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EX-31.2 - CFO SECTION 302 CERTIFICATION - Domark International Inc.ex31-2.txt
EX-32.2 - CFO SECTION 906 CERTIFICATION - Domark International Inc.ex32-2.txt
EX-32.1 - CEO SECTION 906 CERTIFICATION - Domark International Inc.ex32-1.txt
EX-31.1 - CEO SECTION 302 CERTIFICATION - Domark International Inc.ex31-1.txt

                     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, 2010

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT

                    For the transition period from N/A to N/A

                         Commission File No. 333-136247


                           DoMark International, Inc.
           (Name of small business issuer as specified in its charter)

       Nevada                                                20-4647578
State of Incorporation                           IRS Employer Identification No.

                       254 S Ronald Reagan Blvd, Ste. 134
                               Longwood, FL 32750
                    (Address of principal executive offices)

                                  877-700-7369
                           (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 [ ] 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 [X] No [ ]

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

          Class                              Outstanding at October 12, 2010
          -----                              -------------------------------
Common stock, $0.001 par value                          36,460,835

DOMARK INTERNATIONAL, INC. INDEX TO FORM 10-Q FILING FOR THE THREE MONTHS ENDED AUGUST 31, 2010 TABLE OF CONTENTS PAGE ---- PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) 3 Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 5 Condensed Consolidated Statement of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management Discussion & Analysis of Financial Condition and Results of Operations 19 Item 3 Quantitative and Qualitative Disclosures About Market Risk 22 Item 4. Controls and Procedures 22 PART II - OTHER INFORMATION Item 1. Legal Proceedings 23 Item 1A. Risk Factors 24 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27 Item 3. Defaults Upon Senior Securities 27 Item 4. Submission of Matters to a Vote of Security Holders 27 Item 5 Other Information 27 Item 6. Exhibits 28 2
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DOMARK INTERNATIONAL, INC. BALANCE SHEETS As of August 31, 2010 and May 31, 2010 ASSETS 8/31/2010 5/31/2010 --------- --------- CURRENT ASSETS Cash $ 50,715 $ 197 Accounts Receivable -- -- Loans and Notes Receivable 100,000 100,000 Prepaid Expenses -- -- Inventory -- -- -------- -------- Total Current Assets 150,715 100,197 -------- -------- FIXED ASSETS Property & Equipment, Net 1,312 1,531 -------- -------- Total Fixed Assets 1,312 1,531 -------- -------- OTHER ASSETS Deposits -- -- Due From Affiliate -- -- Prepaid Media -- -- Investment in unconsolidated subsidiary 10,000 10,000 Goodwill -- -- -------- -------- Total Other Assets 10,000 10,000 -------- -------- TOTAL ASSETS $162,027 $111,728 ======== ======== The accompanying notes are an integral part of these financial statements. 3
DOMARK INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS As of August 31, 2010 and May 31, 2010 LIABILITIES AND STOCKHOLDERS' EQUITY 8/31/2010 5/31/2010 ------------ ------------ CURRENT LIABILITIES Accounts Payable and Accrued Expenses $ 55,068 $ 46,868 Payroll Liabilities -- -- Due to Affiliate and Shareholder 783,932 729,836 Notes payable and Line of Credit -- -- ------------ ------------ Total Current Liabilities 839,000 776,704 ------------ ------------ TOTAL LIABILITIES 839,000 776,704 ------------ ------------ STOCKHOLDERS' EQUITY Convertible Preferred stock series A, $0.001 par value, Authorized: 2,000,000 Issued: 100,000 and none, respectively 100 100 Common Stock, $0.001 par value, Authorized: 200,000,000 Issued: 36,460,835 and 141,695,383, respectively 36,461 36,461 Additional paid in capital 13,526,618 13,526,618 Accumulated income/(deficit) (14,240,152) (14,228,155) ------------ ------------ Total Stockholders' Equity (Deficiency) (676,973) (664,976) ------------ ------------ TOTAL LIABILITIES AND EQUITY $ 162,027 $ 111,728 ============ ============ The accompanying notes are an integral part of these financial statements. 4
DOMARK INTERNATIONAL, INC. STATEMENTS OF OPERATIONS For the three months ending August 31, 2010 and 2009 THREE MONTHS THREE MONTHS 8/31/2010 8/31/2009 ------------ ------------ REVENUE $ -- $ 987,525 COST OF SERVICES -- 810,342 ------------ ------------ GROSS PROFIT OR (LOSS) -- 177,183 GENERAL AND ADMINISTRATIVE EXPENSES 11,996 288,286 IMPAIRMENT OF GOODWILL -- 100,000 ------------ ------------ OPERATING INCOME/(LOSS) (11,996) (211,103) INTEREST EXPENSE -- 6,727 GAIN ON SALE OF SUBSIDIARY -- -- OTHER INCOME -- -- IMPAIRMENT OF ASSET -- 40,000 ------------ ------------ INCOME/(LOSS) BEFORE INCOME TAXES (11,996) (257,830) PROVISION FOR INCOME TAXES Federal -- -- State -- -- ------------ ------------ CONSOLIDATED NET INCOME/(LOSS) $ (11,996) $ (257,830) ============ ============ EARNINGS (LOSS) PER SHARE, BASIC AND DILUTED $ (0.00) $ (0.01) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 36,460,835 30,055,789 The accompanying notes are an integral part of these financial statements. 5
DOMARK INTERNATIONAL, INC. STATEMENTS OF CASH FLOWS For the three months ending August 31, 2010 and 2009 THREE MONTHS THREE MONTHS 8/31/2010 8/31/2009 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (11,996) $(257,830) --------- --------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: ADJUSTMENTS FOR CHARGES NOT REQUIRING OUTLAY OF CASH: Depreciation and Amortization 219 5,324 Impairment of Assets -- 40,000 Impairment of Goodwill -- 100,000 Common stock issued as compensation and for expenses -- -- Gain on sale of subsidiary -- -- CHANGES IN OPERATING ASSETS AND LIABILITITES: (Increase)/Decrease in Accounts Receivable -- 667,187 (Increase)/Decrease in Notes Receivable -- (21,211) (Increase)/Decrease in Inventory -- (32,773) (Increase)/Decrease Prepaid Exp and Other Current Assets -- 12,596 Deposits -- 1,900 Increase/(Decrease) in Notes Payable -- 102,500 Increase/(Decrease) in Accounts Payable 8,200 (533,195) Increase/(Decrease) in Accrued Expenses -- 2,001 --------- --------- Total adjustments to net income 8,419 344,329 --------- --------- Net cash provided by (used in) operating activities (3,577) 86,499 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Cash Received/(Paid) Furniture & Equipment -- (1,239) --------- --------- Net cash flows provided by (used in) investing activities -- (1,239) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Cash Received/(Paid) from/(to) Affiliates and/or Shareholders 54,095 56,273 Cash Received/(Paid) on notes payable -- (18,268) --------- --------- Net cash provided by (used in) financing activities 54,095 38,005 --------- --------- CASH RECONCILIATION Net increase (decrease) in cash and cash equivalents 50,518 123,265 Cash and cash equivalents - beginning balance 197 24,451 --------- --------- CASH AND CASH EQUIVALENTS BALANCE END OF PERIOD $ 50,715 $ 147,716 ========= ========= The accompanying notes are an integral part of these financial statements. 6
