The accompanying notes are an integral part of these consolidated financial statements.
DOMARK INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2013 AND 2012 AND FOR THE PERIOD OCTOBER 21, 2009 (INCEPTION OF DEVELOPMENT STAGE) TO NOVEMBER 30, 2013
(Unaudited)
NOTE 1 - DESCRIPTION OF BUSINESS
DOMARK INTERNATIONAL, INC. ("DoMark" or the "Company") was incorporated under the laws of the State of Nevada on March 30, 2006. During 2008 and 2009, the Company acquired several operating businesses. On May 21, 2009, the Company entered into an acquisition agreement (the "Victory Lane Agreement") with Victory Lane Financial Elite, LLC ("Victory Lane") with respect to a real estate lifestyle business known as "Victory Lane" (the "Victory Lane Business"). Shortly thereafter, a dispute arose between the Company and the principals of Victory Lane regarding the representations of the principals of Victory Lane and the Victory Lane Business and the Victory Lane Agreement.
On March 5, 2012, the Company entered into an Asset Purchase Agreement with its then controlling shareholder, R. Thomas Kidd, for the sale of the Company’s subsidiary Armada Armada/The Golf Championships and certain assets related thereto. The Company relied upon Accounting Standards Codification (“ASC”) Topic NO5, 860-20-25 and 860-20-40 to record the sale. The fair value of the transaction was measured at the fair value of the assets less any liabilities sold.
On February 29, 2012, the Company formed a new wholly owned subsidiary, Solawerks, Inc. in the state of Nevada, for the purposes of entering the business of marketing specialized solar consumer electronics. Solawerks' current focus is to develop and distribute the SolaPad: a combined cover and charging system for Apple's iPad; and the SolaCase, a combined cover and charging system for all versions of Apple's iPhone. Solawerks competes in a market that also includes 3D Systems (DDD), Dell (DELL) and Hewlett Packard (HPQ).
On June 20, 2012, the Company formed a new wholly-owned subsidiary, MuscleFoot Inc. in the state of Nevada for the purpose of distributing, marketing, and acting as sales agent for the patented foot care system of Barefoot Science. This entity is currently in default with the Nevada Secretary of State.
On July 20, 2012, the Company formed a new wholly-owned subsidiary, DoMark Canada Inc. in the province of Ontario for the purpose of supporting the Company’s corporate operations based in Toronto, Ontario, Canada.
On February 28, 2013, the Company entered into a Memorandum of Understanding to purchase 44% of Zaktek Ltd. (“Zaktek”). Zaktek’s main product is the phonepad+, an Apple Inc. approved tablet device that works with smartphones, including the Apple iPhone® and Samsung Galaxy products to improve functionality including video and gaming abilities.
On April 23, 2013, the Company received notification that Zaktek was ending discussions in regards to the definitive purchase agreement with DoMark.
On June 11, 2013, the Company then purchased 100% of South Hill Ltd., an English private limited company, which owns approximately 19% of Zaktek.
NOTE 2 - GOING CONCERN
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. For the period October 21, 2009 (inception of development stage) to November 30, 2013, the Company incurred losses from operations of $16,187,724. Furthermore, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders.
These factors raise substantial doubt about the ability of the Company to continue as a going concern. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. In this regard, management is planning to raise any necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital.
NOTE 3 - BASIS OF PRESENTATION
The audited consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for financial information and the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included.
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECENT ACCOUNTNG PRONOUNCEMENTS
The Company has reviewed recently issued accounting pronouncements and plans to adopt those that are applicable to it. It does not expect the adoption of these pronouncements to have a material impact on its financial position, results of operations or cash flows.
