPITAL MANAGEMENT, INC.

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDING JULY 31, 2009 AND 2008

(UNAUDITED)







|                                                                       |           |                                           |           |                                          
|---------------------------------------------------------------------- | --------- | ----------------------------------------- | --------- | -----------------------------------------
|                                                                       |           | For the Three
Months Ending
July 31, 2009 |           | For the Three
Months Ending
July 31, 2008
|                                                                       |          
|                                                                       |           |                                          
|                                                                       |           |                                           |           |                                          
|Cash Flows From Operating Activities:                                  |           |                                           |           |                                          
|Net increase (decrease) in net assets resulting from operations        | $         | 53,199                                    | $         | (885,284)                                
|                                                                       |           |                                           |          
|Adjustments to reconcile net increase (decrease) in net assets         |           |                                          
|resulting from operations to net cash used in operating activities:    |           |                                           |          
|Purchase of investment securities                                      |           | (25,484)                                  |           | -                                        
|Exercise of warrant to purchase common stock                           |           | (4,000)                                   |           | -                                        
|Gain on sale of portfolio stock                                        |           | (14,404)                                  |           | (51,545)                                 
|Proceeds from sale of portfolio stock                                  |           | 185,280                                   |           | 208,364                                  
|Investment securities received in exchange for management services     | (4,088)   |                                           | (248,500)
|Depreciation expense                                                   |           | 475                                       |           | 475                                      
|Stock based compensation expense                                       |           | 1,272                                     |           | 87,648                                   
|Net unrealized (appreciation) depreciation on investments              | (253,993) |                                           | 1,308,344
|Deferred income taxes                                                  |           | (212,000)                                 |           | (511,000)                                
|Current income taxes                                                   |           | 236,000                                   |           | (29,000)                                 
|(Increase) decrease in assets                                          |           |                                           |           |                                          
|Notes receivable -  non-affiliates                                     |           | -                                         |           | (4,648)                                  
|Notes receivable  affiliates                                          |           | (505)                                     |           | (505)                                    
|Accounts Receivable  non-affiliates                                   |           | (3,195)                                   |           | 8,363                                    
|Accounts Receivable  affiliates                                       |           | -                                         |           | (834)                                    
|Due from affiliates                                                    |           | (1,058)                                   |           | -                                        
|Due from non-affiliates                                                |           | -                                         |           | 200                                      
|Prepaid expenses                                                       |           | 416                                       |           | 5,671                                    
|Increase (decrease) in liabilities                                     |           |                                           |           |                                          
|Accounts payable                                                       |           | (31,905)                                  |           | 9,253                                    
|Accrued expenses                                                       |           | (3,000)                                   |           | -                                        
|Accrued interest                                                       |           | (30,612)                                  |           | 2,910                                    
|Accrued interest, related party                                        |           | 7,673                                     |           | -                                        
|                                                                       |           |                                           |           |                                          
|Net cash used in operating activities                                  |           | (99,929)                                  |           | (100,088)                                
|                                                                       |           |                                           |           |                                          
|Cash Flows From Financing Activities:                                  |           |                                           |           |                                          
|Proceeds from issuance of promissory notes                             |           | 116,000                                   |           | -                                        
|Repayment of debt                                                      |           | (24,177)                                  |           | (70,000)                                 
|Proceeds from issuance of common stock                                 |           | -                                         |           | 157,500                                  
|                                                                       |           |                                           |           |                                          
|Net cash provided by financing activities                              |           | 91,823                                    |           | 87,500                                   
|                                                                       |           |                                           |           |                                          
|Net Increase (Decrease) in Cash and Cash Equivalents                   | (8,106)   |                                           | (12,588) 
|                                                                       |           |                                           |           |                                          
|Cash and Cash Equivalents  Beginning of Period                        |           | 15,431                                    |           | 20,779                                   
|                                                                       |           |                                           |           |                                          
|Cash and Cash Equivalents  End of Period                              | $         | 7,325                                     | $         | 8,191                                    
|                                                                       |           |                                           |           |                                          
|Supplemental Disclosure of Cash Flows                                  |           |                                           |           |                                          
|                                                                       |           |                                           |           |                                          
|Cash Paid for Income Taxes                                             | $         | -                                         | $         | 10,000                                   
|                                                                       |           |                                           |           |                                          
|Supplemental Disclosure of Non-Cash Investing and Financing Activities |           |                                          
|                                                                       |           |                                           |           |                                          
|Securities received in exchange for deferred revenue                   | $         | -                                         | $         | 332,000                                  



See accompanying notes to these financial statements.



-3-





---

UNIVERSAL CAPITAL MANAGEMENT, INC.

STATEMENTS OF CHANGES IN NET ASSETS

FOR THE THREE MONTHS ENDING JULY 31, 2009 AND 2008

(UNAUDITED)







|                                                                |   |               |               |              
|--------------------------------------------------------------- | - | ------------- | ------------- | -------------
|                                                                |   | For the Three | For the Three
|                                                                |   | Months Ending |               | Months Ending
|                                                                |   | July 31, 2009 |               | July 31, 2008
|                                                                |   |               |               |              
|Changes in Net Assets from Operations:                          |   |               |               |              
|Net income (loss) from operations                               | $ | (215,198)     | $             | 371,515      
|Gain on disposal of portfolio stock                             |   | 14,404        |               | 51,545       
|Change in unrealized appreciation (depreciation) of investments |   | 253,993       |               | (1,308,344)  
|Net increase (decrease) in net assets from operations           |   | 53,199        |               | (885,284)    
|                                                                |   |               |               |              
|Distributions to Stockholders:                                  |   |               |               |              
|From net income (loss) from operations                          |   | -             |               | -            
|                                                                |   |               |               |              
|Capital Stock Transactions:                                     |   |               |               |              
|Issuance of common stock                                        |   | -             |               | 157,500      
|Share-based compensation expense                                |   | 1,272         |               | 87,648       
|Net increase (decrease) in net assets from stock transactions   |   | 1,272         |               | 245,148      
|                                                                |   |               |               |              
|Net Increase (Decrease) in Net Assets                           |   | 54,471        |               | (640,136)    
|                                                                |   |               |               |              
|Net Assets, Beginning of Period                                 |   | 4,268,861     |               | 5,599,232    
|                                                                |   |               |               |              
|Net Assets, End of Period                                       | $ | 4,323,332     | $             | 4,959,096    



See accompanying notes to these financial statements.



-4-





---

UNIVERSAL CAPITAL MANAGEMENT, INC.

