PINX:DMPD DM Products Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

[X]
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
   
 
For the quarterly period ended March  31, 2012
 
 
[  ]
Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
   
 
For the transition period from __________ to __________
   
 
Commission File Number:  333-165961

DM Products, Inc.
(Exact name of registrant as specified in its charter)

Nevada
45-0460095
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)

P.O. Box 2458
Walnut Creek, CA
(Address of principal executive offices)

925-943-2090
(Registrant’s telephone number)
 
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) 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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [  ] No

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

[ ] Large accelerated filer Accelerated filer
[ ] Non-accelerated filer
[X] Smaller reporting company
 

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

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 273,339,011 common shares as of March 31, 2012.
 
 
 
 

 
 

 
 
 
2

 
 
 
PART I - FINANCIAL INFORMATION


Our financial statements included in this Form 10-Q are as follows:
 
Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011 (unaudited) ;
Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011 (unaudited);
Consolidated Statement of Stockholders’ Equity as of March 31, 2012 (unaudited);
Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011 (unaudited); and
Notes to Consolidated Financial Statements.

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  Operating results for the interim period ended March 31, 2012 are not necessarily indicative of the results that can be expected for the full year.
 
 
 
3

 
 
 
DM Products, Inc. And Subsidiaries
Consolidated Balance Sheets
(Unaudited)
           
 
March 31, 2012
   
December 31, 2011
 
ASSETS
Current Assets
         
Cash and cash equivalents
  15,936       26,089  
Royalties Receivable
  6,407       15,835  
Prepaid Expense
  6,211       10,656  
Total Current Assets
  28,554       52,580  
               
Property and Equipment - net
  653       728  
TOTAL ASSETS
  29,207       53,308  
               
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
             
Accounts Payable
  54,204       45,321  
Accrued Expenses
  203,653       173,653  
Sales Tax Payable
  2,424       2,424  
Total Current Liabilities
  260,281       221,398  
               
Total Liabilities
  260,281       221,398  
               
               
               
Stockholders' Equity (Deficit)
             
Preferred Stock, $0.001 par value, 30,000,000 shares authorized, 0 shares issued and outstanding
  -       -  
Common Stock, $0.001 par value, 400,000,000 shares authorized, 273,339,011 shares issued and outstanding (282,720,684 - 2011)
  273,339       282,721  
Additional Paid In Capital
  642,345       632,963  
Accumulated Deficit
  (1,420,009 )     (1,356,080 )
Total DM Products, Inc. Stockholders' Equity (Deficit)
  (504,325 )     (440,396 )
Non-Controlling Interest
  273,251       272,306  
Total Stockholders' Equity (Deficit)
  (231,074 )     (168,090 )
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
  29,207       53,308  

 
 
F-1

 


DM Products, Inc. And Subsidiaries
Consolidated Statements of Operations
(Unaudited)
             
    For the 3 months ended   For the 3 months ended
   
March 31, 2012
   
March 31, 2011
 
Revenues
           
Royalty income
    6,547       8,053  
Total revenues
    6,547       8,053  
                 
Operating expenses
               
Professional Fees
    7,086       24,841  
Salary & Wages
    30,500       34,163  
Consulting
    5,000       9,104  
General & Administrative expenses
    26,944       19,249  
Total operating expense
    69,531       87,357  
                 
Income (Loss) from operations and before non-controlling Interest
    (62,984 )     (79,304 )
                 
Less: Income Attributable to non-controlling interest
    945       1,706  
                 
Income (Loss) before income taxes
    (63,929 )     (81,010 )
                 
Provision for income taxes
    -       -  
                 
Net Income (Loss)
  $ (63,929 )     (81,010 )
                 
                 
                 
Net Income (Loss) per common share-basic and fully diluted
  $ (0.0002 )     (0.0003 )
                 
Weighted average common shares outstanding-basic and diluted
    282,205,207       239,097,352  

 
 
F-2

 



DM Products, Inc. And Subsidiaries
Consolidated Statements of Shareholders' Equity (Deficit)
(Unaudited)
                                   
 
Common Stock
   
Additional
Paid In Capital
   
Non-
Controlling
 Interest
   
Accumulated
Deficit
   
Total
Shareholders'
Equity (Deficit)
 
