UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2013

 

Commission file number: 001-32032


Dewmar International BMC, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Nevada

 

26-4465583

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

132 E. Northside Dr. Suite C

Clinton, MS 39056

(Address of Principal Executive Offices)

 

Registrant’s telephone number, including area code: (601) 488-4360


Securities registered pursuant to Section 12(b) of the Act: None


Securities registered pursuant to section 12(g) of the Act:


Common Stock, $0.001 par value

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [  ] No [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definitions of “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 [  ] No [X]

 

 

The Company’s common stock, $.001 par value is traded on the OTCBB exchange.

 

The number of shares outstanding of the issuer’s common stock, $.001 par value, August 7, 2015 was 2,697,653,513.

 

DOCUMENTS INCORPORATED BY REFERENCE

NONE.



   




 
































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Table of Contents

 

PART I

 

 

Item 1.

Business

4

Item 1A.

Risk Factors

8

Item 1B.

Unresolved Staff Comments

12

Item 2.

Properties

12

Item 3.

Legal Proceedings

12

Item 4.

Mine Safety Disclosures

13

PART II

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

13

Item 6.

Selected Financial Data

13

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

16

Item 8.

Financial Statements and Supplementary Data

16

Item 9.

Change in and Disagreements with Accountants on Accounting and Financial Disclosure

16

Item 9A(T).

Controls And Procedures

17

Item 9B.

Other Information

17

PART III

 

 

Item 10.

Directors, Executive Officers, and Corporate Governance

18

Item 11.

Executive Compensation

20

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

21

Item 13.

Certain Relationships and Related Transactions, and Director Independence

22

Item 14.

Principal Accountant Fees and Services

23

PART IV

 

 

Item 15.

Exhibits and Financial Statement Schedules

24

 


FORWARD LOOKING STATEMENT INFORMATION

 

Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein particularly in view of the current state of our operations, the inclusion of such information should not be regarded as a statement by us or any other person that our objectives and plans will be achieved. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the factors set forth herein under the headings “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors”. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. The terms “we”, “our”, “us”, or any derivative thereof, as used herein refer to Dewmar International BMC, Inc.






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PART 1

 

ITEM 1.  BUSINESS.

 

CORPORATE BACKGROUND


On October 28, 2011, pursuant to an Exchange Agreement (“Agreement”), Dewmar International BMC, Inc. (fka Convenientcast, Inc.) 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. At the time of the Merger, Dewmar International BMC, Inc. (“Dewmar”) held minimal assets and was a developmental stage company. Following the Merger, the Company, through its DSD subsidiary, began manufacturing and marketing Consumer goods primarily in the functional foods segment. After the Merger, the Company operates as one business unit.


The company’s headquarters and product development lab are based in Clinton, Mississippi; with additional executive offices in Houston, Texas

 

Today, Dewmar International BMC, Inc. is a leading provider of consumer brands to global markets. The Company’s primary business strategy has been the creation, manufacturing, marketing and distribution of its select portfolio of innovative consumer products through established distribution channels inclusive of national and international retailers. The Company’s primary source of revenue is through the wholesale of its branded products.


Dewmar’s portfolio of consumer brands include Company-owned and trademarked brands as well as those brands obtained through license and distribution agreements with partner brand owners.


Consumer Product Markets:


One of the Company's leading in-house brands, Lean Slow Motion PotionTM, a relaxation supplement whose flavors include Yella, Purp and Easta Pink, was launched in fourth quarter 2009 and has since become ranked  as high as the top three (3) national selling and/or distributed relaxation products in the U.S. market.


From a business perspective, helping people relax is big business; as reported by the Wall Street Journal, annual sales for the relaxation beverage category have increased year-over-year for the past three years. Moreover, for the next five year period, an IBIS World marketing study on the relaxation beverage sector has forecasted revenue growth of 24.8% annually.


A relaxation drink is a non-alcoholic beverage containing calming ingredients which may be found in nature. Relaxation drinks are formulated to help reduce stress, anxiety, improve mind focus, and promote better sleep. In many scenarios, people use relaxation drinks to promote calmness after dealing with a stressful situation, after a work day, after strenuous exercise or before bed time.


People who are allergic to alcohol, recovering from alcohol abuse or have liver problems have reported drinking relaxation beverages because of its ability to calm nerves and is alcohol free. Moreover, there are reports of people with Attention deficit hyperactivity disorder (ADHD) using relaxation drinks to help focus thoughts.


Studies have concluded that ingredients found in relaxation drinks can help promote alpha wave brain patterns to improve focus. Depending on the formulation, relaxation drinks may promote rapid eye movement (REM) sleep. Relaxation drinks have been known to reduce stress, anxiety and calm nervousness due to their calming effects on the nervous system.




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Some U.S. surveys have shown that 30% to 35% of Americans have reported difficulty falling asleep during the previous year and about 10% reported problems with long standing insomnia. These studies also found that people experiencing anxiety were significantly more likely to develop insomnia.  Over 70 million Americans suffer from insomnia and sleep deprivation.


Lean Slow Motion Potion’s relaxation formula was developed by a registered pharmacist with a thorough understanding of pharmaceutical compounding and nutritional supplement formulations. Lean is a safe and satisfying mix of pharmaceutical grade herbs and syrup-based flavors to give the consumer “functional relaxation.”


The United States Pharmacopeia (USP) publishes official monographs for certain substances.  These monographs include specific assay methods and product specifications to assure identity and potency. When materials are tested by these methods and are found to meet defined specifications—they are referred to as pharmaceutical grade.  These standards were maintained in selecting the active herbal ingredients contained within our nutritional supplement: Melatonin, Valerian Root and Rose Hips.


Current Good Manufacturing Practices are followed by the pharmaceutical, biotech firms and food/beverage manufacturers to ensure that the products produced meet specific requirements for identity, strength, quality, and purity.  The Current Good Manufacturing Practices Guidelines are regulations enforced by the U.S. Food and Drug Administration (FDA).  These regulations are put into place to protect American citizens from potentially harmful products.

 

Through its distribution and retail network, Dewmar is currently shipping its product throughout the U.S. The Company intends to expand distribution of its products internationally over the next twelve to twenty-four months as the CEO, or appointed members, plan to visit a number of foreign countries on International Business Trade Missions.


Relaxation Beverage Market Segmentation

 

As previously eluded, Lean Slow Motion PotionTM features a unique link to rap and hip-hop music culture, which is one of, if not, the most influential form of music in the World today that leads to consumer spending. Not only does the hip-hop culture automatically embrace the brand, but it originally created the “get your lean on” culture. A larger, secondary market exists among consumers of all mature ages searching for a non-alcoholic, drug-free beverage that aids in relaxation for the purposes of stress reduction or sleep assistance.  This secondary consumer base has been reported in several news media outlets to include over 70 million Americans of all ages, races and ethnicities.


Material terms with a Flavor House:


Dewmar must place a valid purchase order for all concentrates and premixes for Lean Slow Motion PotionTM via the appropriately supplied Allen Flavors Formulation Batch Sheets Form.  Dewmar must allow for a minimum of two full weeks in order to have the concentrate order produced and shipped to the bottler for manufacturing. Dewmar is currently required to pay for the product plus its shipping cost immediately prior to Allen Flavors releases the order to the courier for delivery to the bottler. Allen Flavors is supposed to give Dewmar at least 30 days’ notice for any price increases and is currently considering offering Dewmar credit terms.


Market Needs

 

As rap and hip-hop increased in popularity in the 90’s and first part of the 21st century, a sub-culture emerged in the south centered on “getting your lean on.” This term was a euphemism for the dangerous practice of adding cough syrup to a beverage (carbonated or alcoholic) for the purpose of relaxing. As the practice increased in prominence, some drink makers entered the market with products catered to this culture. The Company’s market research revealed that consumers wanted a product with a stronger cultural association, a more pronounced physical affect, and more flavor options.





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The Company’s products formulation is developed by a licensed pharmacist and accomplishes the desired affects the consumer is seeking with none of the dangerous side effects that accompany the traditional practice of consuming narcotic-laced beverages recreationally.


Since the CEO of the company is a licensed-registered pharmacist, he has seen these abusive trends of prescription cough syrup as previously noted; therefore he carefully crafted his brand to cater to all of the cultural demands of those who may have already or could potentially abuse prescription cough syrup by first developing an effective formulation that creates a sense of immediate relaxation and calming effect. A secondary yet very important factor includes creating appealing taste profiles that niche consumers like. This is supported by implementing unique branding methods, inclusive of creating popular brand and flavor names that are recognizable to our target consumers in the hip hop community.


Industry Analysis

 

The Company will operate within the Bottled and Canned Soft Drinks industry (Standard Industrial Classification 2086). The table below shows Dun & Bradstreet data regarding the performance of the businesses in this industry on a national level as well as in the carbonated beverages, nonalcoholic: packaged in cans, bottles subset. 2

 

Industry: Bottled and Canned Soft Drinks (2086)

Establishments primarily engaged in manufacturing soft drinks and carbonated waters. Fruit and vegetable juices are classified in 2032-2038; fruit syrups for flavoring are classified in 2087; and nonalcoholic cider is classified in 2099. Bottling natural spring waters is classified in 5149.

Market Size Statistics

Estimated number of U.S. establishments: 2,230 Number of people employed in this industry: 111,024 Total annual sales in this industry: $48.9 billion Average number of employees per establishment: 59 Average sales per establishment (unknown values are excluded from the average): $51,2000,000

 

Market Analysis by Specialty (8-digit SIC Code)


SIC

Code

 

SIC Description

 

No

Bus.

 

%

Total

 

Total

Employees

 

Total

Sales

 

Average

Employees

 

Average

Sales

2086-0301

 

Carbonated beverages, nonalcoholic: packaged in cans, bottles

 

239

 

10.7

 

13,504

 

$24 billion

 

62

 

$176.6 million


2 Dun & Bradstreet, Industry Data for SIC 5149-0000; obtained February 2010


Competitive Comparison

 

In the relaxation beverage sector, the Company competes directly with Neuro Bliss, Neuro Sleep, Marley's Mellow Mood and Just Chill brand beverages. Each of these products has the same target market, but the Company intends to differentiate itself by offering a more herbal effective product with more flavor varieties and stronger cultural identification. More importantly, the Company will provide excellent distributor level support via trained merchandisers and market managers to assist in gaining the niche consumers’ attention immediately for rapid brand awareness that will result in faster product turnover.


Dewmar has developed a brand that emphasizes a lifestyle beverage connected with the culture of the Deep South, but still has national consumer appeal. Aligning its brand with hip-hop and rap culture and celebrity spokespeople, the Company’s Lean Slow Motion PotionTM has resonated with consumers as the “preferred” relaxation beverage that can ease the mind and body while displaying a level of confident swagger among peers if seen with the beverage in hand.






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Competitive Edge

 

Dewmar has been able to uniquely position the Lean Slow Motion Potion™ brand in the relaxation beverage market, and intends to capitalize on this by building on the following strengths:

 

·

Expert brand management that maintains an intimate understanding of its niche consumer market;

·

Higher than average profit margins for both distributors and retailers;

·

Proven marketing strategy that creates immediate sale-thru to consumers;

·

Quality product with a variety of flavors demanded by consumers;

·

CEO is a licensed pharmacist with functional beverage formulation experience;

·

Commitment to building strong alliances with distribution partners;

·

Trademarked brand name that has been repeatedly used in Hip-Hop music creating strong brand awareness and loyalty within the urban community.


Marketing Strategy

 

The Company will use a variety of marketing mediums to increase the exposure of its brands among prospective customers. The Company’s current marketing efforts include the following:

 

Branding:

 

Point of sale merchandising: A portion of the Company’s marketing budget is being devoted to posters, pole signs, coolers, racks, and other materials intended to help distributors brand its products in-store through retail merchandising partnerships.


Radio: The Company utilizes radio ads to target listeners who may be interested in the Company’s products. Radio commercial production can be done cost effectively, and provides flexibility to tailor the message to the right customer segment.


Digital Marketing: The Company continues to invest resources in the further development of its digital marketing technology platform that seeks to leverage 1) the proliferation of new marketing channels including social media; 2) the rise of disruptive technology such as cloud computing and mobility; and 3) the emergence of new analytic methods driven by big data. The Company sees the emergence of its marketing technology platform as a way to dramatically enhance how it markets to and engages with customers.


The Company will set up pages and profiles on social networking sites including Facebook, YouTube, and Twitter, to name a few. Social networking sites are an effective way to benefit from word of mouth on the web, and generate interest for the Company from the general public. The Company may also place advertisements on these sites. Customers can “become a fan” of Lean Slow Motion PotionTM on Facebook or “follow” the Company’s Twitter feed in order to gain access to special discounts or promotions.  


Tradeshows and Events: Beverage industry tradeshows are fundamental in notifying potential new distributing partners and retailers, especially retail chain stores, about the brand’s presence. The Company will attend a number of annual tradeshows sponsored by national convenience store associations, international beverage cooperative groups, and localized distributor organizations several times per year as a major recruiting tool. The Company will also participate in local indoor and outdoor events to support local distributors in bringing consumer awareness to the brand. This includes concerts, on-campus collegiate tours, sporting events, fairs and other related local but relevant events


Print media: Print advertisements will be placed in magazines and trade journals geared toward both the Company’s demographic, as well as potential distributors.. These advertisements will provide information about the Company, where to shop online, and where to purchase in a store near you. Ads will also list the benefits associated with Lean Slow Motion PotionTM.




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Direct sales: The Company will use direct sales calls, presentations, and appointments with prospective distributors who have existing retail accounts throughout the United States. The Company will leverage current relationships and will also forge new ones by implementing an outside sales force to achieve its overall business objectives.

 

Employees

 

On December 31, 2013, the Company had 1 employee, the Company’s officer and director, who devotes full time efforts to the Company. None of its employees were represented by a collective bargaining arrangement.

 

The Company does carry key person life insurance on CEO/President in the amount of $2 million, however, the loss of the services of any of its executive officers or other directors could have a material adverse effect on the business, results of operations and financial condition of the Company. The Company's future success also depends on its ability to retain and attract highly qualified technical and managerial personnel.


ITEM 1A.   RISK FACTORS.

 

We rely heavily on our independent distributors, and this could affect our ability to efficiently and profitably distribute and market our products, and maintain our existing markets and expand our business into other geographic markets

 

Our ability to establish a market for our leading brands and products in new geographic distribution areas, as well as maintain and expand our existing markets, is dependent on our ability to establish and maintain successful relationships with reliable independent distributors strategically positioned to serve those areas. Many of our larger distributors sell and distribute competing products, including non-alcoholic and alcoholic beverages, and our products may represent a small portion of their business. To the extent that our distributors are distracted from selling our products or do not employ sufficient efforts in managing and selling our products, our sales and profitability will be adversely affected. Our ability to maintain our distribution network and attract additional distributors will depend on a number of factors, many of which are outside our control. Some of these factors include

 

·

the level of demand for our brands and products in a particular distribution area,

·

our ability to price our products at levels competitive with those offered by competing products, and

·

Our ability to deliver products in the quantity and at the time ordered by distributors.


We cannot ensure that we will be able to meet all or any of these factors in any of our current or prospective geographic areas of distribution. Our inability to achieve any of these factors in a geographic distribution area will have a material adverse effect on our relationships with our distributors in that particular geographic area, thus limiting our ability to expand our market, which will likely adversely affect our revenues and financial results.