FINANCIAL HIGHLIGHTS

FOR THE THREE MONTHS ENDING JULY 31, 2009 AND 2008

(UNAUDITED)







|                                                                                                                  |           |               |           |              
|----------------------------------------------------------------------------------------------------------------- | --------- | ------------- | --------- | -------------
|                                                                                                                  |           | July 31, 2009 |           | July 31, 2008
|                                                                                                                  |           |               |           |              
|PER SHARE INFORMATION                                                                                             |           |               |           |              
|                                                                                                                  |           |               |           |              
|Net asset value, beginning of period                                                                              | $         | 0.67          | $         | 0.98         
|                                                                                                                  |           |               |           |              
|Net income (loss) from operations, net of taxes (1)                                                               |           | (0.02)        |           | 0.04         
|Net change in realized gains (losses) and unrealized appreciation (depreciation) on investments, net of taxes (2) | 0.02      |               | (0.22)   
|Net increase from stock transactions (1)                                                                          |           | -             |           | 0.04         
|Distribution to shareholders from net income (loss) from operations                                               |           | -             |           | -            
|                                                                                                                  |           | -             |           | (0.14)       
|                                                                                                                  |           |               |           |              
|Net asset value, end of period                                                                                    | $         | 0.67          | $         | 0.84         
|                                                                                                                  |           |               |           |              
|Per share market value, end of period                                                                             | $         | 0.42          | $         | 0.96         
|                                                                                                                  |           |               |           |              
|Investment return, based on net asset value at end of period                                                      |           | 0.00%         |           | -14.29%      
|                                                                                                                  |           |               |           |              
|RATIO/SUPPLEMENTAL DATA                                                                                           |           |               |           |              
|                                                                                                                  |           |               |           |              
|Net assets, end of period                                                                                         | $         | 4,323,332     | $         | 4,959,096    
|                                                                                                                  |           |               |           |              
|Ratio of expenses to average net assets                                                                           |           | 17.90%        |           | 31.71%       
|Ratio of net income (loss) from operations to average net assets                                                  |           | -20.04%       |           | 28.08%       
|                                                                                                                  |           |               |           |              
|Diluted weighted average number of shares outstanding during the period                                           | 6,412,426 |               | 5,861,511
|                                                                                                                  |           |               |           |              



|    |                                                                                                                                                                                                                                                                                                                                                                                             | 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|    |                                                                                                                                                                                                                                                                                                                                                                                             | 
|(1) | Calculated based on diluted weighted average number of shares outstanding during the period.                                                                                                                                                                                                                                                                                               
|(2) | Calculated as a balancing amount necessary to reconcile the change in net assets value per share with the other per share information presented.  This amount may not agree with the aggregate gains and losses for the period because the difference in the net asset value at the beginning and end of period does not inherently equal the per share changes of the line items disclosed



See accompanying notes to these financial statements.



-5-





---

UNIVERSAL CAPITAL MANAGEMENT, INC.

SCHEDULE OF INVESTMENTS

AS OF JULY 31, 2009

(UNAUDITED)







|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |        |        |  
|----------------------------- | --------------------------------------------------------------- | ------------------- | --------------------------------------- | ------ | ---------------- | ---- | --------- | ---------------- | --------- | ----- | --------- | ------------- | ----------- | ---------- | --------- | ------ | ------ | -
|                              |                                                                 |                     |                                         |        |                  |      |           | Number of        |           |       |           |               |             |           
|                              |                                                                 |                     |                                         |        | Date of          |      | % of      | Units Held       |           |       |           | Value at      |             | % of      
|                              |                                                                 |                     | Business                                |        | Acquisition      |      | Portfolio | at July 31, 2009 |           | Cost  |           | July 31, 2009 |             | Net Assets
|Affiliate Investments (1)     |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |            
|                              | Multi-View Technologies, Inc. (privately held)                  |                     | 3D graphics imaging                     |        | Jul-08           |      | 18.45     | %                | 2,000,000 | (4)   | $         | 20,000        |             | $          | 1,000,000 |        | 23.14  | %
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |          
|                              | Warrant to purchase 500,000 shares of Multi-View Technologies,  | 3D graphics imaging |                                         | Jul-08 |                  | 4.52 | %         | 500,000          | (4)       | 1,000 |           | 245,000       |             | 5.67       | %        
|                              | Inc. (privately held) common stock expiring July 2013           |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | SIVOO Holdings, Inc.                                            |                     | High speed internet media               |        | Dec-05 to Nov-06 |      | 0.12      | %                | 664,501   | (3)   | 319,725   |               | 6,645       |            | 0.15      | %     
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | Warrants to purchase 805,000 shares of SIVOO Holdings, Inc.     |                     | High speed internet media               |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | 250,000 warrants expiring April 11, 2011                        |                     |                                         |        | Apr-06           |      | 0.11      | %                | 250,000   | (4)   | -         |               | 6,000       |            | 0.14      | %     
|                              | 150,000 warrants expiring November 14, 2011                     |                     |                                         |        | Nov-06           |      | 0.07      | %                | 150,000   | (4)   | -         |               | 4,000       |            | 0.09      | %     
|                              | 405,000 warrants expiring February 28, 2013                     |                     |                                         |        | Feb-08           |      | 0.22      | %                | 405,000   | (4)   | 206,202   |               | 12,000      |            | 0.28      | %     
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |          
|                              | Warrant to purchase 1,000,000 shares of Dominion Capital        |                     | SBA lending                             |        | Jul-08           |      | 0.11      | %                | 1,000,000 | (4)   | 5,000     |               | 6,000       |            | 0.14      | %     
|                              | Management (privately held) common stock, expiring July 2013    |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |          
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | Warrant to purchase 500,000 shares of Dominion Capital          |                     | SBA lending                             |        | Jul-08           |      | 0.00      | %                | 500,000   | (4)   | 1,000     |               | -           |            | 0.00      | %     
|                              | Management (privately held) common stock, expiring July 2013    |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |          
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | BF Acquisition Group V, Inc.                                    |                     | Inactive company                        |        | Apr-05           |      | 0.03      | %                | 100,000   | (4)   | 1,625     |               | 1,625       |            | 0.04      | %     
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              |                                                                 |                     | Total Investments in Affiliates         |        |                  |      | 23.63     | %                |           |       | 554,552   |               | 1,281,270   |            | 29.65     | %     
|Non-Affiliate Investments (2) |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |           
|                              | Vystar Corporation                                              |                     | Natural rubber latex products           |        | May-09           |      | 14.75     | %                | 400,000   | (4)   | 800,000   |               | 800,000     |            | 18.50     | %     
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | Warrant to purchase 600,000 shares of Vystar Corporation        |                     | Natural rubber latex                    |        | Apr-08           |      | 22.03     | %                | 600,000   | (4)   | 1,195,000 |               | 1,195,000   |            | 27.64     | %     
|                              | common stock, expiring January 31, 2013                         |                     | products                                |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | Warrant to purchase 500,000 shares of Vystar Corporation        |                     | Natural rubber latex                    |        | Jul-08           |      | 5.20      | %                | 500,000   | (4)   | 193,000   |               | 282,000     |            | 6.52      | %     
|                              | common stock, expiring April 30, 2013                           |                     | products                                |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | Lightwave Logic, Inc.                                           |                     | Plastics engineering                    |        | Feb-07 to Jan-09 |      | 5.81      | %                | 477,277   | (3)   | 384,107   |               | 315,003     |            | 7.29      | %     
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | Warrant to purchase 500,000 shares of Lightwave Logic,          |                     | Plastics engineering                    |        | Feb-08           |      | 5.48      | %                | 500,000   | (4)   | 348,000   |               | 297,000     |            | 6.87      | %     
|                              | Inc. common stock, expiring February 2013                       |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | Warrant to purchase 1,000,000 shares of iVolution Medical       |                     | Medical billing and medical             |        | Jul-08           |      | 9.04      | %                | 1,000,000 | (4)   | 112,000   |               | 491,000     |            | 11.35     | %     
|                              | Systems, Inc. (privately held) common stock, expiring July 2013 | records software    |                                         |        |                  |      |           |                  |           |       |           |               |             |            |          
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | Warrant to purchase 500,000 shares of iVolution Medical         |                     | Medical billing and medical             |        | Jul-08           |      | 2.88      | %                | 500,000   | (4)   | 17,000    |               | 156,000     |            | 3.60      | %     
|                              | Systems, Inc. (privately held) common stock, expiring July 2013 | records software    |                                         |        |                  |      |           |                  |           |       |           |               |             |           
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |          
|                              | Warrant to purchase 1,000,000 shares of MICCO Group             |                     | Software solutions provider             |        | Jul-08           |      | 9.05      | %                | 1,000,000 | (4)   | 6,000     |               | 491,000     |            | 11.36     | %     
|                              | (privately held) common stock expiring July 2013                |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | Warrant to purchase 500,000 shares of MICCO Group (3)           |                     | Software solutions provider             |        | Jul-08           |      | 2.12      | %                | 500,000   | (4)   | -         |               | 115,000     |            | 2.66      | %     
|                              | (privately held) common stock expiring July 2013                |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |           |       
|                              | Other                                                           |                     | Various                                 |        | May-09           |      | 0.01      | %                | 3,000     | (4)   | 300       |               | 300         |            | 0.01      | %     
|                              |                                                                 |                     | Total Investments in Non-Affiliates     |        |                  |      | 76.37     | %                |           |       | 3,055,407 |               | 4,142,303   |            | 95.80     | %     
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |          
|                              |                                                                 |                     | Total Investments                       |        |                  |      | 100.00    | %                |           |       | $         | 3,609,959     |             | $          | 5,423,573 |        | 125.45 | %
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |          
|                              |                                                                 |                     | Cash and other assets, less liabilities |        |                  |      |           |                  |           |       |           |               | (1,100,241) |            | -25.45    | %     
|                              |                                                                 |                     |                                         |        |                  |      |           |                  |           |       |           |               |             |            |          
|                              |                                                                 |                     | Net assets at July 31, 2009             |        |                  |      |           |                  |           |       |           |               | $           | 4,323,332  |           | 100.00 | %     



