U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended August 31, 2011
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT
For the transition period from N/A to N/A
Commission File No. 333-136247
DoMark International, Inc.
(Name of small business issuer as specified in its charter)
Nevada 20-4647578
(State of Incorporation) (IRS Employer Identification No.)
254 S Ronald Reagan Blvd, Ste. 134
Longwood, FL 32750
(Address of principal executive offices)
877-732-5035
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
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 [ ] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer [ ] Accelerated Filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 13, 2011
----- -------------------------------
Common stock, $0.001 par value 37,091,040
DOMARK INTERNATIONAL, INC.
INDEX TO FORM 10-Q FILING
FOR THE THREE MONTHS ENDED AUGUST 31, 2011
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets 3
Consolidated Statements of Operations 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management Discussion & Analysis of Financial Condition and
Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25
Item 3. Defaults Upon Senior Securities 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 5. Other information 26
Item 6. Exhibits 26
2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
DOMARK INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
As of As of
August 31, May 31,
2011 2011
-------- --------
(Unaudited) (Re-stated)
ASSETS
CURRENT ASSETS
Cash $ 756 $ 4,587
Prepaid expenses 125,000 --
-------- --------
TOTAL CURRENT ASSETS 125,756 4,587
-------- --------
FIXED ASSETS
Property & equipment, net 181 399
-------- --------
TOTAL FIXED ASSETS 181 399
-------- --------
OTHER ASSETS
Website development costs, net 8,667 6,417
Deferred financing costs, net 3,516 --
-------- --------
TOTAL OTHER ASSETS 12,183 6,417
-------- --------
TOTAL ASSETS $138,120 $ 11,403
======== ========
The accompanying notes are an integral part of
these financial statements.
3
DOMARK INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
As of As of
August 31, May 31,
2011 2011
------------ ------------
(Unaudited) (Re-stated)
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 85,412 $ 44,987
Notes payable 160,000 75,000
Due to affiliate and shareholder 681,897 696,171
------------ ------------
TOTAL CURRENT LIABILITIES 927,309 816,158
------------ ------------
TOTAL LIABILITIES 927,309 816,158
------------ ------------
STOCKHOLDERS' DEFICIT
Convertible preferred stock series A, $0.001 par value,
authorized: 2,000,000
issued: 100,000 and 100,000, respectively 100 100
Common stock, $0.001 par value,
authorized: 200,000,000
issued: 37,011,495 and 36,460,835, respectively 37,014 36,461
Additional paid in capital 26,600,770 26,448,172
Stock receivable (5,000,000) (5,000,000)
Accumulated deficit (16,850,830) (16,850,830)
Accumulated deficit during development stage (5,576,245) (5,438,656)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIENCY (789,189) (804,755)
------------ ------------
TOTAL LIABILITIES AND EQUITY $ 138,120 $ 11,403
============ ============
The accompanying notes are an integral part of
these financial statements.
4
DOMARK INTERNATIONAL, INC.
(A DEVELOPMENT STATE COMPANY)
STATEMENTS OF OPERATIONS
For the For the From
Three Months Three Months October 21, 2009
Ended Ended (Development stage) to
August 31, August 31, August 31,
2011 2010 2011
------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
General and administrative expense $ 137,589 $ 11,996 $ 485,812
Bad debt expense -- -- 5,100,000
Impairment of goodwill -- -- 10,000
------------ ------------ ------------
OPERATING LOSS (137,589) (11,996) (572,360)
Other income -- -- 29,567
Impairment of asset -- -- 10,000
------------ ------------ ------------
NET LOSS FROM OPERATIONS $ (137,589) $ (11,996) $ (5,576,245)
============ ============ ============
NET LOSS $ (137,589) $ (11,996) $ (5,576,245)
============ ============ ============
Loss per share, basic $ (0.00) $ (0.00) $ (0.15)
------------ ------------ ------------
Weighted average common shares
outstanding, basic 36,953,743 36,460,835 36,527,621
------------ ------------ ------------
The accompanying notes are an integral part of
these financial statements
5
DOMARK INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the For the From
Three Months Three Months October 21, 2009
Ended Ended (Development Stage) to
August 31, August 31, August 31,
2011 2010 2011
------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (137,589) $ (11,996) $ (5,576,245)
------------ ------------ ------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,968 219 4,342
Common stock issued as compensation and for expenses 28,153 -- 28,242
Impairment of assets -- -- 10,000
Bad debt expense -- -- 5,000,000
Changes in Operating Assets and Liabilitites:
Increase/(decrease) in accounts payable 26,000 8,200 (52,130)
Increase/(decrease) in accrued expenses 14,426 -- 14,426
(Increase)/decrease in deferred financing costs (3,516) -- (3,516)
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (70,558) (3,577) (574,882)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for web development (4,000) -- (7,500)
------------ ------------ ------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (4,000) -- (7,500)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received/(paid) from/(to) affiliates and/or
shareholders (14,273) 54,095 520,080
Proceeds from notes payable 85,000 -- 59,531
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 70,727 54,095 579,611
------------ ------------ ------------
CASH RECONCILIATION
Net increase/(decrease) in cash and cash equivalents (3,831) 50,518 (3,831)
Net cash flow from discontinued operations -- -- 1,060
Cash and cash equivalents - beginning balance 4,587 197 3,527
------------ ------------ ------------
CASH AND CASH EQUIVALENTS BALANCE END OF PERIOD $ 756 $ 50,715 $ 756
============ ============ ============
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCIAL ACTIVITIES:
Stock issued for prepaid expenses $ 125,000 $ -- $ --
The accompanying notes are an integral part of
these financial statements.
6
DOMARK INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED AUGUST 31, 2011
--------------------------------------------------------------------------------
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. In 2008, the Company embarked
on a business plan that was intended to acquire profitable businesses that would
create shareholder value in diverse industries. During 2008 and 2009, the
Company acquired several operating businesses, as set forth in various Current
Reports on Form 8-K filed with the Securities and Exchange Commission. On May
21, 2009, the Company closed an acquisition pursuant to that certain Agreement
for the Exchange of Common Stock (the "Victory Lane Agreement") with Victory
Lane Financial Elite, LLC ("Victory Lane") with respect to a real estate
lifestyle business known as "Victory Lane" (the "Victory Lane Business").
