U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 29, 2012
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT
For the transition period from ________ to ________
Commission File No. 333-136247
DoMark International, Inc.
(Name of small business issuer as specified in its charter)
Nevada 20-4647578
(State of Incorporation) (IRS Employer Identification No.)
1809 E Broadway, #125
Oviedo, FL 32765
(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 [X] 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 [X] 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 April 23, 2012
----- -------------------------------
Common stock, $0.001 par value 37,566,798
EXPLANATORY NOTE
This Form 10-Q of Domark International, Inc.'s (the "Company") reflects the
status and operations of the Company and its Armada/The Golf Championships
("Armada") subsidiary as of February 29, 2012.
On March 5, 2012 Company entered into an Asset Purchase Agreement (the
"Agreement") with its then controlling shareholder, R. Thomas Kidd ("Kidd"), for
the sale of Armada, and certain assets related thereto.
Pursuant to the terms of the Agreement, all assets and liabilities directly
related to Armada (as more fully described in Exhibit 10.1 of the Company's
Current Report on Form 8-k filed on March 9, 2012) were transferred to a new
company ("NewCo") formed by Kidd. In consideration for the sale of Armada, Kidd
returned to the Company 50,000 shares of the Company's Series A Preferred Stock
and 9,771,500 shares of the Company's Common Stock. In addition, NewCo assumed
all liabilities due to Kidd by the Company, estimated to be $1,084,000.
As of March 5, 2012 the Company is solely focused on the operations of its
SolaWerks, Inc. subsidiary. As a result of the change in the Company's business
model, the disclosures and financial results contained herein should be reviewed
as they relate to the Company's historical operations but should be discounted
as they relate to the Company's potential future results.
2
DOMARK INTERNATIONAL, INC.
INDEX TO FORM 10-Q FILING
FOR THE NINE MONTHS ENDED FEBRUARY 29, 2012
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets 4
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 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 1A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 22
Item 4. Mine Safety Disclosure 22
Item 5. Other information 22
Item 6. Exhibits 23
3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
DOMARK INTERNATIONAL, INC.
(A development stage company)
CONSOLIDATED BALANCE SHEETS
As of As of
February 29, May 31,
2012 2011
------------ ------------
(Unaudited) (Re-stated)
ASSETS
CURRENT ASSETS
Cash $ 5,993 $ 4,587
Inventory - tv production 16,926 --
Prepaid expenses 403,593 --
------------ ------------
TOTAL CURRENT ASSETS 426,512 4,587
------------ ------------
FIXED ASSETS
Property & equipment, net 3,867 399
------------ ------------
TOTAL FIXED ASSETS 3,867 399
------------ ------------
OTHER ASSETS
Website development costs, net 5,167 6,417
VPAR license, net 24,432 --
Deferred finance costs 47,097 --
------------ ------------
TOTAL OTHER ASSETS 76,696 6,417
------------ ------------
TOTAL ASSETS $ 507,075 $ 11,403
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 323,470 $ 44,987
Notes payable 355,645 75,000
Due to affiliate and shareholder 926,735 696,171
------------ ------------
TOTAL CURRENT LIABILITIES 1,605,850 816,158
------------ ------------
TOTAL LIABILITIES 1,605,850 816,158
------------ ------------
STOCKHOLDERS' DEFICIT
Convertible preferred stock, series A: $0.001 par value,
authorized: 2,000,000 issued: 100,000 and 100,000 shares,
respectively 100 100
Common stock: $0.001 par value, authorized: 100,000,000
issued: 37,566,798 and 36,460,835 shares, respectively 37,566 36,461
Additional paid-in capital 27,472,064 26,448,172
Common stock payable 37,500 --
Accumulated deficit (26,850,830) (26,850,830)
Accumulated deficit during the development stage (1,795,175) (438,656)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIT (1,098,775) (804,755)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 507,075 $ 11,403
============ ============
See accompanying notes to the financial statements
4
DOMARK INTERNATIONAL, INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
From October 21, 2009
(Development Stage)
Three Months Ended Nine Months Ended through
February 29, February 28, February 29, February 28, February 29,
2012 2011 2012 2011 2012
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUE $ -- $ -- $ -- $ -- $ --
Cost of Sales 17,918 17,918 17,918
Gross loss (17,918) (17,918) (17,918)
OPERATING EXPENSES:
Bad debt expense -- -- -- 100,000 100,000
General & Administrative 781,671 (450) 1,338,601 26,511 1,686,824
Impairment of goodwill -- -- -- -- 10,000
------------ ------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 781,671 (450) 1,338,601 (126,511) 1,814,742
------------ ------------ ------------ ------------ ------------
INCOME/(LOSS) FROM OPERATIONS (799,589) 450 (1,356,519) (126,511) (1,814,742)
OTHER (INCOME) EXPENSES
Impairment of asset -- -- -- (10,000) (10,000)
Other Income -- -- -- -- 29,567
