UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended May 31, 2010
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 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.)
3551 W Lake Mary Blvd, Ste 209
Lake Mary, FL 32746
(Address of principal executive offices)
1809 East Broadway #125
Oviedo Florida 32765
(previous address)
877-700-7369
(Registrant's telephone number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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 Act. Yes [X] No [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant on August 17, 2010 was $4,010,692.
State the number of shares outstanding of each of the issuer's classes of equity
securities, as of the latest practicable date: As of August 20, 2010, there were
36,460,835 shares of Common Stock, $0.001 par value per share issued and
outstanding.
Documents Incorporated By Reference
None
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS 3
ITEM 1A. RISK FACTORS 8
ITEM 1B. UNRESOLVED STAFF COMMENTS 15
ITEM 2. PROPERTIES 15
ITEM 3. LEGAL PROCEEDINGS 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 16
ITEM 6. SELECTED FINANCIAL DATA 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 18
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 49
ITEM 9A. CONTROLS AND PROCEDURES 49
ITEM 9B. OTHER INFORMATION 50
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND
CORPORATE GOVERNANCE COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT. 51
ITEM 11. EXECUTIVE COMPENSATION 52
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS 52
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE 54
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 55
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 56
SIGNATURES 57
2
PART I
ITEM 1. BUSINESS
Except for historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties. Such
forward-looking statements include, but are not limited to, statements regarding
future events and the Company's plans and expectations. Actual results could
differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
elsewhere in this Form 10-K or incorporated herein by reference, including those
set forth in MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
HISTORY AND GENERAL OVERVIEW
DOMARK INTERNATIONAL, INC. ("DoMark" or "Company") was incorporated under the
laws of the State of Nevada on March 30, 2006. The Company was formed to engage
in the acquisition and refinishing of aged furniture using exotic materials and
then reselling it through interior decorators, high-end consignment shops and
online sales. The Company has abandoned it prior business of exotic furniture
sales and is acquiring operating entities through acquisition that will bring
value to the company and then providing marketing and management services in
support of the acquired entities. We acquired successfully operating
subsidiaries and started to deploy accounting, governance, risk and compliance
services, marketing, management and media assets to the subsidiaries in order to
build the value of our Company during and subsequent to our 2009 operating
period. These endeavors have resulted in the rescissions of certain acquisitions
due to the advent of the Victory Lane litigation (see legal) that derailed the
Company's ability to pursue its business plan. The business model of the company
did not have enough time to implement and realize results due to the VL
transaction issues and subsequent litigation. The Company is reviewing its
current business model in consideration of legal matters and is seeking swift
resolution in order to adequately pursue its business purpose.
On July 16, 2008, DoMark executed a purchase agreement with JAVACO, Inc. an Ohio
corporation ("Javaco") 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, the President of Javaco, is the sister-in-law of R.
Thomas Kidd, our former Chief Executive Officer. The Closing of the transaction
occurred on July 18, 2008. Javaco, Inc. is engaged in the business of
distributing equipment and tools for the Cable TV and Telecommunications
industry. The company distributes to major telecom systems and their contractors
in North and Latin America.
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 ceased being a
controlling shareholder of SportsQuest, Inc.
3
On November 6, 2008, we executed an asset purchase agreement between Emerging
Growth Advisors, LLC, a Florida limited liability company ("EGA") and Domark
(the "Agreement"), 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. The closing of the
transactions in the agreement are contingent upon satisfaction of closing
conditions listed in the Agreement. In addition, on December 29, 2008, the
Agreement was amended to waive the closing condition of minimum capital raise of
$250,000. This agreement was subsequently rescinded on August 19, 2009 and the
stock was not issued.
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 "Agreement"), 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 became 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
"Agreement"), 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. This Agreement was
subsequently rescinded on August 12, 2009 and the stock was not issued.
On December 16, 2008, we executed an agreement for the exchange of common stock
between ECFO Corporation, a Florida Corporation ("ECFO") and Cathryn L. Walker,
the sole shareholder of Company, (the "Shareholder") and Domark (the
"Agreement"), 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 in return for all outstanding
capital securities of ECFO. Accordingly, ECFO became a wholly owned subsidiary
of Domark. ECFO is an accounting firm who provides accounting and tax services
to public and private entities.
On April 27, 2009, we executed an Agreement for the Exchange of Common Stock
Between Motivation Advantage, Inc., a Florida corporation ("Motivation
Advantage") and its sole shareholder, Suzanne Winfield (the "Agreement"),
whereby pursuant to the terms and conditions of that Agreement, Domark acquired
the right, title, and interest of Motivation Advantage in and to all of the
shares and assets of Motivation Advantage used exclusively in their business in
return for common stock valued at Two Million Dollars ($2,000,000) based on a
formula as described in the Agreement. In addition, for a period of five (5)
years, commencing with the calendar year 2010, Suzanne Winfield shall be
entitled to additional shares of common stock based on certain earn out
4
provisions as described in the Agreement. The Closing underlying the Agreement,
subject to certain due diligence and closing requirements is intended to be on
or before May 15, 2009 (unless both parties agree to a permissible extension of
seven days). After the closing this transaction was subsequently rescinded on
August 12, 2009 and the stock was not issued.
On May 13, 2009, we executed an Agreement for the Exchange of Common Stock with
Victory Lane LLC, a Colorado limited liability corporation ("Victory Lane") and
its members, whereby pursuant to the terms and conditions of that Agreement,
Domark acquired the right, title, and interest of Victory Lane in and to all of
the member interests and assets of Victory Lane in return for our common stock
valued at Ten Million Dollars ($10,000,000) based on a formula as described in
the Agreement. Victory Lane is a unique and exclusive Lifestyle Development on
3,000 acres approximately 75 miles from Savannah Georgia, which includes
exclusive home sites, a 4.5-mile grand prix circuit, a Davis Love III designed
golf course and a 6,000' private runway. On August 10, 2009 legal proceeding
were initiated by both parties (see item 3 Legal Proceedings).
On August 12, 2009, Joseph Vittoria, resigned as a member of the Board of
Directors. There were no disagreements with Joseph Vittoria on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.
On August 13, 2009, Dr. Louis Corrnachia and Richard Smith resigned as members
of the Board of Directors. There were no disagreements with Louis Corrnachia or
Richard Smith, on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure.
On August 14, 2009, Greg Jaclin and Terry Carlson resigned as members of the
Board of Directors. There were no disagreements with Greg Jaclin or Terry
Carlson on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure.
On August 24, 2009, 310 Holdings, Inc.("310") and the Company closed a
Securities Purchase Agreement whereby the 310 purchased 100% of the issued and
outstanding common shares of Javaco in exchange for $150,000 and the issuance of
2,500,000 shares of 310's common stock to Domark. We also entered into a
separate agreement and have assigned $9,997,134 of media credits in print and
radio to 310 Holdings in exchange for the issuance of 1,000,000 shares of 310
Holding's common stock.
On August 26, 2009, R. Thomas Kidd resigned as Chief Executive Officer and
President and as a member of the Board of Directors. There were no disagreements
with R. Thomas Kidd on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure. R. Thomas Kidd
will remain in his position as Principal Financial Officer.
On August 26, 2009, in a Debt Settlement Agreement by and between the Company
and R. Thomas Kidd, any and all debt owed to Mr. Kidd for expenses, advances, or
loans has been settled. The Company agrees to pay Mr. Kidd $150,000 cash and
transfer 3.5 million shares of common stock of TRTN, OTCBB held by us.
Furthermore, the Company shall execute an assignment of all claims against
Victory Lane Financial Elite, et al as known or shall become known in the course
of the litigation entitled DOMK vs Victory Lane Elite, LLC, Costello, et al in
the US District Court, Middle District of Florida, and the case in Tattnall
County, Georgia. In addition, the parties shall execute an assignment of the
repurchase agreement entered into by and between the Company and TRTN, OTCBB.
5
Upon payment and assignment of TRTN shares and assignment of the Company's
claims, Mr. Kidd shall surrender 111,438,394 common shares of Domark, to be
returned to treasury and cancelled.
On August 26, 2009, Scott Sieck, a member of the Board of directors and Chief
Operating Officer, was appointed as our Chief Executive Officer.
On August 26, 2009 the Company executed a Securities purchase agreement with R.
Thomas Kidd, whereby pursuant to the terms of the agreement, the Company agreed
to transfer its ownership of 100 Units of Victory lane LLC to R. Thomas Kidd in
exchange for 25 million shares of Domark common stock held by Mr. Kidd. The
transaction closed on October 15, 2009, upon delivery to the Company of 25
million shares of common stock owned by Mr. Kidd. The issuance of the securities
above were effected in reliance on the exemptions for private sales of
securities not involving a public offering pursuant to in Section 4(2) and
Section 4(6) of the Securities Act.
On September 4, 2009, Richard Altmann resigned as member of the Board of
Directors.
On September 14, 2009, R. Thomas Kidd resigned as Principle Accounting Officer
of the Company to pursue other interests. Mr. Kidd has provided no written
disagreement with the Company on any matter related to the Company's operations,
policies or practices. Scott Sieck, our current Chief Executive Officer, has
been appointed as Principle Accounting Officer.
On September 18, 2009, Scott Sieck entered into an employment agreement with our
Company. The employment agreement provided that the Executive has agreed to
waive his compensation until such time as the Board of Directors determines the
Company has sufficient assets to repay the Executive or receive compensation in
equity and accepts from the corporation 100,000 shares it its authorized Series
"A" Preferred stock during the interim period. Subsequently, on September 21,
2009, Mr. Sieck choose to receive 100,000 shares of Series A Preferred Stock
which have a voting rights in all matters to be voted upon by shareholders of
common stock of 1,000 votes per share of Series A Preferred Stock.
On October 15, 2009, the Company entered into an agreement whereby the Company
and R Thomas Kidd settled outstanding debts to Mr. Kidd. Terms of the debt
settlement agreement relieved the Company of indebtedness to Mr. Kidd in the
amount of $16,491 in exchange for the transference of the website of Executive
Sports and Entertainment, Inc., representing ownership of that website, delivery
of the website framework for www.domarkinternational.com, the assignment of a
$100,000 promissory note payable to the Company, and assignment of all shares
related to MedQuest, Inc., a Nevada corporation formed by the Company in 2008.
On October 20, 2009, the Company executed an agreement to sell the stock of ECFO
Corporation back to ECFO's founding shareholder. Consideration for the 2,000
shares of ECFO Corporation, representing all issued and outstanding shares of
ECFO Corporation, owned by the Company, is Ten Thousand Dollars ($10,000),
payable in the form of a one year promissory note. The transaction is a private
sale exempt from registration under Section 4(1) of the Securities Act of 1933,
as amended. As of February 28, 2010, the promissory note was satisfied.
6
On October 26, 2009, pursuant to an Assignment and Assumption Agreement, the
loan payable in the amount of $100,000, entered into on October 23, 2009 was
assigned to the Company's officer, Scott Sieck.
On November 22, 2009, the Company entered into an agreement with R Thomas Kidd
whereby the Company and Kidd have agreed upon the disbursement of certain
proceeds to be received in a possible settlement the Company and certain Victory
Lane Financial elite parties or a final adjudication of litigation and
arbitration actions in connection with claims in current litigation. The
agreement also mutually cancels the Assignment of Claims granted to R Thomas
Kidd by the Company on August 26, 2009. Terms of the new agreement are outlined
as follows:
Upon closing of any settlement agreement between the Company and Victory Lane
Financial Elite, et al, the Company shall pay to R Thomas Kidd the sum of
$192,500 in cash if cash is received, or at a minimum, $42,500 in cash and an
assignment of a third party promissory note in the minimum amount of $150,000
executed by all Victory Lane Financial Elite, et al in favor of the Company on
terms acceptable to Kidd provided that R Thomas Kidd will cancel the promissory
note executed by the Company in favor of R Thomas Kidd in the amount of $192,500
and return the original promissory note to the Company.