DOMARK INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the quarters ended August 31, 2010 and 2009 NOTE 1 - DESCRIPTION OF BUSINESS DOMARK INTERNATIONAL, INC. ("DoMark" or the "Company") was incorporated under the laws of the State of Nevada on March 30, 2006. The Company was formed to engage in the acquisition and refinishing of aged furniture using exotic materials and then reselling it through interior decorators, high-end consignment shops and online sales. The Company abandoned its original business of exotic furniture sales in May of 2008 and pursued the acquisition of entities to best bring value to the company and its shareholders. We attempted to acquire successfully operating subsidiaries and to deploy accounting, governance, risk and compliance services, marketing, management and media assets to the subsidiaries in order to build the value of our Company during and subsequent to our 2009 operating period. These endeavors have resulted in the rescissions of certain acquisitions due to the advent of the Victory Lane litigation (see legal) that derailed the Company's ability to pursue its business plan. The business model of the company did not have enough time to implement and realize results due to the VL transaction issues and subsequent litigation. The Company is reviewing its current business model in consideration of legal matters and is seeking swift resolution in order to adequately pursue its business purpose of growing shareholder value by acquisition. NOTE 2 - GOING CONCERN The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. The Company has year-end losses from operations for the years ended May 31, 2010 and 2009 and has incurred additional losses of $11,966 for the three months ended August 31, 2010. Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. In this regard, Management is planning to raise any necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RECENT ACCOUNTING PRONOUNCEMENTS DETERMINING WHETHER INSTRUMENTS GRANTED IN SHARE-BASED PAYMENT TRANSACTIONS ARE PARTICIPATING SECURITIES In June 2008, the FASB issued FSP Emerging Issues Task Force ("EITF") Issue No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities." The FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. The FSP affects entities that accrue dividends on share-based payment awards during the awards' service period when the dividends do not need to be returned if the employees forfeit the award. This FSP is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of FSP EITF 03-6-1 on its consolidated financial position and results of operations. 7
DETERMINING WHETHER AN INSTRUMENT (OR AN EMBEDDED FEATURE) IS INDEXED TO AN ENTITY'S OWN STOCK In June 2008, the FASB ratified EITF Issue No. 07-5, "Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock" (EITF 07-5). EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument's contingent exercise and settlement provisions. It also clarifies on the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of EITF 07-5 on its consolidated financial position and results of operations. ACCOUNTING FOR CONVERTIBLE DEBT INSTRUMENTS THAT MAY BE SETTLED IN CASH UPON CONVERSION (INCLUDING PARTIAL CASH SETTLEMENT) In May 2008, the FASB issued FSP Accounting Principles Board ("APB") Opinion No. 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)." The FSP clarifies the accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion. The FSP requires issuers to account separately for the liability and equity components of certain convertible debt instruments in a manner that reflects the issuer's Non-convertible debt (unsecured debt) borrowing rate when interest cost is recognized. The FSP requires bifurcation of a component of the debt, classification of that component in equity and the accretion of the resulting discount on the debt to be recognized as part of interest expense in our consolidated statement of operations. The FSP requires retrospective application to the terms of instruments as they existed for all periods presented. The FSP is effective as of January 1, 2009 and early adoption is not permitted. The Company is currently evaluating the potential impact of FSP APB 14-1 upon its consolidated financial statements. THE HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" (FAS No.162). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles". The implementation of this standard will not have a material impact on the Company's consolidated financial position and results of operations. DETERMINATION OF THE USEFUL LIFE OF INTANGIBLE ASSETS In April 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position on Financial Accounting Standard ("FSP FAS") No. 142-3, "Determination of the Useful Life of Intangible Assets", which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of intangible assets under SFAS No. 142 "Goodwill and Other Intangible Assets". The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of the expected cash flows used to measure the fair value of the asset under SFAS No. 141 (revised 2007) "Business Combinations" and other U.S. generally accepted accounting principles. The Company is currently evaluating the potential impact of FSP FAS No. 142-3 on its consolidated financial statements. DISCLOSURE ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES In March 2008, the FASB issued SFAS No. 161, "Disclosure about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133", (SFAS 161). This statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. The Company is 8
required to adopt SFAS No. 161 on January 1, 2009. The Company is currently evaluating the potential impact of SFAS No. 161 on the Company's consolidated financial statements. DELAY IN EFFECTIVE DATE In February 2008, the FASB issued FSP FAS No. 157-2, "Effective Date of FASB Statement No. 157". This FSP delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The impact of adoption was not material to the Company's consolidated financial condition or results of operations. BUSINESS COMBINATIONS In December 2007, the FASB issued SFAS No. 141(R) "Business Combinations" (SFAS 141(R)). This Statement replaces the original SFAS No. 141. This Statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the PURCHASE METHOD) be used for all business combinations and for an acquirer to be identified for each business combination. The objective of SFAS No. 141(R) is to improve the relevance, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, SFAS No. 141(R) establishes principles and requirements for how the acquirer: a. Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. b. Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase. c. Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and may not be applied before that date. The Company does not expect the effect that its adoption of SFAS No. 141(R) will have on its consolidated results of operations and financial condition. NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS -- AN AMENDMENT OF ARB NO. 51 In December 2007, the FASB issued SFAS No. 160 "Non-controlling Interests in Consolidated Financial Statements - an amendment of ARB No. 51" (SFAS No. 160). This Statement amends the original Accounting Review Board (ARB) No. 51 "Consolidated Financial Statements" to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008 and may not be applied before that date. The does not expect the effect that its adoption of SFAS No. 160 will have on its consolidated results of operations and financial condition. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of 9