Shortly thereafter a dispute arose between the Company and the principals of
Victory Lane regarding the representations of the principals of Victory Lane and
the Victory Lane Business and the Victory Lane Agreement. Litigation between the
Company and various parties pertaining to the Victory Lane Business remains
outstanding. (Refer to Note 10 - Contingencies below).
During the last half of 2009, the Company sold two operating subsidiaries,
Javaco, Inc. and ECFO Corporation and effected rescissions of acquisition
transactions on the remainder of its operating businesses. Between October 2009
and August 2011 the Company had no material ongoing operations. The business of
the Company during the period from October 2009 through August 2011 was to seek
out new acquisitions and to conduct the litigation with Victory Lane.
On May 31, 2011, the Company formed a wholly owned subsidiary, Armada Sports &
Entertainment, Inc. ("Armada Sports"). Armada Sports is a sports marketing and
Management company engaged in owning, developing, and conducting
made-for-television Sports and entertainment events. Armada Sports currently
owns "The Golf Championships", a series of unique competitions in the sport
known as The Million Dollar Invitationals, The World Putting Tour Championships,
and the Celebrity Challenges. Through Armada Sports, the Company intends to
generate revenues through the sale of advertising, sponsorships, event tickets,
promotional fees, broadcasting rights and other products. The Company is also
currently reviewing, researching, and evaluating other acquisitions in the
sports and entertainment field as well as related industries.
NOTE 2 - GOING CONCERN
As reflected in the accompanying consolidated financial statements, the Company
had a deficit accumulated during the development stage of $5,576,245 at August
31, 2011, and a net loss of $137,589 for the interim period then ended.
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. Furthermore, the
Company has inadequate working capital to maintain or develop its operations,
and is dependent upon funds from private investors and the support of certain
stockholders.
These factors raise substantial doubt about the ability of the Company to
continue as a going concern. These financial statements do not include any
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adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of liabilities that might result from
this uncertainty. In this regard, management is planning to raise any necessary
additional funds through loans and additional sales of its common stock. There
is no assurance that the Company will be successful in raising additional
capital.
NOTE 3 - BASIS OF PRESENTATION
The unaudited interim consolidated financial statements of DOMARK INTERNATIONAL,
INC. (the "Company") have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") for interim financial
information and the rules and regulations of the Securities and Exchange
Commission ("SEC"). In the opinion of management, all adjustments, consisting of
normal recurring accruals considered necessary for a fair presentation, have
been included. Operating results for the three months ended August 31, 2011 are
not necessarily indicative of the results that may be expected for the year
ending May 31, 2012.
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECENT ACCOUNTNG PRONOUNCEMENTS
The Company has reviewed recently issued accounting pronouncements and plans to
adopt those that are applicable to it. It does not expect the adoption of these
pronouncements to have a material impact on its financial position, results of
operations or cash flows.
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined in ASC Standard 915-10-05;
has recognized no revenue and devotes substantially all of its efforts on
establishing its sports business. The Company's planned principal operations in
developing its sports business have commenced. All losses accumulated since
inception have been considered part of the Company's development stage
activities.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements. These estimates and assumptions also
affect the reported amounts of revenues, costs and expenses during the reporting
period. Management evaluates these estimates and assumptions on a regular basis.
Actual results could differ from those estimates.
The primary management estimates included in these financial statements are the
impairment reserves applied to various long-lived assets and the fair value of
its stock tendered in various non-monetary transactions.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. At August 31, 2011 and 2010, cash
and cash equivalents included cash on hand and cash in the bank.
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FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reflected in the consolidated balance sheets for cash,
accounts payable, and accrued expenses approximate the respective fair values
due to the short maturities of these items.
PRINCIPLES OF CONSOLIDATION
These interim consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, Armada Sports & Entertainment, Inc. All
intercompany balances and transactions have been eliminated in consolidation.
STOCK BASED COMPENSATION
Stock based compensation is accounted for using the Equity-Based Payments to
Non-Employees Topic of the FASB ASC 505, which establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. It also addresses transactions in which an entity incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the issuance of
those equity instruments. We determine the value of stock issued at the date of
grant. We also determine at the date of grant the value of stock at fair market
value or the value of services rendered (based on contract or otherwise)
whichever is more readily determinable.
The Company accounts for its stock based compensation in which the Company
obtains employee services in share-based payment transactions under the
recognition and measurement principles of the fair value recognition provisions
of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to
paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all
transactions in which goods or services are the Consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. The measurement date used to determine
the fair value of the equity instruments issued is the earlier of the date on
which the performance is complete or the date on which it is probable that
performance will occur.
NET LOSS PER COMMON SHARE
The Company computes net loss per share in accordance with the Earning per Share
Topic of the FASB ASC 260. Under the provisions of ASC, basic net loss per share
is computed by dividing the net loss available to common stockholders for the
period by the weighted average number of shares of common stock outstanding
during the period. The calculation of diluted net loss per share gives effect to
common stock equivalents; however, potential common shares are excluded if their
effect is anti-dilutive. As of August 31, 2011 and 2010 no options and warrants
were outstanding.
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NOTE 5 - RELATED PARTY TRANSACTIONS
The Company is indebted to R. Thomas Kidd, the Company's Chief Executive Officer
and sole Director, and his wife, in the amount of $681,897 and $696,171 as of
August 31, 2011 and May 31, 2011, respectively, which amount does not bear
interest and is due on demand. This amount reflects advances made to the Company
by Mr. Kidd and his wife.
NOTE 6 - COMMITMENTS
On June 1, 2011, Amy Pennock of Pennock Consulting Group, Inc. was engaged to
provide fraud and internal auditing services for the Company. Fees for services
will be billed at an hourly rate, as incurred.
On June 1, 2011, Peter Gordon was appointed Vice President & Executive Producer
of Armada Sports & Entertainment, Inc., a wholly owned subsidiary of the
Company. The Company has agreed to pay a salary of $120,000 each year for the
five year term of the agreement, with 5% increases each year. In addition, Mr.
Gordon is entitled to 100,000 shares of the Company's common stock as a signing
bonus. The shares are to be issued but held back by the Company and not earned
and delivered until one full year of service has elapsed under the agreement.