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined in ASC Topic NO. 915-10-05 and has recognized minimal revenue and devotes substantially all of its efforts on consumer electronic businesses. Its planned principal operations in developing its sports business have commenced. All losses accumulated since October 21, 2009 have been considered as part of the Company's development stage activities.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements represent the consolidated financial position and results of operations of the Company and include the accounts and results of operations of the Company and its subsidiaries. The accompanying consolidated financial statements include the active entity of DoMark International, Inc. and its wholly owned subsidiaries, DoMark Canada, Inc., Solawerks, Inc., Musclefoot, Inc., and South Hill Ltd. The Company has relied upon the guidance provided by ASC Topic NO.810-10-15-3.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.
The primary management estimates included in these financial statements are the fair value of its stock tendered in various non-monetary transactions.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At November 30 and May 31, 2013, cash and cash equivalents included cash on hand and cash in the bank.
NET LOSS PER COMMON SHARE
Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. Dilutive securities having an anti-dilutive effect on diluted net loss per common share are excluded from the calculation.
For the six months ended November 30, 2013 and 2012, diluted common shares outstanding excluded the following dilutive securities as the effect of their inclusion was anti-dilutive:
| | | Six Months Ended November 30 | |
| | | 2013 | | | 2012 | |
| Convertible notes payable | | | | | | - | |
| Series A convertible preferred stock | | | 50,000,000 | | | | 50,000,000 | |
| Warrants | | | 850,000 | | | | 350,000 | |
| | | | | | | | | |
| Total | | | | | | | 50,350,000 | |
INTANGIBLE ASSETS
Intangible assets are carried at cost less accumulated amortization. Amortization is recorded over the estimated useful lives of the respective assets.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with ASC Topic No. 360-10-40, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.
STOCK-BASED COMPENSATION
The Company accounts for share based payments in accordance with ASC Topic No. 718, Compensation - Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with ASC 718-10-30-9, Measurement Objective - Fair Value at Grant Date, the Company estimates the fair value of the award using a valuation technique. For stock options, the Company uses the Black-Scholes option pricing model. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders. Compensation cost is recognized over the requisite service period which is generally equal to the vesting period. Upon exercise, shares issued will be newly issued shares from authorized common stock.
ASC Topic No. 505, "Compensation-Stock Compensation", establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non-employees for goods or services. Under this method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 505.
RESEARCH AND DEVELOPMENT
All research and development expenditures are expensed as incurred.
REVENUE RECOGNITION
The Company recognizes revenues when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured.
NOTE 5 – INVESTMENTS
Investments consist of:
| | | November 30, 2013 | | | May 31, 2013 | |
| Imagic Ltd. - 31% equity interest - at cost (7,500,000 shares of DoMark common stock - $697,500, cash -$120,194, loans payable -$100,000) | | $ | 917,694 | | | $ | - | |
| Barefoot Science Products & Services Inc. - 15% equity interest | | | 14,765 | | | | 5,000 | |
| Total | | $ | 932,459 | | | $ | 361,000 | |
On July 22, 2013, the Company closed on the acquisition of a 19% equity interest n Imagic Ltd. (“Imagic”). Imagic is a privately owned company registered in Gibraltar which owns proprietary product designs for its Digilink and Game Control products. Imagic shares are not quoted or traded on any securities exchange or in any recognized over-the counter market. Accordingly, it is not practicable to estimate the fair value of this investment.
On January 25, 2013, the Company executed an agreement with Barefoot Science Products & Services Inc. (“Barefoot Science”) which cancelled the Marketing and Distribution Agreement dated June 20, 2012 and which provided the Company a 15% equity interest in Barefoot Science. As a result, the Company recognized an impairment charge of $4,605,480 in the year ended May 31, 2013 to write off the remaining unamortized prepaid license fees at February 28, 2013 ($4,605,480) and to record the estimated fair value of the 15% equity interest in Barefoot Science at $5,000. Barefoot Science has developed a patented foot strengthening system through insertion of an insole system or by incorporation right into the design of shoes. Barefoot Science shares are not quoted or traded on any securities exchange or in any recognized over-the counter market. Accordingly, it is not practicable to estimate the fair value of this investment.