In the event of no settlement agreement between the Company and Victory Lane
Financial Elite, et al, R Thomas Kidd agree to accept and the Company agrees to
pay R Thomas Kidd the sum of $192,500 from the first proceeds of any award or
judgment obtained as a result of the prosecution of the litigation and
arbitration actions against the Victory Lane Financial Elite, et al;
R Thomas Kidd canceled the Assignment of Claims executed by the Company in favor
of R. Thomas Kidd on August 26, 2009 and transferred title and ownership of the
Victory Lane, LLC Units to the Company; in addition, R Thomas Kidd resigned as
Managing Member of Victory Lane, LLC and appointed Scott Sieck as Managing
Member of Victory Lane, LLC.
Effective March 29th, 2010, Scott Sieck, CEO/Director and R. Thomas Kidd entered
into a in a Debt and Securities Purchase Agreement (the "Agreement"). Pursuant
to the terms of the Agreement, all debt owed to Mr. Sieck by the Company
($534,271 as of 3/29/2010), his Preferred Series A shares, and one million
common shares were purchased by Mr. Kidd in consideration for the delivery of
250,000 restricted common shares JBI Inc. owned by Mr. Kidd. The change in
control is as a result of the transfer of the Preferred Series A Shares, which
collectively provides the holder thereof with a majority of voting rights.
On April 13, 2010, Scott Sieck resigned as a member of the Boards of Directors
and Chief Operating Officer, and Chief Executive Officer.
On April 13, 2010, R. Thomas Kidd was appointed as a sole member of the Board of
Directors and our Chief Executive Officer, Chief Operating Officer, and Chief
Financial Officer.
7
ADDITIONAL INFORMATION
DoMark files reports and other materials with the Securities and Exchange
Commission. These documents may be inspected and copied at the Commission's
Public Reference Room at 100 F Street, N.E., Washington D.C., 20549. You can
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. You can also get copies of documents that the
Company files with the Commission through the Commission's Internet site at
www.sec.gov.
EMPLOYEES
As of fiscal year end May 31, 2010, the Company had no employees.
ITEM 1A. RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING INFORMATION ABOUT THESE RISKS, TOGETHER WITH
THE OTHER INFORMATION CONTAINED IN THIS ANNUAL REPORT ON FORM 10-K, BEFORE
INVESTING IN OUR COMMON STOCK. IF ANY OF THE EVENTS ANTICIPATED BY THE RISKS
DESCRIBED BELOW OCCUR, OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD
BE ADVERSELY AFFECTED WHICH COULD RESULT IN A DECLINE IN THE MARKET PRICE OF OUR
COMMON STOCK, CAUSING YOU TO LOSE ALL OR PART OF YOUR INVESTMENT.
BECAUSE WE ARE QUOTED ON THE OTCBB INSTEAD OF AN EXCHANGE OR NATIONAL QUOTATION
SYSTEM, OUR INVESTORS MAY HAVE A TOUGHER TIME SELLING THEIR STOCK OR EXPERIENCE
NEGATIVE VOLATILITY ON THE MARKET PRICE OF OUR STOCK.
Our common stock is traded on the OTCBB. The OTCBB is often highly illiquid, in
part because it does not have a national quotation system by which potential
investors can follow the market price of shares except through information
received and generated by a limited number of broker-dealers that make markets
in particular stocks. There is a greater chance of volatility for securities
that trade on the OTCBB as compared to a national exchange or quotation system.
This volatility may be caused by a variety of factors, including the lack of
readily available price quotations, the absence of consistent administrative
supervision of bid and ask quotations, lower trading volume, and market
conditions. Investors in our common stock may experience high fluctuations in
the market price and volume of the trading market for our securities. These
fluctuations, when they occur, have a negative effect on the market price for
our securities. Accordingly, our stockholders may not be able to realize a fair
price from their shares when they determine to sell them or may have to hold
them for a substantial period of time until the market for our common stock
improves.
FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH
SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS AND OPERATING RESULTS.
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.
8
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
December 31, 2007, 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 December 31, 2008, 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.
RISKS RELATING TO OWNERSHIP OF OUR COMMON STOCK
Although there is presently a market for our common stock, the price of our
common stack may be extremely volatile and investors may not be able to sell
their shares at or above their purchase price, or at all. We anticipate that the
market may be potentially highly volatile and may fluctuate substantially
because of:
* Actual or anticipated fluctuations in our future business and
operating results;
* Changes in or failure to meet market expectations;
* Fluctuations in stock market price and volume
9
WE DO NOT INTEND TO PAY DIVIDENDS
We do not anticipate paying cash dividends on our common stock in the
foreseeable future. We may not have sufficient funds to legally pay dividends.
Even if funds are legally available to pay dividends, we may nevertheless decide
in our sole discretion not to pay dividends. The declaration, payment and amount
of any future dividends will be made at the discretion of the board of
directors, and will depend upon, among other things, the results of our
operations, cash flows and financial condition, operating and capital
requirements, and other factors our board of directors may consider relevant.
There is no assurance that we will pay any dividends in the future, and, if
dividends are rapid, there is no assurance with respect to the amount of any
such dividend.
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 OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE
FLUCTUATIONS IN OUR SHARE PRICE.
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
10
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.
OPERATING HISTORY AND LACK OF PROFITS 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
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
11
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.
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 SIGNIFICANT FOCUS ON ACQUISITIONS IN OUR BUSINESS SUBJECTS INVESTORS TO A
GREATER RISK OF LOSSES
A significant portion of our efforts are focused on the development and growth
of the Company and its subsidiaries by acquisitions. Although the Company
believes there are significant acquisition opportunities available, we can make
no assurances that the Company will be able to execute its acquisition strategy.
THE REPORT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONTAINS
EXPLANATORY LANGUAGE THAT SUBSTANTIAL DOUBT EXISTS ABOUT OUR ABILITY TO CONTINUE
AS A GOING CONCERN
12
The independent auditor's report on our financial statements contains
explanatory language that substantial doubt exists about our ability to continue
as a going concern. The report states that we depend on the continued
contributions of our executive officers to work effectively as a team, to
execute our business strategy and to manage our business. The loss of key
personnel, or their failure to work effectively, could have a material adverse
effect on our business, financial condition, and results of operations. If we
are unable to obtain sufficient financing in the near term or achieve
profitability, then we would, in all likelihood, experience severe liquidity
problems and may have to curtail our operations. If we curtail our operations,
we may be placed into bankruptcy or undergo liquidation, the result of which
will adversely affect the value of our common shares.
OPERATING HISTORY AND LACK OF PROFITS 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
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
13
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.
SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR
SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER
SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR
PLANNED.
FORWARD-LOOKING STATEMENTS
This Annual Report contains certain forward-looking statements regarding
management's plans and objectives for future operations including plans and
objectives relating to our planned marketing efforts and future economic
performance. The forward-looking statements and associated risks set forth in
this Annual Report include or relate to, among other things, (a) our growth
strategies, (b) anticipated trends in our industry, (c) our ability to obtain
and retain sufficient capital for future operations, and (d) our anticipated
needs for working capital. These statements may be found under "Management's
Discussion and Analysis or Plan of Operations" and "Business," as well as in
this Annual Report generally. Actual events or results may differ materially
from those discussed in forward-looking statements as a result of various
factors, including, without limitation, the risks outlined under "Risk Factors"
and matters described in this Annual Report generally. In light of these risks
and uncertainties, there can be no assurance that the forward-looking statements
contained in this Annual Report will in fact occur.
The forward-looking statements herein are based on current expectations that
involve a number of risks and uncertainties. Such forward-looking statements are
based on assumptions described herein. The assumptions are based on judgments
with respect to, among other things, future economic, competitive and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control.
Accordingly, although we believe that the assumptions underlying the
forward-looking statements are reasonable, any such assumption could prove to be
14
inaccurate and therefore there can be no assurance that the results contemplated
in forward-looking statements will be realized. In addition, as disclosed
elsewhere in the "Risk Factors" section of this prospectus, there are a number
of other risks inherent in our business and operations which could cause our
operating results to vary markedly and adversely from prior results or the
results contemplated by the forward-looking statements. Management decisions,
including budgeting, are subjective in many respects and periodic revisions must
be made to reflect actual conditions and business developments, the impact of
which may cause us to alter marketing, capital investment and other
expenditures, which may also materially adversely affect our results of
operations. In light of significant uncertainties inherent in the
forward-looking information included in this prospectus, the inclusion of such
information should not be regarded as a representation by us or any other person
that our objectives or plans will be achieved.
Some of the information in this prospectus contains forward-looking statements
that involve substantial risks and uncertainties. Any statement in this
prospectus and in the documents incorporated by reference into this prospectus
that is not a statement of an historical fact constitutes a "forward-looking
statement". Further, when we use the words "may", "expect", "anticipate",
"plan", "believe", "seek", "estimate", "internal", and similar words, we intend
to identify statements and expressions that may be forward- looking statements.
We believe it is important to communicate certain of our expectations to our
investors. Forward-looking statements are not guarantees of future performance.
They involve risks, uncertainties and assumptions that could cause our future
results to differ materially from those expressed in any forward-looking
statements. Many factors are beyond our ability to control or predict. You are
accordingly cautioned not to place undue reliance on such forward-looking
statements. Important factors that may cause our actual results to differ from
such forward-looking statements include, but are not limited to, the risk
factors discussed herein.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable to small business issuers.
ITEM 2. PROPERTIES
As of August 17, 2010, the Company maintains its corporate executive office in
Lake Mary, Florida. ECFO, a former subsidiary of the Company, has been providing
the office space at no charge to the Company as a courtesy to the Company.
ITEM 3. 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 herein, the ultimate disposition of these matters will not have a
material adverse effect on the Company's financial position, results of
operations, or liquidity.
On August 10, 2009, the Company along with Victory Lane, LLC and R. Thomas Kidd
filed a lawsuit in the United States District Court, Middle District of Florida
Case Number 09-CV-1396-ORL-35-DAB against Victory Lane Financial Elite, LLC et
al, for the following causes of action: Fraud in the Inducement, Breach of
Contract, Rescission, Conspiracy, and Libel.
15
On August 10, 2009, the Company was made aware of an action filed in the
Superior Court of Tattnall County, Georgia, case number 2009-V-381-JS by Victory
Lane Financial Elite, LLC et al against the Company and its directors and
officers. The Company believes that the complaint is without merit and the
Company intends to defend said action and file substantial counterclaims against
Victory Lane Financial Elite, LLC, Patrick Costello and numerous other
defendants.
Management is of the opinion that the action has no merit and intends to defend
the action aggressively.
On September 25, 2009 the company amended its Case Number CV-1396-ORL-35-DAB
compliant to request certain complaints be heard in arbitration as called for in
the original acquisition agreement dated May 13, 2009. Both venues are
proceeding.