|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                       |  | 
|--------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|Notes to Schedule of Investments:
|                                  | -                                                                                                                                                                                      | Except where otherwise noted, all of our investments listed above are in common stock of companies that are publicly quoted on the Pink Sheets, OTC Bulletin Board or listed on other similar markets
|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                      
|                                  | -                                                                                                                                                                                      | The above investments, are non-income producing.  Equity investments that have not paid dividends within the last twelve months are considered non-income producing.                                 
|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                      
|                                  | -                                                                                                                                                                                      | The value of all securities for which there is no readily available market value is determined in good faith by the Board of Directors.                                                              
|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                      
|(1).                              | Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns at least 5% but not more than 25% of the voting securities
|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                      
|(2).                              | Non-affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns less than 5% of the voting securities                 
|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                      
|(3)                               | Unrestricted shares - liquid securities                                                                                                                                               
|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                      
|(4)                               | Restricted shares - illiquid securities; total illiquid securities of $5,101,925 make up 117.60% of total net assets as of July 31 2009                                               



See accompanying notes to these financial statements.



-6-





---

UNIVERSAL CAPITAL MANAGEMENT, INC.

SCHEDULE OF INVESTMENTS

AS OF APRIL 30, 2009







|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |           |   |        |   | 
|----------------------------- | -------------------------------------------------------------- | --------------------------- | --------------------------------------- | ------ | ------------------- | ------- | -------------- | -------------------------------------- | ------- | ----------------------- | ----------- | --------------- | --------- | ------ | --------- | - | ------ | - | 
|                              |                                                                |                             |                                         |        |                     |         |                | Number of
Units Held
at April 30, 2009 |         |                         |             |                 |          
|                              |                                                                |                             |                                         |        | Date of
Acquisition |         | % of
Portfolio |                                        |         | Value at
April 30, 2009 |             | % of
Net Assets
|                              |                                                                |                             | Business                                |        |                     | Cost    |                |                                       
|Affiliate Investments (1)     |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |       
|                              | Multi-View Technologies, Inc. (privately held)                 | 3D graphics imaging         |                                         | Jul-08 |                     | 18.84   | %              | 2,000,000                              | (4)     | 20,000                  |             | 1,000,000       |           | 23.43  | %        
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              | Warrant to purchase 500,000 shares of Multi-View Technologies, | 3D graphics imaging         |                                         | Jul-08 |                     | 4.61    | %              | 500,000                                | (4)     | 1,000                   |             | 245,000         |           | 5.74   | %        
|                              | Inc. (privately held) common stock expiring July 2013          |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |           |  
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |           |  
|                              | SIVOO Holdings, Inc.                                           | High speed internet media   | Dec-05 to
Nov-06                        | 0.19   | %                   | 664,501 | (3)            | 319,725                                |         | 9,968                   |             | 0.23            | %        
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |           |  
|                              | Warrants to purchase 805,000 shares of SIVOO Holdings, Inc.    | High speed internet media   |                                         |        |                     |         |                |                                        |         |                         |             |                 |          
|                              | 250,000 warrants expiring April 11, 2011                       |                             |                                         |        | Apr-06              |         | 0.05           | %                                      | 250,000 | (4)                     | -           |                 | 2,700     |        | 0.06      | %
|                              | 150,000 warrants expiring November 14, 2011                    |                             |                                         |        | Nov-06              |         | 0.03           | %                                      | 150,000 | (4)                     | -           |                 | 1,700     |        | 0.04      | %
|                              | 405,000 warrants expiring February 28, 2013                    |                             |                                         |        | Feb-08              |         | 0.12           | %                                      | 405,000 | (4)                     | 206,202     |                 | 6,400     |        | 0.15      | %
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |           |  
|                              | Warrant to purchase 1,000,000 shares of Dominion Capital       | SBA lending                 |                                         | Jul-08 |                     | 0.10    | %              | 1,000,000                              | (4)     | 5,000                   |             | 5,500           |           | 0.13   | %        
|                              | Management (privately held) common stock, expiring July 2013   |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |       
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |           |  
|                              | Warrant to purchase 500,000 shares of Dominion Capital         | SBA lending                 |                                         | Jul-08 |                     | 0.00    | %              | 500,000                                | (4)     | 1,000                   |             | -               |           | 0.00   | %        
|                              | Management (privately held) common stock, expiring July 2013   |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |       
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |           |  
|                              | BF Acquisition Group V, Inc.                                   | Inactive company            |                                         | Apr-05 |                     | 0.03    | %              | 100,000                                | (4)     | 1,625                   |             | 1,625           |           | 0.04   | %        
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              |                                                                |                             | Total Investments in Affiliates         |        | 23.97               | %       |                |                                        | 554,552 |                         | 1,272,893   |                 | 29.82     | %     
|Non-Affiliate Investments (2) |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |       
|                              | Warrant to purchase 1,000,000 shares of Vystar Corporation (5) | Natural rubber latex        |                                         | Apr-08 |                     | 37.47   | %              | 1,000,000                              | (4)     | $ 1,991,000             |             | $               | 1,991,000 |        | 46.63     | %
|                              | common stock, expiring January 31, 2013                        |                             | products                                |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              | Warrant to purchase 500,000 shares of Vystar Corporation (5)   | Natural rubber latex        |                                         | Jul-08 |                     | 5.21    | %              | 500,000                                | (4)     | 193,000                 |             | 277,000         |           | 6.49   | %        
