As filed with the Securities and Exchange Commission on July 22, 2005
Registration No. 333-124161

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2/A
(Amendment No. 2)

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
 

NATIONAL INVESTMENT MANAGERS INC.
(Name of small business issuer in its charter)

FLORIDA
6411
59-2091510
(State or jurisdiction of incorporation or organization)
(Primary Standard Industrial Classification Code Number)
(I.R.S. Employer Identification Number)

830 Third Avenue, 14th Floor
New York, NY 10022
(212) 355-1547
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
 
Leonard A. Neuhaus
Chief Financial Officer
National Investment Managers Inc.
830 Third Avenue, 14 th Floor
New York, New York 10022
(212) 355-1547
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
 
Copies to:
 
Adam Stein, Esq.
Cohen Tauber Spievack & Wagner LLP
420 Lexington Avenue
Suite 2400
New York, New York 10170
(212) 586-5800
 
Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box. x
 
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o.
 
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o.
 
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o.
 
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box o.
 

 
CALCULATION OF REGISTRATION FEE
                   
Title of Class of Securities
To be Registered
 
Amount to be
Registered(1)
 
Proposed Maximum Offering Price
per Share(2)
 
Proposed Maximum Aggregate Offering
Price (2)
 
Amount of
Registration Fee
 
Common Stock, $.001 par value  
   
4,914,700 shares
 
$
0.95
 
$
4,668,965
 
$
549.54
 
Common Stock, $.001 par value (3), (4)
   
1,660,000 shares
 
$
0.95
 
$
1,577,000
 
$
185.61
 
Common Stock, $.001 par value (3), (5)
   
3,420,000 shares
 
$
0.95
 
$
3,249,000
 
$
382.41
 
Common Stock, $.001 par value (3), (6)
   
1,236,000 shares
 
$
0.95
 
$
1,174,200
 
$
138.20
 
Common Stock, $.001 par value (3), (7)
   
420,853 shares
 
$
0.95
 
$
399,810
 
$
47.06
 
Total
   
11,651,553 shares
       
$
11,068,975
 
$
1,302.82*
 
_________________
*Previously paid.
 
(1) Pursuant to Rule 416 under the Securities Act, this Registration Statement also covers such additional number of shares of common stock as may be issuable upon a stock split, stock dividend or similar transaction.
(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based upon the last sale price on the OTC Bulletin Board on April 14, 2005.
(3) In accordance with Rule 457(g), the registration fee for these shares is calculated based upon a price which represents the highest of (i) the price at which the warrants or other rights may be exercised; (ii) the offering price of the securities of the same class included in this Registration Statement, or (iii) the price of securities of the same class, as determined pursuant to Rule 457(c).
(4) Represents shares of common stock issuable upon the exercise of warrants. The exercise price of the warrants is $0.1667.
(5) Represents shares of common stock issuable upon the conversion of Series A Preferred Stock.
(6) Represents 768,000 shares of common stock issuable upon the conversion of up to $500,000 of secured convertible notes by a secured lender, plus 500,000 shares of common stock issuable to the lender if there is an uncured payment default. The conversion price of the convertible notes is $0.68.
(7) Represents 420,853 shares of common stock issuable to holders of Series A Preferred Stock for payment of dividends for the period from December 13, 2004 through December 31, 2006.


THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
 
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND THE SELLING STOCKHOLDERS ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

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PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION, DATED JULY 22, 2005  

NATIONAL INVESTMENT MANAGERS INC.
 
11,651,553 Shares of Common Stock
 
This prospectus relates to the sale of up to 11,651,553 shares of our Common Stock by some of our stockholders. The shares being offered include 6,316,000 shares reserved for issuance upon exercise of warrants and conversion of preferred stock and convertible notes that we have issued to selling stockholders and 420,853 shares reserved for issuance upon payment of dividends on preferred stock in shares of common stock.
 
For a list of the selling stockholders, please see “Selling Stockholders.” We are not selling any shares of Common Stock in this offering and therefore will not receive any proceeds from this offering. However, the Company may receive proceeds of up to $276,667 upon exercise of all of the warrants covered by this prospectus (assuming that no warrant holder acquires shares by a “cashless” exercise).   We intend to use any proceeds from the exercise of warrants and options for working capital purposes. All costs associated with this registration will be borne by us.
 
These shares may be sold by the selling stockholders from time to time in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of sale or at negotiated prices.
 
Our Common Stock currently trades on the OTC Bulletin Board under the trading symbol “NIVM”. On July __, 2005, the last reported sale price of our Common Stock was $ [____] per share.
 
The selling stockholders, and any participating broker-dealers, may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), and any commissions or discounts given to any such broker-dealer may be regarded as underwriting commissions or discounts under the Securities Act. The selling stockholders have informed us that they do not have any agreement or understanding, directly or indirectly, with any person to distribute their Common Stock.
 
Investing in our Common Stock involves a high degree of risks. Please refer to the “Risk Factors” beginning on page 9.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus is July __, 2005.

-3-

 
TABLE OF CONTENTS
 
 
 
PROSPECTUS SUMMARY
5
RISK FACTORS
9
CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS
17
USE OF PROCEEDS
17
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
18
BUSINESS
32
MANAGEMENT
37
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
41
PRINCIPAL STOCKHOLDERS
42
SELLING STOCKHOLDERS
45
PLAN OF DISTRIBUTION
47
DESCRIPTION OF SECURITIES
48
COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
54
LEGAL MATTERS
55
EXPERTS
55
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
55
WHERE YOU CAN FIND MORE INFORMATION
55
FINANCIAL STATEMENTS
F-1
 

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PROSPECTUS SUMMARY
 
This summary highlights selected information from this prospectus and may not contain all of the information that is important to an investor. We encourage you to read this entire prospectus, including our unaudited pro forma condensed consolidated financial statements and our audited consolidated and combined financial statements and the notes thereto, completely and carefully before deciding whether to invest in our Common Stock. You should also review the other available information referred to in the section entitled “Where You Can Find More Information” on page 55.

Summary of Our Business

The Company is a Florida corporation organized in April 1981. The Company's principal executive office is located at 830 Third Avenue, New York, New York 10022. Its telephone number is 212 355-1547.

The Company, formerly known as “Fast Eddie Racing Stables, Inc.” was originally formed for the purpose of acquiring, racing, breeding and selling standardbred race horses (trotters and pacers). The Company commenced business operations in September 1983.
 
The Company completed a public offering of its common stock pursuant to a Registration Statement on Form S-18 during October 1985. The Company did not file a registration statement under the Securities and Exchange Act of 1934, as amended (the “1934 Act”), with respect to its class of Common Stock, and does not meet the asset threshold of $10 million or the record ownership threshold of 500. The Company is filing a registration statement for its class of Common Stock under the 1934 Act contemporaneously with the filing of the registration statement of which this prospectus is a part.
 
During the year ended December 31, 1989, the Company sold or otherwise disposed of all race horses in order to settle then-outstanding indebtedness. From December 31, 1989 until March 9, 2005, the Company had no operations, and nominal assets and liabilities. Prior to March 2005, the Company's principal business activity was to seek a suitable reverse acquisition candidate through acquisition, merger or other suitable business combination method.

On March 9, 2005, the Company acquired all of the outstanding shares of common stock of Duncan Capital Financial Group, Inc. (“Duncan”) in a transaction in which the shareholders of Duncan obtained a controlling interest in the Company. This merger was effected for the principal purpose of obtaining a $10 million credit line from Laurus Master Fund, which conditioned approval of this credit facility on the borrower having publicly traded equity securities. Upon the consummation of this transaction, we issued 12,040,000 shares of our common stock for an equal number of shares of Duncan common stock which were held by stockholders of Duncan. In addition, warrants to acquire an aggregate of 1,910,000 shares of Duncan common stock were converted to warrants to acquire our common stock on similar terms for $0.1667 per share. We subsequently completed the issuance of 3,820,000 shares of our Series A Preferred Stock to a total of ten holders of preferred stock of Duncan in exchange for their surrender of an equivalent number of preferred shares of Duncan containing identical terms. We received no other consideration in such exchange. Holders of Series A Preferred Stock have the right to convert, at any time, their shares of Series A Preferred into shares of common stock on a 1:1 basis. 8,515,000 of the above 12,040,000 shares of common stock, together with 1,660,000 shares of common stock underlying the above warrants, and 3,420,000 shares of common stock issuable upon conversion of the Series A Preferred Stock, are included in the shares of common stock being offered for sale under this prospectus, together with 420,853 shares of common stock that may be issued as dividends to holders of Series A Preferred Stock for the period from December 13, 2004 through December 31, 2006, as and when declared. In addition, on account of other financing transactions, up to 736,000 shares of common stock may be issued to CAMOFI Master LDC (formerly known as DCOFI Master LDC) if that lender converts its $500,000 of loans to Duncan at $0.68 per share, up to 3,614,458 shares of common stock may be issued to Laurus Master Fund Ltd. if that lender converts its $3 million secured note into common stock at $0.83 per share, up to 1,084,338 shares of common stock may be issued to Laurus if Laurus exercises its warrant to acquire common stock at a conversion price of $1.00 per share, and up to 643,700 shares of common stock may be issued to Laurus if Laurus exercises its option to acquire common stock at an exercise price of $0.01 per share. See “Description of Securities - Laurus Financing”.
 
Duncan was formed in November 2004 as a vehicle for the acquisition of pension advisory, investment management and insurance brokerage organizations generating annual revenues in the range of $1 million to $20 million whose clients generally have less than 100 employees, with a view to consolidating such businesses to take advantage of cross-selling opportunities, economies of scale, efficiencies and where appropriate, consolidation of overhead. With these stated business principles in mind, on December 13, 2004, Duncan entered into stock purchase agreements to acquire 100% of the outstanding shares of three companies from their controlling shareholders: Pension Administration Services, Inc. (“PAS”), Complete Investment Management, Inc. of Philadelphia (“CIM”) and MD Bluestein, Inc. (“MDB”). PAS and MDB were owned by a single individual, Michael Bluestein, and CIM was owned by Mr. Bluestein and Irene Feeley. PAS, CIM and MDB were all operated out of common office space in Horsham, Pennsylvania.

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Business of PAS

PAS is a retirement and pension consulting and administration firm that provides services for pension and other retirement plans in the following areas:
 
-  
preparation of plan feasibility and design studies, including the fields of contribution maximization/reduction, retirement planning and distribution, executive compensation, new comparability, 401(k) plans, plan terminations, governmental compliance and coverage, participation and discrimination testing; and
 
-  
administration of existing plans, including: preparation of government forms and summary plan descriptions, training personnel, maintaining employee data maintenance systems, maintaining detailed asset reconciliation data, providing periodic reports, determining plan contributions and benefits, distributions to plan participants, termination of employees and plans and coordination with other benefit programs.
 
PAS' approach is that of a problem solver for its clients, and not a product provider with a specific product as a proposed solution. This approach allows PAS to analyze the specific needs of a client and its employees and then recommend an appropriate course of action.
 
Revenues are generated by PAS through annual plan administration fees, as well as fees for individual projects undertaken on behalf of its clients.
 
Business of CIM

CIM provides financial advisory services to small businesses and high net worth individuals in the Philadelphia metropolitan area. CIM is not a registered broker-dealer or a registered investment advisor. Representatives of CIM are NASD-licensed registered representatives who work in conjunction with, and are supervised by, Capital Analysts, Inc., a registered investment adviser and broker dealer, to provide investment advisory services to corporations, individuals, retirement plan trustees and charitable foundations in the following areas:
 
-  
review of assets and investments, including investment allocations;
 
-  
determination of investment goals and strategies in light of the client's objectives, degree of risk and time horizon;
 
-  
implementation of investment programs from among a broad spectrum of investment choices, including domestic and international mutual funds, certificates of deposit, treasuries, fixed and variable annuities, and specialty investments; and
 
-  
monitoring performance results of investments and advising the client of any recommended adjustments.

Fee income is generated through commissions paid by the various investment platforms, including managed accounts and mutual fund investment programs such as those operated by Capital Analysts, SEI, Lockwood, Nationwide, Wells Real Estate, Brinker Capital, Managers Choice and Envestnet, among others. The majority of revenue derived by CIM is paid through Capital Analysts. As of March 25, 2005, CIM's assets under management totaled approximately $113 million.
 
Business of MDB
 
Through licensed and authorized brokers and agents, MDB is engaged in the business of insurance and annuity product sales as well as estate planning services highlighting wealth accumulation, preservation and transfer needs. Fee income is generated through commissions on product sales.

-6-


Strategy; Plan of Operation

The Company's strategy is to purchase majority interests in small to medium-sized pension advisory, investment management and insurance organizations with recurring revenue streams and consolidate these businesses to take advantage of cross-selling opportunities, economies of scale, efficiencies and where appropriate, consolidation of overhead. These businesses will typically have a sole proprietorship or partnership structure, and will typically have stable revenue growth and cash flow with low client attrition rates.

Management of the Company believes there are numerous such businesses in the United States, individually maintaining up to $500 million in assets under management or under administration. Many of these entities have part or all of their business dedicated to retirement plan management and administration, known as third party administration. These businesses compete very effectively on a local level by offering a high degree of personalized service to wealthy individuals and local businesses.

Management of the Company believes that many of these businesses are attractive acquisition candidates as stand alone-businesses due to their high profitability margins and strong cash flows, long-term client relationships, and consistent fee based income streams. Most of the businesses we will seek to acquire will have a majority of their revenue being derived from recurring sources and not transaction based revenue. However, due to their size and structure, they have not yet taken advantage of the industries' best practices relating to information technology and back office processes.

As stand-alone businesses, many cannot grow and diversify beyond their current levels due to resource constraints and personnel issues. Since these businesses do not have large staffs or marketing budgets, their ability to develop new products and diversify into other product categories is limited. Their ability to cross sell is limited not only by their product offerings, but also by the lack of expertise required to be an expert in many retirement facets, and therefore, much of the products and services they do not or can not offer is referred elsewhere. In many cases, current cash flows provide stable businesses lifestyles to current owners and partners who have little incentive to invest their own capital in the future growth of the business.

The Company believes that these dynamics create an opportunity for industry consolidation. Our goal is to create an organization that can assimilate these businesses, minimizing execution risk while preserving the strong client relationships that make these firms valuable. The technology platforms available for use today could allow the Company to compete effectively against larger institutional platforms in terms of offering sophisticated back office functionality and systems support. This would enable the Company to offer clients greater value, while becoming more competitive against other local service providers who continue to operate on a smaller scale.

Client retention is an important aspect of any such consolidation. The Company intends to promote client retention at the acquired entity level by utilizing some or all of the following:

- issuing our stock as a portion of the purchase price of each subsidiary;

- having the seller/owner finance a portion of the purchase price in the form of a seller's note;

- offering notes convertible into the stock of the Company;

- holding back a portion of the purchase price to ensure compliance with stated goals and objectives, including client retention;

- offering employment contracts to retain key employees;

- entering into non-competition agreements with selling owners and key employees; and

- providing bonus incentives for former owners to expand and grow the business.

The Company plans to enhance revenues in the acquired businesses through cross-selling to existing clients where no such services are currently provided and by offering a more diversified service and product base, the introduction of higher-margin, non-traditional investment management services and products and higher client retention through improved service. The Company believes that it can also improve operating margins in the acquired businesses primarily through increased purchasing power through economies of scale, increased fees due to a greater base of assets under management, decreased sales expense associated with cross-selling, elimination of certain redundant back office support functions and where appropriate, centralized customer services support and consolidation of overhead.
 
Our executive offices are located at 830 Third Avenue, 14th Floor, New York, New York 10022. Our telephone number is (212) 355-1547.

-7-

 
THE OFFERING
Securities Offered by
Selling Stockholders
11,651,553 shares of Common Stock, including 6,316,000 shares of Common Stock issuable upon exercise of warrants and conversion of Preferred Stock and conversion of convertible notes, and 420,853 shares reserved for issuance upon payment of dividends on preferred stock in shares of common stock, as follows:
 
 
    

 
§
4,914,700 shares of outstanding Common Stock
 
§
1,660,000 shares of Common Stock issuable upon the exercise of warrants held by our shareholders, with an exercise price of $0.1667 per share
 
§
3,420,000 shares of Common Stock issuable upon the conversion of shares of our Series A Preferred Stock, convertible on a 1:1 basis
 
§
736,000 shares of Common Stock issuable upon conversion of $500,000 of principal under convertible notes issued to a subordinated secured lender, at a conversion price of $0.68, plus an additional 500,000 shares of Common Stock that would be issuable to that lender upon an uncured payment default
 
§
420,853 shares reserved for issuance upon payment of dividends on preferred stock in shares of common stock
 
Offering Price
Determined at the time of sale by the selling stockholders.
 
 
Use of Proceeds
We will not receive any proceeds from the sale of the shares of Common Stock by the selling stockholders. We intend to use the proceeds from the exercise or conversion of outstanding warrants and options relating to a portion of such shares of Common Stock, which cash proceeds would not exceed $276,667 if all such warrants were exercised, for general corporate purposes.
 
 
Shares of Common Stock
outstanding before the
Offering
13,320,413 shares.
 
 
Risk Factors
An investment in the Company involves significant risks and uncertainties. See “Risk Factors,” beginning on page 9.

-8-

 
RISK FACTORS
 
An investment in our Common Stock involves a high degree of risk. You should carefully consider the risks described below before deciding to purchase shares of our Common Stock. If any of the events, contingencies, circumstances or conditions described in the risks below actually occur, our business, financial condition or results of operations could be seriously harmed. The trading price of our Common Stock could, in turn, decline and you could lose all or part of your investment.

Risks Related To Our Industry And Our Business

Our growth strategy includes making acquisitions in the future, which could subject us to significant risks, any of which could harm our business and adversely affect our growth.

Our growth strategy includes identifying and acquiring or investing in suitable candidates on acceptable terms. In particular, over time, we may acquire or make investments in entities that compete with or complement our business and other companies in the financial services industry.

We will compete with numerous integrated financial services organizations, insurance brokers, insurance companies, banks and other entities to acquire independent financial services distribution firms. Many of our competitors have substantially greater financial resources than we do and may be able to outbid us for these acquisition targets.

We may have difficulty identifying suitable acquisition candidates, as they may not be receptive to our solicitations nor available for sale. If we do identify suitable candidates, we may not be able to complete any such acquisition on terms that are commercially acceptable to us. If we are unable to complete acquisitions, it may have an adverse effect on our earnings or revenue growth and negatively impact our strategic plan because we expect a portion of our growth to come from acquisitions.