The secured lender on the Victory Lane property foreclosed and then filed suit
against Victory Lane, LLC, Patrick J. Costello and Stephen Brown seeking a
deficiency judgment. Brown and Costello filed a third party complaint against
the Company and R. Thomas Kidd. The Company contends the third party complaint
is fatally defective in that it alleges independent claims as opposed to
derivative or a cause of action for indemnity or contribution. On the July 5,
2010, the Company has filed a motion to dismiss the third party complaint which
they believe is meritorious and there should be a ruling by the Court within
sixty days. The hearing is scheduled for August 11, 2010. On August 11, 2010,
the motion to dismiss was converted to a motion for summary judgment.
On July 20, 2010, pursuant to the Company's previously filed motion to dismiss
case number 2009-V-381-JS for lack of jurisdiction in the Superior Court of
Tattnall County, Georgia, the motion was denied as to the Company and R. Thomas
Kidd, but granted as to the other officers and directors of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company submitted no matters to a vote of its security holders during the
fiscal year ended May 31, 2010.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
DoMark common stock is traded in the over-the-counter market, and quoted in the
National Association of Securities Dealers Inter-dealer Quotation System
("Electronic Bulletin Board) and can be accessed on the Internet at
www.otcbb.com under the symbol "DOMK.OB"
At May 31, 2010, there were 36,460,835 shares of common stock of DoMark
outstanding and there were approximately 60 shareholders of record of the
Company's common stock.
16
The following table sets forth for the periods indicated the high and low bid
quotations for DoMark's common stock. These quotations represent inter-dealer
quotations, without adjustment for retail markup, markdown or commission and may
not represent actual transactions.
FISCAL YEAR ENDED MAY 31, 2010
High Low
---- ---
First Quarter (June - August, 2009) $ 2.00 $ 0.05
Second Quarter (September - November 2009) $ 0.05 $ 0.02
Third Quarter (December - February 2010) $ 0.25 $ 0.01
Fourth Quarter (March - May 2010) $ 0.17 $ 0.02
On August 17, 2010, the closing bid price of our common stock was $0.23.
DIVIDENDS
DoMark has never paid dividends on any of its common stock shares. DoMark does
not anticipate paying dividends at any time in the foreseeable future and any
profits will be reinvested in DoMark's business.
RECENT SALES OF UNREGISTERED SECURITIES
Stock Issued Stock Issued
for Cash Cash Recieved for Assests
-------- ------------- -----------
Year Ended May 31, 2009 100,000 $ 100,500 --
Year Ended May 31, 2010 -- $ -- --
TRANSFER AGENT
The Company's Transfer Agent is Signature Stock Transfer, located at 2220 Coit
Road, suite 480, Plano Texas 75075 to serve in the capacity of transfer agent.
STOCK SPLITS
On June 27, 2008, the Company enacted a 2-for-1 forward split and share data in
this report has been adjusted to reflect the stock split relating to the
Company's common stock.
17
On January 22, 2009 the Company enacted a 2-for-1 forward split and share data
in this report has been adjusted to reflect the stock split relating to the
Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
The following information has been summarized from financial information
included elsewhere and should be read in conjunction with such financial
statements and notes thereto.
Summary of Statements of Operations of DOMK
Year Ended May 31, 2010 and 2009
STATEMENT OF OPERATIONS DATA
Years Ended Years Ended
May 31, 2010 May 31, 2009
------------ ------------
Revenues $ 1,002,682 $ 6,617,675
Operating and Other Expenses (2,528,986) (20,443,221)
------------ ------------
Net Loss $ (1,526,304) $(13,825,546)
BALANCE SHEET DATA
Years Ended Years Ended
May 31, 2010 May 31, 2009
------------ ------------
Current Assets $ 100,197 $1,840,515
Total Assets 111,728 5,887,668
Current Liabilities 776,704 1,411,629
Non Current Liabilities -- --
Total Liabilities 776,704 1,411,629
Working Capital (Deficit) (676,507) 428,886
Shareholders'Equity (Deficit) $ (664,976) $4,476,039
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OR PLAN OF OPERATION
The following is management's discussion and analysis of certain significant
factors that have affected our financial position and operating results during
the periods included in the accompanying consolidated financial statements, as
well as information relating to the plans of our current management. This report
includes forward-looking statements. Generally, the words "believes,"
18
"anticipates," "may," "will," "should," "expect," "intend," "estimate,"
"continue," and similar expressions or the negative thereof or comparable
terminology are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, including the matters set forth
in this report or other reports or documents we file with the Securities and
Exchange Commission from time to time, which could cause actual results or
outcomes to differ materially from those projected. Undue reliance should not be
placed on these forward-looking statements which speak only as of the date
hereof. We undertake no obligation to update these forward-looking statements.
The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto and other
financial information contained elsewhere in this Form 10-K.
CRITICAL ACCOUNTING POLICIES
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.
REVENUE RECOGNITION
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 collectability 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.
STOCK BASED COMPENSATION
FSP FAS 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
19
anti-dilution 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
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.
REVENUES
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.
RECENT DEVELOPMENTS
On August 10, 2009, the Company along with Victory Lane, LLC and R. Thomas Kidd
filed a lawsuit in the United States District Court, Middle District of Florida
Case Number 09-CV-1396-ORL-35-DAB against Victory Lane Financial Elite, LLC et
al, for the following causes of action: Fraud in the Inducement, Breach of
Contract, Rescission, Conspiracy, and Libel.
On August 10, 2009, the Company was made aware of an action filed in the
Superior Court of Tattnall County, Georgia, case number 2009-V-381-JS by Victory
Lane Financial Elite, LLC et al against the Company and its directors and
officers. The Company believes that the complaint is without merit and the
Company intends to defend said action and file substantial counterclaims against
Victory Lane Financial Elite, LLC, Patrick Costello and numerous other
defendants.
On September 25, 2009 the company amended its Case Number CV-1396-ORL-35-DAB
compliant to request certain complaints be heard in arbitration as called for in
the original acquisition agreement dated May 13, 2009. Both venues are
proceeding.
The secured lender on the Victory Lane property foreclosed and then filed suit
against Victory Lane, LLC, Patrick J. Costello and Stephen Brown seeking a
20
deficiency judgment. Brown and Costello filed a third party complaint against
the Company and R. Thomas Kidd. The Company contends the third party complaint
is fatally defective in that it alleges independent claims as opposed to
derivative or a cause of action for indemnity or contribution. On the July 5,
2010, the Company has filed a motion to dismiss the third party complaint which
they believe is meritorious and there should be a ruling by the Court within
sixty days. The hearing is scheduled for August 11, 2010. On August 11, 2010,
the motion to dismiss was converted to a motion for summary judgment.
On July 20, 2010, pursuant to the Company's previously filed motion to dismiss
case number 2009-V-381-JS for lack of jurisdiction in the Superior Court of
Tattnall County, Georgia, the motion was denied as to the Company and R. Thomas
Kidd, but granted as to the other officers and directors of the Company.
On May 26, 2010, Domark International, Inc. (the "Company") entered into an
Asset Purchase Agreement (the "Agreement") with Armada Capital, LLC ("Armada")
providing for the purchase and sale of all of Armada's right, title and interest
in and to all of the assets of Armada. Armada, an entity engaged in the business
of providing consulting services for small capital public companies and private
businesses, is owned by R. Thomas Kidd, the Company's Chief Executive Officer,
Director and majority shareholder. The closing of the Agreement shall take place
upon (i) the delivery of all signed documentation; (ii) the completion of all
documentation necessary to perfect the delivery of the assets; and (iii) the
completion and delivery of the audited financial statements of the assets to be
purchased and sold; provided, however, that the closing date shall take place on
or before June 30, 2010. The Purchase Price for the Assets is equal to twenty
percent (20%) of the revenue derived from the fees generated from the consulting
agreements sold pursuant to the Agreement. As of the date of this report, the
parties agreed to mutually terminate the transaction.
On July 21, 2010, Domark International, Inc. (the "Company") entered into an
Agreement for the Exchange of Common Stock (the "Agreement") with Virtual
Devices, Inc., a Pennsylvania corporation (VDI) providing for the issuance of
stock of the Company in exchange for all of the outstanding shares of VDI. At
the closing, VDI will become a wholly owned subsidiary of the Company. The
closing of the Agreement shall take place upon (i) the delivery of all required
signed documentation; (ii) the completion of due diligence by all parties,
provided however, that the closing date shall take place on or before August 15,
2010. On August 13, 2010, the Company and Virtual Devices, Inc. extended the
closing date to allow for sufficient time to complete due diligence.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED MAY 31, 2010, COMPARED TO FISCAL YEAR ENDED MAY 31, 2009
Revenues for Fiscal 2010 decreased to $1,002,682 from $6,617,175 during fiscal
2009. We continue to aggressively pursue and devote our resources and focus our
direction in building asset value. We have further refocused in new acquisitions
to increase our revenues and cash flow.
General and administrative expenses for the fiscal 2010 decreased to $843,825 as
compared to fiscal 2009 of $3,937,598. The decrease is largely due to the
rescissions of our recent acquisitions.
21
Interest expense for fiscal 2010 decreased to $6,727 as compared to fiscal 2009
of $41,958.
The loss for fiscal 2010 decreased to ($1,526,304) as compared to fiscal 2009 of
($13,416,046).
No tax benefit was recorded for fiscal 2010 and 2009 as required by Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes. The Company
has provided for a 100% allowance of its deferred tax assets as it is uncertain
that there will be sufficient net profits in the future to fully realize the tax
benefit of its net operating loss carry-forwards.
LIQUIDITY AND CAPITAL RESOURCES
Our operating requirements have been funded primarily through financing
facilities, sales of our common stock, and loans from shareholders. Currently
the Company's cash flows do not adequately support the operating expenses of the
Company. We received $0 in fiscal year 2010 from the sale of our common stock as
compared to $100,500 in fiscal year 2009.
Cash provided (used) by operating activities for the fiscal year 2010 was
$323,574 compared to $2,650 for the fiscal year 2009. Depreciation expense for
the fiscal year of 2010 was $1,319 as compared to $49,054 for the fiscal year of
2009.
Cash (used in) provided in investing activities was 0 for the fiscal year of
2010, compared to $(26,953) for the fiscal year of 2009.
Cash provided (used in) by financing activities was $(347,828) for the fiscal
year of 2010 as compared to $9,848 for the fiscal year of 2009. Financing
activities primarily consisted of cash paid on notes payable.
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not hold any derivative instruments and do not engage in any hedging
activities. We are in the business of acquiring successfully operating
subsidiaries to build the value of our Company.
22
ITEM 8. FINANCIAL STATEMENTS
DOMARK INTERNATIONAL, INC.
TABLE OF CONTENTS
Page
----
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: 24
Larry O'Donnell CPA P.C
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheet at May 31, 2010 and 2009 25
Consolidated Statements of Operations for the years ended
May 31, 2010 and 2009 27
Consolidated Statements of Stockholders' Equity for the years
ended May 31, 2010 and 2009 28
Consolidated Statements of Cash Flows for the years ended
May 31, 2010 and 2009 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 32
23
Larry O'Donnell, CPA, P.C.
Telephone (303)745-4545 2228 South Fraser Street
Fax (303)369-9384 Unit 1
e-mail larryodonnelcpa@comcast.net Aurora, Colorado 80014
www.larryodonnellcpa.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Domark International, Inc.
Oviedo, Florida
I have audited the accompanying consolidated balance sheets of Domark
International, Inc. and subsidiaries as of May 31, 2010 and 200, and the related
consolidated statements of operations, changes in stockholders' deficiency, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audits.
