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EX-31 - DAM HOLDINGS 10Q, CERTIFICATION 302 - Premier Beverage Group Corp | damhexh31.htm |
EX-32 - DAM HOLDINGS 10Q, CERTIFICATION 906 - Premier Beverage Group Corp | damhexh32.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 000-50370
DAM HOLDINGS, INC.
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(Exact name of small business issuer in its charter)
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Nevada
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33-1041835
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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P.O. Box 503, Totowa, NJ 07511
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(Address of principal executive offices)
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(973) 981-8626
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since last report)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 o
Large accelerated filer
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o |
Accelerated filer
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o |
Non-accelerated filer
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o (Do not check if a smaller reporting company) |
Smaller reporting company
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x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 1,293,939 shares outstanding as of March 31, 2011.
DAM HOLDINGS, INC.
INDEX
PART I – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
DAM HOLDINGS, INC.
And Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
March 31
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December 31
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|||||||
2011
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2010
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|||||||
(Unaudited)
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(Audited)
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|||||||
ASSETS
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Current Assets:
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Cash
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$ | 124 | $ | 124 | ||||
Accounts Receivable
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- | - | ||||||
Prepaid Expenses
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295 | 295 | ||||||
Inventory (net of valuation reserve of $13,580)
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94,552 | 94,552 | ||||||
Total Current Assets
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94,971 | 94,971 | ||||||
Equipment
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8,339 | 8,339 | ||||||
Less: Accumulated Depreciation
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(8,339 | ) | (7,853 | ) | ||||
Total Equipment
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- | 486 | ||||||
Total Assets
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$ | 94,971 | $ | 95,457 | ||||
LIABILITIES & STOCKHOLDERS' (DEFICIT)
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Current Liabilities
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Accounts Payable
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$ | 210,791 | $ | 198,218 | ||||
Accrued Payroll Taxes Payable
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29,980 | 29,980 | ||||||
Promissory Notes Payable Officers
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191,667 | 186,083 | ||||||
Promissory Notes Payable
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207,043 | 200,677 | ||||||
Current Portion of Long Term Notes Payable
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63,889 | 63,014 | ||||||
Total Current Liabilities
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703,370 | 677,972 | ||||||
Long Term Notes Payable
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- | - | ||||||
Total Liabilities
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703,370 | 677,972 | ||||||
Stockholders' Deficit
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Preferred Stock - $0.0001 par value, 338,000 shares
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authorized no shares issued and outstanding
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- | - | ||||||
Series A Preferred Stock - $5 stated value, 660,000 shares
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authorized 60,000 shares issued and outstanding
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300,000 | 300,000 | ||||||
Series B Preferred Stock - $500 stated value, 2,000 shares
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authorized 30 shares issued and outstanding
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15,000 | 15,000 | ||||||
Common Stock - $.00015 par value, 99,000,000 shares
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authorized, 1,291,939 shares issued and outstanding
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194 | 194 | ||||||
Additional Paid-In Capital
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2,009,231 | 1,969,078 | ||||||
Accumulated Deficit
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(2,932,824 | ) | (2,866,787 | ) | ||||
Total Stockholders' Deficit
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(608,399 | ) | (582,515 | ) | ||||
Total Liabilities and Stockholders' Deficit
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$ | 94,971 | $ | 95,457 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
DAM HOLDINGS, INC.
And Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Month Period
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Ending March 31
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2011
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2010
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(Unaudited)
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(Unaudited)
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Revenues
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$ | - | $ | 1,189 | ||||
Cost of Goods Sold
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- | 1,202 | ||||||
Gross Profit
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- | (13 | ) | |||||
Operating Expenses
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General and Administrative
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49,254 | 49,895 | ||||||
Depreciation and amortization
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486 | 1,424 | ||||||
Total Operating Expenses
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49,740 | 51,319 | ||||||
Other Expenses
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Interest expense
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16,297 | 9,422 | ||||||
Net (Loss)
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$ | (66,037 | ) | $ | (60,754 | ) | ||
Net (Loss) Per Common Share
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$ | (0.05 | ) | $ | (0.05 | ) | ||
Weighted average shares outstanding
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1,291,939 | 1,291,939 |
The accompanying notes are an integral part of these unaudited consolidated financial statements
DAM HOLDINGS, INC.
And Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For The Three Period
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Ending March 31,
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2011
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2010
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(Unaudited)
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(Unaudited)
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Cash Flows from Operating Activities
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Net (Loss)
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$ | (66,037 | ) | $ | (60,754 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities:
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Depreciation & amortization
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486 | 1,424 | ||||||
Services contributed to capital
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40,153 | - | ||||||
Changes in assets and liabilities:
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Prepaid expenses
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- | 3,000 | ||||||
Inventory
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- | 105 | ||||||
Accounts payable
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12,573 | 60,420 | ||||||
Accrued payroll and payroll taxes
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- | 2,065 | ||||||
Notes payable interest expense
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12,825 | (9,989 | ) | |||||
Net Cash Used in Operating Activities
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- | (3,729 | ) | |||||
Cash Flows Used in Investing Activities:
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Capitalized costs
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- | - | ||||||
Cash Flows Used in Investing Activities
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- | - | ||||||
Cash Flows From Financing Activities:
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Advances from officer
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- | 2,000 | ||||||
Increase in notes payable
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- | 2,295 | ||||||
Net Cash From Financing Activities
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- | 4,295 | ||||||
Net (Decrease) Increase in Cash
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$ | - | $ | 566 | ||||
Cash at Beginning of Period
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124 | 696 | ||||||
Cash at End of Period
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$ | 124 | $ | 1,262 | ||||
Three Months Ended March 31,
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2011 | 2010 | |||||||
Cash paid for:
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Interest
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$ | - | $ | 2,500 | ||||
Taxes
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$ | - | $ | - |
Supplemental Schedule of Non-cash Investing and Financing Activities;
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For the three months ended March 31, 2011
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Wages and services contributed to paid in capital by shareholders $40,153.
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For the three months ended March 31, 2010
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Increase in vendor notes payable in the amount of $18,000 for legal and accounting fees.
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The accompanying notes are an integral part of these unaudited consolidated financial statements
Notes to the Condensed Consolidated Financial Statements
For the Three Months Ended March 31, 2011
(Unaudited)
NOTE 1 – UNAUDITED FINANCIAL INFORMATION
The unaudited financial information included for the three-month interim periods ended March 31, 2011 and 2010 were taken from the books and records without audit. However, such information reflects all adjustments (consisting only of normal recurring adjustments), which are of the opinion of management, necessary to reflect properly the results of operations for the interim period presented. The results of operations for the three-month period ended March 31, 2011 are not necessarily indicative of the results expected for the fiscal year ending December 31, 2011.
NOTE 2 – FINANCIAL STATEMENTS AND BASIS OF PRESENTATION
Management has elected to omit substantially all footnotes relating to the condensed consolidated financial statements of the Company included in this report. For a complete set of footnotes, reference is made to the Company's Current Report on Form 10-K for the year ending December 31, 2010 as filed with the Securities and Exchange Commission and the audited financial statements included therein.
The accompanying unaudited financial statements include the accounts of the Company, the accounts of its wholly owned subsidiary Delaware American Motors, Inc. (“DAM”) and its wholly owned subsidiary Delaware American Motors LLC (“DAMLLC”) for all periods presented.
NOTE 3 – GOING CONCERN
The accompanying financial statements contemplate continuation of the Company as a going concern. The Company incurred a net loss of $66,037 and $260,535 for the three months ended March 31, 2011 and the year ended December 31, 2010, respectively, and as of March 31, 2011 the Company has an accumulated deficit of $2,932,824 and a net working capital deficit of $608,399.
Further losses are anticipated in the development of the Company’s business and there can be no assurance that the Company will be able to achieve or maintain profitability. The continuing operations of the Company and the recoverability of the carrying value of the assets is dependent upon the ability of the Company to obtain necessary financing to fund its working capital requirements, and upon future profitable operations. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.
We do not currently have any commitments for financing. Our present operations depend upon the continued support of our shareholders and executive officers, and our continuation as a going concern is dependent upon continued financial support from these parties.