On June 10, 2011, the Company entered into an agreement with TVA Media Group who
will provide performance-based media campaigns. The Company has agreed to pay
TVA Media a total of $120,000 in cash, payable in three installments beginning
September 1, 2011. The second installment is due in week four of service and the
final payment is due in week nine. In addition, the Company has agreed to issue
stock in exchange for services
at a value of $500,000 in four installments on June 20, 2011, September 1, 2011,
December 1, 2011, and March 1, 2012. The number of shares issued will be
determined by the five trading day Volume Weighted Average price prior to the
date of issuance.
On June 20, 2011, the Company engaged William Seery as Chief Financial Officer
with an effective start date of September 1, 2011. The Company has agreed to pay
a salary of $150,000 each year for the five year term of the agreement, with 5%
increases each year. In addition, Mr. Seery is entitled to 200,000 shares of the
Company's common stock as a signing bonus. The shares are to be issued but held
back by the Company. After six months of service, 100,000 shares are to be
delivered and after one full year of service has elapsed, the remaining 100,000
shares are deliverable under the agreement.
On June 28, 2011, the Company engaged Peter Bonell as Chief Operating Officer
with an effective start date of July 15, 2011. On July 15, 2011, the Company
terminated its engagement of Peter Bonell.
On July 22, 2011, the Company engaged Jordan Silverstein as Vice President,
Public Sponsor Group & Investor Relations with an effective start date of August
1, 2011. The Company has agreed to pay a salary of $90,000 each year for the
five year term of the agreement, with 5% increases each year. In addition, Mr.
Silverstein is entitled to 100,000 shares of the Company's common stock as a
signing bonus. The shares are to be issued but held back by the Company and not
earned and delivered until one full year of service has elapsed under the
agreement. The Company has also agreed to pay bonuses equal to five percent of
revenue of public company sponsors up to $10,000,000 and six percent for
sponsorship revenues above $10,000,000.
On July 26, 2011, the Company engaged Anthony Gebbia as Chief Operating Officer
with an effective start date of August 8, 2011. The Company has agreed to pay a
salary of $120,000 each year for the five year term of the agreement, with 5%
increases each year. In addition, Mr. Gebbia is entitled to 100,000 shares of
10
the Company's common stock as a signing bonus. The shares are to be issued but
held back by the Company and not earned and delivered until one full year of
service has elapsed under the agreement. The Company has also agreed to pay
bonuses equal to $200,000, payable half in stock and half in cash, upon signing
of title sponsors of the Million Dollar Invitationals. Mr. Gebbia will also
receive $100,000 as a bonus, payable half in Stock and half in cash, upon
signing of presenting sponsors of the Million Dollar Invitationals. Mr. Gebbia
is entitled to a maximum of $300,000 each year.
On August 3, 2011, Armada Sports & Entertainment, Inc., a wholly owned
subsidiary of Domark International, Inc. announced that Joseph Mediate, former
tournament director of the LPGA's Shop Rite Classic, had joined Armada Sports as
Director of Tournament Operations for The Golf Championships. The effective date
of the agreement is September 1, 2011. The Company has agreed to pay a salary of
$80,000 each year for the five year term of the agreement, with 5% increases
each year. In addition, Mr. Mediate is entitled to 25,000 shares of the
Company's common stock as a signing bonus. The shares are to be issued but held
back by the Company and not earned and delivered until one full year of service
has elapsed under the agreement. The Company has also agreed to pay a
performance bonus equal to five percent of the first $2,000,000 in local and
regional sponsors and six percent for sponsorship revenues that exceed
$2,000,000.
NOTE 7 - LIABILITIES & NOTES PAYABLE
Effective March 3, 2011, we obtained an unsecured loan in the amount of $75,000
from Infinite Funding, Inc. ("IFI") as evidenced by a Promissory Note from the
Company to Infinite Funding, Inc. dated March 3, 2011 (the "IFI Note"). The loan
proceeds were disbursed as follows: $50,000 on March 7, 2011, and $25,000 on
March 21, 2011. The maturity date of the promissory note was July 1, 2011. On
June 9, 2011, the Company entered into an Amendment to the Promissory Note with
IFI that amended the IFI Note to extend the maturity date to October 15, 2011,
and increase the amount of the line to $85,000 to provide for the Company to pay
an amendment fee of $10,000.
The IFI Note provides for interest at the rate of 3.00% per annum, payable
together with the principal amount at the maturity date, and is personally
guaranteed by our Chief Executive Officer. Upon an event of default, interest
shall accrue upon the total sum outstanding, from time to time, at the rate
equal to 18% per annum on a basis of a 365-day year for the actual number of
days in which any indebtedness under this promissory note remains outstanding.
Effective June 10, 2011, we obtained an unsecured loan in the amount of $75,000
from Infinite Funding, Inc. ("IFI") as evidenced by a Promissory Note from the
Company to Infinite Funding, Inc. dated June 10, 2011 (the "IFI Note"). The loan
proceeds were disbursed as follows: $25,000 on June 10, 2011, $25,000 or July
10, 2011, and $25,000 on August 10, 2011. The maturity date of the promissory
note is was October 15, 2011.
The IFI Note provides for interest at the rate of 3.00% per annum, payable
together with the principal amount at the maturity date, and is personally
guaranteed by our Chief Executive Officer. Upon an event of default, interest
shall accrue upon the total sum outstanding, from time to time, at the rate
equal to 18% per annum on a basis of a 365-day year for the actual number of
days in which any indebtedness under this promissory note remains outstanding.
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NOTE 8 - STOCKHOLDER'S DEFICIT
On June 20, 2011, the Company issued 550,660 shares of restricted common stock
Pursuantto the terms of the agreement entered into with TVA Media Group as
discussed in Note 6. The shares were valued at $0.23 per share for a value of
$125,000. On June 20, 2011 the Company recorded $125,000 in prepaid expense
related to the shares issued TVA Media Group. As of August 31, 2011, services
have not been performed and the Company has not recorded an expense.
On July 5, 2011, the Company issued 100,000 shares restricted common stock
pursuant to the employment agreement entered into with Peter Gordon. As per the
agreement, the shares have been issued but not delivered to the employee. The
shares will be considered issued once the vesting period of one-year has been
completed.
On July 7, 2011, Peter Gordon was entitled to 100,000 shares of the Company's
common stock as a signing bonus, valued at $22,000, which will not be earned and
delivered until one full year of service has elapsed under the agreement. Under
ASC 718 "Stock Compensation" the Company has expensed the proportionate value of
the stock compensation as of August 31, 2011 with an offset to Additional-Paid-
in-Capital for $4,701.
