UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-QSB





(Mark
One)





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





For the
quarterly period ended March 31, 2005




OR





o 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 2-97360-A




NATIONAL
INVESTMENT MANAGERS INC.


(Exact
name of registrant as specified in its charter)




Florida
    59-2091510(State or other jurisdiction
      of incorporation or organization)
    (I.R.S.Employeridentification No.)




830 Third
Ave., 14 th Floor,
New York, New York 10022


(Address
of principal executive offices)





(212)
355-1547


(Registrant's
telephone number, including area code)








Indicate
by check mark whether the registrant (1) has filed all reports required 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 oNo x





Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act)


Yes oNo x


As of May
11, 2005, 13,318,513 shares of $.001 par value Common Stock of the registrant
were outstanding.










NATIONAL
INVESTMENT MANAGERS INC. AND SUBSIDIARIES





INDEX





PART
I. FINANCIAL INFORMATION




Item
      1. Financial Statements
    Page No.Condensed
      Consolidated Balance Sheet - March 31, 2005 (unaudited)
    3Condensed
      Consolidated Statement of Operations - Three Months endedMarch 31
      2005 (unaudited)
    4Condensed
      Consolidated Statement of Cash Flows - Three Months endedMarch 31,
      2005 (unaudited)
    5Notes
      to Condensed Consolidated Financial Statements
    6-13Item
      2. Management's Discussion and Analysis of Financial Conditionand
      Results of Operations
    13-19Item
      3. Quantitative and Qualitative Disclosures about Market Risks
    19Item
      4. Controls and Procedures
    20PART
      II. OTHER INFORMATIONItem
      2. Unregistered Sales of Equity Securities and Use of Proceeds
    21-24Item
      4. Submission of Matters to a Vote of Security Holders
    24-25Item
      6. Exhibits and Reports on Form 8-K
    25-26SIGNATURES
    26


2




**National
      Investment Managers Inc. and Subsidiaries****Condensed
      Consolidated Balance Sheet****March
      31, 2005****(Unaudited)****CURRENT
      ASSETS:**Cash
    
    $
    295,007Accounts
      receivable, net
    
    
    157,759Accrued
      interest receivable
    
    
    2,778Prepaid
      directors and officers liability insurance
    
    
    94,722Prepaid
      expenses and other current assets
    
    
    60,679Total
      current assets
    
    
    610,945**PROPERTY
      AND EQUIPMENT**,
      net
    
    
    57,845**OTHER
      ASSETS**Restricted
      cash
    
    
    2,500,000Goodwill
    
    
    1,374,486Customer
      lists/relationships
    
    
    3,048,333Other
      intangibles
    
    
    220,833Deferred
      financing costs
    
    
    145,694Deferred
      tax asset
    
    
    30,9737,320,319$
    7,989,109**CURRENT
      LIABILITIES:**Short-term
      debt
    
    $
    436,169Long-term
      debt, current portion
    
    
    132,353Accounts
      payable
    
    
    19,160Accrued
      expenses and other current liabilities
    
    
    52,307Total
      current liabilities
    
    
    639,989**LONG-TERM
      LIABILITIES:**Long-term
      debt, less current portion
    
    
    2,202,647Preferred
      dividends payable
    
    
    68,603Accrued
      interest payable
    
    
    6,070Deferred
      tax liability
    
    
    1,364,139Total
      long-term liabilities
    
    
    3,641,459Total
      liabilities
    
    
    4,281,448**COMMITMENTS
      AND CONTINGENCIES****STOCKHOLDERS'
      EQUITY:**Preferred
      Stock, $.001 par value, 10,000,000 shares authorized;4,000,000
      designated as Series A shares of which 3,820,000shares
      issued and outstanding (liquidation preference$3,820,000)
    
    
    3,820Common
      Stock, $.001 par value 100,000,000 shares authorized,13,318,513
      shares issued
    
    
    13,319Additional
      paid-in capital
    
    
    4,211,173Accumulated
      deficit
    
    
    (520,651
    )Total
      stockholders' equity
    
    
    3,707,661$
    7,989,109See
      accompanying notes to condensed consolidated financial
      statements




3




**National
      Investment Managers Inc. and Subsidiaries****Condensed
      Consolidated Statement of Operations****Three
      Months Ended March 31, 2005****(Unaudited)**REVENUES
    
    $
    555,664OPERATING
      EXPENSES:SELLING
      EXPENSES
    
    
    73,333GENERAL
      AND ADMINISTRATIVE EXPENSES
    
    
    544,078DEPRECIATION
      AND AMORTIZATION
    
    
    87,539STOCK
      BASED COMPENSATION
    
    
    2,953707,903LOSS
      FROM OPERATIONS
    
    
    (152,239
    )OTHER
      INCOME (EXPENSE)REVERSE
      ACQUISITION TRANSACTION COSTS
    
    
    (215,000
    )INTEREST
      EXPENSE
    
    
    (37,519
    )INTEREST
      AND DIVIDEND INCOME
    
    
    3,081(249,438
    )(401,677
    )DEFERRED
      INCOME TAX BENEFIT
    
    
    21,973NET
      LOSS AVAILABLE TO COMMON SHAREHOLDERS
    
    
    (379,704
    )PREFERRED
      DIVIDENDS
    
    
    (68,603
    )NET
      LOSS
    
    $
    (448,307
    )BASIC
      AND DILUTED LOSSPER
      COMMON SHARE
    
    $
    (0.03
    )WEIGHTED
      AVERAGE NUMBER OFCOMMON
      SHARES OUTSTANDING
    
    
    12,396,000See
      accompanying notes to condensed consolidated financial
      statements





4




**National
      Investment Managers Inc. and Subsidiaries****Condensed
      Consolidated Statement of Cash Flows****Three
      Months Ended March 31, 2005****(Unaudited)****Cash
      flows from operating activities:**Net
      loss available to common shareholders
    
    $
    (379,704
    )Adjustments
      to reconcile net loss to net cash
      used in operating activities:Depreciation
      and amortization
    
    
    109,653Non-cash
      interest
    
    
    15,000Stock-based
      compensation
    
    
    2,953Stock
      issued for services
    
    
    25,000Deferred
      income tax benefit
    
    
    (21,973
    )Increase
      (decrease) in cash attributable to changesin
      operating assets and liabilities:Accounts
      receivable
    
    
    (41,389
    )Accrued
      interest receivable
    
    
    (2,778
    )Prepaid
      and other current assets
    
    
    (146,041
    )Accounts
      payable
    
    
    8,243Accrued
      expenses and other current liabilities
    
    
    (43,493
    )Accrued
      interest payable
    
    
    6,070**Net
      cash used in operating activities**
    
    
    (468,459
    )**Cash
      flows from investing activities:**Purchases
      of property and equipment
    
    
    (8,358
    )Acquisition
      costs (PAS transaction)
    