|                              | common stock, expiring April 30, 2013                          |                             | products                                |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              | Lightwave Logic, Inc.                                          | Plastics engineering        |                                         | Feb-07 |                     | 2.67    | %              | 338,005                                | (3)     | 196,313                 |             | 141,624         |           | 3.32   | %        
|                              |                                                                |                             |                                         |        | Jan-09              |         | 3.16           | %                                      | 400,000 | (4)                     | 332,400     |                 | 167,638   |        | 3.93      | %
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              | Warrant to purchase 500,000 shares of Lightwave Logic,         | Plastics engineering        |                                         | Feb-08 |                     | 3.94    | %              | 500,000                                | (4)     | 348,000                 |             | 209,000         |           | 4.90   | %        
|                              | Inc. common stock, expiring February 2013                      |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              | Warrant to purchase 1,000,000 shares of iVolution Medical      | Medical billing and medical | Jul-08                                  |        | 9.24                | %       | 1,000,000      | (4)                                    | 112,000 |                         | 491,000     |                 | 11.50     | %     
|                              | Systems, Inc. (3) common stock, expiring July 2013             |                             | records software                        |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              | Warrant to purchase 500,000 shares of iVolution Medical        | Medical billing and medical | Jul-08                                  |        | 2.92                | %       | 500,000        | (4)                                    | 17,000  |                         | 155,000     |                 | 3.63      | %     
|                              | Systems, Inc. (3) common stock, expiring July 2013             |                             | records software                        |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              | Warrant to purchase 1,000,000 shares of MICCO Group (3)        | Software solutions provider | Jul-08                                  |        | 9.25                | %       | 1,000,000      | (4)                                    | 6,000   |                         | 491,000     |                 | 11.50     | %     
|                              | common stock expiring July 2013                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              | Warrant to purchase 500,000 shares of MICCO Group (3)          | Software solutions provider | Jul-08                                  |        | 2.15                | %       | 500,000        | (4)                                    | -       |                         | 114,000     |                 | 2.67      | %     
|                              | common stock expiring July 2013                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              | Other                                                          | Various                     |                                         | May-09 |                     | 0.02    | %              |                                        |         | 1,086                   |             | 817             |           | 0.02   | %        
|                              |                                                                |                             | Total Investments in Non-Affiliates     |        |                     | 76.03   | %              |                                        |         | 3,196,799               |             | 4,038,079       |           | 94.59  | %        
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              |                                                                |                             | Total Investments                       |        |                     |         | 100.00         | %                                      |         |                         | $           | 3,751,351       |           | $      | 5,310,972 |   | 124.41 | %
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              |                                                                |                             | Cash and other assets, less liabilities |        |                     |         |                |                                        |         |                         | (1,042,111) |                 | -24.41    | %     
|                              |                                                                |                             |                                         |        |                     |         |                |                                        |         |                         |             |                 |           |        |          
|                              |                                                                |                             | Net assets at April 30, 2009            |        |                     |         |                |                                        |         |                         | $           | 4,268,861       |           | 100.00 | %        



|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                       | 
|--------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Notes to Schedule of Investments:
|-                                 | --                                                                                                                                                                                     | Except where otherwise noted, all of our investments listed above are in common stock of companies that are publicly quoted on the Pink Sheets, OTC Bulletin Board or listed on other similar markets
|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                      
|-                                 | -                                                                                                                                                                                      | The above investments, are non-income producing.  Equity investments that have not paid dividends within the last twelve months are considered non-income producing.                                 
|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                      
|-                                 | -                                                                                                                                                                                      | The value of all securities for which there is no readily available market value is determined in good faith by the Board of Directors.                                                              
|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                      
|(1).                              | Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns at least 5% but not more than 25% of the voting securities
|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                      
|(2).                              | Non-affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Company owns less than 5% of the voting securities                 
|                                  |                                                                                                                                                                                        |                                                                                                                                                                                                      
|(3)                               | Unrestricted shares - liquid securities                                                                                                                                               
|                                 
|(4)                               | Restricted shares - illiquid securities; total illiquid securities of $5,159,380 make up 120.90% of total net assets as of April 30, 2009                                             



See accompanying notes to these financial statements.



-7-





---

UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009





NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



History and Nature of Business

Universal Capital Management, Inc. (the Company) is a business development company.  The Company is a closed-end, non-diversified management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940.  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.



Basis of Presentation

The accompanying interim period financial statements of Universal Capital Management, Inc. (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 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 for the fiscal year ended April 30, 2009, as filed with the Securities and Exchange Commission.  The interim operating results for the three months ending July 31, 2009 are not necessarily indicative of operating results expected for the full year.



Investments

Investments in securities of unaffiliated issuers represent holdings of less than 5% of the issuer's voting common stock.  Investments in and advances to affiliates are presented as (i) majority-owned, if holdings, directly or indirectly, represent over 50% of the issuer's voting common stock, (ii) controlled companies if the holdings, directly or indirectly, represent over 25% and up to 50% of the issuer's voting common stock and (iii) other affiliates if the holdings, directly or indirectly, represent 5% to 25% of the issuer's voting common stock.  Investments - other than securities represent all investments other than in securities of the issuer.



Security Valuations

Investments in securities or other than securities of privately held entities are initially recorded at their original cost as of the date the Company obtained an enforceable right to demand the securities or other investment purchased and incurred an enforceable obligation to pay the investment price.



