UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended: March 31, 2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number 000-51403

BLACKWATER MIDSTREAM CORP.

(Exact name of small business issuer in its charter)

Nevada (State or other jurisdiction of incorporation or organization)	26-2590455 (I.R.S. Employer Identification No.)

660 LaBauve Drive Westwego, Louisiana (Address of principal executive offices)	70094 (Zip Code)

(504) 340-3000

(Issuer’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act: None.

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value per share.

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

Indicate by check mark if the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “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 ¨ (do not check if a smaller reporting company)	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 aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of September 30, 2011 was approximately $19,666,000.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

As of June 08, 2012, there were 56,476,186 shares of Common Stock, $.001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424 (b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes.

Blackwater Midstream Corp.

FORM 10-K

PART I

Item 1. Business.

Our Corporate History

Unless indicated otherwise, the terms “our”, “we”, “us” and similar language refer to Blackwater Midstream Corp. (the “Company”), together with our subsidiaries. Company references herein are referring to consolidated information pertaining to Blackwater Midstream Corp., (formerly Laycor Ventures Corp.), the registrant, our wholly owned subsidiaries Blackwater New Orleans, L.L.C.; Blackwater Georgia, L.L.C.; and Blackwater Maryland, L.L.C.; and to Laycor Ventures, Corp.

We were incorporated in the State of Nevada, USA on March 23, 2004 as a development stage company primarily engaged in the acquisition and exploration of mining properties. We changed our name from Laycor Ventures Corp. to Blackwater Midstream Corp. on March 18, 2008 and on March 21, 2008, a change in the ownership and management control of the Company occurred whereby, we changed our business objective to become an independent developer and manager of third party fuel, agricultural and chemical bulk liquid storage terminals. Commencing in May 2008, we hired new management and appointed a new board of directors.

On September 9, 2008, we formed Blackwater New Orleans, L.L.C. (“BWNO”), a Louisiana limited liability company, as our wholly owned subsidiary. We were in the development stage of developing and managing third party storage terminals from March 2008 through December 23, 2008, when we acquired the Westwego, LA liquid bulk storage terminal (the “Westwego Terminal”) from NuStar Terminals Operations Partnership, L.P. (the “Westwego Acquisition”). As of that date, we became an operating company and were no longer in the development stage.

On February 26, 2010, we formed Blackwater Georgia, L.L.C. (“BWGA”), a Georgia limited liability company, as our wholly owned subsidiary. On July 15, 2010 we completed the acquisition of the Brunswick, GA liquid bulk storage terminal (the “Brunswick Terminal”) from NuStar Terminals Operations Partnership, L.P. (the “Brunswick Acquisition”).

On November 22, 2011, we formed Blackwater Maryland, L.L.C. (“BWMD”), a Maryland limited liability company, as our wholly owned subsidiary. On December 22, 2011 we completed the acquisition of the Salisbury, MD fuel rack terminal (the “Salisbury Terminal”) from NuStar Terminals Operations Partnership, L.P. (the “Salisbury Acquisition”).

We maintain our statutory registered agent’s office at 3199 East Warm Springs Road, Suite 200, Las Vegas, Nevada 89120. Our executive office is located at the Westwego Terminal, 660 LaBauve Drive, Westwego, Louisiana 70094; telephone number is (504) 340-3000 and our website address is www.BlackWaterMidStream.com. Available on our website are our quarterly and annual reports and amendments, press releases and other reports furnished pursuant to Section 12(a) or 15(d) of the Exchange Act.

Description of Our Business

Third Party Terminalling Business Background

Independent bulk liquid terminals and fuel rack terminals play a crucial role in product distribution within the supply chain. Terminals store a range of products including crude oil, bunker fuel, gasoline, distillates, chemicals, agricultural products, and renewable fuels.

It is estimated that in the United States, there are approximately 500 million barrels of liquid storage of petroleum, chemicals, agricultural products, and renewable fuels stored in independent third-party terminals, at any one point in time, between the various refining and manufacturing units and the delivery to the ultimate consumer.

The importance of bulk terminal facilities in the refined product and chemical manufacturing segments has grown significantly over the past decade as the nation’s product supply patterns have become increasingly more complex. Globally and in the USA, it is estimated that demand for tank storage capacity will continue to outstrip supply, fueled by the lack of land available for infrastructure development and increased supply-side economics. Bulk liquid terminals allow producers to operate their refineries and manufacturing plants more efficiently by providing capacity to level out both increases and decreases in product demand. In addition, bulk liquid terminals provide a more efficient supply chain by storing the product either closer to the production or consumption locations.

Third-party terminalling businesses are generally independent operations that support many different commercial customers including refiners, manufacturers, blenders, traders and marketers. Income is derived from tank leasing, operational charges associated with blending services and throughput charges for receipt and delivery options. The primary strategic drivers of the business include location and connectivity to logistics infrastructure. Capital investment in terminalling assets is generally supported by long-term (three years or more) contracts with major oil and gas, chemical and agricultural companies.

Investments resulting in incremental expansion of existing capacity through tank additions and increased utilization of existing infrastructure such as docks, pipeline origin pumps, truck racks, etc. have been the focus of the industry over the past two decades. Over the past few years, the underlying infrastructure and in some cases the real estate associated with many bulk terminals has been exhausted. As such, industry fee structures have evolved with costs for additional capacity, today increasing over historical levels to recuperate the total cost for real estate, new tanks and the addition of related terminal infrastructure as well.

The Storage Terminal in Westwego, LA

On December 23, 2008, we completed the acquisition of the Westwego Terminal for $4,800,000; along with acquisition costs of $119,601. BWNO did not assume any contingent liabilities in the Westwego Acquisition.

In connection with the closing of the Westwego Acquisition, the Company received $2,300,000 of proceeds from a private placement in December 2008. Additionally, BWNO entered into a term loan with JPM Chase Bank (“JPM”) in the principal amount of $2,500,000, as well as a credit agreement (the “BWNO Credit Agreement”). This loan agreement and the subsequent loan agreements (April 21, 2009; February 12, 2010; June 24, 2010 and the consolidating loan agreement, the Fourth Amendment to the Credit Agreement, on October 24, 2010 (the “October 2010 Note”)) with JPM are secured by the existing Collateral Mortgage on the Westwego Terminal Property, and a Continuing Security Agreement granting JPM a security interest in BWNO’s accounts, chattel paper, general intangibles and instruments, documents, equipment, letter of credit rights and contracts. The October 2010 Note consolidated all of BWNO’s previous loan agreements with JPM and provided additional proceeds in the amount of $374,160 for a total revised principal amount of $3,766,667. The October 2010 Note bears interest at an annual rate of 1.5% above the Prime Rate. Commencing October 31, 2010, BWNO began make monthly principal payments of $97,822 and interest payments until maturity on September 30, 2014.

In January 2011, JPM responded affirmatively to the Company’s request to delay the next few months of principal payments on the October 2010 Note and make payments as we are able. JPM and the Company agreed that the Company’s funds would be better used by making payments against outstanding accounts payable. The January 2011 principal payment was paid in February 2011, the February 2011 principal payment was paid in March 2011, the March principal payment was paid in April 2011, the April principal payment was paid in early June 2011 and the May and June principal payments were paid in June 2011

At our Westwego Terminal, our income is primarily derived from tank leasing on guaranteed “take or pay” contracts. Additional income is derived from operational charges associated with ancillary services provided to our customers; such as excess throughput, product heating, package filling, product circulation, etc. The terms of our storage leasing contracts range from month-to-month, to multiple years, with renewal options.

We generally receive our customer’s liquid product by river barge or ship at our Mississippi River dock or by rail car. Products are transferred from barges, ships or rail cars to the specified leased storage tank(s) via the terminal’s internal pipeline apparatus. The customer’s product is removed from storage at our terminal by truck, railcar and/or by barge or ship. The length of time that the customer’s product is held in storage without transfer varies depending upon the customer’s needs.

The Storage Terminal in Brunswick, GA

On July 15, 2010, we completed the acquisition of the Brunswick Terminal for $1,800,000. Related to the acquisition, the Company received $1,750,000 from the issuance of convertible debt loans (the “2010 convertible debt loans”). The Brunswick Terminal, when purchased in July 2010, included employees, long-term land and dock lease arrangements, permits, licenses, offices, procedures, systems, storage tanks, truck rack, piping, etc. and processes that had the ability to produce outputs; thus meeting the definition of a business as per ASC Topic 805-10-55, paragraphs 4 through 9. The terminal however, did not have any customers or contracts as of the acquisition date.

We commissioned and obtained a leasehold valuation appraisal (the “Brunswick Terminal Appraisal”) from a third-party independent appraisal firm, Nationwide Consulting Company. The Brunswick Terminal Appraisal concluded that the leasehold value of the Brunswick Terminal as of July 15, 2010 was $1,900,000. As per ASC Topic 805-30-25-4, we reassessed all identifiable assets acquired and liabilities assumed in the acquisition and subsequently valued the combined assets at the Brunswick Terminal for $1,900,000 and recorded a $100,000 “bargain purchase” gain for the difference, which is recorded in the Company’s consolidated statement of operations.

At our Brunswick Terminal, our income is primarily derived from tank leasing on guaranteed “take or pay” contracts. Additional income is derived from operational charges associated with ancillary services provided to our customers; such as excess throughput, truck weighing, etc. The terms of our storage leasing contracts are multiple years, with renewal options.

We generally receive our customer’s liquid product by river barge or ship at our Brunswick River dock. Products are transferred from barges or ships to the specified leased storage tank(s) via the terminal’s internal pipeline apparatus. The customer’s product is removed from storage at our terminals by truck or railcar. The length of time that the customer’s product is held in storage without transfer varies depending upon the customer’s needs.

The Storage Terminal in Salisbury, MD

On December 22, 2011, we completed the acquisition of the Salisbury Terminal for $1,600,000. Related to the acquisition, BWMD entered into a term loan with JPM in the principal amount of $1,600,000, as well as a credit agreement (the “BWMD Credit Agreement”). The obligations under the BWMD Credit Agreement are secured by an existing Collateral Mortgage on the Westwego Terminal property, a Continuing Security Agreement covering BWMD’s accounts, chattel paper, deposit accounts and other payment obligations of a financial institution, documents, equipment, general intangibles, instruments, inventory, investment property and letter of credit rights, and a guarantee by the Company. The Salisbury Terminal when purchased in December 2011 included customer contracts, an employee, permits, licenses, offices, procedures, systems, storage tanks, truck rack, piping, etc. and processes that had the ability to produce outputs; thus meeting the definition of a business as per ASC Topic 805-10-55, paragraphs 4 through 9.

A leasehold valuation appraisal was commissioned (the “Salisbury Terminal Appraisal”) from a third-party independent appraisal firm, Nationwide Consulting Company. The Salisbury Terminal Appraisal concluded that the leasehold value of the Salisbury Terminal as of June 30, 2011 was $2,570,000. As per ASC Topic 805-30-25-4, we reassessed all identifiable assets acquired and liabilities assumed in the acquisition and subsequently valued the combined assets at the Salisbury Terminal for $2,570,000. Thus the Company recorded a $970,000 “bargain purchase” gain for the difference, which is recorded in the Company’s consolidated statement of operations.

At our Salisbury Terminal, our income is derived from throughput fees charged to our customers when their products are either received or disbursed; as well an inactive inventory fees. At our terminal in Salisbury, generally, we receive our customer’s liquid products by barge at our dock along the Wicomico River. Products are transferred from barges to the specified leased storage tank(s) via the terminal’s internal pipeline apparatus. The customer’s product is removed from storage at our terminal by truck. The length of time that the customer’s product is held in storage without transfer varies depending upon the customer’s needs.

Employees

We employ twenty-four full-time employees and four part-time employees for a total of twenty-eight people; of which twenty-two are based at our Westwego Terminal, three are based at our Brunswick Terminal and three are based at our Salisbury Terminal. The positions held are Chief Executive Officer, Chief Operations Officer, Chief Commercial Officer, Chief Financial Officer, Logistics Manager, Assistant Terminal Managers, Operators, Foremen, Maintenance, and Accounting Staff.

Significant Customers

Westwego Terminal. As of May 1, 2012 the terminal had contracts with six customers utilizing approximately 96% of its leasable barrel storage capacity. The contracted leased storage to our largest customer comprised approximately 31% of our total barrel storage utilization, with our next two largest customers comprising approximately 16% and 15% respectively. The increase in utilization is mainly due to our securing additional long-term contract customers. The main products stored at our Westwego Terminal as of the date of this Annual Report on Form 10-K are soybean oils, lubricating oils, and 50% diaphragm grade caustic soda. As of May 1, 2012, one customer accounted for approximately 23% of total revenue. In August 2010, the Westwego Terminal began package filling activities for a contracted customer, anticipated to contribute over $1.4 million in revenues per year over each of the three-year contract periods.

Brunswick Terminal. As of May 1, 2012 the terminal had one operational long-term contract with one customer utilizing 100% of its leasable barrel storage capacity. The main product stored at the Brunswick Terminal is liquid fertilizer. In February 2012, we signed a new long-term agreement with a new customer for storage of 50% caustic soda. This storage contract is scheduled to become operational in July 2012, upon completion of the construction of a new 60,000 barrel storage tank.

Salisbury Terminal. As of May 1, 2012 and at the acquisition date in December 2011, the terminal has contracts with three customers utilizing approximately 76% of the leasable barrel storage capacity. The main products stored at the Salisbury Terminal for our customers are gasoline, ethanol, and diesel.

Percentage of Monthly Consolidated Storage Revenues Generated by all of our Terminals’ Customers as of May 1, 2012:

Customer “A”	=	21%
Customer “B”	=	18%
Customer “C”	=	16%
Customer “D”	=	15%
Customer “E”	=	10%
Customer “F”	=	9%
Customer “G”	=	8%
Customer “H”	=	2%
Customer “I”	=	1%
Customer “J”	=	0%

Growth of our Business

We are engaged in the business of third-party terminalling; specifically, bulk liquid storage and ancillary services at our Westwego and Brunswick Terminals and fuel-rack services at our Salisbury Terminal. Our operations support many different commercial customers, including commodity brokers, refiners, chemical manufacturers and fuel oil distributors.

For the Company as a whole, our current business model is to increase the utilization at all of our terminals, expand storage at all of the terminal sites as needed, and to pursue the acquisition of other underachieving, underutilized storage terminals through asset purchases and management agreements. We believe the considerable experience of the Company’s management team will be a key factor in transitioning newly acquired underperforming terminals into viable profit centers. We expect these potential acquisitions to provide immediate accretive results to the Company’s operations, and will also allow us to serve the specific storage needs of our customers at our various terminals.

Westwego Terminal. Our Westwego Terminal sits on approximately 26.5 acres. As of March 31, 2012, the terminal had 46 above ground storage tanks for a total leasable capacity of approximately 857,000 barrels, including a deep water ship dock and rail access. Construction projects in process as of March 31, 2012 included piping and tank modifications, as well as painting of various storage tanks.

On May 17, 2012, we obtained a building permit to construct two 50,000 barrel storage tanks within the developed area of the terminal. One of the tanks is already contracted to an existing customer and the other tank’s storage contract is being negotiated with another customer. Funding for the construction of the tanks is being arranged with JPM.

Additionally, the Westwego Terminal site has available for development and expansion approximately six acres of undeveloped land. The Company believes this area can support approximately 300,000 barrels of new tank storage. The Westwego Terminal’s location within the Port of New Orleans, the warehousing and international distribution attributes this location provides, along with the diversity of our customer base; contributes to the potential diversity of the products customers may want stored in our terminal. The products will however generally fall into two broad categories: chemical and agricultural.

Brunswick Terminal. Our Brunswick Terminal sits on approximately 6.5 acres of land leased from the Georgia Ports Authority, including access to a shared deep water ship dock and rail access. As of March 31, 2012, the terminal had two leasable 80,000 barrel above ground storage tanks and two leasable 500 barrel storage tanks for a combined leasable capacity of 161,000 barrels.

Construction is currently underway to build a 60,000 barrel steel storage tank related to a new long-term contract with a new customer. After the construction of the new 60,000 storage tank, the Brunswick Terminal site will have remaining approximately three acres of undeveloped land available for the construction and development of approximately 100,000 barrels in new tank storage. Our terminal within the Georgia Ports Authority is ideally suited to serve petroleum, chemical and agricultural customers who need deep-water access and distribution in the southeastern sector of the United States of America.

In November 2011, the Company successfully negotiated with the Georgia Ports Authority to extend the terminal’s long-term land lease until September 4, 2016. Currently, the Company and the Georgia Ports Authority are negotiating to further extend the maturity date of the long-term land lease.

Salisbury Terminal. Our Salisbury Terminal sits on approximately 27 acres of land. As of March 31, 2012, the terminal had fourteen leasable above ground storage tanks for a combined leasable capacity of approximately 177,000 barrels; including access to a barge dock.

The Salisbury Terminal site has approximately two acres of undeveloped land available for development of approximately 100,000 barrels in new tank storage. This terminal is ideally suited to service petroleum distribution customers and potentially agricultural customers located with the Delmarva Peninsula of Maryland; as well as the greater Baltimore and Washington, D.C. metropolitan areas.

Competition

The fuel, chemical and agricultural liquid storage business is highly competitive. We expect this competitive environment to continue in the future. We face competition from a number of existing storage facilities within the New Orleans to Baton Rouge, Louisiana refining and manufacturing corridor, the southeast USA, Florida and Georgia area and the Delmarva, Maryland Peninsula area. We believe that current economic conditions present additional opportunities in the bulk liquid storage industry by allowing refiners and manufacturers the ability to manage product inventories and plant production rates in response to fluctuating consumption demands and variations in market product pricing. As consumers continue to demand a more efficient supply chain from refiners and manufacturers, this demand for storage will continue to drive capacity expansions in the terminal industry.

Some of our competitors include Kinder Morgan, International Matex Tank Terminals and the Westway Group and local truck rack terminals in the Maryland area. Many of our competitors have longer operating histories, better brand recognition and significantly greater financial, technical and marketing resources than we do. Many of these competitors may have well-established relationships with customers and other key partners and can devote substantially more resources to marketing and sales. Larger competitors may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies.

However, we believe we offer prospective customers greater flexibility with their storage needs, due to current excess capacity and our ability to also offer them competitive long-term contract rates. Additionally, the Westwego Terminal, the Brunswick Terminal and the Salisbury Terminal sites all offer storage tank expansion potential, which can be custom-designed to meet specific customer requirements.

Research and Development

We have not spent any funds during either of our last two fiscal years on research or development.

Intellectual Property

We do not hold, nor have we applied for, any patents, trademarks, licenses, franchises or concessions, nor are we a party to any royalty agreements or labor contracts.

Environmental

Under various federal, state and local laws, ordinances and regulations, we are considered to be an owner or operator of real property and may have to arrange for the disposal or treatment of hazardous or toxic substances. As a result, we could become liable for the costs of removal or remediation of certain hazardous substances released on or near our property. We could also be liable for other costs that relate to hazardous or toxic substances, including governmental fines and injuries to persons and/or properties. Many of the chemicals and products we store may be considered hazardous materials. Inadvertent releases or spills can subject us to costly remediation expenses and/or fines.

We have pollution, property, auto, general marine liability, cargo and umbrella insurance coverage, as well as workers compensation insurance. Each of our insurance carriers currently has an AM Best Rating of A to A+.

On February 9, 2009 one of our storage tanks with a leasable capacity of approximately 47,000 barrels developed a minor leak during the initial introduction of our customer’s product (sulfuric acid) into the tank. Terminal staff detected the leakage in its early stages, which was successfully contained in the designed earthen berm area. Terminal staff and management immediately contacted and apprised all required federal, state and local authorities and agencies of the situation. Additionally, terminal staff began remediation and cleanup efforts and activated expert environmental cleanup companies. One of the efforts to minimize the leakage was to transfer the product into an adjacent 100,000 barrel storage tank. This tank also seemed to be experiencing a possible leak, so the product was transferred into rented barges specifically designed for the product.

During the event we worked closely with various agencies and subcontractors and were successful in stopping and containing the leakage. To our knowledge there have been no reported injuries among staff, management, subcontractors, agency staff, nor the community.

All necessary repairs to the tanks have been completed as well as all environmental cleanup. Our out-of-pocket expenses include our insurance deductible amounts of $25,000 and $250,000 for the property and pollution policies, respectively.

In October 2009, we received payment of $250,000 as per a settlement agreement reached with our property insurance carrier.

In relation to our pollution claim, in our Statements of Consolidated Operations for the year ended March 31, 2011, we incurred legal expenses of approximately $7,500, negotiated a reduction in related cleanup expenses with a vendor of approximately $167,700, and agreed upon a settlement of $260,000 with our pollution carrier; resulting in a net gain of approximately $420,200. As of the year ended March 31 2011, all expenses and reimbursements have been recorded, resulting in a net loss of $227,386. See table presented in the Results of Operations section of this report, under Gain/Loss on Disposal of Asset. As our insurance claim was settled as of March 31, 2011, the Company did not report any activity during the fiscal year period ended March 31, 2012.

Government Approvals and Regulation

We are required to maintain and currently hold approvals and permits from federal, state and local regulatory agencies for air quality and water discharge, as well as standard local occupational licenses.

Item 1A. Risk Factors

As a smaller reporting company, we are not required to make disclosures under this item.

Item 1B. Unresolved Staff Comments

As a smaller reporting company, we are not required to make disclosures under this item.

Item 2. Properties.

Our corporate office and Westwego Terminal, with its bulk liquid storage tanks, and dock are located at 660 LaBauve Drive in Westwego, Louisiana. The Westwego Terminal site consists of approximately 26.5 acres of land, including 46 leasable above ground storage tanks with a combined leasable capacity of approximately 857,000 barrels, a ship dock, an office, warehouses, and other site improvements.

As of May 1, 2012, the Westwego Terminal had a storage tank utilization rate of approximately 96%, based on the total leasable barrel storage capacity of 857,000 barrels. The Westwego Terminal is subject to a term note and mortgages held by JPM. On May 17, 2012, we obtained a building permit to construct two 50,000 barrel storage tanks within the developed area of the terminal. One of the tanks is already contracted to an existing customer and the other tank’s storage contract is being negotiated with another existing customer. Funding for the construction of the tanks is being arranged with JPM.

As of May 1, 2012, the Brunswick Terminal had a storage tank utilization of 100%, based on the total leasable barrel storage capacity of 161,000 barrels. Construction is currently underway to build a 60,000 barrel steel storage tank related to a new long-term contract with a new customer. This construction is being 100% funded by JPM, subject to a term note not to exceed $1,380,000 and a mortgage on the Westwego Terminal property. The Brunswick Terminal currently has a lease in place with the Georgia Ports Authority which is scheduled to terminate September 4, 2016.

As of May 1, 2012, the Salisbury Terminal had a storage tank utilization rate of approximately 76%, based on the total leasable barrel storage capacity of approximately 177,000 barrels. The Salisbury Terminal is subject to a term note in the amount of $1,600,000 held by JPM and a mortgage on the Westwego Terminal property.

