Attached files
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 November 30, 2010
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
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 November 30, 2010
Common stock, $0.001 par value 36,460,835
DOMARK INTERNATIONAL, INC.
INDEX TO FORM 10-Q FILING
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2010
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
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 11
Item 3 Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. Controls and Procedures 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 1A. Risk Factors 15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5 Other information 19
Item 6. Exhibits 19
2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
DOMARK INTERNATIONAL, INC.
(A development Stage Company)
BALANCE SHEETS
ASSETS
11/30/2010 5/31/2010
-------- --------
(unaudited)
CURRENT ASSETS
Cash $ 132 $ 197
Accounts Receivable -- --
-------- --------
Total Current Assets 132 100,197
-------- --------
FIXED ASSETS
Property & Equipment, Net 836 1,531
-------- --------
Total Fixed Assets 836 1,531
-------- --------
OTHER ASSETS
Investment in unconsolidated subsidiary -- 10,000
-------- --------
Total Other Assets -- 10,000
-------- --------
TOTAL ASSETS $ 968 $111,728
======== ========
The accompanying notes are an integral part of these financial statements.
3
DOMARK INTERNATIONAL, INC.
(A development Stage Company)
BALANCE SHEETS
(continued)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
11/30/2010 5/31/2010
------------- -------------
(unaudited)
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 53,568 $ 46,868
Due to Affiliate and Shareholder 749,319 729,836
------------- -------------
Total Current Liabilities 802,887 776,704
------------- -------------
TOTAL LIABILITIES 802,887 776,704
------------- -------------
STOCKHOLDERS' EQUITY/(DEFICIENCY)
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 36,460,835, respectively 36,461 36,461
Additional paid in capital 13,526,620 13,526,619
Accumulated deficit (13,864,994) (13,864,994)
Accumulated deficit during development stage (500,106) (363,162)
------------- -------------
Total Stockholders' Equity/(Deficiency) (801,919) (664,976)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 968 $ 111,728
============= =============
The accompanying notes are an integral part of these financial statements.
4
DOMARK INTERNATIONAL, INC.
(A development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
For the cumulative
period during the
Development Stage
For the For the For the For the from
Three Months Three Months Six Months Six Months October 21, 2009
Ended Ended Ended Ended to
November 30, November 30, November 30, November 30, November 30,
2010 2009 2010 2009 2010
----------- ----------- ----------- ----------- -----------
REVENUE $ -- $ -- $ -- $ -- --
COST OF SERVICES -- -- -- -- --
----------- ----------- ----------- ----------- -----------
GROSS PROFIT -- -- -- -- --
GENERAL AND ADMINISTRATIVE EXPENSES 14,948 176,085 26,944 247,456 399,992
BAD DEBT EXPENSE 100,000 -- 100,000 -- 100,000
IMPAIRMENT OF GOODWILL -- 232,000 -- 332,000
----------- ----------- ----------- ----------- -----------
OPERATING INCOME (114,948) (408,085) (126,944) (579,456) (499,992)
INTEREST EXPENSE -- -- -- --
GAIN ON SALE OF SUBSIDIARY -- -- -- 8,000
OTHER INCOME -- 16,491 -- 16,491 9,886
IMPAIRMENT OF ASSET 10,000 8,000 10,000 40,000 10,000
----------- ----------- ----------- ----------- -----------
INCOME/(LOSS) BEFORE INCOME TAXES (124,948) (383,594) (136,944) (594,965) (500,106)
PROVISION FOR INCOME TAXES
Federal -- -- -- -- --
State -- -- -- -- --
----------- ----------- ----------- ----------- -----------
NET INCOME FROM OPERATIONS $ (124,948) $ (383,594) $ (136,944) $ (594,965) $ (500,106)
=========== =========== =========== =========== ===========
INCOME (LOSS) FROM DISCONTINUED OPERATIONS -- 3,963 -- (7,334) --
=========== =========== =========== =========== ===========
NET LOSS $ (124,948) $ (379,631) $ (136,944) $ (602,299) $ (500,106)
=========== =========== =========== =========== ===========
Loss per share on continuing operations,
basic and diluted $ (0.00) $ (0.01) $ (0.00) $ (0.02)
=========== =========== =========== ===========
Loss per share on discontinued operations,
basic and diluted $ -- $ 0.00 $ -- $ (0.00)
=========== =========== =========== ===========
Net loss per share, basic and diluted $ (0.00) $ (0.01) $ (0.00) $ (0.02)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 36,460,835 30,055,789 36,560,835 30,055,789
The accompanying notes are an integral part of these financial statements.