For financial statement purposes, investments are recorded at their fair value.  If at our reporting date, readily determinable fair values do not exist for our investments, such as restricted securities and other securities (small, privately-held companies), the fair value of these investments is determined in good faith by the Company's Board of Directors pursuant to a valuation policy and consistent valuation process.  Due to the inherent uncertainty of these valuations, the estimates may differ significantly from the values that would have been used had a ready market for the investments existed and the differences may be material.  Our valuation methodology includes the examination of among other things, the underlying portfolio company performance, financial condition and market changing events that impact valuation.



Investments in securities traded on a national securities exchange (or reported on the NASDAQ national market) are stated at the last reported sales price on the day of valuation; other securities traded in the over-the-counter market (such as OTC BB, Pink Sheets, etc) and listed securities for which no sale was reported on that date are stated at the last quoted bid price.



Investment securities are exposed to various risks, such as overall market volatility.  Due to the level of risk associated with the securities of certain portfolio companies, it is likely that changes in their values will occur in the near term and that such changes could materially affect the amounts reported in the statement of assets and liabilities at future dates.



-8-



---

UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009





NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Security Valuations (Continued)

Realized gains (losses) from the sale of investments and unrealized gains (losses) from the valuation of investments are reflected in operations during the period incurred.



Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures.  Although these estimates are based on 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, 2009 the Company did not have deposits with a financial institution that exceeded the FDIC deposit insurance coverage of $250,000.



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 $123,755 as of July 31, 2009 and 2008, 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.  The provision for doubtful accounts was approximately $15,000 and $0 as of July 31, 2009 and 2008, respectively.



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.



-9-



---

UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009







NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation.  For financial accounting purposes, depreciation is generally computed by the straight-line method over the following useful lives:



|                              |             
|----------------------------- | ------------
|Furniture and fixtures        | 5 to 7 years
|Computer and office equipment | 3 to 7 years



Fair Value of Financial Instruments

The 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



Management Services

The Company recognizes management services revenue in accordance with EITF 00-8, 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.  Revenue is amortized and recognized evenly over the life of the contract unless otherwise stated in the contract.



Accounting Services

The Company provides accounting and other administrative services to its portfolio companies.  Upon entering into a contact with the portfolio company, the Company provides services as defined in the contract and revenue is recognized as incurred or as otherwise stated in the contract.



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

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.





-10-



---

UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009





NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Net Realized Gains or Losses and Net Changes in Unrealized Appreciation or Depreciation

Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the original cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized.  The original cost basis of the securities we receive in connection with our management services is equal to the amount of revenue we recognize upon receipt of such securities.  Net realized gains or losses are recognized as other income on the Companys statement of operations for the period.



Net change in unrealized appreciation or depreciation of investments reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.  Net change in unrealized appreciation or depreciation are recognized as other income on the Companys statement of operations for the period.



Recoverability of Long Lived Assets

The Company follows SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets (Statement 144).  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, 2008 financial statements in order to conform to the July 31, 2009 financial statement presentation.



Recently Issued Pronouncements

During September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements (SFAS 157), which is effective for fiscal years beginning after November 15, 2007 with earlier adoption encouraged. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS 157 for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until January 1, 2009.   The Company adopted SFAS 157 on May 1, 2008 for all financial assets and liabilities, but the implementation did not require additional disclosures or have a significant impact on the Company's financial statements.  The Company has not yet determined the impact the implementation of SFAS 157 will have on the Companys non-financial assets and liabilities which are not recognized or disclosed on a recurring basis.  However, the Company does not anticipate that the full adoption of SFAS 157 will significantly impact their consolidated financial statements.



During February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilitiesincluding an amendment of FASB Statement No. 115 (SFAS 159), which permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of SFAS 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The Company has adopted SFAS 159 on May 1, 2008 and has elected not to measure any additional financial assets, liabilities or other items at fair value.



In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R 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.



-11-



---

UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009







NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Recently Issued Pronouncements (Continued)

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of Accounting Research Bulletin No. 51 (SFAS 160). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parents ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This statement is effective for the Company beginning May 1, 2009. This statement is not currently applicable since there are no subsidiaries.



In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161), which is effective May 1, 2009. SFAS 161 requires enhanced disclosures about derivative instruments and hedging activities to allow for a better understanding of their effects on an entitys financial position, financial performance, and cash flows. Among other things, SFAS 161 requires disclosures of the fair values of derivative instruments and associated gains and losses in a tabular formant. SFAS 161 is not currently applicable to the Company since the Company does not have derivative instruments or hedging activity.



In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchyof Generally Accepted Accounting Principles(FAS 162"). This Standard identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. FAS 162 directs thehierarchy to the entity, rather than the independent auditors, as the entity is responsible for selecting accounting principles for financial statements that are presented in conformity with generally accepted accounting principles. The Standard was effective November 15, 2008 and is not expected to have an impact on the financial statements.



In April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets.This Staff Position is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. Application of this FSP is not expected to have a significant impact on the financial statements.



In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities. This FSP provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company does not currently have any share-based awards that would qualify as participating securities. Therefore, application of this FSP is not expected to have an effect on the Company's financial reporting.



In May 2008, the FASB issued FASB Staff Position (FSP) APB 14-1, Accounting for Convertible Debt That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)("FSP 14-1"). FSP 14-1 will be effective for financial statements issued for fiscal years beginning after December 15, 2008. The FSP includes guidance that convertible debt instruments that may be settled in cash upon conversion should be separated between the liability and equity components, with each component being accounted for in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods. FSP 14-1 is not currently applicable to the Company since the Company does not have convertible debt.



-12-



---

UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009







NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



Recently Issued Pronouncements (Continued)

In June 2008, the FASB issued EITF Issue No. 07-5, EITF 07-Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entitys Own Stock(EITF Issue No. 07-5) which is effective for financial statements for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.  The Issue addresses the determination of whether an instrument (or an embedded feature) is indexed to an entitys own stock, which is the first part of the scope exception in Paragraph 11(a) of SFAS No. 133 for the purpose of determining whether the instrument is classified as an equity instrument or accounted for as a derivative instrument which would be recognized either as an asset or liability and measured at fair value.  The guidance shall be applied to outstanding instruments as of the beginning of the fiscal year in which this Issue is initially applied.  Any debt discount that was recognized when the conversion option was initially bifurcated from the convertible debt instrument shall continue to be amortized.  The cumulative effect of the change in accounting principles shall be recognized as an adjustment to the opening balance of retained earnings. There was no impact to the Company of EITF Issue No. 07-5 on its financial statements and footnote disclosure.



In October 2008, the FASB issued FAS Staff Position (FSP) 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active." This is effective upon issuance, including prior periods for which financial statements have not been issued. This FSP applies to financial assets within the scope of accounting pronouncements that require or permit fair value measurements in accordance with Statement 157.This FSP clarifies the application of Statement 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 1573 did not have an impact on the companys financial statements.