    
    (27,500
    )Cash
      acquired (reverse merger transaction)
    
    
    10,618Increase
      in restricted cash (for acquisition purposes)
    
    
    (2,500,000
    )**Net
      cash used in investing activities**
    
    
    (2,525,240
    )**Cash
      flows from financing activities:**Proceeds
      from convertible notes
    
    
    3,000,000Proceeds
      from short-term debt
    
    
    460,000Payments
      on short-term debt
    
    
    (23,831
    )Costs
      of 2004 common and preferred stock sales, net
    
    
    (58,242
    )of
      $17,102 collected from the escrow agentPayment
      of deferred financing costs
    
    
    (179,000
    )**Net
      cash provided by financing activities**
    
    
    3,198,927Increase
      in cash
    
    
    205,228Cash,
      beginning of period
    
    
    89,779Cash,
      end of period
    
    $
    295,007**Supplemental
      disclosure of cash flow information:**Interest
      paid
    
    $
    16,449**Supplemental
      disclosures of non-cash investing and****financing
      activities:**Accrued
      preferred dividends
    
    $
    68,603Conversion
      of debt and accrued interest intocommon
      stock
    
    $
    221,109Warrants
      and options issued and embeddedconversion
      feature associated with convertibledebt
      financing
    
    $
    830,000





5




NATIONAL
INVESTMENT MANAGERS INC. AND SUBSIDIARIES


NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




Note 1.
Unaudited Statements





The
accompanying unaudited condensed consolidated financial statements included
herein have been prepared in accordance with generally accepted accounting
principles for interim period reporting in conjunction with the instructions to
Form 10-QSB. Accordingly, these statements do not include all of the information
required by generally accepted accounting principles for annual financial
statements. In the opinion of management, all known adjustments (consisting of
normal recurring accruals and reserves) necessary to present fairly the
financial position, results of operations and cash flows for the three month
periods ended March 31, 2005 and 2004 have been included. It is suggested that
these interim condensed consolidated financial statements be read in conjunction
with the financial statements and related notes included in the Company's Form
SB-2 filed on April 19, 2005.





The
operating results for the three month period ended March 31, 2005 are not
necessarily indicative of the results to be expected for the December 31, 2005
year end.





Note 2.
Background, Basis of Presentation and Reverse Acquisition
Transaction





On
February 18, 2005, Fast Eddie Racing Stables, Inc. (“FEST”) entered into an
Agreement and Plan of Reorganization (the “Acquisition”) with Duncan Capital
Financial Group, Inc. (“DCFG”). On March 9, 2005, FEST completed the acquisition
of DCFG. On March 15, 2005, FEST changed its name to National Investment
Managers Inc. (“NIVM”). The Acquisition was effected through the exchange of
12,040,000 shares of common stock of FEST for 12,040,000 shares of common stock
of DCFG and DCFG effectively became a wholly-owned subsidiary of FEST. Under the
terms of the agreement, the former shareholders of DCFG hold approximately 94%
of the outstanding common shares of FEST immediately after the effective time of
the merger. In addition, each outstanding option and warrant to purchase DCFG
common stock was converted into an option or warrant to purchase the number of
shares of FEST common stock equal to the number of DCFG common shares underlying
the option or warrant immediately prior to the closing of the transaction.
Subsequent to the Acquisition, 3,820,000 shares of Series A Preferred stock of
DCFG was surrendered in exchange for an equivalent number of preferred shares of
NIVM containing identical terms. As the former shareholders of DCFG control FEST
after the transaction, the merger was accounted for as a reverse acquisition
under which, for accounting purposes, DCFG is deemed to be the acquirer and
FEST, the legal acquirer, is deemed to be the acquired entity. No goodwill was
recognized since FEST was a “Shell Company”.





On
December 13, 2004, DCFG, a recently incorporated company with no operations,
acquired 100% of the capital stock of its wholly-owned subsidiaries, Pension
Administration Services, Inc., Complete Investment Management Inc. of
Philadelphia and MD Bluestein, Inc. (“PAS Group”). The PAS Group acquisition is
being accounted for as a purchase.





6





The
accompanying 2005 condensed consolidated financial statements include (i) the
accounts of DCFG and its subsidiaries from January 1, 2005 to March 31, 2005 and
(ii) the accounts of NIVM (formerly FEST) from March 9, 2005 (the effective date
of the reverse acquisition) to March 31, 2005. All significant intercompany
transactions and balances have been eliminated in consolidation.





Note 3.
Use of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual amounts could differ from those
estimates.





Note 4.
Accounts Receivable





We carry
our accounts receivable at cost less an allowance for doubtful accounts.





Note 5.
Allowance for Doubtful Accounts





We
maintain allowances for doubtful accounts for estimated losses from customers'
inability to make payments. We assess each account that is more than 60 days
delinquent and other accounts when information known to us indicates amounts may
be uncollectible. In order to estimate the appropriate level of the allowance,
we consider such factors as historical bad debts, current customer
creditworthiness, changes in customer payment patterns and any correspondence
with the customer. If the financial condition of our customers were to
deteriorate and impair their ability to make payments, additional allowances
might be required in future periods.





Note 6.
Goodwill





Goodwill,
recognized in connection with the PAS Group acquisition, will not be amortized;
rather goodwill will be subject to at least an annual assessment for impairment
applying a fair-value based test.





Note 7.
Other Intangible Assets





Other
intangibles assets recognized in connection with the PAS Group acquisition
include the following:




Amount
    
    Estimated
      LifeCustomer
      lists/relationships
    
    $
    3,100,000
    
    
    15
      yearsCovenants
      not to compete
    
    $
    200,000
    
    
    3
      yearsEmployment
      agreements
    
    $
    50,000
    
    
    1
      year





7





These
other intangible assets will be amortized by use of the straight-line method
over the estimated lives of the assets. During the three month period ended
March 31, 2005, amortization expense related to customer lists/relationships and
other intangible assets was approximately $81,000. We will periodically evaluate
the recoverability of intangible assets, taking into account events or
circumstances that may warrant a revision to estimated useful lives or
impairment conditions.





Note 8.
Short-Term Debt





In
January 2005, we entered into an agreement to borrow up to $500,000 in senior
secured notes (the “2005 Notes”) from a principal stockholder. In January 2005,
we borrowed $350,000 pursuant to this agreement. In May of 2005, we borrowed an
additional $150,000 under this facility. The 2005 Notes bear interest at the
rate of 12% per annum and interest is payable quarterly in arrears on the last
day of each quarter. The principal, plus any accrued and unpaid interest is due
December 31, 2005. The 2005 Notes are subordinate to the Laurus Master Fund,
Ltd. convertible term note issued by the Company.





In
February 2005, we entered into an agreement to finance a $110,000 annual premium
for directors’ and officers’ liability insurance with an unrelated third party.
The notes are payable monthly, with a payment stream of $16,500 in February 2005
and payments of $9,574 from March through December, 2005.





