U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended August 31, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
For the transition period from N/A to N/A
Commission File No. 333-136247
DoMark International, Inc.
(Name of small business issuer as specified in its charter)
Nevada 20-4647578
(State of Incorporation) (IRS Employer Identification No.)
1809 East Broadway #125, Oviedo, Florida 32765
(Address of principal executive offices)
(757) 572-9241
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days: Yes [X] No [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-Accelerated filer [ ] Small Business Issuer |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]
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 10, 2008
----- -------------------------------
Common stock, $0.001 par value 20,070,000
DOMARK INTERNATIONAL, INC.
INDEX TO FORM 10-QSB FILING
FOR THE THREE MONTHS ENDED AUGUST 31, 2008
TABLE OF CONTENTS
Page
Numbers
-------
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited) 3
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statement of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management Discussion & Analysis of Financial Condition
and Results of Operations 11
Item 3 Quantitative and Qualitative Disclosures About Market Risk 16
Item 4. Controls and Procedures 16
PART II - OTHER INFORMATION
Item1. Legal Proceedings 17
Item1A. Risk Factors 17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5 Other information 21
Item 6. Exhibits 22
2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
DOMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
August 31, May 31,
2008 2008
------------ ------------
(unaudited)
ASSETS:
CURRENT ASSETS
Cash $ 151,157 $ 38,906
Accounts recievables 1,089,757 --
Inventory 684,320 1,232
Prepaid expenses and other current assets 195,904 125,043
------------ ------------
Total current assets 2,121,138 165,181
PROPERTY AND EQUIPMENT, net 47,820 7,340
Due from affiliate 707,076 717,076
Intangible assets - media content 10,000,000 10,000,000
Investment in unconsolidated subsidaries 4,859,045 3,903,750
Deposits 6,561 3,000
------------ ------------
TOTAL ASSETS $ 17,741,640 $ 14,796,347
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 752,236 $ 73,739
Accrued expenses and other liabilities 57,657 15,947
Line of credit 239,086 --
Notes from affiliates 3,903,750 3,903,750
------------ ------------
Total current liabilities 4,952,729 3,993,436
COMMITMENTS AND CONTINGENCIES:
Notes payable 204,025 --
Convertible note payable 257,723 255,205
Bond payable 763,500 733,308
------------ ------------
Total liabilities 6,177,977 4,981,949
------------ ------------
STOCKHOLDERS' EQUITY:
Convertible Preferred stock series A, $.001 par value,
2,000,000 shares authorizied 100,000 and 0 issued and
outstanding as of August 31, 2008 and May 31, 2008, respectively 100 --
Common stock, $.001 par value, 200,000,000 shares authorized,
20,070,000 and 8,500,000 issued and outstanding as of
August 31, 2008 and May 31, 2008, respectively 20,070 8,500
Additional Paid-in capital 13,934,831 8,425,568
Common stock subscribed, not issued -- 2,812,300
Accumulated deficit (2,391,338) (1,431,970)
------------ ------------
Total stockholders' equity 11,563,663 9,814,398
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,741,640 $ 14,796,347
============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
DOMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED AUGUST 31, 2008 AND 2007
- --------------------------------------------------------------------------------
2008 2007
----------- -----------
(unaudited)
REVENUES:
Revenue $ 452,336 $ --
----------- -----------
452,336 --
Cost of Sales 360,079 --
----------- -----------
GROSS PROFIT 92,257 --
OPERATING EXPENSES:
General and administrative expenses 958,956 596
Sales and marketing expenses 54,216 --
Depreciation and amortization 575 --
----------- -----------
Total operating expenses 1,013,747 596
----------- -----------
OPERATING LOSS (921,490) (596)
----------- -----------
OTHER (INCOME) AND EXPENSES
Interest expense 37,878 --
----------- -----------
Total other expense 37,878 --
----------- -----------
NET (LOSS) $ (959,368) $ (596)
=========== ===========
NET (LOSS) INCOME PER SHARE:
Basic and diluted: $ (0.05) $ (0.00)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted: 18,051,352 2,000,000
=========== ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
DOMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED AUGUST 31, 2008 AND 2007
- --------------------------------------------------------------------------------
2008 2007
----------- -----------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (959,368) $ (596)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 575 --
Stock issued in a forward split 9,750 --
Common stock issued for directors fees 800,000 --
Cancellation of subscribed stock (2,812,300) --
Common stock issued for assets 5,016,000 --
Changes in operating assets and liabilities:
Accounts recievables (1,362,574) --
Inventory (683,088) --
Prepaid expenses and other current assets (1,058,156) 151
Deposits (3,561) --
Accounts payable 720,207 --
Accrued expenses and interest 30,192 --
Revolving lines of credit 443,111 --
----------- -----------
Net cash (used) in operating activities 140,788 (445)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipement (41,055) --
----------- -----------
Net cash (used in) by investing activities (41,055) --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Convertible notes 2,518 --
Notes from affiliates 10,000 --
----------- -----------
Net cash provided by financing activities 12,518 --
----------- -----------
(DECREASE) IN CASH 112,251 (445)
CASH, BEGINNING OF YEAR 38,906 40,672
----------- -----------
CASH, END OF YEAR $ 151,157 $ 40,227
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 32,711 $ --
=========== ===========
Taxes paid $ -- $ --
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Issuance of company stock for conversion of debt $ 2,518 $ --
=========== ===========
Issuance of common stock for assets $ 5,016,000 $ --
=========== ===========
Issuance of company stock for compensation $ 800,000 $ --
=========== ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
DOMARK INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE ENDED AUGUST 31, 2008 AND 2007
- --------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF BUSINESS
DOMARK INTERNATIONAL, INC. ("DoMark" or "Company") was incorporated under the
laws of the State of Nevada on March 30, 2006. The Company was formed to engage
in the acquisition and refinishing of aged furniture using exotic materials and
then reselling it through interior decorators, high-end consignment shops and
online sales. The Company has abandoned it prior business of exotic furniture
sales and is acquiring through acquisition and merger operating entities that
will bring value to the company.
