10-Q 1 a6124901.txt UNIVERSAL INFOTAINMENT SYSTEMS CORPORATION 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 2009 |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ______________ to ______________ Universal Infotainment Systems Corporation ------------------------------------------ (Name of small business issuer in our charter) Nevada 3670 80 018 7018 (State or other jurisdiction of (Primary Standard IRS I.D. incorporation or organization) Industrial Classification Code Number) East West Corporate Center 1771 Diehl Road, Suite 330 Naperville, Illinois 60563 Registrant's telephone number: 630-390-7674 SEC File No. 333-154227 N/A -------------------------------------------------------------------------------- (Former name, former address and former three months, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 |X| No |_| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |_| Smaller Reporting Company |X| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X| As of December 21st, 2009 there were 29,564,246 shares issued and outstanding of the registrant's common stock. TABLE OF CONTENTS PART I -- FINANCIAL INFORMATION 2-13 Item 1. Financial Statements. 2-13 Item 2. Management's Discussion and Analysis or Plan of Operation. 14 Item 3. Quantitative and Qualitative Disclosure about Market Risk 18 Item 4. Controls and Procedures. 18 PART II -- OTHER INFORMATION 19 Item 1. Legal Proceedings. 19 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 19 Item 3. Defaults Upon Senior Securities 21 Item 4. Submission of Matters to a Vote of Security Holders. 21 Item 5. Other Information. 21 Item 6. Exhibits. 21 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. UNIVERSAL INFOTAINMENT SYSTEMS CORPORATION AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2009 (UNAUDITED) TABLE OF CONTENTS Page ---- Consolidated Balance Sheets at October 31, 2009 (unaudited) and April 30, 2009 2 Consolidated Statements of Operations for the three and six months ended October 31, 2009 and 2008 (unaudited) and the period from April 14, 2008 (Inception) to October 31, 2009 (unaudited) 3 - 4 Consolidated Statement of Changes in Stockholders' Equity (Deficit) for the six months ended October 31, 2009 (unaudited) and the period from April 14, 2008 (Inception) to October 31, 2009 (unaudited) 5 Consolidated Statements of Cash Flows for the six months ended October 31, 2009 and 2008 (unaudited) and the period from April 14, 2008 (Inception) to October 31, 2009 (unaudited) 6 Condensed Notes to Consolidated Financial Statements (unaudited) 7 - 13 Universal Infotainment Systems Corporation and Subsidiary (a development stage company) Consolidated Balance Sheets ASSETS October 31, 2009 (unaudited) April 30, 2009 ----------------- ----------------- Current assets Cash $ 10,000 $ 1,206 Prepaid expenses 61 4,061 ----------------- ----------------- Total current assets 10,061 5,267 Property and equipment, net 49,429 48,619 Other assets Deposits 7,231 7,231 Intangibles 550 550 ----------------- ----------------- Total other assets 7,781 7,781 ----------------- ----------------- Total assets $ 67,271 $ 61,667 ================= ================= LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities Current maturity of note payable $ 11,657 $ 7,753 Accounts payable 47,710 33,461 Accrued compensation 69,996 34,998 Accrued interest 8,282 6,441 Other current liabilities 2,000 - Due to officer - related party 81,076 100,385 ----------------- ----------------- Total current liabilities 220,721 183,038 Note payable, less current maturity 9,531 14,645 Deferred rent 9,538 9,798 ----------------- ----------------- Total liabilities 239,790 207,481 ----------------- ----------------- Commitments and Contingencies (Note 8) Stockholders' equity (deficit) Preferred stock, $0.0001 par value; 50,000,000 shares authorized; no shares issued and outstanding at October 31, 2009 - - and April 30, 2009, respectively Common stock, $0.0001 par value; 100,000,000 shares authorized; 29,244,246 and 28,557,246 shares issued and outstanding at 2,925 2,856 October 31, 2009 and April 30, 2009, respectively Common stock Issuable, 570,000 and 125,000 shares at October 31, 2009 and April 30, 2009, respectively 56 12 Additional Paid in Capital 419,953 252,671 Deficit accumulated during the development stage (595,453) (401,353) ----------------- ----------------- Total stockholders' equity (deficit) (172,519) (145,814) ----------------- ----------------- Total liabilities and stockholders' deficit $ 67,271 $ 61,667 ================= ================= See Accompanying Unaudited Condensed Consolidated Notes to Financial Statements 2

Universal Infotainment Systems Corporation and Subsidiary (a development stage company) Consolidated Statements of Operations Three Months Three Months Ended Ended October 31, October 31, 2009 2008 (unaudited) (unaudited) ------------ ------------ Revenues $ - $ - Operating expenses General and administrative expenses 39,711 102,672 Compensation expense 46,249 33,000 ------------ ------------ Total operating expenses 85,960 135,672 ------------ ------------ Loss from operations (85,960) (135,672) Other income (expense) Interest income - 49 Interest expense (4,425) (4,205) ------------ ------------ Total other (expense) (4,425) (4,156) ------------ ------------ Net loss $ (90,385) $ (139,828) ============ ============ Basic and diluted net loss per share $ - $ - ============ ============ Basic and diluted weighted average common shares outstanding 29,615,007 28,557,246 ============ ============ See