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, 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.)
254 S Ronald Reagan Blvd, Ste 134
Longwood, FL 32750
(Address of principal executive offices)
321-250-4996
(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]
As of August 31, 2012, there were 29,540,298 shares of Common Stock, $0.001 par
value per share, issued and outstanding and there were 50,000 shares of
Preferred Stock A, $0.001 par value per share, issued and outstanding Preferred
Stock B, $0.001 par value per share and zero shares issued and outstanding.
EXPLANATORY NOTE
This Form 10-Q of Domark International, Inc.'s (the "Company") reflects the
status and operations of the Company and its three (3) subsidiaries, Solawerks
Inc ("Solawerks"), Musclefoot Inc. ("Musclefoot") and Domark Canada Inc.
("Domark Canada") as of August 31, 2012.
During the quarter the company hired a new Chief Executive Officer, Andrew
Ritchie and a new Vice President - Business Development, Patrick Johnson. The
new management team sets about reviewing the company operations and
restructuring initiatives. The main operation of the company has been the sale
of our Apple iPhone and iPad solar battery charging covers through our
subsidiary Solawerks. The Company formed a new subsidiary named Musclefoot Inc.
in June of this year. The main purpose of this subsidiary is to sell our new
licensed, patented and FDA approved shoe insole from Barefoot Science, Inc.
The Company has spent the first quarter building new websites, media campaigns,
retail sales strategy, affiliate programs and building a world class
infrastructure to support the sales of our products. We then tested the new
sites and media campaigns in various media channels. After analyzing and
adapting the initial results of our offerings, we are now well positioned for a
full media launch the Company's products in the run-up to Holiday Season.
The Company has also invested in developing the next generation of iPhone and
iPad solar chargers. These will be ready to be launched within the 2nd quarter.
The management has also been reviewing the Company's past financial history,
including share and debt structure in order to ensure that the best capital
structure is utilized by the Company going forward.
2
DOMARK INTERNATIONAL, INC.
INDEX TO FORM 10-Q FILING
FOR THE THREE MONTHS ENDED AUGUST 31, 2012
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited) 4
Consolidated Balance Sheets 4
Consolidated Statements of Operations 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
Item 2. Management Discussion & Analysis of Financial Condition and
Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 1A. Risk Factors 20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Mine Safety Disclosure 20
Item 5. Other information 20
Item 6. Exhibits 20
3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
DOMARK INTERNATIONAL INC.
(A development stage company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
August 31, 2012 May 31, 2012
--------------- ------------
(unaudited) (audited)
ASSETS
CURRENT ASSETS
Cash $ 29,052 $ 52,269
Inventory 13,611 --
Prepaid expenses 95,877 4,897
Prepaid Licensee fee 2,000,000 --
---------- ----------
TOTAL CURRENT ASSETS 2,138,540 57,166
---------- ----------
OTHER ASSETS
Deferred financing costs 10,000 24,799
Website development costs, net -- 2,250
XSE license, net 9,266 9,635
Prepaid Licensee fees long-term 3,605,480 --
---------- ----------
TOTAL OTHER ASSETS 3,624,746 36,684
---------- ----------
TOTAL ASSETS $5,763,286 $ 93,850
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
4
DOMARK INTERNATIONAL INC.