 

We incur significant time and expense in attracting and maintaining key distributors who are crucial to our business.

 

Our marketing and sales strategy presently, and in the future, will rely on the availability and performance of our independent distributors. We have entered into written agreements with many of our top distributors for varying terms and duration. In addition, despite the terms of the written agreements with many of our top distributors, there are no assurances as to the level of performance under those agreements, or that those agreements will not be terminated early. There is no assurance that we will be able to maintain our current distribution relationships or establish and maintain successful relationships with distributors in new geographic distribution areas. Moreover, there is the additional possibility that we may have to incur additional expenditures to attract and maintain key distributors in one or more of our geographic distribution areas in order to profitably exploit our geographic markets.

 




8




Because our distributors are not required to place minimum orders with us, we need to carefully manage our inventory levels, and it is difficult to predict the timing and amount of our sales.

 

Our independent distributors are not required to place minimum monthly or annual orders for our products. In order to reduce inventory costs, independent distributors endeavor to order products from us on a “just in time” basis in quantities, and at such times, based on the demand for the products in a particular distribution area. Accordingly, there is no assurance as to the timing or quantity of purchases by any of our independent distributors or that any of our distributors will continue to purchase products from us in the same frequencies and volumes as they may have done in the past. There can be no assurance as to the number of cases sold by any of our distributors.

 

We need to effectively manage our growth and execution of our current business strategy. A failure to do so would negatively impact our profitability.

 

To manage operations effectively and maintain profitability, we must continue to improve our operational, financial and other management processes and systems. Our success also depends largely on our ability to maintain high levels of employee utilization, to manage our production costs and general and administrative expense, and otherwise to execute on our business strategy. We need to maintain adequate operational controls and focus as we add new brands and products, distribution channels, and business strategies. There are no assurances that we will be able to effectively and efficiently manage our growth. Any inability to do so could increase our expenses and negatively impact our profit margin.

 

The loss of key personnel would directly affect our efficiency and profitability.

 

Our future success is dependent, in a large part, on retaining the services of our founder, Dr. Marco Moran, our President and Chief Executive Officer. Dr. Moran possesses a unique and comprehensive knowledge of our industry. While Dr. Moran has no plans to leave or retire in the near future, his loss could have a material adverse effect on our operating, marketing and financial performance, including our ability to develop and execute our long term business strategy.


We are unable to ensure we can retain key personnel.

 

There can be no assurance that the Company will be able to retain its key managerial and technical personnel or that it will be able to attract and retain additional highly qualified technical and managerial personnel in the future. The inability to attract and retain the technical and managerial personnel necessary to support the growth of the Company's business, due to, among other things, a large increase in the wages demanded by such personnel, could have a material adverse effect upon the Company's business, results of operations and financial condition.We rely on third-party packers of our products, and this dependence could make management of our marketing and distribution efforts inefficient or unprofitable.

 

We do not control and manage the entire manufacturing process of our products, we do not own the plant and equipment required to manufacture and package our beverage products and do not anticipate having such capabilities in the future. As a consequence, we depend on third-parties and contract packers to produce our beverage products and to deliver them to distributors. Our ability to attract and maintain effective relationships with contract packers and other third parties for the production and delivery of our beverage products in a particular geographic distribution area is important to the achievement of successful operations within each distribution area. Currently, competition for contract packers’ business is tight, especially in the western United States, and this could make it more difficult for us to obtain new or replacement packers, or to locate back-up contract packers, in our various distribution areas, and could also affect the economic terms of our agreements with our packers. There is no assurance that we will be able to maintain our economic relationships with current contract packers or establish satisfactory relationships with new or replacement contract packers, whether in existing or new geographic distribution areas. The failure to establish and maintain effective relationships with contract packers for a distribution area could increase our manufacturing costs and thereby materially reduce profits realized from the sale of our products in that area. In addition, poor relations with our contract packers could adversely affect the amount and timing of product delivered to our distributors for resale, which would in turn adversely affect our revenues and financial condition.

 



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Our business and financial results depend upon maintaining a consistent and cost-effective supply of raw materials.

 

Raw materials for our products include concentrate, glass, labels, caps and packaging materials. Currently, we purchase our flavor concentrate from a flavoring house we believe that we have adequate sources of raw materials, which are available from multiple suppliers, and that in general we maintain good supplier relationships. The price of our concentrate is determined by our flavor houses and us, and may be subject to change. Prices for the remaining raw materials are generally determined by the market, and may change at any time. Increases in prices for any of these raw materials could have an adverse impact on our profitability and financial position. If we are unable to continue to find adequate suppliers for our raw materials on economic terms acceptable to us, this will adversely affect our results of operations.

 

Our inability to protect our trademarks, patent and trade secrets may prevent us from successfully marketing our products and competing effectively.

 

Failure to protect our intellectual property could harm our brand and our reputation, and adversely affect our ability to compete effectively. Further, enforcing or defending our intellectual property rights, including our trademarks, patents, copyrights and trade secrets, could result in the expenditure of significant financial and managerial resources. We regard our intellectual property, particularly our trademarks, patent and trade secrets to be of considerable value and importance to our business and our success. We rely on a combination of trademark, patent, and trade secrecy laws, confidentiality procedures and contractual provisions to protect our intellectual property rights. We have obtained certain trademarks and are pursuing the registration of additional trademarks in the United States, Canada and internationally. There can be no assurance that the steps taken by us to protect these proprietary rights will be adequate or that third parties will not infringe or misappropriate our trademarks, trade secrets (including our flavor concentrate trade secrets) or similar proprietary rights. In addition, there can be no assurance that other parties will not assert infringement claims against us, and we may have to pursue litigation against other parties to assert our rights. Any such claim or litigation could be costly. In addition, any event that would jeopardize our proprietary rights or any claims of infringement by third parties could have a material adverse effect on our ability to market or sell our brands, profitably exploit our unique products or recoup our associated research and development costs.

 

We have limited working capital and may need to raise additional capital in the future.

 

Our capital needs in the future will depend upon factors such as market acceptance of our products and any other new products we launch, the success of our independent distributors and our production, marketing and sales costs. None of these factors can be predicted with certainty.

 

The Company does not currently have the financial resources to expand its existing operations and to fully implement its business strategy. Absent raising additional capital or entering into joint venture agreements, it will not be able to fully implement its business strategy. This could limit the size of the business. There is no assurance that capital will be available in the future to the Company or that capital will be available under terms acceptable to the Company. The Company will need to raise additional money, either through the sale of equity securities (which could dilute the existing stockholders' interest), through the entering of joint venture agreements (which, while limiting the Company’s risk, could reduce its ownership interest in particular assets), or from borrowings from third parties (which could result in additional assets being pledged as collateral and which would increase the Company’s debt service requirements).

 

Additional capital could be obtained from a combination of funding sources, many of which could have a material adverse effect on the Company’s business, results of operations and financial condition. These potential funding sources and the potential adverse effects attributable thereto, include:

 

·

borrowings from financial institutions, which may subject the Company to certain restrictive covenants, including covenants restricting its ability to raise additional capital or pay dividends;


·

debt offerings, which would increase the Companys leverage and add to its need for cash to service such debt (which could result in additional assets being pledged as collateral and which could increase the Companys debt service requirements);



10




·

additional offerings of equity securities, which would cause dilution of the Companys common stock;


·

cash flow from operating activities, which is dependent upon the success of current and future operations;

 

The Companys ability to raise additional capital will depend on the results of operations and the status of various capital and industry markets at the time such additional capital is sought. Accordingly, capital may not become available to the Company from any particular source or at all. Even if additional capital becomes available, it may not be on terms acceptable to the Company. Failure to obtain additional financing on acceptable terms may have a material adverse affect on the Company’s business, results of operations and financial condition.

 

Increased competition could hurt our business.

 

The Beverage industry is highly competitive. The principal areas of competition are pricing, packaging, development of new products and flavors, and marketing campaigns. Our products compete with a wide range of drinks produced by a relatively large number of manufacturers, most of which have substantially greater financial, marketing, and distribution resources than we do.

 

Change in consumer preferences may reduce demand for our product.

 

Consumers are seeking greater variety in their beverages. Our future success will depend, in part, upon our continued ability to develop and introduce different and innovative beverages. In order to retain and expand our market share, we must continue to develop and introduce different and innovative beverages and be competitive in the areas of quality and health, although there can be no assurance of our ability to do so. There is no assurance that consumers will continue to purchase our product in the future.


We compete in an industry that is brand-conscious, so brand name recognition and acceptance of our products are critical to our success.

 

Our business is substantially dependent upon awareness and market acceptance of our products and brands by our targeted consumers, between the ages of 15 and 35. In addition, our business depends on acceptance by our independent distributors of our brands as beverage brands that have the potential to provide incremental sales growth rather than reduce distributors’ existing beverage sales. Although we believe that we have been relatively successful towards establishing our brands as recognizable brands in the Alternative beverage industry, it may be too early in the product life cycle of these brands to determine whether our products and brands will achieve and maintain satisfactory levels of acceptance by independent distributors and retail consumers.

 

We could be exposed to product liability claims for personal injury or possibly death.

 

Although we have product liability insurance in amounts we believe are adequate, we cannot assure that the coverage will be sufficient to cover any or all product liability claims. To the extent our product liability coverage is insufficient; a product liability claim would likely have a material adverse effect upon our financial condition. In addition, any product liability claim successfully brought against us may materially damage the reputation of our products, thus adversely affecting our ability to continue to market and sell that or other products.

 

Our business is subject to many regulations and noncompliance is costly.

 

The production, marketing and sale of our unique beverages, including contents, labels, caps and containers, are subject to the rules and regulations of various federal, provincial, state and local health agencies. If a regulatory authority finds that a current or future product or production run is not in compliance with any of these regulations, we may be fined, or production may be stopped, thus adversely affecting our financial conditions and operations. Similarly, any adverse publicity associated with any noncompliance may damage our reputation and our ability to successfully market our products. Furthermore, the rules and regulations are subject to change from time to time and while we closely monitor developments in this area, we have no way of anticipating whether changes in these rules and regulations will impact our business adversely. Additional or revised regulatory requirements, whether labeling, environmental, tax or otherwise, could have a material adverse effect on our financial condition and results of operations.



11




ITEM 1B. UNRESOLVED STAFF COMMENTS.

 

There are no unresolved staff comments not previously disclosed.  

 

ITEM 2. PROPERTIES


The company’s headquarters and product development lab is based in Clinton, Mississippi; with additional executive offices in Houston, Texas.


The Company leases space at 132 E. Northside Dr. Suite C Clinton, MS 39056 and at 811 Town & Country Blvd in Houston, TX.    We believe that these spaces are adequate for our needs at this time, and we believe that we will be able to locate additional space in the future, if needed, on commercially reasonable terms.

 

ITEM 3. 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 December 31, 2013 and December 31, 2012. 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.


On January 20, 2011, a claim was filed against Dewmar International BMC, Inc.(“Dewmar”) by Corey Powell, in Ascension Parish, LA 23rd Judicial District Court. Corey Powell was a former distributor of LEAN, a relaxation beverage marketed by Dewmar. 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 Dewmar’s management. Discovery has continued and a deposition is being scheduled for July or August, 2014 on the last witness prior to a trial date being set. Written discovery has been propounded and several depositions have been taken to better understand the nature and basis for the plaintiff’s claims and to build Dewmar’s defenses. Dewmar has vigorously contested each and every one of the plaintiff’s allegations and has instructed counsel to proceed to trial on the merits. There have been negotiations between the counsels for the parties regarding dropping approximately half of the original claims, but no reasonable discussions have occurred. Currently, there is no trial date set.


On February 14, 2011, a claim was filed against DSD by Charles Moody, in Caddo Parish, LA First Judicial Court seeking in excess of $100,000 in damages. 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. This matter was settled for a payment of $8,000 by DSD on July 27, 2012 with no admission of guilt or liability by either party.


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. The case has been dismissed.



12




During December 2011, Innovative Beverage Group Holdings (“IBGH”) filed a claim against Dewmar International BMC, Inc., Unique Beverage Group, and 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 June 27, 2012, Innovative Beverage Group Holdings (“IBGH”) filed the same claims against Dewmar International BMC, Inc., DSD Network of America, Inc. and Marco Moran CEO of the Company, in Harris County, Texas 127th Judicial District Court, whereas plaintiff asserted that the Defendants engaged in various acts of unfair business practices that caused harm to IBGH. The company’s and Marco Moran have filed an Answer and Counterclaim in this matter on October 31, 2012. Discovery has not yet begun in this matter. Written discovery will be propounded and depositions will have to be taken to better understand the nature and basis for the plaintiff’s claims and to build the Company’s defenses. The Company has vigorously contested each and every one of the plaintiff’s allegations and has instructed counsel to proceed to trial on the merits. As of the date of the filing, Dewmar is no longer the defendant in the case.


On March 22, 2012 Plaintiff, DSD NETWORK OF AMERICA, INC. (hereinafter “DSD”) filed suit against Defendants DeWayne McKoy, Charles Moody, Corey Powell and Peter Bianchi in United States District Court; District of Nevada for a combined thirteen claims accusing this group of defendants in colluding against the Company. Answers have been received from McKoy, Moody and Powell and Powell has filed a counterclaim. DSD vigorously denies all the claims in Powell’s counterclaim. Bianchi failed to answer and was defaulted however Bianchi has filed a Motion to Set Aside the Default and Powell and Bianchi have filed Motions to Dismiss.  This case has been dismissed


ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable

 

PART II

 

ITEM 5.  MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

(a) Market Information. Our Common Stock is traded on the OTCBB as of July 20, 2015. No assurance can be given that any active market for our Common Stock will ever develop.

 

(b) Holders. As of July 20, 2014, there were 201 record holders of all of our issued and outstanding shares of Common Stock.

 

(c) Dividend Policy

 

We have not declared or paid any cash dividends on our Common Stock and do not intend to declare or pay any cash dividend in the foreseeable future. The payment of dividends, if any, is within the discretion of the Board of Directors and will depend on our earnings, if any, our capital requirements and financial condition and such other factors as the Board of Directors may consider.

 

ITEM 6. SELECTED FINANCIAL DATA.

 

As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information required by this item.








13




ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Certain statements in this report and elsewhere (such as in other filings by the Company with the Securities and Exchange Commission ("SEC"), press releases, presentations by the Company of its management and oral statements) may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and "should," and variations of these words and similar expressions, are intended to identify these forward-looking statements. Actual results may materially differ from any forward-looking statements. Factors that might cause or contribute to such differences include, among others, competitive pressures and constantly changing technology and market acceptance of the Company's products and services. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

Results of Operations   


Fiscal Year Ended December 31, 2013 compared to December 31, 2012

 

Revenue

 

Revenue is presented net of sales allowances. Net revenue decreased $293,349, or 56.3%, to $ 227,525 from $520,874 for the years ended December 31, 2013 and 2012, respectively. This decrease was primarily due to a reduction in marketing efforts by Dewmar, while the Company changed its distribution strategy from selling to all accounts inclusive of general food and beverage wholesalers in 2011 and 2012 to focusing on specific big box retailers as Walmart, Target, K-mart and other similar entities.  


Cost of Goods Sold

 

Cost of goods sold decreased $109,563, or 52.4%, to $99,715 from $209,278 for the years ended December 31, 2013 and 2012, respectively. This overall decrease was primarily the result of decreased production and sales.