I conducted my audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Domark International, Inc. and
subsidiaries as of May 31, 2010 and 2009, and the results of their operations
and cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
These consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has operating and liquidity
concerns, has incurred an accumulated deficit of approximately $14,228,156
through the period ended May 31, 2010. This condition raises substantial doubt
about the Company's ability to continue as a going concern. Management's plans
as to these matters are also described in Note 2. The consolidated financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of these
uncertainties.
/s/ Larry O'Donnell
- ------------------------------------
Larry O'Donnell, CPA, P.C.
August 13, 2010
24
DOMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of May 31, 2010 and May 31, 2009
ASSETS
5/31/2010 5/31/2009
--------- ---------
CURRENT ASSETS
Cash $ 197 $ 24,451
Accounts Receivable -- 1,262,334
Loans and Notes Receivable 100,000 3,352
Prepaid Expenses -- 16,023
Inventory -- 534,355
---------- ----------
Total Current Assets 100,197 1,840,515
---------- ----------
FIXED ASSETS
Property & Equipment, Net 1,531 184,218
---------- ----------
Total Fixed Assets 1,531 184,218
---------- ----------
OTHER ASSETS
Deposits -- 6,608
Due From Affiliate -- 106,561
Prepaid Media -- 1,002,866
Investment in unconsolidated subsidiary 10,000 --
Goodwill -- 2,746,900
---------- ----------
Total Other Assets 10,000 3,862,935
---------- ----------
TOTAL ASSETS $ 111,728 $5,887,668
========== ==========
The accompanying notes are an integral part of these financial statements.
25
DOMARK INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of May 31, 2010 and May 31, 2009
LIABILITIES AND STOCKHOLDERS' EQUITY
5/31/2010 5/31/2009
--------- ---------
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 46,868 $ 968,869
Payroll Liabilities -- 8,903
Due to Affiliate and Shareholder 729,836 44,000
Notes payable and Line of Credit -- 389,857
------------ ------------
Total Current Liabilities 776,704 1,411,629
------------ ------------
LONG-TERM LIABILITIES
Convertible Notes Payable -- --
Bond Payable -- --
------------ ------------
Total Long-Term Liabilities -- --
------------ ------------
TOTAL LIABILITIES 776,704 1,411,629
------------ ------------
MINORITY INTEREST IN SUBSIDIARY -- --
------------ ------------
STOCKHOLDERS' EQUITY
Convertible Preferred stock series A, $0.001 par value,
Authorized: 2,000,000
Issued: 100,000 and none, respectively 100 --
Common Stock, $0.001 par value,
Authorized: 200,000,000
Issued: 36,460,835 and 141,695,383, respectively 36,461 141,695
Additional paid in capital 13,526,619 17,036,196
Accumulated income/(deficit) (14,228,156) (12,701,852)
------------ ------------
Total Stockholders' Equity (Deficiency) (664,976) 4,476,039
------------ ------------
TOTAL LIABILITIES AND EQUITY $ 111,728 $ 5,887,668
============ ============
The accompanying notes are an integral part of these financial statements.
26
DOMARK INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
For the twelve months ending May 31, 2010 and 2009
TWELVE TWELVE
MONTHS MONTHS
5/31/2010 5/31/2009
--------- ---------
REVENUE $ 1,002,682 $ 6,617,175
COST OF SERVICES 815,260 5,519,669
------------- -------------
GROSS PROFIT OR (LOSS) 187,422 1,097,506
GENERAL AND ADMINISTRATIVE EXPENSES 843,825 3,937,598
IMPAIRMENT OF GOODWILL 857,551 2,079,750
------------- -------------
OPERATING INCOME/(LOSS) (1,513,954) (4,919,842)
INTEREST EXPENSE 6,727 41,958
GAIN ON SALE OF SUBSIDIARY 8,000 292,868
OTHER INCOME 26,377 250,020
IMPAIRMENT OF ASSET 40,000 8,997,134
------------- -------------
INCOME/(LOSS) BEFORE INCOME TAXES (1,526,304) (13,416,046)
PROVISION FOR INCOME TAXES
Federal -- --
State -- --
------------- -------------
CONSOLIDATED NET INCOME/(LOSS) $ (1,526,304) $ (13,416,046)
============= =============
EARNINGS (LOSS) PER SHARE, BASIC AND DILUTED $ (0.04) $ (0.30)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 36,460,835 45,162,659
The accompanying notes are an integral part of these financial statements.
27
DOMARK INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
As of May 31, 2009
ADDITIONAL COMMON STOCK
PREFERRED COMMON PAR PAID IN ACCUM SUBSCRIBED TOTAL
STOCK STOCK VALUE CAPITAL DEFICIT NOT ISSUED EQUITY
----- ----- ----- ------- ------- ---------- ------
Balance, May 31, 2006 -- 4,000,000 $ 4,000 $ 1,000 (340) $ -- $ 4,660
Common stock issued for cash 4,000,000 4,000 46,000 50,000
Net income (loss) (12,460) (12,460)
--------- ------------ --------- ------------ ------------ ---------- ------------
Balance, May 31, 2007 -- 8,000,000 8,000 47,000 (12,800) -- 42,200
========= ============ ========= ============ ============ ========== ============
Preferred Stock issued as
compensation on January 7,
2008 at $0.001 per share 100,000 100 -- 100
Common stock issued for
asset on May 15, 2008 at
$1.13 per share 26,000,000 26,000 7,303,288 7,329,288
Warrants Issued 804,800 804,800
Bond Issuance 170,000 170,000
Common stock subscribed,
not issued 2,812,300 2,812,300
Common stock issued for
compensation 74,980 74,980
Net income (loss) (1,419,170) (1,419,170)
--------- ------------ --------- ------------ ------------ ---------- ------------
Balance, May 31, 2008 100,000 34,000,000 34,100 8,400,068 (1,431,970) 2,812,300 9,814,498
========= ============ ========= ============ ============ ========== ============
Common stock issued in a 2
for 1 forward split on
June 27, 2008
Removal of Warrants Issued (804,800) (804,800)
Removal of Bond Issuance (170,000) (170,000)
Cancellation of Common stock
subscribed, not issued (2,812,300) (2,812,300)
Cancellation of Common stock
issued as compensation (74,980) (74,980)
Removal of retro-application of
subsidiary earnings 2,146,164 2,146,164
Valuation adjustment to common
stock issued for asset on
May 15, 2008 (7,322,788) (7,322,788)
Common stock issued for
acquisition on July 18, 2008
at $1.75 per share 1,500,000 1,500 2,623,500 2,625,000
Common stock issued on
July 18, 2008 for assignment
of acquisition rights at
$0.75 per share 1,000,000 1,000 1,749,000 1,750,000
Common stock issued for prepaid
media on August 15, 2008 at
$3.79 per share 2,640,000 2,640 9,997,360 10,000,000
Common stock issued as
compensation on September 1,
2008 at $0.001 per share 1,000,000 1,000 (500) 500
The accompanying notes are an integral part of these financial statements.
28
DOMARK INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
As of May 31, 2009
cont'd
ADDITIONAL COMMON STOCK
PREFERRED COMMON PAR PAID IN ACCUM SUBSCRIBED TOTAL
STOCK STOCK VALUE CAPITAL DEFICIT NOT ISSUED EQUITY
----- ----- ----- ------- ------- ---------- ------
Common stock issued for cash
on November 5, 2008 at
$1.00 per share 100,000 100 99,900 100,000
Common stock issued for
consulting on November 5,
2008 at $1.00 per share 100,000 100 99,900 100,000
Common stock issued for
cash & consulting on
December 3, 2008 at
$0.005 per share 200,000 200 300 500
Common stock issued for
acquisition on December 3,
2008 at $4.10 per share 100,000 100 204,900 205,000
Common stock issued as
compensation on December 11,
2008 at $4.10 per share 200,000 200 409,800 410,000
Common stock issued for
compensation on December 11,
2008 at $4.10 per share 10,000 10 20,490 20,500
Common stock issued for
acquisition on December 15,
2008 at $4.10 per share 200,000 200 409,800 410,000
Common stock issued for
assets on December 28, 2008
at $4.10 per share 2,000,000 2,000 4,098,000 4,100,000
Common stock issued for
compensation on December 29,
2009 at $4.00 per share 500,000 500 999,500 1,000,000
Common stock issued for
compensation on December 29,
2008 at $4.00 per share 200,000 200 399,800 400,000
Retroactively applied share
issuance treated as a 2-to-1
stock split on December 29, 2008
Common stock issued as
compensation on April 1, 2009
at $2.35 per share 12,500 13 29,363 29,375
Common stock issued for
consulting on April 1, 2009
at $2.35 per share 60,000 60 140,940 141,000
Common stock issued for
consulting on April 1, 2009
at $2.35 per share 25,000 25 58,725 58,750
Common stock issued for
consulting on April 1, 2009
at $2.35 per share 200,000 200 469,800 470,000
Common stock issued for
consulting on April 6, 2009
at $2.00 per share 125,000 125 249,875 250,000
Common Stock issued for
expenses on April 13, 2009
at $2.00 per share 60,000 60 119,940 120,000
Common stock issued as
compensation on April 14, 2009
at $2.00 per share 12,500 13 24,988 25,000
The accompanying notes are an integral part of these financial statements.
29
DOMARK INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
As of May 31, 2009
cont'd
ADDITIONAL COMMON STOCK
PREFERRED COMMON PAR PAID IN ACCUM SUBSCRIBED TOTAL
STOCK STOCK VALUE CAPITAL DEFICIT NOT ISSUED EQUITY
----- ----- ----- ------- ------- ---------- ------
Common stock issued as
compensation on April 14, 2009
at $2.00 per share 12,500 13 24,988 25,000
Common stock issued for
consulting on April 14, 2009
at $2.00 per share 100,000 100 199,900 200,000
Common stock issued for
consulting on April 15, 2009
at $2.00 per share 8,823 9 17,637 17,646
Preferred Stock converted into
common shares at 1000:1 on
May 15, 2009 (100,000) 100,000,000 99,900 -- 99,900
Common stock issued for
acquisition on May 20, 2009
at $1.90 per share 956,938 957 1,817,225 1,818,182
Common stock issued for
acquisition on May 27, 2009
at $1.74 per share 5,747,126 5,747 9,994,253 10,000,000
Common stock returned to
treasury and cancelled
as a result of rescission (8,704,064) (8,704) (15,909,478) (17,412,434)
Common stock returned to
treasury (670,940) (671) (1,341,209) (1,341,880)
Net income (loss) (13,416,046) (13,416,046)
-------- ------------ --------- ------------ ------------ ---------- ------------
Balance, May 31, 2009 -- 141,695,383 $ 141,695 $ 17,036,196 $(12,701,852) $ -- $ 4,476,039
-------- ----------- --------- ------------ ------------ ---------- ------------
Common stock returned to
treasury and cancelled (105,234,548) (105,235) (3,509,577) -- -- (3,614,812)
Preferred Stock issued for
compensation on December 1, 2009
at $0.001 per share 100,000 -- 100 -- 100
Net income (loss) (1,526,304) (1,526,304)
-------- ----------- --------- ------------ ------------ ---------- ------------
Balance, May 31, 2010 100,000 36,460,835 $ 36,561 $ 13,526,619 $(14,228,156) $ -- $ (664,976)
======== =========== ========= ============ ============ ========== ============
The accompanying notes are an integral part of these financial statements.