Acquisitions involve a number of risks and present financial, managerial and operational challenges, including:
 
 
·
diversion of management's attention from running our existing business;
 
 
·
Increased expenses, including travel, legal, administrative and compensation expenses resulting from newly hired employees;
 
 
·
increased costs to integrate personnel, customer base and business practices of the acquired company with our own;
 
 
·
adverse effects on our reported operating results due to possible write-down of goodwill associated with acquisitions;
 
 
·
potential disputes with sellers of acquired businesses, technologies, services or products; and
 
 
·
dilution to stockholders if we issue securities in any acquisition.
 
Even if we are successful in acquiring firms, performance problems with an acquired business could also have a material adverse impact on our reputation as a whole. In addition, any acquired business, technology, product or service could significantly under-perform relative to our expectations for various reasons, including legislative or regulatory changes that affect the products in which a firm specializes, the loss of key clients or key employees after the acquisition, general economic factors that impact a firm in a direct way and the cultural incompatibility of an acquired firm's management team with us. As such, we may not achieve the benefits we expect from our acquisitions. For all these reasons, our pursuit of an acquisition and investment strategy or any individual acquisition or investment, could have a material adverse effect on our business, financial condition and results of operations.

Failure to manage our growth and expansion effectively could adversely affect our business.

Our ability to successfully offer our products and services and implement our business plan in an evolving market requires an effective planning and management process. We have increased   and plan to continue to increase the scope of our business domestically. Our anticipated growth in future operations will continue to place a significant strain on our management systems and resources. If we are unable to effectively manage our growth, our business could be adversely affected.

Our results of operations could be adversely affected if we are unable to facilitate smooth succession planning at our firms.

We presently intend to seek to acquire firms in which the principals are not ready to currently retire, but instead will be motivated to grow their firm's earnings and participate in the growth incentives we offer. We may acquire firms where the principals seek to retire in the near future. However, we cannot predict with certainty how long the principals of our firms will continue working. The personal reputation of the principals of our firms and the relationships they have in the business and professional community are crucial to success in the independent distribution channel. Upon retirement of a principal, the business of a firm may be adversely affected if that principal's successor in the firm's management is not as successful as the original principal, which may have a material adverse effect on our business, financial condition and results of operations.

-9-

 
Our dependence on the principals of the firms we acquire may limit our ability to effectively manage our business.

We anticipate that most of our acquisitions will result in the acquired businesses becoming our wholly-owned subsidiaries, with the principals to enter into employment agreements under which they will continue to manage the acquired business. The principals will be responsible for ordinary course operational decisions, including personnel and culture, subject to the oversight of our executive officers. Non-ordinary course transactions will require the consent of our executive officers. The principals may also maintain the primary relationship with clients and, in some cases, vendors. Although we expect to maintain internal controls that will allow us to oversee our operations, this operating structure exposes us to the risk of losses resulting from day-to-day decisions of the principals and client losses. Unsatisfactory performance by these principals or the departure of these principals could hinder our ability to grow and could have a material adverse effect on our business, financial condition and results of operations.

Our ongoing success and ability to compete is dependant upon the retention of key personnel.

Our future success depends on the continued services of our executive officers, as well as our key sales and support personnel and principals at the firms we acquire. These individuals have critical industry experience and relationships upon which we rely. The loss of services of any of such persons could divert time and resources, delay the development of our business and negatively affect our ability to sell our services or execute our business. If we were to lose the services of a key person, this loss may have a material adverse effect on our business, financial condition and results of operations.

We intend to seek additional funding to sustain and grow our business, which funding may not be available to us on favorable terms or at all. If we do not obtain funding when we need it, our business may be adversely affected. In addition, if we have to sell securities in order to obtain financing, the rights of our current holders may be adversely affected.

We intend to seek additional outside funding to maintain and grow our business. We will need funding to pursue acquisitions. We cannot assure you that outside funding, including drawing an additional $7 million under our secured credit facility with Laurus Master Fund, Ltd., will be available to us at the time that we need it and in the amount necessary to satisfy our needs, or, that if such funds are available, they will be available on terms that are favorable to us. Although Laurus has the right to advance additional loans of up to $7 million by December 2005 on the same terms and conditions as under our current $3 million secured line of credit with Laurus, Laurus is not obligated to do so. If we are unable to secure financing when we need it, our business may be adversely affected. If we have to issue additional shares of Common Stock or securities convertible into Common Stock in order to secure additional funding, our current stockholders may experience dilution of their ownership of our shares. In the event that we issue securities or instruments other than Common Stock, we may be required to issue such instruments with greater rights than those currently possessed by holders of our Common Stock.

We have substantial indebtedness to Laurus Master Fund, Ltd. secured by substantially all of our assets. If an event of default occurs under the secured note issued to Laurus, Laurus may foreclose on our assets and we may be forced to curtail our operations or sell some of our assets to repay the note.

On March 9, 2005, we borrowed $3,000,000 from Laurus pursuant to a secured promissory note and related agreements. The notes and agreements provide for the following events of default (among others):
 
 
·
failure to pay interest and principal when due,
 
 
·
an uncured breach by us of any material covenant, term or condition in the note or related agreements,
 
 
·
a breach by us of any material representation or warranty made in the note or in any related agreement,
 
 
·
any money judgment or similar final process is filed against us for more than $100,000,
 
 
·
any form of bankruptcy or insolvency proceeding is instituted by or against us, and
 
 
·
our Common Stock is suspended from our principal trading market for five consecutive days or five days during any ten consecutive days.
 
-10-


Use of equity and/or debt to finance future acquisitions may have an adverse impact on our operations.

Payment for suitable acquisition targets may include the our Common Stock, and/or stock options, preferred stock, or equity or debt convertible into our Common Stock as part of the purchase price. These equity issuances may be dilutive to the Company's shareholders. In addition, the financing of any future acquisitions with debt may impair the Company's cash flows to a significant degree.

Competition in our industry is intense and, if we are unable to compete effectively, we may lose clients and our financial results may be negatively affected.

The business of providing financial services is highly competitive and we expect competition to intensify. We will face competition in all aspects of our proposed business, including insurance, retirement services, financial planning, third party administration and investment advisory services. We will compete for clients on the basis of reputation, client service, program and product offerings and our ability to tailor products and services to meet the specific needs of a client.

We will actively compete with numerous integrated financial services organizations as well as insurance companies and brokers, producer groups, individual insurance agents, investment management firms, independent financial planners and broker-dealers. Many of our competitors have greater financial, marketing and human resources than we do and may be able to offer products, technologies and services that we do not currently offer and may not offer in the future.

Our operating strategy and structure may make it difficult to respond quickly to operational or financial problems and to grow our business, which could negatively affect our financial results.

We intend to implement cash management and management information systems that will allow us to monitor the overall performance and financial activities of the entities we acquire and operate. However, we anticipate that such entities will be geographically dispersed, which may adversely affect our ability to maintain efficient ongoing monitoring of performance. If our firms delay either reporting results or informing corporate headquarters of a negative business development such as the possible loss of an important client or relationship with a financial services products manufacturer or a threatened professional liability or other claim or regulatory inquiry or other action, we may not be able to take action to remedy the situation on a timely basis. This in turn could have a negative effect on our financial results. In addition, if one of our firms were to report inaccurate financial information, we might not learn of the inaccuracies on a timely basis and be able to take corrective measures promptly, which could negatively affect our ability to report our financial results.

Because the commission revenue we earn on the sale of certain insurance products is based on premiums and commission rates set by insurers, any decreases in these premiums or commission rates could result in revenue decreases for us.

We earn revenue from commissions on the sale of insurance products to clients that are paid by the insurance underwriters from whom our clients purchase insurance. These commission rates are set by insurance underwriters and are based on the premiums that the insurance underwriters charge. Commission rates and premiums can change based on the prevailing economic and competitive factors that affect insurance underwriters. These factors, which are not within our control, include the capacity of insurance underwriters to place new business, underwriting and non-underwriting profits of insurance underwriters, consumer demand for insurance products, the availability of comparable products from other insurance underwriters at a lower cost and the availability of alternative insurance products, such as government benefits and self-insurance plans, to consumers.

We cannot predict the timing or extent of future changes, if any, in commission rates or premiums. As a result, we cannot predict the effect that any of these changes will have on our operations. These changes may result in revenue decreases for us. These decreases may have a material adverse effect on our business, financial condition and results of operations.

Our revenue and earnings may be affected by fluctuations in interest rates, stock prices and general economic conditions.

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.

-11-


We cannot predict the timing or extent of future changes, if any, in interest rates or the securities markets. As a result, we cannot predict the effect that any of these changes will have on our operations. These changes may result in revenue decreases for us. These decreases may have a material adverse effect on our business, financial condition and results of operations.

If we were required to write down the   excess of the purchase price over the net assets acquired with respect to our current acquisitions and our future acquisitions, our financial condition and results would be negatively affected.

When we acquire a business, a substantial portion of the purchase price of the acquisition may be allocated to the excess of the purchase price over the net assets acquired (“Goodwill”). The amount of the purchase price which is allocated to goodwill is determined by the excess of the purchase price over the net identifiable assets acquired. Statement of Financial Accounting Standards (“SFAS”) No. 142 addresses the financial accounting and reporting standards for the acquisition of intangible assets and for goodwill and other intangible assets. This accounting standard requires that goodwill no longer be amortized but instead be tested for impairment at least on a regular basis. Other intangible assets will continue to be amortized over their useful lives. Under current accounting standards, if we determine goodwill has been impaired, we will be required to write down the value. Any write-down may have a material adverse effect on our business, financial condition and results of operations.

Failure to comply with or changes in state and federal laws and regulations applicable to us could restrict our ability to conduct our business.

The financial services industry is subject to extensive regulation. Our firms and personnel initially will be licensed to conduct business in the states of Pennsylvania, New Jersey, Florida, Maryland and New York, and thereafter in other states, and will be subject to regulation and supervision both federally and in each of these jurisdictions. Our ability to conduct business in the jurisdictions in which they will operate depends on our compliance with the rules and regulations promulgated by federal regulatory bodies and the regulatory authorities in each of these jurisdictions. Failure to comply with all necessary regulatory requirements, including the failure to be properly licensed or registered, can subject our firms to sanctions or penalties. In addition, there can be no assurance that regulators or third parties will not raise material issues with respect to our past or future compliance with applicable regulations or that future regulatory, judicial or legislative changes will not have a material adverse effect on our company.

State insurance laws grant supervisory agencies, including state insurance departments, broad regulatory authority. State insurance regulators and the National Association of Insurance Commissioners continually reexamine existing laws and regulations, some of which affect us. These supervisory agencies regulate, among other things, the licensing of insurance brokers and agents and the marketing practices of insurance brokers and agents, in the context of curbing unfair trade practices. This continual reexamination may result in the enactment of laws and regulations, or the issuance of interpretations of existing laws and regulations, that adversely affect our business. More restrictive laws, rules or regulations may be adopted in the future that could make compliance more difficult and expensive.

Providing investment advice to clients is also regulated on both the federal and state level. We anticipate that certain of our firms will be investment advisers registered with the SEC under the Investment Advisers Act, and certain of our firms and employees will be regulated by state securities regulators under applicable state securities laws. Each firm that is a federally registered investment adviser will be regulated and subject to examination by the SEC. The Investment Advisers Act imposes numerous obligations on registered investment advisers, including disclosure obligations, recordkeeping and reporting requirements, marketing restrictions and general anti-fraud prohibitions. Each firm that will be a state-regulated investment adviser will be subject to regulation under the laws of the states in which it provides investment advisory services. Violations of applicable federal or state laws or regulations can result in the imposition of fines or censures, disciplinary actions, including the revocation of licenses or registrations, and damage to our reputation.

Our revenue and earnings may be more exposed than other financial services firms to the revocation or suspension of the licenses or registrations of our firms' principals because the revenue and earnings of many of our firms are largely dependent on the individual production of their respective principals for whom designated successors may not be in place.

-12-


Elimination or modification of the federal estate tax could adversely affect revenue from our life insurance, wealth transfer and estate planning businesses.

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 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.

The possible geographic concentration of our firms could leave us vulnerable to an economic downturn or regulatory changes in those areas, resulting in a decrease in our revenue.

Initially, the majority of our business will be carried out in the states of New York, New Jersey and Pennsylvania. If our business is concentrated in these states, the occurrence of adverse economic conditions or an adverse regulatory climate in any of these states could negatively affect our financial results more than would be the case if our business were more geographically diversified. A weakening economic environment in any state or region could result in a decrease in employment or wages that may reduce the demand for employee benefit products in that state or region. Reductions in personal income could reduce individuals' demand for various financial products in that state or region.

Our business, financial condition and results of operations may be negatively affected by errors and omissions claims.

We will be conducting insurance agency and investment advisory operations and activities and administration of retirement plans, and will be subject to claims and litigation in the ordinary course of business resulting from alleged and actual errors and omissions in placing insurance and rendering investment and retirement plan advice. These activities involve substantial amounts of money. Since errors and omissions claims against our firms may allege our liability for all or part of the amounts in question, claimants may seek large damage awards. These claims can involve significant defense costs. Errors and omissions could include, for example, failure, whether negligently or intentionally, to place coverage on behalf of clients. It is not always possible to prevent or detect errors and omissions, and the precautions we take may not be effective in all cases.

We have primary errors and omissions insurance coverage to protect us against the risk of liability resulting from alleged and actual errors and omissions. Recently, prices for this insurance have increased and coverage terms have become far more restrictive because of reduced insurer capacity in the marketplace. While we endeavor to purchase coverage that is appropriate to our assessment of our risk, we are unable to predict with certainty the frequency, nature or magnitude of claims for direct or consequential damages.

Our business, financial condition and results of operations may be negatively affected if in the future our insurance proves to be inadequate or unavailable. In addition, errors and omissions claims may harm our reputation or divert management resources away from operating our business.

Because our clients can terminate their agreements with us on short notice, poor performance of the investment products and services our firms recommend or sell may have a material adverse effect on our business.

Our agreements with our clients are generally terminable by them at any time.   These clients can terminate their relationship with our firms, reduce the amount of assets under management or shift their funds to other types of accounts with different rate structures for any of a number of reasons, including investment performance, changes in prevailing interest rates, financial market performance, personal client liquidity needs and price of services provided. Poor performance of the investment products and services that our firms recommend or sell relative to the performance of other products available in the market or the performance of other investment management firms will result in the loss of accounts. The decrease in revenue that could result from such an event may have a material adverse effect on our business, financial condition and results of operations.

-13-


We may underestimate the loss of clients resulting from a change of control of acquired companies, with resulting future revenues failing to achieve expectations.

Although we anticipate that acquisition candidates will reflect positive historical client retention rates, this may change post-acquisition due to unforeseen circumstances. Should the attrition rate of clients increase, this may have a material adverse effect on our business, financial condition and results of operations.

We will initially rely heavily on Capital Analysts, Inc. for broker-dealer services, and termination of agreements with Capital Analysts, Inc. could harm our business.

Neither we nor our affiliates are registered as broker-dealers nor as investment advisors. Unless and until we acquire a registered broker-dealer or investment advisor or become registered as a broker-dealer and investment advisor, we intend to utilize the services of unaffiliated broker-dealers and registered investment advisers, such as Capital Analysts, Inc., to process all securities transactions for the accounts of our clients and to serve as a registered investment adviser under which we will be permitted to conduct investment advisory activities. Agreements with these independent broker-dealers and registered investment advisers may be terminated by either party at any time. If these agreements are terminated, our ability to process securities transactions and perform investment advisory services on behalf of our clients could be adversely affected until a replacement is found. Finding a replacement will require expenditures of our time and resources. Even when a replacement is found, it may be difficult to recoup lost revenues, and additional time and resources will be required to complete the transition to a new broker dealer.

Our systems may be subject to infiltration by unauthorized persons.

We maintain and process data on behalf of our clients, some of which is critical to the business operations of our clients. If our systems or facilities were infiltrated and damaged by unauthorized persons, our clients could experience data loss, financial loss and significant business interruption. If that were to occur, it could have a material adverse effect on our business, financial condition and results of operations.

Our limited operating history makes evaluation of our business difficult.

We have not conducted active business operations for an extended period of time. We are a newly-formed company created for the purpose of acquiring and consolidating pension administration and financial service companies. Our first acquisitions were consummated in December 2004.

We cannot assure you that one or more of the factors described above will not have a material adverse effect on our business, financial condition and results of operation.

-14-

 
Investment Risks

Our common stock is thinly traded on the over-the-counter bulletin board and we may be unable to obtain listing of our common stock on a more liquid market.

There is currently virtually no trading in our Common Stock and on many days there is no trading activity at all in our Common Stock. Our Common Stock is quoted on the Over-The-Counter Bulletin Board, which provides significantly less liquidity than a securities exchange (such as the American or New York Stock Exchange) or an automated quotation system (such as the Nasdaq National or SmallCap Market). We can make no assurances that we will ever be accepted for a listing on an automated quotation system or securities exchange, and we have no basis to believe that our stock will trade on an automated quotation system or securities exchange in the near future.

Our common stock may be volatile, which substantially increases the risk that you may not be able to sell your shares at or above the price that you may pay for the shares.

Because of the limited trading market expected to develop for our Common Stock, and because of the possible price volatility, you may not be able to sell your shares of Common Stock when you desire to do so. The inability to sell your shares in a rapidly declining market may substantially increase your risk of loss because of such illiquidity and because the price for our Common Stock may suffer greater declines because of its price volatility.

The price of our Common Stock that will prevail in the market after this offering may be higher or lower than the price you may pay. Certain factors, some of which are beyond our control, that may cause our share price to fluctuate significantly include, but are not limited to, the following:

 
·
variations in our quarterly operating results;
 
 
·
loss of a key relationship or failure to complete significant transactions;
 
 
·
additions or departures of key personnel; and
 
 
·
fluctuations in stock market price and volume.

Additionally, in recent years the stock market in general, and the over-the-counter markets in particular, have experienced extreme price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying company. These market and industry factors may materially and adversely affect our stock price, regardless of our operating performance.

In the past, class action litigation often has been brought against companies following periods of volatility in the market price of those companies' common stock. If we become involved in this type of litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on your investment in our stock.

Penny stock regulations may affect your ability to sell our common stock.