5
DOMARK INTERNATIONAL, INC.
(A development Stage Company)
STATEMENTS OF CASH FLOWS
For the cumulative
period during the
Development Stage
from
For the Six Months For the Six Months October 21, 2009
Ended Ended to
November 30, November 30, November 30,
2010 2009 2010
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) from continuing operations $ (136,944) $ (594,965) $ (500,106)
---------- ---------- ----------
Loss from disconitinued operations
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 695 -- 1,354
Impairment of Assets 10,000 40,000 10,000
Impairment of Goodwill -- 232,000 --
Common stock issued as compensation and for expenses -- -- 89
Gain on sale of subsidiary -- -- --
Bad debt expense 100,000 -- 100,000
CHANGES IN OPERATING ASSETS AND LIABILITITES:
(Increase)/Decrease in Accounts Receivable -- -- --
(Increase)/Decrease in Notes Receivable -- -- --
(Increase)/Decrease in Inventory -- -- --
(Increase)/Decrease Prepaid Exp and Other Current Assets -- -- --
Deposits -- -- --
Increase/(Decrease) in Notes Payable -- -- --
Increase/(Decrease) in Accounts Payable 6,700 (11,463) (51,748)
Increase/(Decrease) in Accrued Expenses -- (5,382) --
---------- ---------- ----------
Total adjustments to net income 117,395 255,156 59,695
---------- ---------- ----------
Net cash provided by (used in) operating activities (19,549) (339,810) (440,411)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Received/(Paid) Furniture & Equipment -- -- --
---------- ---------- ----------
Net cash flows provided by (used in) investing activities -- -- --
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash Received/(Paid) from/(to) Affiliates and/or Shareholders 19,483 107,786 637,485
Cash Received (Paid in capital) (100,469)
Cash Received/(Paid) on notes payable -- (986)
---------- ---------- ----------
Net cash provided by (used in) financing activities 19,483 106,800 537,016
---------- ---------- ----------
CASH RECONCILIATION
Cash flows from discontinued operations -- 208,585 --
Cash fow from discontinued financing activities -- -- --
Net increase (decrease) in cash and cash equivalents (66) (24,425) (3,395)
Cash and cash equivalents - beginning balance 197 24,451 3,527
---------- ---------- ----------
CASH AND CASH EQUIVALENTS BALANCE END OF PERIOD $ 132 $ 27 $ 100,132
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
6
DOMARK INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED NOVEMBER 30, 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. As of October 21, 2009, the Company
re-entered into development stage.
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 $136,944 for the six months ended November 30,
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 - BASIS OF PRESENTATION
The unaudited interim financial statements of DOMARK INTERNATIONAL, INC. (the
"Company") have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") for interim financial information and
the rules and regulations of the Securities and Exchange Commission ("SEC"). .
In the opinion of management, all adjustments, consisting of normal recurring
accruals considered necessary for a fair presentation, have been included.
Operating results for the three and six months ended November 30, 2010 are not
necessarily indicative of the results that may be expected for the year ending
May 31, 2011. Please note the Company intends to amend the Form 10K due to SEC
correspondence related to the revocation of licenses of our former auditor. As
such the May 31, 2010 financial may not be relied upon.
7
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.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. These estimates and assumptions also affect the
reported amounts of revenues, costs and expenses during the reporting period.
Management evaluates these estimates and assumptions on a regular basis. Actual
results could differ from those estimates.
The primary management 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.
NET LOSS PER SHARE
Restricted shares and warrants are not included in the computation of the
weighted average number of shares outstanding during the periods. The net loss
per common share is calculated by dividing the consolidated loss by the weighted
average number of shares outstanding during the periods.
NOTE 5 - RELATED PARTY TRANSACTIONS
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. As of
December 10, 2010, the Company and VDI determined that it was in the best
interest of the shareholders of the Company and VDI to mutually agree to
terminate the Agreement with no further obligation or liability on the part of
one party to the other.
NOTE 6 - NOTES RECEIVABLE
On November 30, 2010, the Company deemed the note receivable for $100,000 as
uncollectible and has written it off to bad debts.