30
DOMARK INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
For the twelve months ending May 31, 2010 and 2009
TWELVE TWELVE
MONTHS MONTHS
5/31/2010 5/31/2009
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,526,304) $(13,416,046)
------------ ------------
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 1,319 49,054
Impairment of Assets 40,000 2,079,750
Impairment of Goodwill 857,551 --
Common stock issued as compensation and for expenses 5,000 12,367,771
Gain on sale of subsidiary (8,000) --
CHANGES IN OPERATING ASSETS AND LIABILITITES:
(Increase)/Decrease in Accounts Receivable 1,262,334 (1,262,334)
(Increase)/Decrease in Notes Receivable 6,561 (106,561)
(Increase)/Decrease in Inventory 534,355 (534,355)
(Increase)/Decrease Prepaid Exp and Other Current Assets 59,107 (59,107)
Deposits 6,608 (3,608)
Increase/(Decrease) in Accounts Payable (874,190) 847,319
Increase/(Decrease) in Accrued Expenses (40,767) 40,767
------------ ------------
Total adjustments to net income 1,849,878 13,418,696
------------ ------------
Net cash provided by (used in) operating activities 323,574 2,650
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Received/(Paid) Furniture & Equipment -- (26,953)
------------ ------------
Net cash flows provided by (used in) investing activities -- (26,953)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Proceeds from stock issuance -- 100,500
Cash Received/(Paid) from/(to) Affiliates and/or Shareholders 42,029 44,000
Cash Received/(Paid) on notes payable (389,857) (134,652)
------------ ------------
Net cash provided by (used in) financing activities (347,828) 9,848
------------ ------------
CASH RECONCILIATION
Net increase (decrease) in cash and cash equivalents (24,254) (14,455)
Cash and cash equivalents - beginning balance 24,451 38,906
------------ ------------
CASH AND CASH EQUIVALENTS BALANCE END OF PERIOD $ 197 $ 24,451
============ ============
The accompanying notes are an integral part of these financial statements.
31
DOMARK INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MAY 31, 2010 AND 2009
NOTE 1 - DESCRIPTION OF BUSINESS
DOMARK INTERNATIONAL, INC. ("DoMark" or the "Company") was incorporated under
the laws of the State of Nevada on March 30, 2006. 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 abandoned its original business
of exotic furniture sales in May of 2008 and pursued the acquisition of entities
to best bring value to the company and its shareholders. We attempted to acquire
successfully operating subsidiaries and to deploy accounting, governance, risk
and compliance services, marketing, management and media assets to the
subsidiaries in order to build the value of our Company during and subsequent to
our 2009 operating period. These endeavors have resulted in the rescissions of
certain acquisitions due to the advent of the Victory Lane litigation (see
legal) that derailed the Company's ability to pursue its business plan. The
business model of the company did not have enough time to implement and realize
results due to the VL transaction issues and subsequent litigation. The Company
is reviewing its current business model in consideration of legal matters and is
seeking swift resolution in order to adequately pursue its business purpose of
growing shareholder value by acquisition.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America which
contemplate continuation of the Company as a going concern. The Company has
year-end losses from operations. During the year ended May 31, 2010 and 2009,
the Company incurred consolidated net losses of $1,526,304 and $13,416,046,
respectively. Further, the Company has inadequate working capital to maintain or
develop its operations, and is dependent upon funds from private investors and
the support of certain stockholders.
These factors raise substantial doubt about the ability of the Company to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties. In this
regard, Management is planning to raise any necessary additional funds through
loans and additional sales of its common stock. There is no assurance that the
Company will be successful in raising additional capital.
NOTE 3 - 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
32
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
Non-convertible 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.
33
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 non-controlling
interest in the acquiree.
b. Recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase.
34
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 "Non-controlling 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 non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a non-controlling 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.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements represent the consolidated financial
position and results of operations of the Company and include the accounts and
results of operations of the Company and its subsidiaries. The accompanying
financial statements include the active entity of DoMark International, Inc.,
Javaco, Inc., ECFO Corporation, and Executive Sports & Entertainment. The
Company has relied upon the guidance provided by Statements of Financial
Accounting Standards 94, 141(R) and 160.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. These estimates and assumptions also affect the
reported amounts of revenues, costs and expenses during the reporting period.
Management evaluates these estimates and assumptions on a regular basis. Actual
results could differ from those estimates.
The primary management estimates included in these financial statements are the
impairment reserves applied to various long-lived assets, allowance for doubtful
accounts for gateway access fees and licensing fees, and the fair value of its
stock tendered in various non-monetary transactions.
RECLASSIFICATION
Certain prior period amounts have been reclassified to conform to current year
presentations.
35
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. At May 31, 2010 and 2009, cash and
cash equivalents include cash on hand and cash in the bank.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and depreciated over the estimated
useful lives of the assets using principally the straight-line method. When
items are retired or otherwise disposed of, income is charged or credited for
the difference between net book value and proceeds realized thereon. Ordinary
maintenance and repairs are charged to expense as incurred, and replacements and
betterments are capitalized. The ranges of estimated useful lives used to
calculated depreciation for principal items of property and equipment are as
follows:
Depreciation/
Asset Category Amortization Period
-------------- -------------------
Computer Equipment 3 Years
Office equipment 5 Years
Vehicle 5 Years
Leasehold Improvements 15 Years
GOODWILL AND OTHER INTANGIBLE ASSETS
The Company adopted Statement of Financial Accounting Standard No.142, GOODWILL
AND OTHER INTANGIBLE ASSETS, made effective July 1, 2002. As a result, the
Company discontinued amortization of goodwill, and instead annually evaluates
the carrying value of goodwill and other intangible assets for impairment, in
accordance with the provisions of SFAS No. 142. A reduction of the value of
goodwill is expensed as an impairment loss.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with SFAS No. 144, long-lived assets, such as property, plant, and
equipment, and purchased intangibles, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Goodwill and other intangible assets are tested for
impairment annually. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset.
CONCENTRATION OF CREDIT RISK
The Company maintains its operating cash balances in banks in Florida. The
Federal Depository Insurance Corporation (FDIC) insures accounts at each
institution up to $100,000.
36
Financial instruments that potentially subject the Company to concentrations of
credit risk are primarily trade accounts receivable. The trade accounts
receivable are due primarily from small business customers in numerous
geographical locations throughout the United States.
The Company estimates and provides an allowance for uncollectible accounts
receivable.
RECONCILING ADJUSTMENTS TO CASH FLOW
The Company is using the indirect method of reporting cash flow. Information
about all investing and financing activities of the Company that affect
recognized assets or liabilities but that do not result in cash receipts or cash
payments in the period are reported in the cash flow statement as adjustments
for charges not requiring outlay of cash and receipt of cash.
Recent accounting pronouncements that the Company has adopted or that will be
required to adopt in the future are summarized below.
On September 30, 2009, the Company adopted updates issued by the Financial
Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These
changes establish the FASB Accounting Standards CodificationTM (ASC) as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with GAAP. Rules and interpretive releases of the Securities and
Exchange Commission ("SEC") under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. The FASB will no longer issue
new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead the FASB will issue Accounting Standards
Updates. Accounting Standards Updates will not be authoritative in their own
right as they will only serve to update the Codification. These changes and the
Codification itself do not change GAAP. Other than the manner in which new
accounting guidance is referenced, the adoption of these changes had no impact
on the Condensed Consolidated Financial Statements.
In June 2009, the FASB issued guidance now codified as ASC Topic 105, "GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES" ("ASC 105"), which establishes the FASB
Accounting Standards Codification as the source of GAAP to be applied to
nongovernmental agencies. ASC 105 explicitly recognizes rules and interpretive
releases of the SEC under authority of federal securities laws as authoritative
GAAP for SEC registrants. ASC 105 became effective for interim or annual periods
ending after September 15, 2009. ASC 105 does not have a material impact on the
Company's consolidated financial statements presented hereby.
In May 2009, the FASB issued guidance now codified as ASC Topic 855, "SUBSEQUENT
EVENTS" ("ASC 855"). The pronouncement modifies the definition of what qualifies
as a subsequent event--those events or transactions that occur following the
balance sheet date, but before the financial statements are issued, or are
available to be issued--and requires companies to disclose the date through
which it has evaluated subsequent events and the basis for determining that
date. The Company adopted the provisions of ASC 855 in the second quarter of
2009, in accordance with the effective date.
37
On April 1, 2009, the Company adopted updates issued by the FASB to the
recognition and presentation of other-than-temporary impairments. These changes
amend existing other-than-temporary impairment guidance for debt securities to
make the guidance more operational and to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities.
The recognition provision applies only to fixed maturity investments that are
subject to the other-than-temporary impairments. If an entity intends to sell,
or if it is more likely than not that it will be required to sell an impaired
security prior to recovery of its cost basis, the security is
other-than-temporarily impaired and the full amount of the impairment is
recognized as a loss through earnings. Otherwise, losses on securities which are
other-than-temporarily impaired are separated into: (i) the portion of loss
which represents the credit loss; or (ii) the portion which is due to other
factors.
The credit loss portion is recognized as a loss through earnings, while the loss
due to other factors is recognized in other comprehensive income (loss), net of
taxes and related amortization. A cumulative effect adjustment is required to
accumulated earnings and a corresponding adjustment to accumulated other
comprehensive income (loss) to reclassify the non-credit portion of previously
other-than-temporarily impaired securities which were held at the beginning of
the period of adoption and for which the Company does not intend to sell and it
is more likely than not that the Company will not be required to sell such
securities before recovery of the amortized cost basis. These changes were
effective for interim and annual periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. The Company adopted
these changes effective April 1, 2009.
In April 2009, the FASB issued guidance now codified as ASC Topic 825,
"Financial Instruments" ("ASC 825"). The pronouncement amends previous ASC 825
guidance to require disclosures about the fair value of financial instruments in
all interim as well as annual financial statements. This pronouncement was
effective for interim periods ending after June 15, 2009 and the Company adopted
its provisions in the second quarter of 2009.
On January 1, 2009, the Company adopted updates issued by the FASB to fair value
accounting and reporting as it relates to nonfinancial assets and nonfinancial
liabilities that are not recognized or disclosed at fair value in the financial
statements on at least an annual basis. These changes define fair value,
establish a framework for measuring fair value in GAAP, and expand disclosures
about fair value measurements. This guidance applies to other GAAP that require
or permit fair value measurements and is to be applied prospectively with
limited exceptions. The adoption of these changes, as it relates to nonfinancial
assets and nonfinancial liabilities had no impact on the Condensed Consolidated
Financial Statements. These provisions will be applied at such time a fair value
measurement of a nonfinancial asset or nonfinancial liability is required, which
may result in a fair value that is materially different than would have been
calculated prior to the adoption of these changes.
On January 1, 2009, the Company adopted updates issued by the FASB to accounting
for intangible assets. These changes amend the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset in order to improve the consistency between the
useful life of a recognized intangible asset outside of a business combination
and the period of expected cash flows used to measure the fair value of an
38
intangible asset in a business combination. The adoption of these changes had no
impact on the Condensed Consolidated Financial Statements.
On January 1, 2009, the Company adopted updates issued by the FASB to the
calculation of earnings per share. These changes state that unvested share-based
payment awards that contain non-forfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating securities and shall be
included in the computation of earnings per share pursuant to the two-class
method for all periods presented. The adoption of these changes had no impact on
the Condensed Consolidated Financial Statements.