On August 1, 2011, Jordan Silverstein was entitled to 100,000 shares of the
Company's common stock as a signing bonus, valued at $150,000, which will not be
earned and delivered until one full year of service has elapsed under the
agreement. Under ASC 718 "Stock Compensation" the Company has expensed the
proportionate value of the stock compensation as of August 31, 2011 with an
offset to Additional-Paid-in-Capital for $12,740.
On August 8, 2011, Anthony Gebbia was entitled to 100,000 shares of the
Company's common stock as a signing bonus, valued at $170,000, which will not be
earned and delivered until one full year of service has elapsed under the
agreement. Under ASC 718 "Stock Compensation" the Company has expensed the
proportionate value of the stock compensation as of August 31, 2011 with an
offset to Additional-Paid-in-Capital for $10,712.
NOTE 9 - SUBSEQUENT EVENTS
On September 1, 2011, the Company issued 79,545 shares of its common stock as
prepaid media expense, for a value of $125,000 or $1.57 per share.
On September 28, 2011, DoMark entered into a Promissory Note among DoMark, as
borrower, R. Thomas Kidd, the Company's Chief Executive Officer, as guarantor,
and IFI, as lender. The principal amount of the note is $40,000 and bears
interest at a rate of 3% per annum. Payment in full is due on December 15, 2011.
The September 2011 Note provides for customary events of default which, if any
of them occurs, require the unpaid principal of, and accrued interest on the
September 2011 Note to be immediately due and payable plus interest at a rate of
18% per annum.
On September 28, 2011, DoMark entered into a second Amendment to the March 2011
Promissory Note among DoMark, as borrower, R. Thomas Kidd, the Company's Chief
12
Executive Officer, as guarantor, and IFI, as lender (the "Amendment to June 2011
Note"). The Amendment to the March and June 2011 Notes amend the due date of the
original underlying promissory notes among the parties to December 15, 2011.
On September 28, 2011, the Board of Directors of Armada sports & Entertainment,
Inc. appointed Robert M. Greenway and Paul Mangiamele as directors of the
Company. As per the agreement, each director will receive an annual salary of
$25,000 payable in quarterly installments. In addition, each director will
receive as compensation, 100,000 shares of restricted stock.
On September 29, 2011, the Company entered into an agreement with Global Sports
and Entertainment to procure celebrities or celebrity athletes to participate in
The Celebrity Golf Challenge series and/or host one of our other events. Fees
are dependent upon the ability of Global Sports and Entertainment to procure
celebrity hosts for the anticipated events. Should Global Sports and
Entertainment be successful in this endeavor, fees are estimated to be $30,000
for the remainder of 2011 and $290,000 for 2012.
On October 1, 2011, the Company entered into an agreement with Brener Zwikel &
Associates to develop global brand recognition of The Golf Championships and its
series of events. In compensation for services, the Company has agreed to issue
$90,000 in stock in quarterly installments beginning January 31, 2012. In
addition to the stock compensation, the Company has agreed to pay a monthly
retainer in the amount of $6,000 beginning October 30, 2011 and increasing to
$10,000 as of July 30, 2012 through November 30, 2012.
On October 8, 2011, the Company entered into a letter agreement with Mary A.
Beck who will serve as an independent director of DoMark. As per the agreement,
the director will receive an annual salary of $25,000 payable in quarterly
installments. In addition, the director will receive as compensation, 100,000
shares of restricted stock.
NOTE 10 - CONTINGENCIES
On May 21, 2009, the Company entered into that certain Agreement for the
Exchange of Common Stock (the "Victory Lane Agreement") with Victory Lane
Financial Elite, LLC ("Victory Lane") with respect to a real estate lifestyle
business known as Victory Lane (the "Victory Lane Business") pursuant to which
the Company intended to purchase the Victory Lane Business. Shortly thereafter,
a dispute arose between the Company and Victory Lane regarding alleged
misrepresentations made by Victory Lane in connection with the Victory Lane
Agreement.
In August, 2009, Victory Lane Financial Elite, LLC, Legacy Development, LLC and
Patrick Costello filed suit in the Superior Court of Tattnall County, Georgia
(Civ. No. 2009-V-381-JW) against the Company, R. Thomas Kidd and various
officers and directors of the Company, alleging that the Company was in breach
of the Victory Lane Agreement and that the Company and certain of the individual
defendants had committed various torts against the plaintiffs and that certain
of the individual defendants had violated various fiduciary and other duties
owed to the plaintiffs in connection with the Victory Lane Agreement and the
handling of the Victory Lane Business (the "VLFE Case"). The plaintiffs sought a
declaratory judgment to the effect that the Victory Lane Agreement had not been
executed, as well as money damages from the Company and the individual
defendants. The Company and Mr. Kidd have answered the Complaint, denying any
liability for the plaintiff's claims and have asserted various counterclaims
including fraud and other torts. In July 2010 the court dismissed all of the
13
individual defendants, other than R. Thomas Kidd, in response to a motion to
dismiss for lack of jurisdiction. The case has since been stayed.
In December, 2009, AHIFO-21, LLC filed a lawsuit in the Superior Court of
Tattnall County, Georgia (Civ. No. 2009-V-672-JS) against Victory Lane, LLC,
Patrick J. Costello and Stephen Brown (the "Victory Lane Defendants") alleging
that the Victory Lane Defendants owe the plaintiff more than $7,740,000 in
respect of one or more loans made by the plaintiff to certain of the Victory
Lane Defendants in connection with the Victory Lane Business (the "AHIFO Case").
In February, 2010, the Victory Lane Defendants filed a Third Party Complaint
against the Company and R. Thomas Kidd, claiming that the Company and Mr. Kidd
should be liable for any amounts the Victory Lane Defendants are required to pay
to the plaintiff in this case. The Company and Mr. Kidd have answered the
Complaint, denying any liability for the plaintiff's claims and have asserted
various counterclaims including fraud and other torts. The Company and Mr. Kidd
filed a motion to dismiss the Third Party Complaint, but the entire case was
subsequently stayed.
In February, 2010, the Victory Lane Defendants filed a Third Party Complaint
against the Company and R. Thomas Kidd, claiming that the Company and Mr. Kidd
should be liable for any amounts the Victory Lane Defendants are required to pay
to the plaintiff in this case. The Company and Mr. Kidd have answered the
Complaint, denying any liability for the plaintiff's claims and have asserted
various counterclaims including fraud and other torts. The Company and Mr. Kidd
filed a motion to dismiss the Third Party Complaint, but the entire case was
subsequently stayed.