Note 9.
Note Payable - Laurus Master Fund, Ltd.





On March
9, 2005, we entered into a Securities Purchase Agreement with Laurus Master
Fund, Ltd. (“Laurus”), under which we issued and delivered to Laurus (i) a
secured convertible term note in the principal amount of $3,000,000 (the
“Note”), (ii) **** a Common
Stock Purchase Warrant (the “Warrant”), entitling Laurus to purchase up to
1,084,338 shares of our Common Stock at a per share exercise price of $1.00, and
(iii) an option (“Option”) entitling Laurus to purchase up to 643,700 shares of
Common Stock at a per share purchase price of $0.01. The issuance and sale of
the Note, the Warrant and the Option were made pursuant to the exemption from
registration under Section 4(2) under the Securities Act of 1933, as amended
(the “Act”), and Regulation D promulgated under the Act. Laurus has represented
to the Company that Laurus is an accredited investor under the Act and the rules
promulgated thereunder.





At
closing, $500,000 of Note proceeds were disbursed to the Company for working
capital purposes. The Company paid fees to Laurus of $134,000 out of these gross
proceeds and also paid $200,000 to settle outstanding liabilities of the
registrant in connection with the acquisition of Duncan Capital Financial Group,
Inc. We retained $166,000 of the proceeds for working capital purposes. The
remaining $2,500,000 of Note proceeds were deposited by us at a bank in a
restricted cash account under the control of Laurus (“Restricted Account”).
Funds will be released by Laurus to the Company from the Restricted Account as
follows: In connection with certain business acquisitions to be made by the
Company, Laurus will direct the bank to release to the Company an amount of
funds equal to the product of three times the “Acquired Entity Consolidated
EBITDA” of the acquired entities. “Acquired Entity Consolidated EBITDA” is
defined as net income before giving effect to interest, taxes, depreciation and
amortization.





8





Laurus
may, at any time, convert the outstanding indebtedness of the Note into shares
of Common Stock at a price of $0.83 per share, subject to adjustment for
subsequent lower price issuances by the Company (subject to certain exceptions),
as well as customary adjustment provisions for stock splits, combinations,
dividends and the like. Subject to the restrictions on conversion by Laurus
described below, Laurus is required to convert the monthly payment due on
account of principal and interest, plus any other amounts under the Note that
are due and unpaid (“Monthly Amount”), into shares of Common Stock if the
following criteria (“Conversion Criteria”) are met:(i) the average closing price
of the Common Stock for the five consecutive trading days preceding such due
date is greater than 120% of the Fixed Conversion Price, and (ii) the amount of
such conversion does not exceed 25% of the aggregate dollar trading volume of
the Common Stock for the 22-day trading period immediately preceding the due
date of the applicable Monthly Amount. If the Conversion Criteria are not met,
Laurus must convert only such part of the Monthly Amount that meets the
Conversion Criteria. Any part of the Monthly Amount due on a Repayment Date that
Laurus has not been able to convert into shares of Common Stock due to failure
to meet the Conversion Criteria must be paid by the Company in cash within three
business days of the applicable monthly payment date.





The
Warrant grants Laurus the right to purchase up to 1,084,338 shares of Common
Stock at an exercise price of $1.00 per share commencing March 9, 2005. The
Warrant expires at the close of business on March 9, 2012. The exercise price of
the Warrant is subject to adjustment for stock splits, combinations, dividends
and the like.





The
Option grants Laurus the right to purchase for cash up to 643,700 shares of
Common Stock at an exercise price of $0.01 per share on or after the
75 th day
after Laurus delivers a notice to the Company stating that Laurus wishes to
exercise all or a portion of the underlying Common Stock. The Option expires at
the close of business on March 9, 2013. The exercise price of the Warrant is
subject to adjustment for stock splits, combinations, dividends and the
like.





The
Company may pay amounts due under the Note in shares of Common Stock only so
long as there is an effective registration statement under the Act covering the
resale of such shares or an exemption from such registration is available under
Rule 144 of the Act. In addition, Laurus is not entitled to receive shares of
Common Stock upon exercise of the Warrant or the Option, upon payment of
principal or interest on the Note, or upon conversion of the Note if such
receipt would cause Laurus to be deemed to beneficially own in excess of 4.99%
of the outstanding shares of Common Stock on the date of issuance of such
shares. Such provision may be waived by Laurus upon 75 days prior written notice
to the Company.





Under the
terms of a Registration Rights Agreement between Laurus and the Company, the
Company is obligated to register the resale of the shares of Common Stock
issuable upon payment or conversion of the Note and exercise of the Warrant and
Option and have the registration statement declared effective by the Securities
and Exchange Commission on or prior to July 7, 2005. If the registration
statement is not declared effective within the time frame described, or if the
registration is suspended other than as permitted in the registration rights
agreement, the Company will be obligated to pay Laurus a fee equal to 1.5% of
the outstanding principal amount of the Note for each 30-day period (pro rated
for partial periods) that such registration obligations are not satisfied.





9





The
Company determined the initial carrying value of the March 9, 2005 Note by a
two-step allocation process: first to the associated Warrant and Option and
second, to an embedded conversion option. First, the Company allocated the
proceeds from the sale of the Note between the Note and the Warrant and Option
based upon their relative fair values, which resulted in recording a discount on
the Note. The values of the Warrant and Option were computed using the
Black-Scholes option pricing model. Second, in accordance with Emerging Issues
Task Force No. 00-27, “Application of Issue 98-5 to Certain Convertible
Instruments”, after allocating the Note proceeds as described above, the Company
calculated the embedded conversion price and used it to measure the intrinsic
value of the embedded conversion option. Since the conversion price was less
than the fair value of the Company’s stock at the closing date, an embedded
conversion option was recorded as paid in capital.





As a
result of the Company’s allocations above, $830,000 of the principal amount of
the Note was allocated to the Warrant, Option and embedded conversion option.
This amount will be amortized as additional (non-cash) interest expense with a
corresponding increase to the Note over the life of the Note until such Note is
repaid or converted to common stock. During the three months ended March 31,
2005, the Company amortized $15,000 of non-cash interest expense.





Note 10 -
Stockholders’ equity





The
consolidated statement of stockholders’ equity (not presented herein) has been
retroactively restated to reflect the number of shares received by the
stockholders of DCFG in the reverse acquisition (see Note 2 - Background, Basis
of Presentation and Reverse Acquisition Transaction). The 834,000 shares issued
in connection with the reverse acquisition transaction represent the outstanding
shares of FEST, whose net assets consisted solely of cash of approximately
$11,000, prior to the effectuation of the reverse acquisition transaction.