(A development stage company)
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(unaudited)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
August 31, 2012 May 31, 2012
--------------- ------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 138,580 $ 89,164
Accounts payable - related party 40,808 15,366
Notes payable 545,645 545,645
------------ ------------
TOTAL CURRENT LIABILITIES 725,033 650,175
------------ ------------
LONG-TERM LIABILITIES
Due to affiliate and shareholder 154,772 1,000
------------ ------------
Total Long-term Liabilities 154,772 1,000
------------ ------------
TOTAL LIABILITIES 879,755 651,175
------------ ------------
STOCKHOLDERS' DEFICIT
Convertible preferred stock series A, $0.001 par value,
Authorized: 2,000,000
Issued: 50,000 and 50,000 as of August 31, 2012 and
May 31, 2012, respectively 50 50
Convertible preferred stock series B, $0.001 par value, -- --
Authorized: 10,000,000
Common Stock, $0.001 par value,
Authorized: 200,000,000
Issued: 29,540,298 and 29,005,298, respectively 29,540 29,005
Common stock payable 818,000 738,000
Preferred Series B stock payable 6,000,000 --
Additional paid-in capital 32,046,149 31,499,031
Accumulated deficit (26,850,830) (26,850,830)
Accumulated Deficit during development stage (7,159,378) (5,972,579)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIENCY 4,883,531 (557,326)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 5,763,286 $ 93,850
============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
5
DOMARK INTERNATIONAL INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the
cumulative period
during the
Development Stage
For the For the from
Three Months Three Months October 21, 2009
Ended Ended to
August 31, 2012 August 31, 2011 August 31, 2012
--------------- --------------- ---------------
REVENUE $ 20,345 $ -- $ 40,274
Cost of sales 22,976 -- 71,485
------------ ------------ ------------
Gross Profit (2,631) -- (31,211)
General and administrative expenses 788,647 137,589 6,600,606
Research and development -- -- 45,607
Bad debt expense 1,000 -- 101,000
Impairment of asset -- -- 10,000
Impairment of goodwill -- -- 10,000
Forgiveness of debt -- -- 4,000
License Fees 394,520 -- 394,520
------------ ------------ ------------
Operating Loss (1,186,799) (137,589) (7,188,945)
Other Income -- -- 29,567
------------ ------------ ------------
Net Loss $ (1,186,799) $ (137,589) $ (7,159,378)
============ ============ ============
Net loss per share, basic and diluted $ (0.04) $ 0.00 $ (0.25)
============ ============ ============
Weighted average common shares outstanding 29,350,896 36,953,743 29,035,724
============ ============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
6
DOMARK INTERNATIONAL INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the
Cumulative Period
During The
Development Stage
For the For the from
Three Months Three Months October 21, 2009
Ended Ended to
August 31, 2012 August 31, 2011 August 31, 2012
--------------- --------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,186,799) $ (137,589) $(7,159,378)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,619 1,968 13,458
Amortized finance cost 14,799 -- 50,000
Non cash interest -- -- 5,645
Impairment of assets -- -- 10,000
Bad debt expense -- -- 1,000
Common stock issued as compensation and for expenses 920,175 28,153 5,544,485
Gain on sale of assets -- -- --
Forgiveness of debt -- -- (4,000)
Changes in operating assets and liabilities:
Decrease prepaid exp and other current assets 11,020 -- 11,020
Increase inventory (13,611) -- (30,537)
Decrease in deferred financing costs -- (3,516) (3,516)
Increase in accounts payable 49,416 26,000 288,351
Increase in accounts payable-related party 25,442 -- 40,808
Increase in accrued expenses -- 14,426 --
----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (176,939) (70,558) (1,230,149)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for licensing -- -- (35,000)
Cash paid for web development -- (4,000) (7,500)
Cash paid for furniture and equipment -- -- (4,000)
----------- ----------- -----------
NET CASH FLOWS USED IN INVESTING ACTIVITIES -- (4,000) (46,500)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds received from shareholder loans 153,722 5,000 1,048,122
Payment on shareholder loans -- (19,273) (125,478)
Proceeds received from notes payable -- -- 480,000
Payments made on notes payable -- -- (100,470)
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 153,722 70,727 1,302,174
Net increase (decrease) in cash and cash equivalents (23,217) (3,831) 25,525
Cash and cash equivalents - beginning of period 52,269 4,587 3,527
----------- ----------- -----------
CASH AND CASH EQUIVALENTS BALANCE END OF PERIOD $ 29,052 $ 756 $ 29,052
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Prepaid license fee $ 6,000,000 $ -- $ 6,000,000
Prepaid expenses $ -- $ -- $ (397,675)
Inventory $ -- $ -- $ (16,926)
Fixed assets, net of depreciation $ -- $ -- $ (3,868)
Website costs, net of amortization $ -- $ -- $ (1,167)
License, net of amortization $ -- $ -- $ (24,432)
Accounts payable $ -- $ -- $ 19,257
Payroll & related liabilities $ -- $ -- $ 249,631
Due to affiliate and shareholder $ -- $ -- $ 929,738
Return of preferred shares, par value $ -- $ -- $ 50
Return of common stock, par value $ -- $ -- $ 9,772
Additional capital contributed in excess
of net assets sold $ -- $ -- $ (764,380)
The accompanying notes are an integral part of these consolidated
financial statements.