 
Shares
   
Amount
                         
Balance, December 31, 2011
282,720,684     $ 282,721     $ 632,963     $ 272,306     $ (1,356,080 )   $ (168,090 )
                                             
Shares surrendered per settlement and release agreement
(14,863,337 )   $ (14,864 )   $ 14,864                     $ -  
                                             
Shares issued per settlement and release agreement
5,481,664     $ 5,482     $ (5,482 )                   $ -  
                                             
Net income (loss) for the period ended March 31, 2012
-       -       -       945       (63,929 )     (62,984 )
                                  -          
Balance, March 31, 2012
273,339,011     $ 273,339     $ 642,345     $ 273,251     $ (1,420,009 )   $ (231,074 )
                                             

 
 
F-3

 


DM Products, Inc. And Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
             
    For the 3 months ended   For the 3 months ended
   
March 31, 2012
   
March 31, 2011
 
Cash flows from operating activities
           
Net Loss
  $ (62,984 )     (79,304 )
           
Adjustment to reconcile net loss to net cash provided (used) by operating activities:
         
Depreciation
    75       100  
Share-based compensation
    -       -  
Changes in operating assets and liabilities:
               
Royalties receivable
    9,428       31,272  
Prepaid Expenses
    4,445       3,340  
Accounts payable
    8,883       11,591  
Accrued Expenses
    30,000       30,000  
Net cash provided (used) by operating activities
    (10,153 )     (3,001 )
                 
Cash flows from financing activities
               
Net increase in credit card balances
    -       1,172  
Net cash provided by financing activities
    -       1,172  
                 
Net increase (decrease) in cash
    (10,153 )     (1,829 )
                 
Cash at beginning of period
    26,089       2,714  
Cash at end of period
  $ 15,936       885  
                 
Supplemental disclosure of cash flow information:
               
Interest paid
  $ 636       344  
Taxes paid
  $ 3,300       2,400  

 
 
F-4

 


DM Products, Inc. And Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
         
Note 1: Summary of Significant Accounting Policies
   
         
Nature of Operations
       
         
DM Products, Inc.(the Company) was incorporated on March 1, 2001 as Effective Sport Nutrition Corporation. Subsequently, on April 11, 2005, the Company changed its name to Midwest E.S.W.T Corp and on December 14, 2005, it changed its name again to DM Products, Inc.
         
On July 18, 2005, the Company acquired Direct Success, Inc. a California Corporation in exchange for 70 % of the Company's Common Stock, making Direct Success, Inc. a wholly owned subsidiary of the Company. Midwest E.S.W.T agreed that a total of 114,851,043 shares of Restricted Common Stock were to be issued to shareholders of Direct Success, Inc.
         
The Company operates from Walnut Creek, California and it wholly owns Direct Success, Inc., which owns 75% of Direct Success, LLC 3,  a limited liability company formed on or about August 16, 2002. Direct Success, Inc. entered into a joint venture with Buena Vista Infomercial Corporation which owns the remaining 25% of Direct Success, LLC 3. The purpose of Direct Success, Inc. is to market products through direct response television infomercials. The companies obtain the distribution, production and licensing rights to products in exchange for royalty agreements based on the sales of the products.  The Company sets up the production, marketing and the distribution of the products.
         
On July 14, 2010 the Company incorporated a wholly owned subsidiary corporation, Aliano, Inc., dba Aliano Westlake Village. The purpose of this fragrance and personal care division is to create, manufacture, distribute and sell prestige fragrances and beauty related products. Effective as of July 26, 2010, Aliano Inc. entered into an agreement with Portia Entertainment Group LLC for legal services described in the agreement. As per the agreement, Portia Entertainment Group LLC is entitled to receive a fee of 5% on the Net Income earned by Aliano Inc. for celebrity endorsees introduce by Portia.
         
On April 8, 2010, a Form S-1 Registration Statement was completed and submitted to the Securities and Exchange Commission. The registration filing was declared effective on October 15, 2010. On April 21, 2010, an Information Statement Form 211 was submitted to the Financial Industry Regulatory Authority (FINRA) for active trading on the Over the Counter Bulletin Board (OTCBB). The filing was approved on November 09, 2010.
         