In April 2008, the FASB issued guidance now codified as ASC Topic 350,
"INTANGIBLES--GOODWILL AND OTHER" ("ASC 350"). This pronouncement amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under
previous ASC 350 guidance, thereby improving the consistency between the useful
life of a recognized intangible asset under ASC 350 and the period of expected
cash flows used to measure the fair value of the asset under ASC Topic 805,
"Business Combinations" ("ASC 805"). This pronouncement was effective for
financial statements issued for fiscal years beginning after December 15, 2008
and must be applied prospectively to intangible assets acquired after the
effective date. The Company has not acquired any intangible assets since
adopting this pronouncement. As such, there has been no impact to the Company's
financial statements since the January 1, 2009 adoption date.
In March 2008, the FASB issued guidance now codified as ASC Topic 815
"DERIVATIVES AND HEDGING" ("ASC 815"), which expands the disclosure requirements
in previous ASC 815 guidance about an entity's derivative instruments and
hedging activities. This pronouncement's disclosure provisions apply to all
entities with derivative instruments subject to the previous ASC 815 guidance.
The provisions also apply to related hedged items, bifurcated derivatives, and
non-derivative instruments that are designated and qualify as hedging
instruments. Entities with instruments subject to this pronouncement must
provide more robust qualitative disclosures and expanded quantitative
disclosures. Such disclosures, as well as existing required disclosures,
generally will need to be presented for every annual and interim reporting
period. This pronouncement was effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008. For the nine
months ended September 30, 2009, the Company has included the expanded
disclosures about derivative instruments and hedging activities within the
Company's financial statements.
In December 2007, the FASB issued guidance now codified as ASC Topic 805,
"BUSINESS COMBINATIONS" ("ASC 805"), which replaces previous ASC 805 guidance.
This pronouncement establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any non-controlling interest in the acquiree
and the goodwill acquired in connection with a business combination. This
pronouncement also establishes disclosure requirements that will enable users to
evaluate the nature and financial effect of the business combination. This
pronouncement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of an entity's first fiscal year
that begins after December 15, 2008. The Company applied the provisions of ASC
805 in connection with the acquisition that closed during the first quarter of
2009. The adoption of this pronouncement did not have a material impact on the
Company's consolidated financial statements.
39
In August 2009, the FASB issued updates to fair value accounting for
liabilities. These changes clarify existing guidance that in circumstances in
which a quoted price in an active market for the identical liability is not
available, an entity is required to measure fair value using either a valuation
technique that uses a quoted price of either a similar liability or a quoted
price of an identical or similar liability when traded as an asset, or another
valuation technique that is consistent with the principles of fair value
measurements, such as an income approach (e.g., present value technique). This
guidance also states that both a quoted price in an active market for the
identical liability and a quoted price for the identical liability when traded
as an asset in an active market when no adjustments to the quoted price of the
asset are required are Level 1 fair value measurements. These changes became
effective for the Company's Consolidated Financial Statements for the year ended
May 31, 2010. The adoption of this pronouncement did not have a material impact
on the Company's consolidated financial statements.
UPDATES ISSUED BUT NOT YET ADOPTED
In October 2009, the FASB issued updates to revenue recognition guidance. These
changes provide application guidance on whether multiple deliverables exist, how
the deliverables should be separated, and how the consideration should be
allocated to one or more units of accounting. This update establishes a selling
price hierarchy for determining the selling price of a deliverable. The selling
price used for each deliverable will be based on vendor-specific objective
evidence, if available, third-party evidence if vendor-specific objective
evidence is not available, or estimated selling price if neither vendor-specific
or third-party evidence is available. The Company will be required to apply this
guidance prospectively for revenue arrangements entered into or materially
modified after January 1, 2011; however, earlier application is permitted. The
Company has not determined the impact that this update may have on its
Consolidated Financial Statements.
NOTE 4 - RECLASSIFICATIONS
Certain prior periods' balances have been reclassified to conform to the current
period's financial statement presentation. These reclassifications had no impact
on previously reported results of operations or stockholders' equity.
40
NOTE 5 - RELATED PARTY TRANSACTIONS
On August 12, 2009, the parties rescinded the Motivation Advantage transaction
and agreed to return any consideration issued.
On August 12, 2009, the parties rescinded the Crowley & Company transaction and
agreed to consider the stock issued as compensation for services rendered.
On August 12, 2009, Joseph Vittoria, resigned as a member of the Board of
Directors. There were no disagreements with Joseph Vittoria on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.
On August 13, 2009, Dr. Louis Corrnachia and Richard Smith resigned as members
of the Board of Directors. There were no disagreements with Louis Corrnachia or
Richard Smith, on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure.
On August 14, 2009, Greg Jaclin and Terry Carlson resigned as members of the
Board of Directors. There were no disagreements with Greg Jaclin or Terry
Carlson on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure.
On August 19, 2009, the parties rescinded the EGA transaction and agreed to
return any consideration issued.
On August 24, 2009, 310 Holdings, Inc.("310") and the Company closed a
Securities Purchase Agreement whereby the 310 purchased 100% of the issued and
outstanding common shares of Javaco in exchange for $150,000 and the issuance of
2,500,000 shares of 310's common stock to Domark. We also entered into a
separate agreement and have assigned $9,997,134 of media credits in print and
radio to 310 Holdings in exchange for the issuance of 1,000,000 shares of 310
Holding's common stock.
On August 26, 2009, R. Thomas Kidd resigned as Chief Executive Officer and
President and as a member of the Board of Directors. There were no disagreements
with R. Thomas Kidd on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure. R. Thomas Kidd
will remain in his position as Principal Financial Officer.
On August 26, 2009, in a Debt Settlement Agreement by and between the Company
and R. Thomas Kidd, any and all debt owed to Mr. Kidd for expenses, advances, or
loans has been settled. The Company agrees to pay Mr. Kidd $150,000 cash and
transfer 3.5 million shares of common stock of TRTN, OTCBB held by us.
Furthermore, the Company shall execute an assignment of all claims against
Victory Lane Financial Elite, et al as known or shall become known in the course
of the litigation entitled DOMK vs Victory Lane Elite, LLC, Costello, et al in
the US District Court, Middle District of Florida, and the case in Tattnall
County, Georgia. In addition, the parties shall execute an assignment of the
repurchase agreement entered into by and between the Company and TRTN, OTCBB.
Upon payment and assignment of TRTN shares and assignment of the Company's
claims, Mr. Kidd shall surrender 111,438,394 common shares of Domark, to be
returned to treasury and cancelled.
41
On August 26, 2009, Scott Sieck, a member of the Board of directors and Chief
Operating Officer, was appointed as our Chief Executive Officer.
On August 26, 2009 the Company executed a Securities purchase agreement with R.
Thomas Kidd, whereby pursuant to the terms of the agreement, the Company agreed
to transfer its ownership of 100 Units of Victory lane LLC to R. Thomas Kidd in
exchange for 25 million shares of Domark common stock held by Mr. Kidd. The
transaction closed on October 15, 2009, upon delivery to the Company of 25
million shares of common stock owned by Mr. Kidd.
The issuance of the securities above were effected in reliance on the exemptions
for private sales of securities not involving a public offering pursuant to in
Section 4(2) and Section 4(6) of the Securities Act.
On September 4, 2009, Richard Altmann resigned as member of the Board of
Directors.
On September 14, 2009, R. Thomas Kidd resigned as Principle Accounting Officer
of the Company to pursue other interests. Mr. Kidd has provided no written
disagreement with the Company on any matter related to the Company's operations,
policies or practices. Scott Sieck, our current Chief Executive Officer, has
been appointed as Principle Accounting Officer.
On September 18, 2009, Scott Sieck entered into an employment agreement with our
Company. The employment agreement provided that the Executive has agreed to
waive his compensation until such time as the Board of Directors determines the
Company has sufficient assets to repay the Executive or receive compensation in
equity and accepts from the corporation 100,000 shares it its authorized Series
"A" Preferred stock during the interim period. Subsequently, on September 21,
2009, Mr. Sieck choose to receive 100,000 shares of Series A Preferred Stock
which have a voting rights in all matters to be voted upon by shareholders of
common stock of 1,000 votes per share of Series A Preferred Stock.
On October 15, 2009, the Company entered into an agreement whereby the Company
and R Thomas Kidd settled outstanding debts to Mr. Kidd. Terms of the debt
settlement agreement relieved the Company of indebtedness to Mr. Kidd in the
amount of $16,491 in exchange for the transference of the website of Executive
Sports and Entertainment, Inc., representing ownership of that website, delivery
of the website framework for www.domarkinternational.com, the assignment of a
$100,000 promissory note payable to the Company, and assignment of all shares
related to MedQuest, Inc., a Nevada corporation formed by the Company in 2008.
On October 20, 2009, the Company executed an agreement to sell the stock of ECFO
Corporation back to ECFO's founding shareholder. Consideration for the 2,000
shares of ECFO Corporation, representing all issued and outstanding shares of
ECFO Corporation, owned by the Company, is Ten Thousand Dollars ($10,000),
payable in the form of a one year promissory note. The transaction is a private
sale exempt from registration under Section 4(1) of the Securities Act of 1933,
as amended. As of February 28, 2009, the promissory note was satisfied.
On October 26, 2009, pursuant to an Assignment and Assumption Agreement, the
loan payable in the amount of $100,000, entered into on October 23, 2009 was
assigned to the Company's officer, Scott Sieck.
42
On November 22, 2009, the Company entered into an agreement with R Thomas Kidd
whereby the Company and Kidd have agreed upon the disbursement of certain
proceeds to be received in a possible settlement the Company and certain Victory
Lane Financial elite parties or a final adjudication of litigation and
arbitration actions in connection with claims in current litigation. The
agreement also mutually cancels the Assignment of Claims granted to R Thomas
Kidd by the Company on August 26, 2009. Terms of the new agreement are outlined
as follows:
Upon closing of any settlement agreement between the Company and Victory Lane
Financial Elite, et al, the Company shall pay to R Thomas Kidd the sum of
$192,500 in cash if cash is received, or at a minimum, $42,500 in cash and an
assignment of a third party promissory note in the minimum amount of $150,000
executed by all Victory Lane Financial Elite, et al in favor of the Company on
terms acceptable to Kidd provided that R Thomas Kidd will cancel the promissory
note executed by the Company in favor of R Thomas Kidd in the amount of $192,500
and return the original promissory note to the Company.
In the event of no settlement agreement between the Company and Victory Lane
Financial Elite, et al, R Thomas Kidd agree to accept and the Company agrees to
pay R Thomas Kidd the sum of $192,500 from the first proceeds of any award or
judgment obtained as a result of the prosecution of the litigation and
arbitration actions against the Victory Lane Financial Elite, et al;
R Thomas Kidd canceled the Assignment of Claims executed by the Company in favor
of R. Thomas Kidd on August 26, 2009 and transferred title and ownership of the
Victory Lane, LLC Units to the Company; in addition, R Thomas Kidd resigned as
Managing Member of Victory Lane, LLC and appointed Scott Sieck as Managing
Member of Victory Lane, LLC.
Effective March 29th, 2010, Scott Sieck, CEO/Director and R. Thomas Kidd entered
into a in a Debt and Securities Purchase Agreement (the "Agreement"). Pursuant
to the terms of the Agreement, all debt owed to Mr. Sieck by the Company
($534,271 as of 3/29/2010), his Preferred Series A shares, and one million
common shares were purchased by Mr. Kidd in consideration for the delivery of
250,000 restricted common shares JBI Inc. owned by Mr. Kidd. The change in
control is as a result of the transfer of the Preferred Series A Shares, which
collectively provides the holder thereof with a majority of voting rights.