7
DOMARK INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended August 31, 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 an 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 Notes 7 - Contingencies & Item II, Other Information
below).
HISTORY AND GENERAL OVERVIEW
On February 29, 2012, the Company formed a new wholly owned subsidiary,
Solawerks Inc. in the state of Nevada, for the purposes of entering the business
of marketing specialized solar consumer electronics. Solawerks' current focus is
to develop and distribute the SolaPad: a combined cover and charging system for
Apple's iPad, and the SolaCase: a combined cover and charging system for all
versions of Apple's iPhone. Solawerks competes in a market that also includes 3D
Systems (DDD), Dell (DELL) and Hewlett Packard (HPQ).
During the last half of 2009, the Company sold two of its operating
subsidiaries, Javaco, Inc. and ECFO Corporation and effected rescissions of
acquisition transactions on the remainder of its operating businesses. Between
October 2009 and May 2011, the Company had no material ongoing operations. The
business of the Company during the period from October 2009 through May 2011 was
to seek out new acquisitions and to conduct the litigation with Victory Lane.
On March 5, 2012, the Company entered into an Asset Purchase Agreement with its
then controlling shareholder, R. Thomas Kidd, for the sale of Armada, and
certain assets related thereto.
On May 26, 2012, the Company hired a new Chairman and President Brent Strasler.
He then hired a new Chief Executive Officer Andrew Ritchie on 12 June 2012. The
Company then strengthened the executive team by adding Patrick Johnson as VP -
business development.
On May 31, 2011, the Company formed a wholly owned subsidiary, Armada Sports &
Entertainment, Inc. Armada is a sports marketing and Management Company engaged
in owning, developing, and conducting made-for-television sports and
entertainment events. On March 5, 2012, the Company entered into an Asset
Purchase Agreement with its then controlling shareholder, R. Thomas Kidd, for
the sale of Armada, and certain assets related thereto.
In June 2012, the Company entered into a retail sales strategy with North
American retail specialist Chic and Savvy. During the 1st quarter, they attended
many retail sales exhibitions throughout Canada.
On June 20, 2012, the Company formed a new wholly owned subsidiary, Musclefoot
Inc. in the state of Nevada for the purpose of distributing, marketing, and
acting as sales agent for the patented foot care system, Barefoot Science. This
entity is currently in default under the Nevada Secretary of State.
On July 20, 2012, the Company formed a new wholly owned subsidiary, Domark
Canada Inc. in the province of Ontario for the purpose of supporting the
corporate operations based in Toronto, Ontario Canada.
The Company then endorsed world champion triple jumper Will Claye, and US
Olympian Nick Simmons prior to the London 2012 Olympic Games. This was part of a
strategy to obtain global exposure and align brands with world class sports
professionals. We then sponsored several UFC championship contenders.
8
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.
NOTE 2. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America which
contemplate continuation of the Company as a going concern. The Company has
consolidated losses from operations of ($1,186,799) for the 3 months ending
August 31, 2012 compared to a loss of ($137,589) for the same period ending
August 31, 2011. Furthermore, the Company has inadequate working capital to
maintain or develop its operations, and is dependent upon funds from private
investors and the financial 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 consolidated financial statements of the Company have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") for 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, 2012 are not necessarily indicative of the results that
may be expected for the year ending May 31, 2013.
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
and has recognized no revenue and devotes substantially all of its efforts on
establishing its online retail and product development business. Its planned
principal operations in advancing its online product development business have
commenced. All losses accumulated since inception have been considered a 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 is the
licensing fees, stock option valuation 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, 2012, cash and cash
equivalents included cash on hand and cash in the bank.
9
INVENTORIES
Inventories consist of retail products which are stated at the lower of cost or
market. Cost is determined by the specific identification method.