Accompanying Unaudited Condensed Consolidated Notes to Financial Statements 3 Universal Infotainment Systems Corporation and Subsidiary (a development stage company) Consolidated Statements of Operations Period from Six Months Six Months April 14, Ended Ended 2008 (Inception) October 31, October 31, to October 31, 2009 2008 2009 (unaudited) (unaudited) (unaudited) ---------------- ---------------- ----------------- Revenues $ - $ - $ - Operating expenses General and administrative expenses 86,391 108,577 266,480 Compensation expense 98,498 61,996 265,995 Research and Development expense - - 39,500 ---------------- ---------------- ----------------- Total operating expenses 184,889 170,573 571,975 ---------------- ---------------- ----------------- Loss from operations (184,889) (170,573) (571,975) Other income (expense) Interest income - 49 57 Interest expense (9,211) (4,730) (23,690) Miscellaneous income - 155 155 ---------------- ---------------- ----------------- Total other (expense) (9,211) (4,526) (23,478) ---------------- ---------------- ----------------- Net loss $ (194,100) $ (175,099) $ (595,453) ================ ================ ================= Basic and diluted net loss per share $ (0.01) $ (0.01) $ (0.02) ================ ================ ================= Basic and diluted weighted average common shares outstanding 29,357,121 28,192,216 28,721,692 ================ ================ ================= See Accompanying Unaudited Condensed Consolidated Notes to Financial Statements 4

Universal Infotainment Systems Corporation and Subsidiary (a development stage company) Consolidated Statement of Changes in Stockholders' Equity (Deficit) For the Periods from April 14, 2008 (Inception) to April 30, 2008, the Year Ended April 30, 2009, the Six Months Ended October 31, 2009 (unaudited) and from April 14, 2008 (Inception) to October 31, 2009 (unaudited) Deficit Accumulated Total Common Stock Issued Common Stock Issuable Additional During Stockholders' -------------------- ----------------------- Paid In Development Equity Shares Amount Shares Amount Capital Stage (Deficit) ---------- --------- --------- ------------- ---------- ----------- ------------- Balance at April 14, 2008 (Inception) - $ - - $ - $ - $ - $ - Net loss, April 14, 2008 (Inception) through April 30, 2008 - - - - - (510) (510) ---------- --------- --------- ------------- ---------- ----------- ------------- Balance at April 30, 2008 - - - - - (510) (510) Issuance of common stock for cash, net 25,954,460 2,596 - - 85,135 - 87,731 Issuance of common stock for services 2,602,786 260 - - 548 - 808 Common stock issuable for services - - 125,000 12 12,488 - 12,500 Valuation of Officer's contributed services - - - - 115,000 - 115,000 Valuation of contributed research and development services - - - - 39,500 - 39,500 Net loss, year ended April 30, 2009 - - - - - (400,843) (400,843) ---------- --------- --------- ------------- ---------- ----------- ------------- Balances at April 30, 2009 28,557,246 $ 2,856 125,000 $ 12 $252,671 $(401,353) $(145,814) ========== ========= ========= ============= ========== =========== ============= Issuance of common stock for cash, net 542,000 54 380,000 38 88,803 - 88,895 Issuance of common stock for services 135,000 14 75,000 7 20,979 - 21,000 Issuance of previously issuable shares for services 10,000 1 (10,000) (1) - - - Valuation of Officer's contributed services - - - - 57,500 - 57,500 Net loss, six months ended October 31, 2009 - - - - - (194,100) (194,100) ---------- --------- --------- ------------- ---------- ----------- ------------- Balances at October 31, 2009 (unaudited) 29,244,246 $ 2,925 570,000 $ 56 $419,953 $(595,453) $(172,519) ========== ========= ========= ============= ========== =========== ============= See Accompanying Unaudited Condensed Consolidated Notes to Financial Statements 5

Universal Infotainment Systems Corporation and Subsidiary (a development stage company) Consolidated Statements of Cash Flows Period from April 14, Six Months Six Months 2008 (Inception) Ended Ended to October 31, October 31, October 31, 2009 2008 2009 (unaudited) (unaudited) (unaudited) ------------------- ------------------ -------------------- Cash flows from Operating activities: Net loss $ (194,100) $ (175,099) $ (595,453) Adjustment to reconcile net loss to net cash used in operating activities: Depreciation 4,840 1,736 10,835 Impairment of intangibles - 825 825 Common stock issued for services 21,000 808 21,808 Officer's non-cash contributed services 57,500 57,500 172,500 Non-cash contributed research & development services - - 39,500 Common stock issuable for services - - 12,500 Changes in operating assets and liabilities: Prepaid expenses 4,000 (4,061) (61) Deposits - (7,231) (7,231) Accounts payable 14,249 10,600 47,710 Accrued expenses & other current liabilities 38,839 1,353 80,278 Deferred rent (260) 10,057 9,538 ------------------- ------------------ -------------------- Net cash used in operating activities (53,932) (103,512) (207,251) ------------------- ------------------ -------------------- Cash flows from Investing activities: Purchase of property (5,650) (30,709) (36,359) ------------------- ------------------ -------------------- Net cash used in investing activities (5,650) (30,709) (36,359) ------------------- ------------------ -------------------- Cash flows from Financing activities: Proceeds from officer loans 5,320 58,718 112,373 Repayment of officer loans (24,629) (8,043) (32,672) Repayment of note payable (1,210) (998) (2,717) Proceeds from