SPORTSQUEST, INC. ("SportsQuest") is a majority, 79%, owned subsidiary of
DoMark. The Sportsquest business was created to develop, own and manage high end
sports events and their operating entities, as well as executing a growth
strategy involving acquisition of diverse and effective sports marketing
platforms. SportsQuest was incorporated in April 3, 1986 in Delaware under the
name Bay Head Ventures, Inc. The Company has been managing the US Pro Golf Tour
and anticipates it will continue to manage USPGT for the foreseeable future.
SportsQuest trades on the OTCBB under "SPQS" as of the date of this report.
As of August 31, 2008 SportsQuest had mutually agreed to termination of its
agreement with Media4Equity, Inc..
On August 17, 2007,SportsQuest, Inc., a majority owned subsidiary of the
Company, entered into a Stock Issuance, Assumption and Release Agreement (the
"Assumption Agreement"), by and among SportsQuest, Inc. and GREENS WORLDWIDE
INCORPORATED ("Greens") and AJW Partners, LLC, AJW Offshore, Ltd., AJW Qualified
Partners, LLC and New Millennium Capital Partners II, LLC (collectively, the
"Greens Worldwide Investors"). The transactions contemplated by the Assumption
Agreement include the following:
The issuance by Greens of 390,000 shares of its Series A Convertible Preferred
Stock, par value $10.00 per share, to SportsQuest, Inc.; and;
The assumption by SportsQuest of 50% of Greens indebtedness to the Greens
Worldwide Investors under a Securities Purchase Agreement, dated as of March 22,
2007, by and among Greens and the Greens Worldwide Investors (the "Greens
Worldwide Agreement").
Greens is an unconsolidated subsidiary of SportsQuest, Inc.
NOTE 2 - BASIS OF PRESENTATION
INTERIM FINANCIAL STATEMENTS
The accompanying interim unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 8 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In our opinion, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three period ended August 31, 2008 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2008. For further information, refer to the financial
statements and footnotes thereto included in our Form 10-K Report for the fiscal
year ended May 31, 2008.
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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECENT ACCOUNTING PRONOUNCEMENTS
DETERMINING WHETHER INSTRUMENTS GRANTED IN SHARE-BASED PAYMENT TRANSACTIONS ARE
PARTICIPATING SECURITIES
In June 2008, the FASB issued FSP Emerging Issues Task Force ("EITF") Issue No.
03-6-1, "Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities." The FSP addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting and, therefore, need to be included in the earnings
allocation in computing earnings per share under the two-class method. The FSP
affects entities that accrue dividends on share-based payment awards during the
awards' service period when the dividends do not need to be returned if the
employees forfeit the award. This FSP is effective for fiscal years beginning
after December 15, 2008. The Company is currently assessing the impact of FSP
EITF 03-6-1 on its consolidated financial position and results of operations.
DETERMINING WHETHER AN INSTRUMENT (OR AN EMBEDDED FEATURE) IS INDEXED TO AN
ENTITY'S OWN STOCK
In June 2008, the FASB ratified EITF Issue No. 07-5, "Determining Whether an
Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock" (EITF
07-5). EITF 07-5 provides that an entity should use a two step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument's contingent
exercise and settlement provisions. It also clarifies on the impact of foreign
currency denominated strike prices and market-based employee stock option
valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years
beginning after December 15, 2008. The Company is currently assessing the impact
of EITF 07-5 on its consolidated financial position and results of operations.
ACCOUNTING FOR CONVERTIBLE DEBT INSTRUMENTS THAT MAY BE SETTLED IN CASH UPON
CONVERSION (INCLUDING PARTIAL CASH SETTLEMENT)
In May 2008, the FASB issued FSP Accounting Principles Board ("APB") Opinion No.
14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash
upon Conversion (Including Partial Cash Settlement)." The FSP clarifies the
accounting for convertible debt instruments that may be settled in cash
(including partial cash settlement) upon conversion. The FSP requires issuers to
account separately for the liability and equity components of certain
convertible debt instruments in a manner that reflects the issuer's
nonconvertible debt (unsecured debt) borrowing rate when interest cost is
recognized. The FSP requires bifurcation of a component of the debt,
classification of that component in equity and the accretion of the resulting
discount on the debt to be recognized as part of interest expense in our
consolidated statement of operations. The FSP requires retrospective application
to the terms of instruments as they existed for all periods presented. The FSP
is effective as of January 1, 2009 and early adoption is not permitted. The
Company is currently evaluating the potential impact of FSP APB 14-1 upon its
consolidated financial statements.
THE HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles" (FAS No.162). SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements. SFAS No. 162 is effective 60 days following
the SEC's approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally
7
Accepted Accounting Principles". The implementation of this standard will not
have a material impact on the Company's consolidated financial position and
results of operations.
DETERMINATION OF THE USEFUL LIFE OF INTANGIBLE ASSETS
In April 2008, the Financial Accounting Standards Board ("FASB") issued FASB
Staff Position on Financial Accounting Standard ("FSP FAS") No. 142-3,
"Determination of the Useful Life of Intangible Assets", which amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of intangible assets under SFAS No. 142
"Goodwill and Other Intangible Assets". The intent of this FSP is to improve the
consistency between the useful life of a recognized intangible asset under SFAS
No. 142 and the period of the expected cash flows used to measure the fair value
of the asset under SFAS No. 141 (revised 2007) "Business Combinations" and other
U.S. generally accepted accounting principles. The Company is currently
evaluating the potential impact of FSP FAS No. 142-3 on its consolidated
financial statements.