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
The accompanying financial statements represent the consolidated financial
position and results of operations of the Company and include the accounts and
results of operations of the Company and its subsidiaries. The accompanying
financial statements include the active entity of Domark International, Inc. and
its wholly owned subsidiaries, Musclefoot Inc., Solawerks Inc and Domark Canada
Inc. The Company has relied upon the guidance provided by Statements of
Financial Accounting Standards, ASC 810-10-15-3.
STOCK-BASED COMPENSATION
The Company accounts for share based payments in accordance with ASC 718,
Compensation - Stock Compensation, which requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the
financial statements based on the grant date fair value of the award. In
accordance with ASC 718-10-30-9, Measurement Objective - Fair Value at Grant
Date, the Company estimates fair value of the award using a valuation technique.
For this purpose, the Company uses the Black-Scholes option pricing model. The
Company believes the model provides the best estimate of fair value due to its
ability to incorporate inputs that change over time, such as volatility and
interest rates, and to allow for actual exercise behavior of option holders.
Compensation cost is recognized over the requisite service period which is
generally equal to the vesting period. Upon exercise, shares issued will be
newly issued shares from authorized common stock.
ASC 505, "Compensation-Stock Compensation", establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
to non-employees for goods or services. Under this transition method, stock
compensation expenses includes compensation expense for all stock-based
compensation awards granted on or after January 1, 2006, based on the grant-date
fair value estimated in accordance with provisions of ASC 505.
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, 2012, options and warrants were
outstanding and have been valued using Black-Scholes.
10
RESEARCH AND DEVELOPMENT
All research and development expenditures are expensed as incurred. There was no
R&D cost incurred during the Quarter.
REVENUE RECOGNITION
The Company recognizes revenues when persuasive evidence of an arrangement
exists, delivery has occurred or services have been rendered, the price is fixed
or determinable, and collection of the resulting receivable is reasonably
assured. Inventory is capitalized and costs of sales are recognized during the
period in which the sales occurred. The Company derived its revenues for the
period through internet sales of our solar charging units. The Company
recognized these sales once delivery is made from the warehouse (FOB shipping
point).
NOTE 5. RELATED PARTY TRANSACTIONS
On February 29, 2012 the Company executed a Memorandum of Agreement with Xiamen
Tiauyang Neng Gongsi and Michael Franklin related to the acquisition of certain
exclusive worldwide licensing and joint patent rights.
On May 25, 2012, the Company entered into an employment agreement with an
effective date of June 1, 2012 with its newly appointed President, R. Brentwood
Strasler, for a period of no less than three years. Mr. Strasler is entitled to
an annual salary of $150,000 and 100,000 stock purchase warrants exercisable to
purchase common shares of the Company at $1.00 per share. The warrants are
exercisable for a three year period and can be vested quarterly on a pro rata
basis over twelve months from the date of issue. Additionally, Mr. Strasler will
be enrolled in a long term Executive Option Plan no later than three months
after the effective date of the employment agreement and is entitled to term
life insurance in the face amount of $2,500,000, payable to the beneficiary
designated by Mr. Strasler. The warrants awarded will be valued in accordance
with ASC 718-10-30-9, Measurement Objective - Fair Value at Grant Date. The
Company estimates fair value of the award using the Black-Scholes option pricing
model.
The Company is indebted to Michael Franklin, previously President of our wholly
owned subsidiary Solawerks, Inc., in the amount of $1,000 for monies advanced to
the Company to initiate the initial opening of the Sun Trust bank account. This
loan is non-interest bearing and payable upon demand.
11
NOTE 6. SHAREHOLDERS' EQUITY
* On May 25, 2012, - R Brentwood Strasler was appointed as Chairman and
President / Director, with an annual compensation of $150,000 and 150,000
share options at $1.00 which will vest in one year on a quarterly basis.
The Company valued the options using the Black-Scholes valuation model. As
of the grant date the options were valued at $175,419.