------------ ------------ ------------ ------------ ------------
NET GAIN/(LOSS) FROM OPERATIONS $ (799,589) $ 450 $ (1,356,519) $ (136,511) $ (1,795,175)
============ ============ ============ ============ ============
NET INCOME/(LOSS) $ (799,589) $ 450 $ (1,356,519) $ (136,511) $ (1,795,175)
============ ============ ============ ============ ============
NET LOSS PER COMMON SHARE - BASIC $ (0.01) $ (0.00) $ (0.02) $ (0.00)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING: 37,090,166 36,460,835 36,990,434 36,460,835
See accompanying notes to the financial statements
5
DOMARK INTERNATIONAL, INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period from
October 21, 2009
(Development
Nine Months Ended Stage) to
February 29, February 28, February 29,
2012 2011 2012
------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,356,519) $ (136,511) $ (1,795,175)
------------ ------------ ------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 9,253 768 11,627
Impairment of Assets -- 10,000 10,000
Bad Debt Expense -- 100,000 --
Stock issued as compensation and for expenses 687,498 -- 687,587
Changes in operating assets and liabilities:
Increase in inventory- tv production (28,593) -- (28,593)
Bank Overdraft -- 22 --
Prepaid expenses & other current assets (16,926) -- (16,926)
Accounts payable and accrued expenses
278,483 -- 199,292
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (426,804) (25,721) (932,188)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for licensing (25,000) -- (25,000)
Furniture & equipment (4,000) -- (4,000)
Cash paid for web development (4,000) -- (7,500)
------------ ------------ ------------
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES (33,000) -- (36,500)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Deferred financing costs (50,000) -- (50,000)
Proceeds from notes payable 280,645 -- 355,645
Payments on notes payable -- -- (100,469)
Proceeds from stockholder loans 230,565 25,546 764,918
------------ ------------ ------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 461,210 25,546 970,094
------------ ------------ ------------
NET CHANGE IN CASH 1,406 (197) 2,466
CASH BALANCE AT BEGINNING OF PERIOD 4,587 197 3,527
------------ ------------ ------------
CASH BALANCE AT END OF PERIOD $ 5,993 $ -- $ 5,993
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Stock issued for prepaid expense $ 375,000 $ -- $ 375,000
============ ============ ============
See Accompanying Notes to the Financial Statements
6
DOMARK INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED FEBRUARY 29, 2012
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 November 2011 the Company had no material ongoing operations. The business
of the Company during the period from October 2009 through November 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"). On October 13, 2011, the Company filed an
Amendment to the Articles of Armada Sports, changing its name to The Golf
Championships, Inc. ("TGC"). TGC is a sports marketing and Management company
engaged in owning, developing, and conducting made-for-television Sports and
entertainment events. The Golf Championships, Inc. 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 TGC, 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. The Company is currently in default with
the Nevada Secretary of State.
NOTE 2 - GOING CONCERN
As reflected in the accompanying consolidated financial statements, the Company
had a deficit accumulated during the development stage of $1,795,175 at February
29, 2012, and a net loss of $1,356,523 for the nine months 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
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
7
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 nine months ended February 29, 2012 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.
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 February 29, 2012 and February
28, 2011, cash and cash equivalents included cash in the bank.
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.
FILM PROPERTY AND SCREENPLAY RIGHTS
The Company capitalized costs it incurs to buy or produce film or transcripts
that will later be marketed or be used in the production of films according to
ASC 926, ENTERTAINMENT - FILMS. The Company will begin amortization of
capitalized film costs and accrual (expensing) of participation costs when a
film is released and it begins to recognize revenue from that film. The costs of
producing a film and bringing that film to market consist of film costs,
participation costs, exploitation costs, and manufacturing costs. Pursuant to
FASB Codification Topic 926-20-35, the Company will begin amortization of
capitalized film costs using the individual-film-forecast-computation which
amortizes or accrues such costs in the same ratio that current period actual
revenue bears to the estimated remaining unrecognized ultimate revenue as of the
beginning of the current fiscal year.
PRINCIPLES OF CONSOLIDATION
These interim consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, The Golf Championships, Inc. All
intercompany balances and transactions have been eliminated in consolidation.