To the extent the price of our Common Stock remains below $5.00 per share, our Common Stock will be subject to Rule 15g-9 under the Exchange Act, which imposes additional sales practice requirements on broker dealers which sell these securities to persons other than established customers and accredited investors. Under these rules, broker-dealers who recommend penny stocks to persons other than established customers and "accredited investors" must make a special written suitability determination for the purchaser and receive the purchaser's written agreement to a transaction prior to sale. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from effecting transactions in our Common Stock and may make it more difficult for holders of our Common Stock to sell shares to third parties or to otherwise dispose of them.

We have the right to issue up to 10,000,000 shares of “blank check” preferred stock, which may adversely affect the voting power of other of our securities and may deter hostile takeovers or a change of control.

We may issue up to 10,000,000 shares of our “blank check” preferred stock from time to time in one or more series, and with such rights, preferences and designations as our board of directors may determine from time to time. To date, we have authorized the issuance of 4,000,000 of such shares, of which 3,820,000 have been issued. Our board of directors, without further approval of holders of our Common Stock, is authorized to fix the dividend rights and the terms, conversion rights, voting rights, redemption rights, liquidation preferences and other rights and restrictions relating to any series of our preferred stock. Issuances of additional shares of preferred stock, while providing flexibility in connection with possible financings, acquisitions and other corporate purposes, could, among other things, adversely affect the voting power of the holders of other of our securities and may, under certain circumstances, have the effect of deterring hostile takeovers or delaying changes in management control.

-15-

 

Prior to the effective date of this registration statement, approximately 111,000 shares of our Common Stock were eligible for sale in the public market. This represents less than one percent of our outstanding shares of Common Stock. Sales of a significant number of shares of our Common Stock in the public market could result in a decline in the market price of our Common Stock, particularly in light of the illiquidity and low trading volume in our Common Stock. In connection with a private placement we completed in December 2004, we agreed to file a registration statement covering 17,770,000 shares of our Common Stock either currently outstanding or underlying shares of preferred stock and warrants convertible into common stock. Furthermore, up to approximately 14,700,000 additional shares that we may issue to, and may be sold by, Laurus and the foregoing shares we issued in our private placement are not subject to any lock-up.

Our directors, executive officers and certain stockholders own a significant percentage of our shares, which will limit your ability to influence corporate matters

Our directors, executive officers and others who purchased common shares in the December 2004 private placement own approximately 94% of our outstanding Common Stock as of March 9, 2005. Accordingly, these stockholders could have a significant influence over the outcome of any corporate transaction or other matter submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets and also could prevent or cause a change in control. The interests of these stockholders may differ from the interests of our other stockholders. In addition, limited number of shares held in public float effect the liquidity of our Common Stock. Third parties may be discouraged from making a tender offer or bid to acquire us because of this concentration of ownership. 

-16-


CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
 

Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future results may differ materially from those expressed in the forward-looking statements. Many of the factors that will determine these results are beyond the ability of National Investment Managers, Inc. to control or predict. Stockholders are cautioned not to put undue reliance on any forward-looking statements, which speak only to the date made. For those statements, National Investment Managers, Inc. claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

For a discussion of some of the factors that may cause actual results to differ materially from those suggested by the forward-looking statements, please read carefully the information under “Risk Factors” beginning on page 9.

The identification in this document of factors that may affect future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

You may rely only on the information contained in this prospectus. We have not authorized anyone to provide information different from that contained in this prospectus. Neither the delivery of this prospectus nor the sale of Common Stock means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or solicitation of an offer to buy these securities in any circumstances under which the offer or solicitation is unlawful.

USE OF PROCEEDS

There will be no proceeds to the Company from the sale of shares of Common Stock in this offering. However, the Company may receive up to $276,667 upon exercise of all of the warrants covered by this prospectus (assuming that no warrant holder acquires shares by a “cashless” exercise). We intend to use any proceeds from the exercise of warrants for working capital purposes.

-17-


MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Our Common Stock trades on the OTC Bulletin Board under the symbol “NIVM.” From February 24, 2005 to March 21, 2005, our Common Stock was quoted under the symbol “FEDY”, and prior to February 24, 2005, our Common Stock was quoted under the symbol “FEST”. Until March 28, 2005, there had been no reported trading activity in our Common Stock for over the past ten years, and we had ceased filing public reports from November 1996 until October 2004, at which time we submitted delinquent filings. In October 2004, we applied to resume quotations on the OTC Bulletin Board, and in November 2004, the NASD cleared a market maker’s request to enter quotations o the OTC Bulletin Board. Since March 28, 2005, there has been limited trading in our Common Stock. The following table sets forth quarterly high and low bid prices of a share of our Common Stock as reported by the OTC Bulletin Board commencing March 28, 2005. The quotations listed below reflect inter-dealer prices, without mark-ups, mark-downs or commissions and may not necessarily reflect actual transactions.

 
 
PRICE 
 
 
 
HIGH BID
 
LOW BID 
 
2005
 
 
 
 
 
First quarter commencing March 28, 2005
 
$
0.80
 
$
0.25
 
Second quarter ending June 30, 2005
 
$
2.75
 
$
0.45
 

As of July 1, 2005, 13,320,413 shares of Common Stock were issued and outstanding. As of that date, (i) 4,227,495 shares of Common Stock were subject to outstanding options or warrants to purchase Common Stock, of which 2,951,566 shares were subject to options and warrants that were exercisable as of that date, (ii) convertible notes, options, warrants and interest to Laurus were convertible into an aggregate of 5,342,496 shares of Common Stock, and (iii) 3,820,000 shares of Preferred Stock were convertible into an aggregate of 3,820,000 shares of Common Stock.
 
We have agreed to register a total of up to 11,651,553 shares of Common Stock by selling stockholders.

The number of holders of record for our Common Stock as of June 16, 2005 was approximately 86. This number excludes individual stockholders holding stock under nominee security position listings. This number would increase to approximately 93 holders if all derivative securities were exchanged for Common Stock.

DIVIDENDS

We have not paid any cash dividends on our Common Stock and do not anticipate declaring or paying any cash dividends in the foreseeable future. In addition, our agreements with Laurus Master Fund, Ltd. prohibit the payment of cash dividends. Nonetheless, the holders of our Common Stock are entitled to dividends when and if declared by our board of directors from legally available funds. However, before any dividends may be paid to holders of our Common Stock, cumulative dividends of 12% per year from December 13, 2004 must be paid to our holders of Series A Cumulative Convertible Preferred Stock (“Series A Preferred”), either in cash or in registered shares of our Common Stock. As of June 15, 2005, there were 3,820,000 shares of our Series A Preferred issued and outstanding, with an aggregate stated value of $1,910,000 on which the 12% dividend rate is based. No dividends have been declared or paid to date on our Series A Preferred.
 
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion should be read in conjunction with our financial statements and the related notes included elsewhere in this report. In addition to historical information, this discussion includes forward-looking information that involves risks and assumptions which could cause actual results to differ materially from management's expectations. See “Forward-Looking Statements” included elsewhere in this report.

OVERVIEW

From December 1989 until we acquired Duncan Capital Financial Group, Inc. (“Duncan”) in a merger transaction on March 9, 2005 (the “Merger”), we had no active business operations. As a result of the Merger, Duncan became our wholly-owned subsidiary, and the business of Duncan and its subsidiaries became our business. Following the Merger, on March 15, 2005, we changed our name to National Investment Managers Inc. Since the former stockholders of Duncan acquired a majority of our voting interests in the Merger, the transaction was treated as a reverse acquisition, with Duncan treated as the acquirer for accounting purposes. We expect the Company to become profitable within the next 12 to 24 months, based on current assumptions of management, but we cannot assure you that this will be the case. As noted under “Risk Factors”, our growth strategy includes making acquisitions in the future, which could subject us to significant risks, any of which could harm our business and adversely affect our growth and profitability.
 
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On December 13, 2004 Duncan entered into stock purchase agreements to acquire (the “Acquisition”) 100% of the outstanding shares of three companies (the “Acquired Companies”) from their controlling shareholders: Pension Administration Services, Inc., a Pennsylvania corporation organized in 1973 (“PAS”); Complete Investment Management, Inc. of Philadelphia, a Pennsylvania corporation organized in 1986 (“CIM”); and MD Bluestein, Inc., a Pennsylvania corporation organized in 1979 (“MDB”) (together the “Acquired Companies”). Accordingly, the pre-merger financial statements of Duncan and its subsidiaries are our historical financial statements.

Through the subsidiaries of Duncan, our services offered to clients include the following:

 
·
Pension plan design, creation, termination and administration
 
 
·
Investment management of retirement plan assets
 
 
·
Investment management of non-plan assets for wealthy individuals
 
 
·
Quarterly asset monitoring reports
 
 
·
401(k) asset management through an insurance company program
 
 
·
Retirement distribution studies
 
 
·
Life insurance
 
 
·
Deferred compensation and annuities
 
 
·
Limited hospitalization and long-term care insurance
 
The Acquired Companies use PAS' plan administration business to help small businesses organize, report and administer their pension plans. Once an entity becomes a PAS client, it is often a good candidate for pension plan investment management business services, which carry a higher profit margin and an annuity feature as well as insurance services. CIM provides investment guidance and investment performance monitoring while MDB provides insurance-related services.

CRITICAL ACCOUNTING POLICIES
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the 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 period. Actual results could differ from those estimates.

We believe the following critical accounting policies have significant effect in the preparation of our consolidated financial statements.  

REVENUE

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 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.
 
-19-

 
REVENUE RECOGNITION

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

ACCOUNTS RECEIVABLE

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

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.

GOODWILL

Goodwill will not be amortized; rather goodwill will be subject to at least annual assessment for impairment applying a fair-value based test.

-20-


OTHER INTANGIBLES ASSETS

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

 
 
Amount
 
Estimated Life
 
Customer lists/relationships
 
$
3,100,000
   
15 years
 
Covenants not to compete
 
$
200,000
   
3 years
 
Employment agreements
 
$
50,000
   
1 year
 

These other intangible assets will be amortized by use of the straight-line method over the estimated lives of the assets. 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.

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.

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.

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 consolidated balance sheet.

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.

NET INCOME OR LOSS PER COMMON SHARE

Basic net income or loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted net income or loss per common share is computed using the weighted average number of common shares outstanding during the period plus the effect of any dilutive potential common shares. Dilutive potential common shares consist of the assumed exercise of stock options and warrants, the proceeds of which are then assumed to have been used to repurchase outstanding stock using the treasury stock method, and the assumed conversion of convertible preferred stock.

RESULTS OF OPERATIONS

NATIONAL INVESTMENT MANAGERS INC. (formerly known as Fast Eddie Racing Stables, Inc.)

The Company had no revenue for the years ended December 31, 2004 and 2003, respectively.

General and administrative expenses for the years ended December 31, 2004 and 2003 were approximately $9,945 and $1,000, respectively. The expenditures for Calendar 2004 were incurred during the 4th Calendar quarter as the Company cured the deficiencies in the providing of periodic filings pursuant to the Securities Exchange Act of 1934 from prior years. Earnings per share for the respective years ended December 31, 2004 and 2003 was $0.00 and $0.00 based on the weighted-average common shares issued and outstanding at the end of each respective year.

-21-


DUNCAN CAPITAL FINANCIAL GROUP, INC.

Duncan Capital Financial Group, Inc. (“Duncan”) was formed and incorporated in the State of Delaware on November 24, 2004 to acquire substantially all of the net assets of Pension Administrative Services, Inc. and affiliates (“PAS”). On December 13, 2004, Duncan completed a private placement of securities. (See “Liquidity and Capital Resources”.)

Duncan had no revenue for the period from December 13, 2004 through December 31, 2004.

General and administrative expenses for the period from December 13, 2004 through December 31, 2004 were $81,344. These expenses were comprised primarily of compensation to our Chief Executive Officer for November and December of 2004 and for stock based compensation to three individuals, including our Chief Executive Officer and two officers of PAS.

We recorded a deferred income tax benefit of $9,000 which represents the future tax savings we believe we will derive from carrying forward our tax loss of approximately $42,000 for this period. Our tax loss carry-forward will be different than our net loss for this period as stock based compensation is not deductible for Federal income tax purposes.

PENSION ADMINISTRATION SERVICES, INC. and AFFILIATES

We generate revenues from three different service areas:

 
·
Third party administration of retirement plans and plan assets
 
·
Investment management
 
·
Insurance products

Third party administration

We administer retirement plans for our clients. Billings for our services and other revenue sources are primarily divided into the following areas:

 
1.
Annual plan reviews
 
2.
Document fees
 
3.
Terminations (both individuals within a plan and entire plans)
 
4.
Consulting and special projects
 
5.
Commissions on insurance and investment products related to plan assets
 
Investment management

Through Capital Analysts, Inc. a registered broker-dealer in securities and a registered investment advisor, we receive commissions and fees based on assets under management and transactional business. A majority of the income is earned on fee-based accounts and flows through Capital Analysts, Inc. We receive fees from assets under management that range from 0 to 1% per annum. For a separate fee, we also monitor the performance results of our client's portfolios for assets under management with us, and in certain situations, with others. We are seeking to derive a greater percentage of our revenues from fee-based products as compared to transaction-based sales. As assets under management increase, which rise is comprised of a combination of new assets deposited by clients and the change in the underlying value of assets held, we will generate increased revenues in these areas.

Insurance products

Through registered agencies and agents, we sell insurance products. At the present time, most of our insurance-related revenues are generated from life insurance products.

We incur expenses in connection with the generation of our revenues. Our selling expenses consist primarily of salaries, benefits and commissions to our salespeople, advertising, and travel and entertainment. Our general and administrative expenses consist primarily of salaries and benefits to our management and staff, rent, utilities, insurance and professional fees. 

-22-


2004 as compared to 2003
 
For the years ended December 31,
 
2004
 
% of
Revenues
 
2003
 
% of
Revenues
 
$ Change
2003 to 2004
 
% Change
2003 to 2004
 
                                 
Revenues:
                                     
Fees
 
$
1,488,766
   
71.19
%
$
1,303,150
   
70.86
%
$
185,616
   
14.24
%
Commissions and other
   
602,444
   
28.81
%
 
535,911
   
29.14
%
 
66,533
   
12.21
%
 
                                     
 
   
2,091,210
   
100.00
%
 
1,839,061
   
100.00
%
 
252,149
   
13.71
%
Operating expenses:
                                     
Selling
   
950,663
   
45.46
%
 
766,779
   
41.69
%
 
183,884
   
23.98
%
General and administrative
   
1,131,189
   
54.09
%
 
1,095,869
   
59.59
%
 
35,320
   
3.22
%
 
                                     
 
   
2,081,852
   
99.55
%
 
1,862,648
   
101.28
%
 
219,204
   
11.77
%
 
 
Operating income (loss)
   
9,358
   
0.45
%
 
(23,587
)
 
-1.28
%
 
32,945
   
NM
 
                                       
Other income:
                                     
Interest and dividend income
   
1,653
   
0.08
%
 
2,640
   
0.14
%
 
(987
)
 
-37.39
%
Gain on forgiveness of debt
               
20,000
         
(20,000
)
 
NM
 
 
                                     
 
   
1,653
   
0.08
%
 
22,640
   
0.14
%
 
(20,987
)
 
-92.70
%
 
                                     
Net income (loss)
 
$
11,011
   
0.53
%
 
($947
)
 
-1.14
%
$
11,958
   
NM
 

NM - not meaningful
 
REVENUES:
 
Revenues increased 13.71% to $2,091,210 for the year ended December 31, 2004 compared to $1,839,061 for the year ended December 31, 2003. Fees and fee-based revenues increased 14.24% to $1,488,766 for the year ended December 31, 2004 compared to $1,303,150 for the year ended December 31, 2003. Commissions and other revenues increased 12.21% to $602,444 for the year ended December 31, 2004 compared to $535,911 for the year ended December 31, 2003.
 
As of December 31, 2004, we were the third party administrator for 238 plans, a net decrease of 3 plans as compared to the 241 plans we administered as of December 31, 2003. During 2004, we lost 14 plans, primarily of companies that merged or went out of business, which loss was offset by a gain of 11 new plans. Fees for handling the plans we administered increased slightly as compared to 2003. Assets held in 401K and similar plans that we administer increased during the year, which in turn increased the revenues we received in these areas.
 
As of December 31, 2004, the dollar amount of our client's investment assets under our management was approximately $110 million, a net increase of approximately $8 million as compared to the $102 million of assets under management as of December 31, 2003. Our fee based income increased due to the rise in assets under management; however, as was our intent, our transaction based revenues decreased.
 
OPERATING EXPENSES:
 
Operating expenses increased 11.77% to $2,081,852 for the year ended December 31, 2004 compared to $1,862,648 for the year ended December 31, 2003. Selling expenses increased 23.98% to $950,663 for the year ended December 31, 2004 compared to $766,779 for the year ended December 31, 2003. General and administrative expenses increased 3.22% to $1,131,189 for the year ended December 31, 2004 compared to $1,095,869 for the year ended December 31, 2003.
-23-

 
Selling expenses increased primarily due to higher payments to our sales and sales management staff, commensurate with increased revenues. General and administrative expenses increased marginally, which increase was primarily attributable to salary adjustments.
 
OPERATING INCOME (LOSS):
 
Operating income increased to $9,358 for the year ended December 31, 2004 compared to a loss from operations of $23,587 for the year ended December 31, 2003. The change was a result of the factors described in the revenues and operating expenses sections.
 
OTHER INCOME:
 
Other income decreased to $1,653 for the year ended December 31, 2004 compared to $22,640 for the year ended December 31, 2003. Interest and dividend income decreased 37.39% to $1,653 for the year ended December 31, 2004 compared to $2,640 for the year ended December 31, 2003. A one time gain on the forgiveness of debt of $20,000 was recorded for the year ended December 31, 2003. This forgiveness resulted from our broker/dealer waiving the debt due to our exceeding certain revenue target levels.
 
NET INCOME (LOSS):
 
Net income increased to $11,011 for the year ended December 31, 2004 compared to a loss of $947 for the year ended December 31, 2003. The change was a result of the factors described in the previous sections. Until December 13, 2004 (the date of the acquisition of PAS by Duncan), PAS and its affiliates elected to be taxed under Subchapter S of the Internal Revenue Code. As such, no taxes have been provided for.
 