sale of common stock, net 88,895 97,947 176,626 ------------------- ------------------ -------------------- Net cash provided by financing activities 68,376 147,624 253,610 ------------------- ------------------ -------------------- Net increase in cash 8,794 13,403 10,000 Cash, beginning of period 1,206 - - ------------------- ------------------ -------------------- Cash, end of period $ 10,000 $ 13,403 $ 10,000 =================== ================== ==================== Supplemental disclosures of cash flow information Cash paid during the period for: Interest paid $ 5,189 $ - $ 10,152 =================== ================== ==================== Income taxes paid $ - $ - $ - =================== ================== ==================== Supplemental schedule of non-cash investing and financing activities Officer's payment of intangible costs $ - $ - $ 1,375 =================== ================== ==================== Acquisition of property through issuance of long-term debt $ - $ 23,905 $ 23,905 =================== ================== ==================== See Accompanying Unaudited Condensed Consolidated Notes to Financial Statements 6

Universal Infotainment Systems Corporation and Subsidiary (a development stage company) Condensed Notes to Unaudited Consolidated Financial Statements Six Months Ended October 31, 2009 (unaudited) -------------------------------------------------------------------------------- Note 1 - Nature of Operations and Summary of Significant Accounting Policies -------------------------------------------------------------------------------- Nature of Operations -------------------- Universal Infotainment Systems Corporation (UISC, we, us, our or, the Company) is a Nevada corporation with its principal corporate offices in Naperville, Illinois. In April 2008, the Company acquired its completed UNS Infotainment Systems technology from an affiliated entity (Note 6) and is focusing its efforts on raising sufficient additional capital to allow it to enter into production agreements with potential manufacturing partners in order to begin the commercializing of its technology and products. The UNS Infotainment Systems technology combines the Company's proprietary GPS system with aerial photographs, and audio and video communications capabilities for internet, e-mail, text messaging and similar functions available on many cellular telephones for use in passenger, commercial and governmental agency vehicles. The Company is organizing its technology offerings into three main product lines: (1) UNS Infotainment and Navigation System for personal use, (2) UNS Fleet Management and Tracking Application for corporate use, and (3) Stealth and Covert Monitoring Systems for approved governmental agency use. On June 17, 2009, the Company incorporated Global UNS Labs, Inc. as a wholly-owned subsidiary in the State of Nevada. The subsidiary will be responsible for the Company's research and development efforts. Summary of Significant Accounting Policies ------------------------------------------ Basis of presentation of interim financial statements The Company is presented as in the development stage from inception through October 31, 2009. To-date, the Company's business activities during its development stage consist solely of corporate formation, technology acquisition, and raising capital. The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the U.S. Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position and results of operations. Accordingly, these interim consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our Form 10-K/A for the year ended April 30, 2009. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments and certain non-recurring adjustments) have been made that are necessary for a fair financial statement presentation. The results for the six-month period ended October 31, 2009 are not necessarily indicative of the results that may be expected for the year ending April 30, 2010. 7 Universal Infotainment Systems Corporation and Subsidiary (a development stage company) Condensed Notes to Unaudited Consolidated Financial Statements Six Months Ended October 31, 2009 (unaudited) -------------------------------------------------------------------------------- Note 1 - Nature of Operations and Summary of Significant Accounting Policies (continued) -------------------------------------------------------------------------------- Summary of Significant Accounting Policies (continued) ------------------------------------------------------ Use of estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 and the reported amounts of revenues and expenses during the reporting periods. Accordingly, actual results could differ from those estimates used in the preparation of these consolidated financial statements. Significant estimates in the accompanying consolidated financial statements include the estimation of depreciable lives and valuation of property and equipment, valuation of intangible assets, valuation of common stock issued for services, valuation of non-cash contributed services, and deferred income tax valuation allowance. Fair Value of Financial Instruments The Company's financial instruments, including cash and cash equivalents, accounts receivable, notes payable, accounts payable and accrued expenses, are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiary, Global UNS Labs, Inc. All material inter-company balances and transactions have been eliminated in consolidation. Recent Accounting Pronouncements In May 2009, the Financial Accounting Standards Board ("FASB") issued an accounting standard that became part of ASC Topic 855, "Subsequent Events". ASC Topic 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC Topic 855 sets forth (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. ASC Topic 855 is effective for interim or annual financial periods ending after June 15, 2009. The adoption of ASC Topic 855 did not have a material effect on the Company's financial statements. In June 2009, the FASB issued an accounting standard whereby the FASB Accounting Standards Codification ("Codification") will be the single source of authoritative nongovernmental U.S. generally accepted accounting principles. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. ASC Topic 105 is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards are superseded as described in ASC Topic 105. All other accounting literature not included in the Codification is non-authoritative. The Codification is not expected to have a significant impact on the Company's consolidated financial statements. 8 Universal Infotainment Systems Corporation and Subsidiary (a development stage company) Condensed Notes to Unaudited Consolidated Financial Statements Six Months Ended October 31, 2009 (unaudited) -------------------------------------------------------------------------------- Note 2 - Going Concern -------------------------------------------------------------------------------- The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. For the six months ended October 31, 2009, the Company had a net loss of $194,100 and net cash used in operations of $53,932. In addition, as of October 31, 2009, the Company was a development stage company with no revenues and a deficit accumulated during the development stage of $595,453. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These unaudited consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. In order to execute its business plan, the Company will need to raise additional working capital and generate revenues. There can be no assurance that the Company will be able to obtain the necessary working capital or generate revenues to execute its business plan. Management's plan in this regard, include completing product development, generating marketing agreements with product distributors and the additional funds received through a private placement offering of Company common stock during the first and second quarters of fiscal 2010. Management believes its business development and capital raising activities will provide the Company with the ability to continue as a going concern. -------------------------------------------------------------------------------- Note 3 - Concentrations -------------------------------------------------------------------------------- Our financial instruments that are potentially exposed to credit risk consist primarily of cash. At certain times during the year our demand deposits held in banks exceeded federally insured limits. As of October 31, 2009, there were no amounts in excess of FDIC insured limits. -------------------------------------------------------------------------------- Note 4 - Property and equipment -------------------------------------------------------------------------------- Property and equipment consisted of the following: October 31, 2009 (unaudited) April 30, 2009 -------------- --------------- Office furniture and equipment $ 33,423 $ 33,423 Computer equipment 17,328 17,328 Telephone 3,863 3,863 Leasehold Improvements 5,650 - -------------- --------------- 60,264 54,614 Less: accumulated depreciation 10,835 5,995 -------------- --------------- Property and equipment, net $ 49,429 $ 48,619 ============== =============== 9 Universal Infotainment Systems Corporation and Subsidiary (a development stage company) Condensed Notes to Unaudited Consolidated Financial Statements Six Months Ended October 31, 2009 (unaudited) ------------------------------------------------------------------------------- Note 4 - Property and equipment (Continued) ------------------------------------------------------------------------------- Depreciation expense was $4,840 during the six month period ended October 31, 2009 and $5,995 during the year ended April 30, 2009. ------------------------------------------------------------------------------- Note 5 - Note Payable ------------------------------------------------------------------------------- Note payable consisted of the following: October 31, 2009 (unaudited) April 30, 2009 -------------- --------------- Note payable - furniture payable in monthly installments for principal and interest of $1,600 through February 2011 with a final payment of $5,000 due by February 28, 2011. The debt is secured by the furniture acquired. $ 21,188 $ 22,398 Less: current maturity 11,657 7,753 -------------- --------------- Note payable, less current maturity $ 9,531 $ 14,645 ============== =============== Interest expense was $7,031 during the six month period ended October 31, 2009 and $11,334 during the year ended April 30, 2009. Future maturities of long-term debt are as follows for the periods ending October 31: Total ----------------- 2010 $ 11,668 2011 9,520 ----------------- Total $ 21,188 ================= -------------------------------------------------------------------------------- Note 6 - Related Party Transactions -------------------------------------------------------------------------------- On April 16, 2008, the Company acquired its UNS system and underlying technology from Universal Global