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 November 30, 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 November 30, 2008
----- --------------------------------
Common stock, $0.001 par value 20,120,000
DOMARK INTERNATIONAL, INC.
INDEX TO FORM 10-QSB FILING
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2008
TABLE OF CONTENTS
Page Numbers
------------
PART I
FINANCIAL INFORMATION
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited) 3
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 5
Statement of Stockholders' Equity 7
Condensed Consolidated Statement of Cash Flows 8
Notes to Condensed Consolidated Financial Statements 9
Item 2. Management Discussion & Analysis of Financial Condition and
Results of Operations 14
Item 3 Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
18
Item 1. Legal Proceedings 19
Item 1A. Risk Factors 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5 Other information 23
Item 6. Exhibits 23
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DOMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
As of November 30, 2008 and May 31, 2008
ASSETS
11/30/2008 5/31/2008
---------- ---------
CURRENT ASSETS
Cash $ 63,391 44,248
Accounts Receivable 1,225,978 1,576,852
Loans and Notes Receivable 416,109 273
Due From Affiliate 23,500 717,076
Prepaid Expenses 24,148 125,043
Inventory 803,615 705,002
----------- -----------
Total Current Assets 2,556,741 3,168,494
----------- -----------
FIXED ASSETS
Property & Equipment, Net 47,501 35,408
----------- -----------
Total Fixed Assets 47,501 35,408
----------- -----------
OTHER ASSETS
Investment in Unconsilidated Subsidiary 6,561 3,910,311
Deposits 4,333 7,333
Intangible assets - media credits 10,000,000 10,000,000
Goodwill 2,623,706 --
Total Other Assets 12,634,600 13,917,644
----------- -----------
TOTAL ASSETS $15,238,842 17,121,546
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
DOMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
As of November 30, 2008 and May 31, 2007
LIABILITIES AND STOCKHOLDERS' EQUITY
11/30/2008 5/31/2008
---------- ---------
CURRENT LIABILITIES (unaudited)
Accounts Payable & Accrued Expenses $ 979,101 $ 1,224,242
Payroll Liabilities -- 8,349
Compensation payable -- --
Due to affiliate -- 3,903,750
Notes payable -- 100,000
----------- -----------
Total Current Liabilities 979,101 5,236,341
----------- -----------
LONG-TERM LIABILITIES
Loans Payable 454,687 413,827
Convertible Notes Payable -- 255,205
Bond Payable -- 733,308
Total Long-Term Liabilities 454,687 1,402,340
----------- -----------
TOTAL LIABILITIES 1,433,788 6,638,681
----------- -----------
STOCKHOLDERS' EQUITY
Convertible Preferred stock series A, $.001 par value,
Authorized: 2,000,000
Issued: 100,000 and 0 respectively 100 --
Common Stock
Authorized: 200,000,000
Issued: 20,120,000 and 17,000,000, respectively 20,120 17,000
Additional paid in capital 12,780,086 8,417,068
Common Stock subscribed, not issued -- 2,812,300
Accumulated income/(deficit) 1,004,748 (763,503)
----------- -----------
Total Stockholders' Equity 13,805,054 10,482,865
----------- -----------
TOTAL LIABILITIES AND EQUITY $15,238,842 $17,121,546
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
DOMARK INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
For the three months ending November 30, 2008 and 2007
THREE THREE
MONTHS MONTHS
11/30/2008 11/30/2007
---------- ----------
(unaudited) (unaudited)
REVENUE $ 1,577,308 $ 1,505,853
COST OF SERVICES 1,338,731 1,270,575
----------- -----------
GROSS PROFIT OR (LOSS) 238,577 235,278
GENERAL AND ADMINISTRATIVE EXPENSES (458,100) 205,112
----------- -----------
OPERATING INCOME/(LOSS) 696,677 30,166
INTEREST EXPENSE (6,758) (9,276)
----------- -----------
GAIN ON SALE OF SUBSIDIARY 292,868 --
GAIN ON SALE OF ASSETS -- --
OTHER INCOME 250,020 58
----------- -----------
INCOME/(LOSS) BEFORE INCOME TAXES 1,232,807 20,948
PROVISION FOR INCOME TAXES
Federal -- --
State -- --
----------- -----------
NET INCOME/(LOSS) $ 1,232,807 $ 20,948
=========== ===========
The accompanying notes are an integral part of these financial statements.