On December 27, 2011 the Company dissolved Aliano, Inc., dba Aliano Westlake Village since the corporation has been unsuccessful  in raising sufficient capital to commence operations. As a result of this dissolution the intercompany loan between the Company and Aliano, Inc. were written off in the respective books with no effect in the consolidated balance sheet and in the consolidated statement of operations.
         
Basis of Consolidation
     
         
The consolidated financial statements include the accounts of DM Products, Inc., Direct Success, Inc., Aliano, Inc. and the accounts of its 75% owned subsidiary Direct Success LLC 3. All material inter-company transactions have been eliminated.
         
Basis of Presentation
       
         
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
         
Accounting Basis
       
         
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting).  The Company has adopted a December 31 fiscal year end.
         
Cash and Cash Equivalents
     
         
All highly liquid investments with maturities of three months or less are considered to be cash equivalents.  At March 31, 2012 and December 31, 2011, the Company had cash balances of $15,936 and $26,089, respectively.
         
Fair Value of Financial Instruments
     
         
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, prepaid expense, accounts payable, sales tax payable, and other current liabilities. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates, unless otherwise disclosed in these financial statements.
 
 
 
F-5

 
 
         
Income Taxes
       
         
Income taxes are computed using the asset and liability method.  Under the asset and liability method, deferred income tax, assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws.  A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of March 31, 2012, there have been no interest or penalties incurred on income taxes.
         
Use of Estimates
       
         
The preparation of financial statements in conformity with generally accepted accounting principles 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 the financial statements and the reported amount of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
         
Revenue Recognition
       
         
The Company records revenue in accordance with ASC Topic 605 - Revenue Recognition. During the year ended March 31, 2012 revenues came from royalties from the contract Banjo Minnow the fishing lure with TriStar Products, Inc. Revenues derived from the Company license sales are recognized when (1) there is evidence of an arrangement, (2) collection of our fee is considered probable, and (3) the fee is fixed and determinable.
         
Direct Success entered into a manufacturing, marketing and distribution agreement with Banjo Buddies, who is the inventor of Banjo Minnow, a fishing lure which Direct Success LLC 3 had a license agreement to market the product since Oct 2002. The Company entered into a modification of said agreement in April 2005. On September 30, 2011 the Company excercised their option to extend the Banjo Minnow agreement until June 30, 2012. On or about May 11, 2005,  Direct Success LLC 3, subcontracted the manufacturing and distribution rights to TriStar Products, Inc.  In March 2007, Direct Success granted back to Banjo, the right to license and privilege for internet sales and small parts sale of the product. Under the agreement, Banjo will pay Direct Success 4% royalty on all gross sales of product. As of date of settlement, effective January 1, 2010, Direct Success no longer receives the 4% royalty for internet and part sales from Banjo Buddies. The revenues are strictly based on the contractual obligation contained in the agreement with Tristar Products, Inc., which are the royalties received from the sales of the Banjo Minnow. These royalty arrangements with Tristar provide the Company with a flat $4.00 (for unit sales under $18) and $5.00 (for unit sales over $18), per unit sold domestically, and $2.50 per unit sold internationally. The present retail price for the Banjo Minnow is $19.95.
         
Concentration of Risk
       
         
The Company is earning (over 90%) the majority of the royalty income from Tristar Products, Inc. Since the Company is depending on Tristar Products, Inc., the inability of Tristar to perform in the future may have a material adverse effect on the Company’s financial condition.
         
Advertising Policy
       
         
The Company recognizes advertising expense as incurred. The advertising expense for the period ended March 31, 2012 and March 31, 2011 are $0 and $0 respectively.
         
Basic Income (Loss) Per Share
     
         
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of March 31, 2012.
         
Stock-Based Compensation
     
         
The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation – Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. In 2011, 19,999,999 common shares were issued at the fair market value of $0.0015 per share totaling to $30,000. There was no stock-based compensation granted during the period ended March 31, 2012.
 
 
 
F-6

 
 
         
The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees.  In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined.  The fair value of the equity instrument is charged directly to operating expense and additional paid-in capital over the period during which services are rendered. In 2011, 22,783,333 common shares were issued at the fair market value of $0.0015 per share totaling to $34,175. There was no stock-based compensation issued to non-employees during the period ended March 31, 2012.
         