Item 3. Legal Proceedings.

On June 27, 2011, we received a petition for damages from a person working at our Westwego Terminal premises in behalf of one of our customer’s subcontractors. We have submitted this claim to our general liability carrier and have not accrued any liability for the claim. Our general liability insurance policy deductible is $25,000.

On October 12, 2011, we received a letter for damages from a person working at our Westwego Terminal premises in behalf of one of our contractors. We have submitted this claim to our general liability carrier and have not accrued any liability for the claim. Our general liability insurance policy deductible is $25,000. Due to inactivity and the lack of action by the person alleging a claim, this case has been closed.

Item 4. Submission of Matters to a Vote of Security Holders.

During the fourth quarter of our fiscal year ended March 31, 2012, there were no matters submitted to a vote of our shareholders.

PART II.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our shares are traded on the Over-the-Counter Bulletin Board under the symbol “BWMS.” The Company is authorized to issue 200,000,000 shares of common stock and 20,000,000 shares of preferred stock. As of May 31, 2012, 56,476,186 shares of common stock had been issued and were outstanding and zero shares of preferred stock had been issued.

The following table sets forth the range of high and low closing bid prices for the common stock for the fiscal quarters. The over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily reflect actual transactions.

FISCAL QUARTER	HIGH BID		LOW BID
2013
First Quarter 04-01-12 to 05-31-12	$	0.60	$	0.40
2012
Fourth Quarter 01-01-12 to 03-31-12	$	0.53	$	0.32
Third Quarter 10-01-11 to 12-31-11	$	0.45	$	0.30
Second Quarter 07-01-11 to 09-30-11	$	0.55	$	0.35
First Quarter 04-01-11 to 06-30-11	$	0.65	$	0.38
2011
Fourth Quarter 01-01-11 to 03-31-11	$	0.66	$	0.42
Third Quarter 10-01-10 to 12-31-10	$	0.73	$	0.31
Second Quarter 07-01-10 to 09-30-10	$	0.41	$	0.30
First Quarter 04-01-10 to 06-30-10	$	0.50	$	0.17

Dividends

On January 28, 2008, we declared a stock dividend of two shares of common stock for each share outstanding. As a result, the number of outstanding shares increased from 8,011,500 to 24,034,500. Since that time, we have not declared any cash dividends, nor do we intend to do so. Additionally, our loan agreements with JPM restrict our ability to make dividend distributions. Our dividend policy will be based on our cash resources and needs and it is anticipated that all available cash will be needed for our operations in the foreseeable future. All share and per share amounts in this filing have been retroactively adjusted to reflect the stock dividend.

Holders of Record

As of March 31, 2012 there are approximately 93 active record holders of our common stock.

Outstanding Equity Awards at Fiscal Year Ended March 31, 2012

The following table summarizes the number of securities underlying outstanding plan awards for each named executive officer as of March 31, 2012.

	Option Awards											Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)			Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)			Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Michael D. Suder		0		0		705,882	(1)	$	0.17	5/4/2019			0		0		2,935,553	(2)		1,521,920

Donald St. Pierre		0		0		0			0		0		0		0		777,090	(3)		161,988

Dale T. Chatagnier		0		0		0			0		0		0		0		1,483,828	(4)		601,539

Francis Marrocco		0		0		0			0		0		0		0		1,483,828	(5)		742,142

(1) Such options are fully vested and are exercisable at $0.17 per share, the closing price of the common stock on April 1, 2009, the date that such options were issued. Mr. Suder received this compensation as a director as well as for his services as an executive officer of the Company during the fiscal year ending March 31, 2009.

(2) Includes (i) 480,690 shares of restricted common stock granted on May 7, 2008 at $2.00 per share as of such date; (ii) 1,321,898 shares of restricted common stock granted on January 1, 2009, valued at $0.29 per share as of such date;(iii) 1,000,000 shares of restricted common stock granted on March 2, 2009, valued at $0.11 per share as of such date; (iv) 43,465 shares of restricted common stock granted on September 1, 2010, valued at $0.30 per share as of such date; (v) 15,000 shares of restricted common stock granted on November 19, 2010, valued at $0.63 per share as of such date; and (vi) 74,500 shares of restricted common stock granted on June 6, 2011, valued at $0.60 per share as of such value date. The shares referenced in items “i”, “ii”, “iii” “iv” and “v”, immediately preceding, all vest according to the revised vesting date of January 1, 2015 and to the original vesting date of January 1, 2012 for item “vi”, and only if Mr. Suder is employed by the Company on such date.

(3) Includes (i) 150,000 shares of restricted common stock granted on January 1, 2009, valued at $0.29 per share as of such date; (ii) 500,000 shares of restricted common stock granted on March 2, 2009, valued at $0.11 per share as of such date; (iii) 43,465 shares of restricted common stock granted on September 1, 2010, valued at $0.30 per share as of such date; (iv) 9,125 shares of restricted common stock granted on November 19, 2010, valued at $0.63 per share as of such date; and (v) 74,500 shares of restricted common stock granted on June 6, 2011, valued at $0.60 per share as of such value date. The shares referenced in items “i”, “ii”, “iii” and “iv”, immediately preceding, all vest according to the revised vesting date of January 1, 2015 and to the original vesting date of January 1, 2012 for item “v”, and only if Mr. St.Pierre is employed by the Company on such date.

(4) Includes (i) 120,173 shares of restricted common stock granted on May 14, 2008, valued at $2.60 per share as of such date and; (ii) 480,690 shares of restricted common stock granted on January 1, 2009, valued at $0.29 per share as of such date; (iii) 750,000 shares of restricted common stock granted on March 2, 2009, valued at $0.11 per share on such date; (iv) 43,465 shares of restricted common stock granted on September 1, 2010, valued at $0.30 per share as of such date; (v) 15,000 shares of restricted common stock granted on November 19, 2010, valued at $0.63 per share as of such date; and (vi) 74,500 shares of restricted common stock granted on June 6, 2011, valued at $0.60 per share as of such value date. The shares referenced in items “i”, “ii”, “iii” “iv” and “v”, immediately preceding, all vest according to the revised vesting date of January 1, 2015 and to the original vesting date of January 1, 2012 for item “vi”, and only if Mr. Chatagnier is employed by the Company on such date.

(5) Includes (i) 120,173 shares of restricted common stock granted on June 1, 2008, valued at $3.77 per share as of such date; (ii) 480,690 shares of restricted common stock granted on January 1, 2009, valued at $0.29 per share as of such date; (iii) 750,000 shares of restricted common stock granted on March 2, 2009, valued at $0.11 per share as of such date; (iv) 43,465 shares of restricted common stock granted on September 1, 2010, valued at $0.30 per share as of such date; (v) 15,000 shares of restricted common stock granted on November 19, 2010, valued at $0.63 per share as of such date; and (vi) 74,500 shares of restricted common stock granted on June 6, 2011, valued at $0.60 per share as of such value date. The shares referenced in items “i”, “ii”, “iii” “iv” and “v”, immediately preceding, all vest according to the revised vesting date of January 1, 2015 and to the original vesting date of January 1, 2012 for item “vi”, and only if Mr. Marrocco is employed by the Company on such date.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

October 2009 convertible debt offering

On October 15, 2009, we issued $3,001,033 of convertible notes. The convertible notes originally set a maturity date on October 15, 2011 (the date was later extended, see below) and have a stated annual interest rate of 10%. The principal is payable at maturity but interest is paid quarterly beginning January 15, 2010. The Company incurred interest expense of $75,026 and $300,104, respectively for the three-month and twelve-month periods ending March 31, 2012 and March 31, 2011. In addition, the notes are convertible at any time into restricted shares of the Company’s common stock at $0.50 per share.

Related party investors as of March 31, 2012 and March 31, 2011 accounted for $430,000 and $180,000, respectively of the aggregate amount of convertible debt funds collected. The $250,000 increase is due to the appointment in June 2011 of two members to the Company’s Board of Directors, Mr. Philip Tracy and Mr. William Gore, who hold October 2009 convertible debt notes in the amounts of $100,000 and $150,000, respectively. Mr. Gore and Mr. Tracy were elected to the Company’s Board of Directors in September 2011.

On March 28, 2011, the convertible note agreements were amended to reduce the conversion price to $0.40 per share upon a change in control of the Company. This change in the conversion feature was evaluated under ASC 815-40. As a result of the new provision, the conversion feature now qualifies for derivative accounting pursuant to ASC 815. (see Note 6)

In June 2011, the Company contacted the holders of the Company’s 2009 Convertible Promissory Note to extend the note’s maturity date from October 15, 2011 to October 15, 2013. All 2009 Convertible Promissory Notes have been amended to reflect the new maturity date.

As per accounting standards, this change in the maturity date was evaluated under ASC 470 “EITF 96-19” “Debtor’s Accounting for Modification or Exchange of Debt Instruments.” As a result of the maturity date extension amendment, the convertible debt notes then qualified as a debt extinguishment and therefore were treated as if the Company settled the debt prior to the maturity date and then entered into an entirely new debt agreement after the amendment. (see Note 6)

In connection with the offering, we incurred cash fees of $265,103 and issued 700,000 shares of restricted common stock, valued at $203,000 based on the grant-date fair value of our common stock. These fees were included in the deferred financing costs in our consolidated balance sheet and were being amortized over the original term of the convertible notes using the effective interest rate method. During the twelve-month period ended March 31, 2012 and the twelve-month period ended March 31, 2011, we amortized $73,314 and $249,000, respectively, of deferred financing cost. During the three-month period ended March 31, 2012, due to the extinguishment of the debt in June 2011, we did not amortize any expenses. During the three-month period ended March 31, 2011 we expensed $62,198.

On June 24, 2011, as per ASC 815-40, we evaluated the fair value of the derivative liability (using the BWMS closing share price of $0.55) and recorded a net “non-cash” loss of $115,378, which represents the change in the fair value of the derivative from March 31, 2011 through June 24, 2011.

Per the applicable accounting standards, the amendment of the convertible debt notes was required to be treated as an extinguishment of the original convertible debt notes and related accounts, as of June 24, 2011. Therefore, we wrote off and expensed the remainder of the unamortized deferred financing asset of $61,449 and decreased the derivative liability by $820,800. These transactions resulted in a net “non-cash” gain of $759,351.

Additionally as per ASC 470, we evaluated the fair value of the derivative related to the amended convertible debt notes as of June 24, 2011 (using the BWMS closing share price of $0.55) and recorded a new derivative liability of $2,870,987. This amount was recorded as a discount to the debt and will be amortized over the new remaining life of the notes, until October 15, 2013.

As a result of the First Amendment to the BWNO Credit Agreement with JPM, the maturity and conversion dates of the convertible debt notes issued pursuant to the Company’s September 2009 Convertible Debt Offering were to be extended by certain intervals. As of June 24, 2011, the maturity and conversion dates have been extended until October 15, 2013 but still do not meet the maturity date of September 30, 2014, as requested by JPM. However, JPM is aware of the maturity date extension that was achieved and has not requested any action from the Company.

March 2010 convertible debt offering

On March 31, 2010, we issued $1,750,000 of convertible notes. The convertible notes originally set a maturity date on March 31, 2012 (the date was later extended, see below) and have a stated annual interest rate of 10%. The principal is payable at maturity but interest is paid quarterly beginning June 30, 2010. The Company incurred interest expense of $43,750 and $175,000, respectively for the three-month and twelve-month periods ending March 31, 2012 and March 31, 2011. In addition, the notes are convertible at any time into restricted shares of the Company’s common stock at $0.50 per share.

Related party investors as of March 31, 2012 and March 31, 2011 accounted for $245,000 and $70,000, respectively of the aggregate amount of convertible debt funds collected. The $175,000 increase is due to the appointment in June 2011 of two members to the Company’s Board of Directors, Mr. Philip Tracy and Mr. Gore, who hold March 2010 convertible debt notes in the amount of $100,000 and $75,000, respectively. Mr. Gore and Mr. Tracy were elected to the Company’s Board of Directors in September 2011.

On March 28, 2011, the convertible note agreement was amended to reduce the conversion price to $0.40 per share upon a change in control of the Company. This change in the conversion feature was evaluated under ASC 815-40. As a result of the new provision, the conversion feature now qualifies for derivative accounting pursuant to ASC 815. (see Note 6)

As per accounting standards, this change in the maturity date was evaluated under ASC 470 “EITF 96-19” “Debtor’s Accounting for Modification or Exchange of Debt Instruments.” As a result of the maturity date extension amendment, the convertible debt notes then qualified as a debt extinguishment and therefore were treated as if the Company settled the debt prior to the maturity date amendment and then entered into an entirely new debt agreement after the amendment. (see Note 6)

In connection with the offering, we incurred cash fees of $164,750 and issued 659,000 shares of restricted common stock, valued at $171,340 based on the grant-date fair value of our common stock. These fees were included in the deferred financing costs in our consolidated balance sheet and were being amortized over the original term of the convertible notes using the effective interest rate method. During the twelve-month period ended March 31, 2012 and the twelve-month period ended March 31, 2011, we amortized $49,878 and $180,150, respectively, of deferred financing cost. During the three-month period ended March 31, 2012, due to the extinguishment of the debt in June 2011, we did not amortize any expenses. During the three-month period ended March 31, 2011 we expensed $45,038.

On June 24, 2011, as per ASC 815-40, we evaluated the fair value of the derivative liability (using the BWMS closing share price of $0.55) and recorded a net “non-cash” loss of $78,371, which represents the change in the fair value of the derivative from March 31, 2011 through June 24, 2011.

Per the applicable accounting standards, the amendment of the convertible debt notes was required to be treated as an extinguishment of the original convertible debt notes and related accounts, as of June 24, 2011. Therefore, we wrote off and expensed the remainder of the unamortized deferred financing asset of $130,271 and decreased the derivative liability by $770,860. These transactions resulted in a net “non-cash” gain of $640,589.

Additionally as per ASC 470, we evaluated the fair value of the derivative related to the amended convertible debt notes as of June 24, 2011 (using the BWMS closing share price of $0.55) and recorded a new derivative liability of $1,645,253. This amount will be amortized over the new remaining life of the notes, until September 30, 2013.

In summary, during the twelve-month period ending March 31, 2012, the Company recorded a net “non-cash” gain of $2,201,935 related to the 2009 and 2010 Notes; approximately $1,400,000 is due to the extinguishment of the original convertible debt notes and deferred financing charges; and $801,995 is related to changes in the fair market value of the convertible debt notes derivative liabilities.

Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers

None.

Item 6. Selected Financial Data.

Not applicable to smaller reporting company filers.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking Statements

The following discussion of the results of our operations and financial condition should be read in conjunction with our financial statements and the notes thereto included elsewhere in this report. This section of this report includes a number of forward-looking statements that reflect the Company’s current views with respect to future events and financial performance. Forward-looking statements are often identified by words like “believe,” “expect,” “estimate,” “anticipate,” “intend,” “project,” and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

The following discussion provides an analysis of the results of our operations, an overview of our liquidity and capital resources and other items related to our business. The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included in this Annual Report on Form 10-K for the year ended March 31, 2012.

Overview of Company and its Operations

Westwego Terminal Operations. On September 9, 2008, we formed BWNO, a Louisiana limited liability company, as a wholly owned subsidiary of the Company, to acquire the Westwego Terminal.

On December 23, 2008, we completed the acquisition of the Westwego Terminal in the amount of $4,800,000, subject to certain adjustments for prepaid third-party fees, adjustment to inventory, and NuStar’s transaction-related expenses. In connection with the closing of the Westwego Acquisition, the Company received $2,300,000 of proceeds from a private placement in December 2008. Additionally, BWNO entered into a term loan with JPM Chase Bank (“JPM”) in the principal amount of $2,500,000, as well as a credit agreement (the “BWNO Credit Agreement”). At acquisition, the Westwego Terminal had an approximate leasable capacity of 752,000 barrels. The above-the-ground storage tanks at the Westwego Terminal range in size from approximately a 5,000 barrel capacity to tanks with over a 100,000 barrel capacity.

In September 2009, we secured a long-term contract for storage and subsequently began construction of three 50,000 barrel steel tanks and a Mississippi River ship dock to facilitate this contract and the future growth of the Westwego Terminal. It was the opinion and belief of Management that having an operational ship dock, versus a barge dock, would greatly enhance the Company’s ability to promote and secure additional long-term storage contracts. As of the end of May 2010, we completed construction of the ship dock and the three 50,000 barrel steel tanks thus bringing the current storage capacity at the Westwego Terminal to 902,000 barrels. During 2010 we dismantled six empty 7,500 barrel storage tanks to make way for future construction of a larger storage tank. After the demolition of these storage tanks, and as of the filing of this annual report, the leasable storage capacity of the Westwego Terminal is 857,000 barrels.

On May 17, 2012, we obtained a building permit to construct two 50,000 barrel storage tanks within the developed area of the terminal. One of the tanks is already contracted to an existing customer and the other tank’s storage contract is being negotiated with another existing customer. Funding for the construction of the tanks is being arranged with JPM.

Our operations support many different commercial customers, including commodity brokers, refiners and chemical manufacturers. Our location within the Port of New Orleans, the warehousing and international distribution attributes this location provides, along with the diversity of our customer base, contributes to the potential diversity of the products customers may want stored in our terminal. The products will however generally fall into the two broad categories: chemical and agricultural.

Our income from the Westwego Terminal is derived from tank leasing, operational charges associated with the throughput charges for receipt and delivery of our customer’s products; and other services, like blending services, as requested by our customers. The terms of our storage leasing contracts range from month-to-month, to multiple years, with renewal options. In August 2010, the Westwego Terminal began package filling activities for a contracted customer, anticipated to contribute over $1.4 million in revenues per year over each of the three-year contract periods.

Cash generated from the operations at the Westwego Terminal is the primary source of liquidity for funding BWNO’s related debt service, maintenance, and small-scale potential capital expenditures. We will seek debt financing to fund larger-scale capital expenditures with long-term contracts.

At the Westwego Terminal, we generally receive our customer’s liquid product by river vessel at our Mississippi River dock and by rail car. The product is transferred from the river vessels and rail cars to the specified leased storage tank via the terminal’s internal pipeline apparatus. The customer’s product is removed from storage at our terminal by truck, railcar and/or by water vessel. The length of time that the customer’s product is held in storage without transfer varies depending upon the customer’s needs.

At the time of the acquisition of the Westwego Terminal in December 2008, the utilization rate of the leasable barrel storage capacity was approximately 38%. As of May 1, 2012 the Westwego Terminal had contracted with six customers utilizing approximately 96% of its leasable barrel storage capacity. The contracted leased storage to our largest customer comprised approximately 31% of our total barrel storage utilization at the Westwego Terminal, with our next two largest customers comprising approximately 16% and 15%, respectively. The increase in utilization is mainly due to our having secured additional long-term contract customers. The products stored at the Westwego Terminal as of the date of this Annual Report on Form 10-K are soybean oil, lubricating oils, drilling fluids, and 50% diaphragm grade caustic soda. As of May 2012, one customer accounted for approximately 23% of total revenue.

On October 24, 2010, BWNO entered into the Fourth Amendment to BWNO Credit Agreement and a Term Note (collectively the “October 2010 Note”) with JPM. The October 2010 Note consolidated BWNO’s previous loan agreements with JPM and provided additional proceeds in the amount of $374,160 for a total revised principal amount of $3,766,667. The October 2010 Note bears interest at an annual rate of 1.5% above the Prime Rate. Commencing October 31, 2010, BWNO began making monthly principal payments of $97,822 and interest payments until maturity on September 30, 2014.

In January 2011, JPM responded affirmatively to the Company’s request to delay the next few months of principal payments on the October 2010 Note and make payments “as we are able.” JPM and the Company agreed that the Company’s funds would be better used by making payments against outstanding accounts payable. The January 2011 principal payment was paid in February 2011, the February 2011 principal payment was paid in March 2011, the March principal payment was paid in April 2011, the April principal payment was paid in early June 2011; as well as the May and June principal payments were paid in June 2011.

Brunswick Terminal Operations. On February 26, 2010, we formed BWGA, a Georgia limited liability company, as our wholly owned subsidiary.

On July 15, 2010 we completed the acquisition of the Brunswick, GA liquid bulk storage terminal from NuStar Terminals Operations Partnership, L.P. in the amount of $1,800,000. Related to the acquisition, the Company received $1,750,000 from the issuance of convertible debt loans (the “2010 convertible debt loans”).

The Brunswick Terminal site consists of two leasable 80,000 barrel above ground storage tanks and two leasable 500 barrel storage tanks for a combined leasable capacity of 161,000 barrels. Construction is currently underway to build a 60,000 barrel steel storage tank pertaining to a new long-term contract with a new customer. This construction is being 100% funded by JPM, subject to a term note not to exceed $1,380,000 and a mortgage on the Westwego Terminal property. The Brunswick Terminal currently has a lease in place with the Georgia Ports Authority which is scheduled to terminate September 4, 2016.

This terminal is ideally suited to serve petroleum, chemical and agricultural customers who need deep-water access and distribution in the southeastern sector of the United States of America. At the time of the acquisition of the Brunswick Terminal in July 2010, the utilization rate of the leasable barrel storage capacity was 0%. As of May 1, 2012 the Brunswick Terminal has contracted with one liquid fertilizer customer who utilizes 100% of its leasable barrel storage capacity and 100% of the total revenue.

Income from the Brunswick Terminal is derived from tank leasing, operational charges associated with the throughput charges for receipt and delivery of our customer’s products; and other services, like blending services, as requested by our customers. The terms of our storage leasing contracts will range from month-to-month, to multiple years, with renewal options.

At the Brunswick Terminal we offer product transfer via river vessel, railcar and by bulk liquid carrying truck. At the Brunswick Terminal the customer’s liquid product is received by barge or ship at the dock. The product is transferred from barges or ships to the leased storage tank via the terminal’s internal pipeline apparatus. The customer’s product is removed from storage at our terminal by truck, railcar and/or by barge or ship. The length of time that the customer’s product is to be held in storage without transfer will vary depending upon the customer’s needs.

Salisbury Terminal Operations. On November 22, 2011, we formed BWMD, a Maryland limited liability company, as our wholly owned subsidiary.

On December 22, 2011 we completed the acquisition of the Salisbury, MD fuel rack terminal from NuStar Terminals Operations Partnership, L.P. in the amount of $1,600,000. Related to the acquisition, BWMD entered into a term loan with JPM in the principal amount of $1,600,000, as well as a credit agreement (the “BWMD Credit Agreement”). Loan agreements with JPM are secured by an existing Collateral Mortgage on the Westwego Terminal Property, a Continuing Security Agreement, and a Guarantee by the Company.

The Salisbury Terminal site consists of fourteen leasable above ground storage tanks for a combined leasable capacity of approximately 177,000 barrels. This terminal is ideally suited to serve petroleum distributors and agricultural customers who need distribution in the Delmarva Peninsula area of Maryland. At the time of the acquisition and currently the Salisbury Terminal had a utilization rate of the leasable barrel storage capacity of approximately 76%.

