XOTC:DEWM Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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U.S. Securities and Exchange Commission

Washington, D.C. 20549

 

Form 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Three Months ended: March. 31, 2012
 
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _________ to _________

 

Commission File No. 001-32032

 

Dewmar International BMC, Inc.

(Name of Registrant in its Charter )

 

NEVADA   83-0375241
State or other jurisdiction of   (I.R.S. Employer I.D. No.)
incorporation or organization)    

 

132 E. Northside Dr. Suite C Clinton, M 39056
(Address of principal executive offices)

 

(601) 488-4360

(Registrant’s telephone number, including area code)

 

1174 Manitou Dr., PO Box 363, Fox Island, WA 98333

(Former name, former address and former fiscal year, of changed since last report)

 

Indicate by check mark whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[X] Yes [  ] No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of the “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer [  ] Accelerated Filer [  ]
Non-Accelerated Filer [  ] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[  ] Yes [X] No

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

As of May 17, 2012 the registrant had 59,233,000 issued and outstanding shares of common stock.

 

 

 

 
 

  

Dewmar International BMC, Inc. (fkaConvenientcast, Inc.)

 

TABLE OF CONTENTS

 

  Page
   
PART I – FINANCIAL INFORMATION 3
Item 1. Financial Statements:.  
Balance Sheets (unaudited) F-1
Statements of Operations (unaudited) F-2
Statements of Cash Flows (unaudited) F-3
Notes to Financial Statements (unaudited) F-4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 4
Item 3. Quantitative and Qualitative Disclosure About Market Risk 6
Item 4. Controls and Procedures 6
PART II – OTHER INFORMATION 7
Item 1. Legal Proceedings. 7
Item 1A. Risk Factors.  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 7
Item 3. Defaults Upon Senior Securities 7
Item 4. Mine Safety Disclosures 8
Item 5. Other Information. 8
Item 6. Exhibits 8
SIGNATURES 9

 

2
 

  

PART I - FINANCIAL INFORMATION

 

Forward-Looking Information

 

This report on Form 10-Q contains forward-looking statements. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “will,” “could” and similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.

 

Examples of forward-looking statements include:

 

·the timing of the development of future products;
·projections of costs, revenue, earnings, capital structure and other financial items;
·statements of our plans and objectives;
·statements regarding the capabilities of our business operations;
·statements of expected future economic performance;
·statements regarding competition in our market; and
·assumptions underlying statements regarding us or our business.

 

The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. We discuss our known material risks under Item 1.A “Risk Factors contained in the Company’s Annual Report on Form 10K for the year ended December 31, 2011. Many factors could cause our actual results to differ materially from the forward-looking statements. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

 

3
 

  

Item 1. Financial Statements

 

DEWMAR INTERNATIONAL BMC, INC. (fka CONVENIENTCAST, INC.)

 

CONSOLIDATED BALANCE SHEETS

 

   March 31, 2012   December 31, 2011 
   (Unaudited)     
ASSETS           
           
Current Assets          
Cash and cash equivalents  $67,312   $91,506 
Account receivables, net   71,262    113,327 
Related party receivable   13,927    5,603 
Advances to related party   9,332    9,332 
Inventory   17,629    58,162 
Prepaid expenses and other current assets   6,316    11,463 
Total Current Assets   185,778    289,393 
           
Property & equipment, net   15,262    16,155 
           
Total assets  $201,040   $305,548 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current Liabilities          
Accounts payable and accrued liabilities  $444,929   $462,971 
Advances from related party   -    38,800 
           
Total Liabilities   444,929    501,771 
           
Stockholders’ Deficit          
Common stock; $0.001 par value; 75,000,000 shares authorized, 59,233,000, 58,495,000 shares issued and outstanding, respectively   59,233    58,495 
Additional paid-in capital   68,159    22,097 
Accumulated deficit   (371,281)   (276,815)
Total Stockholders’ Deficit   (243,889)   (196,223)
           
Total Liabilities and Stockholders’ Deficit  $201,040   $305,548 

 

F-1
 

  

DEWMAR INTERNATIONAL BMC, INC. (fka CONVENIENTCAST, INC.)

 

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

   Three Months Ended 
   March 31, 2012   March 31, 2011 
         
Revenue, net  $193,216   $279,119 
           
Cost of goods sold   75,693    97,780 
           
Gross profit   117,523    181,339 
           
Operating expenses          
Occupancy and related expenses   6,336    7,523 
Marketing and advertising   9,498    18,446 
General and administrative expenses   153,850    96,319 
Contract labor   37,312    68,703 
Total operating expenses   206,996    190,991 
           
Loss from operations   (89,473)   (9,652)
           
Other income (expenses)          
Interest expense   -    (9,495)
Interest income   7    139 
Loss on extinguishment of debt   (5,000)   - 
Total other income (expenses)   (4,993)   (9,356)
           
Net loss  $(94,466)  $(19,008)
           
Net loss per common share – basic and fully diluted  $(0.00)  $(0.00)
           
Weighted average common shares outstanding – basic and diluted   59,233,000    40,000,000 

 

F-2
 

  

DEWMAR INTERNATIONAL BMC, INC. (fkaConvenientcast, Inc.)