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 estimate included in these financial statements are the impairment reserves applied to various long-lived assets, allowance for doubtful accounts for gateway access fees and licensing fees, and the fair value of its stock tendered in various non-monetary transactions. RECLASSIFICATION Certain prior period amounts have been reclassified to conform to current year presentations. 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, 2010 and 2009, cash and cash equivalents include cash on hand and cash in the bank. PROPERTY AND EQUIPMENT Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized. The ranges of estimated useful lives used to calculated depreciation for principal items of property and equipment are as follows: Depreciation/ Asset Category Amortization Period -------------- ------------------- Computer Equipment 3 Years Office equipment 5 Years Vehicle 5 Years Leasehold Improvements 15 Years GOODWILL AND OTHER INTANGIBLE ASSETS The Company adopted Statement of Financial Accounting Standard No.142, GOODWILL AND OTHER INTANGIBLE ASSETS, made effective July 1, 2002. As a result, the Company discontinued amortization of goodwill, and instead annually evaluates the carrying value of goodwill and other intangible assets for impairment, in accordance with the provisions of SFAS No. 142. A reduction of the value of goodwill is expensed as an impairment loss. IMPAIRMENT OF LONG-LIVED ASSETS In accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. 10
CONCENTRATION OF CREDIT RISK The Company maintains its operating cash balances in banks in Florida. The Federal Depository Insurance Corporation (FDIC) insures accounts at each institution up to $100,000. Financial instruments that potentially subject the Company to concentrations of credit risk are primarily trade accounts receivable. The trade accounts receivable are due primarily from small business customers in numerous geographical locations throughout the United States. RECONCILING ADJUSTMENTS TO CASH FLOW The Company is using the indirect method of reporting cash flow. Information about all investing and financing activities of the Company that affect recognized assets or liabilities but that do not result in cash receipts or cash payments in the period are reported in the cash flow statement as adjustments for charges not requiring outlay of cash and receipt of cash. Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below. On September 30, 2009, the Company adopted updates issued by the Financial Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These changes establish the FASB Accounting Standards Codification TM (ASC) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Condensed Consolidated Financial Statements. In June 2009, the FASB issued guidance now codified as ASC Topic 105, "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" ("ASC 105"), which establishes the FASB Accounting Standards Codification as the source of GAAP to be applied to nongovernmental agencies. ASC 105 explicitly recognizes rules and interpretive releases of the SEC under authority of federal securities laws as authoritative GAAP for SEC registrants. ASC 105 became effective for interim or annual periods ending after September 15, 2009. ASC 105 does not have a material impact on the Company's consolidated financial statements presented hereby. In May 2009, the FASB issued guidance now codified as ASC Topic 855, "SUBSEQUENT EVENTS" ("ASC 855"). The pronouncement modifies the definition of what qualifies as a subsequent event--those events or transactions that occur following the balance sheet date, but before the financial statements are issued, or are available to be issued--and requires companies to disclose the date through which it has evaluated subsequent events and the basis for determining that date. The Company adopted the provisions of ASC 855 in the second quarter of 2009, in accordance with the effective date. On April 1, 2009, the Company adopted updates issued by the FASB to the recognition and presentation of other-than-temporary impairments. These changes amend existing other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities. The recognition provision applies only to fixed maturity investments that are subject to the other-than-temporary impairments. If an entity intends to sell, or if it is more likely than not that it will be required to sell an impaired security prior to recovery of its cost basis, the security is other-than-temporarily impaired and the full amount of the impairment is 11
recognized as a loss through earnings. Otherwise, losses on securities which are other-than-temporarily impaired are separated into: (i) the portion of loss which represents the credit loss; or (ii) the portion which is due to other factors. The credit loss portion is recognized as a loss through earnings, while the loss due to other factors is recognized in other comprehensive income (loss), net of taxes and related amortization. A cumulative effect adjustment is required to accumulated earnings and a corresponding adjustment to accumulated other comprehensive income (loss) to reclassify the non-credit portion of previously other-than-temporarily impaired securities which were held at the beginning of the period of adoption and for which the Company does not intend to sell and it is more likely than not that the Company will not be required to sell such securities before recovery of the amortized cost basis. These changes were effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company adopted these changes effective April 1, 2009. In April 2009, the FASB issued guidance now codified as ASC Topic 825, "Financial Instruments" ("ASC 825"). The pronouncement amends previous ASC 825 guidance to require disclosures about the fair value of financial instruments in all interim as well as annual financial statements. This pronouncement was effective for interim periods ending after June 15, 2009 and the Company adopted its provisions in the second quarter of 2009. On January 1, 2009, the Company adopted updates issued by the FASB to fair value accounting and reporting as it relates to nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on at least an annual basis. These changes define fair value, establish a framework for measuring fair value in GAAP, and expand disclosures about fair value measurements. This guidance applies to other GAAP that require or permit fair value measurements and is to be applied prospectively with limited exceptions. The adoption of these changes, as it relates to nonfinancial assets and nonfinancial liabilities had no impact on the Condensed Consolidated Financial Statements. These provisions will be applied at such time a fair value measurement of a nonfinancial asset or nonfinancial liability is required, which may result in a fair value that is materially different than would have been calculated prior to the adoption of these changes. On January 1, 2009, the Company adopted updates issued by the FASB to accounting for intangible assets. These changes amend the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset in order to improve the consistency between the useful life of a recognized intangible asset outside of a business combination and the period of expected cash flows used to measure the fair value of an intangible asset in a business combination. The adoption of these changes had no impact on the Condensed Consolidated Financial Statements. On January 1, 2009, the Company adopted updates issued by the FASB to the calculation of earnings per share. These changes state that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method for all periods presented. The adoption of these changes had no impact on the Condensed Consolidated Financial Statements. In April 2008, the FASB issued guidance now codified as ASC Topic 350, "INTANGIBLES--GOODWILL AND OTHER" ("ASC 350"). This pronouncement amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previous ASC 350 guidance, thereby improving the consistency between the useful life of a recognized intangible asset under ASC 350 and the period of expected cash flows used to measure the fair value of the asset under ASC Topic 805, "Business Combinations" ("ASC 805"). This pronouncement was effective for financial statements issued for fiscal years beginning after December 15, 2008 and must be applied prospectively to intangible assets acquired after the 12