NOTE 2  INVESTMENTS



As described in Note 1, the Company partially adopted SFAS No. 157 on May 1, 2008.  SFAS No. 157, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis.  SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.  As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:



Level 1

Observable inputs such as quoted prices in active markets;



Level 2

Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and



Level 3

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.





-13-



---

UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009







NOTE 2  INVESTMENTS (CONTINUED)



Assets measured at fair value on a recurring basis are as follows:



|                                |   |               |   |                    |   |                   |   |             
|------------------------------- | - | ------------- | - | ------------------ | - | ----------------- | - | ------------
|                                |   |               |   | Quoted Prices in   |   | Significant Other |   | Significant 
|                                |   |               |   | Active Markets for |   | Observable        |   | Unobservable
|                                |   | Fair Value    |   | Identical Assets   |   | Inputs            |   | Inputs      
|                                |   | July 31, 2009 |   | (Level 1)          |   | (Level 2)         |   | (Level 3)   
|                                |   |               |   |                    |   |                   |   |             
|Investments in securities       |   |               |   |                    |   |                   |   |             
|Affiliated companies            | $ | 1,281,270     | $ | 6,645              | $ | -                 | $ | 1,274,625   
|Non-affiliated companies        |   | 4,142,303     |   | 315,303            |   | -                 |   | 3,827,000   
|                                |   |               |   |                    |   |                   |   |             
|Total Investments in securities | $ | 5,423,573     | $ | 321,948            | $ | -                 | $ | 5,101,625   





|                                                     |   |                                
|---------------------------------------------------- | - | -------------------------------
|                                                     |   | Fair Value Measurement Using   
|                                                     |   | Significant Unobservable Inputs
|                                                     |   | (Level 3)                      
|                                                     |   |                                
|Beginning Balance, April 30, 2009                    | $ | 4,990,925                      
|                                                     |   |                                
|Total gains or losses (realized/unrealized)          |   |                                
|included in changes in net assets                    |   | 110,700                        
|Purchases, issuance and settlements                  |   | -                              
|                                                     |   |                                
|Ending Balance, July 31, 2009                        | $ | 5,101,625                      
|                                                     |   |                                
|The amount of total gains or losses for the period   |   |                                
|included in changes in net assets attributable       |   |                                
|to the change in unrealized gains or losses          |   |                                
|relating to assets still held at the reporting date. | $ | 110,700                        



NOTE 3  INCOME TAXES



As an investment company organized as a corporation, the Company is taxable as a corporation.  As discussed in Note 1, the Company utilizes the assets and liability method of accounting for income taxes in accordance with SFAS 109.



Under the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), the unrecognized tax provisions consisting of interest and penalties at April 30, 2009 was $78,900.  The change in unrecognized tax provisions during the three months ending July 31, 2009 amounted to $6,575 and the accrual at July 31, 2009 amounted to $85,475.  The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense and is included on the Companys balance sheet in accrued interest.



Tax years from 2005 (initial tax year) through 2008 remain subject to examination by major tax jurisdictions.



The income tax benefit for the three months ending July 31, 2009 and 2008 have been included in the accompanying financial statements on the basis of an estimated annual effective rate of 34.0% and 8.75%.  The estimated annual effective rate differs from the U.S. Statutory rate primarily due to the changes in the valuation allowance.



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UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009







NOTE 3  INCOME TAXES (CONTINUED)



The components of deferred tax (assets) liabilities are as follows:



|                                               |   |              
|---------------------------------------------- | - | -------------
|                                               |   | July 31, 2009
|                                               |   |              
|Deferred tax (asset) liability                 |   |              
|Deferred charges                               | $ | (79,000)     
|Net operating loss                             |   | (114,000)    
|Unrealized gains                               |   | 721,000      
|Capital loss carryforward                      |   | (1,461,000)  
|Stock-based compensation                       |   | (124,000)    
|Amortization of deferred revenue from warrants |   | 935,000      
|Bad debt                                       |   | (56,000)     
|Other                                          |   | (1,000)      
|                                               |   |              
|Total deferred tax (asset) liability           | $ | (179,000)    



At April 30, 2009, the Company had a capital loss carryforward of approximately $4,224,000 which if not used will expire in 2014.



At July 31, 2009, there is a $144,224 accrual for estimated penalties and interest associated with the outstanding taxes payable for the year ended April 30, 2007.  In addition, the Company may be subjected to federal and state late filing penalties of up to approximately $180,000 due to filing extensions with no payment.





NOTE 4  NOTES RECEIVABLE



Notes receivable consists of the following:



|                                                                                       |                        |               |           |                |          
|-------------------------------------------------------------------------------------- | ---------------------- | ------------- | --------- | -------------- | ---------
|                                                                                       |                        | July 31, 2009 |           | April 30, 2009
|                                                                                       |                        |               |           |               
|Notes Receivable - non-affiliated companies                                            |                        |               |           |               
|Scientific Products and Systems, Inc. ("SPS") - Total principal of $110,778.           |                        |               |           |               
|These notes bear interest at 8% per year up through August 31, 2007 at                 |                        |               |           |               
|which time the Company demanded payment.  No payment was received                      |                        |               |           |               
|and the notes then began to bear interest at 10%.  The Company filed a                 |                        |               |           |               
|lawsuit in August 2008 against SP&S demanding payment.  SP&S                           |                        |               |           |               
|responded in September 2008 to the lawsuit and in October 2008, the                    |                        |               |           |               
|Company requested for production of documents which it has not                         |                        |               |           |               
|received.  SP&S filed for bankruptcy in May 2009.                                      | $                      | 123,755       | $         | 123,755       
|                                                                                       |                        |               |           |               
|                                                                                       | Allowance for bad debt |               | (123,755) |                | (123,755)
|                                                                                       |                        |               |           |               
|Notes Receivable- non-affiliated companies                                             | $                      | -             | $         | -             
|                                                                                       |                        |               |           |               
|Note Receivable - affiliated companies                                                 |                        |               |           |               
|SIVOO Holdings, Inc. ("SIVOO") - Principal of $25,000.  This note bears interest at 8% |                        |               |           |               
|per year beginning on May 1, 2007.  This note is payable upon demand.                  | $                      | 29,510        | $         | 29,005        





-15-



---

UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009







NOTE 5  DUE FROM AFFILIATED COMPANIES



|                                        |   |               |   |               
|--------------------------------------- | - | ------------- | - | --------------
|                                        |   | July 31, 2009 |   | April 30, 2009
|                                        |   |               |   |               
|BF Acquisition Group V, Inc.            | $ | 52,987        | $ | 52,987        
|Dominion Capital Management Corporation |   | 53,813        |   | 53,813        
|SIVOO Holdings                          |   | 3,500         |   | 3,500         
|Multi-View Technologies                 |   | 14,420        |   | 13,420        
|Incredible 3D, Inc.                     |   | 58            |   | -             
|                                        |   |               |   |               
|Total Due from Affiliated Companies     | $ | 124,778       | $ | 123,720       