2003 as compared to 2002
 
For the years ended December 31,
 
2003
 
% of
Revenues
 
2002
 
% of
Revenues
 
$ Change
2002 to 2003
 
% Change
2002 to 2003
 
                                 
Revenues:
                                     
Fees
 
$
1,303,150
   
70.86
%
$
1,367,441
   
72.58
%
 
($64,291
)
 
-4.70
%
Commissions and other
   
535,911
   
29.14
%
 
516,551
   
27.42
%
 
19,360
   
3.75
%
 
                                     
 
   
1,839,061
   
100.00
%
 
1,883,992
   
100.00
%
 
(44,931
)
 
-2.38
%
 
                                     
Operating expenses:
                                     
Selling
   
766,779
   
41.69
%
 
907,836
   
48.19
%
 
(141,057
)
 
-15.54
%
General and administrative
   
1,095,869
   
59.59
%
 
1,174,233
   
62.33
%
 
(78,364
)
 
-6.67
%
 
                                     
 
   
1,862,648
   
101.28
%
 
2,082,069
   
110.51
%
 
(219,421
)
 
-10.54
%
 
                                     
Operating income (loss)
   
(23,587
)
 
-1.28
%
 
(198,077
)
 
-10.51
%
 
174,490
   
-88.09
%
 
                                     
Other income:
                                     
Interest and dividend income
   
2,640
   
0.14
%
 
6,558
   
0.35
%
 
(3,918
)
 
-59.74
%
Gain on forgiveness of debt
   
20,000
                     
20,000
   
NM
 
 
                                     
 
   
22,640
   
0.14
%
 
6,558
   
0.35
%
 
16,082
   
245.23
%
 
                                     
Net income (loss)
   
($947
)
 
-1.14
%
 
($191,519
)
 
-10.17
%
$
190,572
   
-99.51
%

NM- not meaningful

-24-


REVENUES:

Revenues decreased 2.38% to $1,839,061 for the year ended December 31, 2003 compared to $1,883,992 for the year ended December 31, 2002. Fees and fee-based revenues decreased 4.70% to $1,303,150 for the year ended December 31, 2003 compared to $1,367,441 for the year ended December 31, 2002. Commissions and other revenues increased 3.75% to $535,911 for the year ended December 31, 2003 compared to $516,551 for the year ended December 31, 2002.

As of December 31, 2003, we were the third party administrator for 241 plans, a net decrease of 6 plans as compared to the 247 plans we administered as of December 31, 2002. During 2003, we lost 9 plans which loss was offset by a gain of 3 new plans. Fees for handling the plans we administered decreased slightly as compared to 2002. Assets held in 401K and similar plans that we administer decreased during the year, which in turn decreased the revenues we received in these areas.

As of December 31, 2003, the dollar amount of our client's investment assets under our management was approximately $102 million, a net increase of approximately $22 million as compared to the $80 million of assets under management as of December 31, 2002. Our fee based income increased due to the rise in assets under management; however, as was our intent, our transaction based revenues decreased.

OPERATING EXPENSES:

Operating expenses decreased 10.54% to $1,862,648 for the year ended December 31, 2003 compared to $2,082,069 for the year ended December 31, 2002. Selling expenses decreased 15.54% to $766,779 for the year ended December 31, 2003 compared to $907,836 for the year ended December 31, 20023. General and administrative expenses decreased 6.67% to $1,095,869 for the year ended December 31, 2003 compared to $1,174,233 for the year ended December 31, 2002.

Selling expenses decreased primarily due to lower payments to our sales and sales management staff, commensurate with lower revenues. General and administrative expenses decreased due to a program out into place to reduce costs commensurate with a reduction in revenues.

OPERATING INCOME (LOSS):

Operating loss increased to a loss of $23,587 for the year ended December 31, 2003 compared to a much greater loss from operations of $198,077 for the year ended December 31, 2002. The change was a result of the factors described in the revenues and operating expenses sections.

OTHER INCOME:

Other income increased to $22,640 for the year ended December 31, 2003 compared to $6,558 for the year ended December 31, 2002. Interest and dividend income decreased 59.74% to $2,640 for the year ended December 31, 2003 compared to $6,558 for the year ended December 31, 2002. A one time gain on the forgiveness of debt of $20,000 was recorded for the year ended December 31, 2003. This forgiveness resulted from our broker/dealer waiving the debt due to our exceeding certain revenue target levels.

NET INCOME (LOSS):

Net loss decreased to $947 for the year ended December 31, 2003 compared to a loss of $191,519 for the year ended December 31, 2002. The change was a result of the factors described in the previous sections. Until December 13, 2004 (the date of acquisition of PAS by Duncan), PAS and its affiliates elected to be taxed under Subchapter S of the Internal Revenue Code. As such, no taxes have been provided for.

-25-


NATIONAL INVESTMENT MANAGERS INC. AND SUBSIDIARIES
 
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:

 
For the three months ended March 31,
 
2005
 
% of
Revenues
 
2004
 
% of
Revenues
 
$ Change
2004 to 2005
 
% Change
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
   
NM
 
Stock based compensation
   
2,953
   
0.53
%
       
0.00
%
 
2,953
   
NM
 
 
                                     
 
   
707,903
   
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
)
 
NM
 
Interest expense
   
(37,519
)
 
-6.75
%
       
0.00
%
 
(37,519
)
 
NM
 
Interest and dividend income
   
3,081
   
0.55
%
 
540
   
0.10
%
 
2,541
   
NM
 
 
   
(249,438
)
 
-44.89
%
 
540
   
0.10
%
 
(249,978
)
 
NM
 
 
                                     
Income (Loss) before provision for income taxes
   
(401,677
)
 
-72.29
%
 
125,746
   
22.97
%
 
(527,424
)
 
NM
 
 
                                     
Deferred income tax benefit
   
21,973
   
3.95
%
       
0.00
%
 
21,973
   
NM
 
 
                                     
Net income (loss) available to common shareholders
   
(379,704
)
 
-68.33
%
 
125,746
   
22.97
%
 
($505,450
)
 
NM
 
 
                                     
Preferred 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.

-26-


The primary factors contributing the revenue increase were:

An increase of approximately $57,000 in revenues from our third party administration business, due to additional billings from existing clients
An increase of approximately $29,000 in revenues from our investment management business generated by additional assets under management
A decrease of approximately $79,000 in premiums collected in our insurance business due to reduced production in sales of insurance products

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 for the reasons noted below. 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 for the reasons noted below. 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, with such increase caused by the amortization of intangible assets from our acquisition of PAS.

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

LIQUIDITY AND CAPITAL RESOURCES

NATIONAL INVESTMENT MANAGERS INC. (formerly known as Fast Eddie Racing Stables, Inc.)

At December 31, 2004 and 2003, respectively, the Company had working capital of approximately $10,600 and $(7,000), respectively.

On August 4, 2004, the Company sold 2,754,500 shares of restricted common stock at $0.01 per share for gross proceeds of $27,545, pursuant to a subscription agreement, to Glenn A. Little, who became the Company's then Chief Executive Officer. The Company relied upon Section 4(2) of The Securities Act of 1933, as amended, for an exemption from registration of these shares and no underwriter was used in this transaction. As a result of this transaction, Glenn A. Little became the Company's controlling shareholder, owning 3,554,000 shares of the 5,000,000 issued and outstanding shares of the Company's common stock, or approximately 71.08%, at the close of business on August 4, 2004. Mr. Little retained control until the transaction was consummated with Duncan Capital Financial Group, Inc.

-27-


On March 9, 2005, we entered into a Securities Purchase Agreement with Laurus Master Fund, Ltd., under which we issued and delivered to Laurus (i) a secured $3,000,000 convertible term note (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 our Common Stock at a per share purchase price of $0.01.

We received gross proceeds of $3,000,000 from the sale of the Note, the Warrant and the Option. We may only use such proceeds for general working capital purposes and acquisitions approved by Laurus, as described below. Unless redeemed earlier by us or earlier converted into Common Stock by Laurus, as described below, the Note matures on March 9, 2008.

At closing, $500,000 of gross 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 as a fee to Glenn Little 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. Under an amendment to be entered into by the parties, any funds remaining in the Restricted Account on December 15, 2005 will be returned to Laurus without premium or penalty.

Laurus may, at its sole option, advance additional funds to the Company in the aggregate principal amount of up to $7,000,000, at Laurus' sole discretion, within 270 days of March 9, 2005, on the same terms and conditions (including interest rate and conversion price) as the $3 Million Note.   In the opinion of management, we will have sufficient funds to finance our acquisition program if we are able to draw down on the balance of our secured credit line with Laurus.

Amortizing payments of the outstanding principal amount of the Note not contained in the Restricted Account, referred to as the “Amortizing Principal Amount”, begin on July 1, 2005, in monthly installments of $ 14,705.88 on the first day of each succeeding calendar month (each, a “Repayment Date”) until paid, together with accrued and unpaid interest (whether by the payment of cash or by the conversion of such principal into Common Stock, as described below). Laurus has agreed to amend the existing provisions of the Note to provide that, following a release of funds from the Restricted Account (other than with respect to a release that occurs as a result of a conversion of any Note principal) (a “Release Amount”), each monthly payment of the Amortizing Principal Amount occurring on or after the 90 th day following any such release will be increased by an amount equal to (x) such Release Amount divided by (y) thirty-four, with such Release Amount payable in full 36 months after its release. The remaining principal amount held in the Restricted Account, referred to as the “Non-Amortizing Principal Amount”, is due and payable on the Maturity Date.

Interest accrues on the Note at the “prime rate” published in The Wall Street Journal , as adjusted from time to time, plus three percent (3%). Interest on the Amortizing Principal Amount is payable monthly, in arrears, commencing on April 1, 2005. Accrued interest on the Non-Amortizing Principal Amount is payable only on the Maturity Date unless the Note is redeemed or converted before the Maturity Date, in which case accrued interest on the amount redeemed or converted is due and payable on the date of redemption or conversion.

If, as of the last business day of a month prior to maturity when the shares of Common Stock underlying each of the conversion of the Note and the exercise of the Warrant have been registered, the market price of the Common Stock for the five consecutive trading days immediately preceding the last business day of such month exceeds the then-applicable Fixed Conversion Price (defined below) by at least 25%, the interest rate for the succeeding calendar month will automatically be reduced by 25 basis points (0.25%) for each incremental 25% increase in the market price of the Common Stock above the Fixed Conversion Price.  

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 (the “Fixed Conversion Price”). The Fixed Conversion Price is 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 Repayment Date.

-28-


The Company has the option of prepaying the outstanding principal amount of the Note in whole or in part by paying an amount equal to (i) with respect to the Amortizing Principal Amount, 125% of the principal amount to be redeemed; and (ii) with respect to the Non-Amortizing Principal Amount, 120% of the principal amount to be redeemed. The Company must give Laurus at least seven business days prior written notice of its intention to redeem any portion of the principal amount of the Note.

Our obligations to Laurus are secured by a blanket lien on substantially all of our and our subsidiaries' assets, as well as by our ownership interests in our subsidiaries, which have guaranteed these obligations.

DUNCAN CAPITAL FINANCIAL GROUP, INC.

Duncan Capital Financial Group, Inc. (“Duncan”), was formed and incorporated in the State of Delaware on November 24, 2004 to acquire substantially all of the net assets of Pension Administrative Services, Inc. and affiliates (“PAS”).

On December 13, 2004, Duncan closed on the sale of 3,820,000 shares of preferred stock designated as Series A at a price of $.50 per share and 9,540,000 shares of common stock at a price of one sixth of one dollar per share. Holders of shares of Series A preferred stock also received warrants to purchase an aggregate of 1,910,000 shares of common stock (see “Liquidity and Capital Resources”). We received net proceeds from these sales, after costs and expenses, of approximately $3,125,000.

Coterminous with the sale of securities mentioned in the previous paragraph, we acquired 100% of the common stock of PAS for total consideration of $3,656,350, of which $3,107,898 was payable in cash at the closing, $365,635 in the form of convertible notes is due in 12 quarterly installments commencing March 1, 2005 and $182,817 is contingent upon certain future events. In February 2005, $215,635 of convertibles notes, plus accrued interest, were converted into 294,813 shares of common stock at $0.75 per share. The acquisition is being accounted for as a purchase as if it was effectively completed on December 31, 2004.

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. Management believes that the terms of the 2005 Notes are comparable to terms that may have been obtained in an arms-length transaction from an unaffiliated third party lender. In January 2005, we borrowed $350,000 pursuant to this agreement. In the second quarter of 2005, we borrowed an additional $150,000 under this facility. The 2005 Notes bore interest at the rate of 12% per annum, with interest payable quarterly in arrears on the last day of each quarter. In June 2005, the 2005 Notes were converted by the holder in accordance with their terms to convertible notes which are convertible to common stock at a conversion price of $0.68 per share. The principal, which amortizes in equal monthly installments commencing October 2005, plus any accrued and unpaid interest, is due March 10, 2008. In connection with the agreement, we have agreed to issue five-year warrants to the noteholders to purchase 367,647 shares of common stock at $0.1667 per share. These convertible notes are subordinate to the Laurus Master Fund, Ltd. convertible term note issued by the Company.

PENSION ADMINISTRATION SERVICES, INC. AND AFFILIATES

At December 31, 2004 and 2003, respectively, PAS had working capital of $90,686 and $358,833. Cash balances were $81,509 at December 31, 2004 and $376,091 at December 31, 2003. Accounts receivable balances, net of allowances for doubtful accounts of $11,000 in both years, were $116,370 at December 31, 2004 and $133,341 at December 31, 2003.

Total liabilities, which were all current in nature and classification, were $111,553 at December 31, 2004 and $165,612 at December 31, 2003. Included in the balance as of December 31, 2003 was a liability to a shareholder of $65,692, which liability was paid in 2004.

The decrease in cash of $294,582 in 2004 is attributable to cash provided by operations of $66,283 less $360,865 in payments to a stockholder. The payments to the stockholder were comprised of a loan repayment of $65,692 and a distribution to the stockholder of $295,173.

As of December 31, 2004, PAS has no outstanding liabilities except trade payables and recurring accruals incurred in the normal course of business and has no lines of credit nor debt facilities outstanding or available.

-29-

 
NATIONAL INVESTMENT MANAGERS INC. AND SUBSIDIARIES

March 31, 2005 Compared to December 31, 2004

Liquidity and Capital Resources

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

 
 
  March 31,
2005
 
  December 31,
2004
 
 
 
   
 
   
 
Unrestricted Cash
 
$
295,007
 
$
89,779
 
Working Capital
   
($ 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 net cash used in operating activities:
       
Depreciation and amortization
   
109,653
 
Non-cash interest
   
15,000
 
Stock-based compensation
   
2,953
 
Stock issued for services
   
25,000
 
Deferred income tax benefit
   
(21,973
)
Increase (decrease) in cash attributable to changes in operating assets and liabilities:
       
Accounts receivable
   
(41,389
)
Accrued interest receivable
   
(2,778
)
Prepaid and other current assets
   
(146,041
)
Accounts payable
   
8,243
 
Accrued 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)
   
10,618
 
Increase 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
   
3,000,000
 
Proceeds from short-term debt
   
460,000
 
Payments on short-term debt
   
(23,831
)
Costs of 2004 common and preferred stock sales, net
   
(58,242
)
of $17,102 collected from the escrow agent
       
Payment of deferred financing costs
   
(179,000
)
 
       
Net cash provided by financing activities
   
3,198,927
 
 
       
Increase in cash
 
$
205,228
 
 
-30-


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 period Contractual obligations
 
  Total
 
  Less than 1 year
 
  1 - 2 years
 
 
 
$
61,224
 
$
56,122
 
$
5,102
 

-31-

 
BUSINESS

General

The Company is a Florida corporation organized in April 1981. The Company's principal executive office is located at 830 Third Avenue, New York, New York 10022. Its telephone number is 212 355-1547.

The Company, formerly known as “Fast Eddie Racing Stables, Inc.” was originally formed for the purpose of acquiring, racing, breeding and selling standardbred race horses (trotters and pacers). The Company commenced business operations in September 1983.

The Company completed a public offering of its common stock pursuant to a Registration Statement on Form S-18 during October 1985. The Company did not file a registration statement under the Securities and Exchange Act of 1934, as amended (the “1934 Act”), with respect to its class of Common Stock, and does not meet the asset threshold of $10 million or the record ownership threshold of 500. The Company has filed a registration statement for its class of Common Stock under the 1934 Act contemporaneously with the filing of the registration statement of which this prospectus is a part.

During the year ended December 31, 1989, the Company sold or otherwise disposed of all race horses in order to settle then-outstanding indebtedness. From December 31, 1989 until March 9, 2005, the Company had no operations, and nominal assets or liabilities. Prior to March 2005, the Company's principal business activity was to seek a suitable reverse acquisition candidate through acquisition, merger or other suitable business combination method.

On March 9, 2005, the Company acquired all of the outstanding shares of common stock of Duncan Capital Financial Group, Inc. (“Duncan”) in a transaction in which the shareholders of Duncan obtained a controlling interest in the Company. This merger was effected for the principal purpose of obtaining a $10 million credit line from Laurus Master Fund, which conditioned approval of this credit facility on the borrower having publicly traded equity securities. Upon the consummation of this transaction, we issued 12,040,000 shares of our common stock to the stockholders of Duncan under the acquisition agreement. In addition, warrants to acquire an aggregate of 1,910,000 shares of Duncan common stock were converted to warrants to acquire our common stock on similar terms for $0.1667 per share. We subsequently completed the issuance of 3,820,000 shares of our Series A Preferred Stock to a total of ten holders of preferred stock of Duncan in exchange for their surrender of an equivalent number of preferred shares of Duncan containing identical terms. We received no other consideration in such exchange. Holders of Series A Preferred Stock have the right to convert, at any time, their shares of Series A Preferred into shares of common stock on a 1:1 basis. The above 12,040,000 shares of common stock, together with 1,910,000 shares of common stock underlying the above warrants, and 3,820,000 shares of common stock issuable upon conversion of the Series A Preferred Stock are included in the shares of common stock being offered for sale under this prospectus. In addition, on account of other financing transactions, up to 736,000 shares of common stock may be issued to CAMOFI Master LDC (formerly known as DCOFI Master LDC) if that lender converts its $500,000 of loans to Duncan at $0.68 per share, up to 3,614,458 shares of common stock may be issued to Laurus Master Fund Ltd. if that lender converts its $3 million secured note into common stock at $0.83 per share, up to 1,084,338 shares of common stock may be issued to Laurus if Laurus exercises its warrant to acquire common stock at a conversion price of $1.00 per share, and up to 643,700 shares of common stock may be issued to Laurus if Laurus exercises its option to acquire common stock at an exercise price of $0.01 per share. See “Description of Securities - Laurus Financing”.