effective date. The Company has not acquired any intangible assets since adopting this pronouncement. As such, there has been no impact to the Company's financial statements since the January 1, 2009 adoption date. In March 2008, the FASB issued guidance now codified as ASC Topic 815 "DERIVATIVES AND HEDGING" ("ASC 815"), which expands the disclosure requirements in previous ASC 815 guidance about an entity's derivative instruments and hedging activities. This pronouncement's disclosure provisions apply to all entities with derivative instruments subject to the previous ASC 815 guidance. The provisions also apply to related hedged items, bifurcated derivatives, and non-derivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to this pronouncement must provide more robust qualitative disclosures and expanded quantitative disclosures. Such disclosures, as well as existing required disclosures, generally will need to be presented for every annual and interim reporting period. This pronouncement was effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. For the nine months ended September 30, 2009, the Company has included the expanded disclosures about derivative instruments and hedging activities within the Company's financial statements. In December 2007, the FASB issued guidance now codified as ASC Topic 805, "BUSINESS COMBINATIONS" ("ASC 805"), which replaces previous ASC 805 guidance. This pronouncement establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired in connection with a business combination. This pronouncement also establishes disclosure requirements that will enable users to evaluate the nature and financial effect of the business combination. This pronouncement applies prospectively to business combinations for which the acquisition date is on or after the beginning of an entity's first fiscal year that begins after December 15, 2008. The Company applied the provisions of ASC 805 in connection with the acquisition that closed during the first quarter of 2009. The adoption of this pronouncement did not have a material impact on the Company's consolidated financial statements. In August 2009, the FASB issued updates to fair value accounting for liabilities. These changes clarify existing guidance that in circumstances in which a quoted price in an active market for the identical liability is not available, an entity is required to measure fair value using either a valuation technique that uses a quoted price of either a similar liability or a quoted price of an identical or similar liability when traded as an asset, or another valuation technique that is consistent with the principles of fair value measurements, such as an income approach (e.g., present value technique). This guidance also states that both a quoted price in an active market for the identical liability and a quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. These changes became effective for the Company's Consolidated Financial Statements for the year ended May 31, 2010. The adoption of this pronouncement did not have a material impact on the Company's consolidated financial statements. UPDATES ISSUED BUT NOT YET ADOPTED In October 2009, the FASB issued updates to revenue recognition guidance. These changes provide application guidance on whether multiple deliverables exist, how the deliverables should be separated, and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available. The Company will be required to apply this guidance prospectively for revenue arrangements entered into or materially modified after January 1, 2011; however, earlier application is permitted. The Company has not determined the impact that this update may have on its Consolidated Financial Statements. 13
NOTE 4 - RECLASSIFICATIONS Certain prior periods' balances have been reclassified to conform to the current period's financial statement presentation. These reclassifications had no impact on previously reported results of operations or stockholders' equity. NOTE 5 - RELATED PARTY TRANSACTIONS On August 12, 2009, the parties rescinded the Motivation Advantage transaction and agreed to return any consideration issued. On August 12, 2009, the parties rescinded the Crowley & Company transaction and agreed to consider the stock issued as compensation for services rendered. On August 12, 2009, Joseph Vittoria, resigned as a member of the Board of Directors. There were no disagreements with Joseph Vittoria on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. On August 13, 2009, Dr. Louis Corrnachia and Richard Smith resigned as members of the Board of Directors. There were no disagreements with Louis Corrnachia or Richard Smith, on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. On August 14, 2009, Greg Jaclin and Terry Carlson resigned as members of the Board of Directors. There were no disagreements with Greg Jaclin or Terry Carlson on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. On August 19, 2009, the parties rescinded the EGA transaction and agreed to return any consideration issued. On August 24, 2009, 310 Holdings, Inc.("310") and the Company closed a Securities Purchase Agreement whereby the 310 purchased 100% of the issued and outstanding common shares of Javaco in exchange for $150,000 and the issuance of 2,500,000 shares of 310's common stock to Domark. We also entered into a separate agreement and have assigned $9,997,134 of media credits in print and radio to 310 Holdings in exchange for the issuance of 1,000,000 shares of 310 Holding's common stock. On August 26, 2009, R. Thomas Kidd resigned as Chief Executive Officer and President and as a member of the Board of Directors. There were no disagreements with R. Thomas Kidd on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. R. Thomas Kidd will remain in his position as Principal Financial Officer. On August 26, 2009, in a Debt Settlement Agreement by and between the Company and R. Thomas Kidd, any and all debt owed to Mr. Kidd for expenses, advances, or loans has been settled. The Company agrees to pay Mr. Kidd $150,000 cash and transfer 3.5 million shares of common stock of TRTN, OTCBB held by us. Furthermore, the Company shall execute an assignment of all claims against Victory Lane Financial Elite, et al as known or shall become known in the course of the litigation entitled DOMK vs Victory Lane Elite, LLC, Costello, et al in the US District Court, Middle District of Florida, and the case in Tattnall County, Georgia. In addition, the parties shall execute an assignment of the repurchase agreement entered into by and between the Company and TRTN, OTCBB. Upon payment and assignment of TRTN shares and assignment of the Company's claims, Mr. Kidd shall surrender 111,438,394 common shares of Domark, to be returned to treasury and cancelled. On August 26, 2009, Scott Sieck, a member of the Board of directors and Chief Operating Officer, was appointed as our Chief Executive Officer. 14