5
DOMARK INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
For the six months ending November 30, 2008 and 2007
SIX SIX
MONTHS MONTHS
11/30/2008 11/30/2007
---------- ----------
(unaudited) (unaudited)
REVENUE $ 3,429,498 $ 3,192,316
COST OF SERVICES 2,647,229 2,676,559
----------- -----------
GROSS PROFIT OR (LOSS) 782,269 515,757
GENERAL AND ADMINISTRATIVE EXPENSES 703,470 404,092
----------- -----------
OPERATING INCOME/(LOSS) 78,799 111,665
INTEREST EXPENSE 20,320 17,966
----------- -----------
GAIN ON SALE OF SUBSIDIARY 292,868 --
GAIN ON SALE OF ASSETS -- 326
OTHER INCOME 250,000 131
----------- -----------
INCOME/(LOSS) BEFORE INCOME TAXES 601,347 94,156
PROVISION FOR INCOME TAXES
Federal -- --
State -- --
----------- -----------
NET INCOME/(LOSS) $ 601,347 $ 94,156
=========== ===========
EARNINGS (LOSS) PER SHARE, BASIC AND DILUTED $ 0.03 $ 0.05
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 18,721,967 2,000,000
The accompanying notes are an integral part of these financial statements.
6
DOMARK INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
As of November 30, 2008
ADDITIONAL
COMMON PAR PAID IN ACCUM TOTAL
STOCK VALUE CAPITAL DEFICIT EQUITY
----- ----- ------- ------- ------
Balance, May 31, 2006 2,000,000 $ 2,000 $ 3,000 $ (340) $ 4,660
----------- -------- ----------- ----------- -----------
Common stock issued for cash on
March 9, 2007 at $0.05 per share 2,000,000 2,000 48,000 50,000
Net income (loss) (12,460) (12,460)
----------- -------- ----------- ----------- -----------
Balance, May 31, 2007 4,000,000 $ 4,000 51,000 (12,800) 42,200
----------- -------- ----------- ----------- -----------
Common stock issued on May 15, 2008 13,000,000 13,000 (13,000) --
at $0.05 per share
Net income (loss) 416,201 416,201
----------- -------- ----------- ----------- -----------
Balance, May 31, 2008 17,000,000 17,000 38,000 403,401 458,401
----------- -------- ----------- ----------- -----------
Common stock issued in a 2 for 1 forward
split on June 27, 2008
Common stock issued for acquisition 750,000 750 1,893,956 1,894,706
on July 16, 2008 at $2.78 per share
Preferred Stock issued as compensation -- 100 -- 100
during July 2008
Common stock issued August, 2008 500,000 500 749,500 750,000
for investment in subsidiary at
$1.50 per share
Common stock issued as compensation 500,000 500 500
during August 2008 at $0.001 per share
Common stock issued August, 2008 1,320,000 1,320 9,998,680 10,000,000
at $7.58 per share
Common stock issued for cash 50,000 50 99,950 100,000
at $2.00 per share
Net income (loss) 601,347 601,347
----------- -------- ----------- ----------- -----------
Balance, November 30, 2008 20,120,000 $ 20,220 $12,780,086 $ 1,004,748 $13,805,054
=========== ======== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
7
DOMARK INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
For the six months ending November 30, 2008 and 2007
SIX SIX
MONTHS MONTHS
11/30/2008 11/30/2007
---------- ----------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 601,347 94,156
--------- ---------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
ADJUSTMENTS FOR CHARGES NOT REQUIRING OUTLAY OF CASH:
Depreciation and Amortization 744 1,747
Stock issued in a forward split 8,500 --
Common stock issued for legal fee (21,001) --
Common stock issued for director fees 500 --
Note in connection with break-up fee (250,000) --
Gain on Sale of Subsidiary (292,868) --
Note in connection with exchange of stock (416,109) --
CHANGES IN OPERATING ASSETS AND LIABILITITES:
Accounts Receivable 350,294 (274,243)
Inventory (97,188) (93,819)
Prepaid Expenses and other current assets (20,589) 3,310
Accounts Payable & Accrued Expenses 150,057 314,074
Due from affiliate (23,500) 600
Deposits -- (3,438)
--------- ---------
Total adjustments to net income (611,160) (51,769)
--------- ---------
Net cash provided by (used in) operating activities (9,813) 42,387
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Furniture & Equipment (19,935) (957)
--------- ---------
Net cash flows provided by (used in) investing activities (19,935) (957)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Proceeds from stock issuance 100,000 --
Cash Received from Affiliate (33,333) (7,357)
Cash (Paid)/Received on notes payable (17,876) 7,188
Net cash provided by (used in) financing activities 48,791 (169)
--------- ---------
CASH RECONCILIATION
Net increase (decrease) in cash and cash equivalents 19,043 41,261
Cash and cash equivalents - beginning balance 44,248 15,911
--------- ---------
CASH AND CASH EQUIVALENTS BALANCE END OF PERIOD $ 63,291 57,172
========= =========
The accompanying notes are an integral part of these financial statements.