DISCLOSURE ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In March 2008, the FASB issued SFAS No. 161, "Disclosure about Derivative
Instruments and Hedging Activities, an amendment of SFAS No. 133", (SFAS 161).
This statement requires that objectives for using derivative instruments be
disclosed in terms of underlying risk and accounting designation. The Company is
required to adopt SFAS No. 161 on January 1, 2009. The Company is currently
evaluating the potential impact of SFAS No. 161 on the Company's consolidated
financial statements.
DELAY IN EFFECTIVE DATE
In February 2008, the FASB issued FSP FAS No. 157-2, "Effective Date of FASB
Statement No. 157". This FSP delays the effective date of SFAS No. 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value on a recurring basis (at least annually)
to fiscal years beginning after November 15, 2008, and interim periods within
those fiscal years. The impact of adoption was not material to the Company's
consolidated financial condition or results of operations.
BUSINESS COMBINATIONS
In December 2007, the FASB issued SFAS No. 141(R) "Business Combinations" (SFAS
141(R)). This Statement replaces the original SFAS No. 141. This Statement
retains the fundamental requirements in SFAS No. 141 that the acquisition method
of accounting (which SFAS No. 141 called the PURCHASE METHOD) be used for all
business combinations and for an acquirer to be identified for each business
combination. The objective of SFAS No. 141(R) is to improve the relevance, and
comparability of the information that a reporting entity provides in its
financial reports about a business combination and its effects. To accomplish
that, SFAS No. 141(R) establishes principles and requirements for how the
acquirer:
a. Recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree.
b. Recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase.
c. Determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of
the business combination.
This Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008 and may not be applied before
8
that date. The Company does not expect the effect that its adoption of SFAS No.
141(R) will have on its consolidated results of operations and financial
condition.
NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS--AN AMENDMENT OF
ARB NO. 51
In December 2007, the FASB issued SFAS No. 160 "Noncontrolling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51" (SFAS No. 160).
This Statement amends the original Accounting Review Board (ARB) No. 51
"Consolidated Financial Statements" to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. This Statement is
effective for fiscal years and interim periods within those fiscal years,
beginning on or after December 15, 2008 and may not be applied before that date.
The does not expect the effect that its adoption of SFAS No. 160 will have on
its consolidated results of operations and financial condition.
NOTE 4 - RELATED PARTY TRANSACTIONS
In August 31, 2008 the Company issued 500,000 common shares to its Director
Richard Altman.
In July 2008, DoMark issued 500,000 shares to SportsQuest as consideration for
the assignment of SportsQuest rights to acquire Javaco, Inc. Domark closed on
the acquisition in July 2008 and Javaco became a wholly owned subsidiary of
DoMark.
NOTE 5 - NET LOSS PER SHARE
Restricted shares and warrants are not included in the computation of the
weighted average number of shares outstanding during the periods. The net loss
per common share is calculated by dividing the consolidated loss by the weighted
average number of shares outstanding during the periods.
NOTE 6 - EQUITY
During three months ended August 31, 2008:
Quarter Ended Stock issued Cash Received
------------- ------------ -------------
Forward Split 8,500,000 --
Javaco Inc. Stock Purchase 750,000 --
SportsQuest, Inc. Right Agreement 500,000 --
Stock issued for compensation 500,000 --
Media4, Inc. Asset purchase 1,320,000 --
---------- -----
Total Issued 11,570,000 --
During the three months ended August 31, 2008, the Company issued 11,570,000
shares of its common stock 8,500,000 common shares in a 2 for 1 forward split,
750,000 common shares for the purchase of Javaco, Inc., 500,000 common shares as
director compensation, 500,000 common shares to SportsQuest, Inc. as
consideration of the assignment to Domark of the Acquisition Agreement of
Javaco, Inc, and 1,320,000 common shares as payment for $10 million dollars in
print and radio advertising credits.
9
NOTE 7 - SUBSEQUENT EVENTS
On September 29, 2008, SportsQuest, the Company's subsidiary executed an
agreement with Veridigm, Inc., a Delaware corporation ("Veridigm"), shareholders
of our Company and DoMark International, Inc., a Nevada Corporation (the
"Agreement"), whereby pursuant to the terms and conditions of that Agreement,
Veridigm acquired nine million, nine hundred and seventy three thousand, three
hundred and ninety seven (9,973,397) shares of our common stock and one hundred
thousand (100,000) shares of our preferred stock As a condition to this
acquisition, Veridigm is required to assign certain assets to DoMark. Unless
extended by mutual consent of the parties, the closing shall occur on or before
October 17, 2008. In the event certain closing conditions are not satisfied,
Veridigm shall transfer to DoMark the judgment arising from VRGD (f/k/a E-Notes
Systems Inc, Plaintiff) vs. TOTALMED SYSTEMS INC., in return for Fifty thousand
(50,000) shares of common stock of DoMark.
On October 10, 2008 SportsQuest, Inc. the Company's majority owned subsidiary
was approved by FINRA to receive clearance to enter quotations on the OTC
Bulletin Board.
10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis contains various "forward looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, regarding future events or the future financial performance of
the Company that involve risks and uncertainties. Certain statements included in
this Form 10-QSB, including, without limitation, statements related to
anticipated cash flow sources and uses, and words including but not limited to
"anticipates", "believes", "plans", "expects", "future" and similar statements
or expressions, identify forward looking statements. Any forward-looking
statements herein are subject to certain risks and uncertainties in the
Company's business, including but not limited to, reliance on key customers and
competition in its markets, market demand, product performance, technological
developments, maintenance of relationships with key suppliers, difficulties of
hiring or retaining key personnel and any changes in current accounting rules,
all of which may be beyond the control of the Company. The Company adopted at
management's discretion, the most conservative recognition of revenue based on
the most astringent guidelines of the SEC in terms of recognition of software
licenses and recurring revenue. Management will elect additional changes to
revenue recognition to comply with the most conservative SEC recognition on a
forward going accrual basis as the model is replicated with other similar
markets (i.e. SBDC). The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth therein.