On August 26, 2009 the Company executed a Securities purchase agreement with R. Thomas Kidd, whereby pursuant to the terms of the agreement, the Company agreed to transfer its ownership of 100 Units of Victory lane LLC to R. Thomas Kidd in exchange for 25 million shares of Domark common stock held by Mr. Kidd. The transaction closed on October 15, 2009, upon delivery to the Company of 25 million shares of common stock owned by Mr. Kidd. The issuance of the securities above were effected in reliance on the exemptions for private sales of securities not involving a public offering pursuant to in Section 4(2) and Section 4(6) of the Securities Act. On September 4, 2009, Richard Altmann resigned as member of the Board of Directors. On September 14, 2009, R. Thomas Kidd resigned as Principle Accounting Officer of the Company to pursue other interests. Mr. Kidd has provided no written disagreement with the Company on any matter related to the Company's operations, policies or practices. Scott Sieck, our current Chief Executive Officer, has been appointed as Principle Accounting Officer. On September 18, 2009, Scott Sieck entered into an employment agreement with our Company. The employment agreement provided that the Executive has agreed to waive his compensation until such time as the Board of Directors determines the Company has sufficient assets to repay the Executive or receive compensation in equity and accepts from the corporation 100,000 shares it its authorized Series "A" Preferred stock during the interim period. Subsequently, on September 21, 2009, Mr. Sieck choose to receive 100,000 shares of Series A Preferred Stock which have a voting rights in all matters to be voted upon by shareholders of common stock of 1,000 votes per share of Series A Preferred Stock. On October 15, 2009, the Company entered into an agreement whereby the Company and R Thomas Kidd settled outstanding debts to Mr. Kidd. Terms of the debt settlement agreement relieved the Company of indebtedness to Mr. Kidd in the amount of $16,491 in exchange for the transference of the website of Executive Sports and Entertainment, Inc., representing ownership of that website, delivery of the website framework for www.domarkinternational.com, the assignment of a $100,000 promissory note payable to the Company, and assignment of all shares related to MedQuest, Inc., a Nevada corporation formed by the Company in 2008. On October 20, 2009, the Company executed an agreement to sell the stock of ECFO Corporation back to ECFO's founding shareholder. Consideration for the 2,000 shares of ECFO Corporation, representing all issued and outstanding shares of ECFO Corporation, owned by the Company, is Ten Thousand Dollars ($10,000), payable in the form of a one year promissory note. The transaction is a private sale exempt from registration under Section 4(1) of the Securities Act of 1933, as amended. As of February 28, 2009, the promissory note was satisfied. On October 26, 2009, pursuant to an Assignment and Assumption Agreement, the loan payable in the amount of $100,000, entered into on October 23, 2009 was assigned to the Company's officer, Scott Sieck. On November 22, 2009, the Company entered into an agreement with R Thomas Kidd whereby the Company and Kidd have agreed upon the disbursement of certain proceeds to be received in a possible settlement the Company and certain Victory Lane Financial elite parties or a final adjudication of litigation and arbitration actions in connection with claims in current litigation. The agreement also mutually cancels the Assignment of Claims granted to R Thomas Kidd by the Company on August 26, 2009. Terms of the new agreement are outlined as follows: Upon closing of any settlement agreement between the Company and Victory Lane Financial Elite, et al, the Company shall pay to R Thomas Kidd the sum of $192,500 in cash if cash is received, or at a minimum, $42,500 in cash and an assignment of a third party promissory note in the minimum amount of $150,000 executed by all Victory Lane Financial Elite, et al in favor of the Company on 15
terms acceptable to Kidd provided that R Thomas Kidd will cancel the promissory note executed by the Company in favor of R Thomas Kidd in the amount of $192,500 and return the original promissory note to the Company. In the event of no settlement agreement between the Company and Victory Lane Financial Elite, et al, R Thomas Kidd agree to accept and the Company agrees to pay R Thomas Kidd the sum of $192,500 from the first proceeds of any award or judgment obtained as a result of the prosecution of the litigation and arbitration actions against the Victory Lane Financial Elite, et al; R Thomas Kidd canceled the Assignment of Claims executed by the Company in favor of R. Thomas Kidd on August 26, 2009 and transferred title and ownership of the Victory Lane, LLC Units to the Company; in addition, R Thomas Kidd resigned as Managing Member of Victory Lane, LLC and appointed Scott Sieck as Managing Member of Victory Lane, LLC. Effective March 29th, 2010, Scott Sieck, CEO/Director and R. Thomas Kidd entered into a in a Debt and Securities Purchase Agreement (the "Agreement"). Pursuant to the terms of the Agreement, all debt owed to Mr. Sieck by the Company ($534,271 as of 3/29/2010), his Preferred Series A shares, and one million common shares were purchased by Mr. Kidd in consideration for the delivery of 250,000 restricted common shares JBI Inc. owned by Mr. Kidd. The change in control is as a result of the transfer of the Preferred Series A Shares, which collectively provides the holder thereof with a majority of voting rights. On May 26, 2010, Domark International, Inc. (the "Company") entered into an Asset Purchase Agreement (the "Agreement") with Armada Capital, LLC ("Armada") providing for the purchase and sale of all of Armada's right, title and interest in and to all of the assets of Armada. Armada, an entity engaged in the business of providing consulting services for small capital public companies and private businesses, is owned by R. Thomas Kidd, the Company's Chief Executive Officer, Director and majority shareholder. The closing of the Agreement shall take place upon (i) the delivery of all signed documentation; (ii) the completion of all documentation necessary to perfect the delivery of the assets; and (iii) the completion and delivery of the audited financial statements of the assets to be purchased and sold; provided, however, that the closing date shall take place on or before June 30, 2010. The Purchase Price for the Assets is equal to twenty percent (20%) of the revenue derived from the fees generated from the consulting agreements sold pursuant to the Agreement. As of the date of this report, the parties agreed to mutually terminate the transaction. On July 21, 2010, Domark International, Inc. (the "Company") entered into an Agreement for the Exchange of Common Stock (the "Agreement") with Virtual Devices, Inc., a Pennsylvania corporation (VDI) providing for the issuance of stock of the Company in exchange for all of the outstanding shares of VDI. At the closing, VDI will become a wholly owned subsidiary of the Company. The closing of the Agreement shall take place upon (i) the delivery of all required signed documentation; (ii) the completion of due diligence by all parties, provided however, that the closing date shall take place on or before August 15, 2010. On August 13, 2010, the Company and Virtual Devices, Inc. extended the closing date to allow for sufficient time to complete due diligence. NOTE 6 - ACCOUNTS RECEIVABLE At the end of the three month period ending August 31, 2010, the Company had no trade receivables. NOTE 7 - LIABILITIES The Company is reporting a note payable of $783,932. This note is partially due to our executive officer and his spouse, as tenants by the entirety, and 16