 

Operating Expenses

 

Operating expenses decreased $2, 483,374 or 58.76%, to $1,901,682 from $4,385,056 for the years ended December 31, 2013 and 2012, respectively. The overall decrease in operating expenses results primarily from issuances of preferred stock valued at $3,150,000 to Dr. Moran during the year ended December 31, 2012 and there is no such expense during the year ended December 31, 2013.

 

Contract labor costs decreased to $128,253 from $145,037 for the years December 31, 2013 and 2012, respectively. Contract labor costs primarily included costs for administrative and marketing/sales support.


Interest Expense

 

For the years ended December 31, 2013and 2012, the Company recognized interest expense of $318,921 and $23,764, respectively, an increase of $295,157.  During the year ended December 31, 2013, amortization of debt discount associated with the creation of derivative liabilities totaled $295,726 as compared to $17,282 for the year ended December 31, 2012.

 

Net Loss

 

Our net loss for the year ended December 31, 2013 was $2,407,468 as compared to a net loss of $4,120,571 for the year ended December 31, 2012.   The decrease in net loss is attributable to the decrease in operating expenses and a decrease in cost of goods sold as compared  to prior year.





14




Liquidity and Capital Resources

 

Years ended December 31, 2013 as compared to December 31, 2012


During the years ended December 31, 2013 and 2012, the Company recognized negative cash flows from operating activities of ($235,797) and ($193,118), respectively. As of December 31, 2013, the Company held cash and cash equivalents of $7,231 compared to cash of $38,388 at December 31, 2012.

 

Cash used in investing activities totaled $19,900 and $0 for the years ended December 31, 2013 and 2012, respectively. Cash used in investing activities consisted of purchases of property and equipment. Cash provided by financing activities totaled $224,540 and $140,000, for the years ended December 31, 2013 and 2012, respectively, and consisted of proceeds received from convertible notes and payments made on notes payable during the year ended December 31, 2013 and 2012.  During the year ended December 31, 2013, we received $9,720 for the issuance of 38,880,000 shares of common stock.

 

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.


 During the year ended December 31, 2013, the Company entered into $214,820 of additional convertible notes payable with various holders.  See Note 7 “Convertible Notes” in the footnotes to the financial statements for the terms and conversions of the detailed notes.  


Commitments

 

See the notes to the financial statement for our commitments.  

 

Off-Balance Sheet Arrangements

 

As of December 31, 2013 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

 

In preparing our consolidated financial statements, we make estimates, assumptions and judgments that can have a significant impact on our operating income and net income as well as on the value of certain assets and liabilities on our consolidated balance sheet. The application of our critical accounting policies requires an evaluation of a number of complex criteria and significant accounting judgments by us. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Senior management has discussed the development, selection and disclosure of these estimates with the Board of Directors. Actual results may differ materially from these estimates under different assumptions or conditions.

 



15




An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and/or if different estimates that reasonably could have been used or changes in the accounting estimates that are reasonably likely to occur periodically could materially impact the consolidated financial statements. Management believes the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of the consolidated financial statements:

 

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’ destination. 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 bill of lading 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. Products are sold with extended payment terms not to exceed 120 days. 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, aluminum cans, trays, shrink wrap, can ends, labels and packaging materials. Additionally, costs incurred for shipping, handling and warehousing 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.


Derivatives


The Company’s convertible note arrangements have been determined to contain embedded derivatives in the form of their embedded conversion features.  The embedded conversion features have been bifurcated and have been recorded at their estimated fair market value with the change in the derivative liability being recorded as a gain or loss in other income on the statement of operations.  


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

See the index to the Financial Statements below, beginning on page F-1.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

None.











16




ITEM 9A. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) in effect as of December 31, 2013 was carried out under the supervision and with the participation of our Chief Executive Officer who also performs the functions of the principal financial officer. Based upon that evaluation, the Chief Executive Officer (acting in that capacity and also as the Company’s principal financial officer) concluded that the design and operation of our disclosure controls and procedures were not effective as of December 31, 2013 (the end of the period covered by this annual report on Form 10-K).

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. It should be noted, however, that because of inherent limitations, any system of internal controls, however well-designed and operated, can provide only reasonable, but not absolute, assurance that financial reporting objectives will be met. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

 

An internal control material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements would not be prevented or detected on a timely basis by employees in the normal course of their work. Our Chief Executive Officer, also performing the functions of the principal financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2013 based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission (the COSO criteria). Based on that evaluation under the COSO criteria, our management concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2013. The Company does not have full time accounting and financial reporting personnel and lacks funding in order to file timely reports.  The Company outsources its accounting duties to a consultant and outsources its financial reporting responsibilities to an outside consulting firm.  The Company is dedicated to becoming current with its financial reporting over the next six months.

 

No Attestation Report of the Registered Public Accounting Firm

 

This Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding the Company’s internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to an exemption for smaller reporting companies under Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act provides an exemption from the independent auditor attestation requirement under Section 404(b) of the Sarbanes-Oxley Act for small issuers that are neither a large accelerated filer nor an accelerated filer. The Company qualifies for this exemption.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation referred to above during the last quarter of fiscal 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None.

 



17



PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

The following table sets forth information concerning our officers and directors as of December 31, 2013 together with all positions and offices of the Company held by each and the term of office and the period during which each has served:


Name

 

Age

 

Position with the Company

 

Term Of Office

Marco Moran

 

41

 

Pres/Sec/Treas/CEO/CFO/Dir.

 

2008 to present

Derrick Brooks

 

41

 

Director

 

March 19, 2012 to present


Biographical Information

 

The following paragraphs set forth brief biographical information for the aforementioned director and executive officers and directors:

 

Marco Moran, CEO, President, Secretary, CFO, Treasurer, Director, Chief Accounting Officer

 

As Chief Executive Officer Marco Moran has overall responsibility for the Company’s performance, developing its strategic plan to advance its mission and to manage shareholders’ value through profitable revenue growth.

 

As a licensed Doctor of Pharmacy and graduate degree in Pharmaceutical Sciences, Dr. Moran has direct oversight of all the company’s research and development, quality control and product innovation activity.


Dr. Moran served at the U.S. Naval Hospital in Camp Lejeune, North Carolina as a Medical Service Corp Officer and Pharmacist.


Dr. Moran began his public service career as the Director of Pharmacy and Regulatory Affairs for INO Therapeutics, Inc. in Port Allen, Louisiana. He has been the pharmacist of record for leading medical providers such as the Mississippi Baptist Health System, River Region Medical Center, Accredo Nova Factor, and several retail pharmacy chains. During his time with River Region Medical Center, Dr. Moran managed Six Sigma project teams to assist administration in meeting quality control standards.


In 2008, Dr. Moran launched Unique Beverage Group, LLC, where he developed, and marketed his first mix of branded, functional beverages. Dr. Moran single-handedly introduced relaxation beverages to major beer distributors in the deep Southern U.S. states. The success of these initial products and the relationships formed during this period eventually lead to the development of Lean Slow Motion Potion and the creation of Dewmar International BMC.


Education:

Dr. Moran completed his pre-pharmacy studies at Louisiana State University in Baton Rouge.  Dr. Moran earned  his professional Pharmacy degree, MBA and Pharmaceutical Sciences postgraduate degrees from the University of Louisiana at Monroe.


Dr. Moran has expanded his pharmaceutical formulation experience by completing basic and advanced training as a Professional Compounding Centers of America (PCCA) Compounding in Houston, TX; as a trained American Colleges of the Apothecaries Compounding Specialist in Memphis, TN and has completed numerous specialty courses with the National Community Pharmacists Association


Dr. Moran has completed various extensive training in New York and California through BevNet Live Entrepreneur School annually since 2009, inclusive of branding, packaging, and entrepreneur coursework to enhance his knowledge of the beverage industry.


Public Service:

Appointed Chair of the Mississippi District Export Council which is a position appointed by the United States Department of Commerce and United States Export Assistance Council.

 



18




Dr. Derrick Brooks,  Director

 

 Derrick D. Brooks, Sr., M.D., age 41, is a medical physician whose primary role is to serve as a licensed healthcare profession and medical liaison to assist the company in reviewing opportunities in developing new products that assist in mood enhancement, improving functionality and to serve as an additional medical expert as it relates to the Company’s flagship beverage Lean Slow Motion PotionTM which proves worthy to major retailers, buyer and consumers worldwide.


PROFESSIONAL EXPERIENCE


Staff Emergency Room Physician  Level II)

Our Lady of the Lake Regional Medical Center

July 2003 - April 2011


Staff Pediatric Emergency Room Physician  (Level II)

Our Lady of the Lake Regional Medical Center

July 2003 - November 2009


Staff Emergency Room Physician  (Level II)

Ochsner Baton Rouge

March 2011 - present


Staff Emergency Room Physician  (Level II)

University Medical Center - Lafayette

March 2011 - present


Staff Emergency Room Physician  (Level III)

Iberia Medical Center - Iberia

June 2011 - present


MEDICAL EDUCATION


Louisiana State University School of Medicine

Doctor of Medicine 1999

New Orleans, Louisiana


GRADUATE TRAINING


Internship/Residency

Internal Medicine/Pediatrics

LSU Health Science Center

New Orleans, Louisiana

July 1999 - June 2003


BOARD CERTIFICATIONS


American Board of Internal Medicine

Certified 2003

American Board of Pediatrics

Certified 2003

American Board Physician Specialties - Emergency Medicine

Board Eligible

Sitting 2012




19



MEDICAL LICENSURE


Louisiana #025414

CERTIFICATIONS

Advanced Trauma Life Support

Advanced Cardiac Life Support

Pediatric Advanced Life Support

Basic Life Support


Compensation and Audit Committees

 

As we only have three board members and given our limited operations, we do not have separate or independent audit or compensation committees. Our Board of Directors has determined that it does not have an “audit committee financial expert,” as that term is defined in Item 407(d)(5) of Regulation S-K. In addition, we have not adopted any procedures by which our shareholders may recommend nominees to our Board of Directors.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of our Common Stock (collectively, the “Reporting Persons”) to report their ownership of and transactions in our Common Stock to the SEC. Copies of these reports are also required to be supplied to us. To our knowledge, during the fiscal year ended December 31, 2013 the Reporting Persons complied with all applicable Section 16(a) reporting requirements.

 

Code of Ethics

 

We have not adopted a Code of Ethics given our limited operations. We expect that our Board of Directors following a merger or other acquisition transaction will adopt a Code of Ethics.

 

ITEM 11. EXECUTIVE COMPENSATION.

 

Summary Compensation Table. The following table sets forth certain information concerning the annual compensation of our Chief Executive Officer and our other executive officers during the last two fiscal years including both accrued and cash compensation.


Name and

Principal

Position

Year

Salary

($)

Bonus

($)

Stock

Awards

($)

Option

Awards

($)

Non-

Equity

Incentive

Plan

Compen-

sation

($)

Change

in

Pension

Value

and

Non-

qualified

Deferred

Compen-

sation

Earnings

($)

All

Other

Compen-

sation

($)

Total

($)

Marco Moran,

President, Sec.,

2013

120,000

0

0

0

0

0

0

120,000

Treas, Dir, CFO, CEO

2012

120,000

0

3,150,000

0

0

0

0

3,270,000

 

 

 

 

 

 

 

 

 

 

Kevin M. Murphy

2013

0

0

0

0

0

0

0

0

Former Director

2012

0

0

0

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

Derrick Brooks

2013

0

0

14,400

0

0

0

0

14,400

Director

2012

0

0

0

0

0

0

0

0

 

 

 

 

 

 

 

 

 

 

Howard Bouch

Former Director

2013

0

0

0

0

0

0

0

0

 

2012

0

0

0

0

0

0

0

0




20




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.


On November 7, 2012, the Company agreed to convert $50,000 of accrued salary for Dr. Marco Moran into 19,047,619 shares of common stock. The number of shares issued was calculated using a 25% discount to the trading price on the agreement date. The fair market value of the shares on the date of the agreement was $66,667 which resulted in recognition of loss on settlement of accrued salaries of $16,667 for the difference in the amount of accrued salary and the fair market value of the shares issued.   


On December 6, 2012, the Company agreed to issue 50,000,000 shares of Class A Preferred stock to Dr. Moran for services rendered.  The holders of the preferred stock shall be entitled to participate in dividends upon board approval and do not get liquidation preferences.  The shares are convertible into 10 shares of common stock.  Based on this, the Company determined the fair market value of the preferred shares to be equal to $3,150,000 based on the common stock trading price on the date of the resolution and recorded such as stock based compensation.  The shares were treated as if converted into common shares to determine the fair market value.

On January 30, 2013, the Company issued 3,000,000 shares of Common stock to Derrick Brooks for services rendered.  The Company estimated the fair market value of these shares to be $14,400 based on the closing price of the stock on the issuance date.


Director Compensation

 

We do not currently pay any cash fees to our directors, nor do we pay director’s expenses in attending board meetings.

 

Employment Agreements

 

We are not a party to any employment agreements other than with Dr. Moran.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The following table sets forth certain information as of December 31, 2013 regarding the number and percentage of our Common Stock (being our only voting securities) beneficially owned by each officer, director, each person (including any “group” as that term is used in Section 13(d)(3) of the Exchange Act) known by us to own 5% or more of our Common Stock, and all officers and directors as a group.

 



21




Title of Class

Name, Title and

Address of

Beneficial Owner

of Shares (1)

Amount of Beneficial

Ownership (2)

Percent of

Class

 

 

 

 

Common

Marco Moran, President, CEO, and Director

40,000,000

60.4%

 

 

 

 

All Officers and Directors as a Group

 

40,000,000

60.4%


1. The address of each executive officer and director is 132 E. Northside Dr. Suite C Clinton, MS 39056.

2. As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or share investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of a security).

3. Dr. Moran also owns 50,000,000 shares of preferred stock which are convertible into common shares at a 10 to 1 ratio, which are excluded from the calculation above.

4. On November 7, 2012, the Company agreed to convert $50,000 of accrued salary for Dr. Marco Moran into 19,047,619 shares of common stock. The number of shares issued was calculated using a 25% discount to the trading price on the agreement date. The fair market value of the shares on the date of the agreement was $66,667 which resulted in recognition of loss on settlement of accrued salaries of $16,667 for the difference in the amount of accrued salary and the fair market value of the shares issued

Unless otherwise indicated, we have been advised that all individuals or entities listed have the sole power to vote and dispose of the number of shares set forth opposite their names. For purposes of computing the number and percentage of shares beneficially owned by a security holder, any shares which such person has the right to acquire within 60 days of December 31, 2013 are deemed to be outstanding, but those shares are not deemed to be outstanding for the purpose of computing the percentage ownership of any other security holder.

 

We currently do not maintain any equity compensation plans.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

Our Board of Directors consists solely of Marco Moran, Kevin Murphy and Dr. Derrick Brooks. They are not independent as such term is defined by a national securities exchange or an inter-dealer quotation system.

 

Sales to Related Party Distributor

 

During the years ended December 31, 2013 and 2012, the Company 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.

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 years ended December 31, 2013 and 2012 the Company recognized revenue from product sales to the Distributor of $3,679 and $14,240 respectively, which represented 1.4% and 2.7%, respectively, of total product revenue recognized by the Company. At December 31, 2013and 2012, accounts receivable from the Distributor was $4,085 and $6,329, respectively.