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

   Three Months
Ended
   Three Months
Ended
 
   March 31, 2012   March 31, 2011 
         
Cash flows from operating activities:          
Net loss  $(94,446)  $(19,008)
Adjustments to reconcile net loss to net cash used in operating activities:          
Bad debt expense   -    172 
Depreciation expense   893    665 
Stock-based compensation   3,000    - 
Loss on extinguishment of debt   5,000    - 
Changes in operating assets and liabilities:          
Accounts receivable   42,065    1,160 
Related party receivables and payables   (8,324)   - 
Inventory   40,533    (5,120)
Prepaid expenses and other current assets   5,147    706 
Accounts payable and accrued liabilities   (18,042)   37,083 
Net cash provided by (used in) operating activities   (24,194)   15,658 
           
Cash flows from investing activities:          
Advances to related party   -    (33,599)
Net cash used in investing activities   -    (33,599)
           
Cash flows from financing activities:          
Advances from related party   -    14,000 
Payments on notes payable   -    (63,336)
Net cash used in financing activities   -    (49,336)
           
Net change in cash and cash equivalents   (24,194)   (67,277)
Cash and cash equivalents, at beginning of period   91,506    208,725 
Cash and cash equivalents, at end of period  $67,312   $141,448 
           
Supplemental cash flow information:          
Interest paid  $-   $68,338 
           
Supplemental noncash investing and financing activities:          
Extinguishment of debt for common stock  $43,800    - 
Issuance of common stock for services  $3,000    - 

 

F-3
 

  

DEWMAR INTERNATIONAL BMC, INC. (fkaConvenientcast, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011

 

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

 

On October 28, 2011, pursuant to an Exchange Agreement (“Agreement”), Dewmar International BMC, Inc. (fkaConvenientcast, Inc.) (“Dewmar International BMC, Inc. or the “Company”), a publicly reporting Nevada corporation, acquired DSD Network of America, Inc. (“DSD”), a Nevada corporation, in exchange for the issuance of 40,000,000 shares of common stock of Dewmar International BMC, Inc. (the “Exchange Shares”), a majority of the common stock, to the former owners of DSD. In conjunction with the Merger, DSD became a wholly-owned subsidiary of the Company.

 

For financial accounting purposes, this acquisition (referred to as the “Merger”) was a reverse acquisition of Dewmar International BMC, Inc. by DSD and was treated as a recapitalization. Accordingly, the financial statements were prepared to give retroactive effect of the reverse acquisition completed on October 28, 2011, and represent the operations of DSD prior to the Merger.

 

As of the time of the Merger, Dewmar International BMC, Inc. held minimal assets and was a developmental stage company. Following the Merger, the Company, through DSD, is a manufacturer of its Lean Slow Motion Potion™ brand relaxation beverage, which was launched by DSD in September of 2009. After the Merger, the Company operates through one operating segment.

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. The accompanying interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the Company’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2012 are not necessarily indicative of the results for the full years. While management of the Company believes that the disclosures presented herein and adequate and not misleading, these interim financial statements should be read in conjunction with the audited combined financial statements and the footnotes thereto for the periods ended December 31, 2011 filed in our Annual Report on Form 10K.

 

Certain amounts in prior periods have been reclassified to conform to current period presentation. 

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and DSD, its only subsidiary. All material intercompany accounts and transactions have been eliminated.

 

Use of Estimates

 

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

 

Cash and Cash Equivalents

 

Cash and cash equivalents consist primarily of cash on deposit and money market accounts, which are readily convertible into cash and purchased with original maturities of three months or less. These investments are carried at cost, which approximates fair value.

 

The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). Beginning December 31, 2011 through March 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. This unlimited insurance coverage is separate from, and in addition to, the insurance coverage provided to the depositor’s other accounts held by a FDIC-insured institution, which are insured for balances up to $250,000 per depositor until December 31, 2013. At March 31, 2012 and December 31, 2011, the amounts held in banks did not exceed the insured limits.

 

F-4
 

  

Accounts Receivable and Allowance for Doubtful Accounts

 

The Company’s accounts receivable were composed of receivables from customers for sales of products. The Company performs credit evaluations prior to selling products or granting credit to its customers and generally does not require collateral.

 

The Company’s trade accounts receivable are typically collected within 60 days from the date of sale. The Company monitors its exposure to losses on trade accounts receivable and maintains an allowance for potential losses and adjustments. The Company determines its allowance for doubtful accounts based on the evaluation of the aging of accounts receivable and detailed analysis of high-risk customers’ accounts, and the overall market and economic conditions of its customers. Past due trade accounts receivable balances are written off when the Company’s collection efforts have been unsuccessful in collecting the amount due. At March 31, 2012 and December 31, 2011, the allowance for doubtful accounts was $34,634.