Duncan was formed in November 2004 as a vehicle for the acquisition of pension advisory, investment management and insurance brokerage organizations generating annual revenues in the range of $1 million to $20 million whose clients generally have less than 100 employees, with a view to consolidating such businesses to take advantage of cross-selling opportunities, economies of scale, efficiencies and where appropriate, consolidation of overhead. With these stated business principles in mind, on December 13, 2004, Duncan entered into stock purchase agreements to acquire 100% of the outstanding shares of three companies from their controlling shareholders: Pension Administration Services, Inc., Complete Investment Management, Inc. of Philadelphia and MD Bluestein, Inc.

Financial organizations today are challenged to compete more effectively, improve productivity and maximize profits during periods of both economic growth and decline. Our objectives are to increase our client base and to expand the services we offer to them through focused account management and administration, emphasizing services with recurring revenues and long-term relationships. We seek to increase our business base through (i) organic growth of our clients, (ii) sales of additional products and services to existing clients, (iii) direct sales to new clients, and (iv) acquisitions of businesses that provide similar and/or complementary solutions.

-32-


Competition

We believe that the markets for our products and services are highly competitive. We believe that we remain competitive due to several factors, including our overall company strategy and commitment, product quality, reliability of service, the personal relationships between our key employees and clients, local presence, duration of client relationships and competitive pricing. We believe that, by virtue of our range of product and service offerings, and our overall commitment to client service and relationships, we compete favorably in these categories at the local and regional level. In addition, we believe that we have a competitive advantage as a result of our position as an independent vendor, rather than as a cooperative, an affiliate of a financial institution, a hardware vendor or competitor to our clients.

Our principal competitors are third-party administration firms, mutual fund companies, brokerage firms, insurance companies, distributors of insurance products, investment advisors, financial planners, in-house service departments and affiliates of financial institutions.

Operations

We believe that preserving the entrepreneurial culture of our firms is important to their continued growth. We do not typically integrate the sales, marketing and processing operations of our acquired firms. Recognizing that the principals have established personal relationships with their businesses’ clients, we allow the principals to continue to operate in the same entrepreneurial environment that made them successful before the acquisition, subject to our oversight and control at the corporate level in the areas of accounting, budgeting and business planning. The principals report to Richard E. Stierwalt, our Chief Executive Officer, and Leonard A. Neuhaus, our Chief Financial Officer, and to our Board of Directors.

Corporate Headquarters

Our New York headquarters provides support for our acquired firms. Corporate activities, including mergers and acquisitions and finance and accounting, are centralized in New York. Our mergers and acquisitions team identifies targets, performs due diligence and negotiates acquisitions. Finance and accounting is responsible for working with each firm to ensure timely and accurate reporting. In addition, finance and accounting is responsible for consolidation of our financial statements at the corporate level.

Strategy; Plan of Operation

The Company's strategy is to purchase majority interests in small to medium-sized pension advisory, investment management and insurance organizations with recurring revenue streams and consolidate these businesses to take advantage of cross-selling opportunities, economies of scale, efficiencies and where appropriate, consolidation of overhead. These businesses will typically have a sole proprietorship or partnership structure, and will typically have stable revenue growth and cash flow with low client attrition rates.  

Management of the Company believes there are numerous such businesses in the United States, individually maintaining up to $500 million in assets under management or under administration. Many of these entities have part or all of their business dedicated to retirement plan management and administration, known as third party administration. These businesses compete very effectively on a local level by offering a high degree of personalized service to wealthy individuals and local businesses.

Management of the Company believes that many of these businesses are attractive acquisition candidates as stand alone-businesses due to their high profitability margins and strong cash flows, long-term client relationships, and consistent fee based income streams. Most of the businesses we will seek to acquire will have a majority of their revenue being derived from recurring sources and not transaction based revenue. However, due to their size and structure, they have not yet taken advantage of the industries' best practices relating to information technology and back office processes.

As stand-alone businesses, many cannot grow and diversify beyond their current levels due to resource constraints and personnel issues. Since these businesses do not have large staffs or marketing budgets, their ability to develop new products and diversify into other product categories is limited. Their ability to cross sell is limited not only by their product offerings, but also by the lack of expertise required to be an expert in many retirement facets, and therefore, much of the products and services they do not or can not offer is referred elsewhere. In many cases, current cash flows provide stable businesses lifestyles to current owners and partners who have little incentive to invest their own capital in the future growth of the business.

-33-

 
The Company believes that these dynamics create an opportunity for industry consolidation. Our goal is to create an organization that can assimilate these businesses, minimizing execution risk while preserving the strong client relationships that make these firms valuable. The technology platforms available for use today could allow the Company to compete effectively against larger institutional platforms in terms of offering sophisticated back office functionality and systems support. This would enable the Company to offer clients greater value, while becoming more competitive against other local service providers who continue to operate on a smaller scale.

Client retention is an important aspect of any such consolidation. The Company intends to promote client retention at the acquired entity level by utilizing some or all of the following:

- issuing our stock as a portion of the purchase price of each subsidiary;

- having the seller/owner finance a portion of the purchase price in the form of a seller's note;

- offering notes convertible into the stock of the Company;

- holding back a portion of the purchase price to ensure compliance with stated goals and objectives, including client retention;

- offering employment contracts to retain key employees;

- entering into non-competition agreements with selling owners and key employees; and

- providing bonus incentives for former owners to expand and grow the business.

Over the next 12 to 24 months, the Company plans to enhance revenues in the acquired businesses through cross-selling to existing clients where no such services are currently provided and by offering a more diversified service and product base, the introduction of higher-margin, non-traditional investment management services and products and higher client retention through improved service. For those acquired businesses that do not offer a full suite of products, the Company plans to expand their product lines as soon as practicable upon acquisition. For those acquired companies that already offer a broad line of products, the Company plans to emphasize cross-marketing and referral services to expand market penetration. The Company believes that it can also improve operating margins in the acquired businesses primarily through increased purchasing power through economies of scale, increased fees due to a greater base of assets under management, decreased sales expense associated with cross-selling, elimination of certain redundant back office support functions and where appropriate, centralized customer services support and consolidation of overhead.

Initial Acquisition

Overview

On December 13, 2004 the Company entered into stock purchase agreements to acquire (the “Acquisition”) three companies (the “Acquired Companies”) from their controlling shareholders: Pension Administration Services, Inc., a Pennsylvania corporation organized in 1973 (“PAS”); Complete Investment Management, Inc. of Philadelphia, a Pennsylvania corporation organized in 1986 (“CIM”); and MD Bluestein, Inc., a Pennsylvania corporation organized in 1979 (“MDB”). One individual was the sole owner of PAS and MDB; CIM was jointly owned by the sole owner of PAS and MDB and another individual. The principal executive offices of PAS, CIM and MDB are located at 110 Gibralter Plaza, Suite 101, Horsham, Pennsylvania 19044.

The total purchase price paid for the Acquired Companies was $3,656,350, of which: (i) $3,107,898 was paid in cash at closing; (ii) $365,635 was paid by delivery of convertible notes bearing interest at 7% per annum with principal payable in 12 consecutive quarterly installments beginning 90 days after closing, and convertible into Common Stock at the holder's option at a conversion rate equal to fair market value, and (iii) the balance of $182,817 will be held back by the Company pending completion of an acquisition meeting certain criteria within 24 months of the closing.

PAS. CIM and MDB continue to share administrative and bookkeeping staff and utilize common office space at the Horsham, Pennsylvania location.

-34-

 
Services offered by the Acquired Companies to clients include the following:

 
·
Pension plan design, creation, termination and administration
 
 
·
Investment management of retirement plan assets
 
 
·
Investment management of non-plan assets for wealthy individuals
 
 
·
Quarterly asset monitoring reports
 
 
·
401(k) asset management through an insurance company program
 
 
·
Retirement distribution studies
 
 
·
Life insurance
 
 
·
Deferred compensation and annuities
 
 
·
Limited hospitalization and long-term care insurance

The Acquired Companies use PAS' plan administration business to help small businesses organize, report and administer their pension plans. Once an entity becomes a PAS client, it is often a good candidate for pension plan investment management business services, which carry a higher profit margin and an annuity feature as well as insurance services. CIM provides investment guidance and investment performance monitoring while MDB provides insurance related services. We view ourselves as problem solvers for our clients, recommending third party products and investment platforms that we believe serve our clients' best interests.

A description of the individual Acquired Companies is as follows:
 
Business of PAS

PAS is a retirement and pension consulting and administration firm that provides services for pension and other retirement plans in the following areas:

-preparation of plan feasibility and design studies, including the fields of contribution maximization/reduction, retirement planning and distribution, executive compensation, new comparability, 401(k) plans, plan terminations, governmental compliance and coverage, participation and discrimination testing; and

-administration of existing plans, including: preparation of government forms and summary plan descriptions, training personnel, maintaining employee data maintenance systems, maintaining detailed asset reconciliation data, providing periodic reports, determining plan contributions and benefits, distributions to plan participants, termination of employees and plans and coordination with other benefit programs.

PAS has been an operating business for over 25 years, and currently serves approximately 200 clients. PAS' approach is that of a problem solver for its clients, and not a product provider with a specific product as a proposed solution. This approach allows PAS to analyze the specific needs of a client and its employees and then recommend an appropriate course of action.

Revenues are generated by PAS through annual plan administration fees, as well as fees for individual projects undertaken on behalf of its clients.

Business of CIM

CIM provides financial advisory services to small businesses and high net worth individuals in the Philadelphia metropolitan area. CIM is not a registered broker-dealer or a registered investment advisor. Representatives of CIM are NASD-licensed registered representatives who work in conjunction with, and are supervised by, Capital Analysts, Inc., a registered investment adviser and broker dealer, to provide investment advisory services to corporations, individuals, retirement plan trustees and charitable foundations in the following areas:

-35-

 
- review of assets and investments, including investment allocations;

- determination of investment goals and strategies in light of the client's objectives, degree of risk and time horizon;
 
- implementation of investment programs from among a broad spectrum of investment choices, including domestic and international mutual funds, certificates of deposit, treasuries, fixed and variable annuities, and specialty investments; and

- monitoring performance results of investments and advising the client of any recommended adjustments.

CIM has conducted business operations for over ten years, servicing approximately 125 clients, with commissions earned from over 500 managed accounts.

Fee income is generated through commissions paid by the various investment platforms, including managed accounts and mutual fund investment programs such as those operated by Capital Analysts, SEI, Lockwood, Nationwide, Wells Real Estate, Brinker Capital, Managers Choice and Envestnet, among others. The majority of revenue derived by CIM is paid through Capital Analysts, Inc.. As of March 25, 2005, CIM's assets under management totaled approximately $113 million.

Business of MDB

Through licensed and authorized brokers and agents, MDB is engaged in the business of insurance and annuity product sales as well as estate planning services highlighting wealth accumulation, preservation and transfer needs. Fee income is generated through commissions on product sales. MDB has conducted business operations for over 25 years.

Clients and Customers

The customers of our life insurance and wealth transfer and investment advisory products and services are generally high net worth individuals and the businesses that serve them. We believe that the current economic and stock market environment may lead high net worth persons to increase their demand for the specialized services we offer in order to continue to meet their financial goals.

The customers of our firms' retirement plan administration services are generally small and medium-size corporations and the businesses that serve them. We consider this segment our target market.

Government Regulation - Acquired Companies

The Acquired Companies and their personnel are subject to extensive regulation. The Acquired Companies and its personnel are licensed to conduct business in the states of Pennsylvania, New Jersey, Florida, Maryland, Delaware, Virginia and New York, and are subject to regulation and supervision both federally and at the state level in each of these jurisdictions. The ability of the Acquired Companies and their personnel to conduct business in the jurisdictions in which they operate depends on their compliance with the rules and regulations promulgated by federal regulatory bodies and the regulatory authorities in each of these jurisdictions. Failure to comply with all necessary regulatory requirements, including the failure to be properly licensed or registered, can subject the Acquired Companies to sanctions or penalties.

Each jurisdiction has enacted laws and regulations governing the sale of insurance products. State insurance laws grant supervisory agencies, including state insurance departments, broad regulatory authority. State insurance regulators and the National Association of Insurance Commissioners continually reexamine existing laws and regulations which affect the Acquired Companies. These supervisory agencies regulate, among other things, the licensing of insurance brokers and agents and the marketing practices of insurance brokers and agents, in the context of curbing unfair trade practices. Violations of state insurance laws or failure to maintain applicable state insurance licenses can result in revocation of such licenses.

Providing investment advice to clients is also regulated on both the federal and state level. Personnel of the Acquired Companies are permitted to conduct investment advisory activities through Capital Analysts, Inc., an unaffiliated broker dealer and investment adviser registered with the National Association of Securities Dealers, Inc. and with SEC under the Investment Advisers Act. The Investment Advisers Act imposes numerous obligations on registered investment advisers, including disclosure obligations, recordkeeping and reporting requirements, marketing restrictions and general anti-fraud prohibitions which affect the conduct of the Acquired Companies and their personnel. In addition, certain of the Acquired Companies' personnel are regulated by state securities regulators under applicable state securities laws. Violations of applicable federal or state laws or regulations can result in the imposition of fines or censures and disciplinary actions, including the revocation of licenses or registrations previously issued to the Acquired Companies or their personnel.

-36-

 
EMPLOYEES

As of March 24, 2005, we had approximately 22 full-time employees. None of our employees are represented by a labor union or are subject to collective-bargaining agreements. We believe that we maintain good relationships with our employees.

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, with a one-year lease option that we expect to exercise. 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.
 
LEGAL PROCEEDINGS

We are not party to any material pending legal proceedings.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth our directors and executive officers, their ages and the positions they hold:

NAME  
 
AGE
 
POSITION
Richard E. Stierwalt (4)
 
50
 
President, Chief Executive Officer and Director
Richard J. Berman (1,3,4)
 
62
 
Chairman of the Board and Director
Leonard Neuhaus
 
46
 
Chief Financial Officer
Michael Bluestein
 
57
 
Director
Steven B. Ruchefsky (2,4)
 
42
 
Director
Kevin T. Crow (2,3)
 
43
 
Director
Jeff Cooke (1)
 
43
 
Director
Arthur D. Emil (3)
 
79
 
Director
Steven Ross (1)
 
47
 
Director
 
1 Member of the Audit Committee
2 Member of the Compensation Committee
3 Member of the Governance Committee
4 Member of Executive Committee

Richard E. Stierwalt . Richard E. Stierwalt has served as our President and Chief Executive Officer and as a director since March 9, 2005. Mr. Stierwalt has served as the President and Chief Executive Officer of Duncan since November 2004. Prior to joining Duncan, Mr. Stierwalt was the Managing Partner of New Shorehaven, LLC. Mr. Stierwalt is a member and part owner of Saratoga Capital Management, the investment advisor to the Saratoga Group of mutual funds. From 1998 to 2003, Mr. Stierwalt was the Chief Executive Officer of Orbitex Financial Services Group. Previously, he was the President of BISYS Investment Services, a NYSE-listed firm. Prior to the March 1995 merger of Concord Holding Corporation with BISYS Fund Services, he was Chairman of the Board and Chief Executive Officer of Concord Holding Corporation. Mr. Stierwalt received an associate degree in banking and finance and a BA in management from the University of Indianapolis. He attended the Stonier Graduate School of Banking at Rutgers University and is an OPM graduate of Harvard University. He serves on the Board of Trustees and Chairs Finance at the University of Indianapolis and Chairs the Capital Campaign at East Avenue United Methodist Church. He also serves on the Board of Directors of: Biomega Laboratories, We Are Family Foundation, and Harborside Resort. Mr. Stierwalt intends to devote substantially all of his business time to the Company. Under the terms of his employment agreement, Mr. Stierwalt is permitted to spend up to 10% of his business time in connection with other business matters, provided that, and only for so long as, they do not interfere with, or present conflict of interest issues with respect to, his duties to the Company.

-37-


Richard Berman . Richard Berman has served as our Chairman and as a director since March 9, 2005. Mr. Berman has been Chairman of the Board of Directors and a Director of Duncan since November 24, 2004. Since 2000 Mr. Berman has served as a professional director of Dyadic International, Inc., International Microcomputer Software, Inc., Internet Commerce Corporation, MediaBay, Inc., NexMed, Inc. and GVI Security Solutions, Inc. From 1998 to 2000 Mr. Berman was Chairman and CEO of Internet Commerce Corporation. He is also Chairman of Candidate Resources, Inc. He is a past Director of the Stern School of Business of NYU from which he received a B.S. and an M.B.A. He also has U.S. and foreign law degrees from Boston College and The Hague Academy of International Law, respectively.

Leonard Neuhaus . Mr. Neuhaus has served as our Chief Financial Officer since March 9, 2005. Mr. Neuhaus has served as the Chief Financial Officer of Duncan since January 2005, and has been a certified public accountant since 1982. Mr. Neuhaus spent eight years in the practice of public accounting in regional and international firms, including BDO Seidman. He served as Chief Financial Officer of a publicly-traded entity and has sat on the Board of Directors of publicly-traded entities and not-for-profit organizations. Mr. Neuhaus has been involved in a number of corporate finance and merger and acquisition transactions. His experience includes working with large international financial institutions as well as growing entrepreneurial companies. For the last five years, Mr. Neuhaus has served as a self-employed consultant for Credit Lyonnais, Bank of America, Hauppauge Digital, Inc., a NASDAQ National Market System company, and others. Mr. Neuhaus received a B.A. in Accounting and Information Systems from Queens College in 1980. 

Michael Bluestein. Michael Bluestein has served as a director since April 15, 2005.   Mr. Bluestein founded and has been President of PAS and MDB since 1973 and 1979 respectively, as well as Vice President of CIM since 1986. Mr. Bluestein graduated from Pennsylvania State University with a Bachelor of Science degree and holds a Series 7, 63, and is a Registered Investment Adviser (R.I.A.). He also has a Life and Health License and a Certified Investment Management Consultant (C.I.M.C.) designation.