 

Shipping Reimbursements from Related Party

 

At December 31, 2013 and 2012, the Company had outstanding accounts receivable of $0 and 8,932, respectively, from a company, Wet & Wild, Inc. owned by the CEO’s wife. These receivables represent shipping reimbursements erroneously billed to DSD 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.



22




Advances to Related Party

 

Prior to December 31, 2011, the Company advanced $49,484 to a company owned by the CEO’s wife. As of December 31, 2013and 2012, that Company had repaid a cumulative $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 year ended December 31, 2013, the Company purchased two used vehicles from companies owned by the CEO for a total of $19,900.


Other


During 2012, the Company made payments of $9,353 to his wife and daughter for reimbursement of medical insurance costs and other consulting services performed for the Company.


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

MaloneBailey, LLP is our independent registered public accounting firm. On June 6, 2013, we dismissed McConnell & Jones, LLP as our independent registered public accounting firm.

 

 On December 27, 2011, the Registrant engaged McConnell & Jones, LLP as its independent accountant. During the two most recent fiscal years and the interim periods preceding the engagement, the registrant has not consulted McConnell & Jones, LLP regarding any of the matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.

 

Audit Fees

 

The aggregate fees billed by MaloneBailey, LLC for professional services rendered for the audits and reviews of our annual financial statements on Form 10-K and interim financial statements on Form 10-Q were $22,000.  


The aggregate fees billed by McConnell & Jones, LLP for professional services rendered for the audit of our annual financial statements on Forms 10-K and 10Q or services that are normally provided in connection with statutory and regulatory filings (including 8-K for reverse merge financial statements and SEC comments) were $29,000 for the fiscal years ended December 31, 2012.


Audit-Related Fees

 

None.  

 

Tax Fees

 

None.

 

All Other Fees

 

None.

 

Pre-Approval Policy

 

We do not currently have a standing audit committee. The above services were approved by our Board of Directors.






23




PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(a) The following documents are filed as part of this Report:

 

1. Financial Statements. The following financial statements and the report of our independent registered public accounting firm, are filed herewith.

 

2. Financial Statement Schedules.

 

Schedules are omitted because the information required is not applicable or the required information is shown in the financial statements or notes thereto.

 

3. Exhibits Incorporated by Reference or Filed with this Report.

 

·

Reports of Independent Registered Public Accounting Firms

·

Consolidated Balance Sheets as of December 31, 2013 and 2012

·

Consolidated Statements of Operations the years ended December 31, 2013 and 2012

·

Consolidated Statements of Changes in Stockholders Deficit the years ended December 31, 2013 and 2012

·

Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012

·

Notes to Financial Statements


Exhibit

No.

 

Description

 

 

 

31.1

 

Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002*

 

 

 

31.2

 

Chief Financial Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002*

 

 

 

32.1

 

Chief Executive and Financial Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.*

 

 

 

99.a

 

Convertible Notes

 

 

 

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





24






INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

 

Page

 

 

Reports of Independent Registered Public Accounting Firms

F-1

 

 

Consolidated Balance Sheets as of December 31, 2013 and 2012

F-3

 

 

Consolidated Statements of Operations the years ended December 31, 2013 and 2012

F-4

 

 

Consolidated Statements of Changes in Stockholders’ Deficit for the years ended December 31, 2013 and 2012

F-5

 

 

Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012

F-6

 

 

Notes to Consolidated Financial Statements

F-7

 




























 



25




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 


To the Board of Directors of

Dewmar International BMC, Inc.


We have audited the accompanying consolidated balance sheets of Dewmar International BMC, Inc. (the Company) as of December 31, 2012 and 2011, and the related consolidated statements of operations, shareholders' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.


We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal controls over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2012 and 2011 and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 3 of the financial statements, the Company has incurred losses, has negative operational cash flows and its 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 matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note 3 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ McConnell & Jones, LLP


Houston, Texas

April 12, 2013








F-1




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors

Dewmar International BMC, Inc

Clinton, Mississippi



We have audited the accompanying consolidated balance sheet of Dewmar International BMC, Inc (the “Company”) as of December 31, 2013 and the related statement of operations, changes in stockholders' equity and cash flow for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dewmar International BMC, Inc as of December 31, 2013 and the results of its operations and its cash flow for the year then ended, in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations. These raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/ MaloneBailey, LLP

www.malone-bailey.com

Houston, Texas

August 11, 2015












F-2




DEWMAR INTERNATIONAL BMC, INC.

 

CONSOLIDATED BALANCE SHEETS



 

 

December 31,

2013

 

December 31,

2012

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,231

 

$

38,388

Account receivables

 

 

9,532

 

 

32,714

Related party receivable

 

 

4,085

 

 

13,501

Advances to related party

 

 

9,332

 

 

9,332

Inventory

 

 

35,144

 

 

27,095

Prepaid expenses and other current assets

 

 

6,000

 

 

11,710

  Total Current Assets

 

 

71,324

 

 

132,740

 

 

 

 

 

 

 

Property & equipment, net of accumulated depreciation of

$14,210 and $8,570

 

 

26,845

 

 

12,585

 

 

 

 

 

 

 

Total assets

 

$

98,169

 

$

145,325

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

714,868

 

$

492,326

Accrued interest

 

 

9,707

 

 

3,282

Notes payable

 

 

173,890

 

 

-

Convertible Notes payable, net of unamortized discount

of $77,230 and $36,028, respectively

 

 

122,750

 

 

166,992

Derivative liability

 

 

151,120

 

 

39,028

  Total Current Liabilities

 

 

1,172,335

 

 

701,628

 

 

 

 

 

 

 

Total Liabilities

 

 

1,172,335

 

 

701,628

 

 

 

 

 

 

 

Stockholders’ Deficit

 

 

 

 

 

 

  Preferred Stock; $0.001 par value; 50,000,000 shares authorized;

50,000,000 and - issued and outstanding, respectively

 

 

50,000

 

 

50,000

  Common stock; $0.001 par value; 2,450,000,000 shares authorized,

2,310,488,796 and 110,340,001 shares issued and outstanding, respectively

 

 

2,310,493

 

 

110,340

Additional paid-in capital

 

 

3,370,195

 

 

3,680,743

Accumulated deficit

 

 

(6,804,854)

 

 

(4,397,386)

  Total Stockholders’ Deficit

 

 

(1,074,166)

 

 

(556,303)

Total Liabilities and Stockholders’ Deficit

 

$

98,169

 

$

145,325




The accompanying notes are an integral part of these consolidated financial statements.



F-3




DEWMAR INTERNATIONAL BMC, INC.

 

CONSOLIDATED STATEMENTS OF OPERATIONS



 

 

Year Ended

 

 

December 31, 2013

 

December 31, 2012

 

 

 

 

 

 

 

Revenue, net

 

$

227,525

 

$

520,874

 

 

 

 

 

 

 

Cost of goods sold

 

 

99,715

 

 

209,278

 

 

 

 

 

 

 

Gross profit

 

$

127,810

 

$

311,596

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

Occupancy and related expenses

 

 

43,674

 

 

31,888

Marketing and advertising

 

 

6,211

 

 

28,550

General and administrative expenses

 

 

1,723,544

 

 

4,179,581

Contract labor

 

 

128,253

 

 

145,037

  Total operating expenses

 

$

1,901,682

 

$

4,385,056

 

 

 

 

 

 

 

Loss from operations

 

$

(1,773,872)

 

$

(4,073,460)

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

Interest expense

 

 

(318,921)

 

 

(23,764)

Gain (loss) on derivative liability

 

 

(314,675)

 

 

401

Loss on settlement of accounts payable

 

 

-

 

 

(18,748)

Loss on extinguishment of debt

 

 

-

 

 

(5,000)

  Total other expenses

 

$

(633,596)

 

$

(47,111)

 

 

 

 

 

 

 

Net loss

 

$

(2,407,468)

 

$

(4,120,571)

 

 

 

 

 

 

 

Net loss per common share -

basic and fully diluted

 

$

(0.00)

 

$

(0.07)

 

 

 

 

 

 

 

Weighted average common shares outstanding -

basic and diluted

 

 

542,722,232

 

 

59,904,176










The accompanying notes are an integral part of these consolidated financial statements.




F-4



DEWMAR INTERNATIONAL BMC, INC.

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

 

 

Preferred Stock

 

Common Stock

 

Additional

Paid-in

 

Accumulated

 

Total

Stockholders’

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2011

-

 

-

 

 

58,495,000

 

$

58,495

 

$

22,097

 

$

(276,815)

 

$

(196,223)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for services

-

 

-

 

 

46,457,619

 

 

46,458

 

 

491,735

 

 

-

 

 

538,193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for services

50,000,000

 

50,000

 

 

-

 

 

-

 

 

3,100,000

 

 

-

 

 

3,150,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued to settle advances

-

 

-

 

 

438,000

 

 

438

 

 

43,362

 

 

-

 

 

43,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution to capital due to accounts payable settled in reverse merger

-

 

-

 

 

-

 

 

-

 

 

3,681

 

 

-

 

 

3,681

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contribution to capital for expenses paid by shareholder

-

 

-

 

 

-

 

 

-

 

 

4,375

 

 

-

 

 

4,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for conversions of note payable

-

 

-

 

 

4,949,382

 

 

4,949

 

 

1,632

 

 

-

 

 

6,581

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reduction in derivative liability due to debt conversion

-

 

-

 

 

-

 

 

-

 

 

13,861

 

 

-

 

 

13,861

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,120,571)

 

 

(4,120,571)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2012

50,000,000

 

$50,000

 

 

110,340,001

 

 

$110,340

 

 

$3,680,743

 

 

$(4,397,386)

 

 

$(556,303)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for cash

-

 

-

 

 

38,880,000

 

 

38,880

 

 

(29,160)

 

 

-

 

 

9,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for service

-

 

-

 

 

422,647,618

 

$

422,648

 

$

534,803

 

 

-

 

 

957,451

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for conversions of notes payable and accrued interest

-

 

-

 

 

1,738,621,177

 

 

1,738,625

 

 

(1,351,722)

 

 

-

 

 

386,903

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reduction in derivative liability due to conversion

-

 

-

 

 

-

 

 

-

 

 

535,531

 

 

-

 

 

535,531

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

-

 

-

 

 

-

 

 

-

 

 

-

 

 

(2,407,468)

 

 

(2,407,468)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2013

50,000,000

 

$50,000

 

 

2,310,488,796

 

$

2,310,493

 

$

3,370,195

 

$

(6,804,854)

 

$

(1,074,166)


The accompanying notes are an integral part of these consolidated financial statements.




F-5



DEWMAR INTERNATIONAL BMC, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS


 

 

Year Ended

 

 

December 31, 2013

 

December 31, 2012

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

  Net loss

 

$

(2,407,468)

 

$

(4,120,571)

  Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

    Bad debt expense

 

 

2,438

 

 

-

    Depreciation expense

 

 

5,640

 

 

3,570

    Stock-based compensation

 

 

957,451

 

 

3,625,901

    Amortization of debt discount

 

 

295,726

 

 

17,282

    Non-cash legal fees

 

 

5,500

 

 

6,500

    Loss on settlement of accounts payable

 

 

-

 

 

18,748

    Loss (gain) on derivative liability

 

 

314,675

 

 

(401)

    Loss on extinguishment of debt

 

 

-

 

 

5,000

  Changes in operating assets and liabilities:

 

 

 

 

 

 

    Accounts receivable

 

 

20,744

 

 

80,613

    Related party receivables and payables

 

 

9,416

 

 

(7,898)

    Inventory

 

 

(8,049)

 

 

31,067

    Prepaid expenses and other current assets

 

 

5,710

 

 

(247)

    Accounts payable and accrued liabilities

 

 

562,420

 

 

147,318

Net cash used in operating activities

 

$

(235,797)

 

$

(193,118)

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

  Purchase of fixed assets

 

 

(19,900)

 

 

-

Net cash used in investing activities

 

 

(19,900)

 

 

-

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

  Proceeds from issuance of common stock

 

 

9,720

 

 

-

  Proceeds from convertible notes payable

 

 

214,820

 

 

140,000

Net cash provided by financing activities

 

 

224,540

 

 

140,000

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(31,157)

 

 

(53,118)

  Cash and cash equivalents, at beginning of period

 

 

38,388

 

 

91,506

  Cash and cash equivalents, at end of period

 

$

7,231

 

$

38,388

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

  Interest paid

 

$

8,477

 

$

-

  Income taxes paid

 

$

-

 

$

-

 

 

 

 

 

 

 

Supplemental noncash investing and financing activities:

 

 

 

 

 

 

  Reclassification of accrued salary to common stock payable

 

$

-

 

$

50,000

  Extinguishment of related party advance by issuance of common stock

 

 

-

 

 

43,800

  Reclassification of accounts payable to notes

 

 

251,160

 

 

4,500

  Reclassification of notes to convertible notes

 

 

133,770

 

 

 

  Reclassification of accounts payable to convertible notes

 

 

74,000

 

 

-

  Original issuance discount

 

 

4,000

 

 

-

  Issuance of common stock for conversion of notes payable

 

 

386,903

 

 

6,581

  Creation of debt discount

 

 

332,948

 

 

53,290

  Reduction in derivative liability due to conversions of notes payable

 

 

535,531

 

 

13,861

  Reclassification of accounts payable associated with reverse merger

 

$

-

 

$

3,681




The accompanying notes are an integral part of these consolidated financial statements.



F-6




DEWMAR INTERNATIONAL BMC, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 AND 2012


NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

On October 28, 2011, pursuant to an Exchange Agreement (“Agreement”), Dewmar International BMC, Inc. (fka Convenientcast, Inc.) (the “Company”, “Dewmar”, “we”, “our” or “us), 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 giving 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 and Principles of Consolidation


The consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of the Company and DSD, its only subsidiary. All material intercompany accounts and transactions have been eliminated. Certain amounts in prior periods have been reclassified to conform to current period presentation.


Reclassification


Certain amounts presented for the period ending December 31, 2012 have been reclassified to conform to the presentation at and for the period ended December 31, 2013.   Specifically, 44,157,619 shares of common stock obligated to be issued under contractual arrangements were originally presented in liabilities as of December 31, 2012 in the amount of $199,193. This amount was broken out between common stock in the amount of $44,158 and additional paid in capital in the amount of $155,035.  As of December 31, 2013, common stock obligated to be issued under contractual arrangements are shown as issued and included in equity.  


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.



F-7



The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). Beginning December 31, 2010 through December 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 December 31, 2013 and 2012 the amounts held in banks did not exceed the insured limits.


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 60-120 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 December 31, 2013 and 2012 the allowance for doubtful accounts was $0 and $0, respectively.


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 depreciation and 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


Convertible Notes

 

The Company analyzes its convertible notes in accordance with FASB Accounting Standards Codification (“ASC”) Topic 470-20 and Topic 815 Derivatives and Hedging. If it is determined that the conversion feature is convertible to a variable number of shares, then the Company determines whether it is subject to the Derivatives and Hedging guidance in ASC Topic 815-20. Upon conclusion that it is within the guidance in Topic 815-20, the conversion feature is separated from the host contract and it is accounted for as a derivative instrument with its fair value estimated at every balance sheet date.  Any change in the fair market value of the derivative, results in a gain or loss on derivative liability in the Company’s statement of operations.  If any conversions of the original note occur prior to the settlement of the obligation, the pro-rata portion of the derivative liability is relieved in additional paid in capital after marking to market on the day prior to the conversion date.   