There can be no assurance that capital will be available as necessary to meet our working capital requirements or, if the capital is available, that it will be on reasonable terms acceptable us. The issuances of additional equity securities by the Company may result in dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. If
we are unable to obtain financing in the amounts and on terms deemed acceptable, the business and future success may be adversely affected. Management intends to finance operating costs over the next twelve months with loans from related parties, commercial loans and/or private placement of capital stock.
NOTE 4 – INVENTORY
Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method (“FIFO”). Inventory is stated at cost and reserves are recorded to state the inventory at net realizable value. Inventory at March 31, 2011 consists of the following:
March 31,
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December 31,
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2011
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2010
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Motorcycles
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$ | 83,246 | $ | 83,246 | ||||
Parts and supplies
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22,929 | 22,929 | ||||||
Less valuation allowance
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11,623 | 11,623 | ||||||
$ | 94,552 | $ | 94,552 |
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at March 31, 2011 consists of the following:
March 31,
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December 31,
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|||||||
2010
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2010
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Machinery, plant and equipment
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$ | 8,339 | $ | 8,339 | ||||
Accumulated depreciation
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(8,339 | ) | (7,853 | ) | ||||
$ | - | $ | 486 |
Depreciation expense was $486 and $1,424 for the three months ended March 31, 2011 and 2010, respectively.
NOTE 6 – ABANDONMENT OF SUBSIDIARY
During the first quarter of 2010 the Company ceased support for and abandoned Pukka USA, Inc. and its subsidiary companies (the Pukka Group). The Pukka Group has been inactive since 2008. The abandonment and other adjustments resulted in no net gain or loss.
NOTE 7 – ACCOUNTS AND NOTES PAYABLE
Accounts Payable
The Company had outstanding accounts payable of $210,791 and $198,218 as of March 31, 2011 and December 31, 2010, respectively. Accounts payable also include amounts owed on credit cards used for the payment of goods and services with annual interest rates from 7.99% to 24.00%.
Accrued Wages and Payroll Taxes
The Company has a Key Employee Agreement with its President. The terms of the agreement provides that the executive is employed on an “at will” basis at an annual rate of compensation of $96,000, having an initial term of two years and month to month thereafter. The agreement also provides that any intellectual property originated by the executive during his term of the agreement shall be the property of the Company. The accompanying financial statements include an aggregate of $22,153 and $29,925 of executive officer compensation expense for the three month periods ending March 31, 2011 and 2010 respectively.
The Company’s has a promissory note payable to its President for accrued and unpaid wages and advances bearing interest at the rate of 12% per annum and a balance payable at March 31, 2011 of $191,667.
Notes Payable
At March 31, 2011 the Company has the following notes payable:
Demand promissory notes due officer with interest at 12% per annum
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$ | 191,667 | ||
Demand promissory notes due vendors with interest at 12% per annum.
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207,760 | |||
Unsecured convertible promissory notes with interest at 6% per annum and convertible at the rate of $40.00 per share. These notes are past due and are in default.
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57,705 | |||
Secured convertible promissory note with interest at 10% per annum and convertible at the rate of $0.12 per share. This note is past due and is in default.
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6,192 | |||
Total
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$ | 463,390 | ||
Less current portion
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(463,390 | ) | ||
Long-term debt
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$ | - |
In accordance with Emerging Issues Task Force (“EITF”) No.00-27, “Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Rates’, to Certain Convertible Instruments.” We determined there to be no value attributable to the beneficial conversion feature of the Convertible Notes in that the effective conversion price of those shares was greater than the FMV price of our common stock.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
None.
NOTE 9 – CAPITAL STOCK
Preferred Stock
The Company has an aggregate total of 1,000,000 shares of authorized preferred stock with 338,000 shares of $.0001 par value undesignated preferred stock, 660,000 shares designated as Series A Preferred Stock and 2,000 shares designated as Series B Preferred Stock. The 338,000 shares of undesignated preferred stock, if issued, will carry liquidation preferences and other rights, as determined by the Board of Directors.