Forward-looking statements involve risks, uncertainties and other factors, which
may cause our actual results, performance or achievements to be materially
different from those expressed or implied by such forward-looking statements.
Factors and risks that could affect our results and achievements and cause them
to materially differ from those contained in the forward-looking statements
include those identified in the section titled "Risk Factors" in the Company's
Annual Report on Form 10-K for the transition period ended May 31, 2008, as well
as other factors that we are currently unable to identify or quantify, but that
may exist in the future.
In addition, the foregoing factors may affect generally our business, results of
operations and financial position. Forward-looking statements speak only as of
the date the statement was made. We do not undertake and specifically decline
any obligation to update any forward-looking statements.
RECENT DEVELOPMENTS
Effective JUNE 27, 2008, DoMark International, Inc., a Nevada corporation (the
"Company"), changed its name from DoMark Exotic Furnishings Inc. to DoMark
International, Inc, increased the authorized common stock of the Corporation to
200,000,000 shares, created and authorized 2,000,000 shares of preferred stock,
the rights and preferences of which can be designated by the Board of Directors
and enacted a forward stock split of our common stock on a two for one basis,
payable upon surrender of our shareholders' stock certificates. Our authorized
stock is as follows: The number of shares of common stock authorized that may be
issued by the Corporation is Two Hundred Million (200,000,000) shares, with a
par value of One Tenth of One Cent ($0.001) per share and Two Million
(2,000,000) shares of Preferred Stock, $0.001 par value, the rights and
preferences of which may be determined by the Board of Directors. Said shares
may be issued by the Corporation from time to time for such considerations as
may be fixed by the Board of Directors.
On JULY 16, 2008, we closed an agreement with JAVACO, Inc, an Ohio corporation
("Javaco") and Judith Vazquez (the "Agreement"), whereby pursuant to the terms
and conditions of that Agreement we completed the purchase of all the issued and
outstanding shares of Javaco. Judith Vazquez is the sister-in-law of R. Thomas
Kidd, our Chief Executive Officer. The Closing of the transaction occurred on
July 18, 2008 (the "Closing").
11
As consideration for all the issued and outstanding shares of Javaco, we issued
the shareholders of Javaco, seven hundred and fifty thousand shares of our
common stock, and common stock purchase warrants as follows: 20,000 common stock
purchase warrants at an exercise price of $3.00 per share, expiring on December
31, 2008; 20,000 common stock purchase warrants at an exercise price of $4.00
per share, expiring on 40,000 common stock purchase warrants at an exercise
price of $5.00 per share, expiring on December 31, 2010.
On JULY 24, 2008, we executed an asset purchase agreement (the "Agreement") with
TotalMed Systems, Inc., a Florida corporation ("TotalMed"), whereby pursuant to
the terms and conditions of that Agreement, we completed the purchase of certain
assets. The Closing of the transaction occurred on August 6, 2008, however the
transaction was rescinded by mutual agreement of the Company and TotalMed and
TotalMed agreed to pay the Company $250,000 in a break up fee.
On AUGUST 4, 2008, DoMark has entered into an investment agreement and
registration rights agreement with DUTCHESS PRIVATE EQUITIES, LTD. The
investment agreement, in the form of an equity funding commitment, provides for
the right by the company at its discretion to require Dutchess to purchase up to
$50 million of the Company's common stock at a seven percent discount to market
over the 36 months following the registration statement being declared effective
by the Securities and Exchange Commission. DoMark intends to file a registration
statement in the near future.
On August 18, 2008, DoMark retained E & E COMMUNICATIONS, Laguna Hills, Ca. to
assist with its investor and public relations activities.
On AUGUST 20, 2007, SportsQuest, Inc., our majority owned subsidiary entered
into an Agreement for the Exchange of Stock with Zaring-Cioffi Entertainment,
LLC, a full-service production company of talent-based special events, and its
members, ZCE, Inc. and Q-C Entertainment, LLC. The closing is subject to the
conversion of Zaring-Cioffi Entertainment, LLC to a California Corporation and
completion of our due diligence The transaction closed on September 27, 2008.
SportsQuest, Inc. is presently in litigation with ZCE regarding this
transaction.
REVENUES
Revenue from product sales is recognized upon shipment to customers at which
time such customers are invoiced. Units are shipped under the terms of FOB
shipping point when determination is made that collectibility is probable.
Revenues for services are recognized upon completion of the services. For
consulting services and other fee-for-service arrangements, revenue is
recognized upon completion of the services. The Company has adopted the
Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 104,
which provides guidance on the recognition, presentation and disclosure of
revenue in financial statements.
ADDITIONAL INFORMATION
DoMark. files reports and other materials with the Securities and Exchange
Commission. These documents may be inspected and copied at the Securities and
Exchange Commission, Judiciary Plaza, 100 F Street, N.E., Room 1580, and
Washington, D.C. 20549. You can obtain information on the operation of the
Public Reference Room by calling the Commission at 1-800-SEC-0330. You can also
get copies of documents that the Company files with the Commission through the
Commission's Internet site at www.sec.gov.
12
RESULTS OF OPERATIONS
Revenues for the three months ended August 31, 2008 increased to $452,336 from
$0.00 for the three months ended August 31, 2007 respectively. Our future
revenue plan is dependent on our ability to effectively introduce new viable
acquisitions to provide value to our shareholders.