DoMark International Inc. Announces Appointment of New President
* On Jun 18, 2012, - Andrew Ritchie was appointed as Chief Executive Officer/
Director with an annual Compensation of $240,000 and 250,000 share options
at $1.00 which will vest in one year on a quarterly basis. The Company
valued the options using the Black-Scholes valuation model. As of the grant
date the options were valued at $175,414.
DoMark International Inc. Announces Appointment of New Chief Executive Officer
* On Jun 21, 2012, - Domark signed a contract with Barefoot-Science to become
exclusive marketing direct sales distributor for North America. Barefoot -
Science will be issued 2,500,000 shares of Preferred B shares of Domark
International Inc. which are convertible at any time at request of holder
into common A shares at a 1 Preferred Series B into 2 Common shares ratio.
Shares will hold a six month restriction under 144 rules. The shares have
been valued at $6,000,000 USD which will be expensed over the term of the
agreement (3 years). As of August 31, 2012, $394,520 USD has been expensed.
DoMark International, Inc. Enters Into Multi-Billion Dollar Footwear and Foot
Care Markets with Industry Changing Technology From Barefoot Sciences Inc.
* On Jun 26, 2012, - Patrick Johnson was appointed as Vice President of
Business Development, with an annual compensation of $84,000 and 100,000
share options at $1.00 which will vest in one year on a quarterly basis.
The Company valued the options using the Black-Scholes valuation model. As
of the grant date the options were valued at $116,946.
DoMark International Inc. Announces Appointment of All-Star Athlete and Super
Bowl Champion as VP - Corporate Development
* On Jun 26, 2012,- RBL were appointed to look after all Domarks Social media
campaigns. They were awarded a contract of $1,000 a month and were granted
20,000 free trading shares in Domark international valued at $23,400.
DoMark International Inc. Announces Appointments RBL Communications as social
media agent.
* On July 11, 2012 - Ian Nuttall received an additional 425,000 shares as a
consultant to Domark of Rule 144 common `A' stock in Domark International
Inc. valued at $382,500.
On Jul 19, 2012, - Domark signs Nick Symmonds to endorse Domark products for
compensation of 100,000 shares of rule144 common A stock in Domark International
Inc. valued at $68,000.
DoMark Signs Five-Time American 800 m Champion Nick Symmonds to Endorsement Deal
* On Jul 25, 2012, - Domark signs Will Claye to endorse Domark products for
compensation of 50,000 shares of rule144 common A stock in Domark
International Inc.valued at $34,000.
12
* Strasler. The warrants awarded will be valued in accordance with ASC
718-10-30-9, Measurement Objective - Fair Value at Grant Date. The Company
estimates fair value of the award using the Black-Scholes option pricing
model. Since the effective date of the grant is June 1, 2012, the Company
did not realize or record an estimated fair value of the warrants and
therefore there is no impact to the financial statements for the fiscal
period ending May 31, 2012.
Our common stock is traded in the over-the-counter market, and quoted in
the National Association of Securities Dealers Inter-dealer Quotation
System ("Electronic Bulletin Board) and can be accessed on the Internet at
www.otcbb.com under the symbol "DOMK.OB".
As of August 31, 2012, there were 29,540,298 shares of our common stock
outstanding and 50,000 shares of Preferred Series A (1000:1 conversion)and
2,500,000 shares of Preferred Series B (2:1 conversion). There were
approximately 84 shareholders of record of the Company's common stock.
NOTE 7. 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 mis-representations 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 Victor 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
13
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 8. COMMITMENTS
* On Jul 16, 2012, - Leading specialist Sports physio was appointed to
Domarks advisory committee with a signing agreement of $10,000. DoMark
International Inc. Appoints Sean Pena to Advisory Committee
* On Jun 28, 2012, - Domark donates a Noraxon foot Scanner to Sean Penna to
assist in the training of the U.S Olympic team. The machine cost $19,495,
and is being purchased through a rental buy agreement of $895 a month.
Donates Performance Enhancing Technology by Noraxon to Assist Physio Expert
to World's Top Track Athletes in Preparation for the 2012 Olympic Games
14
NOTE 9. LIABILITIES & NOTES PAYABLE
On February 29, 2012, Company entered into a Promissory Note with R. Thomas
Kidd, our then 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 consolidating the aforementioned debt, the Company is now
obligated under a single Promissory Note dated February 29, 2012 in the
aggregate principle amount of $355,645 along with $2,689 in accrued interest.