F-8




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’ destination. 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. Products are sold with extended payment terms not to exceed 120 days. 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, aluminum cans, trays, shrink wrap, can ends, labels and packaging materials. Additionally, costs incurred for shipping, handling and warehousing 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 $6,211 and $28,550 the years ended December 31, 2013 and 2012, 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.


The Company’s federal and state income tax returns for the years ended 2009 through 2013 are open to examination. At December 31, 2013 and 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


The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivables and payables, accrued liabilities notes payable and derivative 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.


Fair Value Measurements


Generally accepted accounting principles in the United States (“US GAAP”) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are as follows:



F-9




Level 1 - Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities.

 

Level 2 - Other inputs that are observable, directly or indirectly, such as quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

 

Level 3 - Unobservable inputs for which there is little or no market data and which we make our own assumptions about how market participants would price the assets and liabilities.


Our derivative liabilities have been valued as Level 3 instruments.


 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

Fair value of Derivative Liability - December 31, 2012

 

$

--

 

$

--

 

$

39,028

 

$

39,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

Fair value of Derivative Liability - December 31, 2013

 

$

--

 

$

--

 

$

151,120

 

$

151,120


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 years ended December 31, 2013and 2012, the Company issued no stock options 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.

 

During the years ended December 31, 2013 and 2012, 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 adoption of any new accounting pronouncements to have a significant impact on its financial statements.






F-10




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. The Company also had negative working capital. 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.


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


NOTE 4 - INVENTORY


Inventory at December 31, 2013 consisted of raw materials of $23,950 and finished goods of $11,194.  Inventory at December 31, 2012 consisted of raw materials of $11,197 and finished goods in the amounts of $15,898. During the years ended December 31, 2013 and 2012, the Company recorded spoilage of $8,764 and $908, respectively and included this in cost of goods sold.


NOTE 5 - FIXED ASSETS

 

Fixed assets consisted of the following as of December 31, 2013 and 2012:


 

 

December 31,

2013

 

December 31,

2012

Vehicles

 

$

41,055

 

$

21,155

Less: accumulated depreciation

 

 

(14,210)

 

 

(8,570)

Fixed assets, net

 

$

26,845

 

$

12,585


Depreciation expense for the years ended December 31, 2013 and December 31, 2012 was $5,640 and $3,570, respectively, and is recorded in general and administrative expenses.


NOTE 6 - NOTES PAYABLE

 

During the period ended December 31, 2013, the Company reclassified certain accounts payable balances into notes payable based on agreements with various vendors with balances of $251,160. Of these $133,770 became convertible during 2013. The notes payable are due on demand and bear no interest. At December 31, 2013 and December 31, 2012, the Company has presented $173,890, and $56,500 in Notes Payable related to these reclassifications on the balance sheet.










F-11




NOTE 7 - CONVERTIBLE NOTES PAYABLE


In October, 2012, the Company entered into a 10% Contingently Convertible Promissory Note with Birr Marketing Group, Inc. for $20,000 with a due date of April 1, 2013. After the due date of April 1, 2013, the note became convertible at a fixed price of $0.001 into the Company’s common shares at the Holder’s option. The Holder shall receive a royalty or commission of $0.50 per case of Easta Pink Lean that was produced as a result of monies allocated from this note. Because of the outstanding Continental note described below, this convertible note is considered to be “tainted” by the indeterminate amount of shares to be issued under that note. Since the number of shares outstanding at any future date is undetermined by the Company, the Company determined that the conversion feature in this note qualified as an “embedded derivative,” and therefore separated the conversion feature from the host contract and estimated the fair market value as of June 30, 2013 to be $21,297 and $21,297 was recorded as loss on derivative. At September 30, 2013, the Company revalued the derivative liability and determined that its fair market value was $9,466.  As such the company recorded a gain on derivative liability of $11,831. At December 31, 2013, the Company revalued the derivative liability and determined that its fair market value was $9,654.  As such the Company recorded a loss on derivative liability of $9,654 during the year ended December 31, 2013.  These amounts were determined by management using a weighted-average Black-Scholes Merton option pricing model.  On April 1, 2013, this note was in default and was due and payable immediately.  As such the Company has presented this note as current as it was in default on April1, 2013.  


During the year ended December 31, 2013, the Company entered into two 10% Contingently Convertible Promissory Notes with Birr Marketing Group, Inc. for $28,000 and $22,820 with a due date of June 4, 2014 and June 26, 2014. After the due date, the note becomes convertible at a fixed price of $0.001 into the Company’s common shares at the Holder’s option.   On June 6, 2014 and June 26, 2014, these notes were in default and were due and payable immediately.  As such the Company has presented this note as current.


On June 27, 2012, the Company entered into a Securities Purchase Agreement with Asher Enterprises, Inc. (“Asher”) a Delaware Corporation for an 8% convertible promissory note with an aggregate principal amount of $32,500 which together with any unpaid accrued interest was due on March 29, 2013. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option 180 days from inception at a variable conversion price calculated as 55% of the market price which means the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date with no floor stated in the conversion feature except for an overall limit of 4.99% of the total shares outstanding prior to conversion. In July 2012, this convertible promissory note was funded in the amount of $30,000, with $2,500 being recorded as legal fees for amounts held by note holder. The Company analyzed the note on the date on which the contingent conversion feature was settled on December 24, 2012. The Company determined that the variable conversion price results in need of bifurcation of the conversion feature into a separate derivative liability valued at fair market value. On December 24, 2012, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $25,209. The Company recorded an original discount of $25,209.


·

On January 11, 2013, Asher converted $12,000 of its outstanding notes payable entered into on June 27, 2012 into 3,750,000 shares of common stock at a conversion price of $0.0032. After conversion, a principal balance of $20,500 remained. On the day of conversion, the Company accelerated the amortization of the discount of $2,851 into interest expense; revalued the derivative liability and recorded a gain on the derivative liability of $2,383; and reduced the pro-rated portion of the derivative liability by $6,325 into additional paid in capital.


·

On February 1, 2013, Asher converted an additional $12,100 of its outstanding notes payable entered into on June 27, 2012 into 5,761,905 shares of common stock at a conversion price of $0.0021. After conversion, a principal balance of $8,400 remained. On the day of conversion, the Company accelerated the amortization of the discount of $12,100  into interest expense; revalued the derivative liability and recorded a loss on the derivative liability of $31,181; and reduced the pro-rated portion of the derivative liability by $15,632 into additional paid in capital.



F-12




·

On February 14, 2013, Asher converted the remaining $8,400 of its outstanding notes payable entered into on June 27, 2012 into 4,850,000 shares of common stock at a conversion price of $0.0020. After conversion, a principal balance of $0 remained on the June 27, 2012 notes payable. On the day of conversion, the Company accelerated the amortization of the discount of $8,400 into interest expense; revalued the derivative liability and recorded a loss on the derivative liability of $25,722; and reduced the pro-rated portion of the derivative liability by $52,076 into Additional paid in capital. At December 31, 2013, $0 remained in the derivative liability.  In summary, during the year ended December 31, 2013, the Company recorded $54, 520 in loss on derivative liability for this note.  


On August 30, 2012, the Company entered a second Contingently Convertible Promissory Note with Asher for an 8% convertible promissory note with an aggregate principal amount of $42,500 which together with any unpaid accrued interest was due on June 4, 2013. $40,000 was funded on September 13, 2012 with $2,500 being recorded as legal fees for funds held by the note holder. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option 180 days from inception at the greater of (1) a variable conversion price calculated as 55% of the market price which means the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date with no floor stated in the conversion feature; or (2) a fixed price of $0.00009 with an overall share cap of 4.99% of the total shares outstanding prior to conversion. Because of the outstanding Continental note described below, this convertible note is considered to be “tainted” by the indeterminate amount of shares to be issued under that note. The note contains an anti-dilution provision which causes the conversion price to decrease if the company issues any common stock at a lower price or with no consideration.


·

On February 26, 2013, the Company analyzed the conversion feature and determined that it met the criteria as an embedded derivative and therefore bifurcated the conversion feature from the host contract and recorded a separate derivative liability at fair market value. At February 26, 2012, the fair market value of the derivative liability was estimated to be $37,397 and resulted in an immediate discount to the notes payable. This discount of $37,397 was amortized during 2013 over the conversion period into interest expense.


·

On March 14, 2013, the holder converted $12,000 of the note into 3,428,571 shares of common stock at a price of $0.0035. On the day of the conversion, the Company re-valued the derivative liability and recorded a loss of $5,113. After conversion, the Company reduced the derivative liability by its prorated portion of the original note value which was $12,002 into additional paid in capital. On March 31, 2013, the Company re-valued the remaining derivative liability and recorded a loss of $14,684 resulting in a balance of $45,191.


·

On April 15, 2013, the holder converted $15,000 of the note into 7,894,737 shares of common stock at a price of $0.0019. On the day of the conversion, the Company re-valued the derivative liability and recorded a gain of $14,588. After conversion, the Company reduced the pro-rated portion of the derivative liability by $15,051 into additional paid in capital.


·

On April 22, 2013, the holder converted $15,500 of the note balance and $1,700 accrued interest into 10,117,647 shares of common stock at a price of $0.0017. On the day of the conversion, the Company re-valued the derivative liability and recorded a loss of $4,582. After conversion, the Company reduced the pro-rated portion of the derivative liability by $20,135 into additional paid in capital. At December 31, 2013, $0 remained in the derivative liability.  In summary, during the year ended December 31, 2013, the Company recorded a net loss on derivative liability of $9,791.







F-13




On August 30, 2012, the Company entered into a Convertible Promissory Note with Continental Equities, LLC (“Continental”), a New York limited liability corporation for an 8% convertible promissory note in the aggregate principal amount of $21,500, which together with any unpaid accrued interest was due on August 15, 2013. $20,000 of the proceeds was funded directly to the company while $1,500 was recorded as legal expense for funds held by the note holder. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option beginning on the date of the note at a variable conversion price calculated as 55% of the market price which means the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date with the only mention of a “share cap” is that the number of shares of common stock issuable upon the conversion would not exceed 4.99% of the outstanding shares of the company at the time of conversion. Since the number of shares outstanding at any future date is undetermined by the Company, the Company determined that the conversion feature in this note qualified as an “embedded derivative,” and therefore separated the conversion feature from the host contract and estimated the fair market value at inception to be $34,119. As a result, the Company recorded a discount on the original note of $21,500. As of December 31, 2012, the unamortized portion of debt discount is $12,657. And it is fully amortized during the year ended December 31, 2013.


·

On March 6, 2013, Continental converted $5,000 of its outstanding notes payable into 1,567,398 shares of common stock at a conversion price of $0.0032. After conversion, a principal balance of $16,500 remained. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $9,893; and reduced the pro-rated portion of the derivative liability by $6,839 into additional paid in capital.


·

On March 25, 2013, Continental converted an additional $5,000 of its outstanding notes payable into 2,000,000 shares of common stock at a conversion price of $0.0025. After conversion, a principal balance of $11,500 remained. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $1,842; and reduced the pro-rated portion of the derivative liability by $7,397 into additional paid in capital. On March 31, 2013, the Company re-valued the remaining derivative liability and recorded a loss of $5,535.


·

On April 3, 2013, Continental converted an additional $5,000 of its outstanding notes payable into 2,631,578 shares of common stock at a conversion price of $0.0019. After conversion, a principal balance of $6,500 remained. On the day of conversion, the Company revalued the derivative liability and recorded a gain on the derivative liability of $11,205; and reduced the pro-rated portion of the derivative liability by $4,932 into additional paid in capital.


·

On April 11, 2013, Continental converted an additional $4,000 of its outstanding notes payable into 2,222,222 shares of common stock at a conversion price of $0.0018. After conversion, a principal balance of $2,500 remained. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $763; and reduced the pro-rated portion of the derivative liability by $4,415 into additional paid in capital.


·

On April 24, 2013, Continental converted the remaining $2,500 of its outstanding notes payable entered into on September 6, 2012 together with unpaid interest of $969 into 2,312,520 shares of common stock at a conversion price of $0.0015. After conversion, a principal balance of $0 remained. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $1,959; and reduced the pro-rated portion of the derivative liability by $4,719 into additional paid in capital. At December 31, 2013, $0 remained in the derivative liability.  In summary, the Company recorded a net loss of $8,787 on derivative liability.






F-14



In November, 2012, the Company entered into a third 8% Contingently Convertible Promissory Note with Asher for $30,000 which is due together with any unpaid accrued interest on August 29, 2013. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option 180 days from inception at the greater of (1) a variable conversion price calculated as 55% of the market price which means the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date with no floor stated in the conversion feature; or (2) a fixed price of $0.00009 with a share cap disclosed as of 9.99% of the outstanding shares of the company at the time of conversion. The Company analyzed the note on the date on which the contingent conversion feature was settled on May 26, 2013.  Because of the outstanding Continental note described below, this convertible note is considered to be “tainted” by the indeterminate amount of shares to be issued under that note. Since the number of shares outstanding at any future date is undetermined by the Company, the Company determined that the conversion feature in this note qualified as an “embedded derivative,” and therefore separated the conversion feature from the host contract and estimated the fair market value at inception to be $11,648. The Company recorded an original discount of $11,648. And the amount is fully amortized during the year ended December 31, 2013. The note contains an anti-dilution provision which causes the conversion price to decrease if the company issues any common stock at a lower price or with no consideration.


·

On June 4, 2013, Asher converted $12,000 of its outstanding notes payable into 10,000,000 shares of common stock at a conversion price of $0.0012. After conversion, a principal balance of $18,000 remained. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $592; and reduced the pro-rated portion of the derivative liability by $4,896 into additional paid in capital.


·

On June13, 2013, Asher converted an additional $13,000 of its outstanding notes payable into 14,130,435 shares of common stock at a conversion price of $0.00092. After conversion, a principal balance of $5,000 remained. On the day of conversion, the Company revalued the derivative liability and recorded a gain on the derivative liability of $191; and reduced the pro-rated portion of the derivative liability by $5,961 into additional paid in capital.


·

On June 27, 2013, Asher converted the remaining $5,000 of its outstanding notes payable entered into on November 27, 2012 together with unpaid interest of $1,200 into 8,266,667 shares of common stock at a conversion price of $0.00075. After conversion, a principal balance of $0 remained. On the day of conversion, the Company accelerated the amortization of the discount of $5,000 into interest expense; revalued the derivative liability and recorded a loss on the derivative liability of $2,413; and reduced the pro-rated portion of the derivative liability by $3,605 into additional paid in capital. At December 31, 2013, $0 remained in the derivative liability.  In summary, for the year ended December 31, 2013, the Company recorded a net loss of $2,814 on derivative liability for this note.