8
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 November 30, 2011 and 2010, no options and
warrants were outstanding.
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 $926,736 and $696,171 as of
February 29, 2012 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 The Golf Championships, 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, TGC 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 November 30, 2011, TGC
modified the original Agreement by extending the due dates and modifying the
terms as follows:
9
* The final stock tranche is to be issued by March 15, 2012.
* Three payments of $50,000 each, payable on January 15, 2012, February
15, 2012, and March 15, 2012. The total sum of $150,000 includes a 25%
increase in the costs outlined in the original agreement as
"liquidated damages" for the delay in starting the project. TVA will
commence services upon receipt of payment on January 15, 2012 and will
credit the Company $15,000 that may be applied towards future projects
with TVA upon full payment as outlined in the contract modification.
As of February 29, 2012, $150,000 was due for future media services not yet
rendered, however the payments have not been made and the TGC is seeking
modification of the current agreement.
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 with 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
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, TGC (fka 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.
On August 12, 2011, the Company entered into an Agent Agreement with VPAR Golf.
VPAR has granted TGC an exclusive license on its VPAR Scoring system for Florida
business development and for use at its events The Golf Championships, wherever
they may occur in the world, excluding the United Kingdom. Pursuant to the terms
of the agreement, TGC shall pay a license fee for year 1, payable on January 2,
2012, of $25,000. For years 2 through 7, the yearly fee is $10,000 and payable
each year in January.
10
On September 16, 2011, the Company engaged Casey Walker as VP Administration
with an effective start date of July 15, 2011. The Company has agreed to pay a
salary of $48,000 each year for the five year term of the agreement, with 5%
increases each year. In addition, Ms. Walker 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 until after one full year of service has elapsed. On
December 28, 2011, Ms. Walker resigned her position with the Company as VP
Administration.
On September 28, 2011, Robert M. Greenway and Paul Mangiamele were appointed 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.
Effective March 5, 2012, Robert M. Greenway and Paul Mangiamele resigned from
their respective positions on the Board of Directors.
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. As of February 29, 2012, the
Company has incurred $0 fees for services.
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. As of February 29, 2012,
$30,000 was due under this agreement, however the payments have not been made
and the TGC is seeking modification of the current agreement.
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. . Effective March 5, 2012, Mary Beck resigned from
her position on the Board of Directors.
On October 31, 2011, the Company entered into an agreement with CBS Sports, A
Division of CBS Broadcasting, Inc. Pursuant to the terms of the agreement, CBS
will make available eight (8) two (2)-hour time periods for the high-definition
(HD) broadcast coverage of each of the 2012-2013 and 2013-2014 Million Dollar
Invitationals. As consideration, the Company is to pay the net sums of (a)
$450,000 per two (2)-hour network time period made available for the 2012-2013
Programs for a total of $1,800,000; and (b) $470,000 per two (2)-hour network
time period made available for the 2013-2014 Programs, for a total of
$1,880,000. The net sum for the 2012-2013 Programs shall be paid to CBS as
follows: (a)$50,000 by no later than thirty (30) days prior to the taping of
each Event, with the balance of $400,000 by no later than forty-five (45) days
prior to the broadcast of each 2012-2013 Program. The net sum for the 2013-2014
Programs shall be paid to CBS as follows: (b)$50,000 by no later than thirty
(30) days prior to the taping of each Event, with the balance of $420,000 by no
later than forty-five (45) days prior to the broadcast of each 2013-2014
Program. The total net sum payable to CBS under the Agreement is $3,680,000.
In addition, the Company shall have the right to the following as set forth in
the Agreement:
* The Company shall have the right to sell eighteen (18) thirty
(30)-second commercial units during each one (1)-hour time period of
network broadcast time CBS makes available for a total of thirty-six
(36) thirty (30)-second commercial units per two (2)-hour Program. The
Company retains all revenue received from the sale of the commercial
units.
* The Company will receive one (1) opening billboard, one (1) middle
billboard, and one (1) closing billboard in each Program.
* The notice to be included in the credit roll at the conclusion of the
broadcast of each Program containing the broadcast coverage of the
Events shall be: "This has been a presentation of CBS Sports in
association with The Golf Championships, Inc."
11
NOTE 7 - LIABILITIES & NOTES PAYABLE
On February 29, 2012, Company entered into a Promissory Note with R. Thomas
Kidd, Chief Executive Officer of the Company, and Infinite Funding, Inc.