NOTE 6 – LOANS PAYABLE TO CONSULTANTS AND STOCKHOLDERS
| Loans payable to consultants and stockholders consist of: | | | | |
| | | November 30, 2013 | | | May 31, 2013 | |
| Consultant and stockholder | | | 79,800 | | | | 7,800 | |
| Former chairman of DoMark | | | 49,000 | | | | - | |
| Chairman of Barefoot Science and affiliate | | | 33,500 | | | | - | |
| Consultant | | | 26,996 | | | | - | |
| Consultant | | | 16,097 | | | | 37,488 | |
| Consultant | | | 2,602 | | | | - | |
| Total | | $ | 207,995 | | | $ | 29,088 | |
The loans are informal and do not provide for interest or a stated maturity date.
NOTE 7 – CONVERTIBLE NOTES PAYABLE
At November 30, 2013, convertible notes payable consisted of
Date of Note | | Noteholder | | Interest Rate | | | Maturity date | | Principal Amount | | | Unamortized Debt Discount | | | Net Carrying Amount | |
| 06/11/13 | | Asher Enterprises, Inc. | | | 8 | % | | 03/03/14 | | | 32,500 | (a) | | | 19,560 | | | | 12,940 | |
| 08/01/13 | | Continental Equities, LLC | | | 12 | % | | 08/01/14 | | | 30,000 | (b) | | | 28,550 | | | | 1,450 | |
| 08/05/13 | | JSJ Investments, Inc. | | | 10 | % | | 02/05/14 | | | 25,000 | (c) | | | 24,811 | | | | 189 | |
| 08/07/13 | | JMJ Financial Inc. | | | 12 | % | | 08/07/14 | | | 50,000 | (d) | | | 28,610 | | | | 21,390 | |
| 08/13/13 | | Black Mountain Equities, Inc. | | | 10 | % | | 05/13/14 | | | 50,000 | (e) | | | 41,152 | | | | 8,848 | |
| 08/26/13 | | Redwood Fund III | | | 12 | % | | 02/28/14 | | | 95,000 | (f) | | | 92,334 | | | | 2,666 | |
| 09/10/13 | | Asher Enterprises, Inc. | | | 8 | % | | 06/10/14 | | | 32,5010 | (a) | | | 32,353 | | | | 147 | |
| 10/09/13 | | JSJ Investments, Inc. | | | 10 | % | | 04/09/14 | | | 25,000 | | | | 24,234 | | | | 766 | |
| 10/31/13 | | Iconic Holdings, LLC | | | 10 | % | | 10/31/14 | | | 30,000 | | | | 29,955 | | | | 45 | |
| 10/31/13 | | Iconic Holdings, LLC | | | 10 | % | | 10/31/14 | | | 14,677 | | | | 101 | | | | 14,576 | |
| 11/08/13 | | Iconic Holdings, LLC | | | 10 | % | | 11/08/14 | | | 30,000 | | | | 29,955 | | | | 145 | |
| 11/26/13 | | Asher Enterprises, Inc. | | | 8 | % | | 08/26/14 | | | 425,000 | | | | 34,366 | | | | 8,134 | |
| Totals | | | | | | | | | | $ | 457,177 | | | $ | 385,981 | | | $ | 71,196 | |
Legend
| (a) | At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 55% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion. |
| (b) | At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 50% of the average of the three lowest closing prices during the 30 trading days prior to the notice of conversion. |
| (c) | At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.081 or 50% of the average of the three lowest closing prices during the 10 trading days prior to the notice of conversion. |
| (d) | At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.085 or 60% of the lowest closing price during the 25 trading days prior to the notice of conversion. |
| (e) | At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.08 or 50% of the lowest closing price during the 10 trading days prior to the notice of conversion. |
| (f) | At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.0725 or 34% of the lowest closing price during the 20 trading days prior to the notice of conversion. |
| (g) | At noteholder’s option, the principal amount (and accrued interest) are co |
At August 31, 2013 and May 31, 2013, accrued interest payable on convertible notes payable (included in accounts payable and accrued expenses) was $0 and $0, respectively.