 

Inventory Held by Third Party

 

Inventory costs are determined principally by the use of the first-in, first-out (FIFO) costing method and are stated at the lower of cost or market, including provisions for spoilage commensurate with known or estimated exposures which are recorded as a charge to cost of goods sold during the period spoilage is incurred.

 

Fixed Assets

 

Leasehold improvements, property and equipment are stated at cost less accumulated depreciationand amortization. Expenditures for property acquisitions, development, construction, improvements and major renewals are capitalized. The cost of repairs and maintenance is expensed as incurred. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which are generally 3 to 10 years. Leasehold improvements are amortized over the shorter of the lease term, which generally includes reasonably assured option periods, or the estimated useful lives of the assets. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in ”Gain or Loss from Operations”.

 

The estimated useful lives are:

 

Furniture and fixtures   3-10 years
Equipment   3-7 years
Vehicles   3-7 years

 

Revenue Recognition Policy

 

The Company recognizes revenue when the product is received by and title passes to the customer. The Company’s standard terms are ‘FOB’ receiving point. If a customer receives any product that they consider damaged or unacceptable, the customer must document any such damages or reasons for it not to be accepted on the original invoice upon delivery and then inform the Company within 72 hours of receipt of the product. The Company does not accept returns of product for reasons other than damage.

 

We record estimates for reductions to revenue for customer programs and incentives, including price discounts, volume-based incentives, and promotions and advertising allowances. No products are sold on consignment. Revenue is shown net of sales allowances on the accompanying statements of operations.

 

Cost of Goods Sold

 

The Company’s cost of goods sold includes all costs of beverage production, which primarily consist of raw materials such as concentrate, glass, labels, caps and packaging materials. Additionally, costs incurred for shipping and handling charges are included in cost of goods sold. The Company does not bill customers for cost of shipping unless the Company incurs additional charges such as refusing initial shipment or not being able to receive shipment at their prescheduled time with the freight company.

 

Advertising Expense

 

The Company recognizes advertising expense as incurred. The Company recognized advertising expense of $9,498 and $18,446 for the three months ended March 31, 2012 and 2011, respectively.

 

Income Taxes

 

The Company accounts for its income taxes using the liability method, whereby deferred tax assets and liabilities are established for the future tax consequences of temporary differences between the financial statement carrying amounts of assets and liabilities and their tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize the tax assets through future operations.

 

F-5
 

  

The Company’s federal and state income tax returns for the years ended 2009, 2010 and 2011 are open to examination. As of March 31, 2012, the Company evaluated its open tax years in all known jurisdictions. Based on this evaluation, the Company did not identify any uncertain tax positions. We will account for interest and penalties relating to uncertain tax positions in the current period statement of operations as necessary.

 

Fair value of Financial Instruments

 

U.S. GAAP establishes a fair value hierarchy which has three levels based on the reliability of the inputs to determine the fair value. These levels include: Level 1, defined as inputs such as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions. 

 

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivables and payables and accrued liabilities. The carrying values of these financial instruments approximate their respective fair values as they are either short-term in nature or carry interest rates that approximate market rates.

 

Share-Based Compensation

 

The Company recognizes all share-based payments to employees, including grants of Company stock options to Company employees, as well as other equity-based compensation arrangements, in the financial statements based on the grant date fair value of the awards. Compensation expense is generally recognized over the vesting period. During the three months ending March 31, 2012 and 2011, the Company issued no stock options or other share-based payments to employees.

 

Income (Loss) per Share

 

Basic net income (loss) per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

 

Concentration of Risks

 

The Company’s operations and future business model are dependent in a large part on the Company’s ability to execute its business model. The Company’s inability to meet its sales objectives may have a material adverse effect on the Company’s financial condition.

 

Most of the Company’s sales are derived from beverage distributors located in the Southern region of the United States. This concentration of sales may have a negative impact on total sales in the event of a decline in the local economies.

 

New Accounting Pronouncements

 

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

 

NOTE 3. GOING CONCERN

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has incurred net losses and has an accumulated deficit totaling $327,919. The Company also had negative working capital of $259,151. The Company’s operating results are subject to numerous factors, including fluctuation in the cost of raw materials, changes in consumer preference for beverage products and competitive pricing in the marketplace. These conditions give rise to substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to obtain additional financing or sale of its common stock as may be required and ultimately to attain profitability.

 

F-6
 

  

Management’s plan, in this regard, is to raise financing through equity financing to augment the cash flow it receives from product sales and finance the continuing development for the next twelve months.