("IFI"). This Note replaces four promissory notes issued by IFI to the Company
as more fully described below.
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 Note
was amended three times to extend the due date and was first amended on June 9,
2011, a second time on September 28, 2011, and a third amendment on December 9,
2011. Pursuant to the amendments, the Company agreed to pay extension fees of
$30,000, thereby increasing the principle balance of this Note to $105,000.
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 Note
was amended two times to extend the due date and was first amended on September
28, 2011 and again on December 9, 2011. Pursuant to the amendments, the Company
agreed to pay extension fees of $20,000, thereby increasing the principle
balance of this Note to $95,000.
Effective September 28, 2011, we obtained an unsecured loan in the amount of
$40,000 from Infinite Funding, Inc. ("IFI") as evidenced by a Promissory Note
from the Company to Infinite Funding, Inc. dated September 28, 2011 (the "IFI
Note"). The Note was amended to extend the due date on December 9, 2011.
Pursuant to this amendment, the Company agreed to pay an extension fee of
$10,000, thereby increasing the principle balance of this Note to $50,000.
Effective December 9, 2011, we obtained an unsecured loan in the amount of
$100,000 from Infinite Funding, Inc. ("IFI") as evidenced by a Promissory Note
from the Company to Infinite Funding, Inc. dated December 9, 2011 (the "IFI
Note").
As a result of the consolidated debt, the Company is now obligated under a
single Promissory Note dated February 29, 2012 in the aggregate principle amount
of $350,000 along with $5,644.53 in accrued interest. The Note is due on October
15, 2012 and accrues interest at 3% per annum.
NOTE 8 - STOCKHOLDER'S DEFICIT
On June 20, 2011, the Company issued 550,660 shares of restricted common stock
pursuant to 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 November 30, 2011, services
have not been performed and the Company has not recorded an expense.
On June 15, 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 November 30, 2011 with an offset to
Additional-Paid-in-Capital for $10,186. Pursuant to an agreement for the sale of
assets of The Golf Championships, Inc. made effective March 5, 2012, the Company
has reversed the accrued stock compensation in the amount of $10,186.
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 November 30, 2011 with an
offset to Additional-Paid-in-Capital for $50,137. Pursuant to an agreement for
the sale of assets of The Golf Championships, Inc. made effective March 5, 2012,
the Company has reversed the accrued stock compensation in the amount of
$50,137.
12
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 November 30, 2011 with an
offset to Additional-Paid-in-Capital for $53,096. Pursuant to an agreement for
the sale of assets of The Golf Championships, Inc. made effective March 5, 2012,
the Company has reversed the accrued stock compensation in the amount of
$53,096.
On September 1, 2011, the Company issued 79,545 shares of its common stock for a
value of $125,000 or $1.57 per share, pursuant to the terms of the agreement
entered into with TVA Media Group as discussed in Note 6.
On September 1, 2011, William Seery was entitled to 100,000 shares of the
Company's common stock as a signing bonus, valued at $155,000, 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 November 30, 2011 with an
offset to Additional-Paid-in-Capital for $38,644. Pursuant to an agreement for
the sale of assets of The Golf Championships, Inc. made effective March 5, 2012,
the Company has reversed the accrued stock compensation in the amount of
$38,644.
On September 1, 2011, William Seery was entitled to 100,000 shares of the
Company's common stock as a signing bonus, valued at $155,000, which will not be
earned and delivered until six months of service has elapsed under the
agreement. As of February 29, 2012, the shares have fully vested and the Company
has recorded common stock payable
On September 1, 2011, Joseph Mediate was entitled to 25,000 shares of the
Company's common stock as a signing bonus, valued at $38,750, 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 November 30, 2011 with an
offset to Additional-Paid-in-Capital for $9,661. Pursuant to an agreement for
the sale of assets of The Golf Championships, Inc. made effective March 5, 2012,
the Company has reversed the accrued stock compensation in the amount of $9,661.
On October 2, 2011, Jim Hartley was entitled to 100,000 shares of the Company's
common stock as a signing bonus, valued at $165,000, 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 November 30, 2011 with an offset to
Additional-Paid-in-Capital for $25,863. Pursuant to an agreement for the sale of
assets of The Golf Championships, Inc. made effective March 5, 2012, the Company
has reversed the accrued stock compensation in the amount of $25,863.
On October 31, 2011, Bruce Hopp was entitled to 25,000 shares of the Company's
common stock as a signing bonus, valued at $42,250, 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 November 30, 2011 with an offset to
Additional-Paid-in-Capital for $3,473. Pursuant to an agreement for the sale of
assets of The Golf Championships, Inc. made effective March 5, 2012, the Company
has reversed the accrued stock compensation in the amount of $3,473.