Series A 8% Convertible Preferred Stock
The Company has 660,000 shares of preferred stock designated as “Series A 8% Convertible Preferred Stock” authorized with 60,000 shares issued and outstanding as of the date of this report having an aggregate stated value of $300,000. Each share of Series A Preferred Stock (a) has a stated value of $5.00 per share (“Stated Value”), (b) is non-voting, (c) includes a dividend of 8% per annum paid annually, (d) may be redeemed at any time for an amount equal to the Stated Value plus all accumulated and unpaid dividends, (e) may be converted into 10 shares of $0.00015 par value common stock, and has a (f) liquidation preference of $5.00 per share plus all accumulated and unpaid
dividends.
The terms of these shares have been adjusted pursuant to an Anti-Dilution Agreement with the purchasers such that the purchasers may now convert their shares of Series A Preferred Stock into 13,300 shares of the Company’s common stock at an exercise conversion ratio of one (1) share of Preferred Stock to 0.22 shares of Common Stock. This adjustment does not affect the terms of the remaining authorized but un-issued shares of Series A Preferred Stock.
Series B 8% Convertible Preferred Stock
The Company has 2,000 shares of preferred stock designated as “Series B 8% Convertible Preferred Stock” (the “Series B Preferred Stock”) authorized with 30 shares issued and outstanding as of the date of this report having an aggregate stated value of $15,000. Each share of Series B Preferred Stock has an initial issue price or face value of $500.00 (the “Original Issue Price”) and may be converted into shares of the Company’s $0.00015 par value common stock (the “Common Stock”) at any time at the election of the holder. The Series B Preferred Stock may also be redeemed by the Company upon the cash payment per share of $500.00 plus
any unpaid dividends thereon. The Series B Preferred Stock is non-voting.
Shares of Series B Convertible Preferred Stock may be converted into fully paid and nonassessable shares of Common Stock of the Company at a price (the "Conversion Price") equal to 50% of the Market Price per share of Common Stock on the date of conversion (but the Conversion Price shall not be less than $5.00 per share (the "Minimum Price") or greater than $25.00 per share (the "Maximum Price") with respect to the Stated Value of each share of Series B Convertible Preferred Stock and on the basis of the post-reverse split shares of Common Stock. Such option may be exercised by any holder on an all or none basis on or after July 1, 2010. The Market Price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 10 consecutive trading days commencing 12 trading days before the day in question.
Common Stock
The Company has authorized 99,000,000 shares of common stock $.00015 par value per share (the “Common Stock”). As of March 31, 2011, the Company had 1,291,939 shares of Common Stock issued and outstanding. The Company’s shares of Common Stock are traded on the Over the Counter Pink Sheets (“PK”) electronic quotation system, the trading symbol is DAMH.
Shares of Common Stock Reserved For Future Issuance
We have 297,805 shares of common stock reserved for future issuance pursuant to the terms of our outstanding convertible promissory notes, shares of Series A Convertible Preferred Stock, Class A Warrants and selling agent warrants and stock option plans as of the date of this report as follows:
Conversion
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Number of
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Amount
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Rate
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Shares
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Shares of common stock authorized
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99,000,000 | |||||||||||
Shares of common stock outstanding
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1,291,939 | |||||||||||
Shares of common stock reserved for issuance upon exercise of conversion of:
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Secured convertible promissory note
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$ | 6,192 | $ | 0.12 | 51,600 | |||||||
Unsecured convertible promissory notes
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57,705 | 40.00 | 1,442 | |||||||||
Series A convertible preferred stock
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300,000 | 22.50 | 13,333 | |||||||||
Series B convertible preferred stock
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15,000 | 1.00 | 15,000 | |||||||||
Class A warrants
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45.00 | 13,333 | ||||||||||
Class B warrants
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25.00 | 600 | ||||||||||
2009 Consultants Stock Compensation Plan
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Vested options outstanding
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1.00 | 200,000 | ||||||||||
Reserved for future grant
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740,000 | |||||||||||
Selling agent warrants
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54.00 | 2,497 | ||||||||||
Shares of common stock available for future issuance
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96,670,256 |
Class A Warrants
The Company has Class A Warrants issued pursuant to its Series A Preferred Stock Private Placement Unit Offering. The terms of these Class A Warrants have been adjusted pursuant to the Anti-Dilution Agreement with the Unit purchasers such that the purchasers may purchase 13,333 shares of the Company’s common stock at an exercise price of $45.00 per share at any time prior to December 31, 2012 the date of expiration of the Class A Warrants and may be called for redemption at a redemption price of $2.00 per warrant at any time after the Company’s shares of common stock have traded above $1.50 for 10 consecutive trading days.