On January 15, 2013, the Company entered into a fourth Securities Purchase Agreement with Asher Enterprises, Inc. (“Asher”) a Delaware Corporation for an 8% contingently convertible promissory note with an aggregate principal amount of $53,000 which together with any unpaid accrued interest is due on September 17, 2013. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option 180 days from inception at a variable conversion price calculated as the greater of (i) the variable conversion price of 48% of the market price calculated as the average of the lowest three trading prices for the common stock during the 10 trading day period prior to the conversion date or (ii) the fixed price of $0.0009 with a share cap disclosed as of 9.99% of the outstanding shares of the company at the time of conversion. This convertible promissory note was funded in the amount of $50,000, with $3,000 being recorded as legal fees for amounts held by note holder. The note contains an anti-dilution provision which causes the conversion price to decrease if the Company issues any common stock at a lower price or with no consideration. The Company analyzed the note on the date on which the contingent conversion feature was settled on July 14, 2013. The Company determined that the variable conversion price results in need of bifurcation of the conversion feature into a separate derivative liability valued at fair market value. On July 14, 2013, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $39,542. The Company recorded an original discount of $39,542. And the amount is fully amortized during the year ended December 31, 2013.



F-15




·

On July 24, 2013, Asher converted $6,000 of its outstanding notes payable entered into on January 15, 2013 into 14,285,714 shares of common stock at a conversion price of $0.00042. After conversion, a principal balance of $47,000 remained. revalued the derivative liability and recorded a gain on the derivative liability of $10,086; and reduced the pro-rated portion of the derivative liability by $3,335 into additional paid in capital.


·

On August 1, 2013, Asher converted an additional $5,000 of its outstanding notes payable entered into on January 15, 2013 into 14,285,714 shares of common stock at a conversion price of $0.00035. After conversion, a principal balance of $42,000 remained. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $1,485; and reduced the pro-rated portion of the derivative liability by $5,730 into additional paid in capital.


·

On August 21, 2013, Asher converted $10,400 of its outstanding notes payable entered into on January 15, 2013 into 30,588,235 shares of common stock at a conversion price of $0.00034. After conversion, a principal balance of $31,600 remained on the January 15, 2013 notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $4,858; and reduced the pro-rated portion of the derivative liability by $10,795 into additional paid in capital.


·

On August 27, 2013, Asher converted $1,100 of its outstanding notes payable entered into on January 15, 2013 into 3,235,294 shares of common stock at a conversion price of $0.00034. After conversion, a principal balance of $30,500 remained on the January 15, 2013 notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $17,401; and reduced the pro-rated portion of the derivative liability by $14,154 into additional paid in capital.


·

On August 29, 2013, Asher converted $10,800 of its outstanding notes payable entered into on January 15, 2013 into 31,764,706 shares of common stock at a conversion price of $0.00034. After conversion, a principal balance of $19,700 remained on the January 15, 2013 notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $990; and reduced the pro-rated portion of the derivative liability by $12,677 into additional paid in capital.


·

On September 9, 2013, Asher converted $10,400 of its outstanding notes payable entered into on January 15, 2013 into 38,518,519 shares of common stock at a conversion price of $0.00027. After conversion, a principal balance of $9,300 remained on the January 15, 2013 notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $6,390; and reduced the pro-rated portion of the derivative liability by $11,452 into additional paid in capital.   At September 30, 2013, the Company revalued the outstanding derivative liability and estimated its fair market value to be $16,406 and as a result recorded an additional loss on derivative liability of $13,968.


·

On October 1, 2013, Asher converted $7,700 of its outstanding notes payable entered into on January 15, 2013 into 55,000,000 shares of common stock at a conversion price of $0.00014. After conversion, a principal balance of $1,600 remained on the January 15, 2013 notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a gain on the derivative liability of $1,467; and reduced the pro-rated portion of the derivative liability by $14,487 into additional paid in capital.





F-16




·

On October 11, 2013, Asher converted the remaining $1,600 of its outstanding notes payable entered into on January 15, 2013 into 16,000,000 shares of common stock at a conversion price of $0.0001. After conversion, a principal balance of $0 remained on the January 15, 2013 notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $9,822; and reduced the balance of the derivative liability by $10,273 into additional paid in capital.  In summary, the Company recorded a total net loss on derivative liability for this note of $43,361.  As such, the derivative liability had a $0 balance at December 31, 2013. Also on this date, Asher converted $2,120 of unpaid accrued interest into 21,200,000 shares of common stock at the same conversion price.


On February 19, 2013, the Company entered into a fifth Securities Purchase Agreement with Asher Enterprises, Inc. (“Asher”) a Delaware Corporation for an 8% contingently convertible promissory note with an aggregate principal amount of $32,500 which together with any unpaid accrued interest is due on November 21, 2013. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option 180 days from inception at a variable conversion price calculated as the greater of (i) the variable conversion price of 55% of the market price calculated as the average of the lowest three trading prices for the common stock during the 10 trading day period prior to the conversion date or (ii) the fixed price of $0.0009 with a share cap disclosed as of 9.99% of the outstanding shares of the company at the time of conversion. This convertible promissory note was funded in the amount of $30,000, with $2,500 being recorded as legal fees for amounts held by note holder. The note contains an anti-dilution provision which causes the conversion price to decrease if the Company issues any common stock at a lower price or with no consideration. The Company analyzed the note on the date on which the contingent conversion feature was settled on August 18, 2013. The Company determined that the variable conversion price results in need of bifurcation of the conversion feature into a separate derivative liability valued at fair market value. On August 18, 2013, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $54,674. The Company recorded an original discount of $32,500 and an immediate loss on derivative liability of $22,174.  At September 30, 2013, the Company revalued the derivative liability and determined that is fair market value was $23,555 resulting in a gain on derivative liability of $31,119.  The Company amortized the total original discount into interest expense for the year ended December 31, 2013.


·

On October 16, 2013, Asher converted $3,300 of its outstanding notes payable into 30,000,000 shares of common stock at a conversion price of $0.00011. After conversion, a principal balance of $29,200 remained on the notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a gain on the derivative liability of $13,296; and reduced the balance of the derivative liability by $1,042 into additional paid in capital.


·

On November 1, 2013, Asher converted $7,750 of its outstanding notes payable into 70,454,545 shares of common stock at a conversion price of $0.00011. After conversion, a principal balance of $21,450 remained on the notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $8,276; and reduced the balance of the derivative liability by $4,171 into additional paid in capital.


·

On November 12, 2013, Asher converted $8,550 of its outstanding notes payable into 77,727,273 shares of common stock at a conversion price of $0.00011. After conversion, a principal balance of $12,900 remained on the notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $5,629; and reduced the balance of the derivative liability by $4,985 into additional paid in capital.


·

On November 25, 2013, Asher converted $6,000 of its outstanding notes payable into 100,000,000 shares of common stock at a conversion price of $0.00006. After conversion, a principal balance of $6,900 remained on the notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a gain on the derivative liability of $6,860; and reduced the balance of the derivative liability by $1,312 into additional paid in capital.



F-17




·

On December 11, 2013, Asher converted $6,000 of its outstanding notes payable into 100,000,000 shares of common stock at a conversion price of $0.00006. After conversion, a principal balance of $900 remained on the notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $73,224; and reduced the balance of the derivative liability by $14,588 into additional paid in capital.


·

On December 26, 2013, Asher converted $900 of its outstanding notes payable into 3,750,000 shares of common stock at a conversion price of $0.00024. After conversion, a principal balance of $0 remained on the notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a gain on the derivative liability of $62,237; and reduced the balance of the derivative liability by $2,193 into additional paid in capital.  In summary for the year ended December 31, 2013, the Company recorded a net gain on derivative liability of $4,209 for this note.  As such, the derivative liability had a $0 balance at December 31, 2013. In addition, Asher converted the remaining $1,300 unpaid interest into 5,416,667 shares of common stock.


On April 16, 2013, the Company entered into a sixth Securities Purchase Agreement with Asher Enterprises, Inc. (“Asher”) a Delaware Corporation for an 8% contingently convertible promissory note with an aggregate principal amount of $42,500 which together with any unpaid accrued interest is due on December 21, 2013. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option 180 days from inception at a variable conversion price calculated as the greater of the variable conversion price of 55% of the market price calculated as the average of the lowest three trading prices for the common stock during the 10 trading day period prior to the conversion date with an overall cap of 9.99% of total shares outstanding prior to conversion. This convertible promissory note was funded in the amount of $40,000, with $2,500 being recorded as original issuance discount. The note contains an anti-dilution provision which causes the conversion price to decrease if the Company issues any common stock at a lower price or with no consideration. The Company analyzed the note on the date on which the contingent conversion feature was settled on October 13, 2013. The Company determined that the variable conversion price results in need of bifurcation of the conversion feature into a separate derivative liability valued at fair market value. On October 13, 2013, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $10,923. The Company recorded an original debt discount of $10,923 and additional $2,500 debt discount due to the original issuance discount. During the year ended December 31, 2013, the Company amortized $9,253 of the discount into interest expense.

 

·

On December 26, 2013, Asher converted $36,000 of its outstanding notes payable into 150,000,000 shares of common stock at a conversion price of $0.00024. After conversion, a principal balance of $6,500 remained on the notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $75,430; and reduced the pro-rated balance of the derivative liability by $73,146 into additional paid in capital.  As such, the derivative liability had a $13,207 balance after conversion on December 26, 2013.  At December 31, 2013, the Company accelerated amortization of the discount of $9,253 into interest expense. And the Company also fully amortized the $2,500 original issuance discount. On December 31, 2013, the Company re-valued the derivative liability and recorded a loss on derivative liability of $245, resulting in a derivative liability at December 31, 2013 of $13,452.   In summary for the year ended December 31, 2013, the Company recorded a loss on derivative liability of $75,675 for this note.










F-18




On April 7, 2013, the Company entered into a convertible promissory note with a vendor to satisfy outstanding invoices in the amount of $68,000.  The note bears no interest and was convertible into shares of common stock 6 months from the inception at the greater of (1) stock price of the conversion date; or (2) stock price on the execution date of the promissory note.  The Company analyzed the note on the date on which the contingent conversion feature was settled on October 7, 2013. The Company determined that the variable conversion price results in need of bifurcation of the conversion feature into a separate derivative liability valued at fair market value. On October 7, 2013, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $65,407. The Company recorded an original discount of $65,407 and liability debt discount of $65,407.  For the period ended December 31, 2013, the Company recorded $15,232 of interest expense as a result of the amortization of this discount.  At December 31, 2013, the Company re-valued the derivative liability and recorded a total loss on derivative liability for this note of $787, bringing the derivative liability balance to $66,193 at December 31, 2013.


On April 10, 2013, the Company entered into a convertible promissory note with a vendor to satisfy outstanding debt invoices in the amount of $6,000.  The note bears no interest and was convertible into shares of common stock at the holder’s option beginning on the date of the note at a variable conversion price calculated by the average 10 day trading price of the Company’s common stock prior to the date of conversion. Since the number of shares outstanding at any future date is undetermined by the Company, the Company determined that the conversion feature in this note qualified as an “embedded derivative”.  On April 10, 2013, the Company estimated the fair market value of the derivative liability associated with the bifurcated conversion feature to be $10,155.  The Company recorded an original discount of $6,000 and day 1 loss on derivative liability of $4,155.


·

On April 24, 2013, the vendor converted $6,000 of its outstanding note payable into 2,000,000 shares of common stock.  After conversion, a principal balance of $0 remained.  On the day of the conversion, the Company accelerated the amortization of the discount of $6,000 into interest expense; revalued the derivative liability and recorded a loss on the derivative liability of $3,882; and reduced the pro-rated portion of the derivative liability by $14,037 into additional paid in capital.  At December 31, 2013, $0 remained in the derivative liability.  In summary, for the year ended December 21, 2013, the Company recorded a total net loss on derivative liability of $8,037.


On April 30, 2013, the Company converted a 0% promissory note reclassified from certain accounts payable into an 8% contingently convertible promissory note with Continental Equities, LLC, a New York limited liability corporation.  The note has an aggregate principal amount of $34,000 which together with any unpaid accrued interest is due on April 30, 2014.  This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option calculated as 55% of the market price which means the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date with the only mention of a “share cap” is that the number of shares of common stock issuable upon the conversion would not exceed 4.99% of the outstanding shares of the company at the time of conversion. Since the number of shares outstanding at any future date is undetermined by the Company, the Company determined that the conversion feature in this note qualified as an “embedded derivative,” and therefore separated the conversion feature from the host contract and estimated the fair market value at inception to be $19,798. As a result, the Company recorded a discount on the original note of $19,798.  And the debt discount is fully amortized during the year ended December 31, 2013. As of June 30, 2013, the Company revalued the derivative liability and recorded a gain on the derivative liability of $4,106.


·

On August 12, 2013, Continental converted $5,460 of its outstanding notes payable entered into on April 30, 2013 into 14,000,000 shares of common stock at a conversion price of $0.00039. After conversion, a principal balance of $28,540 remained on the April 30, 2013 notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $5,524; and reduced the pro-rated portion of the derivative liability by $3,407 into additional paid in capital.




F-19




·

On August 27, 2013, Continental converted $5,460 of its outstanding notes payable entered into on April 30, 2013 into 13,650,000 shares of common stock at a conversion price of $0.0004. After conversion, a principal balance of $23,080 remained on the April 30, 2013 notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $5,777; and reduced the pro-rated portion of the derivative liability by $7,575 into additional paid in capital.


·

On September 10 2013, Continental converted $6,090 of its outstanding notes payable entered into on April 30, 2013 into 21,000,000 shares of common stock at a conversion price of $0.00029. After conversion, a principal balance of $16,990 remained on the April 30, 2013 notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a gain on the derivative liability of $250; and reduced the pro-rated portion of the derivative liability by $7,885 into additional paid in capital.


·

On September 18, 2013, Continental converted $5,720 of its outstanding notes payable entered into on April 30, 2013 into 22,000,000 shares of common stock at a conversion price of $0.00026. After conversion, a principal balance of $11,270 remained on the April 30, 2013 notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $2,891; and reduced the pro-rated portion of the derivative liability by $7,198 into additional paid in capital.


·

On September 25, 2013, Continental converted $4,950 of its outstanding notes payable entered into on April 30, 2013 into 22,500,000 shares of common stock at a conversion price of $0.00022. After conversion, a principal balance of $6,320 remained on the April 30, 2013 notes payable. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $10,553; and reduced the pro-rated portion of the derivative liability by $11,497 into additional paid in capital. On September 30, 2013, the Company revalued the derivative liability and determined that the market value was $13,248 and as such recorded an additional loss on derivative liability of $10,623.


·

On October 8, 2013, the Continental converted the final $6,320 balance of its outstanding notes payable into 26,330,333 shares of common stock at a conversion price of $0.00024.  The Company also converted an additional $1,004 accrued interest into 4,187,416 shares of common stock.  After conversion, a principal balance of $0 remained.  On the day of conversion, the Company revalued the derivative liability recorded a gain of $4,084 and reduced the remaining balance of $9,165 into additional paid in capital leaving a $0 balance in the derivative liability.  In summary, for the year ended December 31, 2013, the Company recorded a net loss on derivative liability of $26,928 for this note.


On April 30, 2013, the Company converted a second 0% promissory note reclassified from certain accounts payable during the period ended March 31, 2013, into an 8% contingently convertible promissory note with Continental Equities, LLC, a New York limited liability corporation.  The note has an aggregate principal amount of $22,500 which together with any unpaid accrued interest is due on April 30, 2014.  This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option at a variable conversion price calculated as 55% of the market price which means the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date with the only mention of a “share cap” is that the number of shares of common stock issuable upon the conversion would not exceed 4.99% of the outstanding shares of the company at the time of conversion. Since the number of shares outstanding at any future date is undetermined by the Company, the Company determined that the conversion feature in this note qualified as an “embedded derivative,” and therefore separated the conversion feature from the host contract and estimated the fair market value at inception to be $19,798. As a result, the Company recorded a discount on the original note of $19,798. And the debt discount is fully amortized during the year ended December 31, 2013.