On December 15, 2011, the Company issued 79,545 shares of restricted common
stock pursuant to the terms of the agreement entered into with TVA Media Group
as discussed in Note 6. The shares were valued at $1.65 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 to TVA Media Group. As of February 29, 2012,
services have not been performed and the Company has not recorded an expense.
On January 9, 2012, the Company issued 100,000 shares to each of its directors,
Mary Beck, Paul Mangiamele, and Robert Greenway. The shares were valued at
$165,000 or $1.65 per share.
13
NOTE 9 - SUBSEQUENT EVENTS
ARMADA TRANSACTION
On March 5, 2012 Company entered into an Asset Purchase Agreement (the
"Agreement") with its then controlling shareholder, R. Thomas Kidd ("Kidd"), for
the sale of Armada, and certain assets related thereto.
Pursuant to the terms of the Agreement, all assets and liabilities directly
related to Armada (as more fully described in Exhibit 10.1 of the Company's
Current Report on Form 8-k filed on March 9, 2012) were transferred to a new
company ("NewCo") formed by Kidd. In consideration for the sale of Armada, Kidd
returned to the Company 50,000 shares of the Company's Series A Preferred Stock
and 9,771,500 shares of the Company's Common Stock. In addition, NewCo assumed
all liabilities due to Kidd by the Company, estimated to be $1,084,000.
CHANGE IN CONTROL
On March 5, 2012, Michael Franklin ("Franklin") purchased 50,000 shares of the
Company's Series A Preferred Stock from Kidd. Our Series A Preferred Stock is
convertible into Common Stock at the rate of 1,000 shares of Common for each
share of Preferred. In addition, our Preferred stock has voting rights
equivalent to 1,000 votes per share. Upon the conclusion of the Armada
transaction detailed above, Franklin became the controlling shareholder of
Domark by virtue of his ownership of 50,000 shares of Preferred Stock with
voting rights equivalent to 50,000,000 shares of our Common Stock.
CHANGE IN MANAGEMENT
Effective March 5, 2012, R. Thomas Kidd, Chairman and CEO the Company, resigned
from all positions held with the Company, including resigning from Board
service. There was no disagreement between the Registrant and Mr. Kidd at the
time of Mr. Kidd's resignation from the Board of Directors.
Effective March 5, 2012, Robert M. Greenway, Paul Mangiamele and Mary A. Beck
(together the "Former Directors"), each a member of the Company's Board of
Directors, resigned from their respective positions on the Board of Directors.
There was no disagreement between the Registrant and the Former Directors at the
time of their respective resignations from the Board of Directors.
Effective March 5, 2012, William Seery resigned from his position as Chief
Financial Officer of the Company. There was no disagreement between the
Registrant and Mr. Seery at the time of Mr. Kidd's resignation from the Board of
Directors.
Also on March 5, 2012, the Company's Shareholders appointed Michael Franklin as
sole Director, CEO and Corporate Secretary. Mr. Franklin will serve as a
director until his successor has been elected at the next annual meeting of the
Company's shareholders or until his earlier resignation, removal, or death. Mr.
Franklin has not been appointed to any committees of the Board, as the Board
does not presently have any committees.
MASTER CREDIT AGREEMENT
On March 2, 2012, the Company entered into a Master Credit Agreement with IFI,
which provides for a non-revolving line of credit, not to exceed $150,000. The
Company may request advances under the lending facility by issuing borrowing
certificates to the Lender. Each borrowing certificate, together with simple
interest accrued at 18% per year, becomes payable one year after the date of the
advance received. As of the date of this filing the Company has borrowed $60,000
against this credit facility.
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,
14
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.
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.
The Company has been made aware by the Chief Executive Officer of the Company,
that a complaint has been filed against the Company for approximately $534,000
by the United States Trustee for the Middle District of Florida to claim against
funds we owe to our Chief Executive Officer and his wife. The Company has not
been served with the complaint. In the event the Company is served with the
complaint, it will vigorously defend the complaint. However, the outcome of the
litigation, if it were to occur, cannot be determined at this time.
15
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of our financial condition and results of operations
should be read in conjunction with our financial statements and the related
notes, and other financial information included in this Form 10-Q.