NOTE 7 - INVESTMENTS IN UNCONSOLIDATED SUBSIDIARY
On November 30, 2010, the Company also deemed the investment in an
unconsolidated subsidiary as loss and has impaired the $10,000 asset.
8
NOTE 8 - LIABILITIES
The Company is reporting a note payable of $749,319 due on demand and
non-interest bearing. This note is due to our executive officer and reflects
advances, assignment of claims, and expenses paid on behalf of the Company by
our executive officer.
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
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.
9
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 - SUBSEQUENT EVENTS
On December 10, 2010, the Company and VDI determined that it was in the best
interest of the shareholders of the Company and VDI to mutually agree to
terminate the Agreement with no further obligation or liability on the part of
one party to the other.
The Company was notified on January 5, 2010, that effective December 14,
2010,the PCAOB revoked the registration of Larry O'Donnell, CPA, P.C. The
Company is currently in the process of consulting with its professional advisors
and current auditor as to the requirement to engage for audit(s) of any/all
financial statement(s) O'Donnell participated in auditing and will engage as
soon as possible, if applicable.
10
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 six months ended November 30, 2010 were $0 as compared to $0
for the six months ended November 30, 2009. After the sale of ECFO on October
20, 2009, the Company no longer has any operating subsidiaries and is considered
a development stage company as it has nominal operations and assets consisting
of only cash or cash equivalents. Our future revenue plan is dependent on our
ability to effectively close new viable acquisitions.
General and administrative expenses for the six months ended November 30, 2010
decreased to $26,944 from $247,456 for the six months ended November 30, 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.
11
The Company realized a net loss of $136,944, for the six months ended November
30, 2010 compared to net loss of $594,965 for the six months ended November 30,
2009. The Company had no activity attributed to discontinued operations in the
first six months of 2010 as compared to a net loss of $7,334 in the six months
of 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, and the write off to bad debt of a note receivable deemed
uncollectable.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash used in operating activities for the six months ending
November 30, 2010 was $19,549 compared to the net cash of $339,810 - used in
operating activities for the six months ending November 30, 2009.
Accounts receivable was reduced to zero during the six months ending November
30, 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 November 30, 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
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.
12
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.
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.
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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
November 30, 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 November 30, 2010, our internal
control over financial reporting was effective.
b) Changes in Internal Control over Financial Reporting.
During the Quarter ended November 30, 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 affect, our internal control over financial reporting.
It should be noted that any system of controls, however well designed and
operated, can provide only reasonable and not absolute assurance that the
objectives of the system are met. In addition, the design of any control system
is based in part upon certain assumptions about the likelihood of certain
events. Because of these and other inherent limitations of control systems,
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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.
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.
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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
is compared to a national exchange or quotation system. This volatility may be
caused by a variety of factors, including the lack of readily available price
quotations, the absence of consistent administrative supervision of bid and ask
quotations, lower trading volume, and market conditions. Investors in our common
stock may experience high fluctuations in the market price and volume of the
trading market for our securities. These fluctuations, when they occur, have a
negative effect on the market price for our securities. Accordingly, our
stockholders may not be able to realize a fair price from their shares when they
determine to sell them or may have to hold them for a substantial period of time
until the market for our common stock improves.
FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH
SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS AND OPERATING RESULTS.
It may be time consuming, difficult and costly for us to develop and implement
the additional internal controls, processes and reporting procedures required by
the Sarbanes-Oxley Act. We may need to hire additional financial reporting,
internal auditing and other finance staff in order to develop and implement
appropriate additional internal controls, processes and reporting procedures. If
we are unable to comply with these requirements of the Sarbanes-Oxley Act, we
may not be able to obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires of publicly traded companies.
If we fail to comply in a timely manner with the requirements of Section 404 of
the Sarbanes-Oxley Act regarding internal control over financial reporting or to
remedy any material weaknesses in our internal controls that we may identify,
16
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
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
17
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
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.
18
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 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 November 30, 2010.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities of during the interim period ended
November 30, 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 November 30, 2010.
ITEM 5 - OTHER INFORMATION
There is no information with respect to which information is not otherwise
called for by this form.
ITEM 6 - EXHIBITS
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act.
32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act.
32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act.
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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: January 14, 2011 By: /s/ R. Thomas Kidd
--------------------------------------
R. Thomas Kidd
Chief Executive Officer, Principal
Executive Officer, Principal
Financial Officer
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