Income from the Salisbury Terminal is derived from throughput charges for receipt and delivery of our customer’s products; and other services. The terms of our storage leasing contracts will range from month-to-month, to multiple years, with renewal options.

At the Salisbury Terminal we offer product transfer via river barges and by bulk liquid carrying truck. At the Salisbury Terminal the customer’s liquid product is mostly received by barge at the dock. The product is transferred from barges to the leased storage tank via the terminal’s internal pipeline apparatus. The customer’s product is removed from storage at our terminal by truck. The length of time that the customer’s product is to be held in storage without transfer will vary depending upon the customer’s needs.

Recent Developments

As of March 31, 2012 our asset portfolio consisted of the Westwego Terminal, located along the Mississippi River within the Port of New Orleans, Louisiana; the Brunswick Terminal, located near the junction of the East and Brunswick Rivers in Georgia; and the Salisbury Terminal located along the Wicomico River in Maryland.

The Westwego Terminal site consists of approximately 26.5 acres of land, including 46 leasable above ground storage tanks with a combined leasable capacity of approximately 857,000 barrels, a new ship dock, an office, warehouses, and other site improvements. On May 17, 2012, we obtained a building permit to construct two 50,000 barrel storage tanks within the developed area of the terminal. One of the tanks is already contracted to an existing customer and the other tank’s storage contract is being negotiated with another existing customer. Funding for the construction of the tanks is being arranged with JPM.

The Brunswick Terminal site consists of approximately 6.5 acres of leased land from the Georgia Ports Authority; including two 80,000 barrel leasable above ground storage tanks, and two 500 barrel leasable above ground storage tanks, an office building, a two-bay covered truck loading rack and other site improvements; including access to a shared ship dock. Construction is currently underway to build a 60,000 barrel steel storage tank related to a long-term contract with a new customer. In March 2012, BWGA entered into a loan agreement with JPM for an amount of up to $1,380,000 to fund this new construction project. As of March 31, 2012, the Company had obtained construction advances against this note in the amount of approximately $408,100 and as of filing date had obtained advances against this note in the amount of approximately $591,613. In November 2011, the Company successfully negotiated with the Georgia Ports Authority to extend the terminal’s long-term land lease until September 4, 2016. Currently, the Company and the Georgia Ports Authority are negotiating to further extend the maturity date of the long-term land lease.

Growth of our Business. The importance of bulk terminal facilities in the refined product and chemical manufacturing segments has grown significantly over the past decade as the nation’s product supply patterns have become increasingly more complex. Bulk liquid terminals allow producers to operate their refineries and manufacturing plants more efficiently by providing capacity to level out both increases and decreases in product demand. In addition, bulk liquid terminals provide a more efficient supply chain by storing the product either closer to the production or consumption locations.

Our current business model is to increase the utilization at all of our terminal sites and expand storage capacity at the terminal sites as needed.

The Westwego Terminal has available for development approximately six acres of undeveloped land. The Company believes this area can support approximately 300,000 barrels of new tank storage. The Brunswick Terminal also has approximately three acres of land available for development of approximately 100,000 barrels in new tank storage. The Salisbury Terminal site has approximately two acres of land available for development of approximately 100,000 barrels in new tank storage.

We will also grow the business by pursuing the acquisition of underachieving and underutilized storage terminals through asset purchases and management agreements. We believe the considerable experience of the Company’s management team will be a key factor in transitioning underperforming terminals into viable profit centers. We expect these potential acquisitions to provide immediate accretive results to the Company’s operations, and will also allow us to serve the specific storage needs of our customers at our various terminals.

Critical Accounting Policies and Estimates

Our management has discussed the development and selection of the following critical accounting estimates with our audit committee and our Board of Directors and they have reviewed and approved these disclosures.

Revenue Recognition. Revenues for third-party terminals include storage tank lease fees, whereby a customer agrees to pay for a certain amount of tank storage over a certain period of time; and throughput fees, whereby a customer pays a fee based on volumes moving through the terminal. At our terminals, we can also offer and provide blending, handling, filtering and certain other ancillary services. Revenue from storage tank lease fees are recognized at the beginning of each month. Revenue from throughput fees and ancillary fees are recognized as services are provided to the customers.

Property, Plant and Equipment. Property, plant and equipment, are comprised of real estate, buildings, warehouses, storage tanks, a ship dock, other terminal assets, office equipment, computer software and heavy equipment and are stated at cost, less accumulated depreciation.

Assets are depreciated on a straight-line basis over their estimated useful lives, which range from 5 to 40 years. Repair and maintenance costs associated with existing assets that are minor in nature and do not extend the useful life of existing assets are charged to operating expenses as incurred.

Impairment of Long-lived Assets. Long-lived assets, including property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The evaluation of recoverability is performed using undiscounted estimated net cash flows generated by the related asset. If an asset is deemed to be impaired, the amount of impairment is determined as the amount by which the net carrying value exceeds discounted estimated net cash flows.

Results of Operations

For the Year Ended March 31, 2012 compared to March 31, 2011

Revenues. Revenues from our storage terminal facilities are derived from two main areas of operation: recurring contractual storage tank lease fees and monthly ancillary services fees. The following is a discussion about each of these sources of revenue.

Revenues-Storage Revenues. For the year end March 31, 2012 the storage tank revenues totaled approximately $7,483,000, averaging approximately $624,000 over the twelve month period. The March 31, 2012 year end results are approximately 33% more than the storage revenue for the year ended March 31, 2011.

For the year end March 31, 2011 the storage tank revenues totaled approximately $5,612,000, averaging approximately $468,000 over the twelve month period. However, this twelve month period only include revenues in the amount of $338,000 from the Brunswick Terminal from the period August 2010 through March 2011.

Below is a summary of the approximate annual storage revenues and the average monthly storage revenues by terminal for the fiscal periods ending March 31, 2012 and 2011, respectively.

Westwego Terminal:

Period ended March 31, 2012 = $6,747,100, average over 12 months = $562,300

Period ended March 31, 2011 = $5,273,784, average over 12 months = $439,500

Brunswick Terminal:

Period ended March 31, 2012 = $736,000, average over 12 months = $61,300

Period ended March 31, 2011 = $338,000, average over 8 months = $42,250

Storage revenue growth is attributable to an increase in the number of customers, an increase in the number of tanks leased, and an increase in the rate structure due to a different product mix.

Management monitors the utilization rate of the leasable barrels available in our storage tanks at the Westwego, Brunswick and Salisbury Terminals each month. At the commencement of the Company’s operations at the Westwego Terminal in December 2008, the leasable barrel utilization rate was 38%, at the commencement of the Company’s operations at the Brunswick Terminal in July 2010, the leasable barrel utilization rate was 0%, and at the commencement of the Company’s operations at the Salisbury Terminal in December 2011, the leasable barrel utilizations rate was 76%. As of March 2012, the utilization rate at the Westwego Terminal was approximately 96%, at the Brunswick Terminal the utilization rate was 100%, and at the Salisbury Terminal the utilization rate was approximately 76%.

As of March 2012, our consolidated leasable barrel utilization rate was approximately 94%. See the table below for the quarter-to-quarter utilization rate percentages. Management attributes this substantial increase in the utilization rate to aggressive marketing of the Westwego and Brunswick Terminals, their desirable locations as distribution hubs from the Port of New Orleans and the southeast USA, the services offered, storage capacity available, and to management’s industry associations.

		CONSOLIDATED BARREL		CONSOLIDATED
MONTH	Footnote	CAPACITY AVAILABLE		UTILIZATION RATE
March-12			1,190,000		93.5%
December-11	*7		1,190,000		93.5%
September-11			1,018,000		94.9%
June-11			1,018,000		86.8%
March-11			1,018,000		85.4%
December-10			1,018,000		69.8%
September-10	4, 5, *6		1,018,000		82.0%
June-10	*3		902,000		77.0%
March-10	*2		852,000		78.0%
December-09			752,000		74.4%
September-09			752,000		71.8%
June-09			752,000		56.4%
March-09			752,000		57.8%
December-08	*1		752,000		38.0%

*1 – Dec 2008, Acquisition of the Westwego Terminal, approximately 752,000 barrels.

*2 – Feb 2010, Completed construction of two 50,000 barrel tanks at the Westwego Terminal.

*3 – Jun 2010, Completed construction of one 50,000 barrel tank at the Westwego Terminal.

*4 – Jul 2010, Acquisition of the Brunswick Terminal, approximately 161,000 barrels.

*5 – Jul 2010, Demolished four tanks at the Westwego Terminal, approximately 30,000 barrels.

*6 – Aug 2010, Demolished two tanks at the Westwego Terminal, approximately 15,000 barrels.

*7 – Dec 2011, Acquisition of the Salisbury Terminal, approximately 172,000 barrels.

Revenues-Ancillary Services. Ancillary fees are earned based on a customer’s particular needs, and therefore, by their nature fluctuate from month to month. Beginning in December 2011, ancillary fees included the throughput activity generated from the Salisbury Terminal. For the year ended March 31, 2012, our ancillary fees totaled approximately $2,507,500, an average of approximately $209,000 per month. Ancillary fees during the year ended March 31, 2012 were primarily derived from two categories: throughput fees and packaging fees. Our throughput and ancillary fees totaled approximately $904,700 or an average per month of $75,400 for the twelve month period. Our packing fees totaled approximately $1,602,800, averaging approximately $133,600 per month.

Our ancillary fees for the year ended March 2011 was approximately $1,291,600 or approximately $107,600 per month. The monthly average increase of approximately 94% from year ended 2011 to year ended 2012 is due to the company offering increased services needed by our customers, increases in the throughput activity, increases in the utilization of the terminals and the acquisition of the Salisbury Terminal in December 2011.

Operating Expenses. Our operating expenses consist mainly of direct and contract labor, associated payroll taxes and labor burden expenses, general materials, subcontractors, depreciation expenses, and other expenses. Our operating expenses have generally increased ratably from period to period due to our increased utilization, services offered, and increased revenues; however, when viewed as a percentage of revenues they are generally declining. Management continues to strive for cost efficiencies that are realized from increased storage utilization.

Operating expenses, for all of our activity, for the year ended March 31, 2012 was approximately $3,304,700, or approximately 33% of total revenues. This compares to operating expenses for the year ended March 31, 2011 of approximately $2,547,000, or approximately 37% of total revenues.

Since the Westwego Terminal began providing packaging services in August 2010, this activity has become, and will continue to be, a significant revenue and expense category; however, it has a different costing structure than our regular storage and ancillary activities. Therefore, the following table summarizes this activity separate from the storage and ancillary activities offered by the Company.

The operating expenses for our storage and ancillary activities for the year ended March 31, 2012 was 25% of the storage and ancillary revenues; as compared to 31% for the year ended March 31, 2011. This decrease in percentage of operating expenses spans almost all of our cost categories: labor (from 12% to 11%), subcontractors (from 3% to 1%) and other costs (from 7% to 1%.) Depreciation expense as a percentage of revenues held steady at 8% of revenues, as the assets we added to our terminals during the period contributed to increased revenues. The only cost category to increase as a percentage of revenue was the general materials category. This category increased from 1% to 4%. This increase is attributable to maintenance and repairs at the terminals.

The operating expenses for our packaging activity, for the year ended March 31, 2012 was 75% of the packaging revenues; as compared to 81% for the year ended March 31, 2011. The labor cost category decreased (from 12% to 7%), the other cost category decreased (from 4% to 1%), the general materials cost category increased (from 64% to 66%), with depreciation expense as a percentage of revenues holding steady at 1% of revenues. The general materials category for our packaging activity shows a much larger percentage of revenues than our ancillary activity, because for the packaging activity we purchase a large volume of packaging materials; whereas for the storage and ancillary activity, this is mostly service activity.

	Year Ended March 31, 2012
	Storage & Ancillary Activity						Packing Activity						Total Activity
Consolidated Revenue	$	8,387,802					$	1,602,809					$	9,990,611

Operating Expenses:				% of Revenue						% of Revenue						% of Revenue
Labor	$	(948,244	)		11	%	$	(112,760	)		7	%	$	(1,061,004	)		11	%
General materials	$	(306,993	)		4	%	$	(1,060,657	)		66	%	$	(1,367,650	)		14	%
Subcontractors	$	(43,994	)		1	%	$	-			-	%	$	(43,994	)		-	%
Depreciation and amortization	$	(687,618	)		8	%	$	(10,969	)		1	%	$	(698,587	)		7	%
Other costs	$	(120,080	)		1	%	$	(13,396	)		1	%	$	(133,476	)		1	%
Total operating expenses	$	(2,106,929	)		25	%	$	(1,197,782	)		75	%	$	(3,304,711	)		33	%

Net	$	6,280,873			75	%	$	405,027			25	%	$	6,685,900			67	%

	Year Ended March 31, 2011
	Storage & Ancillary Activity						Packing Activity						Total Activity
Consolidated Revenue	$	6,137,947					$	765,475					$	6,903,422

Operating Expenses:				% of Revenue						% of Revenue						% of Revenue
Labor	$	(707,275	)		12	%	$	(94,429	)		12	%	$	(801,704	)		12	%
General materials	$	(90,841	)		1	%	$	(492,401	)		64	%	$	(583,242	)		8	%
Subcontractors	$	(164,151	)		3	%	$	-			0	%	$	(164,151	)		2	%
Depreciation and amortization	$	(513,961	)		8	%	$	(4,304	)		1	%	$	(518,265	)		8	%
Other costs	$	(452,270	)		7	%	$	(27,396	)		4	%	$	(479,666	)		7	%
Total operating expenses	$	(1,928,498	)		31	%	$	(618,530	)		81	%	$	(2,547,028	)		37	%

Net	$	4,209,449			69	%	$	146,945			19	%	$	4,356,394			63	%

Selling, General and Administration Expenses (SG&A). Our SG&A expenses include our corporate executive management salaries, executive management and director non-cash compensation (restrictive stock grants and stock options), expenses related to being a public company and other professional fees, insurance, and other expenses that were not allocated or expensed to the terminal’s operations via our operating expenses. The table below outlines the expenses for the year ended March 31, 2012 and the year ended March 31, 2011 and the narrative following compares the differences between the periods.

Our consolidated SG&A expenses (cash and non-cash) for the year ended March 31, 2012 were approximately $3,618,000 or averaging approximately $301,500 per month. This is a slight increase of approximately $134,000 from the year ended March 31, 2011 when our consolidated SG&A was approximately $3,483,400, and averaging approximately $290,300 per month. However, SG&A expenses as a percentage of total revenues decreased from 50% as of year-end March 2011 to 36% as of year-end March 2012.

Management is pleased with the decrease in SG&A expenses as a percentage of revenues, as this supports Management’s belief and plan that we can increase revenues and utilization from our terminal operations without greatly increasing our established SG&A expenses.

Non-cash activity for the year ended March 31, 2012 includes management and director compensation expense for services of approximately $376,500, investor relations consulting services of approximately $12,500, and office fixture and equipment depreciation expenses of approximately $53,000. These non-cash expenses total approximately $442,000. Comparatively, for the year ended March 31, 2011, our non-cash expenses were approximately $772,000, including approximately $653,000 for management and director compensation expenses for services, investor relations consulting services of approximately $72,500, and office equipment depreciation expenses of approximately $47,000.

	For the				For the
Selling, General & Administrative (SG&A)	Year ended				Year ended
Expenses:	March 31, 2012				March 31, 2011
Management Salaries	$	1,193,000	33	%	$	1,095,000	31	%

Management, Director and Consultant Non-cash Compensation		389,000	11	%		725,000	21	%

Professional Fees		648,000	18	%		496,000	14	%

Insurance-Other		424,000	12	%		443,000	13	%

Depreciation-Office Fixtures & Equipment, Non-Cash		53,000	1	%		47,000	1	%

Other SG&A Expenses		911,000	25	%		677,000	20	%

Total SG&A Expenses	$	3,618,000	100	%	$	3,483,000	100	%

Management salaries increased approximately $98,000 or 9% due to the granting of cash bonuses and related payroll tax expenses.

Non-cash compensation expense for share grants to management, directors and consultants decreased by approximately $336,000 or by 46% from the period ending March 31, 2011 to the period ending March 31, 2012. This decrease is attributable to the expensing, in the year ended March 31, 2011 of the Black-Scholes calculation for modifying the April 2009 director stock options exercise period from December 2010 to January 1, 2012 and the calculation related to the granting of options to consultants. Additionally, in December 2011, the Board of Directors of the Company extended the vesting date of all of the management share grants with a vesting date of January 1, 2012 to January 1, 2015. This change decreased the non-cash compensation expense during the period January through March 2012.

Professional fees (audit, legal, securities, consulting, directors and investor relations) increased by approximately $152,000 and as a percentage of total SG&A expenses from 14% to 18%. This is mainly due to the increase in legal fees of approximately $83,000 from the Company’s due diligence process related to the acquisition of the Salisbury Terminal and loan with JPM. Director fees increased approximately $97,000, as during the year ended March 31, 2012 the Company’s shareholders elected four additional members to the Board of Directors. In September 2011, each of the Company’s five directors was paid an annual fee of $15,000, and fees relating to attending meetings. Expenses for other professional services decreased, such as securities, consulting and investor relations.

Our insurance related expenses decreased by approximately $19,000, even as we added coverage for our Salisbury Terminal and other new assets. Upon renewal in February 2012, our insurance rates generally decreased for most of our coverages.

Non-cash depreciation expenses related to office fixtures and equipment remained relatively the same in dollars and as a percentage of SG&A expenses.

Our other SG&A expenses increased by approximately $234,000. This increase is mostly due to employee benefits; as more employees qualified for enrollment in our employee benefit programs, and bonuses and related payroll expenses granted to office staff-totaling approximately $127,000. Additionally, we expensed more travel related costs of approximately $38,000 and increased property taxes of approximately $52,000.

Gain / Loss on Disposal of Asset. On April 14, 2011 the Company entered into an agreement with River Construction to transfer the Company’s barge dock and related equipment to the vendor in exchange for $115,000 to be offset against amounts currently owed by the Company to River Construction. As a result, the Company recorded a loss of $362,110 on the disposal of assets. William Weidner, who was elected to the Company’s Board of Directors in September 2011, is the owner of River Construction.

For the year ended March 31, 2011, we recorded a net gain of approximately $248,000 related to the disposal of assets. These activities are primarily due to the demolition of six unused tanks at the Westwego Terminal to make way for future construction of larger tanks. This activity resulted in a non-cash net loss of approximately $172,000. Additionally, pertaining to our tank leak incident in February 2009, we recorded the receipt of $260,000 as a settlement payment from our pollution insurance carrier, the reduction in account payable invoices from our major subcontractor of $168,000 and legal expenses of approximately $7,500, totaling a net gain of approximately $420,000.

To recap all of the insurance carrier reimbursements, our net repairs, cleanup and our other expenses related to the tank leak incident in February 2009, these were recorded at a gain or (loss) on disposal of assets to the extent that the loss was not recoverable through insurance. The table below summarizes amounts related to this incident.

Description	COMBINED PERIODS			For the Year Ended March 31, 2011		For the Period February 2009 through the Year Ended March 31, 2010
Environmental: Clean up & mitigation expenses (including gain on account payable offset)	$	(1,030,968	)	$	160,187	$	(1,191,155	)
Property: Tank disposal		(83,678	)		-		(83,678	)
Less: Insurance recovery		887,260			260,000		627,260
(Loss) Gain on Disposal of Asset	$	(227,386	)	$	420,187	$	(647,573	)

Interest Expense. For the year ended March 31, 2012, we recorded a net interest expense of approximately $886,000. This amount consists of cash payments of approximately $300,100 in convertible debt interest related to the September 2009 Offering; approximately $175,000 in convertible debt interest related to the January 2010 Offering; approximately $194,300 in bank loan interest; and approximately $4,000 in other various financing arrangements. Also included in this amount are non-cash expenses of approximately $273,500 in non-cash expenses related to the allocation of discounts related to our September 2009 and January 2010 convertible debt offerings. These expenses were offset by construction in process interest capitalization of approximately $61,000 and interest income of approximately $300.

For the year ended March 31, 2011, we recorded a net interest expense of approximately $908,000. This amount consists of cash payments of approximately $300,100 in convertible debt interest related to the September 2009 Offering; approximately $175,000 in convertible debt interest related to the January 2010 Offering; approximately $209,500 in bank loan interest; and approximately $5,000 in other various financing arrangements. Also included in this amount are non-cash expenses of approximately $429,000 in non-cash expenses related to the allocation of discounts and deferred financing costs related to our September 2009 and January 2010 convertible debt offerings. These expenses were offset by construction in process interest capitalization of approximately $210,000 and interest income of approximately $600.

Gain on Bargain Purchase of Assets. On December 22, 2011 we finalized the acquisition of the Salisbury Terminal for $1,600,000. We commissioned and obtained a leasehold valuation appraisal from Nationwide Consulting Company, a third-party independent appraisal firm. The Salisbury Terminal appraisal concluded that the leasehold value of the Salisbury Terminal as of June 30, 2011 was $2,570,000. We reassessed all identifiable assets acquired and liabilities assumed in the acquisition and subsequently valued the combined assets at the Salisbury Terminal for $2,570,000. Therefore, the Company valued the combined assets at the Salisbury Terminal at $2,570,000 and recorded a $970,000 “bargain purchase” gain for the difference.

On July 15, 2010 we finalized the acquisition of the Brunswick Terminal for $1,800,000. We commissioned and obtained a leasehold valuation appraisal from Nationwide Consulting Company, a third-party independent appraisal firm. The Brunswick Terminal appraisal concluded that the leasehold value of the Brunswick Terminal as of July 15, 2010 was $1,900,000. We reassessed all identifiable assets acquired and liabilities assumed in the acquisition and subsequently valued the combined assets at the Brunswick Terminal at $1,900,000 and recorded a $100,000 “bargain purchase” gain for the difference.

Gain on Extinguishment of Convertible Debt Loans and Gain on Change in the Fair Market Value of Derivative Liabilities. In June 2011, the Board of Directors of the Company passed a resolution to seek written consent from the holders of the Company’s 2009 and 2010 Convertible Promissory Notes to amend the note’s maturity dates from October 15, 2011 to October 15, 2013 for the 2009 Notes and from March 31, 2012 to September 30, 2013 for the 2010 Notes.

These changes to the maturity dates were evaluated under ASC 470 “EITF 96-19” “Debtor’s Accounting for Modification or Exchange of Debt Instruments.” As a result of the maturity date extension amendments, the convertible debt notes now qualify as a debt extinguishment and therefore are treated as if the Company settled the debts prior to their maturity date amendment and then entered into entirely new debt agreements after the amendment. (see Note 6)

In connection with the original offerings, we incurred cash fees and issued shares of the Company’s restricted common stock, valued at the grant-date fair value of our common stock. These fees were included in the deferred financing costs in our consolidated balance sheet and were being amortized over the original terms of the convertible notes using the effective interest rate method.