8
Domark International, Inc.
Notes to Condensed Consolidated Financial Statements
for the Six Months Ended November 30, 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 its prior business of exotic furniture
sales and is acquiring through acquisition and merger operating entities that
will bring value to the company.
On October 20, 2008, we executed an agreement between Mecanismo Corp., a Nevada
Corporation, Domark and R. Thomas Kidd (the "Agreement"), whereby pursuant to
the terms and conditions of that Agreement, Mecanismo Corp. acquired nine
million, nine hundred and seventy three thousand, three hundred and ninety seven
(9,973,397) shares of SportsQuest, Inc. common stock and one hundred thousand
(100,000) shares of SportsQuest, Inc. preferred stock held by us. As
consideration for this acquisition, a judgment arising from CASE BC 359831 LOS
ANGELES SUPERIOR COURT Veridigm Inc (f/k/a E-Notes Systems Inc (DE) ("the
Plaintiff"), against TotalMed Systems, Inc., (The "Defendant") shall be assigned
to Domark and Domark shall receive a promissory note in the amount of One
Hundred Thousand Dollars ($100,000). CONSEQUENTLY, DOMARK IS NO LONGER A
CONTROLLING SHAREHOLDER OF SPORTSQUEST, INC.
JAVACO, INC ("JAVACO") is a wholly owned subsidiary of DoMark. JAVACO, Inc.,
formerly JAVA Company, opened for business in 1997 as a sole proprietorship.
Prior to opening JAVA Co., Judith Vazquez, owner and President, worked several
years in distribution sales and finally with RMS Electronics/Channel. JAVA
Company's initial focus was the sale of used cable TV equipment, including
amplifiers and converters to Colombia, Venezuela and Mexico. JAVA Company teamed
up with a distributor in Argentina to jointly cover a larger Latin American
market. JAVA Company acted as their US office, providing sales expertise and a
much needed North American connection with the manufacturers. JAVA Company
coordinated the sale, expediting, invoicing and exporting of equipment purchased
from the US and Canadian suppliers. JAVACO, Inc. incorporated in March 2000.
Javaco is part of the Supplier Diversity Network, WBENC. JAVACO, Inc. currently
distributes over 100 lines of equipment from fiber optic transmitters to RF
connectors. To further enhance business in the United States, new distribution
lines are frequently being added including a line of home theater and audio
video products.
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 six period ended November 30, 2008 are
not necessarily indicative of the results that may be expected for the year
ending May 31, 2009. 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.
9
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
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.
10
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
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
11
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 as compensation.
In July 2008, DoMark issued 500,000 shares to SportsQuest, Inc. 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 six months ended November 30, 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 --
Stock issued for cash 50,000 $ 100,000
---------- ----------
Total Issued 11,620,000 $ 100,000
========== ==========
During the six months ended November 30, 2008, the Company issued 11,620,000
shares of its common stock: 8,500,000 in a 2 for 1 forward split, 750,000 shares
of common stock for the purchase of Javaco, Inc., 500,000 shares of common stock
as director compensation, 500,000 shares of common stock to SportsQuest, Inc. as
consideration of the assignment to DoMark of the Acquisition Agreement of
Javaco, Inc, 1,320,000 common shares as payment for $10 million dollars in print
and radio advertising credits and 50,000 of common shares issued for cash at
$2.00 per share.