During
the three months ended March 31, 2005, stockholders’ equity was also increased
as a result of (i) the recognition of approximately $830,000 of value associated
with options, warrants and an embedded conversion option associated with the
Laurus Note (see Note 9), (ii) the conversion of approximately $221,000 of notes
payable (initially recorded in connection with the PAS Group acquisition) and
accrued interest into approximately 295,000 shares of common stock, (iii) the
issuance of approximately 150,000 shares of common stock for services and (iv)
stock based compensation of approximately $3,000.





10





During
the three months ended March 31, 2005, stockholders’ equity was decreased as a
result of preferred dividends of approximately $69,000 and private placement
costs of approximately $25,000.





Note 11.
Fair Value of Financial Instruments





The fair
value of the Company's assets and liabilities, which qualify as financial
instruments under SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments,” approximate the carrying amounts presented in the condensed
consolidated balance sheet.





Note 12.
Arrangements with Off-Balance Sheet Risk - Guarantees





FASB
Interpretation No. 45 (FIN 45), Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of the Indebtedness
of Others, clarified the requirements of SFAS No. 5, Accounting for
Contingencies, relating to a guarantor's accounting for and disclosures of
certain guarantees issued. FIN 45 requires enhanced disclosures for certain
guarantees. It also requires certain guarantees that are issued or modified
after December 31, 2002, including certain third-party guarantees, to be
initially recorded on the balance sheet at fair value. For guarantees issued on
or before December 31, 2002, liabilities are recorded when and if payments
become probable and estimable. FIN 45 has the general effect of delaying
recognition for a portion of the revenue for product sales that are accompanied
by certain third-party guarantees. The financial statement recognition
provisions became effective prospectively beginning January 1, 2003. The Company
has not entered into any guarantees.





Note 13.
Revenue Recognition





We
generate revenue primarily from the following sources:





•
    
    ***Third
      party administration.***We
      earn fees for the development and implementation of corporate and
      executive benefit programs as well as fees for the duration that these
      programs are administered.





•
    
    ***Financial
      planning and investment advisory fees and securities commissions.***We
      receive commissions related to the sale of securities and certain
      investment-related insurance products as well as fees for offering
      financial advice through financial intermediaries and related services.
      These fees are based on a percentage of assets under management and are
      generally paid quarterly. We also charge fees for evaluations of the
      performance of portfolios.





•
    
    ***Insurance
      commissions***.
      Insurance and annuity commissions paid by insurance companies are based on
      a percentage of the premium that the insurance company charges to the
      policyholder. First-year commissions are calculated as a percentage of the
      first twelve months premium on the policy and are earned in the year that
      the policy is originated. In many cases, we receive renewal commissions
      for a period following the first year, if the policy remains in force.




11


We recognize
      revenue from these sources, as follows:·
    ***Third
      party administration.***·
    Persuasive
      evidence of an arrangement between us and our client
  exists





·
    Delivery
      of a completed product to the customer has occurred or the service has
      been provided to the customer·
    The
      price to the customer is fixed and
determinable





·
    Collectibility
      of the sales price is reasonably assured





·
    ***Financial
      planning and investment advisory fees and securities commissions.***·
    As
      services are rendered





·
    Contingent
      commissions are recorded as revenue when
received





·
    ***Insurance
      commissions***.·
    The
      policy application is substantially
complete





·
    The
      premium is paid·
    The
      insured party is contractually committed to the purchase of the insurance
      policy





Note 14.
Stock-Based Compensation





The
Company complies with the fair value recognition provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". SFAS No. 123 requires that
compensation cost for all stock awards be calculated and recognized over the
service period (generally equal to the vesting period). This compensation cost
is determined using option pricing models intended to estimate the fair value of
the awards at the grant date. An offsetting increase to stockholders’ equity is
recorded equal to the amount of the compensation expense charge. The fair value
of issued stock options and warrants are estimated on the date of grant using
the Black-Scholes option-pricing model including the following assumptions:
expected volatility of 25.0%, expected dividend yield rate of 0%, expected life
over the term, generally, 5 or 10 years, and a risk-free interest rate of
4.2%.





There was
no cash flow effect resulting from these arrangements.





Note 15.
Income Taxes





The
Company complies with SFAS No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases of assets and
liabilities that will result in future taxable or deductible amounts, based on
enacted tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established,
when necessary, to reduce deferred income tax assets to the amount expected to
be realized.





Note 16.
Net Income (Loss) Per Share





Basic net
income (loss) per share includes no dilution and is computed by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding for the period.





12





Unexercised
stock options and warrants to purchase common stock and Notes convertible into
common stock as of March 31, 2005 are as follows:





Options
    
    
    718,700Warrants
    
    
    4,090,638Convertible
      Notes
    
    
    3,614,4588,423,796





The
foregoing common stock equivalents were excluded from the calculation of net
loss available to common shareholders since their inclusion would be
anti-dilutive.





PROPERTIES





We
currently lease approximately 5,738 square feet of office space in Horsham,
Pennsylvania under a lease agreement which expires on April 30, 2006. We also
lease two offices and shared conference, reception and information technology
services in Manhattan on a month-to-month basis from an entity controlled by a
shareholder at the rate of $3,000 per month per office, which we believe to be a
fair market rate based upon our study of executive office suite rates in the
midtown Manhattan area. In the opinion of our management, the leased properties
are adequately insured. Our existing properties are in good condition and
suitable for the conduct of our business.





Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations





Three
Month Period ended March 31, 2005 Compared to March 31, 2004





Results
of operations for the three months ended March 31, 2005 compared to March 31,
2004 are as follows:





13




%
      of
    
    
    
    %
      of
    
    $
      Change
    
    %
      ChangeFor
      the three months ended March 31,
    
    2005
    
    Revenues
    
    2004
    
    Revenues
    
    2004
      to 2005
    
    2004
      to 2005**Revenues**
    
    $
    555,664
    
    
    100.00
    %
    $
    547,499
    
    
    100.00
    %
    $
    8,164
    
    
    1.49
    %**Operating
      expenses:**Selling
    
    
    73,333
    
    
    13.20
    %
    
    127,973
    
    
    23.37
    %
    
    (54,640
    )
    
    -42.70
    %General
      and administrative
    
    
    544,078
    
    
    97.91
    %
    
    292,340
    
    
    53.40
    %
    
    251,738
    
    
    86.11
    %Depreciation
      and amortization
    
    
    87,539
    
    
    15.75
    %
    
    1,979
    
    
    0.36
    %
    
    85,560
    
    
    NMStock
      based compensation
    
    
    2,953
    
    
    0.53
    %
    
    
    
    
    0.00
    %
    
    2,953
    
    
    NM707,903
    
    
    127.40
    %
    
    422,293
    
    
    77.13
    %
    
    285,610
    
    
    67.63
    %**Operating
      income (loss)**
    
    
    (152,239
    )
    
    -27.40
    %
    
    125,207
    
    
    22.87
    %
    
    (277,446
    )
    