Steven B. Ruchefsky. Steven B. Ruchefsky has served as a director since April 15, 2005.   Mr. Ruchefsky, a graduate of The George Washington University Law School, practiced law in New York City for fifteen years. Through 2000, he was a partner of a 80-attorney New York City law firm, chair of its specialized litigation department and member of the firm's management group. In 2000, he left his law firm to establish a family office for one of his high net worth clients. There, Mr. Ruchefsky was responsible for the diversification out of that family's single stock holding, the development and implementation of an investment strategy and for the establishment of operating controls and procedures. In addition, Mr. Ruchefsky was a principal of an early stage/seed venture capital firm established by the family and sat on the boards of several of its portfolio companies.  Since September 2001, Mr. Ruchefsky has been working with the founder and chief executive officer of a prominent multi-strategy hedge fund and is responsible for this executive's personal finance, tax and investment decisions in addition to performing special projects for the hedge fund.  Since that time, Mr. Ruchefsky has been employed by Caremi Partners Ltd., a significant shareholder of the Company. He currently sits on the boards of several private and not-for-profit companies.

Kevin T. Crow. Kevin T. Crow has served as a director since April 15, 2005. Mr. Crow is the founder Diversified Corporate Solutions, LLC and has been its CEO since 2004. Diversified Corporate Solutions creates strategic alliances that provide start-up and emerging growth businesses solutions. From 2000 to 2003, Mr. Crow was the Chief Operating Officer of Women's United Soccer Association. From February 1994 to September 2000, Mr. Crow was President of ZipDirect, LLC, a full service printing, mailing and shipping company. Mr. Crow was also a professional soccer player, playing on the U.S. National Team, and was a two-time Olympic Athlete between 1983 and 1992. Mr. Crow's current directorships include Grant Health Ventures, a publicly traded woman's health care company, and Knobias, Inc. Mr. Crow has a BA in Finance from San Diego State University. Kevin Crow is the brother of Michael Crow, a principal of MW Crow Family L.P., one of our significant stockholders.

Jeff Cooke . Jeff Cooke has serves as a director since April 15, 2005. Since January 2002, Mr. Cooke has been President and CEO of FDI Collateral Management, which provides electronic lien and titling and other services for automotive lenders. From March 2000 to December 2001 Mr. Cooke served as managing partner for Granite Ventures, LLC which provides interim leadership services for early stage companies and those going through a significant change in direction. From November 1998 to March 2000 Mr. Cooke was President and COO of NEC Computers, Inc. Prior to joining NEC Computers, Mr. Cooke held several positions at Hewlett Packard.

Arthur D. Emil. Arthur D. Emil, Esq. has serves as a director since April 15, 2005. Mr. Emil has been a practicing attorney in New York City for over fifty years, including with Kramer Levin Naftalis & Frankel, from 1994 to 2003 and with Jones Day Reavis & Pogue prior to that. In 2003, Mr. Emil joined Cohen Tauber Spievack & Wagner LLP. Mr. Emil is a principal owner and Chairman of Night Sky Holdings LLC, a company which owns several restaurants now operating in the New York area, which included Windows on the World, and operated the Rainbow Room from 1986 until December 1998. Mr. Emil is the founding principal and shareholder of two real estate development firms with commercial, residential and mixed-use properties in Connecticut and New York. Mr. Emil is a director of NexMed, Inc. Mr. Emil has also served as a director of other publicly held corporations including some in the financial services sector. Mr. Emil has served as trustee for various non-profit organizations including The American Federation of Arts and the Montefiore Medical Center. Mr. Emil received his LLB from Columbia University.

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Steven J. Ross. Steven J. Ross has served as a director since April 15, 2005. Since February 2000, Mr. Ross has been DynTek, Inc.'s President, Chief Executive Officer and Chairman of the Board. Mr. Ross has an extensive industry background, most recently serving as General Manager of Toshiba's Computer System Division, responsible for sales, marketing, and operations in North and South America from 1998 to 1999. Prior to that, Mr. Ross was President and General Manager of the Reseller Division and President of Corporate Marketing at Inacom Corporation from 1996 to 1998. Mr. Ross' other positions have included responsibility for sales and marketing, operations, strategic planning, and other senior executive activities.

AUDIT COMMITTEE FINANCIAL EXPERT

The Board of Directors has determined that each of Mr. Berman and Mr. Ross is an “audit committee financial expert,” as such term is defined in Item 401(e) of Regulation S-B, and is independent as defined in rule 4200(a) (15) of the listing standards of the National Association of Securities Dealers.
 
DIRECTOR COMPENSATION

Our non-management directors other than Richard Berman do not receive any cash compensation for their service on the Board of Directors. Commencing as of May 4, 2005 and for a one-year period thereafter, under an agreement entered into with the Company on June 15, 2005, Mr. Berman receives cash compensation of $52,000 for serving as Chairman of the Board and Chairman of our Audit Committee, and for serving on our the Executive and Corporate Governance Committees, together with the stock option grant described in this paragraph below. Our directors are reimbursed for actual out-of-pocket expenses incurred by them in connection with their attendance at meetings of the Board of Directors. Our non-management directors other than Mr. Berman, presently consisting of Messrs. Ruchefsky, Crow, Cooke, Emil and Ross, have each been granted options, which are fully vested as of the date of grant, to acquire 40,000 shares of Common Stock over a five-year term at an exercise price of $0.1666 per share as annual compensation for services rendered by them during calendar year 2005. For serving as Chairman of the Board and Chairman of our Audit Committee, and for serving on our the Executive and Corporate Governance Committees, in addition to the cash compensation of $52,000 described above, Mr. Berman has been granted options, vesting on May 4, 2006, to acquire 266,370 shares of Common Stock over a seven-year term at an exercise price of $1.00 per share. All unvested options and any vested but unexercised options will terminate upon the termination of Mr. Berman’s engagement for cause or upon Mr. Berman's voluntary termination of his engagement other than as a result of the Company's breach of the Agreement. Upon the termination of Mr. Berman’s engagement due to death, disability or by the Company without cause, all unvested options will terminate and all vested and unexercised options will remain exercisable in accordance with their terms but in any event for a period not less than ninety (90) days following the date of termination of his engagement.
 
EXECUTIVE COMPENSATION - GENERAL

As of December 31, 2004, the sole executive officer who was entitled to compensation from the Company and its subsidiaries was Mr. Stierwalt, our President and Chief Executive Officer, whose employment agreement with one of our subsidiaries, Duncan, was entered into as of November 1, 2004. One of our directors, Michael Bluestein, who is not an executive officer of the Company but who may be deemed to be a significant employee, entered into an employment agreement with another of our subsidiaries, Pension Administration Services, Inc., effective December 13, 2004.

Leonard Neuhaus, our Chief Financial Officer, entered into an employment agreement with Duncan effective as of January 1, 2005.

EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

Employment Agreement with Richard E. Stierwalt. Duncan entered into an employment agreement, dated as of December 23, 2004 but effective as of November 1, 2004, with Richard E. Stierwalt, the President and Chief Executive Officer of Duncan and the Company. The employment agreement provides for a one-year term, expiring October 31, 2005, with automatic extensions of one year upon the parties' agreement to extend the term not later than 90 days prior to the expiration of the then-existing term. Mr. Stierwalt is entitled to a base salary of $250,000 per year, plus a discretionary bonus based on criteria to be established by Mr. Stierwalt and the Board of Directors of the Company. The base salary is subject to increase upon renewal of the term, at the discretion of the Board, but may not exceed 5% of free cash flow. If Mr. Stierwalt is terminated for cause or due to death or disability, he will be paid his base salary through the date of termination plus any unreimbursed expenses. If Mr. Stierwalt is terminated without cause, or resigns due to the Company's breach of the Agreement, he will be entitled to be paid his base salary for the remainder of the term plus any unreimbursed expenses and a pro-rata bonus, based on the number of days he was employed.

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In connection with such employment, Mr. Stierwalt was issued a warrant to acquire 793,000 shares of common stock of Duncan which, as a result of our merger with Duncan, represents the right to acquire 793,000 shares of Company common stock, at an exercise price of $0.166 per share, as adjusted from time to time to reflect stock dividends, stock splits, reorganizations and similar customary adjustments. The warrant vests in twelve equal monthly installments commencing December 1, 2004, or, if sooner, upon a “change of control”, defined as (i) an acquisition of voting securities of the Company by any person or entity immediately after which such person or entity has beneficial ownership of 50% or more of the combined voting power of the Company's then-outstanding voting securities; or (ii) a merger or consolidation that results in more than 50% of the combined voting power of the Company's then-outstanding voting securities changing ownership; or (iii) the sale of all or substantially all of the Company's assets. The warrant expires on October 31, 2009.
 
In addition, the employment agreement provides that, subject to the approval and adoption by the Company of a stock option plan, and the terms of any related stock option agreement, no later one year from the date of the Agreement, Mr. Stierwalt will be granted options (which will be incentive stock options, to the extent permitted by law) to purchase such number of shares of the Company's common stock that represents 5% of the issued and outstanding common stock on the date of issuance, at an exercise price not to exceed the fair market value of common stock on the date of option issuance. The grant to Mr. Stierwalt of options to acquire 665,925 shares of common stock, representing 5% of the issued and outstanding common stock on the date of issuance, at an exercise price of $1.00 per share, was approved by the Board of Directors on May 4, 2005. The options have a term of seven years from the date of grant, and will vest on the first anniversary of the date of grant or, if sooner, upon any sale or other disposition of all or substantially all of the Company's assets, or upon a merger, consolidation, reorganization or other similar transaction resulting in a change of control of the Company's business. All unvested options and any vested but unexercised options will terminate upon the termination of Mr. Stierwalt's employment for cause or upon Mr. Stierwalt's voluntary termination of his employment other than as a result of the Company's breach of the Agreement. Upon the termination of Mr. Stierwalt's employment due to death, disability or by the Company without cause, all unvested options will terminate and all vested and unexercised options will remain exercisable in accordance with their terms but in any event for a period not less than ninety (90) days following the date of termination of employment.

Mr. Stierwalt is prohibited under his employment agreement from disclosing or using any of our confidential information during the term of his employment and for a period of three years thereafter. For a period of one year from the date of termination of his employment, or if he is terminated without cause or resigns due to the Company's breach of the Agreement, for the period ending on the last day on which he receives severance pay, Mr. Stierwalt is prohibited from directly or indirectly competing with the Company and its affiliates in the areas of pension administration, insurance product sales and pension investment advisory services in the geographical area of New York and New England, or soliciting any of our customers or employees.

Employment Agreement with Leonard Neuhaus. Duncan entered into an employment agreement, dated as of January 1, 2005, with Leonard Neuhaus, Chief Financial Officer of Duncan and the Company. The employment agreement provides for a one-year term, expiring December 31, 2005. Mr. Neuhaus is entitled to a base salary of $175,000 per year, plus a discretionary bonus based on criteria to be established by the Chief Executive Officer and the Board of Directors of the Company. If Mr. Neuhaus is terminated for cause or due to death or disability, he will be paid his base salary through the date of termination plus any unreimbursed expenses. If Mr. Neuhaus is terminated without cause, or resigns due to the Company's breach of the Agreement, he will be entitled to be paid his base salary for the remainder of the term and a pro-rata bonus, based on the number of days he was employed.

In connection with such employment, Mr. Neuhaus was issued a warrant to acquire 317,200 shares of common stock of Duncan which, as a result of our merger with Duncan, represents the right to acquire 317,200 shares of the Company's common stock, at an exercise price of $0.166 per share, as adjusted from time to time to reflect stock dividends, stock splits, reorganizations and similar customary adjustments. The warrant vests in twenty-four equal monthly installments commencing February 1, 2005, or, if sooner, upon a “change of control”, defined as (i) an acquisition of voting securities of the Company by any person or entity immediately after which such person or entity has beneficial ownership of 50% or more of the combined voting power of the Company's then-outstanding voting securities; or (ii) a merger or consolidation that results in more than 50% of the combined voting power of the Company's then-outstanding voting securities changing ownership; or (iii) the sale of all or substantially all of the Company's assets. The warrant expires on December 31, 2009.

Mr. Neuhaus is prohibited under his employment agreement from disclosing or using any of our confidential information during the term of his employment and for a period of three years thereafter. For a period of one year from the date of termination of his employment, or if he is terminated without cause or resigns due to the Company's breach of the Agreement, for the period ending on the last day on which he receives severance pay, Mr. Neuhaus is prohibited from directly or indirectly competing with the Company and its affiliates in the areas of pension administration, insurance product sales and pension investment advisory services in the geographical area of New York and New England, or soliciting any of our customers or employees.

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Employment Agreement with Michael Bluestein. Effective as of December 13, 2004, Mr. Bluestein entered into one-year employment agreement with PAS. Under the terms of the agreement, Mr. Bluestein serves as President of PAS at a base salary of $125,000 per year, and is reimbursed for specified business expenses. Under that agreement, subject to adoption and approval of the Company's stock option plan, and the terms thereof, effective as of December 9, 2004, Mr. Bluestein will be granted options to purchase 50,000 shares of Common Stock at an exercise price of $1.00 per share, vesting on the   date of grant. In addition, Mr. Bluestein is entitled to participate in a net profits bonus pool based on the calendar year 2005 performance of PAS, CIM and MDB; will be entitled to participate in a net profits bonus pool for certain businesses acquired by the Company in the future; and will be entitled to earn commissions of 25% of certain new product sales if the gross revenues of PAS, CIM and MDB exceed prior gross revenues for comparable periods. In addition, under a separate agreement, effective as of December 13, 2004, Mr. Bluestein will be entitled to a fee equal to 2% of the purchase price of businesses acquired by the Company that are identified by Mr. Bluestein through the period ending on the earlier of the second anniversary of the agreement or Mr. Bluestein's termination of employment, and that close within a 24 month period thereafter.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In January 2005, Duncan Capital Financial Group, Inc. entered into an agreement to borrow up to $500,000 in senior secured notes (the “2005 Notes”) from CAMOFI Master LDC (formerly known as DCOFI Master LDC), a principal stockholder of the Company. Management believes that the terms of the 2005 Notes are comparable to terms that may have been obtained in an arms-length transaction from an unaffiliated third party lender. In January 2005, we borrowed $350,000 pursuant to this agreement. In the second quarter of 2005, we borrowed an additional $150,000 under this facility. In June 2005, the 2005 Notes were converted by the holder in accordance with their terms to convertible notes which are convertible to common stock at a conversion price of $0.68 per share. The convertible notes bear interest at the rate of 12% per annum (the same rate as the 2005 Notes), amortize in equal monthly payments commencing October 2005 and are due March 10, 2008. In connection with the agreement, we have agreed to issue five-year warrants to the noteholders to purchase 367,647 shares of common stock at $0.1667 per share. The 2005 Notes, as converted, are secured by substantially all of the assets of the Company, are guaranteed by PAS, CIM and MDB and are subordinate to the Laurus Master Fund, Ltd. convertible term note issued by the Company. In the event that the loan is not repaid within two trading days of maturity, we are required to issue to the lender 500,000 shares of our Common Stock.

We 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 stockholder 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.

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PRINCIPAL STOCKHOLDERS

The following table sets forth information known to the Company with respect to the beneficial ownership of Common Stock held of record as of July 1, 2005, by (1) all persons who are owners of 5% or more of our Common Stock, (2) each of our named executive officers, (3) each director, and (3) all of our executive officers and directors as a group. Unless otherwise indicated, each of the stockholders can be reached at our principal executive offices located at 830 Third Avenue, New York, New York 10022.
 
   
SHARES BENEFICIALLY OWNED (1),(2)
 
   
NUMBER
 
PERCENT (%)
 
               
Beneficial Owners of more than 5% of Common Stock (other than Directors and Executive Officers)
             
CAMOFI Master LDC (3)
   
1,463,619
   
9.9
%
Caremi Partners Ltd. (4)
   
2,400,000
   
18.0
%
Steven B. Ruchefsky (12)
   
2,440,000
   
18.3
%
Richard Smithline (5)
   
1,525,000
   
11.4
%
Michael Crow (6)
   
3,275,000
   
24.0
%
William Sarnoff (7)
   
900,000
   
6.6
%
Christopher P. Baker (8)
   
1,270,000
   
9.0
%
 
Directors and Executive Officers
Richard Stierwalt (9)
   
1,860,833
   
13.3
%
Richard Berman
   
0
   
*
 
Leonard Neuhaus (10)
   
105,733
   
*
 
Michael Bluestein (11)
   
250,082
   
1.5
%
Steven B. Ruchefsky (12)
   
2,440,000
   
18.3
%
Kevin T. Crow (13)
   
40,000
   
*
 
Jeff Cooke (14)
   
40,000
   
*
 
Arthur D. Emil (15)
   
940,000
   
6.9
%
Steven J. Ross (16)
   
190,000
   
1.4
%
All directors and executive
             
officers as a group (nine persons)(17)
   
5,866,648
   
40.1
%
________________
* Less than 1%
 

 
1.
Gives effect to the shares of Common Stock issuable upon the exercise of all options, warrants and convertible securities exercisable within 60 days of the date of this prospectus and other rights beneficially owned by the indicated stockholders on that date. Shares of Common Stock issuable pursuant to warrants or options or upon conversion of convertible securities, to the extent such warrants or options or convertible securities are currently exercisable or convertible within 60 days of the date of this prospectus, are treated as outstanding for computing the ownership percentage of the person holding such securities, but are not treated as outstanding for computing the ownership percentage of any other person. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting and investment power with respect to shares. Unless otherwise indicated, the persons named in the table have sole voting and sole investment control with respect to all shares beneficially owned. Percentage ownership is calculated based on 13,320,413 shares of the Common Stock outstanding as of July 1, 2005. All information is based upon information furnished by the persons listed or otherwise available to the Company.

 
2.
Each share of the Company's Series A Preferred Stock is convertible into one share of Common Stock. Unless otherwise noted, the shares of Common Stock and Series A Preferred Stock and the five (5) year warrants to purchase shares of Common Stock at an exercise price of $0.1667 per share (“Common Stock Warrants”) described in the notes to this Principal Stockholders table represent securities that were acquired by such holders from the Company on a 1:1 basis upon the exchange and/or conversion of similar securities of Duncan Capital Financial Group, Inc. (“Duncan”) held by such holders in connection with the consummation of the business combination transaction between Duncan and the Company on March 9, 2005. See “Business - General”.

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3.
Formerly known as DCOFI Master LDC. Under an agreement between CAMOFI Master LDC and the Company, CAMOFI Master LDC is not permitted to exercise any convertible securities for that number of shares of Common Stock that would result in beneficial ownership by CAMOFI Master LDC of more than 9.9% of the outstanding shares of our Common Stock. If not for this limitation, CAMOFI Master LDC’s beneficial ownership percentage would be 21.9%, representing (i) 2,000,000 shares of Common Stock issuable on conversion of 2,000,000 shares of Series A Preferred Stock, (ii) 1,000,000 shares of Common Stock issuable upon conversion of Common Stock Warrants, and (iii) 736,000 shares of Common Stock issuable upon conversion of up to $500,000 principal amount convertible notes issued to CAMOFI Master LDC. Mr. Richard Smithline, who exercises voting and investment control over such securities, disclaims beneficial ownership of such securities.