General and administrative expenses for the three months ended August 31, 2008
increased to $958,956 from $596 for three months ended August 31, 2007. The
increase in general and administrative expenses relates to increased costs of
being a public reporting company, including costs associated with our filings
with the U.S. Securities and Exchange Commission which matches with our overall
business plan, and increase in the use of consulting firms.
Selling and marketing expenses for three months ended August 31, 2008 increase
to $54,216 from $0.00 for three months ended August 31, 2007. The increase in
sales and marketing services relates to costs associated with hiring investor
relations firms, and marketing firms.
Depreciation and amortization for three months ended August 31, 2008 increased
to $575 from $0.00 for three months ended August 31, 2007. The increase in
depreciation and amortization relates to the purchase of new equipment to
prepare our product associated with our marketing plan.
The Company incurred losses of approximately $959,368, and $596 for the three
months ended August 31, 2007, respectively. Our losses since our inception
through August 31, 2008 amount to $2,391,338.
LIQUIDITY AND CAPITAL RESOURCES
The Company has maintained a minimum of three months of working capital in the
bank since September of 2005. This reserve was intended to allow for an adequate
amount of time to secure additional funds from investors as needed. To date, the
Company has not succeeded in securing capital as needed.
The Company's operating activities provided by (used) by $140,788 and ($445) in
the three months ended August 31, 2008 and 2007 respectively. The difference is
mainly attributable to the increase in operating expenses in the current year.
Cash (used) by investing activities was ($41,055) and $0.00 for the three months
ended August 31, 2008 and 2007, respectively. The decrease is due to a decrease
in purchase of equipment to develop our products.
Cash provided by financing activities was $12,518 and $0.00 for the three months
ended August 31, 2008 and 2007, respectively. The increase is due to an increase
in notes from affiliates
On August 16, 2007, the SportsQuest, Inc, our majority owned subsidiary, entered
into a Securities Purchase Agreement (the "Purchase Agreement"), by and among
the Company and AJW Partners, LLC, AJW Master Fund, Ltd. and New Millennium
Capital Partners II, LLC (collectively, the "Air Brook Investors"). The
transactions contemplated by the Purchase Agreement will result in a funding of
a total of $1,500,000 into the Company.
The Purchase Agreement provided for the sale by SportsQuest to the SportsQuest
Investors of callable secured convertible notes with an aggregate face amount of
$1,500,000, plus interest (the "Facility Notes"). The Air Brook Investors
purchased from SportsQuest at closing Facility Notes with an aggregate face
amount of $500,000 and are required to purchase additional Facility Notes with
an aggregate face amount of $500,000 from SportsQuest upon each of (i) the
filing of the registration statement required by the Registration Rights
Agreement and (iii) the declaration of effectiveness of such registration
13
statement by the Securities and Exchange Commission. The Facility Notes accrue
interest at a rate of 8% per year, require quarterly interest payments in
certain circumstances related to the market price of SportsQuest common stock,
and are due and payable on August 16, 2010 (the "Maturity Date"). SportsQuest is
not required to make any principal payments until the Maturity Date, but it has
the option to prepay the amounts due under the Facility Notes in whole or in
part at any time, subject to the payment of varying prepayment penalties
depending on the time of such prepayment, as set forth in the Facility Notes.
The Facility Notes are convertible into common stock of the Company at a
discount to the then current fair market value of SportsQuest common stock, as
set forth in the Facility Notes.
In addition, the Purchase Agreement provided for the issuance by SportsQuest to
the SportsQuest Investors of warrants to purchase 10,000,000 shares of
SportsQuest common stock (the "Warrants"). Each Warrant permits its holder to
acquire shares of SportsQuest common stock at an exercise price of $0.25 per
share at any time through August 16, 2014.
SportsQuest recorded discounts of $833,333 related to the $1,000,000 worth of
Facility Notes issued during 2007. These discounts have been reflected as
additional paid in capital.
Based on present revenues and expenses, SportsQuest is unable to generate
sufficient funds internally to sustain its current operations. SportsQuest must
raise additional capital or other borrowing sources to continue its operations.
It is management's plan to seek additional funding through the sale of common
stock and the issuance of notes and debentures, including notes and debentures
convertible into common stock. If we issue additional shares of common stock,
the value of shares of existing stockholders is likely to be diluted.
However, the terms of the convertible secured debentures issued to certain of
the existing stockholders require that we obtain the consent of such
stockholders prior to our entering into subsequent financing arrangements. No
assurance can be given that we will be able to obtain additional financing, that
we will be able to obtain additional financing on terms that are favorable to us
or that the holders of the secured debentures will provide their consent to
permit us to enter into subsequent financing arrangements.
On AUGUST 4, 2008, DoMark entered into an investment agreement and registration
rights agreement with DUTCHESS PRIVATE EQUITIES, LTD. The investment agreement,
in the form of an equity funding commitment, provides for the right by the
company at its discretion to require Dutchess to purchase up to $50 million of
the Company's common stock at a seven percent discount to market over the 36
months following the registration statement being declared effective by the
Securities and Exchange Commission. DoMark intends to file a registration
statement in the near future.
Our future revenues and profits, if any, will primarily depend upon our ability
to execute our acquisition strategy and deploy our marketing, management and
media assets to our subsidiaries.
Except for the limitations imposed upon SportsQuest, our majority owned
subsidiary,. respective to the convertible secured debentures, there are no
material or known trends that will restrict either short term or long-term
liquidity.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements that are reasonably likely to
have a current or future effect on our financial condition, revenues, results of
operations, liquidity or capital expenditures.
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OTHER CONSIDERATIONS
There are numerous factors that affect the 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 product services, the level and intensity of competition in the media
content industry, and the ability to develop new services based on new or
evolving technology and the market's acceptance of those new services, our
ability to timely and effectively manage periodic product transitions, the
services, customer and geographic sales mix of any particular period, and our
ability to continue to improve our infrastructure including personnel and
systems to keep pace with our anticipated rapid growth.