NOTE 6  DEFERRED REVENUE AND MANAGEMENT SERVICE REVENUE



The deferred revenue represents unearned management fee income.  Income is amortized and recognized evenly over the life of the contract unless otherwise stated in the contract.  In accordance with EITF 96-18, since the shares received by the Company are non-refundable, the value of the contract is determined by the number of shares the Company receives at the closing market price on the day of the contract (commitment date).  Warrants are valued using the Black-Scholes method.  Deferred revenue consists of the following:



|                                                 |                                                              |               |   |                |       | 
|------------------------------------------------ | ------------------------------------------------------------ | ------------- | - | -------------- | ----- | 
|                                                 |                                                              | July 31, 2009 |   | April 30, 2009
|                                                 |                                                              |               |   |               
|Non-Affiliates                                   |                                                              |               |   |               
|iVolution Medical Systmens, Inc. ("IMS")         | $                                                            | -             | $ | 3,588         
|                                                 | Received a warrant to purchase 500,000 shares of IMS         |               |   |                |      
|                                                 | common stock for payment of services per one year contract   |               |   |                |      
|                                                 | dated July 2008, valued at $17,000, fair value and amortized |               |   |                |      
|                                                 | over the life of the contract.                               |               |   |                |      
|                                                 |                                                              |               |   |                |      
|Total Non-Affiliates                             |                                                              | -             |   | 3,588         
|                                                 |                                                              |               |   |               
|Affiliates                                       |                                                              |               |   |               
|Multi-View Technologies, Inc. ("MVT")            |                                                              |               |   |               
|                                                 | Received a warrant to purchase 500,000 shares of MVT         | $             | - | $              | 250  
|                                                 | common stock for payment of services per one year contract   |               |   |                |      
|                                                 | dated July 2008, valued at $1,000, fair value and amortized  |               |   |                |      
|                                                 | over the life of the contract                                |               |   |                |      
|                                                 |                                                              |               |   |               
|Dominion Capital Management Corporation ("DCMC") |                                                              | -             |   | 250           
|                                                 | Received a warrant to purchase 1,000,000 shares of           |               |   |                |      
|                                                 | Dominion Capital Management Corporation common stock         |               |   |                |      
|                                                 | for payment of services per a three month contract dated     |               |   |                |      
|                                                 | April 30, 2008, valued at $5,000, fair value and amortized   |               |   |                |      
|                                                 | over the life of the contract.                               |               |   |                |      
|                                                 |                                                              |               |   |                |      
|Total Affiliates                                 |                                                              | -             |   | 500           
|                                                 |                                                              |               |   |               
|Total Deferred Revenue                           |                                                              | $             | - | $              | 4,088





-16-



---

UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009





NOTE 6  DEFERRED REVENUE AND MANAGEMENT SERVICE REVENUE (CONTINUED)



Management service revenue recognized consists of:

|                                                  |                                                                       |               |       |               |       
|------------------------------------------------- | --------------------------------------------------------------------- | ------------- | ----- | ------------- | ------
|                                                  |                                                                       | For the Three |       | Fpr the Three
|                                                  |                                                                       | Months Ending |       | Months Ending
|                                                  |                                                                       | July 31, 2009 |       | July 31, 2008
|Non-Affiliates                                    |                                                                       |               |       |              
|Vystar Corporation ("Vystar")                     |                                                                       |               |       |              
|                                                  | Received a warrant to purchase 500,000 shares of Vystar               | $             | -     | $             | 48,250
|                                                  | Corporation common stock for payment of services per a one year       |               |       |               |       
|                                                  | contract dated April 2008, valued at $193,000, fair value.            |               |       |               |       
|                                                  |                                                                       |               |       |              
|Lightwave Logic, Inc. ("LWLG")                    |                                                                       |               |       |              
|                                                  | Received a warrant to purchase 400,000 shares of LWLG                 |               | -     |               | 83,000
|                                                  | common stock for payment of services per one year contract            |               |       |               |       
|                                                  | dated February 28, 2008, valued at $332,000, fair value and           |               |       |               |       
|                                                  | amortized over the life of the contract.                              |               |       |               |       
|                                                  |                                                                       |               |       |              
|iVolution Medical Systems ("iVolution")           |                                                                       |               |       |              
|                                                  | Received a warrant to purchase 500,000 shares of iVolution common     |               | 3,588 |               | -     
|                                                  | stock for payment of services per a one year contract dated           |               |       |               |       
|                                                  | July 2008, valued at $17,000, fair value and amortized over the life  |               |       |               |       
|                                                  | of the contract.                                                      |               |       |               |       
|                                                  |                                                                       |               |       |              
|Theater Xtreme Entertainment Group, Inc. ("TXEG") |                                                                       |               |       |              
|                                                  | Received 650,000 shares of TXEG common stock for payment              |               | -     |               | 66,084
|                                                  | of services per one year contract dated July 2007, valued at          |               |       |               |       
|                                                  | $396,500, fair value and amortized over the life of the contract.     |               |       |               |       
|                                                  |                                                                       |               |       |              
|                                                  | Received a warrant to purchase 500,000 shares of TXEG                 |               | -     |               | 46,166
|                                                  | common stock for payment of services per one year contract            |               |       |               |       
|                                                  | dated July 2007, valued at $277,000, fair value and amortized         |               |       |               |       
|                                                  | over the life of the contract.                                        |               |       |               |       
|Total Non-Affiliates                              | $                                                                     | 3,588         | $     | 243,500      
|                                                  |                                                                       |               |       |              
|Affiliates                                        |                                                                       |               |       |              
|Multi-View Technologies ("MVT")                   |                                                                       |               |       |              
|                                                  | Received a warrant to purchase 500,000 shares of MVT common           |               | 250   |               | -     
|                                                  | stock for payment of services per a one year contract dated July      |               |       |               |       
|                                                  | 2008, valued at $1,000, fair value and amortized over the life of the |               |       |               |       
|                                                  | contract.                                                             |               |       |               |       
|                                                  |                                                                       |               |       |               |       
|Dominion Capital Management ("DCMC")              |                                                                       |               |       |              
|                                                  | Received a warrant to purchase 1,000,000 shares of DCMC               |               | -     |               | 5,000 
|                                                  | common stock for payment of services per a three month contract       |               |       |               |       
|                                                  | dated April 2008, valued at $5,000, fair value and amortized over     |               |       |               |       
|                                                  | the life of the contract.                                             |               |       |               |       
|                                                  |                                                                       |               |       |               |       
|                                                  | Received a warrant to purchase 500,000 shares of DCMC common          |               | 250   |               | -     
|                                                  | stock for payment of services per a one year contract dated July      |               |       |               |       
|                                                  | 2008, valued at $1,000, fair value and amortized over the life of the |               |       |               |       
|                                                  | contract.                                                             |               |       |               |       
|Total Affiliates                                  | $                                                                     | 500           | $     | 5,000        
|                                                  |                                                                       |               |       |              
|Total Management Services Revenue                 | $                                                                     | 4,088         | $     | 248,500      