Per the applicable accounting standards, the amendment of the convertible debt notes was required to be treated as an extinguishment of the original convertible debt notes and related accounts, as of June 24, 2011; therefore, we wrote off the remainder of the unamortized deferred financing asset of $191,720 and recorded a loss due to this extinguishment. We also wrote off the derivative liabilities of $1,591,660 and recorded a gain. These transactions resulted in a net “non-cash” gain of $1,399,940.

On June 24, 2011, as per ASC 815-40, we evaluated the fair value of the derivative liabilities (using the BWMS closing share price of $0.55) and recorded a net “non-cash” loss of $193,749. Additionally as per ASC 470, we evaluated the derivative liabilities related to the amended convertible debt notes as of June 24, 2011 (using the BWMS closing share price of $0.55) and recorded a new derivative liability of $4,516,240. This amount will be amortized over the new remaining life of the notes, until October 15, 2013 for the 2009 notes and until September 30, 2013 for the 2010 notes.

On June 30, 2011, as per ASC 815-40, we evaluated the fair value of the derivative liabilities again (using the BWMS closing share price of $0.51) and recorded a net “non-cash” gain of $418,724.

On September 30, 2011, as per ASC 815-40, we evaluated the fair value of the derivative liabilities again (using the BWMS closing share price of $0.45) and recorded a net “non-cash” gain of $710,565.

On December 31, 2011, as per ASC 815-40, we evaluated the fair value of the derivative liabilities again (using the BWMS closing share price of $0.39) and recorded a net “non-cash” gain of $867,705.

On March 31, 2012, as per ASC 815-40, we evaluated the fair value of the derivative liabilities again (using the BWMS closing share price of $0.53) and recorded a net “non-cash” loss of $1,001,250.

The net result of these transactions was a “non-cash” gain on the extinguishment of convertible debt loans of $1,399,940 and a “non-cash” gain on the change in the fair market value of derivative liabilities of $801,995.

Other Income. In March 2012, we recorded a net gain of $47,556 pertaining to the Company’s award of a Louisiana incentive program related to employment increases at the Westwego Terminal. These funds are expected to be received by the Company in June or July of 2012.

In December 2010, we recorded a net gain of approximately $140,000 related to the Company’s award of a Louisiana Quality Jobs incentive grant based on our asset investments at the Westwego Terminal. These funds were received by the Company in April 2011. Additionally, in March 2011 the Company recorded a net gain of approximately $48,000 pertaining to the Company’s award of a Louisiana incentive program related to employment increases at the Westwego Terminal. These funds were received by the Company in June 2011.

Net Income (Loss). For the year ended March 31, 2012, we incurred a net gain from operations in the amount of $5,039,845 or 50% of revenues. This is a significant increase from the net income recorded by the Company for the year ended March 31, 2011 of approximately $1,003,842 or 14.5% of revenues.

Included in the net income figure for the year ended March 31, 2012 are non-cash, non-recurring events consisting of the “bargain purchase” gain of $970,000 pertaining to the Salisbury Terminal acquisition, and the gain of $1,399,940 due to the extinguishment of the 2009 and 2010 convertible debt loans. Also included is the non-cash gain of $801,995 related to the fair market valuation of our derivative convertible debt liabilities.

For the year ended March 31, 2011, included in the net income figure of $1,003,842 were non-cash events for the “bargain purchase” gain of $100,000 pertaining to the Brunswick Terminal acquisition, and the gain of $503,141 related to the fair market valuation of our derivative convertible debt liabilities.

For the Year Ended March 31, 2011.

Revenues-Storage Revenues. For the year end March 31, 2011 the storage tank revenues totaled approximately $5,612,000, averaging approximately $468,000 per month. However, this twelve month period average does not include any storage revenue from the Brunswick Terminal, for the period April 2010 through July 2010; as it was acquired in July 2010. As of March 2011, the consolidated storage utilization at our terminals was 85%, based on 1,018,000 barrels of leasable capacity.

Revenues-Ancillary Services. Ancillary fees are earned based on a customer’s particular needs, and therefore, by their nature fluctuate from month to month. For the year ended March 31, 2011, our ancillary fees totaled approximately $1,292,000, an average of approximately $107,600 per month. Ancillary fees during the year ended March 31, 2011 included packaging fees of approximately $765,000.

Operating Expenses. Our operating expenses consist mainly of direct and contract labor, associated payroll taxes and labor burden expenses, general materials, subcontractors, depreciation expenses, and other expenses. These amounts totaled approximately $2,547,000 for the year ended March 31, 2011, or approximately $212,300 average per month, or 37% of revenue.

Selling, General and Administration Expenses (SG&A). Our SG&A expenses include our corporate executive management salaries, executive management and director non-cash compensation (restrictive stock grants and stock options), expenses related to being a public company and other professional fees, insurance, office fixture and equipment depreciation and other expenses that were not allocated or expensed to the terminals’ operations via our operating expenses.

Our consolidated SG&A expenses for the year ended March 31, 2011 were approximately $3,483,000, averaging approximately $290,300 per month or 50% of total revenues. Included in this SG&A total is non-cash activity for management, directors and consultant’s compensation expense for services of approximately $725,500 and office depreciation expense of approximately $47,000.

Gain / Loss on Disposal of Asset. For the year ended March 31, 2011, we recorded a net gain of approximately $248,000 related to the disposal of assets. These activities are primarily due to the demolition of six unused tanks at the Westwego Terminal to make way for future construction of larger tanks. This activity resulted in a non-cash net loss of approximately $172,000. Additionally, pertaining to our tank leak incident in February 2009, we recorded the receipt of $260,000 as a settlement payment from our pollution insurance carrier, the reduction in account payable invoices from our major subcontractor of $168,000 and legal expenses of approximately $7,500, totaling a net gain of approximately $420,000.

Interest Expense. We recorded approximately $908,000 in net interest expense for the year March 31, 2011. Approximately $209,500, of our net consolidated interest expense was related to our loan agreements with JPM. The remainder relates to our interest payments pertaining to the September 2009 and January 2010 convertible debt loans of $475,000, and approximately $5,000 for other financing arrangements. Also included in this amount are non-cash expenses of $429,000 for the allocation of financing charges related to our September 2009 and January 2010 convertible debt offerings. These expenses were offset by construction in process interest capitalization of approximately $210,000.

Net Income (Loss). For the year ended March 31, 2011, included in the net income figure of $1,003,842 were non-cash events for the “bargain purchase” gain of $100,000 pertaining to the Brunswick Terminal acquisition, and the gain of $503,141 related to the fair market valuation of our derivative convertible debt liabilities.

Liquidity and Capital Resources.

General. Our primary cash requirements are for working capital; which includes debt service and normal operating expenses. We attempt to fund our working capital requirements with cash generated from our operations. If we do not generate sufficient cash from operations to meet these requirements, we attempt to raise funds through debt financing or refinancing and/or issuing equity. We generally fund our strategic capital expenditures from external sources, primarily borrowing which is secured by long-term contracts with our customers. However, our ability to raise funds by refinancing debt, issuing debt or issuing equity depends on many factors beyond our control. The volatility of the capital and credit markets could restrict our ability to issue debt or equity or may increase our cost of capital beyond rates acceptable to us.

Significant Events during the Year Ended March 31, 2012.

Bank Loans

October 2010 Term Note.

In January 2011, JPM responded affirmatively to the Company’s request to delay the next few months of principal payments on the October 29, 2010 Term Note and make payments “as we are able.” JPM and the Company agreed that the Company’s funds would be better used by making payments against outstanding accounts payable. The January 2011 principal payment was paid in February 2011, the February 2011 principal payment was paid in March 2011, the March principal payment was paid in April 2011, and the April, May and June principal payments were paid in June 2011. Since June 2011, the principal payments have been made timely, and the Company anticipates that all subsequent principal payments will be made timely.

Acquisition of the Salisbury Terminal.

In connection with the purchase and acquisition of the Salisbury Terminal on December 22, 2011, BWMD entered into a term loan with JPM in the principal amount of $1,600,000 to finance the purchase price of the terminal. The loan bears interest at the annual fixed rate of 4.50%. Beginning on January 21, 2012 and continuing on the last day of each calendar month thereafter, BWMD will pay consecutive monthly installments of interest only on the loan. In addition, beginning on July 21, 2012 and continuing on the last day of each calendar month thereafter. BWMD will pay monthly principal installments of $26,667. All unpaid principal and accrued and unpaid interest is finally due and payable on July 21, 2017.

The term loan includes customary events of default including, but not limited to, the failure of BWMD to pay any principal or interest when due, the breach of any representation or warranty in any of JPM’s loan documents, or the insolvency or bankruptcy. Upon the occurrence of an event of default the loan will become due and payable automatically and without notice.

Additionally, in connection with the closing of the acquisition, BWMD entered into the following with JPM: a credit agreement, a continuing security agreement covering all of BWMD’s personal property and a Subordination Agreement.

As additional collateral, BWNO agreed to secure the BWMD loan with the existing collateral mortgage encumbering BWNO’s right, title and interest in the immovable property, buildings, structures, machinery, equipment and improvements on the premises located at 660 LaBauve Drive, Westwego, Jefferson Parish, Louisiana.

Blackwater Midstream Corp. entered into a continuing guaranty and the Subordination Agreement with JPM, and guaranteed the obligations of BWMD under the terminal Purchase Agreement with NuStar.

Storage Tank Construction at the Brunswick Terminal

In connection with the construction of a 60,000 barrel storage tank at the Brunswick Terminal, on February 28, 2012, BWGA entered into a term loan with JPM in the principal amount of $1,380,000 to finance the construction of the new storage tank. As of March 31, 2012, BWGA has received advances on this loan in the amount of $408,072.

The term loan bears interest at the annual fixed rate of 4.50%. Beginning on March 31, 2012 and continuing on the last day of each calendar month thereafter, BWGA will pay consecutive monthly installments of interest only on the loan. In addition, beginning on October 31, 2012 and continuing on the last day of each calendar month; thereafter BWGA will pay monthly principal installments of $23,000. All unpaid principal and accrued and unpaid interest is finally due and payable on August 31, 2017.

The BWGA loan includes customary events of default including, but not limited to, the failure of BWGA to pay any principal or interest when due, the breach of any representation or warranty in any of JPM’s loan documents, or the insolvency or bankruptcy. Upon the occurrence of an event of default, the BWGA loan will become due and payable automatically and without notice.

Additionally, in connection with the closing of the acquisition, BWGA entered into the following with JPM: a credit agreement, a continuing security agreement covering all of BWGA’s personal property, and a Subordination Agreement.

As additional collateral, BWNO agreed to secure the BWGA loan with the existing collateral mortgage encumbering BWNO’s right, title and interest in the immovable property, buildings, structures, machinery, equipment and improvements on the premises located at 660 LaBauve Drive, Westwego, Jefferson Parish, Louisiana.

Blackwater Midstream Corp. entered into a continuing guaranty and the Subordination Agreement with JPM, and guaranteed the obligations of BWGA under the terminal Purchase Agreement with NuStar.

Convertible Debt

On June 14, 2011, the Board of Directors of the Company passed a resolution to seek written agreements from the holders of the Company’s 2009 Convertible Promissory Note (the “2009 Notes”) and the 2010 Convertible Promissory Note (the “2010 Notes) to amend their respective maturity dates to:

For the 2009 Notes, from October 15, 2011 to October 15, 2013.

For the 2010 Notes, from March 31, 2012 to September 30, 2013.

All of the 2009 Notes and 2010 Notes has been amended to reflect the extended maturity dates.

October 2009 convertible debt offering

In June 2011, the Company contacted the holders of the Company’s 2009 Convertible Promissory Note to extend the note’s maturity date from October 15, 2011 to October 15, 2013. All of the 2009 Convertible Promissory Notes have been amended to reflect the new maturity date.

March 2010 convertible debt offering

Related party investors as of March 31, 2012 and March 31, 2011 accounted for $245,000 and $70,000, respectively of the aggregate amount of convertible debt funds collected. The $175,000 increase is due to the appointment in June 2011 of two members to the Company’s Board of Directors, Mr. Philip Tracy and Mr. William Gore, who hold March 2010 convertible debt notes in the amount of $100,000 and $75,000, respectively. Mr. Gore and Mr. Tracy were elected to the Company’s Board of Directors in September 2011.

As per accounting standards, this change in the maturity date was evaluated under ASC 470 “EITF 96-19” “Debtor’s Accounting for Modification or Exchange of Debt Instruments.” As a result of the maturity date extension amendment, the convertible debt notes then qualified as a debt extinguishment and therefore were treated as if the Company settled the debt prior to the maturity date amendment and then entered into an entirely new debt agreement after the amendment. (see Note 6)

Per the applicable accounting standards, the amendment of the convertible debt notes was required to be treated as an extinguishment of the original convertible debt notes and related accounts, as of June 24, 2011. Therefore, we wrote off and expensed the remainder of the unamortized deferred financing asset of $130,271 and decreased the derivative liability by $770,860. These transactions resulted in a net “non-cash” gain of $640,589.

Additionally as per ASC 470, we evaluated the fair value of the derivative related to the amended convertible debt notes as of June 24, 2011 (using the BWMS closing share price of $0.55) and recorded a new derivative liability of $1,645,253. This amount will be amortized over the new remaining life of the notes, until September 30, 2013.

In summary, during the twelve-month period ending March 31, 2012, the Company recorded a net “non-cash” gain of $2,201,935 related to the 2009 and 2010 Notes; approximately $1,400,000 due to the extinguishment of the original convertible debt notes and deferred financing charges; and $801,995 related to changes in the fair market value of the convertible debt notes derivative liabilities.

For the Year Ended March 31, 2012

As of March 31, 2012, our total assets were approximately $17,596,000. This amount includes cash and cash equivalents of approximately $190,300. Additionally, the total assets amount includes approximately $386,700 from trade receivables, approximately $50,600 from other receivables, approximately $210,200 for the current portion of intangible net assets, approximately $237,800 for prepaid expenses, and approximately $16,520,600 for net property, plant and equipment and intangibles.

Our total liabilities were approximately $10,548,300. Our current liabilities were approximately $6,772,300, which includes accounts and accrued payables of approximately $1,586,000, deferred revenue (due to storage prepayment) of approximately $114,000, a derivative liability valuation for the convertible debt notes of approximately $3,520,500, and the current portion of our long-term debt of approximately $1,551,900. Our long-term bank loans are approximately $3,390,900 and our convertible debt loans, net of discount, totals approximately $385,000.

At March 31, 2012, we had negative working capital of approximately $5,697,000, as compared to negative working capital of approximately $8,989,000 as of March 31, 2011. This is an increase in working capital of approximately $3,292,000 from the year ended March 31, 2011. Of this increase, approximately $2,313,500 is related to our convertible debt loan liabilities and the remainder of approximately $978,500 is from regular business activity.

As shown in the accompanying consolidated financial statements, we generated a consolidated net gain of $5,039,845 for the year ended March 31, 2012. This figure includes non-cash expenses for depreciation of approximately $752,000, amortization expense of deferred financing fees and convertible loan discounts of approximately $273,500, loss on the disposal of assets of approximately $362,000, gain of approximately $970,000 on the bargain purchase of the Salisbury Terminal, gain on the extinguishment of convertible debt loans of approximately $1,400,000, gain of approximately $802,000 due to changes in the fair market value of derivative convertible debt notes, and stock based compensation expense of approximately $389,000.

For the Year Ended March 31, 2011

As of March 31, 2011, our total assets were approximately $14,506,000. This amount includes cash and cash equivalents of approximately $51,000. Additionally, the total assets amount includes approximately $196,000 from trade receivables, approximately $209,000 from other receivables, approximately $315,000 related to the current portion of deferred financing charges and approximately $192,000 for prepaid expenses; and approximately $13,543,000 from net property, plant and equipment.

Our total liabilities were approximately $12,887,000. Our current liabilities were approximately $9,952000, which includes accounts and accrued payables of approximately $1,906,000, deferred revenue (due to storage prepayment) of approximately $215,000, liabilities for our tank disposal associated with our insurance incident of approximately $410,000, convertible debt loans and derivative liabilities of approximately $6,149,000 and the current portion of our long-term debt of $1,272,000. The long-term portion of our bank debt was approximately $2,935,000.

At March 31, 2011, we had negative working capital of approximately $8,989,000.

As shown in the accompanying consolidated financial statements, we generated a consolidated net gain of $1,004,000 for the year ended March 31, 2011. This figure includes non-cash expenses for depreciation of approximately $565,000, amortization expense of deferred financing fees and convertible loan discounts of approximately $429,000, loss on the disposal of assets of approximately $165,000, gain of $100,000 on the bargain purchase of the Brunswick Terminal, gain of approximately $503,000 due to changes in the fair market value of derivative convertible debt notes, and stock based compensation expense of approximately $726,000.

For the Year Ended March 31, 2012 as Compared to the Year Ended March 31, 2011.

At March 31, 2012, we had cash totaling $190,344. At March 31, 2011 we had cash of $51,386; therefore, during the period we had a net increase in cash of approximately $139,000.

During the year ended March 31, 2012, we reported a gain from operating activities of approximately $5,039,800. This was offset by non-cash activities of approximately $1,395,600 and use of cash from changes in operating assets and liabilities of approximately $1,201,100, use of cash from investing activities of approximately $3,040,500 and receipt of funds from various financing activities of approximately $736,000, resulting in an increase in cash for the period of approximately $139,000.

During the year ended March 31, 2011, we reported a gain from operating activities of approximately $1,003,800. This was offset by non-cash activities of approximately $1,281,000, use of cash from changes in operating assets and liabilities of approximately $1,280,000, use of cash from investing activities of approximately $3,841,000 (which does include $1,800,000 used to purchase the Brunswick Terminal) and receipt of funds from various financing activities of approximately $867,000, resulting in a decrease in cash for the period of approximately$1,969,000.

Future minimum payments related to our JPM credit facilities and our convertible debt notes as of March 31, 2012, for the next five years and the total amount thereafter are as follows; assuming none of the convertible debt notes are converted.

Year ending March 31,
2013	$	1,551,864
2014		6,514,969
2015		906,932
2016		320,000
2017		320,000
Thereafter		80,000
	$	9,693,765

We do not have any operating leases.

Previous Liquidity and Capital Resources Activity.

Redemption of Investment in Safeland Storage, L.L.C. On June 26, 2008, we purchased a seven percent (7%) interest in Safeland Storage, L.L.C. (“Safeland”) for $1,500,000 pursuant to a Membership Interest Purchase Agreement with Safeland for the purchase of land located in Garyville, LA for a purchase price of $20,500,000. The investment in Safeland was to facilitate our acquisition of 435 acres of land near the town of Garyville, Louisiana; where we planned to build and develop a storage terminal. However, due to economic conditions at the time, the closing on the land did not take place.

During the year ended March 31, 2009 we evaluated our investment in Safeland for impairment. Safeland’s principal asset was the property located in Garyville, LA as referenced above. At the time of our evaluation, the property was valued at approximately $7,760,000; therefore, our 7% share was valued at about $543,200. This amount was discounted approximately 25% to reflect our minority management interest and we recorded an impairment charge of $1,092,600. On September 4, 2009, we redeemed our seven percent (7%) interest in Safeland for $325,000, which resulted in an additional impairment charge of $82,400.

Private Placement of Equity. From June through August 2008, we issued 2,092,500 shares of restricted common stock for cash proceeds of $4,185,000 in a private placement, which was exempt from registration under Regulation S and/or Regulation D and Section 4(2) of the Securities Act of 1933, as amended. In connection with the offering, we engaged Falcon International Consulting Limited to act as placement agent. Falcon International received a fee of 10% of the gross proceeds of the Offering.

In August 2008, we granted and issued 83,700 shares of restricted common stock at $2.00 per share, to affiliates of Falcon International Consulting Limited for professional services rendered to the Company in connection with the private placement described above. The value of these shares was recorded as a cost of the offering.

In December 2008, we entered into certain subscription agreements (collectively, the “December Purchase Agreement”) with certain investors (the “December 2008 Investors”) for the sale of an aggregate of 8,224,600 shares of our common stock, par value $.001 per share, at a purchase price of $0.25 per share for gross proceeds of $2,056,150 (the “December 2008 Offering”). Pursuant to the terms of the December Purchase Agreement the December 2008 Investors are entitled to receive one share of common stock at no additional consideration for each four shares for which they subscribed, resulting in an effective purchase price of $0.20 per share. This resulted in an additional 2,056,150 shares (collectively, the “Free Shares”), in the aggregate issued to the purchasers, at no additional consideration, resulting in an aggregate of 10,280,750 shares issued to the December 2008 Investors. The Company issued these additional shares in March 2009.

The December Purchase Agreement sets forth certain rights and obligations of the parties, as well as customary representations and warranties by the Company and the Investors, including anti-dilution and preemptive rights. The issuance of the shares pursuant to the December 2008 Offering is exempt from registration under Regulation D and Section 4(2) of the Securities Act of 1933, as amended.

In connection with the December 2008 Offering, the Company engaged Falcon Capital Limited to act as placement agent. Falcon Capital secured Purchase Agreements for a total of 5,424,600 shares and received a fee of $135,615, or 10% of the gross proceeds for the portion of the December 2008 Offering attributable to them, as well as 542,460 restricted shares of the Company’s common stock distributed to affiliates of Falcon Capital, which includes 406,845 shares to the Company’s director at that time, Mathijs van Houweninge.

The December 2008 Offering triggered anti-dilution rights of investors in its August 2008 private placement, in which the Company sold an aggregate of 2,092,500 shares for gross proceeds of $4,185,000, par value $.001 per share, at a purchase price of $2.00 per share (the “August 2008 Offering”). The December 2008 Offering entitled investors in the August 2008 Offering to receive an aggregate of approximately 690,016 shares pursuant to their contractual anti-dilution rights. At its meeting on January 28, 2009, the Board of Directors determined to reprice the per share amount paid in the August 2008 Offering to $0.40 per share, which was not contractually required, resulting in an aggregate additional issuance of 8,704,800 shares, which includes an additional 334,800 shares issued to affiliates of Falcon Capital, the placement agent in the August 2008 Offering. The decision of the Board of Directors to reprice the shares purchased in the August 2008 Offering was based on the $0.25 per share offering price of the December 2008 Offering and the quoted market price of the stock on or near the date of the resolution. Therefore, investors in the August 2008 Offering received four shares of restricted common stock of the Company for every one share purchased in the August 2008 Offering.

Private Offering of Convertible Debt.

October 2009 convertible debt offering

On October 15, 2009, we issued $3,001,033 of convertible notes. The convertible notes originally set a mature date on October 15, 2011 (the date was later extended, see below) and have a stated annual interest rate of 10%. The principal is payable at maturity but interest is paid quarterly beginning January 15, 2010. During the year ended March 31, 2012 and 2011, we incurred $300,103 in interest expense in each year. In addition, the notes are convertible at any time into restricted shares of the Company’s common stock at $0.50 per share. Related party investors accounted for $430,000 as of March 31, 2012 and $180,000 as of March 31, 2011 of the aggregate amount of convertible debt funds collected.