    -221.59
    %**Other
      income (expense):**Reverse
      acquisition transaction costs
    
    
    (215,000
    )
    
    -38.69
    %
    
    
    
    
    0.00
    %
    
    (215,000
    )
    
    NMInterest
      expense
    
    
    (37,519
    )
    
    -6.75
    %
    
    
    
    
    0.00
    %
    
    (37,519
    )
    
    NMInterest
      and dividend income
    
    
    3,081
    
    
    0.55
    %
    
    540
    
    
    0.10
    %
    
    2,541
    
    
    NM(249,438
    )
    
    -44.89
    %
    
    540
    
    
    0.10
    %
    
    (249,978
    )
    
    NMIncome
      (Loss) before provision for income taxes
    
    
    (401,677
    )
    
    -72.29
    %
    
    125,746
    
    
    22.97
    %
    
    (527,424
    )
    
    NMDeferred
      income tax benefit
    
    
    21,973
    
    
    3.95
    %
    
    
    
    
    0.00
    %
    
    21,973
    
    
    NMNet
      income (loss) available to common shareholders
    
    
    (379,704
    )
    
    -68.33
    %
    
    125,746
    
    
    22.97
    %
    
    ($505,450
    )
    
    NMPreferred
      dividends
    
    
    (68,603
    )Net
      Income (Loss)
    
    
    ($448,307
    )
    
    
    
    $
    125,746








NM - Not
meaningful





Revenues
for the three months ended March 31, 2005 increased $8,164 to $555,664 compared
to the three months ended March 31, 2004 as shown on the table
above.





14





The
primary factors contributing the revenue increase were:





·
    An
      increase of approximately $57,000 in revenues from our third party
      administration business


·
    An
      increase of approximately $29,000 in revenues from our investment
      management business


·
    A
      decrease of approximately $79,000 in premiums collected in our insurance
      business




Operating
expenses increased $285,610 to $707,903 from the prior year's first quarter. As
a percentage of sales, operating expenses increased by 67.63% when compared to
the three months ended March 31, 2004.





Selling
expenses decreased $54,640 to $73,333 from the prior year's first quarter. As a
percentage of sales, selling expenses decreased by 42.70% when compared to the
three months ended March 31, 2004.





General
and administrative expenses increased $251,738 to $544,078 from the prior year's
first quarter. As a percentage of sales, general and administrative expenses
increased by 86.11% when compared to the three months ended March 31,
2004.





Depreciation
and amortization increased $85,560 to $87,539 from the prior year's first
quarter.





Stock
based compensation increased $2,953 to $2,953 from the prior year's first
quarter.





The
decrease in selling expenses was primarily attributable to lower compensation
costs for sales personnel.





The
increase in general and administrative expense of $219,000, which accounted for
approximately 87% of the total increase in general and administrative expenses,
was mainly due to:





·
    Salaries
      and payroll fringe of approximately $120,000 for the Chief Executive
      Officer and Chief Financial Officer of the
registrant


·
    Professional
      fees of approximately $60,000


·
    Rent
      expense for the registrant of $24,000


·
    Directors
      and officers liability insurance of approximately
  $15,000





The
increase in depreciation and amortization was primarily attributable to
amortization of intangible and other assets of approximately
$87,000.





Other
income (expense)





Net other
expense increased $249,978 to $249,438 for the three months ended March 31, 2005
as compared to net other income of $540 for the three months ended March 31,
2004, was mainly due to:





·
    Interest
      expense of approximately $38,000 from our secured convertible note
      (including non-cash interest of $15,000 due to accretion of our secured
      convertible note), a secured convertible loan, loans to former owners of
      certain subsidiaries and interest on the financing of our directors and
      officers liability insurance policy


·
    Cash
      costs due to the reverse acquisition transaction of
    $215,000





15





Liquidity
and Capital Resources





Our cash,
working capital and stockholders' equity position is disclosed
below:


March
      31, 2005
    
    December
      31, 2004Unrestricted
      Cash
    
    $
    295,007
    
    $
    89,779Working
      Capital Deficit
    
    
    ($
      29,044
    )
    
    ($83,959
    )Stockholders'
      Equity
    
    $
    3,707,661
    
    $
    3,091,632
   The
Company had cash as of March 31, 2005 of $295,007, an increase of $205,228 from
December 31, 2004.





The
increase in cash was due to:





**Cash
      flows from operating activities:**Net
      loss available to common shareholders
    
    $
    (379,704
    )Adjustments
      to reconcile net loss to netcash
      used in operating activities:Depreciation
      and amortization
    
    
    109,653Non-cash
      interest
    
    
    15,000Stock-based
      compensation
    
    
    2,953Stock
      issued for services
    
    
    25,000Deferred
      income tax benefit
    
    
    (21,973
    )Increase
      (decrease) in cash attributable to changesin
      operating assets and liabilitiesAccounts
      receivable
    
    
    (41,389
    )Accrued
      interest receivable
    
    
    (2,778
    )Prepaid
      and other current assets
    
    
    (146,041
    )Accounts
      payable
    
    
    8,243Accrued
      expenses and other current liabilities
    
    
    (43,493
    )Accrued
      interest payable
    
    
    6,070**Net
      cash used in operating activities**
    
    
    (468,459
    )**Cash
      flows from investing activities:**Purchases
      of property and equipment
    
    
    (8,358
    )Acquisition
      costs (PAS transaction)
    
    
    (27,500
    )Cash
      acquired (reverse merger transaction)
    
    
    10,618Increase
      in restricted cash (for acquisition purposes)
    
    
    (2,500,000
    )**Net
      cash used in investing activities**
    
    
    (2,525,240
    )**Cash
      flows from financing activities:**Proceeds
      from convertible notes
    
    
    3,000,000Proceeds
      from short-term debt
    
    
    460,000Payments
      on short-term debt
    
    
    (23,831
    )Costs
      of 2004 common and preferred stock sales, netof
      $17,102 collected from the escrow agent
    
    
    (58,242
    )Payment
      of deferred financing costs
    
    
    (179,000
    )**Net
      cash provided by financing activities**
    
    
    3,198,927Increase
      in cash
    
    $
    205,228




16





Net cash
of $468,459 used in operating activities was primarily due to a net loss
available to common shareholders, increases in accounts receivable and prepaid
expenses of $379,704, $41,389 and $146,041 respectively, and reflect a quarterly
loss, increases required to support the seasonal high of our first fiscal
quarter receivables and capitalization of certain costs. These uses of cash were
offset by non cash items of $130,633.





Net cash
of $2,525,240 used in investing activities was primarily due to an increase of
cash restricted for acquisition purposes of $2,500,000 and acquisition costs of
$27,500.





Net cash
of $3,198,927 provided by financing activities was primarily due to the proceeds
of three loans (two of which are secured) of $3,460,000 less issuance costs of
the two secured notes of $179,000.