F-20




·

On May 28, 2013, Continental converted $5,500 of its outstanding notes payable into 5,000,000 shares of common stock at a conversion price of $0.0011.  After conversion, a principal balance of $17,000 remained. On the day of conversion, the Company revalued the derivative liability and recorded a gain on the derivative liability of $1,024; and reduced the pro-rated portion of the derivative liability by $4,589 into additional paid in capital.


·

On June 17, 2013, Continental converted $3,900 of its outstanding notes payable into 5,000,000 shares of common stock at a conversion price of $0.00078.  After conversion, a principal balance of $13,100 remained. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $72; and reduced the pro-rated portion of the derivative liability by $3,271 into additional paid in capital. At June 17, 2013, a derivative liability of $10,986 remained.


·

On June 24, 2013, Continental converted $5,090 of its outstanding notes payable into 7,485,000 shares of common stock at a conversion price of $0.00068.  After conversion, a principal balance of $8,010 remained. On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $4,550; and reduced the pro-rated portion of the derivative liability by $6,036 into additional paid in capital. At June 24, 2013, a derivative liability of $9,499 remained. On June 30, 2013, the Company re-valued the remaining derivative liability and recorded a loss of $2,417 resulting in a balance of $11,916.


·

On July 9, 2013, Continental converted $4,079 of its outstanding notes payable into 7,485,000 shares of common stock at a conversion price of $0.00054.  After conversion, a principal balance of $3,931 remained. On the day of conversion, the Company accelerated the amortization of $5,308 of the discount into interest expense; revalued the derivative liability and recorded a loss on the derivative liability of $3,128; and reduced the pro-rated portion of the derivative liability by $7,661 into additional paid in capital.

 

·

On July 24 2013, Continental converted the final $3,931 of its outstanding notes payable into 7,963,400 shares of common stock at a conversion price of $0.00049.  After conversion, a principal balance of $0 remained. On the day of conversion, the Company revalued the derivative liability and recorded a gain on the derivative liability of $625; and reduced the pro-rated portion of the derivative liability by $6,759 into additional paid in capital.  At December 31, 2013, there is $0 remaining in the derivative liability.  In summary, for the year ended December 31, 2013, the Company recorded a total net loss on derivative liability for this note of $8,518.


On May 21, 2013, the Company entered into a second Convertible Promissory Note with Continental Equities, LLC, a New York limited liability corporation for an 8% convertible promissory note in the aggregate principal amount of $30,000, which together with any unpaid accrued interest is due on May 20, 2014. $28,500 of the proceeds was funded directly to the company while $1,500 was recorded original issuance discount. This convertible note together with any unpaid accrued interest is convertible into shares of common stock at the holder’s option beginning on the date of the note at a variable conversion price calculated as 55% of the market price which means the average of the lowest three trading prices during the ten trading day period ending on the latest complete trading day prior to the conversion date with the only mention of a “share cap” is that the number of shares of common stock issuable upon the conversion would not exceed 4.99% of the outstanding shares of the company at the time of conversion. Since the number of shares outstanding at any future date is undetermined by the Company, the Company determined that the conversion feature in this note qualified as an “embedded derivative,” and therefore separated the conversion feature from the host contract and estimated the fair market value at inception to be $16,113. As a result, the Company recorded a discount on the original note of $17,613 including $16,113 debt discount due to derivative liability and $1,500 debt discount due to original issuance discount.  As of December 31, 2013, the amortization of debt discount is $10,180. On June 30, 2013; the Company re-valued the remaining derivative liability and recorded a gain of $475.  On September 30, 2013, the Company recorded $3,964 of interest expense associated with the amortization of the discount associated with the bifurcation of the conversion feature and revalued the derivative liability and recorded a gain of $1,277.



F-21




·

On November 25 2013, Continental converted $2,500 of its outstanding notes payable into 45,454,545 shares of common stock at a conversion price of $0.000055.  After conversion, a principal balance of $27,500 remained. On the day of conversion, the Company revalued the derivative liability and recorded a gain on the derivative liability of $9,754; and reduced the pro-rated portion of the derivative liability by $384 into additional paid in capital.


·

On December 10, 2013, Continental converted $3,200 of its outstanding notes payable into 58,181,818 shares of common stock at a conversion price of $0.000055.  After conversion, a principal balance of $24,300 remained.  On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $7,455 and reduced the pro-rated portion of the derivative liability by $1,246 into additional paid in capital.


·

On December 20, 2013, Continental converted $6,540 of its outstanding notes payable into 71,086,956 shares of common stock at a conversion price of $0.000092.  After conversion, a principal balance of $17,760 remained.  On the day of conversion, the Company revalued the derivative liability and recorded a loss on the derivative liability of $18,921 and reduced the pro-rated portion of the derivative liability by $6,399 into additional paid in capital.  At December 31, 2013, the Company re-valued the remaining derivative liability for an amount of $21,004 and recorded a gain of $1,950. In summary for the year ended December 31, 2013, the Company recorded a net loss of $12,920 on derivative liability for this note.


On November 11,2013, The Company entered into an assignment agreement where the Company assigned  a previously entered into $11,300 Notes Payable to Dash Consulting to Magna Group, LLC, a third party.  As such the Company entered into a 12% Convertible note with Magna Group for $11,300.  The Note matures on November 11, 2014.  Magna in entitled at its option at any time after the issuance of the note to convert all or any portion of the outstanding principal amount and accrued but unpaid interest into common stock at a conversion price for each share of common stock equal to a price which is a 45% discount from the lowest trading price in the 5 days prior to the day that Magna requests conversion.  In no event shall the conversion price be less than $0.00004 and is subject overall to 9.99% of the total outstanding shares of the company prior to conversion.  Since the number of shares outstanding at any future date is undetermined by the Company, the Company determined that the conversion feature in this note qualified as an “embedded derivative,” and therefore separated the conversion feature from the host contract and estimated the fair market value at inception to be $12,972. As a result, the Company recorded a discount on the original note of $11,300 and recorded an immediate loss on derivative liability of $1,672.  


·

On November 19, 2013, Magna converted $4,650 of the original notes payable into 84,545,454 shares of common stock at a conversion price of $0.000055.  After conversion, a principle balance of $6,650 remained.  On the day of conversion, the Company re-valued the derivative liability and recorded a loss on derivative liability of $7,702 and reduced the pro-rated portion of the derivative liability of $8,507 into additional paid in capital.


·

On November 26, 2013, Magna converted $4,650 of the original notes payable into 84,545,454 shares of common stock at a conversion price of $0.000055.  After conversion, a principle balance of $2,000 remained.  On the day of conversion, the Company re-valued the derivative liability and recorded a gain on derivative liability of $4,514 and reduced the pro-rated portion of the derivative liability of $3,149 into additional paid in capital.


·

On December 10, 2013, Magna converted the remaining $2,000 of the original notes payable into 36,363,636 shares of common stock at a conversion price of $0.000055.  After conversion, a principle balance of $0 remained.  On the day of conversion, the Company re-valued the derivative liability and recorded a loss on derivative liability of $669 and reduced the remaining derivative liability of $5,173 into additional paid in capital.  As such, the derivative liability had a balance of $0 at December 31, 2013.  In addition, the Company accelerated the amortization of the discount of $11,300 into interest expense.  In summary for the year ended December 21, 2015, the Company recorded a net loss on derivative liability of $5,529 on this note.



F-22




On December 10, 2013, the Company entered into an assignment agreement where the Company assigned a previously entered into $17,500 Notes payable with Pitts Riley to Microcap Equity Group, LLC, a third party.  As such the Company entered into a 10% Convertible note with Microcap Equity Group for $17,500 which matures on December 10, 2014.  Microcap is entitled at its option at any time after the issuance of the note to convert all or any portion of the outstanding principal amount and accrued but unpaid interest into common stock at a conversion price for each share of common stock equal to a price which is a 45% of the lowest trading price in the 10 days prior to conversion. Since the number of shares outstanding at any future date is undetermined by the Company, the Company determined that the conversion feature in this note qualified as an “embedded derivative,” and therefore separated the conversion feature from the host contract and estimated the fair market value at inception to be $14,052. As a result, the Company recorded a discount on the original note of $14,052.


·

On December 12, 2013, Microcap converted $2,900 of the notes payable into 58,000,000 shares of common stock at a conversion price of $0.00005.  After conversion, $14,600 remained on the notes payable.  On the day of conversion, the Company re-valued the derivative liability and recorded a loss on the liability of $43,012 and reduced the pro-rated portion of the derivative liability of $9,456 into additional paid in capital.  


·

On December 18, 2013, Microcap converted $3,500 of the notes payable into 70,000,000 shares of common stock at a conversion price of $0.00005.  After conversion, $11,100 of the notes payable balance remained.  On the day of the Conversion, the Company re-valued the derivative liability and recorded a gain on derivative liability of $10,738 and reduced the pro-rated portion of the derivative liability of $7,374 into additional paid in capital.  


·

On December 20, 2013, Microcap converted $3,700 of the notes payable into 74,000,000 shares of common stock at a conversion price of $0.00005.  On the day of conversion, the Company re-valued the derivative liability and recorded a gain on derivative liability of $24,723 and reduced the pro-rated portion of the derivative liability of $1,010  into additional paid in capital. Additionally, the Company accelerated the amortization of the discount of $10,100 related to the conversions into interest expense.  On December 31, 2013, the Company re-valued the derivative liability and recorded loss on derivative liability of $22,529 resulting in a derivative liability balance of $26,292 at December 31, 2013.   In summary, for the year ended December 31, 2013, the Company recorded a loss of $30,080 on derivative liability for this note.


On December 24 ,2013, The Company entered into an assignment agreement where the Company assigned  a previously entered into $48,470 Notes Payable to Pitts Riley  to Magna Group, LLC, a third party.  As such the Company entered into a 10% Convertible note with Magna Group for $48,470 on December 26, 2013.  The Note matures on December 26, 2014.  Magna in entitled at its option at any time after the issuance of the note to convert all or any portion of the outstanding principal amount and accrued but unpaid interest into common stock at a conversion price for each share of common stock equal to a price which is a 45% discount from the lowest trading price in the 5 days prior to the day that Magna requests conversion.  In no event shall the conversion price be less than $0.00009, also subject to a cap of 9.99% of the total shares outstanding of the company prior to conversion..  Since the number of shares outstanding at any future date is undetermined by the Company, the Company determined that the conversion feature in this note qualified as an “embedded derivative,” and therefore separated the conversion feature from the host contract and estimated the fair market value at inception to be $77,940. As a result, the Company recorded a discount on the original note of $48,470 and recorded an immediate loss on derivative liability of $29,470.  








F-23




·

On December 26, 2013, Magna converted $34,470 of the original notes payable into 156,681,818 shares of common stock at a conversion price of $0.00022.  After conversion, a principle balance of $14,000 remained.  On the day of conversion, reduced the pro-rated portion of the derivative liability of $55,428 into additional paid in capital. The Company also accelerated the discount of $34,470 into interest expense related to the conversion.  On December 31, 2013, the Company re-valued the derivative liability and recorded a gain on the liability of $7,987 resulting in a remaining derivative liability at December 31, 2013 of $14,525.    In summary, for the year ended December 31, 2013, the company recorded a net loss of $21,483 on derivative liability for this note.


On December 23, 2013, the Company received $15,500 in exchange for a 5% Convertible Promissory Note from J Riley Consulting Group.  The Note is due together with any unpaid interest on December 23, 2014.  Under the terms of the Note, the principle amount together with any unpaid interest is convertible after the maturity date at the option of the Holder into common stock at a fixed conversion price of $0.001 per share.  Since the Notes Payable is not convertible until a future date, the Company did not evaluate the conversion feature for derivative considerations.  


In summary, during the year ended December 31, 2013 and 2012, the Company recorded a total of $318,921 and $23,764, respectively in interest expense.  During years ended December 31, 2013 and 2012, the amount of interest expense associated with the amortization of discounts associated with the amortization of the debt discounts established by derivative liabilities in the convertible notes was $295,726 and $17,282.


NOTE 8 - DERIVATIVE LIABILITY


In June 2008, the FASB issued authoritative guidance on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. Under the authoritative guidance, effective January 1, 2009, instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The conversion feature of certain of the Company’s Convertible Promissory Note (described in Note 5), does not have a fixed settlement provision because conversion of the Asher Notes and the Continental Notes will be lowered if the Company issues securities at lower prices in the future. The Company was required to include the reset provisions in order to protect the holders of the Asher Notes and the Continental Note from the potential dilution associated with future financings.  In accordance with the FASB authoritative guidance, the conversion feature of the Asher Notes and the Continental Notes were separated from the host contract and recognized as a derivative instrument. The conversion feature of the Asher Notes and the Continental Notes have been characterized as a derivative liability to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.


The following table summarizes the derivative liabilities included in the consolidated balance sheet:


Derivative liability

 

 

 

Derivative liabilities as of December 31, 2012

 

$

39,028

Loss on derivative liability

 

 

314,675

Debt discount

 

 

332,948

Settlement of derivative liability due to conversion of related notes

 

 

 (535,531)

Derivative liabilities as of December 31, 2013

 

$

151,120


NOTE 9 - INCOME TAXES

 

No provision for federal income taxes has been recognized for the years ended December 31, 2013 and 2012, as the Company incurred a net operating loss for income tax purposes in each year and has no carryback potential.

 






F-24




Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2013 and 2012 were as follows:


 

 

December 31,

2013

 

December 31,

2012

 

 

 

 

 

 

Deferred tax assets:

 

$

472,824

 

$

188,051

Net operating loss

 

 

472,824

 

 

188,051

Less valuation allowance

 

 

(472,824)

 

 

(188,051)

 

 

$

--

 

$

--


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 December 31, 2013 and 2012, the Company had net operating loss carry forwards of approximately $1,390,660 and $553,092, respectively for federal income tax purposes. These net operating loss carry forwards begin to expire in 2023.


Income tax expense differed from the amounts computed by applying the U.S. federal statutory tax rate of 34% to pretax income from continuing operations as a result of the following:


 

 

Year ended December 31,

 

 

2013

 

2012

Computed “expected” income tax expense (benefit)

 

$

(818,539)

 

$

(1,400,994)

Increase (reduction) resulting from:

 

 

 

 

 

 

Permanent difference

 

 

533,766

 

 

1,239,281

Change in valuation allowance

 

 

284,773

 

 

161,713

Income tax expense

 

$

--

 

$

--


NOTE 10 - STOCKHOLDERS’ DEFICIT


On December 26, 2013, the Company increased the authorized number of shares to 4,500,000,000, with 4,450,000,000 being common shares and 50,000,000 being preferred shares.  


Preferred Stock


On December 6, 2012, the Company agreed to issue 50,000,000 shares of Class A Preferred stock to Dr. Moran for services rendered.  The holders of the preferred stock shall be entitled to participate in dividends upon board approval and do not get liquidation preferences.  The shares are convertible into 10 shares of common stock.  Based on this, the Company determined the fair market value of the preferred shares to be equal to $3,150,000 based on the common stock trading price on the date of the resolution and recorded such as stock based compensation.  The shares were treated as if converted into common shares to determine the fair market value.