 

NOTE 4. INCOME TAXES

 

No provision for federal income taxes has been recognized for the three months ended March 31, 2012 and the years ended November 30, 2011 and 2010 as the Company incurred a net operating loss for income tax purposes in each year and has no carryback potential.

 

Significant components of the Company’s deferred tax liabilities and assets as of March 31, 2012 and December 31, 2011 were as follows:

 

   March 31, 2012   December 31, 2011 
Deferred tax assets:          
Net operating loss  $40,961   $23,938 
    40,961    23,938 
Less valuation allowance   (40,961)   (23,938)
   $-   $- 

 

The Company has provided a full valuation allowance for net deferred tax assets as it is more likely than not that these assets will not be realized.

 

At March 31, 2012, the Company had net operating loss carryforwards of approximately $120,474 for federal income tax purposes. These net operating loss carryforwards begin to expire in 2024.

 

NOTE 5. STOCKHOLDERS’ DEFICIT

 

Shares Issued for Services

 

On November 7, 2011, the Company entered into an Advisory Services Agreement (“Advisory Agreement”) with an unrelated investment advisory company (the “Advisor”), whereas the Advisor agreed to perform certain advisory services in exchange for 50,000 shares, valued at $4,500 ($0.09 per share), of the Company’s common stock, to be delivered within 10 days after execution of the Advisory Agreement, in addition to reimbursement by the Company for the $4,500 DTC Application fee. The shares issued pursuant to the Advisory Agreement are restricted shares. The term of the Advisory Agreement commenced on November 7, 2011 and was set to expire upon the Company’s receipt of either an approval or a denial of their DTC Eligibility Request by DTC. On March 14, 2012, the Company completed the final approved DTC opinion and it is currently expecting notification of its DTC Eligibility Request.

 

On March 19, 2012, the Company exchanged 300,000 shares of restricted common stock for consulting services. The value of the services was $3,000 resulting in an Additional Paid in Capital amount of $2,700.

 

Shares Issued to Settle Note Payable

 

On December 30, 2011, the Company issued 1,250,000 restricted shares, valued at $81,250 ($0.065 per share) to settle its outstanding note payable to an unrelated third party (the “Exchange”). The exchange price was determined to be 50% below the average ten (10) day trading price of the Company’s unrestricted shares of common stock prior to the conversion date. Pursuant to the exchange, the unrelated third party released the Company from its obligation to repay outstanding principle and interest due, aggregating $328,656 at the time of the exchange. The Company recognized a $247,406 gain on extinguishment of debt as a result of the exchange.

 

NOTE 6. RELATED PARTY TRANSACTIONS

 

Sales to Related Party Distributor

 

The Company is engaged with a distributor that is wholly-owned by the Company’s CEO (the “Distributor”). The Distributor is responsible for shipping out product samples, transferring small quantities of product to local distributors at the request of the Company, sales of product to local retailers or small wholesalers and for the fulfillment of online sales orders. The Company may withdraw cases of product from the Distributor at the Company’s will for Company use, for which the Company will provide the Distributor with a credit memo based on a per-case price equal to the price paid by the Distributor to the Company.

 

F-7
 

  

The Distributor pays the Company on a per case basis which is consistent with terms between the Company and third party distributors. Since the Company uses a substantial amount of the Distributor’s inventory as samples and promotions, the Company offers the Distributor credit terms of “on consignment.” During the three months ended March 31, 2012 and 2011, the Company recognized revenue from product sales to the Distributor of $12,800 and $19,920, respectively, which represented 0.07% and 0.07%, respectively, of total product revenue recognized by the Company. At March 31, 2012 and December 31, 2011, receivable from the Distributor was $11,324 and $1,758, respectively.

 

Shipping Reimbursements from Related Party

 

At March 31, 2012, and December 31, 2011, the Company had outstanding accounts receivable of $2,603 and $2,603, respectively, from a company owned by the CEO’s wife. These receivables represent shipping reimbursements erroneously billed by logistics and shipping companies. The Company paid these invoices and then in turn generated invoices to the company owned by the CEO’s wife for reimbursement.

 

Advances to Related Party

 

During the period beginning February 2011 through April 2011, the Company advanced $49,484 to a company owned by the CEO’s wife. As of March 31, 2012 and December 31, 2011, that company had repaid $40,152 of these advances resulting in outstanding advances due of $9,332 as of these dates.

 

Acquisition of Fixed Assets from Related Party

 

During the period ended November 30, 2011, the Company purchased two used vehicles from companies owned by the CEO for a total of $7,850. There were no such purchases from related parties in the periods ended March 31, 2012 and December 31, 2011.

 

Advances from Related Party

 

During 2011, the Company received related party advances from a company majority owned by the CEO and of which the CEO was the sole officer and director in the aggregate amount of $38,800. On March 7, 2012, the Company issued 438,000 restricted shares of common stock to settle the $38,800 advances from third parties that were outstanding at December 31, 2011. The 438,000 restricted shares were valued at $43,800 ($0.10 per share) with a par value of $438 resulting in a loss on extinguishment of debt of $5,000.