Because each of the VLFE Case and the AHIFO Case have been stayed and because
discovery in those cases is not complete, the Company has not reached a
determination that any loss is other than remote and that the amount of any
damages, if any were determined adverse to the Company, would be reasonably
estimable. The Company believes that it has meritorious claims against the
opposing parties with respect to the Victory Lane Agreement and that the claims
asserted against it are not meritorious. The Company intends to defend itself
vigorously.
NOTE 11 - OTHER EVENTS
RESTATEMENT
The Company intends to restate its financial statements for the year ending May
31, 2011, to correct items relating to the outstanding shares issued for the
Victory Lane agreement. Accordingly, our previously filed financial statements
for the year ending May 31, 2011 cannot be relied upon. On May 27, 2009, the
Company issued 5,747,126 shares of common stock, valued at $10,000,000, to
Victory Lane Financial Elite, LLC for the purchase of Victory Lane. Shortly
thereafter, a dispute arose between the Company and Victory Lane regarding
alleged misrepresentations made by Victory Lane in connection with the Victory
Lane Agreement. As a result the Company considered the transaction as
incomplete, demanded the return of the shares and reversed the initial recording
of the transaction.
Our May 31, 2011, 10-K will be restated to include the issuance of the shares
valued at $10,000,000, a stock receivable for the outstanding shares due to the
Company, and an allowance for bad debt of $5,000,000 based on management's
estimate of the collectability of the stock receivable.
14
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis contains various "forward looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, regarding future events or the future financial performance of
the Company that involve risks and uncertainties. Certain statements included in
this Form 10-Q, including, without limitation, statements related to anticipated
cash flow sources and uses, and words including but not limited to
"anticipates", "believes", "plans", "expects", "future" and similar statements
or expressions, identify forward looking statements. Any forward-looking
statements herein are subject to certain risks and uncertainties in the
Company's business, including but not limited to, reliance on key customers and
competition in its markets, market demand, product performance, technological
developments, maintenance of relationships with key suppliers, difficulties of
hiring or retaining key personnel and any changes in current accounting rules,
all of which may be beyond the control of the Company. The Company adopted at
management's discretion, the most conservative recognition of revenue based on
the most astringent guidelines of the SEC. Management will elect additional
changes to revenue recognition to comply with the most conservative SEC
recognition on a forward going accrual basis. The Company's actual results could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth therein.
Forward-looking statements involve risks, uncertainties and other factors, which
may cause our actual results, performance or achievements to be materially
different from those expressed or implied by such forward-looking statements.
Factors and risks that could affect our results and achievements and cause them
to materially differ from those contained in the forward-looking statements
include those identified in the section titled "Risk Factors" in the Company's
Annual Report on Form 10-K for the transition period ended May 31, 2011, as well
as other factors that we are currently unable to identify or quantify, but that
may exist in the future.
In addition, the foregoing factors may affect generally our business, results of
operations and financial position. Forward-looking statements speak only as of
the date the statement was made. We do not undertake and specifically decline
any obligation to update any forward-looking statements.
RECENT DEVELOPMENTS
Effective May 31, 2011, the Company formed a wholly owned subsidiary, Armada
Sports & Entertainment, Inc. ("Armada Sports"). Armada Sports is a sports
marketing and management company engaged in owning, developing and conducting
made for television sports and entertainment events. Armada Sports currently
owns THE GOLF CHAMPIONSHIPS, a series of unique competitions in the sport, known
as The Million Dollar Invitationals, The World Putting Tour Championships, and
the Celebrity Challenges.
On June 10, 2011, the Company entered into a media agreement with TVA Media
Group, Inc. to provide a national television, radio, social media, and print
media campaign for the benefit of the Company and Armada Sports & Entertainment,
Inc., a wholly owned subsidiary of the Company.
15
On July 25, 2011, Armada Sports & Entertainment, Inc., a wholly owned subsidiary
of Domark International, Inc. announced that it had engaged GoConvergence to
provide its world class television production services in connection with its US
and Caribbean made for television Golf Championships, the Million Dollar
Invitationals, and World Putting Tour Championships.
On August 21, 2011, the Company entered into an Asset Purchase Agreement to
acquire all of the assets of USPT, LLC., which owns and operates The US Putting
Tour Championship. The purchase price for the assets was fifty thousand shares
(50,000) of restricted common stock of the Company. In addition to the shares to
be issued at closing, the Company has agreed to issue additional shares pursuant
to the following schedule, and wholly conditioned upon the business assets being
purchased generating a profit in the following three years after purchase;25,000
shares for 2012,25,000 shares for 2013, and 25,000 shares for 2014. Closing has
not occurred as of the date of this report.
On August 24, 2011, Armada Sports & Entertainment, Inc., a wholly owned
subsidiary of DoMark International, Inc., announced that it had reached an
agreement with Peter Jacobsen Sports to provide event management services for
its three (3) US and Caribbean Million Dollar Invitational and World Putting
Tour Championships commencing in 2012.
ADDITIONAL INFORMATION
We file reports and other materials with the Securities and Exchange Commission.
These documents may be inspected and copied at the Securities and Exchange
Commission, Judiciary Plaza, 100 F Street, N.E., Room 1580, Washington, D.C.,
20549. You can obtain information on the operation of the Public Reference Room
by calling the Commission at 1-800-SEC-0330. You can also get copies of
documents that we file with the Commission through the Commission's Internet
site at www.sec.gov.
RESULTS OF OPERATIONS
Revenues for the three months ended August 31, 2011 were $0 as compared to $0
for the three months ended August 31, 2010. After the sale of ECFO on October
20, 2009, the Company no longer has any operating subsidiaries and is considered
a development stage company as it has nominal operations and assets consisting
of only cash or cash equivalents. Our future revenue plan is dependent on our
ability to effectively close new viable acquisitions.
General and administrative expenses for the three months ended August 31, 2011
increased by $125,593 from $11,996 for the three months ended August 31, 2010.
During the current period, the Company issued stock compensation for a value of
$28,153. Other expenses increased as a result of the development of the
Company's sports business through its wholly owned subsidiary, Armada Sports &
Entertainment, Inc.