Recent 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 2: Property & Equipment
     
         
Property and equipment are carried at cost. Major expenditures and those which substantially increase useful lives are capitalized. Maintenance, repairs and minor renewals are charged to operations when incurred. When property and equipment is sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. Once placed in service, depreciable assets are depreciated over their estimated useful lives using both accelerated and straight-line methods.
         
Depreciation expenses totaled $75 and $100 for the the period ended March 31, 2012 and  March 31, 2011, respectively.
         
Note 3: Prepaid Expenses
     
         
Prepaid expenses consisted of the following at March 31, 2012 and December 31, 2011:
         
   
2012
2011
 
 
Prepaid insurance
 $                          6,211
 $                                        10,656
 
             
 
Total Prepaid Expenses
 $                                           6,211
 $                                        10,656
 
         
         
Note 4: Non-Controlling Interest
     
         
The Company has owned 75% of Direct Success LLC 3 (LLC 3) since 2002. The assets and liabilities of Direct Success LLC 3 have been included in these consolidated financial statements. The 25% of LLC 3 not owned by the Company has been presented as a non-controlling interest in these financial statements.
         
Note 5: Accrued Expenses
     
         
Accrued expenses consisted of the following at March 31, 2012 and December 31, 2011:
         
   
2012
2011
 
 
Accrued Wages
 $                                       195,653
 $                                      165,653
 
 
Accrued directors' fees
 $                                           8,000
 $                                          8,000
 
 
Total Prepaid Expenses
 $                                       203,653
 $                                      173,653
 
         
Wages are accrued under an employee agreement entered into on the 20th day of April, 2007 by and between the Company and its President. According to the agreement, employee's starting salary is $6,000 per month during the first 90 days following execution of the agreement or until $500,000 in capital is raised. After such period of time, employee's salary shall be increased to $10,000 per month. Should the company determine it in the best interest not to pay employee's entire monthly compensation, at any time, any such compensation shall be treated as deferred compensation and will accumulate on the books and provided to employee, at employee's sole discretion, taking into consideration the funds available and the best interest of the Company.
         
The accrued wages owed under the employment agreement as of March 31, 2012 and December 31, 2011, respectively, were $195,653 and $165,653.
         
Salary expense to the related party was $30,000 and $30,000 for the period ended March 31, 2012 and March 31, 2011, respectively.
         
The Board of Directors passed a resolution on October 15, 2011 to compensate Directors, Secretary, Treasurer, CEO, President and Board Chairman by issuing common stock annually. This policy is retroactive with an effective date of January 1, 2010. Per the policy the Company owed Kurtis Cockrum who is a Director, CEO, President and Board Chairman $6,000 worth of common stock, James Clarke who is a Director, Secretary and Treasurer $2,000 worth of common stock as of December 31, 2011. This amount has been recorded  as director fees at December 31, 2011.
 
 
 
F-7

 
 
         
Note 6: Related Party Transactions
     
         
The Company has entered into  a consulting contract with Michael DeBenon, Esq., a stockholder of the Company, for $6,000 per month on a month to month basis for general counsel. Legal expenses to the related party were $0 and $18,000 for the periods ended March 31, 2012 and March 31, 2011, respectively.
         
Note 7: Common Stock
       
         
The Company has 430,000,000 shares of capital stock, consisting of 400,000,000 shares of $0.001 par value common stock,  and 30,000,000 shares of $0.001 par value preferred stock. The Company had 273,339,011 shares of common stock issued and outstanding as of March 31, 2012 and 239,937,352 shares issued and outstanding as of March 31, 2011.
         
On March 26, 2012, 3,390,834 shares of $0.001 par value common stock owned by Celecia Family Trust were surrendered per a Settlement and Release Agreement.
         
On March 26, 2012, 3,390,834 shares of $0.001 par value common stock owned by Koontz Family Trust were surrendered per a Settlement and Release Agreement.
         
On March 26, 2012, 8,081,669 shares of $0.001 par value common stock owned by K & B Kerry Living Trust were surrendered per a Settlement and Release Agreement.
         