Class B Warrants
The Company has outstanding Class B Warrants for the purchase of 600 shares of common stock at an exercise price of $25.00 per share. The Class B Warrants (a) may be exercised at any time before expiration or redemption, (b) may be called for redemption for a redemption price of $0.01 per warrant and (c) expire on June 30, 2014. The Company may call the Warrants at any time.
Selling Agent Warrants
The Company granted a selling agent rights to purchase 2,497 shares of the Company’s common stock at an exercise price of fifty-four dollars ($54.00) per share at any time prior to the date of expiration of January 31, 2013.
2009 Consultant Stock Compensation Plan
The 2009 Consultant Stock Compensation Plan provides for the issuance of up to 1,000,000 shares of Company’s $0.00015 shares of Common Stock at a price to be no less than the fair value of the Company’s shares of common stock on the date of grant. On December 22, 2009 the Company filed SEC Form S-8 in registration of shares to be issued pursuant to this plan. As of the date of this report the Company has reserved 740,000 shares of common stock reserved for future issuance pursuant to the Plan.
Summary of Warrants and Options Outstanding
A summary of the status of warrants and options granted at March 31, 2011 and December 31, 2010 and changes during the periods then ended is presented below:
For the Three Months
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For the Twelve Months
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Ended March 31, 2011
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Ended December 31, 2010
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Shares
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Weighted Average Exercise Price
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Shares
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Weighted Average Exercise Price
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Outstanding at beginning of period
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216,430 | $ | 4.39 | 216,430 | $ | 4.39 | ||||||||||
Granted
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- | - | - | - | ||||||||||||
Exercised
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- | - | - | - | ||||||||||||
Forfeited
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- | - | - | - | ||||||||||||
Expired
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- | - | - | - | ||||||||||||
Outstanding at end of period
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216,430 | $ | 4.39 | 216,430 | $ | 4.39 | ||||||||||
Weighted average fair value of warrants granted during the period
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216,430 | $ | 4.39 | 216,430 | $ | 4.39 |
A summary of the status of the warrants outstanding at March 31, 2010 is presented below:
Warrants Outstanding
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Warrants Exercisable
|
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Weighted
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|||||||||||||||||||||||
Average
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Weighted
|
Weighted
|
|||||||||||||||||||||
Remaining
|
Average
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Average
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|||||||||||||||||||||
Exercise
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Number
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Contractual
|
Exercise
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Number
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Exercise
|
||||||||||||||||||
Prices
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Outstanding
|
Life
|
Price
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Exercisable
|
Price
|
||||||||||||||||||
$ | 45.00 | 13,333 | 1.75 | $ | 45.00 | 13,333 | $ | 45.00 | |||||||||||||||
$ | 25.00 | 600 | 2.83 | $ | 25.00 | 600 | $ | 25.00 | |||||||||||||||
$ | 54.00 | 2,497 | 1.83 | $ | 54.00 | 2,497 | $ | 54.00 | |||||||||||||||
$ | 1.00 | 200,000 | 8.75 | $ | 1.00 | 200,000 | $ | 1.00 |
NOTE 10 – INCOME TAXES
The Company has available at March 31, 2011 an unused operating loss carryforward of approximately $2,900,000 which may be applied against future taxable income and which expires in the years 2028 and 2031. The amount of and ultimate realization of the benefits from the operating loss carryforward for income tax purposes is dependent, in part, upon the tax laws then in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the net deferred tax asset associated with the Company’s net operating loss carryforward, the Company has established a valuation allowance equal to the total tax
effect of the net operating loss and, therefore, no deferred tax asset has been recognized.