Our Management's Discussion and Analysis contains not only statements that are
historical facts, but also statements that are forward-looking. Forward-looking
statements are, by their very nature, uncertain and risky. These risks and
uncertainties include international, national, and local general economic and
market conditions; our ability to sustain, manage, or forecast growth; our
ability to successfully make and integrate acquisitions; new product development
and introduction; existing government regulations and changes in, or the failure
to comply with, government regulations; adverse publicity; competition; the loss
of significant customers or suppliers; fluctuations and difficulty in
forecasting operating results; change in business strategy or development plans;
business disruptions; the ability to attract and retain qualified personnel; the
ability to protect technology; the risk of foreign currency exchange rate; and
other risks that are set forth in our Form 10-K for the period ended March 31,
2011 and as might be detailed from time to time in our filings with the
Securities and Exchange Commission.
Although the forward-looking statements in this Report reflect the good faith
judgment of our management, such statements can only be based on facts and
factors currently known by them. Consequently, and because forward-looking
statements are inherently subject to risks and uncertainties, the actual results
and outcomes may differ materially from the results and outcomes discussed in
the forward-looking statements. You are urged to carefully review and consider
the various disclosures made by us in this report as we attempt to advise
interested parties of the risks and factors that may affect our business,
financial condition, and results of operations and prospects.
OVERVIEW
Effective May 31, 2011, the Company formed a wholly owned subsidiary, Armada
Sports & Entertainment, Inc. ("Armada Sports"). On October 13, 2011, the Company
filed an Amendment to the Articles of Armada Sports, changing its name to The
Golf Championships, Inc. ("TGC"). TGC is a sports marketing and management
company engaged in owning, developing and conducting made for television sports
and entertainment events. The Golf Championships, Inc. 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 The Golf Championships, Inc.,
a wholly owned subsidiary of the Company. On November 30, 2011, the Company
modified the original Agreement by extending the due dates and modified the
terms of payments due to TVA. See note 6 to the financial statements.
On July 25, 2011, The Golf Championships, 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 12, 2011, the Company entered into an Agent Agreement with VPAR Golf.
VPAR has granted TGC an exclusive license on its VPAR Scoring system for Florida
business development and for use at its events The Golf Championships, wherever
they may occur in the world, excluding the United Kingdom.
On October 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 is 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. On
January 19, 2012, the parties agreed to mutually terminate the agreement of
August 21, 2011. The Company retains the ownership of the 2010 US Putting Tour
16
Championship television programming produced by the Company and may distribute
it to television outlets for airing in 2012 and will pay all costs in connection
therewith.
On October 24, 2011, The Golf Championships, 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. On January 13, 2012, the Company and Peter Jacobsen Sports
mutually agreed to terminate the Agreement.
On October 31, 2011, the Company entered into an agreement with CBS Sports, A
Division of CBS Broadcasting, Inc. Pursuant to the terms of the agreement, CBS
will make available eight (8) two (2)-hour time periods for the high-definition
(HD) broadcast coverage of each of the 2012-2013 and 2013-2014 Million Dollar
Invitationals. As consideration, the Company is to pay the net sums of (a)
$450,000 per two (2)-hour network time period made available for the 2012-2013
Programs for a total of $1,800,000; and (b) $470,000 per two (2)-hour network
time period made available for the 2013-2014 Programs, for a total of
$1,880,000. The net sum for the 2012-2013 Programs shall be paid to CBS as
follows: (a)$50,000 by no later than thirty (30) days prior to the taping of
each Event, with the balance of $400,000 by no later than forty-five (45) days
prior to the broadcast of each 2012-2013 Program. The net sum for the 2013-2014
Programs shall be paid to CBS as follows: (b)$50,000 by no later than thirty
(30) days prior to the taping of each Event, with the balance of $420,000 by no
later than forty-five (45) days prior to the broadcast of each 2013-2014
Program. The total net sum payable to CBS under the Agreement is $3,680,000.
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
THREE MONTHS ENDED FEBRUARY 29, 2012 vs. FEBRUARY 28, 2011
Revenues for the three months ended February 29, 2012 were $0 as compared to $0
for the three months ended November 30, 2010. After the sale of ECFO on October
20, 2009, the Company no longer had any operating subsidiaries until May 31,
2011 when the Company formed a wholly owned subsidiary, Armada Sports. The
Company is considered a development stage company. Our future revenue plan is
dependent on our ability to effectively close new viable acquisitions and the
successful production of the golf events planned in 2012 through our wholly
owned subsidiary, The Golf Championships, Inc., (fka Armada Sports &
Entertainment, Inc).
General and administrative expenses for the three months ended February 29, 2012
increased by $782,121 from ($450) for the three months ended February 28, 2011.