On March 26, 2012, 5,481,664 shares of $0.001 par value common stock were issued to Tony L. Kerry and Erika D. Kerry Revocable Trust per a Settlement and Release Agreement.
         
         
Note 8: Commitments and Contingencies
     
         
The CEO and employees of the Company work from their homes. The fair market value of rents contributed by the related parties are estimated to be $50.00 per month, which is immaterial to the Company's financial statements, and has not been recorded on the Company's books.
         
Note 9: Income Taxes
       
         
As of March 31, 2012, the Company had net operating loss carry forwards of approximately $1,420,009 that may be available to reduce future years’ taxable income through 2030. Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.
         
The provision for federal income tax consists of the following:
   
         
   
March 31,
March 31,
 
   
2012
2011
 
Federal income tax attributable to:
     
Current Operations
 
 $                 21,736
 $                 27,543
 
Less: valuation allowance
 $               (21,736)
 $                (27,543)
 
Net provision for Federal income taxes
 $                           -
 $                           -
 
         
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
         
   
March 31,
December 31,
 
   
2012
2011
 
Deferred tax asset attributable to:
     
Net operating loss carryover
 $               482,803
 $               461,067
 
Less: valuation allowance
 $             (482,803)
 $              (461,067)
 
Net deferred tax asset
 
 $                           -
 $                           -
 
         
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $1,420,009 for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, the net operating loss carry forwards may be limited as to use in future years.
 
 
F-8

 
 
         
Note 10: Going Concern
     
         
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has sustained substantial losses since inception, has a working capital deficit, and is in need of additional capital to grow its operations so that it can become profitable.
         
In view of these matters, the ability of the Company to continue as a going concern is dependent upon growth of revenues and the ability of the Company to raise additional capital.  Management believes that its successful ability to raise capital and increases in revenues will provide the opportunity for the Company to continue as a going concern.
         
Note 11: Subsequent Events
     
         
On April 11, 2012, the Board of Directors entered into a resolution for the formation of a wholly owned subsidiary, ELK Films, Inc., a California corporation.  Articles of Incorporation were filed with the California Secretary of State on April 12, 2012.  The subsidiary has been established to become a film distribution and production company in the motion picture industry.  DM Products is currently in negotiations with experienced management personnel who have long standing relationships in theatrical placement and Print & Advertising.  The Company is also negotiating for the distribution rights to a fully produced family oriented comedy.  
         
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2012 to the date these financial statements were issued, and has determined that it does not have any additional material subsequent events to disclose in these financial statements other than those events described above.

 
 
F-9

 
 


Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.   These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Executive Overview

We, through our wholly owned subsidiary, Direct Success, Inc., develop, finance, produce, market and distribute beauty, fashion, fitness and other products for sale through infomercial marketing and distribution channels. Profits are derived from inbound sales, outbound sales, up sells and retail distribution. Our primary objective is to penetrate this rapidly expanding industry by introducing consumer products to national and international markets through a series of infomercial campaigns. We intend to aggressively develop, finance, produce and market various new products for television infomercials. We intend to systematically expand our product list using a direct response model.

Our operational strategy consists of employing one of three distinct business alternatives for each product/infomercial:

·
Complete Project Funding - The Company would obtain the exclusive licensing rights to products and pay a nominal royalty (2-5%) of gross sales to the product developer;

·
Joint Venture Projects - The Company would share costs of production, marketing and distribution and would share revenues with product developers; and

·
Straight Royalty Arrangements - The Company would partially finance the infomercials in exchange for a fixed royalty on gross sales.

 
 
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Of course, the key to our ability to continually attract new products and new product developers will, in large part, determine our success. As part of our strategy, we intend to, and have developed, strategic alliances with strong companies that are established operators in the infomercial and advertising industry.  These companies include TriStar Products, Inc. and Script-to-Screen.

Our business is focused on improving shareholder returns with a particular emphasis on profitability and capital productivity.

Economic and market conditions have been, and continue to be, disruptive and volatile.  The availability and cost of credit and currency volatility have obviously contributed to diminished expectations for the economy.  These conditions, along with reduced consumer confidence and increased unemployment, have contributed to reductions in consumer spending, particularly on discretionary products such as the ones offered by DM Products.

