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 February 28, 2009
[ ] 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 February 28, 2009
----- --------------------------------
Common stock, $0.001 par value 43,200,000
DOMARK INTERNATIONAL, INC.
INDEX TO FORM 10-Q FILING
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2009
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Page Number
-----------
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 16
Item 3 Quantitative and Qualitative Disclosures About Market Risk 21
Item 4. Controls and Procedures 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 1A. Risk Factors 23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27
Item 3. Defaults Upon Senior Securities 28
Item 4. Submission of Matters to a Vote of Security Holders 28
Item 5 Other information 28
Item 6. Exhibits 28
2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
DOMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
As of February 28, 2009 and May 31, 2008
ASSETS
2/28/2009 5/31/2008
----------- -----------
(unaudited) (audited)
CURRENT ASSETS
Cash $ 113,889 $ 44,248
Accounts Receivable 1,126,374 1,576,852
Loans and Notes Receivable 709 273
Due From Affiliate 568,645 717,076
Prepaid Expenses 871,857 125,043
Inventory 707,935 705,002
----------- -----------
TOTAL CURRENT ASSETS 3,389,409 3,168,494
----------- -----------
FIXED ASSETS
Property & Equipment, Net 263,122 35,408
----------- -----------
TOTAL FIXED ASSETS 263,122 35,408
----------- -----------
OTHER ASSETS
Deposits 12,708 7,333
Prepaid Media 10,000,000 10,000,000
Intangible Assets - Software & Intellectual Property 4,100,000 0
Goodwill 5,121,763 0
TOTAL OTHER ASSETS 19,234,471 13,917,644
----------- -----------
TOTAL ASSETS $22,887,002 $17,121,546
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
DOMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
As of February 28, 2009 and May 31, 2008
LIABILITIES AND STOCKHOLDERS' EQUITY
2/28/2009 5/31/2008
------------ ------------
(unaudited) (audited)
CURRENT LIABILITIES
Accounts Payable & Accrued Expenses $ 884,372 $ 1,224,242
Payroll Liabilities 1,560 8,349
Due to affiliate & Shareholder 26,000 3,903,750
Notes payable & Line of Credit 473,830 100,000
------------ ------------
TOTAL CURRENT LIABILITIES 1,385,762 5,236,341
------------ ------------
LONG-TERM LIABILITIES
Loans Payable -- 413,827
Convertible Notes Payable -- 255,205
Bond Payable -- 733,308
TOTAL LONG-TERM LIABILITIES -- 1,402,340
------------ ------------
TOTAL LIABILITIES 1,385,762 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: 43,200,000 and 17,000,000, respectively 43,200 17,000
Additional paid in capital 20,532,303 8,417,068
Common Stock subscribed, not issued -- 2,812,300
Accumulated income/(deficit) 925,637 (763,503)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 21,501,240 10,482,865
------------ ------------
TOTAL LIABILITIES AND EQUITY $ 22,887,002 $ 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 February 28, 2009 and February 29, 2008
THREE MONTHS THREE MONTHS
02/28/2009 02/29/2008
----------- -----------
(unaudited) (unaudited)
REVENUE $ 1,711,774 $ 901,633
COST OF SERVICES 1,315,703 721,495
----------- -----------
GROSS PROFIT OR (LOSS) 396,071 180,138
GENERAL AND ADMINISTRATIVE EXPENSES 513,616 146,003
----------- -----------
OPERATING INCOME/(LOSS) (117,545) 34,135
INTEREST EXPENSE 13,838 --
----------- -----------
OTHER INCOME 1,809 --
----------- -----------
INCOME/(LOSS) BEFORE INCOME TAXES (129,574) 34,135
PROVISION FOR INCOME TAXES
Federal -- --
State -- --
----------- -----------
NET INCOME/(LOSS) $ (129,574) $ 34,135
=========== ===========
The accompanying notes are an integral part of these financial statements.
5
DOMARK INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
For the nine months ending February 28, 2009 and February 29, 2008
NINE MONTHS NINE MONTHS
2/28/2009 2/29/2008
------------ ------------
(unaudited) (unaudited)
REVENUE $ 4,935,843 $ 4,060,655
COST OF SERVICES 3,993,737 3,369,045
------------ ------------
GROSS PROFIT OR (LOSS) 942,106 691,610
GENERAL AND ADMINISTRATIVE EXPENSES 1,231,017 586,246
------------ ------------
OPERATING INCOME/(LOSS) (289,911) 105,364
INTEREST EXPENSE 34,158 20,320
------------ ------------
GAIN ON SALE OF SUBSIDIARY 292,868 0
OTHER INCOME 256,029 4,220
------------ ------------
INCOME/(LOSS) BEFORE INCOME TAXES 225,828 89,264
PROVISION FOR INCOME TAXES
Federal 0 0
State 0 0
------------ ------------
NET INCOME/(LOSS) $ 225,828 $ 89,264
============ ============
EARNINGS (LOSS) PER SHARE, BASIC AND DILUTED $ 0.01 $ 0.02
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 39,370,220 4,000,000
The accompanying notes are an integral part of these financial statements.