In connection with the offering, we incurred cash fees of $265,103 and issued 700,000 shares of restricted common stock, valued at $203,000 based on the grant-date fair value of our common stock. These fees were included in the deferred financing costs in the consolidated balance sheet and were being amortized over the original term of the convertible notes using the effective interest rate method. During the year ended March 31, 2012 and the year ended March 31, 2011, we amortized approximately $73,314 and $249,000, respectively, of deferred financing cost.

On June 14, 2011, the Board of Directors of the Company passed a resolution to seek written agreements from the holders of the Company’s 2009 Convertible Promissory Note to amend its maturity date from October 15, 2011 to October 15, 2013. All of the 2009 Convertible Promissory Notes have been amended to reflect the new maturity date.

March 2010 convertible debt offering

On March 31, 2010, we issued $1,750,000 of convertible notes. The convertible notes originally set a mature date on March 31, 2012 (the date was later extended, see below) and have a stated annual interest rate of 10%. The principal is payable at maturity but interest is paid quarterly beginning June 30, 2010. During the year ended March 31, 2012 and 2011, we incurred $175,000 in interest expense in each year. In addition, the notes are convertible at any time into restricted shares of the Company’s common stock at $0.50 per share. Related party investors accounted for $245,000 as of March 31, 2012 and $70,000 as of March 31, 2011 of the aggregate amount of convertible debt funds collected.

In connection with the offering, we incurred cash fees of $164,750 and issued 659,000 shares of restricted common stock, valued at $171,340 based on the grant-date fair value of our common stock. These fees were included in the deferred financing costs in the consolidated balance sheet and were being amortized over the original term of the convertible notes using the effective interest rate method. During the year ended March 31, 2012 and the year ended March 31, 2011, we amortized approximately $49,878 and $180,500, respectively, of deferred financing cost.

On June 14, 2011, the Board of Directors of the Company passed a resolution to seek written agreements from the holders of the Company’s 2009 Convertible Promissory Note to amend its maturity date from October 15, 2011 to October 15, 2013. All of the 2010 Convertible Promissory Notes have been amended to reflect the new maturity date.

Off Balance-Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable to smaller reporting company filers.

Item 8. Financial Statements and Supplementary Data.

BLACKWATER MIDSTREAM CORP.

CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent registered public accounting firm,

Consolidated Balance Sheets as of March 31, 2012 and March 31, 2011,

Consolidated Statements of Operations for the year ended March 31, 2012 and the year ended March 31, 2011,

Consolidated Statements of Stockholders’ Equity for the period March 31, 2011 through March 31, 2012,

Consolidated Statements of Cash Flows for the year ended March 31, 2012 and the year ended March 31, 2011,

Notes to consolidated financial statements.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Blackwater Midstream Corp.

Westwego, LA

We have audited the accompanying consolidated balance sheets of Blackwater Midstream Corp. and its subsidiaries (collectively, the “Company”) as of March 31, 2012 and 2011, and the related consolidated statements of operations, stockholders’ equity, 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 audits.

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 audit to obtain reasonable assurance about whether the consolidated 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 audits 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 consolidated 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 audits provide a reasonable basis for our opinion.

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

MaloneBailey, LLP

www.malone-bailey.com

Houston, Texas

June 15, 2012

BLACKWATER MIDSTREAM CORP.

CONSOLIDATED BALANCE SHEETS

	MARCH 31,			MARCH 31,
	2012			2011

ASSETS

CURRENT ASSETS:
Cash	$	190,334		$	51,386
Receivables-trade		386,668			196,424
Receivables-other		50,567			208,600
Current portion of deferred financing charges		-			314,913
Current portion of intangible assets, net		210,214			-
Prepaid expenses and other current assets		237,780			191,533
Total current assets		1,075,563			962,856

Property, plant, equipment, net		16,473,674			13,542,885
Intangible assets, net		46,894			-

TOTAL ASSETS	$	17,596,131		$	14,505,741

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	1,320,305		$	1,746,155
Accounts payable-related parties		60,763			10,527
Accrued liabilities		204,582			149,073
Deferred revenue		114,334			215,234
Liabilities-disposal of asset		-			410,431
Current portion of related party long-term convertible debt loans		-			250,000
Current portion of long-term convertible debt loans		-			4,501,033
Derivative liabilities of convertible debt loans		3,520,496			1,397,911
Current portion of long-term bank loans		1,551,864			1,271,686
Total current liabilities		6,772,344			9,952,050

Long-term liabilities:
Bank loans		3,390,868			2,934,660
Related party convertible debt loans, net of discount of $620,291 and $0		54,709			-
Convertible debt loans, net of discount of $3,745,668 and $0		330,365			-
Total long-term liabilities		3,775,942			2,934,660

TOTAL LIABILITIES		10,548,286			12,886,710

STOCKHOLDERS' EQUITY
Preferred stock - 20,000,000 "blank check" preferred shares, issuable in one or more series, no shares issued and outstanding		--			--

Common stock - 200,000,000 shares authorized, $0.001 par value: 56,476,186 and 54,792,114 issued, outstanding at March 31, 2012 and March 31, 2011, respectively		56,476			54,792
Additional paid-in capital		8,398,943			8,011,658
Accumulated deficit		(1,407,574	)		(6,447,419	)
TOTAL STOCKHOLDERS' EQUITY		7,047,845			1,619,031

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	17,596,131		$	14,505,741

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

BLACKWATER MIDSTREAM CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year			Year
	Ended			Ended
	March 31, 2012			March 31, 2011

Revenue
Storage	$	7,483,073		$	5,611,784
Packaging services		1,602,809			765,475
Excess through-put services		438,094			10,395
Other services		466,635			515,768

Total Revenue		9,990,611			6,903,422

Operating expenses		(3,304,711	)		(2,547,028	)
Selling, general and administrative expenses		(3,617,813	)		(3,483,476	)
Gain (loss) on disposal of assets		(362,110	)		247,938

Operating income		2,705,977			1,120,856

Net interest expense		(885,623	)		(907,895	)
Gain on bargain purchase of assets		970,000			100,000
Gain on extinguishment of convertible debt loans		1,399,940			-
Gain on change in fair market value of derivative liabilities		801,995			503,141
Other income		47,556			187,740

Net Income	$	5,039,845		$	1,003,842

NET INCOME PER COMMON SHARE,
BASIC	$	0.09		$	0.02
DILUTED	$	0.01		$	0.01

Weighted average number of shares outstanding:
BASIC		55,783,597			54,616,489
DILUTED		65,724,878			65,817,436

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

BLACKWATER MIDSTREAM CORP.

CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY

For the two years ended March 31, 2012 and 2011

	COMMON STOCK

	NUMBER OF COMMON SHARES		PAR VALUE $0.001		ADDITIONAL PAID -IN CAPITAL			ACCUMULATED DEFICIT			TOTAL

Balance, April 1, 2010		54,408,734	$	54,409	$	9,187,531		$	(7,451,261	)		1,790,679

Shares issued for services		383,380		383		462,095			—			462,478

Reclassification of derivatives liabilities on convertible debt loans		—		—		(1,901,052	)		—			(1,901,052	)

Stock option expense		—		—		263,084			—			263,084

Net profit		—		—		—			1,003,842			1,003,842

Balance, March 31, 2011		54,792,114		54,792		8,011,658			(6,447,419	)		1,619,031

Shares issued for services		325,500		325		388,644			—			388,969

Shares issued upon option exercises		1,358,572		1,359		(1,359	)		—			—

Net profit		—		—		—			5,039,845			5,039,845

Balance, March 31, 2012		56,476,186	$	56,476	$	8,398,943		$	(1,407,574	)	$	7,047,845

The accompanying notes as an integral past of these audited consolidated financial statements

BLACKWATER MIDSTREAM CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year			Year
	Ended			Ended
	March 31, 2012			March 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	5,039,845		$	1,003,842
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		672,283			565,102
Amortization of intangible assets		79,457			-
Amortization of deferred financing fees & convertible loan discounts		273,473			428,943
Net loss on disposal of assets		362,110			164,534
Net gain on bargain purchase of assets		(970,000	)		(100,000	)
Net gain on extinguishment of convertible debt loans		(1,399,940	)		-
Net gain on change in fair market value of derivative liabilities		(801,995	)		(503,141	)
Stock based compensation		388,969			725,562

Changes in operating assets and liabilities:
Accounts receivable-trade		(190,244	)		(146,704	)
Accounts receivable-other		158,033			(208,600	)
Prepaid expenses		(70,182	)		87,003
Inventory		23,934			(25,929	)
Deferred revenue		(100,900	)		(189,950	)
Accounts payable and accruals		(1,021,742	)		(795,414	)
Net cash provided by operating activities	$	2,443,101		$	1,005,248

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Brunswick, GA Terminal		-			(1,800,000	)
Purchase of Salisbury, MD Terminal		(1,600,000	)		-
Purchase of property, plant and equipment		(1,440,539	)		(2,041,235	)
Net cash provided by investing activities	$	(3,040,539	)	$	(3,841,235	)

CASH FLOWS FROM FINANCING ACTIVITES:
Proceeds from bank loan		2,008,072			1,816,160
Payments on bank loan		(1,271,686	)		(949,314	)
Net cash provided by financing activities	$	736,386		$	866,846

NET CHANGE IN CASH FOR THE PERIOD		138,948			(1,969,141	)
CASH AT BEGINNING OF PERIOD		51,386			2,020,527
CASH AT END OF PERIOD	$	190,334		$	51,386

SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for interest	$	672,297		$	689,812
Cash paid for income taxes	$	-		$	-
Non-cash investing and financing activities:
Construction in process included in accounts payable	$	406,208		$	1,013,619
Barge dock exchanged for accounts payable	$	115,000		$	-
Shares issues in cashless exercises	$	1,359		$	-
Debt discount related to derivative liabilities	$	4,516,240		$	-

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

BLACKWATER MIDSTREAM CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

We were incorporated in the State of Nevada, U.S.A., on March 23, 2004. On March 18, 2008, we changed our name to Blackwater Midstream Corp. from Laycor Ventures Corp.

On September 9, 2008, we formed Blackwater New Orleans, L.L.C. (“BWNO”), a Louisiana limited liability company, as our wholly-owned subsidiary of the Company. On December 23, 2008, BWNO acquired an existing bulk liquid storage terminal in Westwego, LA (the “Westwego Terminal”) from NuStar Terminals Operations Partnership L.P.

On February 26, 2010, we formed Blackwater Georgia, L.L.C. (“BWGA”), a Georgia limited liability company, as our wholly-owned subsidiary of the Company. On July 15, 2010, BWGA acquired an existing bulk liquid storage terminal in Brunswick, GA (the “Brunswick Terminal”) from NuStar Terminals Operations Partnership L.P. (See Note 3)

On November 22, 2011, we formed Blackwater Maryland, L.L.C. (“BWMD”), a Maryland limited liability company, as our wholly-owned subsidiary of the Company. On December 22, 2011, BWMD acquired an existing truck rack liquid storage terminal in Salisbury, MD (the “Salisbury Terminal”) from NuStar Terminals Operations Partnership L.P. (See Note 3)

Blackwater, we, our or the Company references herein are referring to consolidated information pertaining to Blackwater Midstream Corp., the registrant, our wholly-owned subsidiaries, Blackwater New Orleans, L.L.C.; Blackwater Georgia, L.L.C., and Blackwater Maryland, L.L.C and to Laycor Ventures, Corp.

CONSOLIDATION

The accompanying consolidated financial statements represent the consolidated operations of Blackwater Midstream Corp. and its wholly-owned subsidiaries, BWNO, BWGA and BWMD. Intercompany balances and transactions have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, management reviews their estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

CASH AND CASH EQUIVALENTS

Cash equivalents are all highly liquid investments with an original maturity of three months or less when acquired.

REVENUE RECOGNITION

Revenues for third-party terminals include storage tank lease fees, whereby a customer agrees to pay for a certain amount of tank storage over a certain period of time; and throughput fees, whereby a customer pays a fee based on volumes moving through the terminal. At our terminals, we also offer and provide packaging, blending, handling, filtering and certain other ancillary services. Revenue from storage tank lease fees are recognized ratably, which is typically monthly, over the term of the lease. Occasionally, customers pay for tank lease fees in advance. Fees received in advance are deferred until the period they are earned. As of March 31, 2012 and 2011, $114,334 and $215,234 of tank lease fees were deferred. Revenue from throughput fees and ancillary fees are recognized as services are provided to the customer and when the fees are realizable.

ACCOUNTS RECEIVABLE

Accounts receivable represent valid claims against non-affiliated customers and are recognized when services are rendered. We extend credit terms to certain customers based on historical dealings and to other customers after review of various credit indicators, including the customer’s credit rating. Outstanding customer receivable balances are regularly reviewed for possible non-payment indicators and allowances for doubtful accounts are recorded based upon management’s estimate of collectability at the time of their review. Accounts receivable are written off when the account is deemed uncollectible. The Company has recorded no uncollectible allowance as of March 31, 2012 or March 31, 2011.

As of March 31, 2012, the Company had a receivable-other balance of approximately $50,567 due mainly from the State of Louisiana pertaining to a jobs incentive award grant. As of March 31, 2011, the Company had a receivable-other balance of approximately $208,600 due mainly from the State of Louisiana pertaining to investment incentive rebates and job incentive award grants.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, are comprised of real estate, buildings, warehouses, storage tanks, terminal assets, office equipment, computer software and heavy equipment and are stated at cost, less accumulated depreciation.

Assets are depreciated on a straight-line basis over their estimated useful lives, which range from 4 to 40 years. Repair and maintenance costs associated with existing assets that are minor in nature and do not extend the useful life of existing assets are charged to operating expenses as incurred.

CONSTRUCTION IN PROGRESS

Construction in progress is stated at cost, which includes the costs of construction and other direct costs attributable to the construction. No provision for depreciation is made on construction in progress until such time as the relevant assets are completed and put into use. Construction in progress at March 31, 2012 and March 31, 2011, represents facilities under installation and prepayments on assets being purchased.

IMPAIRMENT OF LONG-LIVED AND INTANGLIBLE ASSETS

We account for impairment of plant and equipment and amortizable intangible assets in accordance with ASC 360-10-35 “Impairment or Disposal of Long-Lived Assets” which requires us to evaluate a long-lived asset for recoverability when there are events or circumstances that indicate the carrying value of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset’s (or asset group’s) fair value. No impairment losses were recorded during the years ended March 31, 2012 or 2011.

DEFERRED FINANCING COSTS

Costs incurred for debt borrowing are capitalized as paid and amortized over the life of the associated debt instrument. To the extent that debt is retired before its scheduled maturity date, any remaining deferred financing costs associated with that debt are written off.

ENVIRONMENTAL REMEDIATION COSTS

Environmental remediation costs are expensed and an associated accrual established when site restoration and environmental remediation and cleanup obligations are either known or considered probable and can be reasonably estimated. As of March 31, 2012, we are not aware of any environmental remediation costs associated with the acquisition of the Westwego Terminal, the Brunswick Terminal or the Salisbury Terminal. All cleanup efforts have been completed associated with the tank leak incident in February 2009 at the Westwego Terminal site and were recorded in our Consolidated Statements of Operations during the appropriate fiscal period.

INCOME TAXES

We follow Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting Standards Codification (“ASC”) 740 - “Accounting for Income Taxes” (“ASC 740”). This standard requires the use of an asset and liability approach for financial accounting and reporting of income taxes. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.

BASIC AND DILUTED LOSS PER SHARE

Basic loss per share is computed using the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the dilutive effects of common stock equivalents using the “treasury method” for outstanding options and the “if converted” method for outstanding convertible notes. For the year ended March 31, 2012, 120,000 of the total 825,882 potential dilutive securities had an anti-dilutive effect and therefore, were not included in the calculation of diluted net loss per common share.

CAPITALIZED INTEREST

Interest costs are capitalized while development is in progress.

STOCK-BASED COMPENSATION

The Company follows SFAS 123(R) ASC 718 which requires all share-based payments to employees, including grants of employee stock options and restricted stock, to be recognized in the income statement based on their estimated fair values. The Company recognizes the expense on a straight-line basis over the requisite service period, which is normally the vesting period.

We account for non-employee share-based awards in accordance with EITF No. 96-18 ASC 505 “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquisition, or in Conjunction with Selling, Goods or Services.”

EMBEDDED CONVERSION FEATURE

The Company evaluates embedded conversion features within convertible debt and convertible preferred stock under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion feature.

FAIR VALUE MEASURES

The Company follows ASC 820 “Fair Value Measurements and Statement No. 157, as amended The fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates book value at March 31, 2012 and 2011 due to the short-term nature of these accounts. The fair value of our debts with JP Morgan Chase Bank, N.A. also approximates book value due to the variable rate of interest charged. The fair value of these loans does not materially differ from book value. It is management’s opinion that we are not exposed to significant interest or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values. Occasionally, our cash deposits may exceed the FDIC insurable limit.

NEW ACCOUNTING PRONOUNCEMENTS

We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

2. PROPERTY, PLANT AND EQUIPMENT

Property and equipment consisted of the following. The Estimated Useful Life figure presented in the table represents management’s determination as to the potential full useful life of the assets when new:

	Estimated Useful Life		March 31, 2012			March 31, 2011
Land			$	1,914,808		$	1,313,947
Office buildings & warehouses		10-40		729,690			339,784
Improvements		20-40		628,049			539,622
Dock		20-40		3,675,065			4,228,648
Tanks, truck rack and piping		20-40		9,696,197			7,455,192
Equipment		–5		16,119			15,346
Office equipment, software, packing equip. & tools		5 – 7		408,993			337,996
Construction in process				1,053,052			365,713
Total property, plant and equipment				18,121,973			14,596,248
Less: accumulated depreciation				(1,648,299	)		(1,053,363	)
Net property, plant and equipment, net			$	16,473,674		$	13,542,885

The Company’s remaining useful life of major assets acquired with the Westwego, Brunswick and the Salisbury Terminals was based on an appraiser’s determination of a percent of useful life remaining for major assets as of the acquisition date. Management applied this percentage to its determination as to the potential full useful life of each major asset to arrive at a useful life remaining. Above ground steel storage tanks are designed for long lives and it is common for a storage tank to provide useful service for a period of 40 years or longer.

A summary of the ranges of remaining useful lives calculated for the Westwego, Brunswick and Salisbury Terminal assets when acquired are as follows:

	Office buildings & warehouses		2.5 – 26 years
	Improvements		4 – 20 years
	Dock		7 - 40 years
	Tanks, racks and piping		4 – 40 years *1
	Equipment		5 – 15 years
	Office equipment, software, tools		5 years

*1 One storage tank was recorded with a remaining useful life of 37 years as it had been recently constructed as of December 2008 and the new ship dock and the three tanks constructed in late 2009 and early 2010 are recorded with a useful life of 40 years. The remainder of our tanks is recorded with a remaining useful life of between 6 and 12 years.

On April 14, 2011 the Company entered into an agreement with one of its vendors to transfer the Company’s barge dock and related equipment to the vendor in exchange for $115,000 to be offset against amounts currently owed by the Company to the vendor. As a result, the Company recorded a loss of $362,110 on the disposal of assets in April 2011.

Construction in Process projects as of the end of each fiscal year are recorded as assets when completed during the next current year. Storage tank and piping improvements, along with a new truck loading facility were recorded as Construction in Process projects as of March 31, 2011, totaling approximately $366,000. Construction in Process projects as of March 31, 2012 totaled approximately $1,053,000 and consists of storage tank and piping improvements.

Depreciation and amortization expenses related to property, plant and equipment totaled $672,283 and $565,102 for the year ended March 31, 2012 and the year ended March 31, 2011, respectively.

The Company capitalizes interest cost while Construction in Process projects are under construction. During the year ended March 31, 2012 approximately $61,200 of interest was capitalized and for the year ended March 31, 2011, approximately $210,000 of interest was capitalized.

3. BRUNSWICK TERMINAL AND SALISBURY TERMINAL ASSET PURCHASES.

Brunswick, GA Terminal

On July 15, 2010, we acquired the 161,000 barrel Brunswick Terminal, including storage tanks and other improvements for $1,800,000. The terminal consists of two 80,000 barrel leasable above ground storage tanks, and two 500 barrel leasable above ground storage tanks, an office building, a two-bay covered truck loading rack and other site improvements located on approximately 6.5 acres of land leased from the Georgia Ports Authority, including access to a shared ship dock.

The Brunswick Terminal when purchased in July 2010 included employees, long-term land and dock lease arrangements, permits, licenses, offices, procedures, systems, storage tanks, truck rack, piping, etc. and processes that had the ability to produce outputs; thus meeting the definition of a business as per ASC Topic 805-10-55, paragraphs 4 through 9. The terminal however, did not have any customers or contracts as of the acquisition date.

The following table sets forth the costs and final purchase price allocation related to the Brunswick Terminal acquisition.

Cost of the acquisition:
Cash paid from the proceeds of debt	$	1,750,000
Cash paid from cash on hand		50,000
Gain on bargain purchase of asset		100,000
	$	1,900,000
Purchase price allocation:
Property, plant and equipment, net		1,900,000
	$	1,900,000

Salisbury, Maryland Terminal

On December 22, 2011, we acquired the 172,000 barrel Salisbury Terminal, including storage tanks and other improvements for $1,600,000. The terminal consists of fourteen leasable above ground storage tanks (ranging in size from 2,500-50,000 barrels), two office buildings, a three-bay covered truck loading rack, a barge dock and other site improvements located on approximately 27 acres of land, located along the Wicomico River in Salisbury, Maryland.

The Salisbury Terminal when purchased in December 2011 included one employee, customer contracts, permits, licenses, offices, procedures, systems, storage tanks, truck rack, piping, etc. and processes that had the ability to produce outputs; thus meeting the definition of a business as per ASC Topic 805-10-55, paragraphs 4 through 9.

We commissioned and obtained a market valuation appraisal (the “Salisbury Terminal Appraisal”) from a third-party independent appraisal firm, Nationwide Consulting Company. The Salisbury Terminal Appraisal concluded that the market value of the Salisbury Terminal as of June 30, 2011 was $2,570,000.

As per ASC Topic 805-30-25-4, we reassessed all identifiable assets acquired and liabilities assumed in the acquisition and subsequently valued the combined assets at the Salisbury Terminal at $2,570,000 and recorded a $970,000 “bargain purchase” gain for the difference, which is recorded in the Company’s consolidated statement of operations. The Company determined that the market value of the Salisbury Terminal did not change materially from the date of the appraisal on June 30, 2011 and the date of the acquisition on December 22, 2011.

Included in the acquired assets is the tangible terminal assets described above; as well as four in-place customer contracts with a fair value of $287,766 and various prepaid permits and taxes with a fair value of $48,799. The fair value of the in-place customer contacts was determined using a discounted cash flow projection over the one-year life of the contracts and this amount will be amortized over a useful life of one-year.

The following table sets forth the costs and final purchase price allocation related to the Salisbury Terminal acquisition.