 

NOTE 7. LEGAL PROCEEDINGS

 

The Company is aggressively defending itself in all of the below proceedings. The Company’s management believes the likelihood of future liability to the Company for these contingencies is remote, and the Company has not recorded any liability for these legal proceedings at March 31, 2012 or December 31, 2011. While the results of these matters cannot be predicted with certainty, the Company’s management believes that losses, if any, resulting from the ultimate resolution of these proceedings will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

 

During January 2011, a claim was filed against DSD by Corey Powell, in Ascension Parish, LA 23rd Judicial District Court. Corey Powell was a former distributor of LEAN, a relaxation beverage marketed by DSD. Powell filed suit to recover allegedly unpaid commissions, “invasion fees” and “finder’s fees.” The commissions related to payments allegedly owed for Powell’s direct sale of LEAN product to wholesalers and retailers. The invasion fees relate to payments allegedly owed to Powell when the LEAN product was sold by other wholesalers in his geographic territory. The finders’ fees relate to payments allegedly owed to Powell for introducing investors to the DSD management. Discovery is ongoing. Written discovery has been propounded and depositions have been taken to better understand the nature and basis for the plaintiff’s claims and to build DSD’s defenses.DSD has vigorously contested each and every one of the plaintiff’s allegations and has instructed counsel to proceed to trial on the merits.

 

On February 14, 2011, a claim was filed against DSD by Charles Moody, in Caddo Parish, LA First Judicial Court. Charles Moody loaned DSD approximately $63,000 in June 2009. In exchange, Moody received a Promissory Note containing the terms and conditions of the repayment of the loan. Based upon the understanding of the parties, DSD began making monthly payments to Moody in January 2010 in satisfaction of the loan. In December 2010, final payment of the remaining balance of the loan was paid to Moody in full and final satisfaction of the Promissory Note. Moody filed suit to recover “late fees” allegedly owed under the Promissory Note. DSD contends the Promissory Note was satisfied with the final payment in December 2010; Moody contends that repayment should have begun in November 2009, and that because it did not, late fees are owed.Discovery is ongoing. Written discovery has been propounded and depositions have been taken to better understand the nature and basis for the plaintiff’s claims and to build DSD’s defenses. Trial is set for July 31, 2012.DSD has vigorously contested each and every one of the plaintiff’s allegations.

 

F-8
 

 

On November 9, 2011, Charles Moody and DeWayne McKoy filed a claim against DSD and Marco Moran, CEO, in Bossier Parish, LA 26th Judicial Court. Charles Moody and Dewayne McKoy, allegedly both shareholders of DSD, brought an action against Dr. Moran alleging that he engaged in various acts of misconduct and breaches of his fiduciary duties to the corporation which damaged them as minority shareholders. Moody and McKoy also seek damages from Dr. Moran for dilution and/or loss of value of their shareholder interest in DSD as a result of his alleged misconduct.DSD is a nominal defendant in this derivative action, as required by Louisiana law. Initial pleadings have been filed and exceptions to the plaintiff’s claims have been asserted. Discovery has not yet commenced.DSD vigorously denies that its officers or directors engaged in any conduct which may have harmed minority shareholders.

  

During December 2011, Innovative Beverage Group Holdings (“IBGH”) filed a claim against Dewmar International BMC, Inc., Unique Beverage Group, LLC. and Marco Moran, CEO of the Company, in Harris County, TX 61st Judicial District Court, whereas the plaintiff asserted certain allegations. On February 24, 2012, the Company filed a motion for summary judgment to dismiss these frivolous allegations due to lack of proper evidence. On April 12, 2012 Dewmar International BMC, Inc was given written notice of its non-suit without prejudice from Innovative Beverage Group, Inc. This releases Dewmar International BMC, Inc. from any and all liability.

 

On March 22, 2012 whereas Plaintiff, DSD NETWORK OF AMERICA, INC. (hereinafter “DSD”) is a Nevada corporation doing business in Clark County, Nevada files suit against Defendants DeWayne McKoy, Charles Moody, Corey Powell and Peter Bianchi in United States District Court; District of Nevada for a combined thirteen complaints accusing this group of defendants in colluding against the Company.

 

NOTE 8. COMMITMENTS AND CONTINGENCIES

 

Employment Agreement

 

On January 1, 2011, the Company entered into employment agreement with Dr. Moran (“Employee”) to serve as President and Chief Executive Officer of the Company. The employment commenced on January 1, 2011 and runs for the period through January 1, 2015. The Company will pay Employee, as consideration for services rendered, a base salary of $120,000 per year.