The Company realized a net loss of $137,589 for the three months ended August
31, 2011 compared to net loss of $11,996 for the three months ended August 31,
2010.
16
LIQUIDITY AND CAPITAL RESOURCES
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 during the three months ended August 31, 2011 from the sale of our
common stock and $0 for the three months ended August 31, 2010. The Company will
continue to require financing from loans and notes payable until such time our
business has generated income sufficient to carry our operating costs.
Cash used in operating activities for the three months ended August 31, 2011 was
($70,558) compared to ($3,577) for the three months ended August 31, 2010.
Cash used in investing activities was ($4,000) for the three monthsended August
31, 2011, compared to $0.00 for the three months ended August 31, 2010.
Cash provided by financing activities was $70,727 for the three monthsended
August 31, 2011 as compared to $54,095 for the three months ended August 31,
2010. Financing activities consisted of cash received from shareholders and cash
received on notes payable.
OFF-BALANCE SHEET ARRANGEMENTS
None
OTHER CONSIDERATIONS
There are numerous factors that affect the business and the results of its
operations. Sources of these factors include general economic and business
conditions, federal and state regulation of business activities, the level of
demand for product services, the level and intensity of competition in the media
content industry, and the ability to develop new services based on new or
evolving technology and the market's acceptance of those new services, our
ability to timely and effectively manage periodic product transitions, the
services, customer and geographic sales mix of any particular period, and our
ability to continue to improve our infrastructure including personnel and
systems to keep pace with our anticipated rapid growth.
CRITICAL ACCOUNTING POLICIES
The Company prepares its consolidated financial statements in accordance with
Accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Our management periodically evaluates the estimates and judgments made.
Management bases its estimates and judgments on historical experience and on
various factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates as a result of different
assumptions or conditions.
17
STOCK BASED COMPENSATION
The Company accounts for its stock based compensation in which the Company
obtains employee services in share-based payment transactions under the
recognition and measurement principles of the fair value recognition provisions
of section 718-10-30 of
the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of
the FASB Accounting Standards Codification, all transactions in which goods or
services are the Consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably
measurable. The measurement date used to determine the fair value of the equity
instruments issued is the earlier of the date on which the performance is
complete or the date on which it is probable that performance will occur.
The fair value of share options or similar instrument awards is estimated on the
date of grant using a Black-Scholes option-pricing valuation model. The ranges
of assumptions for inputs are as follows:
* Expected term of share options and similar instruments: Pursuant to
Paragraph 718-10-50-2 of the FASB Accounting Standards Codification
the expected term of share options and similar instruments represents
the period of time the options and similar instruments are expected to
be outstanding taking into consideration of the contractual term of
the instruments and employees' expected exercise and post-vesting
employment termination behavior into the fair value (or calculated
value) of the instruments. The Company will use historical data to
estimate employee termination behavior. The contractual term of share
options or similar instruments is used as expected term of share
options or similar instruments for the Company if it is a thinly
traded public entity.
* Expected volatility of the entity's shares and the method used to
estimate it. An entity that uses a method that employs different
volatilities during the contractual term shall disclose the range of
expected volatilities used and the weighted-average expected
volatility. A thinly-traded or nonpublic entity that uses the
calculated value method shall disclose the reasons why it is not
practicable for it to estimate the expected volatility of its share
price, the appropriate industry sector index that it has selected, the
reasons for selecting that particular index, and how it has calculated
historical volatility using that index. The Company uses the average
historical volatility of the comparable companies over the expected
contractual life of the share options or similar instruments as its
expected volatility. If shares of a company are thinly traded the use
of weekly or monthly price observations would generally be more
appropriate than the use of daily price observations as the volatility
calculation using daily observations for such shares could be
artificially inflated due to a larger spread between the bid and asked
quotes and lack of consistent trading in the market.
* Expected dividends. An entity that uses a method that employs
different dividend rates during the contractual term shall disclose
the range of expected dividends used and the weighted-average expected
dividends. The expected dividend yield is based on the Company's
current dividend yield as the best estimate of projected dividend
yield for periods within the expected contractual life of the option.
18
* Risk-free rate(s). An entity that uses a method that employs different
risk-free rates shall disclose the range of risk-free rates used. The
risk-free interest rate is based on the U.S. Treasury yield curve in
effect at the time of grant for periods within the contractual life of
the option.
The Company's policy is to recognize compensation cost for awards with only
service conditions and a graded vesting schedule on a straight-line basis over
the requisite service period for the entire award.
ACCOUNTING POLICIES AND ESTIMATES
The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States of America requires our
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Our management periodically
evaluates the estimates and judgments made. Management bases its estimates and
judgments on historical experience and on various factors that are believed to
be reasonable under the circumstances. Actual results may differ from these
estimates as a result of different assumptions or conditions. As such, in
accordance with the use of accounting principles generally accepted in the
United States of America, our actual realized results may differ from
management's initial estimates as reported. A summary of significant accounting
policies are detailed in notes to the financial statements which are an integral
component of this filing.
ADDITIONAL INFORMATION
We file reports and other materials with the Securities and Exchange Commission.
These documents may be inspected and copied the Commission's Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the
Commission.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not hold any derivative instruments and do not engage in any hedging
activities. We attempt to acquire successfully operating subsidiaries and to
deploy accounting, governance, risk and compliance services, marketing,
management and media assets to the subsidiaries, to build the value of our
Company.
19
ITEM 4 - CONTROLS AND PROCEDURES
a) Evaluation of Disclosure Controls and Procedures
Our management team, under the supervision and with the participation of our
principal executive officer and our principal financial officer, evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures as such term is defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), as of the last day
of the fiscal period covered by this report, August 31, 2011. The term
disclosure controls and procedures means our controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is accumulated
and communicated to management, including our principal executive and principal
financial officer, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. Based on this evaluation,
our principal executive officer and our principal financial officer concluded
that our disclosure controls and procedures were not effective as of August 31,
2011.
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 chosen the COSO
framework on which to base its assessment. Based on this evaluation, our
management concluded that our internal control over financial reporting was not
effective as of August 31, 2011.
There were no changes in our internal control over financial reporting that
occurred during the fiscal year ended May 31, 2011 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
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.
b) Changes in Internal Control over Financial Reporting.