On May 26, 2010, Domark International, Inc. (the "Company") entered into an
Asset Purchase Agreement (the "Agreement") with Armada Capital, LLC ("Armada")
providing for the purchase and sale of all of Armada's right, title and interest
in and to all of the assets of Armada. Armada, an entity engaged in the business
of providing consulting services for small capital public companies and private
businesses, is owned by R. Thomas Kidd, the Company's Chief Executive Officer,
Director and majority shareholder. The closing of the Agreement shall take place
upon (i) the delivery of all signed documentation; (ii) the completion of all
documentation necessary to perfect the delivery of the assets; and (iii) the
completion and delivery of the audited financial statements of the assets to be
purchased and sold; provided, however, that the closing date shall take place on
or before June 30, 2010. The Purchase Price for the Assets is equal to twenty
percent (20%) of the revenue derived from the fees generated from the consulting
agreements sold pursuant to the Agreement. As of the date of this report, the
parties agreed to mutually terminate the transaction.
43
On July 21, 2010, Domark International, Inc. (the "Company") entered into an
Agreement for the Exchange of Common Stock (the "Agreement") with Virtual
Devices, Inc., a Pennsylvania corporation (VDI) providing for the issuance of
stock of the Company in exchange for all of the outstanding shares of VDI. At
the closing, VDI will become a wholly owned subsidiary of the Company. The
closing of the Agreement shall take place upon (i) the delivery of all required
signed documentation; (ii) the completion of due diligence by all parties,
provided however, that the closing date shall take place on or before August 15,
2010. On August 13, 2010, the Company and Virtual Devices, Inc. extended the
closing date to allow for sufficient time to complete due diligence.
NOTE 6 - ACCOUNTS RECEIVABLE
At the end of the twelve months period ending May 31, 2010, the Company had no
trade receivables.
NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS - Adoption of Statement 142
The changes in the carrying amounts of goodwill for the year ended May 31, 2010
are as follows:
JAVACO ESE ECFO
---------- ---------- ----------
Balance as of May 31, 2009 $1,650,000 $ 69,900 $ 27,000
Goodwill acquired during year -- -- --
Impairment Loss -- 69,900 --
Goodwill written off related
to sale of business unit 1,650,000 -- 27,000
---------- ---------- ----------
Balance as of May 31, 2010 $ -- $ -- $ --
========== ========== ==========
* JAVACO
The Company had adjusted the carrying amount of goodwill as of May 31, 2009
as a result of the subsequent sale of the Company's wholly owned subsidiary
on August 24, 2009. The amount of the impairment loss was determined by
adjusting the carrying amount to the quoted market price of the acquirer's
stock at the time of sale.
44
* ECFO
The Company has impaired the carrying amount of goodwill as of May 31, 2009
according to the guidance in FAS 142, GOODWILL AND OTHER INTANGIBLE ASSETS.
The amount of the impairment was determined by adjusting the carrying
amount to the present value of the reporting unit. As of October 20, 2009,
the Company adjusted the balance to zero as a result of the sale of ECFO,
its wholly owned Subsidiary.
NOTE 8 - LIABILITIES
The Company is reporting loans and notes payable of $100,000. On October 23,
2009, pursuant to a Rescission Offer, the Company agreed to repay $100,000 to
one of its shareholders in exchange for the return of 100,000 shares of the
Company's common stock. The Company is required to repay the note on or before
April 22, 2010. In the event that a default occurs, the note will accrue
interest at a rate of 1.5% per month on any unpaid balance. On October 26, 2009,
pursuant to an Assignment and Assumption Agreement, the loan payable entered
into on October 23, 2009 was assigned to the Company's officer, Scott Sieck.
Pursuant to the terms of the Debt and Securities Purchase Agreement between
Scott Sieck and R. Thomas Kidd as of March 29, 2010, all debt owed to Mr. Sieck
by the Company ($534,271 as of 3/29/2010 including $100,000 in assigned loan
payable) was purchased by Mr. Kidd.
NOTE 9 - INCOME TAXES
The Company has available net operating loss carry-forwards for financial
statement and federal income tax purposes. These loss carry-forwards expire if
not used within 20 years from the year generated. The Company's management has
decided a valuation allowance is necessary to reduce any tax benefits because
the available benefits are more likely than not to expire before they can be
used. The tax based accumulated deficit create tax benefits in the amount of
$2,134,223 from inception through May 31, 2010.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial statement
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of May 31, 2010 are as
follows:
Deferred tax assets:
Federal $ 2,134,223
State 0
-----------
Total Deferred Tax Asset 2,134,223
Less valuation allowance (2,134,223)
-----------
$ 0
===========
The Company has provided a 100% valuation allowance on the deferred tax assets
at May 31, 2010 to reduce such tax asset to $0 as there is no assurance that the
45
Company will generate future taxable income to utilize such asset. Management
will review this valuation allowance requirement periodically and make
adjustments as warranted.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
On April 13, 2009, the Company entered into a sponsorship agreement with
Executive Adventures, LLC. The Company has committed to $465,000 in total
sponsorship fees for the annual World Sailfish Championship events, for years
2009 - 2012. The agreement provides that the Company shall remit fees according
to the following payment schedule:
2009 Event 60,000 shares, due by April 14, 2009 *
2010 Event 105,000 net due January 15, 2010
2011 Event 110,000 net due January 15, 2011
2012 Event 115,000 net due January 15, 2012
- ----------
* On April 13, 2009, the Company issued 60,000 shares for a value of
$120,000.
Terms of the Agreement include an option to pay stock shares in lieu of cash
payments based upon a mutually agreed upon arrangement that will be determined
on a yearly basis.
Due to the change in the business model of the Company, the Company has
previously notified Executive Adventures, LLC. that it was not going forward
with any future sponsorships.
On May 13, 2009, we executed an Agreement for the Exchange of Common Stock with
Victory Lane LLC. Subsequent to closing, the Company has discovered certain
liabilities which were undisclosed at the time of closing. The amounts of those
liabilities are as follows:
Legacy Development $3,157,000
Executive Adventures 227,000
Statewide Engineering 20,000
Tattnall County 3,000
Bob Barnard 140,000
Davis Love Design 950,000
Davis Love Design - Penalties 85,000
Andrew Goggin 307,000
----------
TOTAL $4,889,000
==========
On August 10, 2009, the Company along with Victory Lane, LLC and R. Thomas Kidd
filed a lawsuit in the United States District Court, Middle District of Florida
Case Number 09-CV-1396-ORL-35-DAB against Victory Lane Financial Elite, LLC et
al, for the following causes of action: Fraud in the Inducement, Breach of
Contract, Rescission, Conspiracy, and Libel. The Company considers these
liabilities contingent until the court makes a ruling on the aforementioned
court case.
46
On August 10, 2009, the Company was made aware of an action filed in the
Superior Court of Tattnall County, Georgia, case number 2009-V-381-JS by Victory
Lane Financial Elite, LLC et al against the Company and its directors and
officers. The Company believes that the complaint is without merit and the
Company intends to defend said action and file substantial counterclaims against
Victory Lane Financial Elite, LLC, Patrick Costello and numerous other
defendants.
On September 25, 2009 the company amended its Case Number CV-1396-ORL-35-DAB to
request certain complaints be heard in arbitration as called for in the original
acquisition agreement dated May 13, 2009. Both venues are proceeding.
The secured lender on the Victory Lane property foreclosed and then filed suit
against Victory Lane, LLC, Patrick J. Costello and Stephen Brown seeking a
deficiency judgment. Brown and Costello filed a third party complaint against
the Company and R. Thomas Kidd. The Company contends the third party complaint
is fatally defective in that it alleges independent claims as opposed to
derivative or a cause of action for indemnity or contribution. On the July 5,
2010, the Company has filed a motion to dismiss the third party complaint which
they believe is meritorious and there should be a ruling by the Court within
sixty days. The hearing is scheduled for August 11, 2010. On August 11, 2010,
the motion to dismiss was converted to a motion for summary judgment.
On July 20, 2010, pursuant to the Company's previously filed motion to dismiss
case number 2009-V-381-JS for lack of jurisdiction in the Superior Court of
Tattnall County, Georgia, the motion was denied as to the Company and R. Thomas
Kidd, but granted as to the other officers and directors of the Company.
NOTE 11 - 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 12 - STOCKHOLDER'S EQUITY
Stock issued Stock issued
for Cash Cash Received for Assets
-------- ------------- ----------
Twelve months ended May 31, 2010 -- -- --
During the twelve months ended May 31, 2010, the Company cancelled 105,234,548
shares of its common stock as a result of rescissions of its subsidiaries and
debt settlements.
47
NOTE 13 - SUBSEQUENT EVENTS
On July 21, 2010, Domark International, Inc. (the "Company") entered into an
Agreement for the Exchange of Common Stock (the "Agreement") with Virtual
Devices, Inc., a Pennsylvania corporation (VDI) providing for the issuance of
stock of the Company in exchange for all of the outstanding shares of VDI. At
the closing, VDI will become a wholly owned subsidiary of the Company. The
closing of the Agreement shall take place upon (i) the delivery of all required
signed documentation; (ii) the completion of due diligence by all parties,
provided however, that the closing date shall take place on or before August 15,
2010. On August 13, 2010, the Company and Virtual Devices, Inc. extended the
closing date to allow for sufficient time to complete due diligence.
48
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On October 15 2009, Larry O'Donnell CPA P.C. was appointed as the independent
auditor for Domark International commencing with a re-audit of year ending May
31, 2008 and for the years ended May 31, 2009 and May 31, 2010.
On October 15, 2009, Kramer Wiseman and Associates, LLP was dismissed as the
independent auditors for the Company.
ITEM 9A. CONTROLS AND PROCEDURES
Our management team, under the supervision and with the participation of our
principal executive officer and our principal financial officer, evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures as such term is defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (Exchange Act), as of the last day
of the fiscal period covered by this report, May 31, 2010. The term disclosure
controls and procedures means our controls and other procedures that are
designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
accumulated and communicated to management, including our principal executive
and principal financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. Based on
this evaluation, our principal executive officer and our principal financial
officer concluded that our disclosure controls and procedures were effective as
of May 31, 2010.
Our principal executive officer and our principal financial officer, are
responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f).
Management is required to base its assessment of the effectiveness of our
internal control over financial reporting on a suitable, recognized control
framework, such as the framework developed by the Committee of Sponsoring
Organizations (COSO). The COSO framework, published in INTERNAL
CONTROL-INTEGRATED FRAMEWORK, is known as the COSO Report. Our principal
executive officer and our principal financial officer, have has chosen the COSO
framework on which to base its assessment. Based on this evaluation, our
management concluded that our internal control over financial reporting was
effective as of May 31, 2010.
This annual report on Form 10-K does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit us to provide only management's report in this
annual report on Form 10-K.
49
There were no changes in our internal control over financial reporting that
occurred during of fiscal year of 2010 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
This annual report does not include an attestation report of the company's
registered public accounting firm regarding internal control over financial
reporting. Our principal executive officer and our principal financial officer,
report was not subject to attestation by the company's registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit the company to provide only management's report in this
annual report.
It should be noted that any system of controls, however well designed and
operated, can provide only reasonable and not absolute assurance that the
objectives of the system are met. In addition, the design of any control system
is based in part upon certain assumptions about the likelihood of certain
events. Because of these and other inherent limitations of control systems,
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions, regardless of how remote.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the fiscal year ended May 31, 2010, there were no changes in our internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
LACK OF INDEPENDENT BOARD OF DIRECTORS AND AUDIT COMMITTEE
Management is aware that an audit committee composed of the requisite number of
independent members along with a qualified financial expert has not yet been
established. Considering the costs associated with procuring and providing the
infrastructure to support an independent audit committee and the limited number
of transactions, Management has concluded that the risks associated with the
lack of an independent audit committee are not justified. Management will
periodically reevaluate this situation.