NOTE 7 - SUBSEQUENT EVENTS
On December 3, 2008, we executed an agreement for the exchange of common stock
between Executive Sports Tickets and Entertainment, Inc. a Georgia Corporation
("EST") and Domark (the "Domark"), whereby pursuant to the terms and conditions
12
of that Agreement, Domark acquired all the shares in EST in return for an
initial issuance of Fifty Thousand (50,000) shares of Domark common stock and
the right to an additional Fifty Thousand (50,000) shares of Domark common stock
in the event that a current pending contract concerning EST's management of a
Junior World Series endorsed by Major League Baseball becomes a written binding
agreement between EST and the appropriate entities in the face amount of $1.5
million, and all terms of the contract are performed and payment received.
Accordingly, EST becomes a wholly owned subsidiary of Domark.
On December 11, 2008, we executed an asset purchase agreement between Crowley
and Company Advertising, Inc., a Florida corporation ("C&C") and Domark (the
"Domark"), whereby pursuant to the terms and conditions of that Agreement,
Domark acquired the right, title, and interest of C&C in and to all of the
assets of C&C used exclusively in their business in return for one hundred
thousand (100,000) shares of Domark common stock.
On December 16, 2008, we executed an agreement for the exchange of common stock
between eCFO and Domark. whereby pursuant to the terms and conditions of that
Agreement, Domark acquired all the shares in eCFO in return for an issuance of
One Hundred Thousand (100,000) shares of Domark common stock. Accordingly, eCFO
became a wholly owned subsidiary of Domark.
On December 17, 2008 we terminated an Investment Agreement with Dutchess Private
Equities, L.P.
On December 29, 2008, we executed an asset purchase agreement between Emerging
Growth Advisors, LLC, a Florida limited liability company ("EGA") and Domark
(the "Domark"), whereby pursuant to the terms and conditions of that Agreement,
Domark acquired the right, title, and interest of EGA in and to all of the
assets of EGA used exclusively in their business in return for one million
(1,000,000) shares of Domark common stock. In addition, on December 28, 2008,
the Agreement was amended to waive the closing condition of minimum capital
raise of $250,000. The Amendment is attached hereto as Exhibit 10.2. EGA is
engaged in the business of marketing, designing and distributing consulting
services for small cap public companies and owns certain hardware, software and
other assets and intellectual property in connection with their business.
On December 29, 2008, an accredited investor executed a subscription agreement
for the purchase of 250,000 shares of Domark common stock at $2.00 per share for
a value of $500,000. The subscription agreement was canceled on January 14,
2009.
On December 29, 2008, we effectuated a forward stock split consisting of two
shares for every one share held. The filing of the Amendment to the Articles of
Incorporation was accepted by the State of Nevada on January 2, 2009. The record
date is January 22, 2009 the Company has received notice that its ex dividend
date is January 22, 2009.
On January 5, 2009, we filed a registration on Form S-8 with the Securities and
Exchange Commission titled 2008 Employee and Consultants Stock Option Plan.
In January, 2009, we changed our fiscal year end to December 31 beginning with
the year end December 31, 2009.
13
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 Domar 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 executed 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").
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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 September 8,
2008.
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. On November 21, 2008, the Investment
Agreement was amended to increase the Investors commitment to purchase our
common stock over the course of 36 months to $100,000,000 and the amount the
Company shall be entitled to request from each purchase shall be $5,000,000 or
200% of the average daily volume. Subsequently on December 17, 2008, the Company
terminated the Investment Agreement with Dutchess.
On August 18, 2008, DoMark retained E & E Communications, Laguna Hills, Ca. to
assist with its investor and public relations activities.
On October 20, 2008, we executed an agreement between Mecanismo Corp., a Nevada
Corporation, Domark and R. Thomas Kidd (the "Domark"), whereby pursuant to the
terms and conditions of that Agreement, Mecanismo Corp. acquired nine million,
nine hundred and seventy three thousand, three hundred and ninety seven
(9,973,397) shares of SportsQuest, Inc. common stock and one hundred thousand
(100,000) shares of SportsQuest, Inc. preferred stock held by us. As
consideration for this acquisition, the judgment arising from CASE BC 359831 LOS
ANGELES SUPERIOR COURT Veridigm Inc (f/k/a E-Notes Systems Inc (DE) ("the
Plaintiff"), against TotalMed Systems, Inc., (The "Defendant") was assigned to
Domark and Domark received a promissory note in the amount of One Hundred
Thousand Dollars ($100,000). Consequently, Domark is no longer a controlling
shareholder of SportsQuest, Inc.