During the Quarter ended August 31, 2011, there were no changes in our internal
control over financial reporting (as such term is defined in Rule 13a-15(f)
under the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
20
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company may become involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, except as
discussed below, the ultimate disposition of these matters will not have a
material adverse effect on the Company's financial position, results of
operations, or liquidity except as follows:
On May 21, 2009, the Company entered into that certain Agreement for the
Exchange of Common Stock (the "Victory Lane Agreement") with Victory Lane
Financial Elite, LLC ("Victory Lane") with respect to a real estate lifestyle
business known as Victory Lane (the "Victory Lane Business") pursuant to which
the Company intended to purchase the Victory Lane Business. Shortly thereafter,
a dispute arose between the Company and Victory Lane regarding alleged
misrepresentations made by Victory Lane in connection with the Victory Lane
Agreement.
In August, 2009, Victory Lane Financial Elite, LLC, Legacy Development, LLC and
Patrick Costello filed suit in the Superior Court of Tattnall County, Georgia
(Civ. No. 2009-V-381-JW) against the Company, R. Thomas Kidd and various
officers and directors of the Company, alleging that the Company was in breach
of the Victory Lane Agreement and that the Company and certain of the individual
defendants had committed various torts against the plaintiffs and that certain
of the individual defendants had violated various fiduciary and other duties
owed to the plaintiffs in connection with the Victory Lane Agreement and the
handling of the Victory Lane Business (the "VLFE Case"). The plaintiffs sought a
declaratory judgment to the effect that the Victory Lane Agreement had not been
executed, as well as money damages from the Company and the individual
defendants. The Company and Mr. Kidd have answered the Complaint, denying any
liability for the plaintiff's claims and have asserted various counterclaims
including fraud and other torts. In July 2010 the court dismissed all of the
individual defendants, other than R. Thomas Kidd, in response to a motion to
dismiss for lack of jurisdiction. The case has since been stayed.
In December, 2009, AHIFO-21, LLC filed a lawsuit in the Superior Court of
Tattnall County, Georgia (Civ. No. 2009-V-672-JS) against Victory Lane, LLC,
Patrick J. Costello and Stephen Brown (the "Victory Lane Defendants") alleging
that the Victory Lane Defendants owe the plaintiff more than $7,740,000 in
respect of one or more loans made by the plaintiff to certain of the Victory
Lane Defendants in connection with the Victory Lane Business (the "AHIFO Case").
In February, 2010, the Victory Lane Defendants filed a Third Party Complaint
against the Company and R. Thomas Kidd, claiming that the Company and Mr. Kidd
should be liable for any amounts the Victory Lane Defendants are required to pay
to the plaintiff in this case. The Company and Mr. Kidd have answered the
Complaint, denying any liability for the plaintiff's claims and have asserted
various counterclaims including fraud and other torts. The Company and Mr. Kidd
filed a motion to dismiss the Third Party Complaint, but the entire case was
subsequently stayed.
Because each of the VLFE Case and the AHIFO Case have been stayed and because
discovery in those cases is not complete, the Company has not reached a
determination that any loss is other than remote and that the amount of any
damages, if any were determined adverse to the Company, would be reasonably
estimable. The Company believes that it has meritorious claims against the
21
opposing parties with respect to the Victory Lane Agreement and that the claims
asserted against it are not meritorious. The Company intends to defend itself
vigorously.
ITEM 1A - RISK FACTORS
You should carefully consider the following risk factors, in addition to the
risk factors disclosed in prior filings on Form 10-K (as amended) or 10-Q before
making an investment decision. If any of the following risks actually occur, our
business, financial condition or results of operations could be materially
adversely affected. In such cases, the trading price of our common stock could
decline and you may lose all or a part of your investment.
OUR COMMON STOCK IS SUBJECT TO PENNY STOCK REGULATION
Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be penny stock unless
that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
the NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
registrant's net tangible assets; or exempted from the definition by the
Commission. Since our shares are deemed to be "penny stock", trading in the
shares will be subject to additional sales practice requirements on
broker/dealers who sell penny stock to persons other than established customers
and accredited investors.
WE MAY NOT HAVE ACCESS TO SUFFICIENT CAPITAL TO PURSUE OUR BUSINESS AND
THEREFORE WOULD BE UNABLE TO ACHIEVE OUR PLANNED FUTURE GROWTH:
We intend to pursue a growth strategy that includes development of the Company
business and technology. Currently we have limited capital which is insufficient
to pursue our plans for development and growth. Our ability to implement our
growth plans will depend primarily on our ability to obtain additional private
or public equity or debt financing. We are currently seeking additional capital.
Such financing may not be available at all, or we may be unable to locate and
secure additional capital on terms and conditions that are acceptable to us. Our
failure to obtain additional capital will have a material adverse effect on our
business.
OUR LACK OF DIVERSIFICATION IN OUR BUSINESS SUBJECTS INVESTORS TO A GREATER RISK
OF LOSSES
All of our efforts are focused on the development and growth of our business and
its technology in an unproven area.
22
BECAUSE WE ARE QUOTED ON THE OTCBB INSTEAD OF AN EXCHANGE OR NATIONAL QUOTATION
SYSTEM, OUR INVESTORS MAY HAVE A TOUGHER TIME SELLING THEIR STOCK OR EXPERIENCE
NEGATIVE VOLATILITY ON THE MARKET PRICE OF OUR STOCK.
Our common stock is traded on the OTCBB. The OTCBB is often highly illiquid.
There is a greater chance of volatility for securities that trade on the OTCBB
in comparison to a national exchange or quotation system. This volatility may be
caused by a variety of factors, including the lack of readily available price
quotations, the absence of consistent administrative supervision of bid and ask
quotations, lower trading volume, and market conditions. Investors in our common
stock may experience high fluctuations in the market price and volume of the
trading market for our securities. These fluctuations, when they occur, have a
negative effect on the market price for our securities. Accordingly, our
stockholders may not be able to realize a fair price from their shares when they
determine to sell them or may have to hold them for a substantial period of time
until the market for our common stock improves.
FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH
SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS AND OPERATING RESULTS.
It may be time consuming, difficult and costly for us to develop and implement
the additional internal controls, processes and reporting procedures required by
the Sarbanes-Oxley Act. We may need to hire additional financial reporting,
internal auditing and other finance staff in order to develop and implement
appropriate additional internal controls, processes and reporting procedures. If
we are unable to comply with these requirements of the Sarbanes-Oxley Act, we
may not be able to obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires of publicly traded companies.