For the three months ended August 31, 2013, interest expense includes accretion of debt discounts (relating to beneficial conversion features) on convertible notes payable of $3,518.
Derivative Liability for Convertible Notes Payable
The convertible notes issued in 2013 (with a total principal amount of $354,000) all contain a provision that the conversion price is to be reduced in the event that we are deemed to have sold or issued any shares of common stock for a consideration price per share less than the conversion price. Accordingly, in accordance with EITF Issue No. 07-05, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock”, we charged the option value of these convertible notes at the respective dates of issuance (totaling $544,962) to debt discounts for the intrinsic value of the embedded beneficial conversion features (limited to the principal amount of the notes) in these notes (totaling $330,196), which are expensed over the terms of the respective notes to increase the carrying values to principal amounts, and to “income (loss) from revaluation of derivative liability for convertible notes” ($214,766) and credited $544,962 to “derivative liability for convertible notes payable”. Each quarter, the option value of these convertible notes is remeasured and changes are reflected within the “Statement of Operations” as “income (loss) from revaluation of derivative liability for convertible notes”. Option values were calculated using the Black-Scholes option pricing model and the following assumptions: Stock prices ranging from $________to $________ per share, strike prices ranging from $________ to $________ per share; risk-free interest rates ranging from __% to __%, terms ranging from ___days to ___days, and expected volatility ranging from ___% to ___%.
Below is a reconciliation of the change in option values from January 30, 2013 to August 31, 2013:
| | | Principal Amount of Convertible Note Payable | | | Option Value | |
| Issuance of convertible notes with EITF 07-05 provision: | | | | | | |
| January 30,2013 | ($17,256 charged to operations) | | $ | 53,000 | | | $ | 67,256 | |
| April 15, 2013 | ($9,717charged to operations) | | | 32,500 | | | | 37,658 | |
| Total | | | | 85,500 | | | | 104,914 | |
| | | | | | | | | | |
| Revaluation of derivative liability charged (credited) to operations: | | | | | | | | |
| Three months ended February 28, 2013 | | | - | | | | - | |
| Three months ended May 31, 2013 | | | - | | | | 132,664 | |
| Total | | | - | | | | 132,664 | |
| | | | | | | | | |
| Balance, May 31, 2013: | | | 85,500 | | | | 237,578 | |
| | | | | | | | | |
| Issuance of convertible notes with EITF 07-05 provision: | | | | | | | | |
| June 11, 2013 | ($6,647 charged to operations) | | | 32,500 | | | | 38,359 | |
| August 1, 2013 | ($7,703 charged to operations) | | | 30,000 | | | | 37,672 | |
| August 5, 2013 | ($6,998 charged to operations) | | | 25,000 | | | | 31,967 | |
| August 7, 2013 | ($30,500 charged to operations) | | | 50,000 | | | | 63,788 | |
| August 13, 2013 | ($36,359 charged to operations) | | | 50,000 | | | | 81,818 | |
| August 26, 2013 | ($91,454 charged to operations) | | | 95,000 | | | | 186,444 | |
| Total | | | 282,500 | | | | 440,048 | |
| | | | | | | | | |
| Conversion of $14,000 principal amount of January 30, 2013 $53,000 convertible note into 389,972 shares of common stock on August 28, 2013 | | | (14,000 | ) | | | (13,727 | ) |
| | | | | | | | | |
| Revaluation of derivative liability charged (credited) to operations: | | | | | | | | |
| Three months ended August 31, 2013 | | | - | | | | (143,046 | ) |
| | | | | | | | | |
| Balance, August 31, 2013 | | $ | 354,000 | | | $ | 520,853 | |
NOTE 8. STOCKHOLDERS’ EQUITY
SERIES A CONVERTIBLE PREFERRED STOCK
EACH SHARE OF Series A Convertible Stock has 1000 voting rights and is convertible into 1000 shares of common stock
COMMON STOCK ISSUANCES
On September 18, 2013, the Company issued 856,164 shares of common stock in satisfaction of $14,500 loan payable