partially due to an affiliate of our executive officer, which is owned by our executive officer and his spouse as tenants by the entirety, and reflects advances, assignment of claims, and expenses paid on behalf of the Company by our executive officer and his wife, as tenants by the entirety or the affiliate of our executive officer, as referenced herein. NOTE 8 - INCOME TAXES The Company has available net operating loss carry-forwards for financial statement and federal income tax purposes. These loss carry-forwards expire if not used within 20 years from the year generated. The Company's management has decided a valuation allowance is necessary to reduce any tax benefits because the available benefits are more likely than not to expire before they can be used. The tax based accumulated deficit create tax benefits in the amount of $2,134,223 from inception through May 31, 2010. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of May 31, 2010 are as follows: Deferred tax assets: Federal $ 2,134,223 State 0 ----------- Total Deferred Tax Asset 2,134,223 Less valuation allowance (2,134,223) ----------- $ 0 =========== The Company has provided a 100% valuation allowance on the deferred tax assets at May 31, 2010 to reduce such tax asset to $0 as there is no assurance that the Company will generate future taxable income to utilize such asset. Management will review this valuation allowance requirement periodically and make adjustments as warranted. NOTE 9 - COMMITMENTS AND CONTINGENCIES On April 13, 2009, the Company entered into a sponsorship agreement with Executive Adventures, LLC. The Company has committed to $465,000 in total sponsorship fees for the annual World Sailfish Championship events, for years 2009 - 2012. The agreement provides that the Company shall remit fees according to the following payment schedule: 2009 Event 60,000 shares, due by April 14, 2009 * 2010 Event 105,000 net due January 15, 2010 2011 Event 110,000 net due January 15, 2011 2012 Event 115,000 net due January 15, 2012 ---------- * On April 13, 2009, the Company issued 60,000 shares for a value of $120,000. Terms of the Agreement include an option to pay stock shares in lieu of cash payments based upon a mutually agreed upon arrangement that will be determined on a yearly basis. Due to the change in the business model of the Company, the Company has previously notified Executive Adventures, LLC. that it was not going forward with any future sponsorships. On May 13, 2009, we executed an Agreement for the Exchange of Common Stock with Victory Lane LLC. Subsequent to closing, the Company has discovered certain 17
liabilities which were undisclosed at the time of closing. The amounts of those liabilities are as follows: * Legacy Development $3,157,000 * Executive Adventures 227,000 * Statewide Engineering 20,000 * Tattnall County 3,000 * Bob Barnard 140,000 * Davis Love Design 950,000 * Davis Love Design - Penalties 85,000 * Andrew Goggin 307,000 ---------- TOTAL $4,889,000 ========== On August 10, 2009, the Company along with Victory Lane, LLC and R. Thomas Kidd filed a lawsuit in the United States District Court, Middle District of Florida Case Number 09-CV-1396-ORL-35-DAB against Victory Lane Financial Elite, LLC et al, for the following causes of action: Fraud in the Inducement, Breach of Contract, Rescission, Conspiracy, and Libel. The Company considers these liabilities contingent until the court makes a ruling on the aforementioned court case. On August 10, 2009, the Company was made aware of an action filed in the Superior Court of Tattnall County, Georgia, case number 2009-V-381-JS by Victory Lane Financial Elite, LLC et al against the Company and its directors and officers. The Company believes that the complaint is without merit and the Company intends to defend said action and file substantial counterclaims against Victory Lane Financial Elite, LLC, Patrick Costello and numerous other defendants. On September 25, 2009 the company amended its Case Number CV-1396-ORL-35-DAB to request certain complaints be heard in arbitration as called for in the original acquisition agreement dated May 13, 2009. Both venues are proceeding. The secured lender on the Victory Lane property foreclosed and then filed suit against Victory Lane, LLC, Patrick J. Costello and Stephen Brown seeking a deficiency judgment. Brown and Costello filed a third party complaint against the Company and R. Thomas Kidd. The Company contends the third party complaint is fatally defective in that it alleges independent claims as opposed to derivative or a cause of action for indemnity or contribution. On the July 5, 2010, the Company has filed a motion to dismiss the third party complaint which they believe is meritorious and there should be a ruling by the Court within sixty days. The hearing is scheduled for August 11, 2010. On August 11, 2010, the motion to dismiss was converted to a motion for summary judgment. On July 20, 2010, pursuant to the Company's previously filed motion to dismiss case number 2009-V-381-JS for lack of jurisdiction in the Superior Court of Tattnall County, Georgia, the motion was denied as to the Company and R. Thomas Kidd, but granted as to the other officers and directors of the Company. NOTE 10 - NET LOSS PER SHARE Restricted shares and warrants are not included in the computation of the weighted average number of shares outstanding during the periods. The net loss per common share is calculated by dividing the consolidated loss by the weighted average number of shares outstanding during the periods. 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis contains various "forward looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to "anticipates", "believes", "plans", "expects", "future" and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company's business, including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. The Company adopted at management's discretion, the most conservative recognition of revenue based on the most astringent guidelines of the SEC in terms of recognition of software licenses and recurring revenue. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein. Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled "Risk Factors" in the Company's Annual Report on Form 10-K for the transition period ended May 31, 2010, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future. In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements. RECENT DEVELOPMENTS NONE ADDITIONAL INFORMATION We file reports and other materials with the Securities and Exchange Commission. These documents may be inspected and copied at the Securities and Exchange Commission, Judiciary Plaza, 100 F Street, N.E., Room 1580, and Washington, D.C. 20549. You can obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. You can also get copies of documents that we file with the Commission through the Commission's Internet site at www.sec.gov. RESULTS OF OPERATIONS Revenues for the three months ended August 31, 2010 were $0 as compared to $987,525 for the three months ended August 31, 2009. The decrease is due to the rescission of our subsidiaries. After the sale of ECFO on October 20, 2009, the Company no longer has any operating subsidiaries and is considered a shell 19