We
believe that our cash and cash equivalents as of March 31, 2005 and our
internally generated cash flow and available borrowings under existing lines
will provide us with sufficient liquidity to meet our currently foreseeable
short-term and long-term capital needs.





Future
Contractual Obligations





The
following table shows the Company's contractual obligations related to lease
obligations as of March 31, 2005:


Payments due by periodContractual
      obligations
    
    Total
    
    Less
      than 1 year
    
    1 -
      2 years$
    61,224
    
    $
    56,122
    
    $
    5,102
    Critical
Accounting Policies and Estimates





We
believe the following critical accounting policies affect the significant
judgments and estimates used in the preparation of our financial
statements:





o Revenue
Recognition





o Management's estimates





17


Revenue
Recognition





We
generate revenue primarily from the following three sources:





•
    
    *Third
      party administration.*





•
    
    *Financial
      planning and investment advisory fees and securities commissions.*





•
    
    *Insurance
      commissions*





We
recognize revenue from these sources, as follows:





·
    ***Third
      party administration.***·
    Persuasive
      evidence of an arrangement between the us and our client
      exists





·
    Delivery
      of the product to the customer has occurred or service has been provided
      to the customer·
    The
      price to the customer is fixed and
determinable





·
    Collectibility
      of the sales price is reasonably assured





·
    ***Financial
      planning and investment advisory fees and securities commissions.***·
    As
      services are rendered





·
    Contingent
      commissions are recorded as revenue when
received





·
    ***Insurance
      commissions***.·
    The
      policy application is substantially
complete





·
    The
      premium is paid·
    The
      insured party is contractually committed to the purchase of the insurance
      policy





Management's
Estimates





The
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities
and related disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts for revenues and
expenses during the reporting period. On an ongoing basis, management evaluates
estimates, including those related to allowances for doubtful accounts, as
described above, income taxes, bad debts, and contingencies. We base our
estimates on historical data, when available, experience, and on various other
assumptions that are believed to be reasonable under the circumstances, the
combined results of which form the basis for making judgments approximately the
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.





18





Inflation





While
inflation has not had a material effect on our operations in the past, there can
be no assurance that we will be able to continue to offset the effects of
inflation on the costs of our services through price increases to our clients
without experiencing a reduction in the demand for our services; or that
inflation will not have an overall effect on the retirement market that would
have a material affect on us.





Item
3. Quantitative and Qualitative Disclosures about Market Risks





General
economic and market factors, such as changes in interest rates or declines or
significant volatility in the securities markets, will affect our commission and
fee income. These factors can affect the volume of new investment sales and the
extent to which clients keep their investments and maintain funds in accounts we
manage. Equity returns and interest rates can have a significant effect on the
sale of many employee benefit programs whether they are financed by life
insurance or other financial instruments. For example, if interest rates
increase, competing products offering higher returns could become more
attractive to potential purchasers than the programs and policies we market and
distribute. Further, a decrease in stock prices can have a significant effect on
the sale of financial services products that are linked to the stock market,
such as variable life insurance, variable annuities, mutual funds and managed
accounts. In addition, a portion of our earnings will be derived from fees,
typically based on a percentage of assets under management, for offering
financial advice and related services to clients, and a decrease in stock prices
would reduces fees that are based on a percentage of assets under management.
Further, we will earn recurring commission revenue on certain products over a
period after the initial sale, provided the customer retains the product. These
factors may lead customers to surrender or terminate their products, ending
these recurring revenues. A portion of our earnings will be derived from
commissions and override payments from manufacturers of financial services
products that are based on the volume and profitability of business generated by
us. If investors were to seek alternatives to our investment advice and services
or to our insurance products and services, it could have a negative impact on
our revenue. We cannot guarantee that we will be able to compete with
alternative products if these market forces make our products and services
unattractive to clients. Finally, adverse general economic conditions may cause
potential customers to defer or forgo the purchase of products that we sell, for
example to invest more defensively or to surrender products to increase personal
cash flow.





Legislation
enacted in the spring of 2001 under the Economic Growth and Tax Relief
Reconciliation Act of 2001 (“EGTRRA”) increased the size of estates exempt from
the federal estate tax and phases in additional increases between 2002 and 2009.
EGTRRA also phases in reductions in the federal estate tax rate between 2002 and
2009 and repeals the federal estate tax entirely in 2010. Under EGTRRA, the
federal estate tax will be reinstated, without the increased exemption or
reduced rate, in 2011 and thereafter. However, President Bush and members of
Congress have expressed a desire to modify the current legislation, which could
result in additional increases in the size of estates exempt from the federal
estate tax, further reductions in the federal estate tax rate or a permanent
repeal of the federal estate tax. As enacted, EGTRRA has had a modest negative
impact on our revenue from the sale of estate planning services and products
including certain life insurance products that are often used to fund estate tax
obligations and could have a further negative impact on our insurance business
in the future. The pending bill, if enacted in its current form, or any
additional increases in the size of estates exempt from the federal estate tax,
further reductions in the federal estate tax rate or other legislation to
permanently repeal the federal estate tax, could have a material adverse effect
on our revenue. There can be no assurance that the pending bill will not be
enacted in its current form or, alternatively, that other legislation will not
be enacted that would have a further negative impact on our revenue.





19





Item
4. Controls and Procedures





Our Chief
Executive Officer and Chief Financial Officer conducted an evaluation of the
effectiveness of our disclosure controls and procedures. Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective as of March 31, 2005
in alerting them in a timely manner to material information required to be
included in our SEC reports. In addition, no change in our internal control over
financial reporting occurred during the fiscal quarter ended March 31, 2005 that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.





Special
Note Regarding Forward Looking Statements





This
Quarterly Report contains forward-looking statements as that term is defined in
the federal securities laws. The events described in forward-looking statements
contained in this Quarterly Report may not occur. Generally these statements
relate to business plans or strategies, projected or anticipated benefits or
other consequences of our plans or strategies, projected or anticipated benefits
from acquisitions to be made by us, or projections involving anticipated
revenues, earnings or other aspects of our operating results. The words "may,"
"will," "expect," "believe," "anticipate," "project," "plan," "intend,"
"estimate," and "continue," and their opposites and similar expressions are
intended to identify forward-looking statements. We caution you that these
statements are not guarantees of future performance or events and are subject to
a number of uncertainties, risks and other influences (including, but not
limited to, those set forth in our Form SB-2 filed on April 19 th , 2005),
many of which are beyond our control, that may influence the accuracy of the
statements and the projections upon which the statements are based. Any one or
more of these uncertainties, risks and other influences could materially affect
our results of operations and whether forward looking statements made by us
ultimately prove to be accurate. Our actual results, performance and
achievements could differ materially from those expressed or implied in these
forward-looking statements. We undertake no obligation to publicly update or
revise any forward-looking statements, whether from new information, future
events or otherwise.