 

As additional compensation, Employee is eligible to receive one percent of the issued and outstanding shares of the Company if the gross revenues hit specified milestones for each fiscal year under the agreement. The Company will provide additional benefits to Employee during the employment term which include, but are not limited to, health and life insurance benefits, vacation pay, expense reimbursement, relocation reimbursement and a Company car. The Company may also include Employee in any benefit plans which it now maintains or establishes in the future for executives. If Employee dies, the Company will pay the designated beneficiary an amount equal to two years’ compensation, in equal payments over the next twenty four months.

 

In the event Employee’s employment is constructively terminated within five years of the commencement date, Employee shall receive a termination payment, which will be determined according to a schedule based upon the number of years since the commencement of the contract, within a range of $120,000 to $400,000. Additionally, Employee shall continue to receive the additional benefits mentioned above for a period of two years from the termination date. If the constructive termination date is later than five years after the commencement date, Employee shall receive the lesser amount of an amount equal to his aggregate base salary for five years following the date of the termination date, or an amount equal to his aggregate base salary through the end of the term. Additionally, Employee shall continue to receive the additional benefits mentioned above during the period he is entitled to receive the base salary.

 

During the three months ended March 31, 2012 and 2011, the Company accrued $30,000 and $30,000 in base salary to Dr. Moran, respectively, which were included as a component of general and administrative expenses. The Company recorded total accrued payroll to Dr. Moran in the amounts of $363,000 and $333,000 in accounts payable and accrued liabilities on its consolidated balance sheets at March 31, 2012 and December 31, 2011, respectively.

 

Leases Operating Expenses

 

The Company leased office spaces in Clinton, MS and Houston, TX under non-cancelable operating leases during 2011. Rent expense for the three months ended March 31, 2012 and 2011 was approximately $4,331 and $4,871, respectively.

 

F-9
 

  

The following is a schedule of future minimum lease payments under non-cancelable operating leases at March 31, 2012:

 

Years Ending
December 31,
  Future
Minimum
Lease
Payments
 
2012  $7,317 
2013   6,000 
   $13,317 

 

Distribution Agreement

On March 1, 2012, the Company entered into a distribution and brokerage agreement with Brand Builderz, USA, LLC (BBUSA), a Limited Liability Company organized under the laws of the State of Maine, to sell, market, manage and assist in distributing products in its designated territory. The Company will pay a monthly retainer fee of two thousand dollars ($2,000) until sales commissions reach at least four thousand dollars ($4,000) for two consecutive months. The company will pay commissions of ten percent (10%) of gross sales collected, pay an invasion fee of fifty cents ($0.50) per physical case of product sold within the territory of BBUSA by a third party.

 

NOTE 9. SUBSEQUENT EVENTS

 

On April 27, 2012, the Board of Directors approved a resolution to increase the number of Authorized shares to 125 million of which 25 million are Preferred Stock with a par value of $0.001 per share and 100 million are Common Stock.

 

On April 9, 2012, The Company entered into an agreement with NA Beverages, LLC, a Nevada Limited Liability Company (the Consultant), to provide advice, analysis, sales and recommendations. The Consultant shall be paid at the base salary of $40,000 per year, receive a commission of five percent (5%) of the gross sales of all fully paid invoices received from the Consultant’s customers and provide a monthly bonus of up to twenty-five hundred dollars ($2,500) for arranging, conducting and reporting of meetings with buyers and or similar business related personnel. Either the Company or the Consultant may terminate the agreement with at least thirty (30) says prior written notice with no specific reasons given.

 

F-10
 

  

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

 

Except for the historical information contained in this report on Form 10-Q, the matters discussed herein are forward-looking statements. Words such as “anticipates,” “believes,” “expects,” “future,” and “intends,” and similar expressions are used to identify forward-looking statements. These and other statements regarding matters that are not historical are forward-looking statements. These matters involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed below as well as those discussed elsewhere in this report. Readers are cautioned not to place undue reliance on these forward-lookingstatements, which reflect management’s analysis only as of the date hereof. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. This information should also be read in conjunction with our audited historical financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011,

 

Background

 

On October 28, 2011, pursuant to an Exchange Agreement (“Agreement”), Dewmar International BMC, Inc. (fka Convenientcast, Inc.) (“Dewmar International BMC, Inc or the “Company”), a publicly reporting Nevada corporation, acquired DSD Network of America, Inc. (“DSD”), a Nevada corporation, in exchange for the issuance of 40,000,000 shares of common stock of Dewmar International BMC, Inc. (the “Exchange Shares”), a majority of the common stock, to the former owners of DSD. In conjunction with the Merger, DSD became a wholly-owned subsidiary of the Company.

 

For financial accounting purposes, this acquisition (referred to as the “Merger”) was a reverse acquisition of Dewmar International BMC, Inc. by DSD and was treated as a recapitalization. Accordingly, the financial statements were be prepared to give retroactive effect of the reverse acquisition completed on October 28, 2011, and represent the operations of DSD prior to the Merger.