If we fail to comply in a timely manner with the requirements of Section 404 of
the Sarbanes-Oxley Act regarding internal control over financial reporting or to
remedy any material weaknesses in our internal controls that we may identify,
such failure could result in material misstatements in our financial statements,
cause investors to lose confidence in our reported financial information and
have a negative effect on the trading price of our common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations,
beginning with our annual report on Form 10-K for our fiscal period ending May
31, 2008, we will be required to prepare assessments regarding internal controls
over financial reporting and beginning with our annual report on Form 10-K for
our fiscal period ending May 31, 2009, furnish a report by our management on our
internal control over financial reporting. We have begun the process of
documenting and testing our internal control procedures in order to satisfy
these requirements, which is likely to result in increased general and
administrative expenses and may shift management time and attention from
revenue-generating activities to compliance activities. While our management is
expending significant resources in an effort to complete this important project,
there can be no assurance that we will be able to achieve our objective on a
timely basis. There also can be no assurance that our auditors will be able to
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
23
results in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or detected. The
PCAOB defines "significant deficiency" as a deficiency that results in more than
a remote likelihood that a misstatement of the financial statements that is more
than inconsequential will not be prevented or detected.
In the event that a material weakness is identified, we will employ qualified
personnel and adopt and implement policies and procedures to address any
material weaknesses that we identify. However, the process of designing and
implementing effective internal controls is a continuous effort that requires us
to anticipate and react to changes in our business and the economic and
regulatory environments and to expend significant resources to maintain a system
of internal controls that is adequate to satisfy our reporting obligations as a
public company. We cannot assure you that the measures we will take will
remediate any material weaknesses that we may identify or that we will implement
and maintain adequate controls over our financial process and reporting in the
future.
Any failure to complete our assessment of our internal control over financial
reporting, to remediate any material weaknesses that we may identify or to
implement new or improved controls, or difficulties encountered in their
implementation, could harm our operating results, cause us to fail to meet our
reporting obligations or result in material misstatements in our financial
statements. Any such failure could also adversely affect the results of the
periodic management evaluations of our internal controls and, in the case of a
failure to remediate any material weaknesses that we may identify, would
adversely affect the annual auditor attestation reports regarding the
effectiveness of our internal control over financial reporting that are required
under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could
also cause investors to lose confidence in our reported financial information,
which could have a negative effect on the trading price of our common stock.
OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN
OUR SHARE PRICE. THE PRICE AT WHICH YOU PURCHASE OUR COMMON SHARES MAY NOT BE
INDICATIVE OF THE PRICE THAT WILL PREVAIL IN THE TRADING MARKET. YOU MAY BE
UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY
RESULT IN SUBSTANTIAL LOSSES TO YOU. THE MARKET PRICE FOR OUR COMMON SHARES IS
PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A
SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED
The market for our common shares is characterized by significant price
volatility when compared to seasoned issuers, and we expect that our share price
will continue to be more volatile than a seasoned issuer for the indefinite
future. The volatility in our share price is attributable to a number of
factors. First, as noted above, our common shares are sporadically and thinly
traded. As a consequence of this lack of liquidity, the trading of relatively
small quantities of shares by our shareholders may disproportionately influence
the price of those shares in either direction. The price for our shares could,
for example, decline precipitously in the event that a large number of our
common shares are sold on the market without commensurate demand, as compared to
a seasoned issuer which could better absorb those sales without adverse impact
on its share price. Secondly, we are a speculative or "risky" investment due to
our limited operating history and lack of profits to date, and uncertainty of
future market acceptance for our potential products. As a consequence of this
enhanced risk, more risk-adverse investors may, under the fear of losing all or
most of their investment in the event of negative news or lack of progress, be
more inclined to sell their shares on the market more quickly and at greater
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discounts than would be the case with the stock of a seasoned issuer. Many of
these factors are beyond our control and may decrease the market price of our
common shares, regardless of our operating performance. We cannot make any
predictions or projections as to what the prevailing market price for our common
shares will be at any time, including as to whether our common shares will
sustain their current market prices, or as to what effect that the sale of
shares or the availability of common shares for sale at any time will have on
the prevailing market price.
Shareholders should be aware that, according to SEC Release No. 34-29093, the
market for penny stocks has suffered in recent years from patterns of fraud and
abuse. Such patterns include (1) control of the market for the security by one
or a few broker-dealers that are often related to the promoter or issuer; (2)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and (5) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
VOLATILITY IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION,
THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR
PROFITABILITY AND RESULTS OF OPERATIONS.
As discussed in the preceding risk factors, the market for our common shares is
characterized by significant price volatility when compared to seasoned issuers,
and we expect that our share price will continue to be more volatile than a
seasoned issuer for the indefinite future. In the past, plaintiffs have often
initiated securities class action litigation against a company following periods
of volatility in the market price of its securities. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management's attention and resources.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES
The Company issued 550,660 of restricted shares to TVA Media Group.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the interim period ended
August 31, 2011.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted for a vote from securities holders during the
interim period ended August 31, 2011.
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ITEM 5 - OTHER INFORMATION
RESTATEMENT
The Company intends to restate its financial statements for the year ending May
31, 2011, to correct items relating to the outstanding shares issued for the
Victory Lane agreement. Accordingly, our previously filed financial statements
for the year ending May 31, 2011 cannot be relied upon. On May 27, 2009, the
Company issued 5,747,126 shares of common stock, valued at $10,000,000, to
Victory Lane Financial Elite, LLC for the purchase of Victory Lane. Shortly
thereafter, a dispute arose between the Company and Victory Lane regarding
alleged misrepresentations made by Victory Lane in connection with the Victory
Lane Agreement. As a result the Company considered the transaction as
incomplete, demanded the return of the shares and reversed the initial recording
of the transaction.
Our May 31, 2011, 10-K will be restated to include the issuance of the shares
valued at $10,000,000, a stock receivable for the outstanding shares due to the
Company, and an allowance for bad debt of $5,000,000 based on management's
estimate of the collectability of the stock receivable.
ITEM 6 - EXHIBITS
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act.
32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act.
32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934 the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DoMark International, Inc.
Registrant
Date: October 14, 2011 By: /s/ R. Thomas Kidd
--------------------------------------
R. Thomas Kidd
Chief Executive Officer, Principal
Executive Officer
By: /s/ William Seery
--------------------------------------
William Seery
Chief Financial Officer
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