Stock compensation for the three months was $418,807 and other expenses have
increased as a result of the development of the Company's sports business
through its wholly owned subsidiary, The Golf Championships, Inc.
During the three months ended February 29, 2012, the Company issued stock for
prepaid expenses related to the golf events of our subsidiary in the amount of
$125,000.
The Company realized a net loss of $799,589 for the three months ended February
29, 2012 compared to net income of $450 for the three months ended February 28,
2012.
NINE MONTHS ENDED FEBRUARY 29, 2012 vs. FEBRUARY 28, 2011
Revenues for the six months ended February 29, 2012 were $0 as compared to $0
for the nine months ended February 28, 2011.
17
General and administrative expenses for the nine months ended February 29, 2012
increased by $1,312,091 from $26,511 for the nine months ended February 28,
2011. Expenses have increased as a result of the development of the Company's
sports business through its wholly owned subsidiary, The Golf Championships,
Inc. During the nine month period ended February 29, 2012, the Company issued
75,758 shares of common stock, for a value of $125,000, as compensation for
prepaid media services. The Company's total prepaid expenses for the nine months
is related to the golf events of our subsidiary and totals $403,593.
The Company realized a net loss of $1,356,519 for the nine months ended February
29, 2012 compared to a net loss of $136,511 for the nine months ended February
28, 2011.
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 nine months ended February 29, 2012 from the sale of our
common stock and $0 for the nine months ended February 28, 2011. 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 nine months ended February 29, 2012
was ($426,804) compared to ($25,743) for the nine months ended February 28,
2011.
Cash used in investing activities was ($33,000) for the nine months ended
February 29, 2012, compared to $0.00 for the nine months ended February 28,
2011.
Cash provided by financing activities was $461,210 for the nine months ended
February 29, 2012 as compared to $25,546 for the nine months ended February 28,
2011. Financing activities consisted of cash received from shareholders and cash
received on notes payable.
At February 29, 2012, the Company's cash balance was $5,993 and is not
sufficient to cover operating expenses for the next twelve months and the
Company's cash position has not improved as of the date of this Report. As a
result of the current liquidity shortfall, the company has deferred certain
compensation due officers and employees under their employments agreements until
funding is obtained. Management, which has in the past funded cash flow
deficiencies through additional loans, has indicated that they currently are
unable to provide further financing. The Company is currently planning to
conduct a private placement under Regulation D to raise up to approximately
$63,000,000 through the sale of shares of preferred series B stock as well as
the sale of sponsorships for its planned golf tournaments. However, there is no
assurance that such a placement will occur or will be successful in raising the
funds necessary to implement our business plan. If this placement does not occur
or does not raise sufficient funds and management remains unable to provide
additional loans, the Company will cease the development of its business plan as
currently contemplated.
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/or additional sales of its common stock. There is no assurance that
the Company will be successful in raising additional capital.
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
18
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.
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.
* 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.
19
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.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 4 - CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company has established disclosure controls and procedures to ensure that
information required to be disclosed in this quarterly report on Form 10-Q was
properly recorded, processed, summarized and reported within the time periods
specified in the Commission's rules and forms. The Company's controls and
procedures are designed to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Act is accumulated
and communicated to the Company's management, including its principal executive
and principal financial officers to allow timely decisions regarding required
disclosure.
We carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) at May 31, 2011 based on the evaluation of these
controls and procedures required by paragraph (b) of Rule 13a-15 or Rule 15d-15
under the Exchange Act. This evaluation was carried out under the supervision
and with the participation of our Chief Executive Officer and Chief Financial
Officer. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that, at May 31, 2011, our disclosure controls and
procedures are not effective.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in the Company's internal control over financial
reporting that occurred during the Company's last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company may become involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, except as
discussed below, the ultimate disposition of these matters will not have a
material adverse effect on the Company's financial position, results of
operations, or liquidity 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,
20
a dispute arose between the Company and Victory Lane regarding alleged
misrepresentations made by Victory Lane in connection with the Victory Lane
Agreement.
In October, 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
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.
The Company has been made aware by the Chief Executive Officer of the Company,
that a complaint has been filed against the Company for approximately $534,000
by the United States Trustee for the Middle District of Florida to claim against
funds we owe to our Chief Executive Officer and his wife. The Company has not
been served with the complaint. In the event the Company is served with the
complaint, it will vigorously defend the complaint. However, the outcome of the
litigation, if it were to occur, cannot be determined at this time.