Although we continually adjust our procurement, marketing and production schedules, together with an acute awareness of production costs, it is still uncertain as to when the economy will recover, and it is not clear that our current activities will sufficiently offset the impact of the poor economy on our net sales.

Plan of Operation

Since its acquisition of Direct Success, Inc. in July, 2005, we have focused primarily on the manufacturing, marketing, sale, and distribution of the Banjo Minnow Fishing Lure System (“Banjo Minnow”), via a direct marketing campaign, primarily promoted through the production and airing of a thirty minute infomercial.  The exclusive rights to the Banjo Minnow were acquired through a Manufacturing, Marketing and Distribution Agreement entered into between Direct Success, LLC#3 and Banjo Buddies, Inc., dated October 10, 2003 (prior to the company’s acquisition of Direct Success, Inc

Direct Success, Inc., on or about August 16, 2003, entered into a joint venture with Buena Vista Infomercials, Inc. and formed Direct Success, LLC #3 (a Delaware Limited Liability Company) for the purpose of acquiring the exclusive manufacturing and distribution rights to the Banjo Minnow.   Direct Success, LLC #3 is 75% owned by Direct Success, Inc, while the remaining 25% is owned by Buena Vista Infomercials, Inc.

On or about October 10, 2003, Direct Success, LLC #3 entered into an agreement with Banjo Buddies Inc. (the owner and inventor of the lure) in which Banjo granted to Direct Success, LLC #3 the exclusive rights to manufacture, use, distribute, sell, advertise, promote and otherwise exploit the Banjo Minnow.  Direct Success, Inc. produced and financed the current infomercial featuring the Banjo Minnow and invested substantial capital in its promotion.

On or about May 11, 2005, Direct Success, LLC #3 subcontracted the manufacturing and distribution rights to TriStar Products, Inc.  Pursuant to this subcontract, Direct Success, LLC #3 receives a royalty, based on sales generated by TriStar.

Our rights under the Manufacturing, Marketing and Distribution Agreement terminate on June 1, 2012.  However, we expect to receive royalty payments from Tristar for several months following the contract’s termination.
 
 
 
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Diversification

We realize the need to expand on the products offered to consumers, thereby diversifying our commitments and attracting new customers.  Our directors and officers are consistently approached with ideas for new products from various individuals and companies. It is expected that our officers and directors will continue to be “pitched” for new product ideas and that our referral sources will grow as we gain recognition in the infomercial industry. As opportunities arise, our officers and directors will present potential product ideas to our Board of Directors for its discussion and review.

In deciding which products to pursue, our Board will consider, among other things, the product's viability, costs of development and marketing, acceptable sales price point per unit, as well as the product's overall likelihood of success. In some instances, our Board may retain an outside consultant to evaluate such things as the product's likely market appeal or the product's optimal price point. Although we expect that our directors and officers will continue to be approached by inventors with viable products without any solicitation, the Board of Directors may decide to solicit product pitches or ideas in the future if the Board believes that such a strategy would be in the our best interest.

If the Board approves a product for further development, we intend to retain outside parties to produce the infomercial, assist in the design, the overall marketing campaign and sales process, and source and manufacture the product for competitive rates. When determining what parties to retain for these services, our Board of Directors will consider several factors, including a proven track record, cost and the ability to meet our timetable. We do not intend to retain any one service provider exclusively, and, instead we intend to seek competitive bids from numerous potential providers for each infomercial campaign.

Motion Picture Production and Distribution Division

On April 11, 2012, the Board of Directors of DM Products, Inc. (“DMP”) entered into a resolution for the formation of a wholly owned subsidiary corporation, ELK Films, Inc. (“ELK”), a California corporation. Articles of Incorporation were filed with the California Secretary of State on April 12, 2012. The subsidiary has been established to become a film distribution and production company in the motion picture industry. DM Products is currently in negotiations with experienced management personnel who have long standing relationships in theatrical placement and Print & Advertising.

Our pursuit of this line of business and the appointment of the foregoing persons to officer positions is, however, conditioned upon our ability to raise capital to fund this new line of business.
 