Corporation, an entity wholly-owned by the Company's Chairman. Under the assignment agreement, Universal Global assigned all rights, title and interest in the UNS system to the Company for its further development and commercialization. There was no consideration required to be paid by the Company in exchange for the UNS system. The assets were recorded by the Company at their historical cost basis to Universal Global Corporation of zero. On July 15, 2008, the Company entered into a sub-lease agreement with an affiliate entity whose President is also the Chairman of our Company, for its corporate offices under terms of a non-cancelable operating lease. The lease term is from July 16, 2008 through October 31, 2013 and requires an escalating monthly lease payment over the term of the lease ranging from $3,149 to $3,615. Deferred rent aggregated $9,538 as of October 31, 2009. The lease required a security deposit of $7,231. 10 Universal Infotainment Systems Corporation and Subsidiary (a development stage company) Condensed Notes to Unaudited Consolidated Financial Statements Six Months Ended October 31, 2009 (unaudited) -------------------------------------------------------------------------------- Note 6 - Related Party Transactions (Continued) -------------------------------------------------------------------------------- As of October 31, 2009, the Company owed one of its officers an aggregate of $81,076, which was comprised of initial startup costs, cash advances and other expenses the officer paid on behalf of the Company net of repayments. The balance of the Due to Officer account bears interest at a rate of 5%. Total accrued interest as of October 31, 2009, amounted to $5,325 and is included in "Due to officer - related party" in the accompanying consolidated financial statements. -------------------------------------------------------------------------------- Note 7 - Stockholders' Equity (Deficit) -------------------------------------------------------------------------------- Capital structure On April 14, 2008, the Company was originally incorporated with 500,000,000 shares of common stock authorized with a $0.0001 par value and 500,000,000 shares of preferred stock with a $0.0001 par value. Subsequently, on July 17, 2008, the Company amended its articles to 100,000,000 shares of common stock authorized with a $0.0001 par value and 50,000,000 shares of preferred stock with a $0.0001 par value. All references in the accompanying unaudited consolidated financial statements to the number of common and preferred shares, par values and per share amounts have been retroactively adjusted to reflect these amendments. Shares issued for cash During the period from May 1, 2009 through October 31, 2009, the Company issued 922,000 shares of its common stock at $0.10 per share in a private placement, raising $88,895, net of $3,305 of associated offering costs. Issuance of Common Stock for Services - Employment Agreement Effective May 2, 2009, the Company entered into an employment agreement with an individual, which provides for cash compensation upon the Company successfully raising a predetermined amount of capital. The agreement also provides an execution bonus of 60,000 vested shares of Company common stock. The stock was valued at $0.10, based on the contemporaneous cash sale price, resulting in a total valuation and expense of $6,000. Issuance of Common Stock for Services - Legal agreement In May 2009, the company entered into an agreement requiring it to issue 300,000 common shares of its common stock in exchange for legal services for fiscal year ending April 30, 2010. The shares are issuable quarterly in advance. 150,000 shares were issued during first and second quarters of fiscal 2010 pursuant to this agreement. The stock valued at $.10 or $15,000 based on the contemporaneous cash sale price. 11 Universal Infotainment Systems Corporation and Subsidiary (a development stage company) Condensed Notes to Unaudited Consolidated Financial Statements Six Months Ended October 31, 2009 (unaudited) -------------------------------------------------------------------------------- Note 7 - Stockholders' Equity (Deficit) (Continued) -------------------------------------------------------------------------------- Contributed capital For the six months ended October 31, 2009, the Company's Chairman of the board and founding shareholder has provided services to the Company without the expectation of receiving any compensating payment. The value of these services was estimated at $57,500, based upon an existing compensation contract with the director in which he has forgiven payments until such time as the Company has sufficient operating funds. Accordingly, the Company has recorded the value of these services as a charge to operations and a corresponding credit to Additional Paid in Capital in these accompanying consolidated financial statements. The agreement is renewable for additional five-year periods, subject to certain conditions, and the initial fee is refundable to the distributor if certain minimum quotas are met. -------------------------------------------------------------------------------- Note 8 - Commitments and Contingencies -------------------------------------------------------------------------------- Distribution Agreement On April 20, 2009, the Company established a five-year distribution agreement with Low Rider Establishment (LRE), a United Arab Emirate-domiciled entity. The agreement provides LRE with the right to distribute future Company products as they become