On October 9, 2013, the Company issued 1,000,000 shares of common stock for consulting services
On October 10, 2013, the Company issued 250,000 shares of common stock for consulting services
On November 4, 2013, the Company issued 903,261 shares of common stock in satisfaction of $14,750 of loan payable
On November 4, 2013, the Company issued 1,153,846 shares of common stock in satisfaction of $33,750 loan payable
On November 4, 2013, the Company issued 3,500,000 shares of common stock in satisfaction of $52,500 loan payable
On November 12, 2013, the Company issued 1,630,435 shares of common stock in satisfaction of $18,750 loan payable
On November 14, 2013, the Company issued 3,999,200 shares of common stock in satisfaction of $13,197 loan payable
On November 15, 2013, the Company issued 175,000 shares of common stock for consulting services
On November 19, 2013, the Company issued 3,456,597 shares of common stock in satisfaction of $18,750 loan payable
On November 19, 2013, the Company issued 8,850,572 shares of common stock in satisfaction of $27,874 loan payable
Warrants to Purchase Common Stock
A summary of warrant activity for the year ended May 31, 2013 and for the six months ended November 30, 2013 follows:
| | | | | | Weighted | |
| | | Number of | | | Average Exercise | |
| | | Warrants | | | Price | |
| | | | | | | |
| Outstanding at May 31, 2013 | | | 850,000 | | | | .42 | |
| Granted | | | - | | | | - | |
| Exercised | | | - | | | | - | |
| Cancelled | | | - | | | | - | |
| Outstanding at May 31, 2013 | | | 850,000 | | | | .42 | |
| Granted | | | - | | | | .42 | |
| Exercised | | | - | | | | - | |
| Cancelled | | | - | | | | - | |
| Outstanding November 30, 2013 | | | 850,000 | | | | .42 | |
Warrants outstanding at November 30, 2013 consist of:
| | | # of outstanding | | | Exercise Price | | |
| Date Granted | | | | | | | |
| May 25, 2012 | | | 100,000 | | | | 1.00 | | May 25, 2015 |
| June 12, 2012 | | | 150,000 | | | | 1.00 | | June 12, 2015 |
| June 26, 2012 | | | 100,000 | | | | 1.00 | | June 26, 2015 |
| January 13, 2013 | | | 500,000 | | | | 1.00 | | January 1, 2015 |
| | | | | | | | | | |
| Totals | | | 850,000 | | | | | | |
NOTE 9. COMMITMENTS and CONTINGENCIES
License Agreements
On February 29, 2012 , the Company entered into a memorandum of Agreement with Xiamen Taiyang Neng Gongsi and Michael Franklin. For and in consideration of the payment of an license fee of $10,000, and for the future payment of royalties of $5.00 per SolaPad unit sold, Xiamen granted an exclusive worldwide license and joint patent rights to the Company for a solar charging case for IPAD, including IPAD 3. The license under the Agreement expires December31, 2018
On April 19, 2013, our subsidiary DoMark Canad, Inc. executed an agreement with Bioharmonics Technologies Cop ( “Bioharmonics”0. The agreement provided for the acquisition of certain inventions and related patents and patent applications in exchange for 500,000 shares of Domark common stock ( which was delivered April 19, 2013 and valued at $40,000) and $30,000 cash payable no later than October 17, 2013 ( which was satisfied through delivery of an additional 500,000 shares of Domark common stock to Bioharmonics on August 15, 2013 valued at $35,500) The agreement also provides for a royalty obligation to Bioharmonics equal to 10% of the wholesale price for each unit using the infrared solar charging.
Employment Agreements
On May 25, 2012, the Company entered into an employment agreement with its non exec chairman, Brent Strassler, for an indefinite period or until terminated. Mr. Strassler is entitles to an annual salary of $150,000 and 100,000 stock purchase warrants exercisable to purchase common stock of the Company at $1.00 per share. The warrants are exercisable for a three year period and can be vested quarterly on a pro rata basis over twelve months from the date of issue. Additionally, Mr. Strassler is to be enrolled in a long term Executive Option Plan and is entitled to term life insurance in the face amount of $2,500,000, payable to the beneficiary designated by Mr. Strassler.