The Note is due on October 15, 2012 and accrues interest at 3% per annum. In
addition, R Thomas Kidd executed a Personal Guarantee of the Note, whereby Kidd
guarantees the payment of $100,000 of the principle balance in an Event of
Default pursuant to Article III of the Note.
MASTER CREDIT AGREEMENTS
On March 2, 2012, the Company entered into a Master Credit Agreement with
Infinite Funding, Inc. which provides for a non-revolving line of credit. 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 8% per year, becomes payable one year after the date of the
advance received. Infinite Funding has amended the Master Credit Agreement,
increasing the amount of the Lending Facility from $150,000 to $200,000. As of
May 31, 2012, the Company received $190,000 in advances and the Company has
accrued $1,375 in interest.
As of August 31, 2012, the company has received additional loans in the amounts
of $49,470 USD and $104,252 USD.
15
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors that have affected our financial position and operating results during
the periods included in the accompanying consolidated financial statements, as
well as information relating to the current plans of our management. This report
includes forward-looking statements. Generally, the words "believes",
"anticipates", "may", "will", "should", "expect", "intend", "estimate",
"continue", and similar expressions or the negative thereof or comparable
terminology are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, including the matters set forth
in this report or other reports or documents we file with the Securities and
Exchange Commission from time to time, which could cause actual results or
outcomes to differ materially from those projected. Undue reliance should not be
placed on these forward-looking statements, which speak only as of the date
hereof. We undertake no obligation to update these forward-looking statements.
The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto and other
financial information contained elsewhere in this Form 10-Q.
RECENT DEVELOPMENTS
On February 29, 2012, the Company formed a new wholly owned subsidiary,
Solawerks, Inc. in the state of Nevada, for the purposes of entering the
business of marketing specialized solar consumer electronics.
On February 29, 2012, the Company entered into a Memorandum of Agreement with
Xiamen Taiyang Neng Gongsi and Michael Franklin. For and in consideration of the
payment of an initial license fee of $10,000, and for the future payment of
royalties, Xiamen granted an exclusive worldwide license and joint patent rights
to Domark International, Inc. for a solar charging case for IPAD, including IPAD
3. There is no prior business relationship with Xiamen, or any of its officers
or directors.
On March 5, 2012, the Company entered into an Asset Purchase Agreement with its
controlling shareholder, R. Thomas Kidd, for the sale of its wholly owned
subsidiary, Armada/The Golf Championships, and certain assets related thereto.
As consideration, the Mr. Kidd returned 9,771,500 shares of common stock to
treasury.
On March 5, 2012, Michael Franklin purchased 50,000 shares of the Company's
Series A Preferred Stock from R Thomas 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, 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.
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.
As of March 29, 2012, our prior CEO, Tom Kidd, returned to the Company's
treasury, 50,000 shares of its Series A Preferred Stock and 9,771,500 shares of
its Common Stock. These shares were then cancelled. There are 50,000 issued and
outstanding shares of the Company's Series `A' Preferred Stock, owned by the
Company's CEO, Michael Franklin.
Effective May 25, 2012, Michael Franklin, 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. Franklin at
the time of his resignation from the Board of Directors.
On May 25, 2012, the Company's Shareholders appointed R. Brentwood Strasler as
sole Director, President and Corporate Secretary.
On June 1, 2012, the Company hired a new CEO, Andy Ritchie.
16
On June 1, 2012, the Company hired a new VP Business Development, Patrick
Johnson.
On June 20, 2012, the Company signed a long term 3 year license agreement with
Barefoot Science. The agreement provided Barefoot with 2,500,000 shares of
preferred shares convertible to 2 shares of common for every preferred share
held in exchange for rights to Barefoot Science technologies.