available. The initial fee is approximately $21,500 and includes product training and related materials, software, an advertising allowance, and customer support. The agreement provides for a 5% royalty fee on gross sales per year beginning with the second year of the agreement. The agreement is effective upon its signing, however, payment of the initial fee has been deferred verbally between the parties until the availability and delivery of the Company's first products. Employment Agreements Effective May 2, 2008, the Company entered into various employment agreements with its Chairman of the Board, Chief Executive Officer, Chief Operating Officer, and Executive Vice President. These agreements were amended on May 5, 2008 to defer the effective date of the employment agreement to a time when the Company is a publically-traded entity and has secured a predetermined amount of capital. Guarantee and Share Pledge Agreement Pursuant to a Guarantee and Share Pledge agreement dated May 12, 2009, the Company's Chairman guarantees the payment of a Company account payable aggregating $12,000 as of April 30, 2009 by the extended due date, February 2, 2010. As security for the Company's liability, the Company's Chairman pledges a first security interest in all of the rights, title, and interest in and to 1,000,000 shares of Company's Common Stock owned by the Company's Chairman. 12 Universal Infotainment Systems Corporation and Subsidiary (a development stage company) Condensed Notes to Unaudited Consolidated Financial Statements Six Months Ended October 31, 2009 (unaudited) Note 9 - Subsequent Events -------------------------- Issuance of Common Stock for Services - Legal agreement In November 2009, the company is required to issue 75,000 shares of its common stock in exchange for legal services for quarter ending January 31, 2010. These shares will be issued in the third quarter of 2010. Management evaluated all activity of the Company through December 21, 2010 (the issue date of the Company's consolidated financial statements) and concluded that no subsequent events have occurred that would require recognition in the consolidated financial statements. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. Forward-Looking Statements -------------------------- The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, the Financial Statements of the Company and Notes thereto included elsewhere in this Report. Historical results and percentage relationships among any amounts in these financial statements are not necessarily indicative of trends in operating results for any future period. The statements, which are not historical facts contained in this Report, including this Plan of Operations, and Notes to the Financial Statements, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on currently available operating, financial and competitive information, and are subject to various risks and uncertainties. Future events and the Company's actual results may differ materially from the results reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, dependence on existing and future key strategic and strategic end-user customers, limited ability to establish new strategic relationships, ability to sustain and manage growth, variability of operating results, the Company's expansion and development of new service lines, marketing and other business development initiatives, the commencement of new engagements, competition in the industry, general economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the service requirements of its clients, the potential liability with respect to actions taken by its existing and past employees, risks associated with international sales, and other risks described in the Company's other SEC filings. The safe harbors of forward-looking statements provided by Section 21E of the Exchange Act are unavailable to issuers of penny stock. As we issued securities at a price below $5.00 per share, our shares are considered penny stock and such safe harbors set forth under the Reform Act are unavailable to us. Overview -------- We are a development stage company. We have generated no revenues to date. Our auditors have raised substantial doubt as to our ability to continue as a going concern. Although we will need only approximately $200,000 to $250,000 to remain in business during the next 12 months with minimal operations, we will need approximately $6,395,385 during the next 12 months to implement our business plan to sell what we call UIS Infotainment Systems for use in passenger, commercial and government agency vehicles. These systems combine our proprietary GPS Navigation and Display Engine, combining aerial and satellite imagery/photographs rather than traditional grid map displays, with communications capabilities for 3G Communications Audio/Video, Internet Browsing, E-mail, Fax, Text messaging and similar functions available today on many cellular telephones. We call this combination of services "Infotainment." 