20





PART
II. OTHER INFORMATION




Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds





On
February 21, 2005, we sold 473,994 shares of Common Stock for gross proceeds of
$13,320 to Glenn A. Little. This issuance was made to Mr. Little, an accredited
investor, in reliance on Section 4(2) of the Act. On that date, we also sold a
total of 110,000 shares of Common Stock to ten other person who represented to
us that they were accredited investors, in reliance on Section 4(2) of the Act.
These shares are restricted securities under the Act and will not be eligible
for resale unless we file a registration covering such securities or another
exemption from the registration requirements under the Act is
available.





Effective
February 28, 2005, we issued 200,082 shares of Common Stock to Michael
Bluestein, one of our directors, with respect to the conversion of a total of
$150,061.31 of principal and interest under two convertible promissory notes at
the conversion price of $0.75 per share. The promissory notes had been issued in
connection with the acquisition from Mr. Bluestein of his interests in PAS, MDB
and CIM in December 2004. This issuance was made to Mr. Bluestein, an accredited
investor, in reliance on Section 4(2) of the Act. These shares are restricted
securities under the Act and will not be eligible for resale unless we file a
registration covering such securities or another exemption from the registration
requirements under the Act is available.





Effective
February 28, 2005, we issued 94,731 shares of Common Stock to Irene Feeley with
respect to the conversion of a total of $71,048.06 of principal and interest
under a convertible promissory note at the conversion price of $0.75 per share.
The promissory note had been issued in connection with the acquisition from Ms.
Feeley of her interest in CIM in December 2004. This issuance was made to Ms.
Feeley, an accredited investor, in reliance on Section 4(2) of the Act. These
shares are restricted securities under the Act and will not be eligible for
resale unless we file a registration covering such securities or another
exemption from the registration requirements under the Act is
available.





In
consideration for $25,000 due to John Rice for services rendered and completed
on March 9, 2005, on April 14, 2005 we issued to Mr. Rice 149,700 shares of
Common Stock. This issuance was made to Mr. Rice, an accredited investor, in
reliance on Section 4(2) of the Act. These shares are restricted securities
under the Act and will not be eligible for resale unless we file a registration
covering such securities or another exemption from the registration requirements
under the Act is available.





21





As
previously reported in our Form 8-K filed with the Securities and Exchange
Commission on March 15, 2005, we completed our acquisition of Duncan Capital
Financial Group, Inc. (“Duncan”) on March 9, 2005. The acquisition was made
pursuant to the Agreement and Plan of Reorganization, dated February 18, 2005
(the “Acquisition Agreement”), among us, Glenn A. Little and Duncan. Under the
terms of the Acquisition Agreement, each share of Duncan common stock
outstanding immediately prior to the Effective Date was exchanged for one share
of our Common Stock. As a result of the Acquisition, we issued 12,040,000 shares
of common stock to the former stockholders of Duncan. In addition to the Common
Stock issued to the former stockholders of Duncan, under the Acquisition
Agreement each outstanding option or warrant to purchase Duncan common stock was
converted into an option to purchase the number of shares of our Common Stock
equal to the number of Duncan common shares underlying the option or warrant
immediately prior to the closing date. The issuance of our Common Stock and of
options and warrants to acquire Common Stock were made pursuant to an exemption
from the registration requirements under the Securities Act of 1933. Each of the
stockholders of Duncan to whom we issued common stock, options or warrants was
an accredited investor within the meaning of the Act, and the Acquisition was
conducted as a private placement in accordance with Rule 506 of Regulation D
under the Act. The Common Stock, warrants and options we issued in the
Acquisition, and the shares of our Common Stock underlying the options and
warrants, are restricted securities under the Act and will not be eligible for
resale unless we file a registration statement covering such securities or
another exemption from the registration requirements under the Securities Act of
1933 is available to a particular selling stockholder.





In
addition, as previously reported in our Form 8-K filed with the Securities and
Exchange Commission on March 15, 2005, on March 9, 2005, we entered into a
Securities Purchase Agreement with Laurus Master Fund, Ltd. (“Laurus”), under
which we issued and delivered to Laurus (i) a secured convertible term note in
the principal amount of $3,000,000 (the “Note”), (ii) **** a Common
Stock Purchase Warrant (the “Warrant”), entitling Laurus to purchase up to
1,084,338 shares of our Common Stock at a per share exercise price of $1.00, and
(iii) an option (“Option”) entitling Laurus to purchase up to 643,700 shares of
Common Stock at a per share purchase price of $0.01. The issuance and sale of
the Note, the Warrant and the Option were made pursuant to the exemption from
registration under Section 4(2) under the Securities Act of 1933, as amended
(the “Act”), and Regulation D promulgated under the Act. Laurus has represented
to the Company that Laurus is an accredited investor under the Act and the rules
promulgated thereunder.





At
closing, $500,000 of Note proceeds were disbursed to the Company for working
capital purposes. The Company paid fees to Laurus of $134,000 out of these gross
proceeds and also paid $200,000 to settle outstanding liabilities of the
registrant in connection with the acquisition of Duncan Capital Financial Group,
Inc. We retained $166,000 of the proceeds for working capital purposes. The
remaining $2,500,000 of Note proceeds were deposited by us at a bank in a
restricted cash account under the control of Laurus (“Restricted Account”).
Funds will be released by Laurus to the Company from the Restricted Account as
follows: In connection with certain business acquisitions to be made by the
Company, Laurus will direct the bank to release to the Company an amount of
funds equal to the product of three times the “Acquired Entity Consolidated
EBITDA” of the acquired entities. “Acquired Entity Consolidated EBITDA” is
defined as net income before giving effect to interest, taxes, depreciation and
amortization.





22





Laurus
may, at any time, convert the outstanding indebtedness of the Note into shares
of Common Stock at a price of $0.83 per share, subject to adjustment for
subsequent lower price issuances by the Company (subject to certain exceptions),
as well as customary adjustment provisions for stock splits, combinations,
dividends and the like. Subject to the restrictions on conversion by Laurus
described below, Laurus is required to convert the monthly payment due on
account of principal and interest, plus any other amounts under the Note that
are due and unpaid (“Monthly Amount”), into shares of Common Stock if the
following criteria (“Conversion Criteria”) are met:(i) the average closing price
of the Common Stock for the five consecutive trading days preceding such due
date is greater than 120% of the Fixed Conversion Price, and (ii) the amount of
such conversion does not exceed 25% of the aggregate dollar trading volume of
the Common Stock for the 22-day trading period immediately preceding the due
date of the applicable Monthly Amount. If the Conversion Criteria are not met,
Laurus must convert only such part of the Monthly Amount that meets the
Conversion Criteria. Any part of the Monthly Amount due on a Repayment Date that
Laurus has not been able to convert into shares of Common Stock due to failure
to meet the Conversion Criteria must be paid by the Company in cash within three
business days of the applicable monthly payment date.