Cost of the acquisition:
Cash paid from the proceeds of debt	$	1,600,000
Less: fair market value of identifiable assets acquired		(2,570,000	)
Gain on bargain purchase of asset		(970,000	)

Purchase price allocation:
Property, plant and equipment, net		2,233,435
Intangible assets		336,565
Identifiable assets	$	2,570,000

Presented below are pro-forma consolidated statements of operations for the year ended March 31, 2012 and 2011, when considering the operating results of the Brunswick and the Salisbury Terminals, if acquired as of April 1, 2010.

BLACKWATER MIDSTREAM CORP.
CONSOLIDATED PRO-FORMA STATEMENTS OF OPERATIONS
(AUDITED)

	Year Ended 31-March-2012							Year Ended 31-March-2011

	Actual Blackwater Midstream, Westwego, Brunswick & Salisbury Terminals		Salisbury Terminal Pro-Forma for Period 1/Apr/2011-21/Dec/2011			Consolidated Pro-Forma		Actual Blackwater Midstream, Westwego & Brunswick Terminals		Brunswick Terminal Pro-Forma for Period 1/Apr/2010-14/Jul/2010			Salisbury Terminal Pro-Forma for Period 1/Apr/2010-31/Mar/2011		Consolidated Pro-Forma
Revenue	$	9,990,611	$	343,000		$	10,333,611	$	6,903,422	$	-		$	393,028	$	7,296,450

Net income	$	5,039,845	$	(984,075	)	$	4,055,770	$	1,003,842	$	(35,000	)	$	1,003,092	$	1,971,934

NET INCOME PER COMMON SHARE,
BASIC	$	0.09	$	(0.02	)	$	0.07	$	0.02	$	0.00		$	0.02	$	0.04
DILUTED	$	0.01	$	(0.02	)	$	(0.01)	$	0.02	$	0.00		$	0.00	$	0.00

Weighted average number of shares outstanding:
BASIC		55,783,597		55,781,119			55,783,597		54,616,489		54,616,489			54,616,489		54,616,489
DILUTED		65,724,878		55,781,119			65,724,878		65,817,436		54,616,489			65,817,436		65,817,436

4. LOSS ON STORAGE TANK DISPOSAL

For the year ended March 31, 2011, we recorded a total net gain of approximately $248,000 related to the disposal of assets. These activities are primarily due to the demolition of six unused tanks at the Westwego Terminal to make way for future construction of larger tanks. This activity resulted in a non-cash net loss of approximately $172,000.

On February 9, 2009 one of our storage tanks developed a minor leak during the introduction of product (sulfuric acid) into the tank. Terminal staff detected the leak and successfully contained it in the designated earthen berm area and immediately contacted all required federal, state and local authorities and agencies about the situation. Shortly thereafter, we began remediation and cleanup efforts and engaged expert environmental cleanup companies to assist with the process. While the cleanup effort was ongoing, the product was transferred into rented barges specifically designed for sulfuric acid. Related to this incident, during the year ended March 31, 2011, we recorded the receipt of $260,000 as a settlement payment from our pollution insurance carrier, a reduction in account payable invoices from our major subcontractor of approximately $168,000 and legal expenses of approximately $7,500, totaling a net gain of $420,187.

As of March 31, 2011, approximately $410,000 of liabilities related to this event was included in the current section of our consolidated balance sheet listed as Liabilities-disposal of asset. As of March 31, 2012, this amount was $0.

The insurance carrier reimbursements, our net repairs, cleanup, and our other expenses related to the tank leak incident in February 2009 are recorded as a gain or (loss) on disposal of assets to the extent that the loss was not recoverable through insurance. The table below summarizes the cumulative activity related to this incident.

Description	COMBINED PERIODS			For the Year Ended March 31, 2011		For the Period February 2009 through the Year Ended March 31, 2010
Environmental: Clean up & mitigation expenses (including gain on account payable offset)	$	(1,030,968	)	$	160,187	$	(1,191,155	)
Property: Tank disposal		(83,678	)		-		(83,678	)
Less: Insurance recovery		887,260			260,000		627,260
(Loss) Gain on Disposal of Asset	$	(227,386	)	$	420,187	$	(647,573	)

Insurance recovery is shown net of a $275,000 deductible.

The underside of the tanks’ steel bottoms, related pumps and valves and the surrounding containment areas were damaged when they came in contact with the leaked sulfuric product during the remediation and cleanup process. The tank bottom was replaced and we recognized a loss on disposal of tank totaling $83,678 for the year ended March 31, 2009. There were no tank leaks in other periods presented.

5. LONG-TERM DEBT AND RELATED PARTY NOTES PAYABLE

JP Morgan Chase loan agreements

Acquisition of the Westwego Terminal and subsequent construction projects

In connection with the purchase of the Westwego Terminal in December 2008, BWNO entered into a credit agreement (the “BWNO Credit Agreement” or the “Loan”) with JPM to finance the purchase price of the storage terminal. Beginning on April 30, 2009, we made monthly principal installments on the Loan, plus accrued monthly interest. All unpaid principal and accrued and unpaid interest is finally due and payable on September 30, 2014.

The JPM Loan is secured by a mortgage on the Westwego Terminal property. The BWNO Credit Agreement includes customary events of default including, but not limited to, the failure of BWNO to pay any principal or interest when due, the breach of any representation or warranty in any of JPM’s loan documents, or insolvency or bankruptcy. Upon the occurrence of an event of default, the JPM Loan will become due and payable automatically and without notice.

Since the original BWNO Credit Agreement and Loan, the Company has entered into additional loan agreements with JPM on February 12, 2010 (which were both incorporated into an agreement on September 27, 2010), on June 24, 2010, on August 16, 2010, and on October 29, 2010. With the October 29, 2010 agreement, we entered into the Fourth Amendment to the BWNO Credit Agreement with JPM in the principal amount of $4,695,456 with JPM consolidating our previous loans as follows:

BWNO Credit Agreement of September 27, 2010, as amended = $3,689,796

Line of Credit Note of June 24, 2010 = $500,000

Non-Revolving Line of Credit of August 16, 2010 = $131,500, and

An advance, pursuant to the October 29, 2010 BWNO Credit Agreement = $374,160

The October 2010 Note bears interest at the annual rate of 1.50% above the Prime Rate, subject to certain minimum rate requirements. The October 2010 Note provides for consecutive monthly installments of principal in the amount of $97,822, commencing October 31, 2010 and continuing until maturity on September 30, 2014; along with related interest.

In January 2011, we requested and JPM approved a revised payment schedule. Under the revised plan, the next six subsequent monthly payments were delayed approximately one month.

Acquisition of the Salisbury Terminal.

In connection with the purchase and acquisition of the Salisbury Terminal on December 22, 2011, BWMD entered into a term loan with JPM in the principal amount of $1,600,000 to finance the purchase price of the terminal. The term loan bears interest at the annual fixed rate of 4.50%. Beginning on January 21, 2012 and continuing on the last day of each calendar month thereafter, BWMD will pay consecutive monthly installments of interest only on the loan. In addition, beginning on July 21, 2012 and continuing on the last day of each calendar month thereafter BWMD will pay monthly principal installments of $26,667. All unpaid principal and accrued and unpaid interest is finally due and payable on July 21, 2017.

The BWMD loan includes customary events of default including, but not limited to, the failure of BWMD to pay any principal or interest when due, the breach of any representation or warranty in any of JPM’s loan documents, or insolvency or bankruptcy. Upon the occurrence of an event of default, the BWMD loan will become due and payable automatically and without notice.

As additional collateral for the BWMD loan, BWNO agreed to secure the BWMD loan with the existing collateral mortgage encumbering BWNO’s right, title and interest in the immovable property, buildings, structures, machinery, equipment and improvements on the premises located at 660 LaBauve Drive, Westwego, Jefferson Parish, Louisiana.

Blackwater Midstream Corp. entered into a continuing guaranty and the Subordination Agreement with JPM, and guaranteed the obligations of BWMD under the terminal Purchase Agreement with NuStar.

Storage Tank Construction at the Brunswick Terminal

The loan bears interest at the annual fixed rate of 4.50%. Beginning on March 31, 2012 and continuing on the last day of each calendar month thereafter, BWGA will pay consecutive monthly installments of interest only on the loan. In addition, beginning on October 31, 2012 and continuing on the last day of each calendar month thereafter BWGA will pay monthly principal installments of $23,000. All unpaid principal and accrued and unpaid interest is finally due and payable on August 31, 2017.

The BWGA loan includes customary events of default including, but not limited to, the failure of BWGA to pay any principal or interest when due, the breach of any representation or warranty in any of JPM’s loan documents, or insolvency or bankruptcy. Upon the occurrence of an event of default, the BWGA loan will become due and payable automatically and without notice.

As additional collateral for the BWMD loan, BWNO agreed to secure the BWGA loan with the existing collateral mortgage encumbering BWNO’s right, title and interest in the immovable property, buildings, structures, machinery, equipment and improvements on the premises located at 660 LaBauve Drive, Westwego, Jefferson Parish, Louisiana.

Blackwater Midstream Corp. entered into a continuing guaranty and the Subordination Agreement with JPM, and guaranteed the obligations of BWGA under the terminal Purchase Agreement with NuStar.

Convertible Notes

Relatives of the Company’s CEO and current members on the Company’s Board of Directors, together with others, participated in the private offering of convertible debt described below. As of March 31, 2012 and 2011, the outstanding balance of these loans to related parties was $675,000 and $250,000, respectively.

Private Offering of Convertible Debt.

October 2009 convertible debt offering

In June 2011, the Company contacted the holders of the Company’s 2009 Convertible Promissory Note to extend the note’s maturity date from October 15, 2011 to October 15, 2013. All of the 2009 Convertible Promissory Notes have been amended to reflect the new maturity date.

March 2010 convertible debt offering

On March 31, 2010, we issued $1,750,000 of convertible notes. The convertible notes originally set a maturity date on March 31, 2012 (the date was later extended, see below) and have a stated annual interest rate of 10%. The principal is payable at maturity but interest is paid quarterly beginning June 30, 2010. The Company incurred interest expense of $43,750 and $175,000, respectively for the three-month and twelve-month periods ended March 31, 2012 and March 31, 2011. In addition, the notes are convertible at any time into restricted shares of the Company’s common stock at $0.50 per share.

In June 2011, the Company contacted the holders of the Company’s 2010 Convertible Promissory Note to extend the note’s maturity date from March 31, 2012 to September 30, 2013. All of the 2010 Convertible Promissory Notes have been amended to reflect the new maturity date. As per accounting standards, this change in the maturity date was evaluated under ASC 470 “EITF 96-19” “Debtor’s Accounting for Modification or Exchange of Debt Instruments.” As a result of the maturity date extension amendment, the convertible debt notes then qualified as a debt extinguishment and therefore were treated as if the Company settled the debt prior to the maturity date amendment and then entered into an entirely new debt agreement after the amendment. (see Note 6)

Per the applicable accounting standards, the amendment of the convertible debt notes was required to be treated as an extinguishment of the original convertible debt notes and related accounts, as of June 24, 2011. Therefore, we wrote off and expensed the remainder of the unamortized deferred financing asset of $130,271 and decreased the derivative liability by $770,860. These transactions resulted in a net “non-cash” gain of $640,589.

Additionally as per ASC 470, we evaluated the fair value of the derivative related to the amended convertible debt notes as of June 24, 2011 (using the BWMS closing share price of $0.55) and recorded a new derivative liability of $1,645,253. This amount will be amortized over the new remaining life of the notes, until September 30, 2013.

In summary, during the twelve-month period ending March 31, 2012, the Company recorded a net “non-cash” gain of $2,201,935 related to the 2009 and 2010 Notes; approximately $1,400,000 due to the extinguishment of the original convertible debt notes and deferred financing charges; and $801,995 related to changes in the fair market value of the convertible debt notes derivative liabilities.

Year ending March 31,
2013	$	1,551,864
2014		6,514,969
2015		906,932
2016		320,000
2017		320,000
Thereafter		80,000
	$	9,693,765

The following table reconciles our various debt instruments to the balance sheet line items for March 31, 2012 and March 31, 2011. Of special note, in June 2011, we extended the maturity date of our convertible debt loans; thus removing them for current liabilities to long-term liabilities.

	For the Year Ended March 31, 2012
	Consolidated		JPM CHASE		2009		2010
	Balance Sheet		Bank Loans		CD Loans		CD Loans
Current portion of related party long-term convertible debt loans	$	-	$	-	$	-	$	-
Current portion of long-term convertible debt loans	$	-	$	-	$	-	$	-
Related party long-term convertible debt loans *1	$	675,000	$	-	$	430,000	$	245,000
Long-term convertible debt loans *2	$	4,076,033	$	-	$	2,571,033	$	1,505,000
Current portion of long-term bank loans	$	1,551,864	$	1,551,864
Long-term bank loans	$	3,390,868	$	3,390,868	$	-	$	-
	$	9,693,765	$	4,942,732	$	3,001,033	$	1,750,000

*1 - Shown on Consolidated Balance Sheet as of March 31, 2012 as Net of CD Discount:

Related party long-term convertible debt loans of $675,000 less CD Discounts of $620,291 = Net of $54,709

*2 - Shown on Consolidated Balance Sheet as of March 31, 2012 as Net of CD Discount:

Long-term convertible debt loans of $4,076,033 less CD Discounts of $3,745,668 = Net of $330,365

	For the Year Ended March 31, 2011
	Consolidated		JPM CHASE			2009		2010
	Balance Sheet		Bank Loans		CD Loans		CD Loans
Current portion of related party long-term convertible debt loans	$	250,000	$	-	$	180,000	$	70,000
Current portion of long-term convertible debt loans	$	4,501,033	$	-	$	2,821,033	$	1,680,000
Related party long-term convertible debt loans *1	$	-	$	-	$	-	$	-
Long-term convertible debt loans *2	$	-	$	-	$	-	$	-
Current portion of long-term bank loans	$	1,271,686	$	1,271,686	$	-	$	-
Long-term bank loans	$	2,934,660	$	2,934,660	$	-	$	-
	$	8,957,379	$	4,206,346	$	3,001,033	$	1,750,000

6. EMBEDDED DERIVATIVE LIABILITY

As described in Note 5, the Company issued convertible debt notes in October 2009 and March 2010. The notes are convertible at $0.50 per share, or $0.40 per share upon a change in control of the Company. Based on the alternative conversion options, the Company determined that the conversion options in the notes should be accounted for as derivatives. The Company used the Black-Scholes model to determine the fair value of each of the conversion options at the end of each quarter and as of March 31, 2012, assigning a probability of occurrence to each conversion option. The final fair value of each of the derivative liabilities considered the likelihood of conversion at the separate conversion prices.

On June 24, 2011 as per ASC 470 the Company amended the notes to extend the maturity date from October 15, 2011 to October 15, 2013 for the October 2009 Notes and from March 31, 2012 to September 30, 2013 for the March 2010 Notes. As a result of these changes to the maturity dates, the Company compared the fair values of the embedded derivative liabilities using the maturity dates immediately prior to and after the modification date to determine if the amendments should be accounted for as a debt extinguishment.

October 2009 notes:

The table below summarizes the Black-Scholes Option Pricing Model range of inputs used to calculate the fair market values on the date of the amendment (June 24, 2011) and then at the end of each quarter afterwards.

2009 Convertible Debt Notes

	Value Date	Dividend	Stock	Risk Free	Expected
	Stock Price	Yield	Volatility	Rate	Term
	$0.39-0.55	0%	95.01%-195.20%	0.25%-0.80%	4-28 Months

March 2010 notes:

The table below summarized the Black-Scholes Option Pricing Model information used to calculate the fair market values on the date of the amendment (June 24, 2011) and then at the end of each quarter afterwards.

2010 Convertible Debt Notes

	Value Date	Dividend	Stock	Risk Free	Expected
	Stock Price	Yield	Volatility	Rate	Term
	$0.39-0.55	0%	109.41%-189.35%	0.25%-0.80%	9-27 Months

For the twelve-month period ended March 31, 2012, the Company recorded an aggregate gain of $801,995 as a result of these transactions.

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures fair value in accordance with a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities;

Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The table below sets forth a summary of the fair values of the Company’s financial assets and liabilities as of March 31, 2012:

	TOTAL			LEVEL 1		LEVEL 2		LEVEL 3
LIABILITIES:

Convertible loan derivative liability at March 31, 2011	$	1,397,911		$	-	$	-	$	1,397,911
Change in fair market value from March 31, 2011 to June 24, 2011		193,749			-		-		193,749
Accounting “extinguishment” of derivative liabilities on June 24, 2011		(1,591,660	)		-		-		(1,591,660	)
Establishment of new derivative liabilities on June 24, 2011		4,516,240			-		-		4,516,240
Change in fair market value from June 24, 2011 to June 30, 2011		(418,724	)		-		-		(418,724	)
Change in fair market value from July 1, 2011 to Sept. 30, 2011		(710,565	)		-		-		(710,565	)
Change in fair market value from Oct. 1, 2011 to Dec. 31, 2011		(867,705	)		-		-		(867,705	)
Change in fair market value from Jan. 1, 2012 to Mar. 31, 2012		1,001,250			-		-		1,001,250


Convertible loan derivative liability at March 31, 2012	$	3,520,496		$	-	$	-	$	3,520,496

8. STOCK-BASED COMPENSATION

In May and June 2008, we granted 821,036 shares of common stock for management services and legal services with a grant-date fair value of $1,726,160 and $200,000, respectively. The shares granted for legal services vested immediately and were expensed. The shares granted for management services vest over a period of twenty months. Related to these grants we expensed $27,950 for the year ended March 31, 2011 and $20,962 for the year ended March 31, 2012.

On May 7, 2008, the Company issued 20,000 stock options for legal services. The options have an exercise price of $2.00 per share. The options vested on the grant date and the grant-date fair value of these options was $2,957, which was expensed immediately. The Company used the Black-Scholes option pricing model to value the warrants using the following assumptions: number of options as set forth in the option agreements; no expected dividend yield; expected volatility of 44%; risk-free interest rates of 2.44%; and expected term consistent with the contractual term of the warrants.

In January 2009, we granted 2,283,278 shares of common stock to certain managers as compensation. These shares were valued at $0.29 per share as of the January 2009 grant date and vest according to the following schedule: (i) 33.3% on January 1, 2010; and (ii) 8.3375% on the last calendar day of each subsequent calendar quarter, until all such shares have vested, provided; however, that such shares shall vest according to such schedule only if the officers are employed by us on such dates. Related to these grants we expensed $219,956 for the year ended March 31, 2011, and $164,967 for the year ended March 31, 2012.

In January 2009, we issued 150,000 shares of common stock to the Company’s Chief Financial Officer as compensation. The shares were valued at $0.29 per share as of the grant date and vest according to the following schedule: (i) 33.3% on January 1, 2010; and (ii) 8.3375% on the last calendar day of each subsequent calendar quarter, until all such shares have vested, provided; however, that such shares shall vest according to such schedule only if the Chief Financial Officer is employed by us on such dates. For the year ended March 31, 2011 we expensed $14,450 related to these grants, and for the year ended March 31, 2012 we expensed $10,837 related to these grants.

In March 2009, we issued 3,000,000 shares of common stock to certain managers of the Company as compensation. The shares were valued at $0.11 per share as of the grant date and vest according to the following schedule: (i) 33.3% on January 1, 2010; and (ii) 8.3375% on the last calendar day of each subsequent calendar quarter, until all such shares have vested, provided; however, that such shares shall vest according to such schedule only if the officers are employed by us on such dates. For the year ended March 31, 2011 we expensed $115,412 related to these grants and for the year ended March 31, 2012 we expensed $86,559 related to these grants.

On December 8, 2009 the Board of Directors of the Company amended all of the restricted share grants to management (discussed above) to change the vesting to January 1, 2012. These fees were included in the deferred financing costs in our consolidated balance sheet and were being amortized over the original term of the convertible notes using the effective interest rate method. During the twelve-month period ended March 31, 2012 and the twelve-month period ended March 31, 2011, we amortized $49,878 and $180,150, respectively, of deferred financing cost. During the three-month period ended March 31, 2012, due to the extinguishment of the debt in June 2011, we did not amortize any expenses. During the three-month period ended March 31, 2011 we expensed $45,038.

On April 1, 2009, we granted 2,823,528 shares of stock options with a grant-date fair value of $435,274 to four directors. These options vested immediately and were expensed. The exercise price for the stock options was based on the Company’s closing stock price on the date of grant which was $0.17. For the year ended March 31, 2010 we expensed $435,274 related to these options.

The grant-date fair value for the April 1, 2009 stock options was estimated using a Black-Scholes option valuation model which incorporated the following assumptions:

Exercise Price	$	0.17
Expected Term		5
Expected Volatility		149%
Risk-Free Interest rate		1.79
Expected Dividend Distributions		N/A

The Company uses the simplified method for Expected Term, in accordance with the Staff Accounting Bulletin # 107 as appropriate.

Pertaining to the April 2009 stock option grants to directors, in September 2010 the Board of Directors of the Company passed a resolution to amend, modify and extend the exercise time period for vested outstanding options as per Section 6.6 (a) of the 2008 Incentive Plan and Section 9 (b) of each director’s Option Grant document to be exercisable until January 1, 2012. This amendment and modification triggered the Company to recalculate the stock options’ valuation using a Black-Scholes option valuation model. The result was the Company recorded an expense of $202,230 due to this amendment and modification.

The grant-date fair value for these amended stock options was estimated using a Black-Scholes option valuation model which incorporated the following assumptions:

Exercise Price	$	0.17
Expected Term		1.3
Expected Volatility		203%
Risk-Free Interest rate		0.25
Expected Dividend Distributions		N/A

The Company uses the simplified method for Expected Term, in accordance with the Staff Accounting Bulletin # 107 as appropriate.

On December 8, 2009, the Board of Directors authorized a Director $40,000 in restricted shares, pursuant to the Company’s 2008 Incentive Plan: 60,000 shares were granted as of December 8, 2009 with a share price of $0.32 per share; which vested immediately. The remaining 61,176 shares were granted and issued on January 4, 2010 with a share price of $0.34 per share, and vested immediately upon such grant. These shares were fully expensed during the year ended March 31, 2010; therefore, we did not record any expense during the years ending March 31, 2011 or 2012.

On December 1, 2009 the Board of Directors granted related parties, Isaac Suder, No Logo Air, Inc. and Ter Mast Beheer Utrecht, B.V, restricted shares of the Company’s common stock, 125,000 shares, 93,750 shares and 156,250 shares, respectively; pursuant to loan agreements between the parties and the Company in January 2009. These shares vested immediately and were expensed by the Company at $0.32 per share. These shares were fully expensed during the year ended March 31, 2010; therefore, we did not record any expense during the years ending March 31, 2011 or 2012.

On December 31, 2009, in connection with a private offering of $3,001,033 of convertible debt we issued 700,000 shares of restricted common stock valued at $203,000. These fees were included in the deferred financing costs in our consolidated balance sheet and were being amortized over the original term of the convertible notes using the effective interest rate method. During the twelve-month period ended March 31, 2012 and the twelve-month period ended March 31, 2011, we amortized $73,314 and $249,000, respectively, of deferred financing cost. During the three-month period ended March 31, 2012, due to the extinguishment of the debt in June 2011, we did not amortize any expenses. During the three-month period ended March 31, 2011 we expensed $62,198.