CRITICAL ACCOUNTING POLICIES
We prepare our consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Our
management periodically evaluates the estimates and judgments made. Management
bases its estimates and judgments on historical experience and on various
factors that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates as a result of different assumptions or
conditions.
STOCK BASED COMPENSATION
In December 2004, the FASB issued a revision of SFAS No. 123 ("SFAS No. 123(R)")
that requires compensation costs related to share-based payment transactions to
be recognized in the statement of operations. With limited exceptions, the
amount of compensation cost will be measured based on the grant-date fair value
of the equity or liability instruments issued. In addition, liability awards
will be re-measured each reporting period. Compensation cost will be recognized
over the period that an employee provides service in exchange for the award.
SFAS No. 123(R) replaces SFAS No. 123 and is effective as of the beginning of
January 1, 2006. Based on the number of shares and awards outstanding as of
December 31, 2005 (and without giving effect to any awards which may be granted
in 2006), we do not expect our adoption of SFAS No. 123(R) in January 2006 to
have a material impact on the financial statements.
FSP FAS 123(R)-5 was issued on October 10, 2006. The FSP provides that
instruments that were originally issued as employee compensation and then
modified, and that modification is made to the terms of the instrument solely to
reflect an equity restructuring that occurs when the holders are no longer
employees, then no change in the recognition or the measurement (due to a change
in classification) of those instruments will result if both of the following
conditions are met: (a). There is no increase in fair value of the award (or the
ratio of intrinsic value to the exercise price of the award is preserved, that
is, the holder is made whole), or the antidilution provision is not added to the
terms of the award in contemplation of an equity restructuring; and (b). All
holders of the same class of equity instruments (for example, stock options) are
treated in the same manner. The provisions in this FSP shall be applied in the
first reporting period beginning after the date the FSP is posted to the FASB
website. The Company has adopted SP FAS 123(R)-5 but it did not have a material
impact on its consolidated results of operations and financial condition.
ACCOUNTING POLICIES AND ESTIMATES
The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States of America requires our
management to make certain 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 and the reported amounts of
15
revenues and expenses during the reporting period. Our management periodically
evaluates the estimates and judgments made. Management bases its estimates and
judgments on historical experience and on various factors that are believed to
be reasonable under the circumstances. Actual results may differ from these
estimates as a result of different assumptions or conditions.
As such, in accordance with the use of accounting principles generally accepted
in the United States of America, our actual realized results may differ from
management's initial estimates as reported. A summary of significant accounting
policies are detailed in notes to the financial statements which are an integral
component of this filing.
ADDITIONAL INFORMATION
We file reports and other materials with the Securities and Exchange Commission.
These documents may be inspected and copied the Commission's Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the
Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do hold any derivative instruments but do not engage in any hedging
activities. We are in the business of acquiring successfully operating
subsidiaries and to deploy marketing, management and media assets to the
subsidiaries to build the value of our Company.
ITEM 4. CONTROLS AND PROCEDURES
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Our Chief Executive
Officer and Chief Financial Officer evaluated the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
report. Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures as of
the end of the period covered by this report were effective such that the
information required to be disclosed by us in reports filed under the Securities
Exchange Act of 1934 is (i) recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms and (ii) accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding
disclosure. A controls system cannot provide absolute assurance, however, that
the objectives of the controls system are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING. Our management
is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance of achieving
their control objectives. Furthermore, smaller reporting companies face
additional limitations. Smaller reporting companies employ fewer individuals and
find it difficult to properly segregate duties. Often, one or two individuals
control every aspect of the Company's operation and are in a position to
16
override any system of internal control. Additionally, smaller reporting
companies tend to utilize general accounting software packages that lack a
rigorous set of software controls.
Our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the Company's internal control over financial reporting as of
August 31, 2008. In making this assessment, our management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control -- Integrated Framework. Based on this evaluation,
our management, with the participation of the President, concluded that, as of
August 31, 2008, our internal control over financial reporting was effective.
(b) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. There were no changes
in our internal control over financial reporting, as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act, during our most recently completed fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company may become involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, except as
discussed below, the ultimate disposition of these matters will not have a
material adverse effect on the Company's financial position, results of
operations, or liquidity.
Subsequent from the completion of the Exchange Agreement and Bring Down and
Amendment agreement dated September 25, 2007 with Zaring-Cioffi Entertainment,
LLC, a California limited liability company ("Zaring-Cioffi"), ZCE, Inc., a
California corporation ("ZCE"), and Q-C Entertainment, LLC, a Washington limited
liability company ("Q-C"), SportsQuest, our majority owned subsidiary, uncovered
discrepancies in the representations of certain ZCE principals and management
and the operations of ZCE. SportsQuest is currently involved in assessing these
discrepancies and determining the best course of action. As a result, the
management of ZCE has been terminated for cause.
On April 3, 2008, SportsQuest filed a lawsuit against ZC Entertainment and John
Zaring for $20,000 in the Circuit Court of Chesapeake Virginia in connection
with a promissory note. This suit by SportsQuest is related to an advance made
by SportsQuest prior to the closing. SportsQuest made demand on ZCE and the
guarantor, John Zaring, but the promissory note was not paid in accordance with
its terms.
In connection with the litigation above, John Zaring and Bianca Cioffi filed a
claim against SportsQuest with the American Arbitration Association ("AAA"),
however, as of September 22, 2008 their claims in arbitration against
SportsQuest have been withdrawn and canceled.
ITEM 1A - RISK FACTORS
You should carefully consider the following risk factors before making an
investment decision. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely
affected. In such cases, the trading price of our common stock could decline and
you may lose all or a part of your investment.