 
 
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General

Our results of operations may vary significantly from period-to-period.  Our revenues will fluctuate due to the seasonality of our products, customer buying patterns, product innovations and competition, our ability to meet customer demand, media and advertising campaigns, and our ability to attract new customers and renew existing sales relationships.  In addition, our revenues are highly susceptible to economic factors, including, among other things:  the overall condition of the U.S. economy and economics of other countries where we market our products; and the availability of credit, both in the U.S. and abroad.

Results of Operations for the three months ended March 31, 2012

Our revenue was $6,547 for the three months ended March 31, 2012, a decrease of $1,506 for the same period ended March 31, 2011.   For all periods mentioned above, our revenues were solely based on royalty payments, thus, our cost of goods sold during this period was zero. Pursuant to an arbitration settlement, the contractual term of our rights concerning the Banjo Minnow will continue through June 30, 2012.

Revenues during the first quarter of our fiscal year are traditionally low due to the seasonality of the fishing industry.  Since our sole source of revenue, at this time, is based on sales of the Banjo Minnow Fishing Lure, management is not surprised with the amount received.  It has been the company’s experience that revenues increase during the second and third quarters of each fiscal year.

We have incurred an operating loss in the amount of $62,984 and net loss in the amount of $63,929 for the three months ended March 31, 2012 as compared to an operating loss $79,304 and net loss in the amount of $81,010 for the same period ended March 31, 2011.  

Factors contributing to the increased expenses during this same period were primarily the result of the increased legal, accounting, and auditing fees, as well as the increased general and administrative expenses, associated with the company’s obtaining a fully reporting status in October, 2010.  Additionally, the company has incurred increased expenses as a result of its formation of Aliano, Inc. and its due diligence in investigating the possibility of establishing a personal care products division.

 
 
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Liquidity and Capital Resources

As of March 31, 2012, we had total assets in the amount of $28,554, consisting of $15,936 in cash, $6,407 in Tristar Receivables, and $6,211 in Prepaid Expenses.  Our current liabilities as of March 31, 2012 were $260,281.  We had a working capital deficit of $(231,727) as of March 31, 2012.

Our current monthly fixed expenses (“Burn Rate”) are approximately $30,000.  Based on our history of revenues generated, we believe that we will have adequate funds for the duration of our distribution contract with Tristar, which will expire June 30, 2012,  However, following the expiration of that agreement, and assuming the royalties received between the date of this filing and June 30, 2012 do not remain consistent with the royalties we have received to date, we will be faced with depletion of funds within a short period of time, should the company not have in place additional revenue streams or additional financing.

We also expect to launch our film distribution and production division (ELK Films, Inc.) once sufficient capital is acquired for this purpose.    The expected short term cost associated with developing this line of business is roughly $ 100,000.  This money will be used to pay our management team, consultants, and to secure immediate distribution rights to targeted and completed films.

As of March 31, 2012, our cash reserves were $15,936 and we do have a line of credit which enables us to access $45,000.   If we need to and cannot raise additional capital, we would be forced to discontinue operations.
 
Off Balance Sheet Arrangements

As of March 31, 2012, there were no off balance sheet arrangements.
 
 
 
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A smaller reporting company is not required to provide the information required by this Item.


Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2012.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, Kurtis Cockrum.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2012, our disclosure controls and procedures are effective.  There have been no changes in our internal controls over financial reporting during the quarter ended March 31, 2012.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

 
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PART II – OTHER INFORMATION


We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.


A smaller reporting company is not required to provide the information required by this Item.


There were no sales of equity securities during the period ended March 31, 2012.


None

 
N/A


None

 
Exhibit
Number
Description of Exhibit
31.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 
 
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SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
DM Products, Inc.
   
Date:
May 15, 2012
   
 
By:       /s/ Kurtis Cockrum                                                                 
             Kurtis Cockrum
Title:    Chief Executive Officer and Director
 
 
 
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PINX:DMPD DM Products Inc Quarterly Report 10-Q Filling

DM Products Inc PINX:DMPD Stock - Get Quarterly Report SEC Filing of DM Products Inc PINX:DMPD stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

PINX:DMPD DM Products Inc Quarterly Report 10-Q Filing - 3/31/2012
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