 

As of the time of the Merger, Dewmar International BMC, Inc held minimal assets and was a developmental stage company. Following the Merger, the Company, through DSD, is a manufacturer of its Lean Slow Motion Potion™ brand relaxation beverage, which was launched by DSD in September of 2009. After the Merger, the Company operates through one operating segment.

 

Results of Operations

 

For the three months ended March 31, 2012 and 2011.

 

Revenue

 

Revenue is presented net of sales allowances. Net revenue decreased $85,903, or 30.8%, to $193,216 from $279,119 for the three months ended March 31, 2012 and 2010, respectively. This decrease was primarily due to an overall decrease in purchase orders.

 

Cost of Goods Sold

 

Cost of goods sold decreased $22,087, or 22.6%, to $75,693 from $97,780 for the three months ended March 31, 2012 and 2011, respectively. This overall decrease was primarily the result of decreased sales.

 

Operating Expenses

 

Operating expenses increased $16,005, or 0.08%, to $206,996 from $190,991 for the three months ended March 31, 2012 and 2011, respectively. The overall increase in operating expenses results from increases in professional fees including legal, accounting, audit fees and other expenses for the reverse merger and related compliance filings and requirements with an increase of $59,559 to $62,118 from $2,559 for the three months ended March 31, 2012 and 2011, respectively.

 

Marketing and advertising costs decreased $8,948, or 48.5%, to $9,498 for the three month ended March 31, 2012, as compared to $18,446 for the three month ended March 31, 2011. This overall decrease was due to reducing marketing and advertising.

 

Contract labor costs decreased $31,391 to $37,312 from $68,703 for the three months ended March 31, 2012 and 2011, respectively. Contract labor costs primarily included costs for administrative and marketing/sales support.

 

4
 

  

Interest Expense

 

For the three months ended March 31, 2012 and 2011, the Company incurred interest expense of $0.00 and $9,495 respectively. The Company paid a prior accrued interest payment of $68,338 for the three months ended March 31, 2011.

 

Net Loss

 

Our net losses for the three months ended March 31, 2012 and 2011 were $94,466 and $19,008, respectively. The increase in net loss is attributable to the increases in expenses from the operating expenses, which is discussed above.

 

Off-Balance Sheet Arrangements

 

As of March 31, 2012, we have no off-balance sheet arrangements such as guarantees, retained or contingent interest in assets transferred, obligation under a derivative instrument and obligation arising out of or a variable interest in an unconsolidated entity.

 

Critical Accounting Policies

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. Our Annual Report on Form 10-K for the year ended December 31, 2011 contains a discussion of these significant accounting policies. There have been no significant changes in our significant accounting policies since December 31, 2011. See our Note 2 in our unaudited financial statements for the three months ended March 31, 2012, as set forth herein.

 

Liquidity and Capital Resources

 

During the three months ended March 31, 2012 and 2011, the Company recognized positive (negative) cash flows from operating activities of $(24,194), and $25,153, respectively. As of March 31, 2012, the Company held cash and cash equivalents of $67,312 compared to cash of $141,448as of March 31, 2011.

 

Cash used in investing activities totaled $0, and $33,599 for the three months ended March 31, 2012 and 2011, respectively. Cash used in investing activities consisted of advances to a related party. Cash provided by (used in) financing activities totaled $0, and $(58,831) for the three months ended March 31, 2012 and 2011, respectively, and consisted of advances received from third parties and payments made on notes payable.

 

The Company is dependent upon obtaining adequate financing to enable it to pursue its business plan and manage its operations for profitability. The Company has limited financial resources available, which has had an adverse impact on the Company's liquidity, activities and operations. These limitations have adversely affected the Company's ability to obtain certain projects and pursue additional business. There is no assurance that the Company will be able to raise sufficient funding to enhance the Company's financial resources sufficiently to generate volume for the Company, or to engage in any significant research and development, or purchase plant or significant equipment.

 

Management has been successful in raising sufficient funds to cover the Company’s immediate expenses including general and administrative.

 

The Company as a whole may continue to operate at a loss for an indeterminate period thereafter, depending upon the performance of its new businesses. In the process of carrying out its business plan, the Company will continue to identify new financial partners and investors. However, it may determine that it cannot raise sufficient capital to support its business on acceptable terms, or at all. Accordingly, there can be no assurance that any additional funds will be available on terms acceptable to the Company or at all.

 

5
 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not Required

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this report, the Company carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined by Rule 13-15(e) under the Securities Exchange Act of 1934) under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer. Based on and as of the date of such evaluation, the aforementioned officers have concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2012.