The
Warrant grants Laurus the right to purchase up to 1,084,338 shares of Common
Stock at an exercise price of $1.00 per share commencing March 9, 2005. The
Warrant expires at the close of business on March 9, 2012. The exercise price of
the Warrant is subject to adjustment for stock splits, combinations, dividends
and the like.





The
Option grants Laurus the right to purchase for cash up to 643,700 shares of
Common Stock at an exercise price of $0.01 per share on or after the
75 th day
after Laurus delivers a notice to the Company stating that Laurus wishes to
exercise all or a portion of the underlying Common Stock. The Option expires at
the close of business on March 9, 2013. The exercise price of the Warrant is
subject to adjustment for stock splits, combinations, dividends and the
like.





The
Company may pay amounts due under the Note in shares of Common Stock only so
long as there is an effective registration statement under Act covering the
resale of such shares or an exemption from such registration is available under
Rule 144 of the Act. In addition, Laurus is not entitled to receive shares of
Common Stock upon exercise of the Warrant or the Option, upon payment of
principal or interest on the Note, or upon conversion of the Note if such
receipt would cause Laurus to be deemed to beneficially own in excess of 4.99%
of the outstanding shares of Common Stock on the date of issuance of such
shares. Such provision may be waived by Laurus upon 75 days prior written notice
to the Company.





Under the
terms of a Registration Rights Agreement between Laurus and the Company, the
Company is obligated to register the resale of the shares of Common Stock
issuable upon payment or conversion of the Note and exercise of the Warrant and
Option and have the registration statement declared effective by the Securities
and Exchange Commission on or prior to July 7, 2005. If the registration
statement is not declared effective within the time frame described, or if the
registration is suspended other than as permitted in the registration rights
agreement, the Company will be obligated to pay Laurus a fee equal to 1.5% of
the outstanding principal amount of the Note for each 30-day period (pro rated
for partial periods) that such registration obligations are not satisfied.





23





As
previously reported in our Form 8-K filed on March 22, 2005 with the Securities
and Exchange Commission, our Board of Directors authorized the issuance of up to
4,000,000 shares of 12% Series A Convertible Preferred Stock (“Series A
Preferred”), in accordance with the Agreement and Plan of Reorganization entered
into on February 18, 2005 among the company, Duncan Capital Financial Group,
Inc. and Glenn A. Little. On April 12, 2005, we completed the issuance of
3,820,000 shares of Series A Preferred to a total of ten holders of preferred
stock of our subsidiary, Duncan Capital Financial Group, Inc., in exchange for
their surrender of an equivalent number of preferred shares of Duncan Capital
Financial Group, Inc. containing identical terms. We received no other
consideration. Each shareholder to whom Series A Preferred shares were issued is
an accredited investor within the meaning of the Act, and the issuance of the
shares of Series A Preferred was made in reliance on Section 4(2) of the Act.
There were no underwriting discounts or commissions paid in connection with this
share exchange. The shares of Series A Preferred, and the underlying shares of
common stock into which they are convertible, are restricted securities under
the Act and will not be eligible for resale unless we file a registration
statement covering such securities or another exemption from registration
requirements under the Act is available.





Item 4. -
Submission of Matters to a Vote of Security Holders





On
January 18, 2005, by written consents in lieu of meeting, shareholders
representing approximately 70% of the issued and outstanding shares of the
Company's common stock approved a recommendation of the Company's Board of
Directors to effect a one share for twenty shares reverse split of the Company's
common stock, par value $.001 per share, with all fractional shares rounded up to the
nearest whole share.





As
previously reported in our Form 8-K filed on March 21, 2005 with the Securities
and Exchange Commission, on March
15, 2005, we amended our Articles of Incorporation to change the name of our
company to National Investment Managers Inc. (“Name Change Amendment”). The Name
Change Amendment was filed with the Secretary of State of the State of Florida
on March 15, 2005. This amendment to our Articles of Incorporation was
authorized by our Board of Directors and approved by written consent of
shareholders without a meeting under Section 607.0704 of the Florida Business
Corporation Act (FBCA”), which shareholders represented approximately 51% of the
issued and outstanding shares of our common stock.





As
previously reported in our Form 8-K filed on March 22, 2005 with the Securities
and Exchange Commission, on March
18, 2005, we amended our Articles of Incorporation to create a class of “blank
check” preferred stock, par value $0.001 per share, consisting of 10,000,000
shares. The Blank Check Preferred Stock Amendment was filed with the Secretary
of State of the State of Florida on March 18, 2005. This amendment to our
Articles of Incorporation was authorized by our Board of Directors and approved
by written consent of shareholders without a meeting under Section 607.0704 of
the FBCA, which shareholders represented approximately 51% of the issued and
outstanding shares of our common stock.





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We do not
presently have a class of equity securities registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the “1934 Act”), and are therefore
not subject to the proxy solicitation requirements of the 1934 Act.





Item 6.
Exhibits and Reports on Form 8-K





Exhibits





31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002





31.2
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002





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Certification of Chief Executive Officer and Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002





(b)
Reports on Form 8-K





On
February 23, 2005, we filed a Report on Form 8-K with respect to our entry into
a material definitive agreement with Duncan Capital Financial Group (“Duncan”)
regarding the acquisition by shareholders of Duncan of a controlling interest in
our company through an agreement and plan of reorganization (the “Duncan
Acquisition”).





On March
15, 2005, we filed a Report on Form 8-K with respect to (i) the closing of the
Duncan Acquisition, (ii) unregistered sales of equity securities with respect to
the Duncan Acquisition, (iii) the change of control of our company as a result
of the Duncan Acquisition, (iv) our entry into financing arrangements with
Laurus Master Fund, Ltd., and (v) changes in our certifying
accountant.





On March
21, 2005, we filed a Report on Form 8-K with respect to the amendment of our
Articles of Incorporation to change our name to “National Investment Managers
Inc.”





On March
22, 2005, we filed a Report on Form 8-K with respect to the amendment of our
Articles of Incorporation to authorize the issuance of a class of blank check
preferred stock.





25





On April
14, 2005, we filed a Report on Form 8-K with respect to the unregistered sale of
equity securities relating to the completion of the exchange of preferred stock
in connection with the Duncan Acquisition.





On April
14, 2005, we filed an amended Report on Form 8-K, amending our report of March
15, 2005, with respect to the filing of audited and pro forma financial
information in connection with the Duncan Acquisition.




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.





NATIONAL INVESTMENT
      MANAGERS INC.RegistrantDate: May 13, 2005
    By:
    /s/ Richard StierwaltRICHARD STIERWALTChief Executive Officer and
      Director
 ****Date: May 13, 2005
    By:
    /s/ Leonard NeuhausLEONARD NEUHAUSChief Financial Officer





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