LACK OF SEGREGATION OF DUTIES
Management is aware that there is a lack of segregation of duties at the Company
due to the small number of employees dealing with general administrative and
financial matters. However, at this time management has decided that considering
the abilities of the employees now involved and the control procedures in place,
the risks associated with such lack of segregation are low and the potential
benefits of adding employees to clearly segregate duties do not justify the
substantial expenses associated with such increases. Management will
periodically re-evaluate this situation
ITEM 9B. OTHER INFORMATION
None
50
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Our executive officers and directors, and their ages and positions as of May 31,
2010 are as follows:
DIRECTORS AND EXECUTIVE OFFICER
R. Thomas Kidd, 63, Chairman, President, Chief Executive Officer and Chief
Financial Officer (1)
- ----------
(1) As of April 13, 2010, Mr. Kidd holds the positions of Chief Executive
Officer, Chief Operating Officer and Principal Financial Officer and is a
sole member of the Board of Directors.
The Chief Executive Officer of the Company will hold office until additional
members or officers are duly elected and qualified. The background and principal
occupations of the sole officer and director of the Company is as follows:
R. THOMAS KIDD, Chief Executive Officer , Chief Operating Officer and Principal
Financial Officer
Mr. R. Thomas Kidd, as of April 13, 2010, has served as Chief Executive Officer,
Chief Operating Officer and Principal Financial Officer and Director of the
Company for the periods from May 2008 until August 2009 and from April 2010
through the current date.
R. Thomas Kidd has served as the President and Chief Executive Officer of
SportsQuest, Inc., a Delaware corporation that was involved in creating,
developing, and managing high end sports events and related operating entities.
From January 2007 until August 2007, Mr. Kidd was the Chief Executive Officer of
Lextra Management Group, Inc., whose assets were acquired by SportsQuest, Inc.
Prior thereto from July 2005 through November 2006 he served as the Chief
Executive Officer and Director of Greens Worldwide Incorporated, a publicly held
company, and its subsidiary U.S. Golf Tour, primarily involved in the
development of a new golf organization and sports enterprise. Mr. Kidd currently
serves as the managing member of Armada Capital, LLC. For approximately the past
thirty (30) years, Mr. Kidd has been engaged in various capacities in developing
sports organizations including, among others, two (2) national professional golf
tours and one (1) senior golf tour and completing mergers and acquisitions of
various business operations in the technology, business services, and
communications industries.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT 9.A. DIRECTORS AND EXECUTIVE
OFFICERS, PROMOTERS, AND CONTROL PERSONS:
The Company is aware that some filings of Form 4 and 5 required of Section 16(a)
of the Exchange Act of Directors, Officers or holders of 10% of the Company's
shares have not been timely and the Company has instituted procedures to ensure
compliance in the future.
On August 26, 2009 R. Thomas Kidd resigned as Chief Executive Office and
President and as a member of the Board of Directors. There were no disagreements
with R. Thomas Kidd on any matter of accounting principles or practices,
51
financial statement disclosure or auditing scope or procedure. R. Thomas Kidd
will remain in his position as Principal Financial Officer.
On August 26, 2009, Scott Sieck, a member of the Board of Directors and Chief
Operating Officer, was appointed as our Chief Executive Officer.
On September 4, 2009, Richard Altman resigned as member of the Board of
Directors. There were no disagreements with Richard Altman on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.
On April 13, 2010, Scott Sieck resigned as a member of the Boards of Directors
and Chief Operating Officer, and Chief Executive Officer.
On April 13, 2010, R. Thomas Kidd was appointed as a sole member of the Board of
Directors and our Chief Executive Officer, Chief Operating Officer, and Chief
Financial Officer.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation paid by the Company to its
Chief Executive Officer and to all other executive officers for services
rendered from May 31, 2009 through May 31, 2010.
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred All
Name and Plan Compen- Other
Principal Stock Option Compen- sation Compen-
Position Year Salary Bonus Awards Awards sation Earnings sation Totals
- ------------ ---- ------ ----- ------ ------ ------ -------- ------ ------
R. Thomas Kidd 2010 0 0 0 0 0 0 0 0
Chief Executive 2009 0 0 0 0 0 0 0 0
Officer
COMPENSATION OF DIRECTORS
Mr. Kidd is also a member of the board of directors of the Company and is not
compensated for those services.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
52
The following table sets forth certain information regarding beneficial
ownership of the common stock as of August 13, 2010 by (i) each person who is
known by the Company to own beneficially more than 5% of the any classes of
outstanding Stock, (ii) each director of the Company, (iii) each of the Chief
Executive Officers and the two (2) most highly compensated executive officers
who earned in excess of $100,000 for all services in all capacities
(collectively, the "Named Executive Officers") and (iv) all directors and
executive officers of the Company as a group.
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 and 13d-5 of the Exchange Act, and the information is
not necessarily indicative of beneficial ownership for any other purpose and is
based on 36,460,835 shares beneficially owned as of August 13, 2009. We believe
that each individual or entity named has sole investment and voting power with
respect to the securities indicated as beneficially owned by them, subject to
community property laws, where applicable, except where otherwise noted. Unless
otherwise stated, the address of each person: 3551 W Lake Mary Blvd, Ste. 209,
Lake Mary, FL 32746.
Shares Owned (1)
Name and Address Common Stock Preferred Stock Percentage
- ---------------- ------------ --------------- ----------
R. Thomas Kidd & Joan Kidd 10,785,000 100,000 81.18% (1)
as Tenants by the Entireties
1809 East Broadway #125
Oviedo Florida 32765
- ----------
(1) Percentage beneficial ownership as if preferred is converted.
CHANGES IN CONTROL
We are not aware of any arrangements that may result in a change in control of
the Company.
DESCRIPTION OF SECURITIES
GENERAL
Our authorized capital stock consists of 200,000,000 common stock, par value of
$0.001, and 2,000,000 preferred stock, par value of $0.001.
COMMON STOCK
The shares of our common stock presently outstanding, and any shares of our
common stock issues upon exercise of stock options and/or warrants, will be
fully paid and non-assessable. Each holder of common stock is entitled to one
vote for each share owned on all matters voted upon by shareholders, and a
majority vote is required for all actions to be taken by shareholders. In the
event we liquidate, dissolve or wind-up our operations, the holders of the
common stock are entitled to share equally and ratably in our assets, if any,
remaining after the payment of all our debts and liabilities and the liquidation
preference of any shares of preferred stock that may then be outstanding. The
common stock has no preemptive rights, no cumulative voting rights, and no
redemption, sinking fund, or conversion provisions. Since the holders of common
53
stock do not have cumulative voting rights, holders of more than 50% of the
outstanding shares can elect all of our Directors, and the holders of the
remaining shares by themselves cannot elect any Directors. Holders of common
stock are entitled to receive dividends, if and when declared by the Board of
Directors, out of funds legally available for such purpose, subject to the
dividend and liquidation rights of any preferred stock that may then be
outstanding.
SERIES A PREFERRED STOCK
The Company has 2,000,000 shares of preferred stock, the rights and preferences
of which can be designated by the Board of Directors. The Board of Directors
designated and issued 100,000 shares of Series A Preferred. The shares have no
dividend rights but may be voted as if converted, and convert at the holder's
option to the Company's Common Stock at the rate of 1,000 to 1. The preferred
shares have no liquidation value, no liquidation rights, no dividend rights and
no redemption rights.
On December 1, 2009, the Company issued 100,000 shares of its preferred stock to
a Director for a value of $100.
DIVIDEND POLICY
We have never declared any cash dividends on our common stock. We currently
intend to retain future earnings, if any, to finance the expansion of our
business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
OPTIONS AND WARRANTS:
As of May 31, 2010, we have no options and warrants issued and outstanding.
CONVERTIBLE SECURITIES
At May 31, 2010 we have no convertible securities issued.
AMENDMENT OF OUR BYLAWS
Our bylaws may be adopted, amended or repealed by the affirmative vote of a
majority of our outstanding shares. Subject to applicable law, our bylaws also
may be adopted, amended or repealed by our board of directors.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
On September 1, 2008, the Company issued 1,000,000 shares of its common stock to
a Director as compensation for a value of $500.
On December 29, 2008, the Company issued 200,000 shares of its common stock to a
Director as compensation for a value of $400,000. Subsequently, the Director has
returned 170,940 shares to the Company and the shares were cancelled.
54
On April 1, 2009, the Company issued 12,500 shares of its common stock to a
Director as compensation for a value of $29,375.
On April 14, 2009, the Company issued 12,500 shares of its common stock to a
Director as compensation for a value of $25,000.
On April 14, 2009, the Company issued 12,500 shares of its common stock to a
Director as compensation for a value of $25,000.
On May 15, 2009, the Chief Executive Officer at the time, converted to common
100,000 shares of the Company's preferred stock, convertible at a rate of
1000:1.
During August 2009, 105,234,548 shares of common stock were returned to treasury
and cancelled.
On December 1, 2009, the Company issued 100,000 share of its preferred stock to
a Director as compensation for a value of $100.
From time to time, the Company's officers would lend the Company money. At May
31, 2010, there was an outstanding loan payable in the amount of $729,836 to the
Chief Executive Officer of the Company.
As of May 31, 2010, there were no formal executive compensation agreements in
effect.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
The aggregate fees billed by Larry O'Donnell CPA, P.C. for professional services
rendered for the audit of the Company's annual financial statements for fiscal
years ended May 31, 2010 and 2009 approximated $10,000 and $10,000,
respectively.
AUDIT-RELATED FEES
The aggregate fees billed by Larry O'Donnell CPA, P.C. for assurance and related
services that are reasonably related to the performance of the audit or review
of the Company's financial statements for the fiscal years ended May 31, 2010
and 2009, and that are not disclosed in the paragraph captioned "Audit Fees"
above, were $10,000 and $10,000, respectively.
TAX FEES
The aggregate fees billed by ECFO Corporation for professional services rendered
for accounting, tax compliance, tax advice and tax planning for the fiscal year
ended May 31, 2010 and 2009 were $17,500 and $24,795, respectively.
55
PART IV
ITEM 15. EXHIBITS AND REPORTS
EXHIBITS
- --------
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes Oxley Act. (1)
31.2 Certification of Principal Financial Officer Pursuant to Section 302
of the Sarbanes Oxley Act (1)
32.1 Certification of Chief Executive Officer Pursuant to Section 906 of
the Sarbanes Oxley Act. (1)
32.2 Certification of Principal Accounting Officer Pursuant to Section 906
of the Sarbanes Oxley Act (1)
- ----------
(1) Filed herewith
56
ITEM 15. SIGNATURES
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.
Registrant DoMark International, Inc.
Date: August 20, 2010 By: /s/ R. Thomas Kidd
-------------------------------------------
R. Thomas Kidd
Chairman, President Chief Executive Officer
Date: August 20, 2010 By: /s/ R. Thomas Kidd
-------------------------------------------
R Thomas Kidd
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 20th day of August 2010.
/s/ R. Thomas Kidd
- -------------------------------------------
R. Thomas Kidd
Chairman, President Chief Executive Officer
/s/ R. Thomas Kidd
- -------------------------------------------
R Thomas Kidd
Principal Financial Officer
57