6
DOMARK INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
As of February 28, 2009
ADDITIONAL
PREFERRED COMMON PAR PAID IN ACCUM TOTAL
STOCK STOCK VALUE CAPITAL DEFICIT EQUITY
----- ----- ----- ------- ------- ------
Balance, May 31, 2008 34,000,000 34,000 $ 21,000 699,809 754,809
----------- -------- ----------- --------- -----------
Common stock issued in a 2 for 1 forward
split on June 27, 2008
Common stock issued for acquisition 1,500,000 1,500 2,623,503 2,625,003
on July 18, 2008 at $1.75 per share
Common stock issued on July 18, 2008 1,000,000 1,000 1,749,000 1,750,000
for assignment of acquisition rights
at $0.75 per share
Preferred Stock issued as compensation 100,000 -- 100 -- 100
during August 2008
Common stock issued as compensation 1,000,000 1,000 (500) 500
on September 1, 2008 at $0.001 per share
Common stock issued for prepaid media 2,640,000 2,640 9,997,360 10,000,000
on August 15, 2008 at $3.79 per share
Common stock issued for cash on 100,000 100 99,900 100,000
November 5, 2008 at $1.00 per share
Common stock issued for acquisition 100,000 100 204,900 205,000
on December 3, 2008 at $2.05 per share
Common stock issued for acquisition 200,000 200 409,800 410,000
on December 11, 2008 at $2.05 per share
Common stock for compensation 10,000 10 19,900 20,000
on December 11, 2008 at $2.00 per share
Common stock issued for acquisition 200,000 200 409,800 410,000
on December 15, 2008 at $2.05 per share
Common stock issued for acquisition 2,000,000 2,000 4,098,000 4,100,000
on December 28, 2008 at $2.05 per share
Common stock issued for compensation 500,000 500 499,500 500,000
on December 29, 2008 at $1.00 per share
Common stock issued for compensation 200,000 200 399,800 400,000
on December 29, 2008 at $2.00 per share
Retroactively applied share issuance treated
as a 2-to-1 stock split on December 29, 2008
Common stock returned to treasury stock (250,000) (250) 250 0
at par on December 30, 2008
Net income (loss) 225,828 225,828
------- ----------- -------- ----------- --------- -----------
BALANCE, FEBRUARY 28, 2009 100,000 43,200,000 $ 43,200 $20,532,303 $ 925,637 $21,501,240
======= =========== ======== =========== ========= ===========
The accompanying notes are an integral part of these financial statements.
7
DOMARK INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
For the nine months ending February 28, 2009 and February 29, 2008
NINE MONTHS NINE MONTHS
2/28/2009 2/29/2008
--------- ---------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 225,828 89,264
--------- ---------
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 6,256 8,483
Common stock issued as compensation and expenses 920,100 --
Note in connection with break-up fee (250,000) --
Gain on Sale of Subsidiary (292,868) --
CHANGES IN OPERATING ASSETS AND LIABILITITES:
Accounts Receivable 450,478 85,628
Inventory (2,993) (1,428)
Prepaid Expenses and other current assets (746,814) (1,200)
Accounts Payable & Accrued Expenses (346,658) (167,780)
Deposits (5,375) (519)
--------- ---------
TOTAL ADJUSTMENTS TO NET INCOME (267,814) (76,816)
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (41,986) 12,448
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Furniture & Equipment 2,215 (470)
--------- ---------
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES (2,215) (470)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Proceeds from stock issuance 100,000 --
Cash Received from Affiliate 9,412 400
Cash (Paid)/Received on notes payable -- (2,528)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 109,412 (2,128)
--------- ---------
CASH RECONCILIATION
Net increase (decrease) in cash and cash equivalents 69,641 9,850
Cash and cash equivalents - beginning balance 44,248 15,911
--------- ---------
CASH AND CASH EQUIVALENTS BALANCE END OF PERIOD $ 113,889 $ 25,761
========= =========
The accompanying notes are an integral part of these financial statements.
8
DOMARK INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2009 and 2008
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.
Executive Sports, Tickets and Entertainment, Inc. is a wholly owned subsidiary
of Domark and is engaged in the business of sports concierge packages and event
management for individuals and groups to major US sports events such as the
Super Bowl, the Masters, the US Open, Kentucky Derby and PGA Championship.
Emerging Growth Advisors, Inc. is a wholly owned subsidiary of Domark and is
engaged in the business of providing Sarbannes Oxley compliance solutions and
GRC services to small and mid cap public entities.
9
ECFO Corporation is a wholly owned subsidiary of Domark and is engaged in the
business of tax preparation and accounting.
Crowley and Company is a wholly owned subsidiary of DoMark and is engaged in the
business of advertising specialties, graphic design and advertising marketing
services.