17
OUR COMMON STOCK IS SUBJECT TO PENNY STOCK REGULATION.
Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be penny stock unless
that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
the NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
registrant's net tangible assets; or exempted from the definition by the
Commission. Since our shares are deemed to be "penny stock", trading in the
shares will be subject to additional sales practice requirements on
broker/dealers who sell penny stock to persons other than established customers
and accredited investors.
WE MAY NOT HAVE ACCESS TO SUFFICIENT CAPITAL TO PURSUE OUR BUSINESS AND
THEREFORE WOULD BE UNABLE TO ACHIEVE OUR PLANNED FUTURE GROWTH.
We intend to pursue a growth strategy that includes development of the Company
business and technology. Currently we have limited capital which is insufficient
to pursue our plans for development and growth. Our ability to implement our
growth plans will depend primarily on our ability to obtain additional private
or public equity or debt financing. We are currently seeking additional capital.
Such financing may not be available at all, or we may be unable to locate and
secure additional capital on terms and conditions that are acceptable to us. Our
failure to obtain additional capital will have a material adverse effect on our
business.
OUR LACK OF DIVERSIFICATION IN OUR BUSINESS SUBJECTS INVESTORS TO A GREATER RISK
OF LOSSES.
All of our efforts are focused on the development and growth of that business
and its technology in an unproven area. Although the medical billing is
substantial, we can make no assurances that the marketplace will accept our
products.
BECAUSE WE ARE QUOTED ON THE OTCBB INSTEAD OF AN EXCHANGE OR NATIONAL QUOTATION
SYSTEM, OUR INVESTORS MAY HAVE A TOUGHER TIME SELLING THEIR STOCK OR EXPERIENCE
NEGATIVE VOLATILITY ON THE MARKET PRICE OF OUR STOCK.
Our common stock is traded on the OTCBB. The OTCBB is often highly illiquid, in
part because it does not have a national quotation system by which potential
investors can follow the market price of shares except through information
received and generated by a limited number of broker-dealers that make markets
in particular stocks. There is a greater chance of volatility for securities
that trade on the OTCBB as compared to a national exchange or quotation system.
This volatility may be caused by a variety of factors, including the lack of
readily available price quotations, the absence of consistent administrative
supervision of bid and ask quotations, lower trading volume, and market
conditions. Investors in our common stock may experience high fluctuations in
the market price and volume of the trading market for our securities. These
fluctuations, when they occur, have a negative effect on the market price for
our securities. Accordingly, our stockholders may not be able to realize a fair
price from their shares when they determine to sell them or may have to hold
them for a substantial period of time until the market for our common stock
improves.
FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH
SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS AND OPERATING RESULTS.
18
It may be time consuming, difficult and costly for us to develop and implement
the additional internal controls, processes and reporting procedures required by
the Sarbanes-Oxley Act. We may need to hire additional financial reporting,
internal auditing and other finance staff in order to develop and implement
appropriate additional internal controls, processes and reporting procedures. If
we are unable to comply with these requirements of the Sarbanes-Oxley Act, we
may not be able to obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires of publicly traded companies.
If we fail to comply in a timely manner with the requirements of Section 404 of
the Sarbanes-Oxley Act regarding internal control over financial reporting or to
remedy any material weaknesses in our internal controls that we may identify,
such failure could result in material misstatements in our financial statements,
cause investors to lose confidence in our reported financial information and
have a negative effect on the trading price of our common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations,
beginning with our annual report on Form 10-K for our fiscal period ending May
31, 2008, we will be required to prepare assessments regarding internal controls
over financial reporting and beginning with our annual report on Form 10-K for
our fiscal period ending May 31, 2009, furnish a report by our management on our
internal control over financial reporting. We have begun the process of
documenting and testing our internal control procedures in order to satisfy
these requirements, which is likely to result in increased general and
administrative expenses and may shift management time and attention from
revenue-generating activities to compliance activities. While our management is
expending significant resources in an effort to complete this important project,
there can be no assurance that we will be able to achieve our objective on a
timely basis. There also can be no assurance that our auditors will be able to
issue an unqualified opinion on management's assessment of the effectiveness of
our internal control over financial reporting. Failure to achieve and maintain
an effective internal control environment or complete our Section 404
certifications could have a material adverse effect on our stock price.
In addition, in connection with our on-going assessment of the effectiveness of
our internal control over financial reporting, we may discover "material
weaknesses" in our internal controls as defined in standards established by the
Public Company Accounting Oversight Board, or the PCAOB. A material weakness is
a significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or detected. The
PCAOB defines "significant deficiency" as a deficiency that results in more than
a remote likelihood that a misstatement of the financial statements that is more
than inconsequential will not be prevented or detected.
In the event that a material weakness is identified, we will employ qualified
personnel and adopt and implement policies and procedures to address any
material weaknesses that we identify. However, the process of designing and
implementing effective internal controls is a continuous effort that requires us
to anticipate and react to changes in our business and the economic and
regulatory environments and to expend significant resources to maintain a system
of internal controls that is adequate to satisfy our reporting obligations as a
public company. We cannot assure you that the measures we will take will
remediate any material weaknesses that we may identify or that we will implement
and maintain adequate controls over our financial process and reporting in the
future.
Any failure to complete our assessment of our internal control over financial
reporting, to remediate any material weaknesses that we may identify or to
implement new or improved controls, or difficulties encountered in their
implementation, could harm our operating results, cause us to fail to meet our
reporting obligations or result in material misstatements in our financial
statements. Any such failure could also adversely affect the results of the
periodic management evaluations of our internal controls and, in the case of a
failure to remediate any material weaknesses that we may identify, would
adversely affect the annual auditor attestation reports regarding the
effectiveness of our internal control over financial reporting that are required
under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could
also cause investors to lose confidence in our reported financial information,
which could have a negative effect on the trading price of our common stock.