company as it has nominal operations and assets consisting of only cash or cash equivalents. Our future revenue plan is dependent on our ability to effectively close new viable acquisitions. General and administrative expenses for the three months ended August 31, 2010 decreased to $11,996 from $288,286 for the three months ended August 31, 2009. As a result of the rescission of subsidiaries, the Company recognized a significant decrease in the amount of general and administrative expenses. The Company expects to continue to incur professional and legal fees until such time it can close new viable acquisitions. The Company realized a net loss of $11,996, for the three months ended August 31, 2010 compared to net loss of $257,830 for the three months ended August 31, 2009. The current net loss is largely attributable to the legal and professional fees associated with the contingent liability with Victory Lane Financial Elite, LLC. LIQUIDITY AND CAPITAL RESOURCES The Company's net cash used in operating activities for the three months ending August 31, 2010 was $3,577 compared to the net cash of $86,499 - provided by operating activities for the three months ending August 31, 2009. Accounts receivable was reduced to zero during the three months ending August 31, 2010 as a result of the deconsolidation of all subsidiaries. Our future revenues and profits, if any, will primarily depend upon our ability to close new viable acquisitions. At August 31, 2010 the Company had no capital resources and will rely upon additional capital contributions from its sole director to fund administrative expenses. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures. OTHER CONSIDERATIONS There are numerous factors that affect the business and the results of its operations. Sources of these factors include general economic and business conditions, federal and state regulation of business activities, the level of demand for product services, the level and intensity of competition in the media content industry, and the ability to develop new services based on new or evolving technology and the market's acceptance of those new services, our ability to timely and effectively manage periodic product transitions, the services, customer and geographic sales mix of any particular period, and our ability to continue to improve our infrastructure including personnel and systems to keep pace with our anticipated rapid growth. CRITICAL ACCOUNTING POLICIES We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various 20
factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions. STOCK BASED COMPENSATION In December 2004, the FASB issued a revision of SFAS No. 123 ("SFAS No. 123(R)") that requires compensation costs related to share-based payment transactions to be recognized in the statement of operations. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be re-measured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123(R) replaces SFAS No. 123 and is effective as of the beginning of January 1, 2006. Based on the number of shares and awards outstanding as of December 31, 2005 (and without giving effect to any awards which may be granted in 2006), we do not expect our adoption of SFAS No. 123(R) in January 2006 to have a material impact on the financial statements. FSP FAS 123(R)-5 was issued on October 10, 2006. The FSP provides that instruments that were originally issued as employee compensation and then modified, and that modification is made to the terms of the instrument solely to reflect an equity restructuring that occurs when the holders are no longer employees, then no change in the recognition or the measurement (due to a change in classification) of those instruments will result if both of the following conditions are met: (a). There is no increase in fair value of the award (or the ratio of intrinsic value to the exercise price of the award is preserved, that is, the holder is made whole), or the antidilution provision is not added to the terms of the award in contemplation of an equity restructuring; and (b). All holders of the same class of equity instruments (for example, stock options) are treated in the same manner. The provisions in this FSP shall be applied in the first reporting period beginning after the date the FSP is posted to the FASB website. The Company has adopted SP FAS 123(R)-5 but it did not have a material impact on its consolidated results of operations and financial condition. ACCOUNTING POLICIES AND ESTIMATES The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions. As such, in accordance with the use of accounting principles generally accepted in the United States of America, our actual realized results may differ from management's initial estimates as reported. A summary of significant accounting policies are detailed in notes to the financial statements which are an integral component of this filing. ADDITIONAL INFORMATION We file reports and other materials with the Securities and Exchange Commission. These documents may be inspected and copied the Commission's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains a web site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission. 21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We do not hold any derivative instruments and do not engage in any hedging activities. We attempted to acquire successfully operating subsidiaries and to deploy accounting, governance, risk and compliance services, marketing, management and media assets to the subsidiaries, to build the value of our Company. ITEM 4. CONTROLS AND PROCEDURES a) Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the Company's operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company's internal control over financial reporting as of August 31, 2010. In making this assessment, our Chief Executive Officer and Chief Financial Officer used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control -- Integrated Framework. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of August 31, 2010, our internal control over financial reporting was effective. b) Changes in Internal Control over Financial Reporting. During the Quarter ended August 31, 2010, there was not a change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially effected, or is reasonably likely to materially effect, our internal control over financial reporting. 22
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. 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 August 10, 2009, the Company along with Victory Lane, LLC and R. Thomas Kidd filed a lawsuit in the United States District Court, Middle District of Florida Case Number 09-CV-1396-ORL-35-DAB against Victory Lane Financial Elite, LLC et al, for the following causes of action: Fraud in the Inducement, Breach of Contract, Rescission, Conspiracy, and Libel. On August 10, 2009, the Company was made aware of an action filed in the Superior Court of Tattnall County, Georgia, case number 2009-V-381-JS by Victory Lane Financial Elite, LLC et al against the Company and its directors and officers. The Company believes that the complaint is without merit and the Company intends to defend said action and file substantial counterclaims against Victory Lane Financial Elite, LLC, Patrick Costello and numerous other defendants. Management is of the opinion that the action has no merit and intends to defend the action aggressively. On September 25, 2009 the company amended its Case Number CV-1396-ORL-35-DAB compliant to request certain complaints be heard in arbitration as called for in the original acquisition agreement dated May 13, 2009. Both venues are proceeding. The secured lender on the Victory Lane property foreclosed and then filed suit against Victory Lane, LLC, Patrick J. Costello and Stephen Brown seeking a deficiency judgment. Brown and Costello filed a third party complaint against the Company and R. Thomas Kidd. The Company contends the third party complaint is fatally defective in that it alleges independent claims as opposed to derivative or a cause of action for indemnity or contribution. On the July 5, 2010, the Company has filed a motion to dismiss the third party complaint which they believe is meritorious and there should be a ruling by the Court within sixty days. The hearing is scheduled for August 11, 2010. On August 11, 2010, the motion to dismiss was converted to a motion for summary judgment. On July 20, 2010, pursuant to the Company's previously filed motion to dismiss case number 2009-V-381-JS for lack of jurisdiction in the Superior Court of Tattnall County, Georgia, the motion was denied as to the Company and R. Thomas Kidd, but granted as to the other officers and directors of the Company. 23