14 Since our inception, we have devoted our activities to the following: - Securing our agreements with the necessary third party data providers with regards to our Product - Developing our marketing strategy - Created our prototype hardware equipment necessary to the UIS concept - Securing the required manufacturing planning and implementation of our proprietary hardware in Taiwan ROC - Determining the market for our products and our manufacturing activities; - Developing a marketing plan; and - Networking and indentifying future customers and projects. Results of Operations --------------------- We have generated no revenues during the period from inception on April 14, 2008 to October 31, 2009. Development stage operating expenditures during the period from inception on April 14, 2008 to October 31, 2009 were $595,453, which consisted of general and administrative expenses related to our formation and legal, accounting and other start-up costs of $266,480, compensation expense of $265,995, and research and development expense of $39,500. Other expenses aggregated $23,478 (net) and consisted primarily of interest expense of $23,690. Liquidity and Capital Resources ------------------------------- Our principal capital resources have been acquired through the sale of $176,626 of our common stock, net of offering costs and net advances from our founder aggregating $81,076. At October 31, 2009, we had total assets of $67,271 consisting of cash, prepaid expenses, property and equipment, deposits and intangibles. At October 31, 2009, our total liabilities were $239,790, consisting primarily of accounts payable of $47,710, accrued compensation of $69,996, amounts due to officer aggregating $81,076, and a note payable of $21,188. 15 We anticipate taking the following actions during the next 12 months, assuming we receive the required funding: Time After Receiving Expected Manner of Funding When Occurrence or Step Method of Should be Milestone or Step Achievement Accomplished Cost of Completion --------------------------- ----------------------------- -------------- ------------------- Purchase office furniture Hire employees and begin 2 Months and computers training $ 60,000 Software from Microsoft and Locate appropriate vendors to 2-3 Months GIS software providers purchase the software's including Advance Graphics needed. Corporate editions from Maya, Adobe, and others. $ 470,000 Formation and set up of Find and lease location for 4 Months company and lab in Taiwan company offices & laboratory ROC purchase equipment, and hire employees. Contract out the various Choose among the 30 OEM 5 Months Components needed in factories those that can creating the UNS Hardware produce the UNS Hardware in in Taiwan ROC our time table. $ 540,000 Start Operations on the Sign Imagery and Navigable 2-4 Months $ 647,385 development of the North Data contracts with vendors, (This cost covers America module of UNS begin processing staff labor on the USA images and USA office expenses) Start Marketing Phase Develop Sales Materials, 6 Months Start Mailings and Product Presentations $ 450,000 Begin testing of the North Test hardware and software, 7 Months America UNS Module prepare the UNS calling centers, field test UNS, present UNS to the OEMs. $ 10,000 Begin production of Test Hardware Load software 6-7 months Hardware for the Middle and deliver to the East in Taiwan Distributor In the Middle East $ 1,368,000 Order UNS Hardware from Finish and Ship UNS to USA 8 Months UISC TW for the USA Work with distributors - set market, begin by placing the logistics for the Cost for initial 3,000 units in the market distribution Channel, begin 3000 Units via pre-contracted trade shows presence, media, To USA expected at: Electronics Distributors and print advertising. $2,750,000 Contract with national Offers premiums in marketing 6 Months brands distributors and sales to each major Electronics Distributor in each State so that market penetration be achieved. $ 100,000

16 Cash Requirements ----------------- We intend to provide funding for our activities, if any, through a combination of the private placement of our equity securities and the public sales of equity securities. At October 31, 2009, our Chairman had net advances to us aggregating $81,076. He has indicated that he does not intend to make additional advances to us in the future. These funds were obtained by him through loans from his parents pursuant to an oral agreement which bears no interest and is repayable as mutually agreed with no due date. However, the advances from our Chairman to us bear interest at the rate of 5%, and thus our Chairman will receive additional compensation as a result. At October 31, 2009, the accrued interest owed our Chairman was $5,325. We are a development stage company. We have generated no revenues to date. Our auditors have raised substantial doubt as to our ability to continue as a going concern. Although we will need only approximately $200,000 to $250,000 to remain in business during the next 12 months with minimal operations, we need approximately $6,395,385 during the next 12 months to implement our business plan as described above. The Company raised net, $176,626 through the sale of its common stock in a recent private placement offering. The placement is scheduled to run through November 30, 2009. This additional funding will permit us to sustain minimal operations until approximately February, 2010. We have no agreement, commitment or understanding to secure any such funding from any other source. There is uncertainty regarding our ability to commence operations or implement our business plan without additional financing. We have a history of operating losses, limited funds and no agreements, commitments or understandings to secure additional financing. Our future success is dependent upon our ability to commence operations, generate cash from operating activities and obtain additional financing. There is no assurance that we will be able to commence operations, generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse affect on our ability to continue in business and implement our business plan. Commitments ----------- On July 15, 2008, we entered into a sub-lease agreement with Universal Global Corp. whose President is Emanuel Pavlopoulos, our Chairman, for corporate offices under terms of a non-cancelable operating lease. The lease term is from July 16, 2008 through October 31, 2013 and requires an escalating monthly lease payment over the term of the lease ranging from $3,149 to $3,615. The lease required a $7,231 security deposit. The landlord has orally agreed to allow us to assume the obligations under the lease directly following the dissolution of Universal Global Corp. 17 Off-Balance Sheet Arrangements ------------------------------ We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not applicable. ITEM 4. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures ------------------------------------------------ We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer/principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act (defined below)). Based upon that evaluation, our principal executive officer/ principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer/principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management, including our principal executive officer/principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented. Changes in Internal Control Over Financial Reporting ---------------------------------------------------- In addition, our management with the participation of our Principal Executive Officer/Principal Financial Officer have determined that no change in our internal control over financial reporting occurred during or subsequent to the quarter ended October 31, 2009 that has materially affected, or is (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) reasonably likely to materially affect, our internal control over financial reporting. 18 PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. (a) Unregistered Sales of Equity Securities. From May 1st, 2009 to October 31, 2009, the Company sold 922,000 common shares to 42 U.S. and 0 non U.S investors at a price of $0.10 per share for proceeds of $88,895 and the company issued 210,000 common shares for services rendered to 2 U.S. and 0 non U.S service providers which we valued at a price of $0.10 per share based upon recent cash sales. We relied upon Section 4(2) of the Securities Act of 1933, as amended for the above issuances to US citizens or residents. We believed that Section 4(2) of the Securities Act of 1933 was available because: - None of these issuances involved underwriters, underwriting discounts or commissions. - Restrictive legends were and will be placed on all certificates issued as described above. - The distribution did not involve general solicitation or advertising. - The distributions were made only to investors who were sophisticated enough to evaluate the risks of the investment. 19 We relied upon Regulation S of the Securities Act of 1933, as amended for the above issuances to non US citizens or residents. We believed that Regulation S was available because: - None of these issuances involved underwriters, underwriting discounts or commissions; - We placed Regulation S required restrictive legends on all certificates issued; - No offers or sales of stock under the Regulation S offering were made to persons in the United States; - No direct selling efforts of the Regulation S offering were made in the United States. In connection with the above transactions, although some of the investors may have also been accredited, we provided the following to all investors: - Access to all our books and records. - Access to all material contracts and documents relating to our operations. - The opportunity to obtain any additional information, to the extent we possessed such information, necessary to verify the accuracy of the information to which the investors were given access. 20 Prospective investors were invited to review at our offices at any reasonable hour, after reasonable advance notice, any materials available to us concerning our business. Prospective Investors were also invited to visit our offices. (b) Use of Proceeds. During the fiscal quarter ended October 31, 2009, we used sale of common share proceeds for general operating purposes. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Registrant did not submit any matters to a vote of its security holders during the six-months ended October 31, 2009. ITEM 5. OTHER INFORMATION. Not applicable. ITEM 6. EXHIBITS. (a) Exhibits. Exhibit No. Document Description ------- -------------------- 31.1 CERTIFICATION OF CEO/CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. 32.1 CERTIFICATION OF CEO/CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. * --------------------- * This exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. 21 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 Infotainment Systems Corporation SIGNATURE NAME TITLE DATE /s/ Emanuel G. Pavlopoulos Emanuel G. Pavlopoulos Chairman 12/21/09 /s/ James Clark Beattie James Clark Beattie CEO, 12/21/09 Principal Executive Officer, Principal Financial Officer/ Principal Accounting Officer 22 EXHIBIT INDEX Exhibit No. Document Description ------- -------------------- 31.1 CERTIFICATION OF CEO/CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. 32.1 CERTIFICATION OF CEO/CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. * --------------------- * This exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. 23

UNIVERSAL INFOTAINMENT SYSTEMS CORP 10-Q