-17-



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UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009







NOTE 7  NOTES PAYABLE



Notes payable consists of the following:



|                                                                |   |               |   |               
|--------------------------------------------------------------- | - | ------------- | - | --------------
|                                                                |   | July 31, 2009 |   | April 30, 2009
|                                                                |   |               |   |               
|Notes payable                                                   |   |               |   |               
|Notes payable.  Interest accrued at the prime rate of interest, |   |               |   |               
|6% at April 30, 2009.  Principal and interest are payable       |   |               |   |               
|on demand. (NOTE 7)                                             | $ | -             | $ | 24,177        
|                                                                |   |               |   |               
|Promissory notes payable.  Interest accrued at 5.0% per         |   |               |   |               
|annum.  Interest will be waived upon conversion of note by      |   |               |   |               
|note holder into $1.00 shares of Vystar common stock.           |   |               |   |               
|Principal and interest due September 30, 2009. (NOTE 11)        |   | 116,000       |   | -             
|                                                                |   |               |   |               
|Notes payable                                                   | $ | 116,000       | $ | 24,177        
|                                                                |   |               |   |               
|Notes payable, related party.  Interest accrued at 8.0%         |   |               |   |               
|beginning on November 1, 2008.  Principal and interest          |   |               |   |               
|payable on demand.                                              | $ | 375,372       | $ | 375,372       





NOTE 8  ADVANCES FROM SHAREHOLDER



Amount represents advances from shareholder to cover operating expenses.  There are no stated interest rate or repayment terms.





NOTE 9  STOCK BASED COMPENSATION



The Company used the Black-Scholes option pricing model to calculate the grant-date fair value of options awarded during the three months ended July 31, 2009, with the following assumptions: no dividend yield, expected volatility of 126%, risk-free interest rate of 3.27% and expected option life of ten years.



As of July 31, 2009, there was approximately $11,450 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through May 2011.



The following tables summarize all stock option activity of the Company since April 30, 2009:



|                            |                           |  |                       |   |                 
|--------------------------- | ------------------------- |  | --------------------- | - | ----------------
|                            | Stock Options Outstanding
|                            |                           |  |                       |   | Weighted Average
|                            | Number of Shares          |  | Exercise Price        |   | Exercise Price  
|                            |                           |  |                       |   |                 
|Outstanding, April 30, 2009 | 750,000                   |  | $0.20 - $0.87         | $ | 0.29            
|                            |                           |  |                       |   |                 
|No activity                 | -                         |  | $                   - | $ | -               
|                            |                           |  |                       |   |                 
|Outstanding, July 31, 2009  | 750,000                   |  | $0.20 - $0.87         | $ | 0.29            
|                            |                           |  |                       |   |                 
|Exercisable, July 31, 2009  | 715,000                   |  | $0.20 - $0.87         | $ | 0.29            





-18-



---

UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009





NOTE 9  STOCK BASED COMPENSATION (CONTINUED)



|                          |                       |                  |                          
|------------------------- | --------------------- | ---------------- | -------------------------
|Stock Options Outstanding
|                          | Number Outstanding    | Weighted Average | Weighted Average         
|Range of                  | Currently Exercisable | Remaining        | Exercise Price of Options
|Exercise Prices           | at July 31, 2009      | Contractual Life | Currently Exercisable    
|                          |                       |                  |                          
|$0.20- $0.87              | 715,000               | 9.5 years        | $ 0.29                   



NOTE 10  CONTINGENCIES



McCrae Associates, LLC Lawsuit

In July 2006, McCrae Associates, LLC (McCrae) filed a lawsuit against the Company and its directors and officers in the United States District Court for the District of Connecticut.  The lawsuit alleges that McCrae is the owner of 300,000 shares of the Companys common stock and that the Company did not deliver to and is wrongfully withholding such shares from McCrae.  The lawsuit alleges that the directors and officers conspired with the Company to deprive McCrae of such shares, and that the directors and officers owed a fiduciary duty to McCrae that they violated by refusing to tender the shares to McCrae upon demand.  The lawsuit also alleges that all of the defendants violated the Connecticut Unfair Trade Practices Act.  McCrae seeks delivery of a stock certificate covering the shares, unspecified monetary damages, including treble damages, attorney fees and punitive damages.  The Company is vigorously defending the action and has filed a counter-claim against McCrae and a third-party claim against Stephen Funk seeking to rescind the issuance of shares to McCrae and to recover monetary damages on fraud and breach of contract theories.  The Company also filed similar claims in the Chancery Court in Wilmington, Delaware seeking to rescind the issuance of 200,000 shares of common stock to Liberator, LLC, a company it believes is controlled by Stephen Funk.  Recently, the parties agreed to the voluntary dismissal of the action in Delaware with the express understanding that Liberator would be bound by the decision of the Court in Connecticut with respect to the McCrae shares.  Recent efforts by the Company and McCrae to settle the litigation have been unsuccessful and the parties have commenced discovery.



The Company believes that McCraes claims lack merit and intends to defend against such claims vigorously.



Carlin and Wilson Lawsuit

During February 2008, Leo Carlin Jr. (Carlin) and Richard H. Wilson, III (Wilson) filed a lawsuit in New Castle County, Delaware, Superior Court.  Carlin and Wilson are the Plaintiffs and UCM is the Defendant.



On or around June 2006, Carlin and Wilson loaned the Company a total of $175,000 which was evidenced by two promissory notes payable (Notes), due with interest, on or before October 15, 2006.  These funds were for short-term financing for the Company.  Carlin and Wilson sued demanding payment, claiming that three weeks after the Notes were executed and delivered, the Company failed to send the plaintiffs a subscription agreement for shares of the Companys common stock at $2.50 per share in exchange for the cancellation of the notes.



On or around March 2008, a judgment was placed on the Company for the amounts owed.



As of October 31, 2008, the outstanding notes payable balance was $155,000 and the accrued interest payable on those notes was $32,925.



In December 2008, the Company was served a notice to attend an additional discovery hearing on January 12, 2009.  At this discovery hearing additional documents were provided by the Company as requested.



In February 2009, the judgment was ordered into effect and the Companys investment accounts were seized.





-19-



---

UNIVERSAL CAPITAL MANAGEMENT, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2009





NOTE 10  CONTINGENCIES (CONTINUED)



In March 2009, the Plaintiffs and the Company agreed to settle the Notes over a four month payment.  The Company made a $100,000 payment in March 2009 and two additional payments of $30,823 in each April and May 2009.  The final payment of $30,823 was made in June 2009, which was a complete settlement of all interest and principle.



NOTE 11  SUBSEQUENT EVENTS



On August 31, 2009, $116,000 of promissory notes were due but not paid.  In September 2009, the promissory note holders agreed to extend the due date and the conversion option to September 30, 2009.



-20-