On June 15, 2012, the Company entered into an employment agreement with its Chief Executive Officer Andrew Ritchie, for an indefinite period or until terminated. Mr Ritchie is entitled to an annual salary of $240,000, and 150,000 stock purchase warrants exercisable to purchase shares of common stock of the Company at $1.00 per share. The warrants are exercisable over a three year period and can be vested quarterly on a pro rata basis over twelve months from the date of issue. Additionally Mr. Ritchie is to be enrolled in a long term Executive option Plan and is entitled to a term life insurance in the face amount of $2,500,000 payable to the beneficiary designated by Mr. Ritchie.
Lease Agreement
On August 1,2013 the Company entered into an office lease in Toronto, Ontario, Canada for a five year period. The future lease commitments on this lease are as follows for the years ended May 31:
| May 2014 | | $ | 31,500 | |
| May 2015 | | $ | 54,000 | |
| May 2016 | | $ | 54,000 | |
| May 2017 | | $ | 54,000 | |
| May 2018 | | $ | 31,500 | |
| Total | | $ | 225,000 | |
NOTE 10 – SUBSEQUENT EVENTS
On December 3, 2013, the Company issued 8,000,000 shares of common stock (valued at $180,000) to Meadow Grove Ltd. in connection with the acquisition of an additional 9% equity interest in Imagic Ltd. (increasing its ownership to a 40% equity interest). See Note 5.
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the current plans of our management. This report includes forward-looking statements. Generally, the words "believes", "anticipates", "may", "will", "should", "expect", "intend", "estimate", "continue", and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information contained elsewhere in this Form 10-Q.
RECENT DEVELOPMENTS
The main operations of the Company have been to search, negotiate and acquire ownership interests in companies with products at an advanced stage of their development or products already in production.
During this quarter the Company has become SEC complaint, with full reporting of all statements.
The Company has dramatically decreased its on going trade debt to a minimum, by issuing convertible note instruments.
The packaging for the SmartLink tm product will be completed, and the Company is anticipating a first Quarter (1st "Q") release of the product.
The Power+ charger has been delayed until the 1st quarter (2014). This was primarily due to specification standard requirements, and packaging design and completion. the Company anticipates an early 1st quarter (2014) product release.
The Company is in negotiations with an extremely large worldwide distributor for the Power+ charger, and is moving forward with its progress. The packaging is being set up for final design for the product launch.
The Company is in negotiations with two European distributors, and the rights with two pioneering future business opportunities.
Thomas Crompton has been appointed the new CFO of Domark international, serving in a financial capacity.
The Company increased its authorized common shares by 300 million with the Secretary of State of Nevada.
LIQUIDITY AND CAPITAL RESOURCES
Our operating requirements have been funded primarily through financing facilities, sales of our common stock, and loans from shareholders and 3rd party financiers. Currently, the Company's cash flows do not adequately support the operating expenses of the Company. We received $0 in the six months ended November 30, 2013 from the sale of our common stock. The Company will continue to require financing from loans and notes payable until such time as our business has generated income sufficient to carry our operating costs.
Cash used by operating activities for the six month period ended November 30, 2013 was $486,698 compared to $203,374 for the same period 2012. Stock-based compensation for the six month period ended November 30, 2013 was $513,675 as compared to $707,461 for the six month period ended November 30, 2012.
Cash used in investing activities was $170,352 for the six month period ended November 30, 2013 compared to $0 for the six month period ended November 30, 2012. Cash provided by financing activities was $656,992 for the six month period ended November 30, 2013 versus $157,437 for the six month period ended November 30, 2012. Financing activities consisted of cash received from related parties and notes payable.