Common Stock


Shares Issued for Cash


During the year ended December 31, 2013, the Company issued 38,880,000 for $9,720. There is no share issued for cash during the year ended December 31, 2012.


Shares Issued for Services


During the years ending December 31, 2013 and 2012, the Company issued 422,647,618 and 46,457,619 shares, respectively to consultants for services rendered. The Company estimated the fair market value of the shares issued to be $957,451 and $538,193, respectively and recorded this as stock based compensation.



F-25



During the year ended December 31, 2012, the Company entered into an agreement to issue 438,000 shares of common stock in exchange for release of a related party receivable of $38,800.  The fair market value of the shares issued was $43,800; therefore the Company recorded a $5,000 loss on the extinguishment of debt.


During the year ended December 31, 2012, the Company determined that $3,681 in accounts payable were related to the former shareholders and therefore were written off with an increase in additional paid in capital


On November 7, 2012, the Company agreed to convert $50,000 of accrued salary for Dr. Marco Moran into 19,047,619 shares of common stock. The number of shares issued was calculated using a 25% discount to the trading price on the agreement date. The fair market value of the shares on the date of the agreement was $66,667, however these shares have not been issued as of the issuance of these financial statements and the $50,000 of accrued salary is still recorded as of December 31, 2012.   


During the year ended December 31, 2012, a shareholder agreed to issue some of his shares to a third party for services rendered on behalf of the Company.  The fair market value of these services totaled $4,375.  The Company recorded this as a contribution to capital and an increase in stock based compensation.  


Shares Issued for Conversion of Notes Payable


During the years ended December 31, 2013 and 2012, the Company issued 1,738,621,177 and 4,949,382 shares of common stock, respectively related to $386,903 and $6,581, respectively of conversions of various notes payable. See Note 7 - Convertible Notes Payable for further discussion.


Reduction in Derivative Liability


During the years ended December 31, 2013 and 2012, the Company recorded $535,531 and $13,861, respectively into additional paid in capital related to the pro-rated reduction of the derivative liability associated with conversion of various convertible notes payable.  


NOTE 11 - RELATED PARTY TRANSACTIONS

 

Sales to Related Party Distributor

 

During the years ended December 31, 2013 and 2012, the Company 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.

 

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 years ended December 31, 2013 and 2012 the Company recognized revenue from product sales to the Distributor of $3,679 and $14,240 respectively, which represented 1.4% and 2.7%, respectively, of total product revenue recognized by the Company. At December 31, 2013and 2012, accounts receivable from the Distributor was $4,085 and $6,329, respectively.


Shipping Reimbursements from Related Party

 

At December 31, 2013 and 2012, the Company had outstanding accounts receivable of $0 and $8,932, respectively, from a company, Wet & Wild, Inc. owned by the CEO’s wife. These receivables represent shipping reimbursements erroneously billed to DSD 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.



F-26




Advances to Related Party

 

Prior to December 31, 2011, the Company advanced $49,484 to a company owned by the CEO’s wife and repaid $40,152. As of December 31, 2013and 2012, $9,332 is outstanding and presented as Advances to Related Parties on the balance sheet.

 

Acquisition of Fixed Assets from Related Party

 

During the year ended December 31, 2013, the Company purchased two used vehicles from companies owned by the CEO for a total of $19,900.


Other


During 2012, the Company made payments of $9,353 to his wife and daughter for reimbursement of medical insurance costs and other consulting services performed for the Company.


NOTE 12 - 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 December 31, 2013 and December 31, 2012. 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.


On January 20, 2011, a claim was filed against Dewmar International BMC, Inc.(“Dewmar”) by Corey Powell, in Ascension Parish, LA 23rd Judicial District Court. Corey Powell was a former distributor of LEAN, a relaxation beverage marketed by Dewmar. 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 Dewmar’s management. Discovery has continued and a deposition is being scheduled for July or August, 2014 on the last witness prior to a trial date being set. Written discovery has been propounded and several depositions have been taken to better understand the nature and basis for the plaintiff’s claims and to build Dewmar’s defenses. Dewmar has vigorously contested each and every one of the plaintiff’s allegations and has instructed counsel to proceed to trial on the merits. There have been negotiations between the counsels for the parties regarding dropping approximately half of the original claims, but no reasonable discussions have occurred. Currently, there is no trial date set.


On February 14, 2011, a claim was filed against DSD by Charles Moody, in Caddo Parish, LA First Judicial Court seeking in excess of $100,000 in damages. 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. This matter was settled for a payment of $8,000 by DSD on July 27, 2012 with no admission of guilt or liability by either party.






F-27




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. The plaintiffs have not filed any additional pleadings or requested additional discovery in these matters in over three and a half years.  The case has been dismissed.  


During December 2011, Innovative Beverage Group Holdings (“IBGH”) filed a claim against Dewmar International BMC, Inc., Unique Beverage Group, and 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 June 27, 2012, Innovative Beverage Group Holdings (“IBGH”) filed the same claims against Dewmar International BMC, Inc., DSD Network of America, Inc. and Marco Moran CEO of the Company, in Harris County, Texas 127th Judicial District Court, whereas plaintiff asserted that the Defendants engaged in various acts of unfair business practices that caused harm to IBGH. The company’s and Marco Moran have filed an Answer and Counterclaim in this matter on October 31, 2012. Discovery has not yet begun in this matter. Written discovery will be propounded and depositions will have to be taken to better understand the nature and basis for the plaintiff’s claims and to build the Company’s defenses. The Company is no longer named as a defendant in this case.


On March 22, 2012 Plaintiff, DSD NETWORK OF AMERICA, INC. (hereinafter “DSD”) filed suit against Defendants DeWayne McKoy, Charles Moody, Corey Powell and Peter Bianchi in United States District Court; District of Nevada for a combined thirteen claims accusing this group of defendants in colluding against the Company. Answers have been received from McKoy, Moody and Powell and Powell has filed a counterclaim. DSD vigorously denies all the claims in Powell’s counterclaim. Bianchi failed to answer and was defaulted however Bianchi has filed a Motion to Set Aside the Default and Powell and Bianchi have filed Motions to Dismiss.  The case has been dismissed.


NOTE 13 - 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.

 





F-28




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 years ended December 31, 2013 and 2012, the Company incurred $126,726, and $120,000 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 $494,000 and $390,000, in accounts payable and accrued liabilities on its consolidated balance sheets at December 31, 2013 and 2012, respectively. On November 7, 2012, the Company agreed to convert $50,000 of accrued salary for Dr. Marco Moran into 19,047,619 shares of common stock. The number of shares issued was calculated using a 25% discount to the trading price on the agreement date. The fair market value of the shares on the date of the agreement was $66,667 which resulted in recognition of loss on settlement of accrued salaries of $16,667 for the difference in the amount of accrued salary and the fair market value of the shares issued.


On December 6, 2012, the Company issued 50,000,000 shares of Class A Preferred stock to Dr. Moran for services rendered.  The shares are convertible into 10 shares of common stock.  Based on this, the Company determined the fair market value of the preferred shares to be equal to $3,150,000 based on the common stock trading price on the date of the resolution and recorded such as stock based compensation.  The shares were treated as if converted into common shares to determine the fair market value.


Lease Operating Expenses

 

The Company leased office spaces in Clinton, MS and Houston, TX under non-cancelable operating leases during 2013 and 2012. Rent expense was $27,547 and $23,898 for the years ended December 31, 2013 and 2012, respectively.  


The following is a schedule of future minimum lease payments under non-cancelable operating leases at December 31, 2013:


Years Ending

December 31,

 

Future

Minimum

Lease

Payments

2014

 

$

30,040

2015

 

 

6,000

2016

 

 

6,000

2017

 

 

6,000

 

 

 

 

Total

 

$

48,040






F-29




Broker/Sales Agreements


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 was to pay a minimum monthly retainer fee until sales commissions reach at least a pre-determined amount for at least two consecutive months. The company will pay commissions of a pre-determined percentage of gross sales collected, pay an invasion fee of less than one dollar ($1.00) per physical case of product sold within the territory of BBUSA by a third party. Due to breach of contract by BBUSA, this Agreement was discontinued on May 22, 2012. BBUSA failed to generate any sales therefore was never paid any commissions or invasion fees.


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 an annual base salary based upon sales performance, receive a commission of a set percentage of 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. This agreement was terminated on August 1, 2012.


On November 15, 2012, the Company entered into a business development agreement with Globalization Accelerator, LLC (“Global XLR”) to assist the company in improving sales and product placement.  The Company agreed to provide Global XLR: (i) a commission of 4% of gross sales revenue; (ii) a 4.90% equity stock option at the purchase price of $49,000 if Global XLR generates $3,000,000 of gross revenue within any 12 consecutive month period or less, and (iii) pay a finder’s fee of 3% of the gross investment amount for any source of funding introduced to the Company.


Distributor Agreements


On July 5, 2012, the Company entered into a distribution agreement with Hooper Sales Co., Inc. a corporation organized under the laws of the state of Arkansas to exclusively sell, market, manage and assist in distributing products in its designated territory in Arkansas and Mississippi. The Company will provide an invasion fee up to $4.00 per case if products are sold within said territory by any other approved distributor or wholesaler to which the Company chooses to directly ship product.


On July 5, 2012, the Company entered into a distribution agreement with Mikeska Distributing Co, a corporation organized under the laws of the State of Texas to exclusively sell, market, manage and assist in distributing products in its designated territory in Texas. The Company will provide an invasion fee up to $4.00 per case if products are sold within said territory by any other approved distributor or wholesaler to which the Company chooses to directly ship product.


On July 16, 2012, the Company entered into a distribution agreement with New Age Distributing, a corporation organized under the laws of the State of Arkansas to sell and assist in distributing products in its designated territory of Arkansas. The Company will provide an invasion fee up to $4.00 per case if products are sold within said territory by any other approved distributor or wholesaler to which the Company chooses to directly ship product.


Consulting Agreements


On October 15, 2012 the Company entered into a consulting agreement with Chad Tendrich for general business consulting for a period of 12 months.  The Company agreed to deliver 8,500,000 shares of restricted common stock as compensation.  The shares are not considered earned until delivered to the consultant.  As of December 31, 2012, the shares were not considered earned nor delivered.  The shares were issued to the consultant in January 2013.




F-30




On October 27, 2012, the Company entered into a consulting agreement with Dash Consulting, LLC to provide bookkeeping and invoicing consulting for a period of 12 months. As compensation, the Company agreed to deliver 10,000,000 shares of restricted common stock per month.  The Company has accrued the obligation on a monthly basis over the time period the service is rendered.  As of December 31, 2012, the Company has accrued 20,000,000 shares at the total estimated fair market value of $104,000.  In 2013, the Company issued 100,000,000 shares under this contract.  


On November 12, 2012, the Company entered into a consulting agreement with Derrick Brooks to become a medical and healthcare consultant to the Company for a period of 12 months.  The Company agreed to deliver 3,000,000 shares of restricted common stock as compensation.  The shares are not considered earned until delivered to the Consultant.  As of December 31, 2012, the shares were not considered earned until delivered.  The shares were issued in January 2013.  


On November 15, 2012, the Company entered into a consulting agreement with Christy Favorite to conduct wellness programs for the Company for a period of 12 months.  The Company agreed to deliver 5,000,000 shares of restricted common stock as compensation. The shares are not considered earned until delivered to the Consultant.  As of December 31, 2012, the shares were not considered earned until delivered.  The shares were issued in January 2013.  


Other

 

On August 1, 2012, the Company entered into an investor relations consulting agreement with Empire Relations Group, Inc. (“Empire”), a corporation organized under the laws of the State of New York. Under the terms of the agreement, the Company will pay Empire a non-refundable guaranteed consulting fee of $15,000 if Empire introduces the Company to at least $30,000 in capital either through equity investment, loans, notes, debt settlements or any other type of financing which results in an increase in the net cash position of the Company


NOTE 14 - SUBSEQUENT EVENTS

 

Conversion of Convertible Notes


On January 2, 2014, Asher converted $6,500 of the remaining balance of its original notes payable (Asher #6)  plus unpaid accrued interest of $1,700 into 34,166,667 shares of common stock at a conversion price of $0.00024 .  After this conversion, there was $0 remaining balance on its original notes payable.  


On January 6, 2014, Magna converted $14,000 of its remaining balance of its original notes payable into 50,909,090 shares of common stock at a conversion price of $0.00028 per share.  After conversion, there was $0 remaining balance on its original notes payable.  


On January 21, 2014, Continental converted $17,760 of the remaining balance of its original notes payable (Continental #2) into 64,581,818 shares of common stock at a conversion price of $0.000275 leaving $0 balance on its original notes payable.  


On January 27, 2014, Microcap converted $7,400 of the remaining balance of its original notes payable into 52,857,142 shares of common stock at a conversion price of $0.00014 leaving a $0 balance on its notes payable.


Common Stock


On January 28, 2014, the Company entered into a securities purchase agreement to sell 33,400,000 shares of its common stock for $0.0003 per share for $10,020.





F-31




In February 2014 the Company issued 60,000,000 shares of its common stock under its consulting agreement with Origins CF.


On February 4, 2014, the Company entered into a three year consulting arrangement with Hemp, Inc. for consulting services in the hemp/medical marijuana industry.  Payment under the arrangement includes an initial fee of 30,000,000 shares of common stock and 10,000,000 shares on a quarterly basis.  In March 2014, the Company issued 30,000,000 shares of common stock and in December 2014, the Company issued 30,000,000 shares of its common stock for its quarterly commitment.


On March7, 2014, the Company sold 31,250,000 shares of its common stock to a third party for $25,000 or $0.0008 per share.








































F-32




SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Dewmar International BMC, Inc.

 

 

Date: August 7, 2015

 

 

By: /s/ Marco Moran

 

Marco Moran, Secretary

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Date: August 7, 2015

 

 

 

 

By: /s/ Marco Moran

 

Marco Moran, President, Sec., Treasurer and Director

 

(Principal Executive Officer)

 

Chief Financial Officer

 

(Principal Financial and Accounting Officer)

 





























26





Exhibit 31.1


CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002


I, Marco Moran, certify that:


1. I have reviewed this annual report of Dewmar International BMC, Inc. for the period ended December 31, 2013.

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and

5.The Registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design of operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting.


Date:  August 7, 2015


/s/ Marco Moran

Marco Moran

CEO








Exhibit 31.2


CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002


I, Marco Moran, certify that:


1. I have reviewed this annual report of Dewmar International BMC, Inc. for the period ended December 31, 2013.

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and

5.The Registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design of operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting.


Date:  August 7, 2015


/s/ Marco Moran

Marco Moran

CFO








Exhibit 32.1


CERTIFICATION PURSUANT TO 18 U.S.C. 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to their knowledge, the Annual Report on Form 10-K for the period ended December 31, 2013 of Dewmar International BMC, Inc.. (the Company) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and the information contained in such periodic report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in such report.

 

Very truly yours,

 

 

/s/ Marco Moran

 

Marco Moran

 

Chief Executive Officer

 

 

 

August 7, 2015

 

 

 

 

 

/s/ Marco Moran

 

Marco Moran

 

Chief Financial Officer

 

 

 

August 7, 2015

 

 

 

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Dewmar International BMC, Inc. and will be furnished to the Securities and Exchange Commission or its staff upon request.







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