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 nine month period ended February 28,
2009 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.
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
10
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.
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
11
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
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.
12
NOTE 4 - RELATED PARTY TRANSACTIONS
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.
On August 31, 2008 the Company issued 500,000 common shares to its Director,
Richard Altman, as compensation.
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
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, the Company 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, the Company's management 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 29, 2008, the Company 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.
During December 2008, the Company issued 355,000 shares to related parties as
prepaid expenses for a value of $920,000.
13
NOTE 5 - ACCOUNTS RECEIVABLE & PREPAID
At the end of the nine month period ending February 28, 2009, the Company's
accounts receivable balance is as follows:
Javaco $1,100,266
Crowley 14,569
ECFO 11,539
----------
$1,126,374
==========
During August 2008, the Company issued 1,320,000 shares of common stock in
exchange for prepaid media to Media 4 Equity, Inc.
During December 2008, the Company issued 355,000 shares as prepaid expenses for
a value of $920,000.
NOTE 6 - LIABILITIES
On December 17, 2008, we terminated an Investment Agreement with Dutchess
Private Equities, L.P.
The Company is reporting loans payable of $473,380. $444,930 reflects the
financing of operating capital in Javaco and $28,900 reflects two unsecured
demand notes payable in Domark.
NOTE 7 - 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 8 - EQUITY
During the nine months ended February 28, 2009:
Quarter Ended Stock Issued Cash Received
- ------------- ------------ -------------
Forward Split 34,000,000 --
Javaco Inc. Stock Purchase 1,500,000 --
SportsQuest, Inc. Right Agreement 1,000,000 --
Stock issued for compensation 1,000,000 --
Media4, Inc. Asset purchase 2,640,000 --
Stock issued for cash 100,000 $ 100,000
ESE Stock Purchase 100,000 --
Crowley Asset Purchase 200,000 --
Stock issued for compensation 10,000 --
ECFO Stock Purchase 200,000 --
14
EGA Asset Purchase 2,000,000 --
Stock issued for compensation 500,000 --
Stock issued for compensation 200,000 --
Stock returned to treasury (250,000) --
----------- -----------
Total Issued 43,200,000 $ 100,000
=========== ===========
During the nine months ended February 28, 2009, the Company issued 9,200,000
shares of its common stock: 4,725,000 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,50,000 of common shares issued for cash at $2.00
per share, 150,000 shares issued in stock exchanges, 1,100,000 shares in asset
Acquisitions, 355,000 for prepaid expenses, and 250,000 shares were returned to
treasury.
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.
NOTE 9 - SUBSEQUENT EVENTS
Subsequent to the date of filing, the Company has put a Directors & Officers
insurance policy into place through Carolina Casualty.
15
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.
16
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").
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.
17
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
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 nine months ended February 28, 2009 increased to $4,935,843
from $4.060,655 for the nine months ended February 28, 2007 . 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 nine months ended February 28, 2009
increased to $1,231,017 from $586,246 for the nine months ended February 28,
2009. 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 acquisitions.
18
The Company realized net income (loss) of ($129,574), for the Nine months ended
February 28, 2009 compared to net income of $34,135 for the nine months ended
February 28, 2008, primarily as a result of increased costs associated with
public reporting status and stock based compensation.
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 nine
months ending February 28, 2009 was $113,889 compared to $44,248 as of the year
ended May 31, 2008.
Accounts receivable decreased from $1,126,374 for the nine months ending
February 28, 2009 compared to $1,576,852 as of the year ended May 31, 2008,
primarily due to the holiday season adjustments by our customers.
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.
19
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
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.
20
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, 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 the 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.
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
21
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
February 28, 2009. In making this assessment, our Chief Executive Officer and
Chief Financial Officer 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 Chief Executive Officer
and Chief Financial Officer concluded that, as of February 28, 2009, our
internal control over financial reporting was effective.
b) Changes in Internal Control over Financial Reporting.
During the Quarter ended February 28, 2009, there was no change in our internal
control over financial reporting (as such term is defined in Rule 13a-15(f)
under the Exchange Act) that has materially effected, or is reasonably likely to
materially effect, our internal control over financial reporting.
22
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 except as follows: The Company was named as a defendant
in a claim by Andresen and Associates. The Company entered into a settlement
agreement with Andresen and Associates and paid a settlement in full to Andresen
and Associates on April 10, 2009.
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.
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.
23
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.
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
24
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.
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.
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
25
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 February 28, 2009, we had 43,200,000 shares of common stock issued and
outstanding.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES
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
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, the Company 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, the Company's management 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 29, 2008, the Company 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.
During December 2008, the Company issued 355,000 shares to related parties as
prepaid expenses for a value of $920,000.
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
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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
February 28, 2009.
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 February 28, 2009.
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.
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: April 15, 2009 By: /s/ R. Thomas Kidd
--------------------------------------------
R. Thomas Kidd
Chief Executive Officer (Principal Executive
Officer, Principal Financial Officer)
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