OTHER CONSIDERATIONS
There are numerous factors that affect the Company's business and the results of its operations. Sources of these factors include general economic and business conditions, federal and state regulation of business activities, the level of demand for services, the level and intensity of competition, and our ability to continue to improve our infrastructure, including personnel and systems, to keep pace with our anticipated rapid growth in the development of our business.
RESULTS OF OPERATIONS
THREE MONTHS QUARTER ENDED NOVEMBER 30, 2013 VS. NOVEMBER 30, 2012
The Company had no revenues for the quarter ended November 30, 2013. The same period in 2012 had sales of $16,193.
Total operating expenses for the quarter ended November 30, 2013 were $319,769 compared to $942,123 for the same quarter period in 2012. The decrease is primarily due to the absence of any amortization of Barefoot-Science license fee in 2013 ($500,000 in 2012).
The net loss for the quarter amounted to $519,534 and a net loss per share of $0.01 vs. a net loss of $962,354 and a net loss per share of $0.03 for the same 3 month period in 2012.
SIX MONTHS ENDED NOVEMBER 30, 2013 VS. NOVEMBER 30, 2012
The Company had no revenues for the six months ended November 30, 2013. The same period in 2012 had sales of $36,538.
Total operating expenses for the six months ended November 30, 2013 were $1,033,397 compared to $2,121,520 for the same six month period in 2012. The decrease is primarily due to the absence of any amortization of Barefoot-Science license fee in 2013 ($894,520 in 2012).
The net loss for the six months amounted to $1,283,144 and a net loss per share of $0.02 vs. a net loss of $2,149,153 and a net loss per share of $0.07 for the same 6 month period in 2012.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
ITEM 4 - CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management team, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"), as of the last day of the fiscal period covered by this report, November 30, 2013. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of November 30, 2013
Our principal executive officer and our principal financial officer, are responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Management is required to base its assessment of the effectiveness of our internal control over financial reporting on a suitable, recognized control framework, such as the framework developed by the Committee of Sponsoring Organizations ("COSO"). The COSO framework, published in INTERNAL CONTROL-INTEGRATED FRAMEWORK, is known as the COSO Report. Our principal executive officer and our principal financial officer have chosen the COSO framework on which to base its assessment. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of November 30, 2013.
There were no changes in our internal control over financial reporting that occurred during the period ended November 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Controls have been put in place for daily operations which will allow for controlled cash management and oversite.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Management is aware that there is a lack of segregation of duties at the Company due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically reevaluate this situation.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None outstanding at November 30, 2013.
ITEM 1A - RISK FACTORS
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the interim period ended November 30, 2013.
ITEM 4 - MINE SAFETY DISCLOSURE
None.
ITEM 5 - OTHER INFORMATION
Exhibit
| No. | | Document Description | |
| 31.1 | | Certification of Ceo Pursuant to 18 U.s.c. Section 1350, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | as Adopted |
| 31.2 | | Certification of Cfo Pursuant to 18 U.s.c. Section 1350, Pursuant to Section 302 of the Sarbanes-oxley Act of 2002. | as Adopted |
| 32.1* | | Certification of Ceo Pursuant to 18 U.s.c. Section 1350, Pursuant to Section 906 of the Sarbanes-oxleyact of 2002. | as Adopted |
| 32.2* | | Certification of Cfo Pursuant to 18 U.s.c. Section 1350, Pursuant to Section 906 of the Sarbanes-oxleyact of 2002. | as Adopted |
| 101 | | Interactive data files pursuant to Rule 405 of Regulation S-T. | |
* This exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
| | | DOMARK INTERNATIONAL, INC. | |
| | | REGISTRANT | |
| Date: January 14, 2014 | By: | /s/ Andrew Ritchie | |
| | | Andrew Ritchie | |
| | | Chief Executive Officer and Chief Financial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the undersigned on behalf of the registrant and in the capacities indicated on the 14th day of January 2014.
| | By: | /s/ Andrew Ritchie | |
| | | Andrew Ritchie | |
| | | Chief Executive Officer and Chief Financial Officer |