March 31,
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December 31,
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|||||||
2011
|
2010
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss and credit carryforwards
|
$ | 1,102,000 | $ | 1,089,080 | ||||
Less valuation allowance
|
1,102,000 | 1,089,080 | ||||||
Total deferred tax assets
|
$ | - | $ | - |
NOTE 11 – MATERIAL SUBSEQUENT EVENTS AND CONTINGENCIES
The Company has evaluated subsequent events through the time September 20, 2011 which is the date of this report. No events have occurred subsequent to March 31, 2011, that requires disclosure or recognition in these financial statements.
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion of our plan of operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this quarterly report.
Forward Looking Statements
Because the Company intends to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions readers regarding forward looking statements found in the following discussion and elsewhere in this report and in any other statement made by, or on the behalf of the Company, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond the Company's control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. The Company disclaims any obligation to update forward-looking statements.
Overview, Plan of Operations and Outlook
Overview
Net Loss
The company had a net loss of $66,037 for the three months ended March 31, 2011 compared to a net loss of $60,754 for the same period in 2010. The 2011 loss was due primarily to expenses for salaries, consulting and professional fees associated with the Company’s high performance motorcycle manufacturing subsidiary Delaware American Motors LLC.
Liquidity and Capital Resources
Since our inception, we have funded our operations primarily through private sales of equity and securities, the use of short and long-term debt and credit from our vendors, shareholders and executive officers. As of March 31, 2011, we had $124 of cash on hand, $94,552 in inventory, and $703,370 in current liabilities.
Net cash used by operating activities for the three months ended March 31, 2011 was $-0- which was primarily the result of the net loss of $66,037, compared to net cash used by operating activities of $3,729 with a net loss of $60,754 for the three months ended March 31, 2010. We have not been able to meet our operating expenses and current public reporting obligations in a timely manner and our operations have been funded principally from credit provided by our vendors and from short term cash advances. Further vendor credit and cash advances may not be available to us in the future.
We will require additional cash resources of $200,000 to meet our operating needs for the next twelve months plus an additional $63,889 to pay our short term secured convertible promissory notes which are in default and $210,791 to pay our current accounts payable.
Plan of Operations
The current economic environment in the U.S. and abroad continues to deteriorate. The effect of this continuing deterioration on the Company is expected to be significant. The Company is a young company with a new brand and a high dollar value luxury product. Over the next twelve months we intend to build our brand name “Delaware American Motors” based upon the introduction of the Tech Twin American 13C Series and Tech Twin American Signature Series of high-performance heavy weight motorcycles. Competition in the heavyweight motorcycle market is based upon a
number of factors, including price, quality, reliability, styling, product features, customer preference and warranties. In the U.S., suggested retail prices for the Company’s motorcycles range from being comparable to higher than suggested retail prices for comparable motorcycles available in the market.
We believe the Tech Twin engine and our design and styling are significant brand advantages which distinguishes our motorcycles from those of other manufacturers. Our Tech Twin American 13C model titled the Pennsylvania won the 2008 Sturgis AMD World Championship competition’s first place award in the Production Manufacture class. In addition we are limiting the number of bikes in the American 13C and American
Signature model to 13 (one each for the original 13 colonies) and 56 (one each for the signers of the Declaration of Independence) respectively and serializing each model with an individual name and number.
The Company believes that its larger-displacement products can command a premium price. The Company will be emphasizing quality, reliability and styling with a limited warranty generally consistent with industry wide standards for similar motorcycles. The Company’s products are new to the market and will have no established resale values we may reduce the opportunity for customers to obtain suitable financing to purchase our bikes which may reduce the number of available customers. We anticipate that our selling efforts will initially be carried out by the Company in intensive one-on-one selling directly to the buyer of our motorcycles.
In the U.S., the Company expects that its products will compete in the custom segment of the heavyweight motorcycle market. The larger-displacement custom and touring motorcycle segments are dominated by large well capitalized companies such as Harley-Davidson and BMW. In addition, there are many smaller U.S. custom builders who are better known with large volumes of used bikes in circulation.