ITEM 1A - RISK FACTORS
Not required.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On June 20, 2011, and pursuant to the terms of an Agreement dated June 1, 2011,
the Company issued 550,660 of restricted common shares to TVA Media Group These
shares were valued at $125,000 in consideration of prepaid media services. Under
the terms of the Agreement, the Company is obligated to issue $500,000 worth of
our restricted common stock, payable in installments of $125,000 each. The
number of shares issued is determined by the five trading day Volume Weighted
Average price prior to the date of issuance.
On September 1, 2011, the Company issued 79,545 shares of its common stock for a
value of $125,000 or $1.57 per share, pursuant to the terms of the agreement
entered into with TVA Media Group.
21
On December 15, 2011, the Company issued 75,758 shares of its common stock for a
value of $125,000 or $1.65 per share, pursuant to the terms of the agreement
entered into with TVA Media Group.
On January 9, 2012, the Company issued 300,000 shares to each of its three
directors, for a value of $165,000 or $1.65 per share, respectively.
We relied upon Section 4(2) of the Securities Act of 1933 for these issuances.
We believed that Section 4(2) of the Securities Act of 1933 was available
because:
* None of these issuances involved underwriters, underwriting discounts
or commissions.
* Restrictive legends were and will be placed on all certificates issued
as described above.
* The distribution did not involve general solicitation or advertising.
* The distributions were made only to investors who were sophisticated
enough to evaluate the risks of the investment.
In connection with the above transactions, although some of the investors may
have also been accredited, we provided the following to all investors:
* Access to all our books and records.
* Access to all material contracts and documents relating to our
operations.
* The opportunity to obtain any additional information, to the extent we
possessed such information, necessary to verify the accuracy of the
information to which the investors were given access.
Prospective investors were invited to review at our offices at any reasonable
hour, after reasonable advance notice, any materials available to us concerning
our business. Prospective Investors were also invited to visit our offices.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the interim period ended
February 29, 2012.
ITEM 4 - MINE SAFETY DISCLOSURE
ITEM 5 - OTHER INFORMATION
22
ITEM 6 - EXHIBITS
Exhibit
No. Document Description
--- --------------------
31.1 Certification of Ceo Pursuant to 18 U.s.c. Section 1350, as Adopted
Pursuant to Section 302 of the Sarbanes-oxley Act of 2002.
31.2 Certification of Cfo Pursuant to 18 U.s.c. Section 1350, as Adopted
Pursuant to Section 302 of the Sarbanes-oxley Act of 2002.
32.1* Certification of Ceo Pursuant to 18 U.s.c. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-oxleyact of 2002.
32.2* Certification of Cfo Pursuant to 18 U.s.c. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-oxleyact of 2002.
101** Interactive data files pursuant to Rule 405 of Regulation S-T.
----------
* This exhibit shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to the liabilities of
that section, nor shall it be deemed incorporated by reference in any
filing under the Securities Act of 1933 of the Securities Exchange Act of
1934, whether made before or after the date hereof and irrespective of any
general incorporation language in any filings.
** To be filed by Amendment.
23
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DoMark International, Inc., a Nevada corporation
Title Name Date Signature
----- ---- ---- ---------
Principal Executive Michael Franklin April 23, 2012 /s/ Michael Franklin
Officer -----------------------------------
In accordance with the Exchange Act, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Signature Name Title Date
--------- ---- ----- ----
/s/ Michael Franklin Michael Franklin Principal Executive Officer and April 23, 2012
---------------------------- Director
/s/ Michael Franklin Michael Franklin Principal Financial Officer and April 23, 2012
---------------------------- Principal Accounting Officer
24
EXHIBIT INDEX
Exhibit
No. Document Description
--- --------------------
31.1 Certification of Ceo Pursuant to 18 U.s.c. Section 1350, as Adopted
Pursuant to Section 302 of the Sarbanes-oxley Act of 2002.
31.2 Certification of Cfo Pursuant to 18 U.s.c. Section 1350, as Adopted
Pursuant to Section 302 of the Sarbanes-oxley Act of 2002.
32.1* Certification of Ceo Pursuant to 18 U.s.c. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-oxleyact of 2002
32.2* Certification of Cfo Pursuant to 18 U.s.c. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-oxleyact of 2002.
101** Interactive data files pursuant to Rule 405 of Regulation S-T.
----------
* This exhibit shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to the liabilities of
that section, nor shall it be deemed incorporated by reference in any
filing under the Securities Act of 1933 of the Securities Exchange Act of
1934, whether made before or after the date hereof and irrespective of any
general incorporation language in any filings.
** To be filed by Amendment.