19
THE REPORT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONTAINS
EXPLANATORY LANGUAGE THAT SUBSTANTIAL DOUBT EXISTS ABOUT OUR ABILITY TO CONTINUE
AS A GOING CONCERN.
The independent auditor's report on our financial statements contains
explanatory language that substantial doubt exists about our ability to continue
as a going concern. The report states that we depend on the continued
contributions of our executive officers to work effectively as a team, to
execute our business strategy and to manage our business. The loss of key
personnel, or their failure to work effectively, could have a material adverse
effect on our business, financial condition, and results of operations. If we
are unable to obtain sufficient financing in the near term or achieve
profitability, then we would, in all likelihood, experience severe liquidity
problems and may have to curtail our operations. If we curtail our operations,
we may be placed into bankruptcy or undergo liquidation, the result of which
will adversely affect the value of our common shares.
OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN
OUR SHARE PRICE. THE PRICE AT WHICH YOU PURCHASE OUR COMMON SHARES MAY NOT BE
INDICATIVE OF THE PRICE THAT WILL PREVAIL IN THE TRADING MARKET. YOU MAY BE
UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY
RESULT IN SUBSTANTIAL LOSSES TO YOU. THE MARKET PRICE FOR OUR COMMON SHARES IS
PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A
SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED
The market for our common shares is characterized by significant price
volatility when compared to seasoned issuers, and we expect that our share price
will continue to be more volatile than a seasoned issuer for the indefinite
future. The volatility in our share price is attributable to a number of
factors. First, as noted above, our common shares are sporadically and thinly
traded. As a consequence of this lack of liquidity, the trading of relatively
small quantities of shares by our shareholders may disproportionately influence
the price of those shares in either direction. The price for our shares could,
for example, decline precipitously in the event that a large number of our
common shares are sold on the market without commensurate demand, as compared to
a seasoned issuer which could better absorb those sales without adverse impact
on its share price. Secondly, we are a speculative or "risky" investment due to
our limited operating history and lack of profits to date, and uncertainty of
future market acceptance for our potential products. As a consequence of this
enhanced risk, more risk-adverse investors may, under the fear of losing all or
most of their investment in the event of negative news or lack of progress, be
more inclined to sell their shares on the market more quickly and at greater
discounts than would be the case with the stock of a seasoned issuer. Many of
these factors are beyond our control and may decrease the market price of our
common shares, regardless of our operating performance. We cannot make any
predictions or projections as to what the prevailing market price for our common
shares will be at any time, including as to whether our common shares will
sustain their current market prices, or as to what effect that the sale of
shares or the availability of common shares for sale at any time will have on
the prevailing market price.
Shareholders should be aware that, according to SEC Release No. 34-29093, the
market for penny stocks has suffered in recent years from patterns of fraud and
abuse. Such patterns include (1) control of the market for the security by one
or a few broker-dealers that are often related to the promoter or issuer; (2)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and (5) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
20
practical limitations to prevent the described patterns from being established
with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
VOLATILITY IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION,
THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR
PROFITABILITY AND RESULTS OF OPERATIONS.
As discussed in the preceding risk factors, the market for our common shares is
characterized by significant price volatility when compared to seasoned issuers,
and we expect that our share price will continue to be more volatile than a
seasoned issuer for the indefinite future. In the past, plaintiffs have often
initiated securities class action litigation against a company following periods
of volatility in the market price of its securities. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management's attention and resources.
As of August 31, 2008, we had 20,070,000 shares of common stock issued and
outstanding.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES
During the three months ended August 31, 2008, the Company issued 11,570,000
common shares of 8,500,000 in a 2 for 1 forward split, 750,000 common shares for
the purchase of Javaco, Inc., 500,000 common shares as for director
compensation, 500,000 common shares for the buy out of the Right Agreement with
SportsQuest, Inc., and 1,320,000 common shares for the purchase of Media4, Inc.
for their media content of $10,000,000. These shares were issued based up on the
value received and the price of the stock trading on those dates. The offer and
sale of such shares of our common stock were effected in reliance on the
exemptions for sales of securities not involving a public offering, as set forth
in Rule 506 promulgated under the Securities Act and in Section 4(2) of the
Securities Act, based on the following: (a) the investors confirmed to us that
they were "accredited investors," as defined in Rule 501 of Regulation D
promulgated under the Securities Act and had such background, education and
experience in financial and business matters as to be able to evaluate the
merits and risks of an investment in the securities; (b) there was no public
offering or general solicitation with respect to the offering; (c) the investors
were provided with certain disclosure materials and all other information
requested with respect to our company; (d) the investors acknowledged that all
securities being purchased were "restricted securities" for purposes of the
Securities Act, and agreed to transfer such securities only in a transaction
registered under the Securities Act or exempt from registration under the
Securities Act; and (e) a legend was placed on the certificates representing
each such security stating that it was restricted and could only be transferred
if subsequent registered under the Securities Act or transferred in a
transaction exempt from registration under the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the period ended August 31,
2008.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the vote of securities holders during the
period ended August 31, 2008.
ITEM 5. OTHER INFORMATION
There is no information with respect to which information is not otherwise
called for by this form.
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ITEM 6. EXHIBITS
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act.
32.2 Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act.
32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act.
SIGNATURES
Pursuant to the requirements of 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, thereunto duly authorized.
DoMark International, Inc.
Registrant
Date: October 15, 2008 By: /s/ R. Thomas Kidd
---------------------------------
R. Thomas Kidd
Chairman, Chief Executive Officer
(Principle Executive Officer,
Principle Financial Officer)
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