On March 31, 2010, in connection with a private offering of $1,750,000 of convertible debt we issued 659,000 shares of restricted common stock valued at $171,340. These fees are included in the deferred financing costs in the consolidated balance sheet as of March 31, 2010 and will be amortized over the term of the convertible notes using the effective interest rate method. During the twelve-month period ended March 31, 2012 and the twelve-month period ended March 31, 2011, we amortized $49,878 and $180,150, respectively, of deferred financing cost. During the three-month period ended March 31, 2012, due to the extinguishment of the debt in June 2011, we did not amortize any expenses. During the three-month period ended March 31, 2011 we expensed $45,038.

On April 29, 2009, the Company entered into a one year supplemental retainer agreement with Milling Benson Woodward, L.L.P. (“Milling”) wherein, as of April 1, 2009, Milling agreed to accept 50% of its monthly retainer fee payable in the common stock of the Company, with the remainder, payable in cash. Through March 31, 2010, Milling had received 500,004 shares of common stock. These shares were fully expensed during the year ended March 31, 2010; therefore, we did not record any expense during the years ending March 31, 2011 or 2012.

On June 30, 2009 we granted a former employee 60,530 shares of common stock as compensation. The shares vested immediately and have a grant-date fair value of $10,290, which was expensed on the date of grant. These shares were fully expensed during the year ended March 31, 2010; therefore, we did not record any expense during the years ending March 31, 2011 or 2012.

In September 2010, we issued 304,255 shares of common stock to certain managers and directors of the Company as compensation. The shares were valued at $0.30 per share as of the grant date and vested immediately for the directors; and for the managers, the vesting date was set to be January 1, 2012. For the year ended March 31, 2011 we expensed 100% of these grants for directors, $39,119. For the year ended March 31, 2011 we expensed $21,602 related to these grants for managers and for the year ended March 31, 2012 we expensed $29,339 related to these grants for managers.

In November 2010, we issued 54,125 shares of common stock to certain managers of the Company as compensation. The shares were valued at $0.63 per share as of the grant date and the vesting date was set to be January 1, 2012. For the year ended March 31, 2011 we expensed $12,415 related to these grants, and for the year ended March 31, 2012 we expensed $22,902 related to these grants.

On May 19, 2010, the Company entered into an investor relations agreement with Malcolm McGuire & Associates, L.L.C. (“McGuire) and amended the agreement on June 11, 2010. These agreements require the Company to grant McGuire the option to purchase 100,000 shares of restricted common stock at an exercise price of $0.50 per share. The options vested on November 20, 2010 and may be exercised by McGuire at any time after vesting date and prior to November 20, 2015. Related to these options the Company recorded an expense of $60,854. The agreement with McGuire also requires the Company, beginning in June 2010 and every month for a six month period, to issue 2,500 shares of the Company’s restricted common stock. The initial six-month time period was allowed to extend. The Company terminated the agreement with McGuire, effective February 29, 2012.

For the period May 2010 through March 31, 2011, McGuire received 25,000 shares of the Company’s restricted common stock, and the Company recorded an expense in the amount of $11,575. For the period April 2011 through February 29, 2012 (the date the contract was terminated), McGuire received 27,500 shares of the Company’s restricted common stock, and the Company recorded an expense in the amount of $12,463.

On May 10, 2011, former director Christopher Wilson gave notice to the Company of his intent to exercise the 705,882 options granted to him in 2009, in a cashless exercise transaction. This cashless option exercise transaction resulted in Mr. Wilson surrendering 196,722 shares; determined by the stated exercise amount of $120,000 (exercise per share price of $0.17 for the 705,882 options granted to him in 2009), divided by the value of the Company’s common stock share price on May 10, 2011 of $0.61, the date of exercise. After surrendering the 196,722 shares, Mr. Wilson received 509,160 common shares. The Company did not record any expenses related to this event.

On June 6, 2011, we issued 298,000 shares of common stock to certain managers of the Company as compensation. The shares were valued at $0.60 per share as of the grant date and the vesting date was set to be January 1, 2015. For the year ended March 31, 2012 we expensed $40,940 related to these grants.

On October 05, 2011, director Herbert Whitney gave notice to the Company of his intent to exercise 200,000 of the options granted to him in 2009, in a cashless exercise transaction. This cashless option exercise transaction resulted in Mr. Whitney surrendering 75,555 shares; determined by the stated exercise amount of $34,000 (exercise per share price of $0.17 for 200,000 of the options granted to him in 2009), divided by the value of the Company’s common stock share price on October 05, 2011 of $0.45, the date of exercise. After surrendering the 75,555 shares, Mr. Whitney received 124,445 common shares. The Company did not record any expenses related to this event.

On November 17, 2011, director Herbert Whitney gave notice to the Company of his intent to exercise 200,000 of the options granted to him in 2009, in a cashless exercise transaction. This cashless option exercise transaction resulted in Mr. Whitney surrendering 77,273 shares; determined by the stated exercise amount of $34,000 (exercise per share price of $0.17 for 200,000 of the options granted to him in 2009), divided by the value of the Company’s common stock share price on November 17, 2011 of $0.44, the date of exercise. After surrendering the 77,273 shares, Mr. Whitney received 122,727 common shares. The Company did not record any expenses related to this event.

On December 21, 2011, former director Mathijs von Houweninge gave notice to the Company of his intent to exercise 705,882 of the options granted to him in 2009, in a cashless exercise transaction. This cashless option exercise transaction resulted in Mr. Houweninge surrendering 285,714 shares; determined by the stated exercise amount of $120,000 (exercise per share price of $0.17 for the 705,882 options granted to him in 2009), divided by the value of the Company’s common stock share price on December 21, 2011 of $0.42, the date of exercise. After surrendering the 285,714 shares, Mr. Houweninge received 420,168 common shares. The Company did not record any expenses related to this event.

On December 22, 2011, director Herbert Whitney gave notice to the Company of his intent to exercise 305,882 of the options granted to him in 2009, in a cashless exercise transaction. This cashless option exercise transaction resulted in Mr. Whitney surrendering 123,810 shares; determined by the stated exercise amount of $52,000 (exercise per share price of $0.17 for 305,882 of the options granted to him in 2009), divided by the value of the Company’s common stock share price on December 22, 2011 of $0.42, the date of exercise. After surrendering the 123,810 shares, Mr. Whitney received 182,072 common shares. The Company did not record any expenses related to this event.

On December 1, 2011 the Board of Directors of the Company amended all of the restricted share grants to management having a revised vesting date of January 1, 2012 (discussed above) to a vesting of January 1, 2015. The fair value of the affected options immediately after the amendment was compared to the fair value immediately prior to the amendment, and the incremental increase in fair value is being recognized over the remaining service period, which is equal to the vesting period.

A summary of the status of our common stock options awards is presented in the table below.

	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)
Outstanding at March 31, 2010		2,843,528		$	0.16		8.09
Granted		100,000			0.50		4.64
Exercised		-			-		-
Forfeited		-			-		-
Outstanding at March 31, 2011		2,943,528			0.18		2.69
Granted		-			-		-
Exercised		(2,117,646	)		0.17		-
Forfeited		-			-		-
Outstanding and Exercisable at March 31, 2012		825,882		$	0.25		6.65

As of March 31, 2012, there was approximately $137,859 of total unrecognized compensation cost related to restricted share-based compensation arrangements granted under the 2008 Plan. That cost is expected to be recognized over the next 33 months. As of March 31, 2012, outstanding options had an aggregate intrinsic value of $257,118.

9. EARNINGS PER SHARE RECONCILIATION

The following is a reconciliation between basic earnings per share ("EPS") and diluted earnings per share for the year ended March 31, 2012:

	For the Year Ended March 31, 2012
				Weighted Average		Earnings
	Income (loss)			Number of Shares		per Share
	(Numerator)			(Denominator)		Amount

Basic EPS	$	5,039,845			55,783,597	$	0.09

Effect of Dilutive Securities:
Options		-			439,215		0.00

October 2009 Convertible Debt		(3,024,501	)		6,002,066		(0.06	)

March 2010 Convertible Debt		(1,668,351	)		3,500,000		(0.02	)

Diluted EPS
Net income + assumed conversions	$	346,993			65,724,878	$	0.01

Options to purchase 20,000 shares of common stock at $2.00 per share and 100,000 shares of common stock at $0.50 per share were outstanding during the year ended March 31, 2012 but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares.

10. CONCENTRATION OF RISK

Concentrations of customers in the terminalling industry may impact our overall exposure to credit risk, in that these customers may be similarly affected by changes in economic or other conditions. We market and sell our services to a broad base of customers and perform ongoing credit evaluations of our customers.

As of March 31, 2012, the Company maintained its cash balances at one financial institution. Balances are insured by the Federal Deposit Insurance Corporation (the “FDIC”) up to $250,000 per institution. Occasionally, our cash deposits may exceed the FDIC insurable limit.

As of May 2012, one customer accounted for approximately 21% of total monthly storage revenue. In addition, for the year ended March 31, 2012, approximately 80% of our revenues were derived from five major customers. Our largest customer accounted for approximately 24% of our total 2012 revenues. Each of the other four customers accounted for 8% or more of our 2012 revenues.

11. OTHER INCOME

In March 2012 the Company recorded a net gain of approximately $48,000 related to the Company’s award of a Louisiana incentive program related to employment increases at the Westwego Terminal. These funds are expected to be received during the Company’s 2013 first or second fiscal quarter. As of March 31, 2012, receivables related to these awards were recorded as Receivables-other in the consolidated balance sheet.

12. PROVISION FOR INCOME TAXES

The Company follows the provisions of SFAS No. 109, ASC 740 “Accounting For Income Taxes,” which provides for recognition of deferred tax assets and liabilities for deductible temporary timing differences, operating loss carryforwards, statutory depletion carryforwards and tax credit carryforwards net of a valuation allowance for any asset for which it is more likely than not will not be realized in the Company’s tax return. An analysis of the Company’s deferred taxes follows:

	2012			2011
Deferred tax liabilities
Fixed assets	$	2,544,488		$	1,534,761
Discount on convertible debt loan		1,702,724			-
		4,247,212			1,534,761
Deferred tax assets
Stock-based compensation		1,225,596			1,078,758
Accrued income and expenses		55,415			90,398
Charitable contributions		1,727			1,434
Intangible assets		-			15,578
Derivative liability		1,372,994			545,185
Net operating loss carryforwards		2,903,248			3,083,937
		5,558,980			4,815,290
Valuation allowance		(1,311,768	)		(3,280,529	)
Deferred income taxes, net	$	—		$	—

At March 31, 2012, we had approximately $7.4 million of operating loss carryforwards. The net operating loss carryfowards would begin to expire in 2028. Some of our net operating losses may be limited by section 382 of the Internal Revenue Code due to the change in control that occurred in March of 2008. Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, (SFAS 109) specifies that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion of the deferred tax asset will not be realized. Accounting rules require that more restrictive criteria be used to consider the book value of deferred assets in instances in which a company has not demonstrated an ability to generate taxable income. Realization of the deferred tax asset is dependent on generating sufficient taxable income prior to expiration of any net operating loss carryforwards. Because there is some uncertainty as to the Company’s ability to generate future taxable income, net operating loss carryforwards have been fully reserved.

Management assessed its various income tax positions and this assessment resulted in no adjustment to the tax asset or liability. The preparation of our various tax returns requires the use of estimates for federal and state income tax purposes. These estimates may be subjected to review by the respective taxing authorities. A revision, if any, to an estimate may result in an assessment of additional taxes, penalties and interest. At this time, a range in which our estimates may change is not quantifiable and a change, if any, is not expected to be material. We will account for interest and penalties relating to uncertain tax provisions in the current period income statement, as necessary. We have not recorded any adjustment to our financial statements as a result of this interpretation. We have tax years 2004 through 2011 remaining subject to examination by various federal and state tax jurisdictions, as applicable.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 8A. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures.

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures include processes to accumulate and evaluate relevant information and communicate such information to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow for timely decisions regarding required disclosures.

In designing such disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Noting these assumptions, under the supervision and with the participation of management, including our CEO and CFO, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2012, as required by Rule 13a-15(e) of the Exchange Act.

Based on this evaluation, our CEO and CFO have concluded that, as of March 31, 2012, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC due to a material weakness noted below.

(b) Management’s Annual Report on Internal Control Over Financial Reporting.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed 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.

The Company’s internal controls over financial reporting include policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (2) provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our financial statements.

Under the supervision and with the participation of our management, including the CEO, CFO and Audit Committee, we evaluated the effectiveness of our internal control over financial reporting as of March 31, 2012. In its evaluation, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on our assessment and the criteria described above, management and our Audit Committee have concluded that, as of March 31, 2012, our internal control over financial reporting were effective.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over our financial reporting. Our management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report.

There have been no changes in the Company’s internal controls over financial reporting that occurred during the fourth quarter of the fiscal year that have materially affected; or are reasonably likely to materially affect our internal control over financial reporting.

Item 9A. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Executive Officers

The following sets forth the names and ages of our executive officers, their respective positions and offices, and their respective principal occupations or brief employment history.

Name	Age	Office
Michael D. Suder	57	President and Chief Executive Officer and Director
Donald St.Pierre	55	Chief Financial Officer
Dale T. Chatagnier	50	Chief Operating Officer and Secretary
Francis A. Marrocco	50	Chief Commercial Officer

Michael D. Suder. Mr. Suder has been the Chief Executive Officer and a director of the Company since May 7, 2008, and our President since August 18, 2008. From September 2005 through 2007, Mr. Suder was the director of new business development for LBC Tank Terminals. Prior to that time, from 2001 through 2005, Mr. Suder was the general manager of Kinder Morgan Energy Partners LP's lower Mississippi River region. Prior to his tenure with Kinder Morgan, Mr. Suder was the President/COO of Delta Terminal Services, Harvey, Louisiana from 1995 through December 2000. Mr. Suder holds a B.A. degree from George Washington University in Washington, D.C.

Donald St.Pierre. Mr. St.Pierre joined the Company in June 2008 as Vice President of Finance and became our Chief Financial Officer on August 18, 2008. Prior to employment with Blackwater Midstream Corp., Mr. St.Pierre held the position of Comptroller with Beverly Industries, LLC, in Westwego, Louisiana from January 2003 through June 2008. Beverly Industries, LLC and its associated companies are engaged in civil construction, trucking, and river aggregate sales. Mr. St.Pierre prepared in-house financial statements and managed contract administration, banking, insurance, IT and office administration. Mr. St.Pierre graduated from Nicholls State University in 1978, earning a BS degree in Marketing and Management and completed postgraduate business classes at the University of New Orleans. Mr. St.Pierre is also the owner of an e-commerce business located in New Orleans.

Dale T. Chatagnier. Mr. Chatagnier joined the Company in May 2008 as our Chief Operating Officer and became our Secretary on August 18, 2008. Prior to joining the Company, Mr. Chatagnier served as the Vice President of Engineering and Operations for North American Terminal Services from 2003 to 2008. From 2001 to 2003, Mr. Chatagnier was the Director of Operations and Engineering for Kinder Morgan in Harvey, LA. From 1995 to 2001 Mr. Chatagnier served as the Vice President of Facility Development and Engineering at Westway Terminals Co., where he was responsible for the development of liquid storage facilities. Mr. Chatagnier earned a BS in Mechanical Engineering from Louisiana State University in Baton Rouge, LA.

Francis A. Marrocco. Mr. Marrocco has been our Chief Commercial Officer since May 2008. At Kinder Morgan Terminals, from 2000 to 2008, Mr. Marrocco held the position of Northeast Regional Vice President managing all New York Harbor Operations and Business Development. Prior to Kinder Morgan, Mr. Marrocco was responsible for commercial development at Delta Terminal Services in Harvey, Louisiana. Mr. Marrocco earned an Associate’s Degree from Morris County College and is working on earning a Bachelor of Management degree from Thomas Edison State College in New Jersey.

The Board and Board Committees

Board of Directors. Michael Suder, the sole member of the Company’s Board of Directors since September 2010, appointed the following to the Company’s Board of Directors in June 2011: Mr. Philip Tracy; Mr. William Weidner, III; Mr. Herbert Whitney, and Mr. William Gore. In September 2011, they were duly elected to the Company’s Board by the shareholders during the Company’s annual shareholder meeting.

The current board of five directors met ten times during the fiscal year, from June 2011 through March 2012. Each director is expected to participate, either in person or via teleconference, in meetings of our Board of Directors and meetings of committees of our Board of Directors in which each director is a member, and to spend the time necessary to properly discharge such director’s respective duties and responsibilities. During the fiscal year ended March 31, 2012, each incumbent director attended 100% of the total number of meetings of our Board of Directors and meetings of committees of our Board of Directors of which the director was a member. We do not have a written policy with regard to directors’ attendance at annual meetings of stockholders; however, all directors are encouraged to attend the annual meeting.

From June 2011 through March 31, 2012 our Board of Directors has determined that Mr. Herbert N. Whitney, and Mr. William Weidner, III currently met the independence requirements and standards currently established by the Nasdaq Stock Exchange and applicable Securities and Exchange Commission (“SEC”) regulations.

Nominating Committee. We do not have a separately designated Nominating Committee as our entire Board of Directors participates in the identification and consideration of qualified individuals to become director candidates. The Board of Directors will consider director candidates recommended by security holders. Potential nominees to the Board of Directors are required to have such experience in business or financial matters as would make such nominee an asset to the Board of Directors and may, under certain circumstances, be required to be “independent”, as such term is defined in the Nasdaq Stock Exchange Rules and applicable Securities and Exchange Commission (“SEC”) regulations. Security holders wishing to submit the name of a person as a potential nominee to the Board of Directors must send the name, address, and a brief (no more than 500 words) biographical description of such potential nominee to the Board of Directors at the following address: Board of Directors, c/o Blackwater Midstream Corp., 660 LaBauve Drive, Westwego, Louisiana 70094. Potential director nominees will be evaluated by personal interview, such interview to be conducted by one or more members of the Board of Directors, and/or any other method the Board of Directors deems appropriate, which may, but need not include a questionnaire. The Board of Directors may solicit or receive information concerning potential nominees from any source it deems appropriate. The Board of Directors need not engage in an evaluation process unless (i) there is a vacancy on the Board of Directors, (ii) a director is not standing for re-election, or (iii) the Board of Directors does not intend to recommend the nomination of a sitting director for re-election. A potential director nominee recommended by a security holder will not be evaluated any differently than any other potential nominee.

Audit Committee. From June, 2011 through March 2012 we had a separately-designated Audit Committee (which is formed in compliance with Section 3(a) (58) (A) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”). No member of the Board of Directors or the Audit Committee qualified as an “audit committee financial expert.” The board did not believe that any of our former directors had the qualifications or experience to be considered a financial expert. However, the members of the Board of Directors individually and collectively had vast educational and business financial experience and training. At this time no qualified candidates have been identified and there can be no assurance that we can attract and retain an independent director to act as our qualified financial expert.

The Audit Committee is organized to assist the Board by overseeing the performance of the independent auditors and the quality and integrity of Blackwater’s internal accounting, auditing and financial reporting practices. The Audit Committee is responsible for retaining (subject to stockholder ratification) and, as necessary, terminating, the independent auditors, annually reviews the qualifications, performance and independence of the independent auditors and the audit plan, fees and audit results, and pre-approves audit and non-audit services to be performed by the auditors and related fees. The Audit Committee operates under a written charter. During the fiscal year ending March 31, 2012 the Audit Committee met one time.

Compensation Committee. In December 2011, the Board of Directors formed a Compensation Committee, exclusive of the one executive member of the Board. The members participate in making recommendations to the Board of Directors concerning salaries and incentive compensation for our officers and employees, and our entire Board of Directors administers the Blackwater Midstream 2008 Incentive Plan. During the fiscal year ending March 31, 2012 the Compensation Committee met one time.

Disclosure Committee. We have a disclosure committee and disclosure committee charter. Our disclosure committee is comprised of all of our officers and directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us and the accuracy, completeness and timeliness of our financial reports.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial and accounting officer, respectively).

Changes in Director Nomination Process for Stockholders

None.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Such executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons.

Based solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that during fiscal year ending March 31, 2012 Michael D. Suder filed all reports timely, Dale Chatagnier filed all reports timely, Francis (Frank) Marrocco filed all reports timely, Donald St.Pierre filed all reports timely, Philip Tracy filed all reports timely, Herbert Whitney filed one report that was not filed timely, William Weidner, II filed all reports timely, and William Gore filed all reports timely. Otherwise, based solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that all filing requirements applicable to our executive officers, directors and other beneficial owners of greater than 10% of our common stock were complied with during the current fiscal year.

Item 11. Executive Compensation.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table shows information concerning the annual compensation for services provided to us by our Chief Executive Officer, our three other most highly compensated executive officers during the last two completed fiscal years and during the fiscal year ended March 31, 2012.

Name and Position	Fiscal Year Ending	Salary ($)	Bonus ($) (1)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Non-Qualified Deferred Compensation Earnings	All Other Compen- sation ($)		Total Compen- sation ($)
Michael D. Suder,	2010	300,000	35,000	0				32,500	(4)	367,500
President and Chief	2011	300,000	43,667	22,490				6,000	(4)	372,157
Executive Officer (2)(3)	2012	300,000	50,000	44,700				17,000	(4)	411,700
Donald St.Pierre,	2010	100,000	10,000	0						110,000
Chief Financial Officer (5)(6)	2011	100,000	6,000	18,788						124,788
	2012	100,000	20,000	44,700						164,700
Dale T. Chatagnier,	2010	225,000	35,000	0						260,000
Chief Operating Officer	2011	225,000	17,500	22,490						264,990
and Secretary (2)(7)	2012	225,000	45,000	44,700						314,700
Francis Marrocco,	2010	237,500	40,000	0						277,500
Chief Commercial	2011	237,500	22,500	22,490						282,490
Officer (5)(8)	2012	237,500	60,000	44,700						342,200

(1) Bonuses were paid to our named executive officers during the fiscal year ended March 31, 2010 in the amount of $120,000, $89,667 was paid in the fiscal year ended March 31, 2011 and $175,000 was paid in the fiscal year ended March 31, 2012.

(2) Employment began May 2008.

(3) Includes (i) 480,690 shares of restricted common stock granted on May 7, 2008 at $2.00 per share and with an original vesting date on January 1, 2010, only if Mr. Suder is employed by us on such date; (ii) 1,321,898 shares of restricted common stock granted on January 1, 2009, valued at $0.29 per share as of such date; and (iii) 1,000,000 shares of restricted common stock granted on March 2, 2009, valued at $0.11 per share as of such date. The shares referenced in items “ii” and “iii”, immediately preceding, with an original vesting date according to the following schedule: (a) 33.3% on January 1, 2010; and (b) 8.3375% on the last calendar day of each subsequent calendar quarter, until all such shares have vested, provided; however, that such shares shall vest according to such schedule only if Mr. Suder is employed by the Company on such dates, respectively. On December 8, 2009, the Board of Directors of the Company amended all of the restricted share grants wherein, the vesting dates were changed to be January 1, 2012. Includes 43,465 shares of restricted common stock granted on September 1, 2010 valued at $0.30 per share as of such date and 15,000 shares of restricted common stock granted on November 19, 2010 valued at $0.63 per share as of such date; both with a vesting date of January 1, 2012. Includes 74,500 shares of restricted common stock granted on June 11, 2011 valued at $0.60 per share as of such date with a vesting date of January 1, 2015. On December 1, 2011, the Board of Directors of the Company amended all of the restricted share grants with a revised vesting date of January 1, 2012 wherein, the vesting dates were changed to be January 1, 2015.