LIQUIDITY AND CAPITAL RESOURCES
Our operating requirements have been funded primarily through financing
facilities, sales of our common stock, and loans from shareholders. Currently
the Company's cash flows do not adequately support the operating expenses of the
Company. We received $0 in fiscal years 2012 and 2011 from the sale of our
common stock. 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 by operating activities for the three month period ending August 31,
2012 was ($176,939) compared to $(70,558) for the same period 2011. Depreciation
and amortization expense for the quarter was $2,619 as compared to $1,968 for
period ending August 31, 2011.
Cash used in investing activities was $0 for the three month period ending
August 31, 2012 compared to $(4,000) for the period ending August 31, 2011. Cash
provided by financing activities was $153,722 for the period versus $70,727 for
the three month period ending August 31, 2011. Financing activities consisted of
cash received from shareholders and notes payable.
OTHER CONSIDERATIONS
There are numerous factors that affect the Company's 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 services, the level and intensity of competition in the, and our
ability to continue to improve our infrastructure, including personnel and
systems, to keep pace with our anticipated rapid growth in the development of
our business.
QUARTER ENDED AUGUST 31, 2012
The Company had $20,345 in total revenues for the quarter ended August 31, 2012.
Revenues earned for the period were related to sales through the Company's
wholly owned subsidiaries Solawerks Inc. $15,752 and Musclefoot Inc. $4,593.
General and administrative expenses for the quarter increased to $788,647 from
$137,589 for the same period in 2011. The increase is primarily related to
salaries and expenses during the period the Company was developing its internet
sites. In addition, the Company incurred significant expense in stock
compensation and advertising relating to the development of Solawerks Inc. and
Musclefoot Inc., the Company's wholly owned subsidiaries. Licensing fees
increased by $394,520. Interest expense for the three months ending August 31,
2012 was $0. The Company's operations during fiscal 2012 were funded through
interest free, demand notes from shareholders and short term loans financed
through Infinite Funding. As of August 31, 2012, the Company is indebted to a
shareholder in the amount of $154,772 and to Infinite Funding in the aggregate
of $545,645 plus interest.
The operating loss for the quarter amounted to ($1,186,799) or a Net loss per
share of $0.04 vs. a Net loss per share of $0.00 for the same 3 month period in
2011.
17
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
ITEM 4 - CONTROLS AND PROCEDURES
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, 2012. 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,
2012.
Our principal executive officer and our principal financial officer, are
responsible for establishing and maintaining adequate internal controls 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, 2012.
There were no changes in our internal control over financial reporting that
occurred during the fiscal year ended August 31, 2012 that have materially
affected, or are reasonably likely to materially affect, our internal controls
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.
Management is aware that there is a lack of segregation of duties at the Company
due to the small number of employees dealing with general administrative and
financial matters. However, at this time management has decided that considering
the abilities of the employees now involved and the control procedures in place,
the risks associated with such lack of segregation are low and the potential
benefits of adding employees to clearly segregate duties do not justify the
substantial expenses associated with such increases. Management will
periodically reevaluate this situation.
18
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On May 21, 2009, the Company entered into an 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
miss-representations 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 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 Victor 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 Mr. Kidd has
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.
On January 24, 2012, the Company was made aware by the Chief Executive Officer
of the Company, that a complaint had 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 owed to our Chief Executive Officer and his
wife. On January 23, 2012, the Trustee's Motion for Approval and Notice of
Compromise was filed to obtain the approval of the court of a settlement of the
matters that were the subject of the complaint. On April 24, 2012, the Company
was advised that the complaint, which was never served, was dismissed with
prejudice by the US Trustee.
19
ITEM 1A - RISK FACTORS
Not required.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
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
None.
ITEM 5 - OTHER INFORMATION
None.
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.
20
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.
DOMARK INTERNATIONAL, INC.
Registrant
By: /s/ Andrew Ritchie
----------------------------------
Andrew Ritchie
Chief Executive Officer
Date: October 22, 2012
By: /s/ Andrew Ritchie
----------------------------------
Andrew Ritchie
Principal Financial Officer
Date: October 22, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 22nd day of October.
/s/ Andrew Ritchie
----------------------------------
Andrew Ritchie
Chief Executive Officer
/s/ Andrew Ritchie
----------------------------------
Andrew Ritchie
Principal Financial Officer
21