 

6
 

  

Changes in Internal Controls over Financial Reporting

 

Changes in Internal Controls Over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

The Company is aggressively defending itself in all of the below proceedings. The Company’s management believes the likelihood of future liability to the Company for these contingencies is remote, and the Company has not recorded any liability for these legal proceedings at March 31, 2012, December 31 2011, November 30, 2011, and November 30, 2010. While the results of these matters cannot be predicted with certainty, the Company’s management believes that losses, if any, resulting from the ultimate resolution of these proceedings will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

 

During January 2011, a claim was filed against DSD by Corey Powell, in Ascension Parish, LA 23rd Judicial District Court. Corey Powell was a former distributor of LEAN, a relaxation beverage marketed by DSD. Powell filed suit to recover allegedly unpaid commissions, “invasion fees” and “finder’s fees.” The commissions related to payments allegedly owed for Powell’s direct sale of LEAN product to wholesalers and retailers. The invasion fees relate to payments allegedly owed to Powell when the LEAN product was sold by other wholesalers in his geographic territory. The finders’ fees relate to payments allegedly owed to Powell for introducing investors to the DSD management. Discovery is ongoing. Written discovery has been propounded and depositions have been taken to better understand the nature and basis for the plaintiff’s claims and to build DSD’s defenses. DSD has vigorously contested each and every one of the plaintiff’s allegations and has instructed counsel to proceed to trial on the merits.

 

On February 14, 2011, a claim was filed against DSD by Charles Moody, in Caddo Parish, LA First Judicial Court. Charles Moody loaned DSD approximately $63,000 in June 2009. In exchange, Moody received a Promissory Note containing the terms and conditions of the repayment of the loan. Based upon the understanding of the parties, DSD began making monthly payments to Moody in January 2010 in satisfaction of the loan. In December 2010, final payment of the remaining balance of the loan was paid to Moody in full and final satisfaction of the Promissory Note. Moody filed suit to recover “late fees” allegedly owed under the Promissory Note. DSD contends the Promissory Note was satisfied with the final payment in December 2010; Moody contends that repayment should have begun in November 2009, and that because it did not, late fees are owed. Discovery is ongoing. Written discovery has been propounded and depositions have been taken to better understand the nature and basis for the plaintiff’s claims and to build DSD’s defenses. Trial is for July 31, 2012. DSD has vigorously contested each and every one of the plaintiff’s allegations.

 

On November 9, 2011, Charles Moody and DeWayne McKoy filed a claim against DSD and Marco Moran, CEO, in Bossier Parish, LA 26th Judicial Court. Charles Moody and Dewayne McKoy, allegedly both shareholders of DSD, brought an action against Dr. Moran alleging that he engaged in various acts of misconduct and breaches of his fiduciary duties to the corporation which damaged them as minority shareholders. Moody and McKoy also seek damages from Dr. Moran for dilution and/or loss of value of their shareholder interest in DSD as a result of his alleged misconduct. DSD is a nominal defendant in this derivative action, as required by Louisiana law. Initial pleadings have been filed and exceptions to the plaintiff’s claims have been asserted. Discovery has not yet commences. DSD vigorously denies that its officers or directors engaged in any conduct which may have harmed minority shareholders.

 

During December 2011, Innovative Beverage Group Holdings (“IBGH”) filed a claim against Dewmar International BMC, Inc., Unique Beverage Group, LLC. and Marco Moran, CEO of the Company, in Harris County, TX 61st Judicial District Court, whereas the plaintiff asserted certain allegations. On February 24, 2012, the Company filed a motion for summary judgment to dismiss these frivolous allegations due to lack of proper evidence. On April 12, 2012 Dewmar International BMC, Inc was given written notice of its non-suit without prejudice from Innovative Beverage Group, Inc. This releases Dewmar International BMC, Inc. from any and all liability.

 

On March 22, 2012 whereas Plaintiff, DSD NETWORK OF AMERICA, INC. (hereinafter “DSD”) is a Nevada corporation doing business in Clark County, Nevada files suit against Defendants DeWayne McKoy, Charles Moody, Corey Powell and Peter Bianchi in United States District Court; District of Nevada for a combined thirteen complaints accusing this group of defendants in colluding against the Company.

 

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

 

On March 19, 2012, the Company exchanged 300,000 shares of restricted common stock for consulting services. The value of the services was $3,000 resulting in an Additional Paid in Capital amount of $2,700.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

7
 

  

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

The following exhibits are filed herewith:

 

Exhibit

Number

 

Exhibit

Description

     
31.1   Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
31.2   Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase
     
101.DEF   XBRL Taxonomy Extension Definition Linkbase
     
101.LAB   XBRL Taxonomy Extension Label Linkbase
     
101.PRE   XBRL Taxonomy Presentation Linkbase

 

8
 

  

SIGNATURES

 

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

 

  Dewmar International BMC, Inc.
     
Date: May 21, 2012 By:  /s/ Marco Moran 
    President, CEO, and Director

 

9
 

 

XOTC:DEWM Quarterly Report 10-Q Filling

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