(4) Includes $32,500 in compensation paid to Mr. Suder during the year ended March 31, 2010 for his services as a member of the Board of Directors; and includes $6,000 in compensation paid to Mr. Suder during the year ended March 31, 2011 and $17,000 in compensation paid during the year ended March 31, 2012 for his services as a member of the Board of Directors.

(5) Employment began June 2008.

(6) Includes (i) 150,000 shares of restricted common stock granted on January 1, 2009, valued at $0.29 per share as of such date; and (ii) 500,000 shares of restricted common stock granted on March 2, 2009, valued at $0.11 per share as of such date. Each such grant’s original vesting was according to the following schedule: (i) 33.3% on January 1, 2010; and (ii) 8.3375% on the last calendar day of each subsequent calendar quarter, until all such shares have vested, provided; however, that such shares shall vest according to such schedule only if Mr. St.Pierre is employed by us on such dates, respectively. On December 8, 2009, the Board of Directors of the Company amended all of the restricted share grants wherein, the vesting dates were changed to be January 1, 2012. Includes 43,465 shares of restricted common stock granted on September 1, 2010 valued at $0.30 per share as of such date and 9,125 shares of restricted common stock granted on November 19, 2010 valued at $0.63 per share as of such date; both with a vesting date of January 1, 2012. Includes 74,500 shares of restricted common stock granted on June 11, 2011 valued at $0.60 per share as of such date with a vesting date of January 1, 2015. On December 1, 2011, the Board of Directors of the Company amended all of the restricted share grants with a revised vesting date of January 1, 2012 wherein, the vesting dates were changed to be January 1, 2015.

(7) Includes (i) 120,173 shares of restricted common stock granted on May 14, 2008, valued at $2.60 per share on such date with an original vesting date on January 1, 2010, only if Mr. Chatagnier is employed by us on such date; (ii) 480,690 shares of restricted common stock granted on January 1, 2009, valued at $0.29 per share as of such date; and (iii) 750,000 shares of restricted common stock granted on March 2, 2009, valued at $0.11 per share on such date. The shares referenced in items “ii” and “iii”, immediately preceding, had an original vesting date according to the following schedule: (a) 33.3% on January 1, 2010; and (b) 8.3375% on the last calendar day of each subsequent calendar quarter, until all such shares have vested, provided; however, that such shares shall vest according to such schedule only if Mr. Chatagnier is employed by the Company on such dates, respectively. On December 8, 2009, the Board of Directors of the Company amended all of the restricted share grants wherein, the vesting dates were changed to be January 1, 2012. Includes 43,465 shares of restricted common stock granted on September 1, 2010 valued at $0.30 per share as of such date and 15,000 shares of restricted common stock granted on November 19, 2010 valued at $0.63 per share as of such date; both with a vesting date of January 1, 2012. Includes 74,500 shares of restricted common stock granted on June 11, 2011 valued at $0.60 per share as of such date with a vesting date of January 1, 2015. On December 1, 2011, the Board of Directors of the Company amended all of the restricted share grants with a revised vesting date of January 1, 2012 wherein, the vesting dates were changed to be January 1, 2015.

(8) Includes (i) 120,173 shares of restricted common stock granted on June 1, 2008, valued at $3.77 per share as of such date with an original vesting date on January 1, 2010 if Mr. Marrocco is employed by us on such date; (ii) 480,690 shares of restricted common stock granted on January 1, 2009, valued at $0.29 per share as of such date; and (iii) 750,000 shares of restricted common stock granted on March 2, 2009, valued at $0.11 per share as of such date. The shares referenced in items “ii” and “iii”, immediately preceding, had an original vesting date according to the following schedule: (a) 33.3% on January 1, 2010; and (b) 8.3375% on the last calendar day of each subsequent calendar quarter, until all such shares have vested, provided; however, that such shares shall vest according to such schedule only if Mr. Marrocco is employed by the Company on such dates, respectively. On December 8, 2009, the Board of Directors of the Company amended all of the restricted share grants wherein, the vesting dates were changed to be January 1, 2012. Includes 43,465 shares of restricted common stock granted on September 1, 2010 valued at $0.30 per share as of such date and 15,000 shares of restricted common stock granted on November 19, 2010 valued at $0.63 per share as of such date; both with a vesting date of January 1, 2012. Includes 74,500 shares of restricted common stock granted on June 11, 2011 valued at $0.60 per share as of such date with a vesting date of January 1, 2015. On December 1, 2011, the Board of Directors of the Company amended all of the restricted share grants with a revised vesting date of January 1, 2012 wherein, the vesting dates were changed to be January 1, 2015.

For a description of the material terms of employment agreements with our named executive officers, see “Executive Compensation—Employment Agreements.”

Outstanding Equity Awards at Fiscal Year Ended March 31, 2012

The following table summarizes the number of securities underlying outstanding plan awards for each named executive officer as of March 31, 2012.

	Option Awards											Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)			Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)			Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

Michael D. Suder		0		0		705,882	(1)	$	0.17	5/4/2019			0		0		2,935,553	(2)		1,521,920

Donald St. Pierre		0		0		0			0		0		0		0		777,090	(3)		161,988

Dale T. Chatagnier		0		0		0			0		0		0		0		1,483,828	(4)		601,539

Francis Marrocco		0		0		0			0		0		0		0		1,483,828	(5)		742,142

(2) Includes (i) 480,690 shares of restricted common stock granted on May 7, 2008 at $2.00 per share as of such date; (ii) 1,321,898 shares of restricted common stock granted on January 1, 2009, valued at $0.29 per share as of such date; (iii) 1,000,000 shares of restricted common stock granted on March 2, 2009, valued at $0.11 per share as of such date; (iv) 43,465 shares of restricted common stock granted on September 1, 2010, valued at $0.30 per share as of such date; and (v) 15,000 shares of restricted common stock granted on November 19, 2010, valued at $0.63 per share as of such date. The shares referenced in items “i”, “ii”, “iii” “iv” and “v” immediately preceding, all vest according to the revised vesting date of January 1, 2012, and only if Mr. Suder is employed by the Company on such date. Includes 74,500 shares of restricted common stock granted on June 11, 2011 valued at $0.60 per share as of such date with a vesting date of January 1, 2015. On December 1, 2011, the Board of Directors of the Company amended all of the restricted share grants with a revised vesting date of January 1, 2012 wherein, the vesting dates were changed to be January 1, 2015.

(3) Includes (i) 150,000 shares of restricted common stock granted on January 1, 2009, valued at $0.29 per share as of such date; (ii) 500,000 shares of restricted common stock granted on March 2, 2009, valued at $0.11 per share as of such date; (iii) 43,465 shares of restricted common stock granted on September 1, 2010, valued at $0.30 per share as of such date; and (iv) 9,125 shares of restricted common stock granted on November 19, 2010, valued at $0.63 per share as of such date. The shares referenced in items “i”, “ii”, ”iii” and “iv” immediately preceding, all vest according to the revised vesting date of January 1, 2012, and only if Mr. St.Pierre is employed by the Company on such date. Includes 74,500 shares of restricted common stock granted on June 11, 2011 valued at $0.60 per share as of such date with a vesting date of January 1, 2015. On December 1, 2011, the Board of Directors of the Company amended all of the restricted share grants with a revised vesting date of January 1, 2012 wherein, the vesting dates were changed to be January 1, 2015.

(4) Includes (i) 120,173 shares of restricted common stock granted on May 14, 2008, valued at $2.60 per share as of such date and; (ii) 480,690 shares of restricted common stock granted on January 1, 2009, valued at $0.29 per share as of such date; (iii) 750,000 shares of restricted common stock granted on March 2, 2009, valued at $0.11 per share on such date; (iv) 43,465 shares of restricted common stock granted on September 1, 2010, valued at $0.30 per share as of such date; and (v) 15,000 shares of restricted common stock granted on November 19, 2010, valued at $0.63 per share as of such date. The shares referenced in items “i”, “ii”, “iii”, “iv” and “v” immediately preceding, all vest according to the revised vesting date of January 1, 2012, and only if Mr. Chatagnier is employed by the Company on such date. Includes 74,500 shares of restricted common stock granted on June 11, 2011 valued at $0.60 per share as of such date with a vesting date of January 1, 2015. On December 1, 2011, the Board of Directors of the Company amended all of the restricted share grants with a revised vesting date of January 1, 2012 wherein, the vesting dates were changed to be January 1, 2015.

(5) Includes (i) 120,173 shares of restricted common stock granted on June 1, 2008, valued at $3.77 per share as of such date; (ii) 480,690 shares of restricted common stock granted on January 1, 2009, valued at $0.29 per share as of such date; (iii) 750,000 shares of restricted common stock granted on March 2, 2009, valued at $0.11 per share as of such date; (iv) 43,465 shares of restricted common stock granted on September 1, 2010, valued at $0.30 per share as of such date; and (v) 15,000 shares of restricted common stock granted on November 19, 2010, valued at $0.63 per share as of such date. The shares referenced in items “i”, “ii”, “iii”, “iv” and “v” immediately preceding, all vest according to the revised vesting date of January 1, 2012, and only if Mr. Marrocco is employed by the Company on such date. Includes 74,500 shares of restricted common stock granted on June 11, 2011 valued at $0.60 per share as of such date with a vesting date of January 1, 2015. On December 1, 2011, the Board of Directors of the Company amended all of the restricted share grants with a revised vesting date of January 1, 2012 wherein, the vesting dates were changed to be January 1, 2015.

Employee Benefits Plans

Pension Benefits

We do not sponsor any qualified or non-qualified pension benefit plans.

Nonqualified Deferred Compensation

We do not maintain any non-qualified defined contribution or deferred compensation plans. We sponsor a tax qualified defined contribution 401(k) plan in which all eligible executive officers and employees may participate.

Employment Agreements

Employment Agreement with Michael D. Suder

We are a party to an employment agreement with Michael D. Suder, our Chief Executive Officer and President, which expires on April 30, 2013. The agreement provides for a base annual salary of $300,000 and allows Mr. Suder to participate in any of the Company’s executive benefit plans. Pursuant to the agreement, Mr. Suder was entitled to 480,690 shares of the Company’s common stock at a purchase price of $.001 per share. Pursuant to the agreement, the Company granted Mr. Suder common stock purchase options to acquire 1,321,898 shares of the Company’s common stock at an exercise price of $2.00 per share. In December 2008, Mr. Suder voluntarily cancelled the 1,321,898 common stock purchase options acquired pursuant to the agreement and received 1,321,898 shares of common stock from the Board at no additional consideration.

Mr. Suder’s employment agreement may be terminated, with or without cause (as defined in the agreement). If we terminate the employment agreement for cause or on account of death or disability or if Mr. Suder terminates the agreement for any reason, Mr. Suder is entitled to no further compensation or benefits other than those earned through the date of termination, provided, however, that if we terminate the employment agreement on account of death or disability, Mr. Suder’s heirs shall be entitled to continue to participate in any executive benefit plan, to the extent provided in such plan or as may be required by law. If we terminate the agreement for any reason other than for cause, death or disability; (i) we will provide severance of continued payment of cash compensation at a rate of Mr. Suder’s then current base annual salary for a period equal to the lesser of the balance of the term of the agreement or 6 months; (ii) we will provide Mr. Suder and his spouse and dependents, if any, with medical benefits comparable to such benefits received prior to termination, for up to 12 months, or the cash equivalent of such benefits; and (iii) all securities issued to Mr. Suder that remain subject to vesting shall immediately vest and become exercisable for a period of up to 12 months.

The Company has agreed to indemnify Mr. Suder against all claims, losses and expenses sustained by him as a result of any action taken by him in good faith and furtherance of the Company’s business and within the scope of Mr. Suder’s duties and authority, in connection with any and all claims by stockholders or third parties which are based on such actions.

Employment Agreement with Dale T. Chatagnier

We are a party to an employment agreement with Dale T. Chatagnier, our Chief Operating Officer, which expires on May 13, 2013, and automatically renews for successive periods of one year after May 13, 2013, unless either party gives notice to the other party that such party desires to terminate the agreement. The agreement provides for a base annual salary of $225,000 and allows Mr. Chatagnier to participate in any of the Company’s executive benefit plans. Pursuant to the agreement, Mr. Chatagnier was entitled to purchase 120,173 shares of the Company’s common stock, pursuant to the 2008 Plan, at a purchase price of $.001 per share. Pursuant to the agreement, the Company granted Mr. Chatagnier 480,690 common stock purchase options at an exercise price of $2.60 per share. In December 2008, Mr. Chatagnier voluntarily cancelled his common stock purchase options acquired pursuant to the agreement and received 480,690 shares of common stock from the Board at no additional consideration.

Mr. Chatagnier’s employment agreement may be terminated, with or without cause (as defined in the agreement). If we terminate the employment agreement for cause or on account of death or disability or if Mr. Chatagnier terminates the agreement for any reason, Mr. Chatagnier is entitled to no further compensation or benefits other than those earned through the date of termination, provided, however, that if we terminate the employment agreement on account of death or disability, Mr. Chatagnier’s heirs shall be entitled to continue to participate in any executive benefit plan, to the extent provided in such plan or as may be required by law. If we terminate the agreement for any reason other than for cause, death or disability; (i) we will provide severance of continued payment of cash compensation at a rate of Mr. Chatagnier’s then current base annual salary for a period equal to the lesser of the balance of the term of the agreement or 6 months; (ii) we will provide Mr. Chatagnier and his spouse and dependents, if any, with medical benefits comparable to such benefits received prior to termination, for up to 12 months, or the cash equivalent of such benefits; and (iii) all securities issued to Mr. Chatagnier that remain subject to vesting shall immediately vest and become exercisable for a period of up to 12 months.

The Company has agreed to indemnify Mr. Chatagnier against all claims, losses and expenses sustained by him as a result of any action taken by him in good faith and furtherance of the Company’s business and within the scope of Mr. Chatagnier’s duties and authority, in connection with any and all claims by stockholders or third parties which are based on such actions.

Employment Agreement with Francis Marrocco

We are a party to an employment agreement with Francis Marrocco, our Chief Commercial Officer, which expires on May 13, 2013, and automatically renews for successive periods of one year after May 13, 2013, unless either party gives notice to the other party that such party desires to terminate the agreement. The agreement provides for a base annual salary of $237,500 and allows Mr. Marrocco to participate in any of the Company’s executive benefit plans. Pursuant to the agreement, Mr. Marrocco was entitled to purchase 120,173 shares of the Company’s common stock, pursuant to the 2008 Plan, at a purchase price of $.001 per share. Pursuant to the agreement, the Company granted Mr. Marrocco 480,690 common stock purchase options at an exercise price of $3.77 per share. In December 2008, Mr. Marrocco voluntarily cancelled his common stock purchase options acquired pursuant to the agreement and received 480,690 shares of common stock from the Board at no additional consideration.

Mr. Marrocco’s employment agreement may be terminated, with or without cause (as defined in the agreement). If we terminate the employment agreement for cause or on account of death or disability or if Mr. Marrocco terminates the agreement for any reason, Mr. Marrocco is entitled to no further compensation or benefits other than those earned through the date of termination, provided, however, that if we terminate the employment agreement on account of death or disability, Mr. Marrocco’s heirs shall be entitled to continue to participate in any executive benefit plan, to the extent provided in such plan or as may be required by law. If we terminate the agreement for any reason other than for cause, death or disability; (i) we will provide severance of continued payment of cash compensation at a rate of Mr. Marrocco’s then current base annual salary for a period equal to the lesser of the balance of the term of the agreement or 6 months; (ii) we will provide Mr. Marrocco and his spouse and dependents, if any, with medical benefits comparable to such benefits received prior to termination, for up to 12 months, or the cash equivalent of such benefits; and (iii) all securities issued to Mr. Marrocco that remain subject to vesting shall immediately vest and become exercisable for a period of up to 12 months.

The Company has agreed to indemnify Mr. Marrocco against all claims, losses and expenses sustained by him as a result of any action taken by him in good faith and furtherance of the Company’s business and within the scope of Mr. Marrocco’s duties and authority, in connection with any and all claims by stockholders or third parties which are based on such actions.

Potential Payments Upon Termination or Change in Control

Assuming the employment of our named executive officers were to be terminated without cause, each as of March 31, 2012, the following individuals would be entitled to payments in the amounts set forth opposite to their name in the below table:

Cash Severance
Michael D. Suder	Up to $150,000
Dale T. Chatagnier	Up to $112,500
Francis Marrocco	Up to $118,750

We are obligated to pay Mr. Suder the above sum if he resigns for good reason. We are not obligated to make any cash payments to these executives if their employment is terminated by us for cause, or in the event of death or disability, other than the payment of accrued but unpaid annual salary and vacation time, and reimbursement of business expenses. If employment of the above-named executives is terminated by reason of death or disability, the heirs of the deceased shall, in certain circumstances, be entitled to continue to participate in certain employee benefits plans. A change in control does not affect the amount or timing of these cash severance payments.

Assuming the employment of our named executive officers were to be terminated without cause or for good reason, each as of March 31, 2012, the following individuals would be entitled to accelerated vesting of their outstanding stock options and common stock awards described in the table below:

	Value of Equity Awards: Termination Without Cause or For Good Reason (1)			Value of Equity Awards: In Connection With a Change in Control
Michael D. Suder	$	1,555,843	(2)	$	1,555,843
Dale T. Chatagnier	$	786,429	(3)	$	786,429
Francis Marrocco	$	786,429	(3)	$	786,429

(1) The market price of our common stock on the OTCBB on March 31, 2012 was $0.53 per share

(2) Includes 2,935,553 shares of restricted common stock and 705,882 common stock purchase options.

(3) Includes 1,483,828 shares of restricted common stock.

DIRECTOR COMPENSATION

Summary of Director Compensation

Cash Compensation

At the June 2011 meeting of the newly appointed Board of Directors, the Board revised the director compensation payments, applicable to the next Board of Directors to be elected in September 2011, to be $15,000 per year to director, paid in September of each year for their future period of service from September through August. The Board additionally approved in-person meeting fees would be paid in the amount of $1,000 per person per meeting but no fees would be paid for participating in meetings via telephone or other methods.

Previously, at the June 2010 meeting of the Company’s Board of Directors, the Board increased the number of director seats from four to five. The Board also revised the previous director compensation payments, applicable to the next Board of Directors to be elected in September 2010, to be $20,000 per year to each non-employee director, paid in September of each year for their future period of service from September through August. The board additionally approved that no fees would be paid for attending or participating in any Board of Director or committee meeting, whether in person or by other means.

Prior to the September 2010 revised director compensation terms, each member of the Board of Directors was paid a fee of $25,000 as of August 1. Each director was also paid $1,000 for participating in person in board and committee meetings and $500 for participating in board and committee meetings via teleconference.

Options Granted in May 2009 and Subsequent Exercises

Prior to August 2009, annually, as of August 1, each member of the Board of Directors was to be awarded shares of restricted common stock or common stock purchase options as outlined below via our 2008 Incentive Plan. Such compensation was awarded on May 7, 2009. Our directors had the option to choose one of the following methods of compensation:

A) Up to $60,000 in value of shares of the Company’s common stock at the grant date with immediate vesting, or

B) Stock options equal to double the number of shares of stock equal to $60,000 at the grant date, with immediate vesting.

On May 7, 2009, each of the Company’s four directors at that time (Suder, Wilson, Whitney, van Houweninge) elected to receive $120,000 worth of stock options (705,882 options) valued on the grant date at $0.17, which is also the exercise price. These options were expensed by the Company in May 2009 at $435,274 using a Black-Scholes per share valuation of approximately $0.154.

Had each of the directors chosen to receive $60,000 worth of the Company’s shares on this date (352,941 shares), the price would have also been $0.17, but the Company would have expensed $240,000.

Options exercised relating to the May 2009 option grants are as follows:

As of the filing date of the annual report on 10-K for the year ending March 31, 2012, Mr. Suder had not exercised any of his options.

Options Granted in December 2009 and Subsequent Non-Approval by Shareholders

As of August, 2009, and through December 2009, our 2008 Incentive Plan often did not have adequate shares available to issue or grant shares or options to the Board of Directors as called for in the Company’s 2008 Incentive Plan; therefore the Board decided to create a new non-employee directors incentive plan.

On December 7, 2009, the Board of Directors of the Company authorized and approved the 2009 Non-Employee Directors Stock Incentive Plan. The Plan would have allowed non-employee directors to receive up to an aggregate amount of stock options, not to exceed 2,000,000 shares, of the common stock of the Company. The Plan also established a vesting schedule and other terms and conditions. The Plan needed to be ratified by the Company’s Shareholders at the next annual shareholders meeting. At the next annual shareholders meeting held on September 2, 2010, the shareholders did not approve the 2009 Non-Employee Directors Stock Incentive Plan.

Shares Granted

On December 8, 2009 the Board of Directors authorized Director Mathijs van Houweninge to receive $40,000 in shares of restricted common stock, pursuant to the Company’s 2008 Incentive Plan: 60,000 shares were granted as of December 8, 2009 with a share price of $0.32 per share, which vested immediately. The remaining 61,176 shares were granted and issued on January 4, 2010 with a share price of $0.34 per share, and vested immediately upon such grant.

On September 1, 2010 the Board of Directors granted each of the three non-employee directors, pursuant to the Company’s 2008 Incentive Plan: 43,465 shares of restricted common stock with a share price of $0.30 per share, which vested immediately.

Each director is personally responsible for their personal income taxes as a result of the above-referenced awards. Our directors are not precluded from serving us in any other capacity and receiving compensation therefore.

The following table summarizes compensation that our directors received during the fiscal years ending March 31, 2011 and March 31, 2012, for services as members of our Board of Directors.

Name		Fees Earned or Paid in Cash ($)		Stock Awards ($)		Options Awards ($)		Non-equity incentive plan compensation ($)		Nonqualified deferred compensation earnings ($)		All Other Compensation ($)		Total ($)
Christopher A Wilson:(1)	2011	$	7,000	$	13,039	$	0		0		0		0	$	20,039
	2012	$	0	$	0	$	0		0		0		0	$	0
Mathijs van Houweninge(1)	2011	$	6,500	$	13,039	$	0		0		0		0	$	19,539
	2012	$	0	$	0	$	0		0		0		0	$	0
Michael D. Suder(2)	2011	$	6,000	$	0	$	0		0		0		0	$	6,000
	2012	$	17,000

Blackwater Midstream Corp. 10-K