On November 8, 2008, we executed an exclusive license agreement with Greens
Worldwide Incorporated, an Arizona corporation (the "Agreement"), whereby
pursuant to the terms and conditions of that Agreement, we acquired an exclusive
license to the assets used by Greens Worldwide Incorporated in conducting Golf
Championships, which in the past have been conducted under the name US Pro Golf
Tour, Inc. In return for this license, we are obligated to pay Greens Worldwide
Incorporated 5% of the first million dollars in revenue arising from the use of
this license, 4% of the next 2 million dollars in revenue arising from the use
of this license, and 3% of the revenue in excess of $3 million dollars arising
from the use of this license. In addition, we receive 5% equity ownership of the
assets for each of the first 5 years of the Agreement beginning with the year
2009, up to a maximum ownership position of 50%.
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
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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
We file 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 we file with the Commission through the Commission's Internet
site at www.sec.gov.
RESULTS OF OPERATIONS
Revenues for the six months ended November 30, 2008 increased to $3,429,498 from
$3,192,316 for the six month period ending 11-30-07. Our future revenue plan is
dependent on our ability to effectively deploy assets and services to maximize
organic growth of our subsidiaries and close new viable acquisitions in the
business sectors of Sports, Technology, Medicine, Energy, and Business Services,
to provide value to our shareholders.
General and administrative expenses for the six months ended November 30, 2008
increased to $703,370 from $596. 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 new
operating expenses as a result of acquisition. Selling and marketing expenses
for six months ended November 30, 2008 increased to $27,708 from $0.00. The
increase in sales and marketing services relates to costs associated with the
launch of the Company's business plan.
Depreciation and amortization for six months ended November 30, 2008 increased
to $264 from $0.00. The increase in depreciation and amortization relates to the
purchase of new equipment to prepare our product associated with our marketing
plan.
The Company realized net income of approximately $601,447, and ($6536) for the
six months ended November 30, 2008 and 2007, respectively.
Revenues for the three months ending 11-30-2008 were $1,577, 308, with net
income of $1,232,807 as compared to revenues of $1,505,853 and net income of
$20,948 for the three months ending 11-30-07.
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 on favorable terms needed to
effectively execute its business plan of acquisitions.
The Company's net cash provided by (used in) operating activities for the six
months ending November 30, 2008 and 2007 was ($9713) and $42387 respectively.
Cash provided by (used in) investing activities was ($19935) and ($957) for the
six months ended November 30, 2008 and 2007, respectively. The increase is due
to an increase in purchase of equipment to develop our products.
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Cash provided by (used in) financing activities was $48,791 and ($169) for the
six months ended November 30, 2008 and 2007, respectively. The increase is due
to proceeds of stock issued.
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. On December 17, 2008, the Company terminated
the Investment Agreement and all amendments.
Our future revenues and profits, if any, will primarily depend upon our ability
to execute our acquisition strategy, our ability to secure capital on favorable
terms and to effectively deploy our assets to our subsidiaries.
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, and
results of operations, liquidity or capital expenditures.
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.
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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
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 accounting, governance, risk and compliance services,
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
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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, specifically our Chief Executive Officer and Chief Financial
Officer, are 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
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
November 30, 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 November 30, 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.
Andresen and Associates filed suit to recover a promissory note in the sum of
$15,500. The Company believes the suit is without merit and will defend it
vigorously.
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.
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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 our business and
its technology in an unproven area.
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.
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.
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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.
21
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
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 November 30, 2008, we had 20,120,000 shares of common stock issued and
outstanding.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES
During the six months ended November 30, 2008, the Company issued 11,620,000
shares of its common stock: 8,500,000 common shares in a 2 for 1 forward split
on June 27, 2008, 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.,1,320,000 common
shares for the purchase of Media4, Inc. for their media content and 50,000 in
stock purchase at $2.00 per share for a value of $100,000. 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 of during the period ended
November 30, 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 November 30, 2008.
ITEM 5. OTHER INFORMATION
Effective January 22, 2008, we effected a two for one forward stock split.
Without any action by our shareholders, one additional share of common stock
will be issued for each share held by the shareholder. There is no information
with respect to which information is not otherwise called for by this form.
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.
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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: January 20, 2009 By: /s/ R. Thomas Kidd
---------------------------------
R. Thomas Kidd
Chairman, Chief Executive Officer
(Principal Executive Officer,
Principal Financial Officer)
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