Establishing our brand name, we believe, will require us to invest in media and event attendance centered on upscale high income motorcycle enthusiasts. The market for this buyer is intensely competitive and marketing to this demographic is obtained through the use of product and advertising placements in high end publications and media events. We presently do not have the resources to undertake selling efforts at this level and will require substantial additional capital in order to carry out our brand introduction and product marketing plans.
Our plan of operation for the coming quarter is to focus on obtaining the financing necessary to undertake our goals of: (i) the development of our Tech Twin American 13C Series and Tech Twin American Signatures Series of motorcycles, (ii) undertake selling efforts of these products and (iii) undertake the introduction of our brand. We anticipate the total aggregate capital needed to carry out our long-term goals to be approximately $2,600,000.
Outlook
We have no commitments for financing and we do not have sufficient funds to continue to operate at current levels. To continue operations for the next twelve months and remain current in our public reporting obligations we require additional financing in the amount of $600,000. To carry out our product and brand goals we require additional financing in the amount of $2,000,000. We are exploring various methods for obtaining additional capital including short-term borrowing and the issuance of our equity or debt securities.
The price of our common stock has declined from $0.95 on May 13, 2008, the date we acquired DAM to $0.01 on June 30, 2010 and has not been actively traded in the past year. This decline has had an adverse impact on our ability to raise additional cash from the sale of our equity securities. In addition, the holders of our derivative securities have the right to convert or purchase up to 297,805 shares of our common stock at prices ranging from seven cents ($0.12) to twenty-seven cents ($54.00). These rights may have the effect of further depressing the price of our equity securities and restricting our ability to raise additional financing.
There can be no assurance that capital will be available as necessary to meet our working capital requirements or, if the capital is available, that it will be on reasonable terms acceptable us. The issuances of additional equity securities by the Company may result in dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable, the business and our future success may be adversely affected. Management intends to finance operating costs over the next twelve months with loans from related parties,
commercial loans, or through private placements of capital stock.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company has no market risk sensitive instruments.
Item 4T. Controls and Procedures
The Company maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed by the Company in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, is accumulated and communicated to management in a timely manner. The Company's principal executive officer and principal financial officer have evaluated this system of disclosure controls and procedures as of the end of the period covered by this quarterly report, and believe that the system is operating effectively to ensure appropriate disclosure.
Other than as described hereinabove, there has been no change in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Limitations on the Payments of Dividends
The holders of Series A Preferred Stock shall be entitled to receive dividends at a rate of eight percent (8%) per annum of the Original Issue Price which shall be prior and in preference to any declaration or payment of any dividend (payable other than in shares of Common Stock) or other distribution on the Common Stock of the Corporation. The dividends on the Series A Preferred Stock shall accrue from the date of issuance of each share and shall be payable annually on December 31 of each year (each a "Dividend Date") commencing on December 31, 2008, except that if any such date is a Saturday, Sunday or legal holiday (a "Non-Business Day") then such dividend shall be payable on the next day that is not a
Non-Business Day on which banks in the State of Nevada are permitted to be closed (a "Business Day") to holders of record as they appear on the stock books of the Corporation on the applicable record date, which shall be not more than 60 nor less than 10 days preceding the payment date for such dividends, as fixed by the Board of Directors (the "Record Date"). The dividends on the Series A Preferred Stock shall be payable only when, as and if declared by the Board of Directors out of funds legally available therefore, or in shares of the Company’s Common Stock at a value equal to the greater of (i) the average closing bid price for the 20 trading days immediately preceding the date the dividend is declared or (ii) twenty-five cents ($0.25). Any dividends on the Series A Preferred Stock which have accrued but have not been paid, shall be accumulated and shall be payable
only when, as and if declared by the Board of Directors as provided in the preceding sentence.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit No.
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Exhibit
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* Filed herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DAM Holdings, Inc.
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Date:
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September 21, 2011
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/s/ MARK S. KLEIN
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Mark S. Klein, President
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Principal Executive Officer and
Principal Accounting Officer
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