 
4.
The address of Caremi Partners Ltd. is Two American Lane, Greenwich Connecticut 06836. Steven Ruchefsky, one of our directors, is employed by Caremi Partners Ltd. Mr. Ruchefsky, who has voting and investment control over such securities, disclaims beneficial ownership of the securities of Caremi Partners Ltd.

 
5.
Includes (i) 1,165,000 shares of Common Stock held of record by Mr. Smithline, and (ii) 120,000 shares held of record by Mr. Smithline as custodian for each of William Smithline, Robert Smithline and Andrew Smithline. Mr. Smithline disclaims beneficial ownership of shares held of record by him as custodian for William Smithline (120,000 shares), Robert Smithline (120,000 shares) and Andrew Smithline (120,000 shares). Under an agreement between Mr. Smithline and the Company, Mr. Smithline is not permitted to exercise any convertible securities for that number of shares of Common Stock that would result in beneficial ownership by Mr. Smithline of more than 9.9% of the outstanding shares of our Common Stock. If not for this limitation, Mr. Smithline’s beneficial ownership percentage would be 31.7% of the outstanding shares of our Common Stock, giving effect to (w) 100,000 shares of Common Stock issuable on conversion of 100,000 shares of Series A Preferred Stock owned by Mr. Smithline, (x) 50,000 shares of Common Stock issuable upon conversion of Common Stock Warrants owned by Mr. Smithline, (y) 62,500 shares of Common Stock issuable upon conversion of Common Stock Warrants owned by Centrecourt Asset Management LLC, over which Mr. Smithline exercises voting and investment control, and as to which securities Mr. Smithline disclaims beneficial ownership, and (z) 3,736,000 shares of Common Stock beneficially owned by CAMOFI Master LDC described in footnote 3 above, over which Mr. Smithline exercises voting and investment control, and as to which securities Mr. Smithline disclaims beneficial ownership.

 
6.
Consists of (i) 2,925,000 shares of Common Stock, (ii) 200,000 shares of Common Stock issuable on conversion of 200,000 shares of Series A Preferred Stock and (iii) 150,000 shares of Common Stock issuable upon conversion of Common Stock Warrants, in each case held of record by DCI Master LDC. Michael Crow, the brother of one of our directors, Kevin Crow, has sole voting and dispositive power with respect to such shares. Michael Crow disclaims beneficial ownership of such securities.

 
7.
Consists of (i) 600,000 shares of Common Stock, (ii) 200,000 shares of Common Stock issuable on conversion of 200,000 shares of Series A Preferred Stock and (iii) 100,000 shares of Common Stock issuable upon conversion of Common Stock Warrants.

 
8.
Consists of: (i) 180,000 shares of Common Stock, 140,000 shares of Common Stock issuable upon conversion of 140,000 shares of Series A Preferred Stock and 70,000 shares of Common Stock issuable upon conversion of Common Stock Warrants, held of record by Mr. Baker, (ii) 180,000 shares of Common Stock, 240,000 shares of Common Stock issuable upon conversion of 240,000 shares of Series A Preferred Stock and 70,000 shares of Common Stock issuable upon conversion of Common Stock Warrants, held of record by Anasazi Partners III LLC, as to which Mr. Baker has sole voting and dispositive power, and (iii) 180,000 shares of Common Stock, 140,000 shares of Common Stock issuable upon conversion of 140,000 shares of Series A Preferred Stock and 70,000 shares of Common Stock issuable upon conversion of Common Stock Warrants, held of record by Anasazi Partners III Offshore Ltd., as to which Mr. Baker has sole voting and dispositive power. Mr. Baker disclaims beneficial ownership as to the foregoing shares of Common Stock, Series A Preferred Stock and Common Stock Warrants securities held of record by Anasazi Partners III LLC and by Anasazi Partners III Offshore Ltd.

 
9.
Consists of (i) 1,200,000 shares of Common Stock and (ii) 660,833 shares of Common Stock issuable within 60 days of July 1, 2005 at an exercise price of $0.1666 per share upon Mr. Stierwalt's exercise of his Warrant, dated as of November 1, 2004, for 793,000 shares, which vest at the rate of 8.333% per month, commencing December 1, 2004.

 
10.
Represents 105,733 shares issuable within 60 days of July 1, 2005 at an exercise price of $0.1666 per share upon Mr. Neuhaus' exercise of his Warrant, dated as of January 1, 2005, for 317,200 shares, which vest at the rate of 4.166% per month, commencing February 1, 2005.

 
11.
Consists of (i) 200,082 shares of Common Stock and (ii) 50,000 shares that may be purchased upon exercise of currently exercisable stock options at an exercise price of $1.00 per share.  

 
12.
Consists of (i) 40,000 shares of Common Stock that may be purchased upon exercise of currently exercisable stock options issued in February 2005 as remuneration for services as a director at an exercise price of $0.1666 per share, and (ii) 2,400,000 shares of Common Stock owned by Caremi Partners Ltd. Mr. Ruchefsky, who has voting and investment control over such securities of Caremi Partners Ltd., disclaims beneficial ownership of such securities.

 
13.
Represents 40,000 shares of Common Stock that may be purchased upon exercise of currently exercisable stock options issued in February 2005 as remuneration for services as a director at an exercise price of $0.1666 per share.

 
14.
Represents 40,000 shares of Common Stock that may be purchased upon exercise of currently exercisable stock options issued in February 2005 as remuneration for services as a director at an exercise price of $0.1666 per share.

 
15.
Consists of (i) 600,000 shares of Common Stock, (ii) 200,000 shares of Common Stock issuable on conversion of 200,000 shares of Series A Preferred Stock, (iii) 100,000 shares of Common Stock issuable upon conversion of Common Stock Warrants and (iv) 40,000 shares of Common Stock that may be purchased upon exercise of currently exercisable stock options issued in February 2005 as remuneration for services as a director at an exercise price of $0.1666 per share.

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16.
Includes 40,000 shares of Common Stock that may be purchased upon exercise of currently exercisable stock options issued in February 2005 as remuneration for services as a director at an exercise price of $0.1666 per share.

 
17.
Includes Messrs. Stierwalt, Berman, Neuhaus, Bluestein, Ruchefsky, Kevin Crow, Cooke, Emil and Ross.
 
On March 9, 2005, we entered into a series of agreements with Laurus Master Fund, Ltd., a Cayman Islands company, pursuant to which we issued the $3 Million Note, due March 9, 2008, the Laurus Warrant and the Laurus Option.  The $3 Million Note is convertible into shares of our Common Stock at a fixed conversion rate of $0.83 per share, the Laurus Warrant provides for the purchase of up to 1,084,338 shares of Common Stock at a price of $1.00 each, subject to customary adjustments, until March 9, 2012, and the Laurus Option provides for the purchase of up to 643,700 shares of Common Stock at a price of $0.01 each, subject to customary adjustments, until March 9, 2013.

Laurus is not entitled to exercise the Laurus Warrant or Laurus Option, or convert its $3 Million Note, for that number of shares of Common Stock that would exceed the sum of (i) the number of shares of Common Stock beneficially owned by Laurus and its affiliates on an exercise or conversion date, and (ii) the number of shares of Common Stock issuable upon the exercise of the Laurus Warrant and Laurus Option, or conversion of the $3 Million Note, which would result in beneficial ownership by Laurus and its affiliates of more than 4.99% of the outstanding shares of our Common Stock. This restriction may be revoked upon 75 days prior notice to us from Laurus and is automatically null and void upon an event of default under the Laurus Note.

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SELLING STOCKHOLDERS

The following is a list of the selling stockholders who own or who have the right to acquire the 11,651,553 shares of Common Stock covered by this prospectus. Up to 6,316,000 shares are issuable upon exercise or conversion of warrants or other convertible securities held by the selling stockholders, and up to 420,853 shares are issuable upon payment of dividends on preferred stock in shares of common stock. As set forth below and elsewhere in this prospectus, some of these selling stockholders hold or within the past three years have held, a position, office or other material relationship with us or our predecessors or affiliates.

The following table sets forth information concerning the selling stockholders, including:

 
·
the number of shares currently held;
 
·
the number of shares issuable upon exercise or conversion of options, warrants or other convertible securities; and
 
·
the number of shares offered by each selling stockholder.
 
   
BEFORE OFFERING
     
AFTER OFFERING (4)
 
Name of Selling Stockholder
 
Number of Shares Owned
 
Number of Shares Issuable upon Exercise or Conversion of Warrants, Options, Series A Preferred Stock, Notes, Preferred Stock Dividends (1)
 
Number of Shares Offered
 
Number of Shares Owned (3)
 
Percentage Owned (2)
 
Anasazi Partners III LLC (7)
   
180,000
   
339,551 (5
)
 
519,591
   
0
   
*
 
Anasazi Partners III Offshore Ltd. (7)
   
180,000
   
227,379 (6
)
 
407,379
   
0
   
*
 
Asset Managers International Ltd.
   
0
   
749,031 (8
)
 
749,031
   
0
   
*
 
Christopher P. Baker
   
180,000
   
227,379 (6
)
 
407,379
   
0
   
*
 
Bushido Capital Master Fund, L.P. (10)
   
300,000
   
162,212 (9
)
 
462,212
   
0
   
*
 
CAMOFI Master LDC
   
0
   
4,482,124 (11
)
 
4,482,124
   
0
   
*
 
Drake Investments Ltd. (12)
   
600,000
   
0
   
600,000
   
0
   
*
 
William Sarnoff 
   
600,000
   
324,425 (13
)
 
924,425
   
0
   
*
 
Frederick Smithline
   
300,000
   
0
   
300,000
   
0
   
*
 
Richard Smithline 
   
1,525,000
   
162,212 (9
)
 
1,687,212
   
0
   
*
 
Uzi Zucker
   
600,000
   
0
   
600,000
   
0
   
*
 
Alan Gelband (14)
   
300,000
   
0
   
300,000
   
0
   
*
 
John Rice (15)
   
149,700
   
0
   
149,700
   
0
   
*
 
Centrecourt Asset Management LLC (16)
   
0
   
62,500
   
62,500
   
0
   
*
 
________________
* Less than 1%.

 
(1)
Includes shares of Common Stock that the selling stockholders have the right to acquire beneficial ownership of within 60 days.  Each share of the Company's Series A Preferred Stock is convertible into one share of Common Stock. Unless otherwise noted, the shares of Common Stock and Series A Preferred Stock and the five (5) year warrants to purchase shares of Common Stock at an exercise price of $0.1667 per share (“Common Stock Warrants”) described in this Selling Stockholders table and in the notes to this Selling Stockholders table represent securities that were acquired by such holders from the Company on a 1:1 basis upon the exchange and/or conversion of similar securities of Duncan Capital Financial Group, Inc. (“Duncan”) held by such holders in connection with the consummation of the business combination transaction between Duncan and the Company on March 9, 2005. See “Business - General”. Except as otherwise indicated in the footnotes below, such securities of Duncan were acquired in a private placement in December 2004 to a total of 21 individuals and entities, each of whom was an accredited investor within the meaning of the Securities Act, in reliance on Section 4(2) of the Act. Also includes shares of Common Stock issuable upon payment of Series A Preferred Stock dividends in the amounts noted in the footnotes below.

-45-

 
 
(2)
Based on 13,320,413 shares of Common Stock issued and outstanding on July 1, 2005.
 
 
(3)
This table assumes that each selling stockholder will sell all shares offered for sale by it under this registration statement. Stockholders are not required to sell their shares.

 
(4)
Assumes that all shares of Common Stock registered for resale by this prospectus have been sold.

 
(5)
Consists of (i) 240,000 shares of Common Stock issuable on conversion of 240,000 shares of Series A Preferred Stock, (ii) 70,000 shares of Common Stock issuable upon conversion of Common Stock Warrants and (iii) 29,591 shares of Common Stock issuable upon payment of Series A Preferred Stock dividends. 100,000 of these shares of Series A Preferred Stock were acquired from MW Crow Family LP, a purchase in the December 2004 private placement referred to in Note 1.

 
(6)
Consists of (i) 140,000 shares of Common Stock issuable on conversion of 140,000 shares of Series A Preferred Stock, (ii) 70,000 shares of Common Stock issuable upon conversion of Common Stock Warrants and (iii) 17,379 shares of Common Stock issuable upon payment of Series A Preferred Stock dividends.

 
(7)
Christopher Baker, who holds sole voting and dispositive power with respect to the securities held by Anasazi Partners III, LLC and Anasazi III Partners Offshore Ltd., disclaims beneficial ownership of such securities.

 
(8)
Consists of (i) 500,000 shares of Common Stock issuable on conversion of 500,000 shares of Series A Preferred Stock, (ii) 187,500 shares of Common Stock issuable upon conversion of Common Stock Warrants and (iii) 61,531 shares of Common Stock issuable upon payment of Series A Preferred Stock dividends. Mr. Quang Tran of Pentagon Capital Management plc, the financial advisor of Asset Managers International Ltd., who exercises voting and investment control over such securities, disclaims beneficial ownership of such securities.

 
(9)
Consists of (i) 100,000 shares of Common Stock issuable on conversion of 100,000 shares of Series A Preferred Stock, (ii) 50,000 shares of Common Stock issuable upon conversion of Common Stock Warrants and (iii) 12,212 shares of Common Stock issuable upon payment of Series A Preferred Stock dividends.

 
(10)
Bushido Capital Partners, Ltd., a Cayman Island company, is the General Partner of Bushido Capital Master Fund, LP, a Cayman Island registered limited partnership, with the power to vote and dispose of the shares being registered on behalf of Bushido Capital Master Fund, LP. As such, Bushido Capital Partners, Ltd. may be deemed to be the beneficial owner of said shares. Christopher Rossman is the Managing Director of Bushido Capital Partners possessing the investment power to act on its behalf. Bushido Capital Partners, Ltd. and Christopher Rossman each disclaims beneficial ownership of the shares being registered by Bushido Capital Master Fund, LP.

 
(11)
Represents (i) 2,000,000 shares of Common Stock issuable on conversion of 2,000,000 shares of Series A Preferred Stock, (ii) 1,000,000 shares of Common Stock issuable upon conversion of Common Stock Warrants, (iii) 736,000 shares of Common Stock issuable upon conversion of up to $500,000 principal amount of a 12% Senior Secured Note issued by Duncan to CAMOFI Master LDC in January 2005 (“Bridge Note”), (iv) 500,000 shares of Common Stock issuable in the event of a payment default under the Bridge Note and (v) 246,124 shares of Common Stock issuable upon payment of Series A Preferred Stock dividends. Mr. Richard Smithline, who exercises voting and investment control over such securities, disclaims beneficial ownership of such securities.

 
(12)
The directors of Drake Investments Ltd. are Dudley R. Cottingham, S. Arthur Morris and Chris C. Morris, who have voting and investment control over such securities.

 
(13)
Consists of (i) 200,000 shares of Common Stock issuable on conversion of 100,000 shares of Series A Preferred Stock, (ii) 100,000 shares of Common Stock issuable upon conversion of Common Stock Warrants and (iii) 24,425 shares of Common Stock issuable upon payment of Series A Preferred Stock dividends.

 
(14)
Consists of 150,000 shares of Common Stock owned of record by Mr. Gelband and 150,000 shares of Common Stock owned of record by the Alan Gelband Co. Defined Contribution Pension Plan and Trust, as to which Alan Gelband has sole voting and dispositive power.

 
(15)
In consideration for $25,000 due to John Rice on March 9, 2005, for services rendered, 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.

 
(16)
Formerly known as DC Asset Management LLC. Securities consist of 62,500 shares of Common Stock issuable upon conversion of Common Stock Warrants.  Mr. Richard Smithline, who exercises voting and investment control over such securities, disclaims beneficial ownership of such securities.

-46-


Mr. Stierwalt is Chief Executive Officer and a director of the Company. Arthur D. Emil, Michael Bluestein and Steven J. Ross are directors of the Company. Michael Bluestein is President of PAS and Irene Feeley is President of CIM. Glenn A. Little is a former Chief Executive Officer and a former director of the Company.

Under the terms of Duncan Capital Financial Group's private placement of shares of its common stock, preferred stock convertible into common stock and warrants in December 2004, Duncan agreed to file a registration statement on behalf of the purchasers of such securities with the Securities and Exchange Commission for the issued common stock of Duncan, as well as the Duncan common stock underlying the Duncan preferred stock and warrants, within 45 days of t he effective date of a reverse merger with a public reporting company and would seek to have the registration statement declared effective within 120 days of the reverse merger. Under the terms of the February 2005 agreement of reorganization entered into among National Investment Managers and Duncan, Duncan shareholders exchanged their respective shares of common and preferred stock and their warrants for similar securities of National Investment Managers, to which such registration rights attached. If the registration statement is not declared effective within such 120-day period, then until the registration statement is declared effective, the Company will be required to pay to each holder of Duncan common stock and/or preferred stock an amount in cash, as liquidated damages and not as a penalty, equal to one percent of the original purchase price of such holder's shares for each thirty day period (prorated for partial periods) beyond the applicable registration deadline. The total purchase price for such securities was $3,500,000.

Under the terms of the Agreement and Plan of Reorganization among the Company, Duncan and Glenn A. Little, the Company agreed to effect a piggyback registration of Mr. Little's and Mr. Rice's shares of Common Stock, with such registration to become effective no later than March 9, 2006.
 
PLAN OF DISTRIBUTION

We are registering the shares of Common Stock on behalf of the selling stockholders. As used in this prospectus, “selling stockholders” includes the pledges, donees, transferees or others who may later hold the selling stockholders' interests. We have agreed to pay the costs and fees of registering the shares, but the selling stockholders will pay any brokerage commissions, discounts or other expenses relating to the sale of the shares, including attorneys' fees.

The stockholders and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The stockholders may use anyone or more of the following methods when selling shares:

 
·
ordinary brokerage transactions and transactions in which the broker dealer solicits purchasers;

 
·
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 
·
purchases by a broker-dealer as principal and resale by the broker dealer for its account;

 
·
privately negotiated transactions;

 
·
broker-dealers may agree with the stockholders to sell a specified number of such shares at a stipulated price per share;

 
·
a combination of any such methods of sale; and

 
·
any other method permitted pursuant to applicable law.

The stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.

-47-


None of the selling stockholders may engage in “short sales” so long as this Prospectus is effective with respect to such selling stockholder.

Broker-dealers engaged by the stockholders may arrange for other brokers dealers to participate in sales. Broker-dealers may receive commissions or discounts from the stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.  No selling stockholder is a registered broker-dealer or an affiliate of a registered broker-dealer.
 
The stockholders may from time to time pledge or grant a security interest in some or all of the shares of Common Stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of Common Stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of stockholders to include the pledgee, transferee or other successors in interest as stockholders under this prospectus.

The stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Such sales to broker-dealers would require the filing of a post-effective amendment to the registration statement of which this prospectus is a part, listing the broker-dealers as underwriters and disclosing the compensation arrangements.

The Company is required to pay all fees and expenses incident to the registration of the shares. The Company has agreed to indemnify the stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
 
The selling stockholders are subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and its regulations, including, Regulation M. Under Registration M, the selling stockholders or their agents may not bid for, purchase, or attempt to induce any person to bid for or purchase, shares of our common stock while such selling stockholders are distributing shares covered by this prospectus.

LOCK-UP PROVISIONS

The selling stockholders are not subject to contractual “lock-up” provisions with respect to the sale of Common Stock.

DESCRIPTION OF SECURITIES

Our authorized capital stock consists of 100,000,000 shares of Common Stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share, of which 4,000,000 shares are designated as Series A Cumulative Convertible Preferred Stock and 3,828,000 are currently outstanding. Our board of directors may designate the rights and preferences of additional series of preferred stock. Preferred stock could be used, under certain circumstances, as a way to discourage, delay or prevent a takeover of the Company. See “Anti-Takeover Provisions.” As of July 1, 2005, we had 13,320,413 shares of Common Stock issued and outstanding and 3,820,000 shares of Series A Convertible Preferred Stock issued and outstanding.

COMMON STOCK

Under our Articles of Incorporation, shares of our Common Stock are identical in all respects, and each share entitles the holder to the same rights and privileges as are enjoyed by other holders and is subject to the same qualifications, limitations and restrictions as apply to other shares.

Holders of our Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Holders of Series A Preferred have the right to vote together with holders of Common Stock as a single class on all matters upon which stockholders are entitled to vote, including election of the members of the Company's Board of Directors. Each share of Series A Preferred has the number of votes corresponding to the number of shares of Common Stock into which the Series A Preferred may be converted on the record date for determining stockholders entitled to vote. Holders of our Common Stock do not have cumulative voting rights. Accordingly, subject to the voting rights of the Series A Convertible Preferred Stock described below and any voting rights of holders of any other preferred stock that may be issued, holders of a plurality of our Common Stock present at a meeting at which a quorum is present are able to elect all of the directors eligible for election. The holders of a majority of the voting power of our issued and outstanding capital stock constitutes a quorum.

-48-


The holders of our Common Stock are entitled to dividends when and if declared by our board of directors from legally available funds, subject to any dividend preference in favor of holders of our preferred stock. However, before any dividends may be paid to holders of our Common Stock, cumulative dividends of 12% per year from December 13, 2004 must be paid to our holders of Series A Cumulative Convertible Preferred Stock (“Series A Preferred”), either in cash or in registered shares of our Common Stock. As of June _ , 2005, there were 3,820,000 shares of our Series A Preferred issued and outstanding, with an aggregate stated value of $1,910,000 on which the 12% dividend rate is based. No dividends have been declared or paid to date on our Series A Preferred.

We are presently prohibited from paying dividends under the terms of our financing arrangements with the company's secured lender. The holders of our Common Stock are also entitled to share pro rata in any distribution to stockholders upon the Company's liquidation or dissolution after liquidation distributions to holders of our preferred stock, as described below.

-49-

 
None of the shares of our Common Stock:
 
 
·
None of the shares of our Common Stock:

 
·
have preemptive rights;

 
·
are redeemable;

 
·
are subject to assessments or further calls;

 
·
have conversion rights; or

 
·
have sinking fund provisions.
 
PREFERRED STOCK

We have a class of “blank check” preferred stock, par value $0.001 per share, consisting of 10,000,000 shares. The term “blank check” preferred stock refers to stock for which the designations, preferences, conversion rights, and cumulative, relative, participating, optional or other rights, including voting rights, qualifications, limitations or restrictions thereof, are determined by the board of directors of a company. As such, the Board of Directors will be entitled to authorize the creation and issuance of 10,000,000 shares of preferred stock in one or more series with such limitations and restrictions as may be determined in the sole discretion of the Board of Directors, with no further authorization by shareholders required for the creation and issuance of the preferred stock. The terms of any issuance of preferred stock may include:

 
·
voting rights, including the right to vote as a series on particular matters, which could be superior to those of our Common Stock;

 
·
preferences over our Common Stock as to dividends and distributions in liquidation;

 
·
conversion and redemption rights, including the right to convert into shares of our Common Stock; and

 
·
sinking fund provisions.
 
Any preferred stock issued would have priority over the common stock upon liquidation and might have priority rights as to dividends, voting and other features. Accordingly, the issuance of preferred stock could decrease the amount of earnings and assets allocable to or available for distribution to holders of common stock and adversely affect the rights and powers, including voting rights, of the common stock. We are presently prohibited from paying dividends under the terms of our financing arrangements with the company's secured lender.

Except for the authorization and issuance of the Series A Preferred Stock described below, our Board of Directors does not have any current plans to take any action to issue shares of preferred stock. The Board of Directors believes the creation of the preferred stock is in the best interests of the company and its shareholders and believes it advisable to have such shares available for, among other things, possible issuance in connection with such activities as public or private offerings of shares, acquisitions of other companies, strategic alliances, implementation of employee benefit plans, pursuit of financing opportunities and other valid corporate purposes.

The issuance of additional shares of preferred stock that are convertible into common stock could adversely affect the market price of our common stock. Moreover, if we issue securities convertible into common stock or other securities that have rights, preferences and privileges senior to those of our common stock, the holders of our common stock may suffer significant dilution. The Board of Directors believe that it is in the best interests of our company and its shareholders to have the flexibility to raise additional capital or to pursue acquisitions to support our business plan, including the ability to authorize and issue preferred stock having terms and conditions satisfactory to investors or to acquisition candidates, including preferred stock which contains some features which could be viewed as having an anti-takeover effect or a potentially adverse effect on the holders of common stock. While we may consider issuing common stock or preferred stock in the future for purposes of raising additional capital or in connection with acquisition transactions, the company presently has no agreements or understanding with any person to effect any such issuance.

-50-

Series A Preferred Stock

Of the available 10,000,000 shares of Blank Check Preferred Stock, the Board of Directors has authorized the issuance of 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, and we have amended our Articles of Incorporation accordingly. Of those authorized shares, 3,820,000 shares of Series A Preferred have been issued to 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 containing identical terms. A summary of the rights of holders of Series A Preferred is as follows:

Optional Conversion : The holders of Series A Preferred have the right to convert, at any time, their shares of Series A Preferred into such number of shares of Common Stock as is determined by dividing (i) the aggregate Stated Value (currently $0.50 per share) of the shares of Series A Preferred to be converted, plus accrued but unpaid dividends of 12% of the Stated Value, whether or not declared or currently payable, from December 13, 2004 to the date of conversion, by (ii) the Conversion Price (currently $0.50 per share). Proportional adjustments will be made to the conversion rate for capital reorganizations, stock splits and reclassifications. In addition, the conversion rate may be adjusted on a broad-based weighted average basis in the event the Company issues additional common shares (other than shares issued to employees, consultants, directors and officers pursuant to arrangements approved by the Board, and other customary exclusions) at a purchase price below the Series A Preferred purchase price of $0.50 per share.

Automatic Conversion : Shares of Series A Preferred will be automatically converted into Common Stock upon ( i ) the approval of the holders of a majority of the then-outstanding Series A Preferred or (ii) the closing of a firm commitment underwritten public offering of the Company's securities in which the aggregate gross proceeds to the Company are not less than $10,000,000.

Voting : In addition to any voting rights provided by law, holders of Series A Preferred have the right to vote together with holders of Common Stock as a single class on all matters upon which stockholders are entitled to vote, including election of the members of the Company's Board of Directors. Each share of Series A Preferred has the number of votes corresponding to the number of shares of Common Stock into which the Series A Preferred may be converted on the record date for determining stockholders entitled to vote.

Dividends : Dividends on the Series A Preferred accrue and are cumulative from December 13, 2004. Holders of Series A Preferred are entitled to receive annual dividends of $0.06 per share (12%), paid semi-annually, in preference to the common stock, subject to adjustment in certain events, to the extent dividends are declared, on a cumulative basis. Such dividends may be paid, at the election of the Company, either (i) in cash or (ii) in registered common stock of the Company, valued at 98% of the volume-weighted average price of the common stock for the 20 trading days immediately preceding the record date for payment of such dividend. We are presently prohibited from paying dividends under the terms of our financing arrangements with the Company's secured lender.

Liquidation Preference : In the event of any liquidation or winding up of the Company, the holders of the Series A Preferred will be entitled to receive, in preference to holders of common stock, an amount equal to two times the original purchase price per share, plus any declared and unpaid dividends. A merger or sale of substantially all of the assets of the Company will be treated as a liquidation or winding up for the purposes of the liquidation preference.

COMMON STOCK WARRANTS

There are issued and outstanding warrants for an aggregate of 1,910,000 shares of Common Stock at an exercise price of $0.1667 per share (“Series A Warrants”). These warrants were originally issued to holders of preferred stock of our subsidiary, Duncan Capital Financial Group, Inc., in connection with their acquisition of shares of Duncan Series A Preferred Stock that was subsequently exchanged on a 1:1 basis for shares of our Series A Preferred Stock. The warrants have a term of five years from December 2004. Proportional adjustments will be made to the exercise price for capital reorganizations, stock splits and reclassifications.

LAURUS FINANCING

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.

-51-


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, to be amended by the parties, 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 within 120 days after all funds have been released to us from a restricted cash account under the control of Laurus under the terms of the $3 Million Note . 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.

Convertible Note . 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 as a fee to Glenn Little 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. The parties have agreed to amend the Note to provide that any Funds not released from the Restricted Account by December 15, 2005 will be returned to Laurus without premium or penalty.

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 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.

Warrant . 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.

Option . 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.

CAMOFI CONVERTIBLE NOTES

Effective January 27, 2005, we issued a secured convertible note to CAMOFI Master LDC (formerly known as DCOFI Master LDC) for $350,000, and effective May 4, 2005, we issued a similar secured convertible note to CAMOFI Master LDC for an additional $150,000 for a total of $500,000, convertible into an aggregate of 736,000 shares of common stock of the Company, as successor to Duncan, at a conversion price of $0.68 per share. Each note bears interest at the rate of 12% per annum and interest is payable quarterly in arrears on the last day of each quarter. The notes amortize in equal monthly payments commencing October 2005 and are due March 10, 2008. In connection with the issuance of these notes, we agreed to issue five-year warrants to the noteholders to purchase 367,647 shares of common stock at $0.1667 per share. The notes are secured by substantially all of the assets of the Company, are guaranteed by PAS, CIM and MDB and are subordinate to the Laurus Master Fund, Ltd. convertible term note issued by the Company. In the event that the loan is not repaid at maturity, we are required to issue to the lender 500,000 shares of our Common Stock.

-52-


MANAGEMENT WARRANTS AND OPTIONS

On December 23, 2004, effective November 1, 2004, in connection with his employment by Duncan, Mr. Stierwalt was issued a warrant to acquire 793,000 shares of common stock of Duncan which, as a result of our merger with Duncan, represents the right to acquire 793,000 shares of Company common stock, at an exercise price of $0.166 per share, as adjusted from time to time to reflect stock dividends, stock splits, reorganizations and similar customary adjustments. The warrant vests in twelve equal monthly installments commencing December 1, 2004, or, if sooner, upon a “change of control”, defined as (i) an acquisition of voting securities of the Company by any person or entity immediately after which such person or entity has beneficial ownership of 50% or more of the combined voting power of the Company's then-outstanding voting securities; or (ii) a merger or consolidation that results in more than 50% of the combined voting power of the Company's then-outstanding voting securities changing ownership; or (iii) the sale of all or substantially all of the Company's assets. The warrant expires on October 31, 2009.

In addition, the employment agreement provides that, subject to the approval and adoption by the Company of a stock option plan, and the terms of any related stock option agreement, no later one year from the date of the Agreement, Mr. Stierwalt will be granted options (which will be incentive stock options, to the extent permitted by law) to purchase such number of shares of the Company's common stock that represents 5% of the issued and outstanding common stock on the date of issuance, at an exercise price not to exceed the fair market value of common stock on the date of option issuance. The grant to Mr. Stierwalt of options to acquire 665,925 shares of common stock, representing 5% of the issued and outstanding common stock on the date of issuance, at an exercise price of $1.00 per share, was approved by the Board of Directors on May 4, 2005. The options have a term of seven years from the date of grant, and will vest on the first anniversary of the date of grant or, if sooner, upon any sale or other disposition of all or substantially all of the Company's assets, or upon a merger, consolidation, reorganization or other similar transaction resulting in a change of control of the Company's business. All unvested options and any vested but unexercised options will terminate upon the termination of Mr. Stierwalt's employment for cause or upon Mr. Stierwalt's voluntary termination of his employment other than as a result of the Company's breach of the Agreement. Upon the termination of Mr. Stierwalt's employment due to death, disability or by the Company without cause, all unvested options will terminate and all vested and unexercised options will remain exercisable in accordance with their terms but in any event for a period not less than ninety (90) days following the date of termination of employment.

Effective January 1, 2005, in connection with his employment by Duncan, Mr. Neuhaus was issued a warrant to acquire 317,200 shares of common stock of Duncan which, as a result of our merger with Duncan, represents the right to acquire 317,200 shares of the Company's common stock, at an exercise price of $0.166 per share, as adjusted from time to time to reflect stock dividends, stock splits, reorganizations and similar customary adjustments . The warrant vests in twenty-four equal monthly installments commencing February 1, 2005, or, if sooner, upon a “change of control”, defined as (i) an acquisition of voting securities of the Company by any person or entity immediately after which such person or entity has beneficial ownership of 50% or more of the combined voting power of the Company's then-outstanding voting securities; or (ii) a merger or consolidation that results in more than 50% of the combined voting power of the Company's then-outstanding voting securities changing ownership; or (iii) the sale of all or substantially all of the Company's assets. The warrant expires on December 31, 2009.

OPTIONS TO NON-MANAGEMENT DIRECTORS

Effective March 9, 2005, five of our non-management directors, consisting of Messrs. Ruchefsky, Crow, Cooke, Emil and Ross, were each granted options, which are fully vested as of the date of grant, to acquire 40,000 shares of Common Stock over a five-year term at an exercise price of $0.1666 per share, as adjusted from time to time to reflect stock dividends, stock splits, reorganizations and similar customary adjustments, as annual compensation for services rendered by them during calendar year 2005.

For serving as Chairman of the Board and Chairman of our Audit Committee, and for serving on our the Executive and Corporate Governance Committees, in addition to the cash compensation of $52,000 described above, Mr. Berman has been granted options, vesting on May 4, 2006, to acquire 266,370 shares of Common Stock over a seven-year term at an exercise price of $1.00 per share. All unvested options and any vested but unexercised options will terminate upon the termination of Mr. Berman’s engagement for cause or upon Mr. Berman's voluntary termination of his engagement other than as a result of the Company's breach of the Agreement. Upon the termination of Mr. Berman’s engagement due to death, disability or by the Company without cause, all unvested options will terminate and all vested and unexercised options will remain exercisable in accordance with their terms but in any event for a period not less than ninety (90) days following the date of termination of his engagement.

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ANTI-TAKEOVER PROVISIONS

Certain anti-takeover provisions in our Articles of Incorporation may make a change in control of the Company more difficult, even if a change in control would be beneficial to our stockholders. We have no present intention to use the “blank check” preferred stock for anti-takeover purposes. However, the issuance of shares of preferred stock could increase the number of shares necessary to acquire control of the Board or to meet the voting requirements imposed by Florida law with respect to a merger or other business combination involving us. In particular, our board of directors will be able to issue up to 6,000,000 shares of preferred stock with rights and privileges that might be senior to our Common Stock, without the consent of the holders of our Common Stock, and has the authority to determine the price, rights, preferences, privileges and restrictions of the preferred stock. Although the ability to issue preferred stock may provide us with flexibility in connection with possible acquisitions and other corporate purposes, this issuance may make it more difficult for a third party to acquire a majority of our outstanding voting stock.
 
TRANSFER AGENT

The transfer agent for our Common Stock is Continental Stock Transfer & Trust Company, located at 17 Battery Place, New York, NY 10002. Continental Stock Transfer & Trust Company's telephone number is (212) 509-4000.

COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Our Bylaws provide that we shall indemnify our directors and officers to the fullest extent permitted by Florida law.

Section 607.0850(1) of the Florida Business Corporation Act, as amended (the "Florida Act"), provides that, in general, a Florida corporation may indemnify any person who was or is a party to any proceeding (other than an action by, or in the right of, the corporation), by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against liability incurred in connection with such proceeding, including any appeal thereof, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, he had no reasonable cause to believe his conduct was unlawful.

In the case of proceedings by or in the right of the corporation, Section 607.0850(2) of the Florida Act provides that, in general, a corporation may indemnify any person who was or is a party to any such proceeding by reason of the fact that he is or was a director, officer, employee or agent of the corporation against expenses and amounts paid in settlement actually and reasonably incurred in connection with the defense or settlement of such proceeding, including any appeal thereof, provided that such person acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, except that no indemnification shall be made in respect of any claims as to which such person is adjudged liable unless a court of competent jurisdiction determines upon application that such person is fairly and reasonably entitled to indemnity.

Section 607.0850 further provides that to the extent a director, officer, employee or agent of a corporation is successful on the merits or in the defense of any proceeding referred to in subsections (1) or (2) of Section 607.0850 or in the defense of any claim, issue or matter therein, he will be indemnified against expenses actually and reasonably incurred by him in connection therewith; that the corporation may advance such expenses; that indemnification provided for by Section 607.0850 will not be deemed exclusive of any other rights to which the indemnified party may be entitled; and that the corporation may purchase and maintain insurance on behalf of such person against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such, whether or not the