ITEM 1A. RISK FACTORS You should carefully consider the following risk factors, in addition to the risk factors disclosed in prior filings on Form 10-K (as amended) or 10-Q before making an investment decision. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline and you may lose all or a part of your investment. OUR COMMON STOCK IS SUBJECT TO PENNY STOCK REGULATION Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors. WE MAY NOT HAVE ACCESS TO SUFFICIENT CAPITAL TO PURSUE OUR BUSINESS AND THEREFORE WOULD BE UNABLE TO ACHIEVE OUR PLANNED FUTURE GROWTH: We intend to pursue a growth strategy that includes development of the Company business and technology. Currently we have limited capital which is insufficient to pursue our plans for development and growth. Our ability to implement our growth plans will depend primarily on our ability to obtain additional private or public equity or debt financing. We are currently seeking additional capital. Such financing may not be available at all, or we may be unable to locate and secure additional capital on terms and conditions that are acceptable to us. Our failure to obtain additional capital will have a material adverse effect on our business. OUR LACK OF DIVERSIFICATION IN OUR BUSINESS SUBJECTS INVESTORS TO A GREATER RISK OF LOSSES All of our efforts are focused on the development and growth of our business and its technology in an unproven area. BECAUSE WE ARE QUOTED ON THE OTCBB INSTEAD OF AN EXCHANGE OR NATIONAL QUOTATION SYSTEM, OUR INVESTORS MAY HAVE A TOUGHER TIME SELLING THEIR STOCK OR EXPERIENCE NEGATIVE VOLATILITY ON THE MARKET PRICE OF OUR STOCK. Our common stock is traded on the OTCBB. The OTCBB is often highly illiquid. There is a greater chance of volatility for securities that trade on the OTCBB as compared to a national exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations in the market price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative effect on the market price for our securities. Accordingly, our 24
stockholders may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial period of time until the market for our common stock improves. FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS. It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. If we are unable to comply with these requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies. If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock. Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, beginning with our annual report on Form 10-K for our fiscal period ending May 31, 2008, we will be required to prepare assessments regarding internal controls over financial reporting and beginning with our annual report on Form 10-K for our fiscal period ending May 31, 2009, furnish a report by our management on our internal control over financial reporting. We have begun the process of documenting and testing our internal control procedures in order to satisfy these requirements, which is likely to result in increased general and administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities. While our management is expending significant resources in an effort to complete this important project, there can be no assurance that we will be able to achieve our objective on a timely basis. There also can be no assurance that our auditors will be able to issue an unqualified opinion on management's assessment of the effectiveness of our internal control over financial reporting. Failure to achieve and maintain an effective internal control environment or complete our Section 404 certifications could have a material adverse effect on our stock price. In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover "material weaknesses" in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines "significant deficiency" as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected. In the event that a material weakness is identified, we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will 25
remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future. Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE PRICE. THE PRICE AT WHICH YOU PURCHASE OUR COMMON SHARES MAY NOT BE INDICATIVE OF THE PRICE THAT WILL PREVAIL IN THE TRADING MARKET. YOU MAY BE UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU. THE MARKET PRICE FOR OUR COMMON SHARES IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or "risky" investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price. Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with 26
consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price. VOLATILITY IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION, THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR PROFITABILITY AND RESULTS OF OPERATIONS. As discussed in the preceding risk factors, the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management's attention and resources. WE ARE A "SHELL" COMPANY AND OUR SHARES WILL BE SUBJECT TO RESTRICTIONS ON RESALE. As we currently have nominal operations and our assets consist of cash, and/or cash equivalents, we will be deemed a "shell company" as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Accordingly, until we are no longer a "shell company," and will file a Form 10 level disclosure, and continue to be a reporting company pursuant to the Securities Exchange Act of 1934, as amended, and for twelve months following the filing of the Form 10 level disclosure, shareholders holding restricted, non-registered shares will not be able to use the exemptions provided under Rule 144 for the resale of their shares of common stock. Preclusion from any prospective investor using the exemptions provided by Rule 144 may be more difficult for us to sell equity securities or equity-related securities in the future to investors that require a shorter period before liquidity or may require us to expend limited funds to register their shares for resale in a future prospectus. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES There were no unregistered sales of equity securities during the interim period ended August 31, 2010. ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities of during the interim period ended August 31, 2010. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to the vote of securities holders during the interim period ended August 31, 2010. ITEM 5. OTHER INFORMATION There is no information with respect to which information is not otherwise called for by this form. 27
ITEM 6. EXHIBITS 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. 32.2 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. 32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DoMark International, Inc. Registrant Date: October 12,2010 By: /s/ R. Thomas Kidd -------------------------------------------- R. Thomas Kidd Chief Executive Officer, Principal Executive Officer, Principal Financial Officer 2