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 31st, 2014

 

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

 

For the transition period from ________ to ___________

 

Commission File No. 333-136247

 

Domark International, Inc.

(Name of small business issuer as specified in its charter)

 

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

 

34 King Street, East Suite 1102

Toronto, Ontario M5C1E9

321-250-4996

(Issuer's telephone number)

 

Securities registered under Section 12(b) of the Exchange Act:

 

None

 

Securities registered under Section 12(g) of the Exchange Act:

 

Common Stock, $0.001 par value per share

(Title of Class)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

 

Large accelerated filer	¨	Accelerated Filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

 

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act) Yes ¨ No x

 

As of August 31, 2014, there were 1,760,869,080 shares of Common Stock, $0.001 par value per share, issued and outstanding and there were 50,000 shares of Series A Preferred Stock, $0.001 par value per share, issued and outstanding and there are zero shares of Series B Preferred Stock, $0.001 par value per share, issued and outstanding.

 

 

 

 

DOMARK INTERNATIONAL, INC.

 

TABLE OF CONTENTS

 

			PAGE
PART I - FINANCIAL INFORMATION
Item 1.
	Consolidated Balance Sheets August 31, 2014 (unaudited) and May 31, 2014			3-4
	Consolidated Statements of Operations three months ending August 31, 2014 and August 31, 2013 (unaudited)			5
	Consolidated Statements of Cash Flows three months ending August 31, 2014 and August 31, 2013 (unaudited)			6
	Notes to Consolidated Financial Statements (unaudited)			7-18
Item 2.	Management Discussion & Analysis of Financial Condition and Results of Operations			19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			20
Item 4.	Controls and Procedures			20
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings			22
Item 1A.	Risk Factors			22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			22
Item 3.	Defaults Upon Senior Securities			23
Item 4.	Mine Safety Disclosure			23
Item 5.	Other information			23
Item 6.	Exhibits			23

 

2

 

PART I – CONSOLIDATED FINANCIAL INFORMATION

 

ITEM 1 – CONSOLIDATED FINANCIAL STATEMENTS

 

DOMARK INTERNATIONAL, INC.

 CONSOLIDATED BALANCE SHEETS

 

ASSETS

 

		August 31, 2014				May 31, 2014
		(Unaudited)
CURRENT ASSETS
Cash and cash equivalents		$	-			$	460
Loan receivable from consultant			36,203				36,203
Prepaid expenses			4,500				4,500
TOTAL CURRENT ASSETS			40,703				41,163
INVESTMENTS			1,144,166				1,144,166
OTHER ASSETS
Patents, net of accumulated amortization of $6,105 and $3,605, respectively			64,397				66,897
Licenses, net of accumulated amortization of $111,758 and $60,890, respectively			198,242				249,102
TOTAL OTHER ASSETS			262,639				315,999
TOTAL ASSETS		$	1,447,508			$	1,501,328

 

See notes to interim consolidated financial statements.

 

3

  

DOMARK INTERNATIONAL, INC.

 CONSOLIDATED BALANCE SHEETS

 

LIABILITIES AND STOCKHOLDERS’ (DEFICIT)

 

		August 31, 2014				May 31, 2014
		(Unaudited)
CURRENT LIABILITIES
Bank overdraft		$	35			$	-
Note payable to bank			180,000				180,000
Accounts payable and accrued expenses			61,741				56,940
Amounts due under Licensing Agreement with Wazzamba S.A.			224,924				224,925
Loans payable to consultants and stockholders			167,636				188,972
Convertible notes payable (net of unamortized discounts of $742,235 and $674,886, respectively)			22,936				67,414
Derivative liability for convertible notes payable			1,941,872				1,748,982
TOTAL CURRENT LIABILITIES AND TOTAL LIABILITIES			2,599,144				2,467,233
STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value, authorized 10,000,000 shares:
Series A convertible preferred stock - issued and outstanding 50,000 shares			50				50
Common stock, $0.001 par value, authorized 4,000,000,000 shares:
1,885,668,882 & 801,626,781 issued, 1,760,869,080 and 676,806,979 shares outstanding as August 31, 2014 & May 31, 2014 respectively			1,885,668				801,627
Less: Treasury Stock (124,819,820 shares) as of August 31 & May 31, 2014			(124,820	)			(124,820	)
Common stock payable			858,000				858,000
Additional paid in capital			42,930,750				43,529,923
Accumulated other comprehensive loss			(100,201	)			(88,551	)
Accumulated deficit			(46,601,083	)			(45,942,134	)
TOTAL STOCKHOLDERS' DEFICIT			(1,151,636	)			(965,905	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	1,447,508			$	1,501,328

 

See notes to interim consolidated financial statements.

 

4

 

DOMARK INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For three months ended August 31, 2014				For three months ended August 31, 2013
Sales		$	-			$	-
Cost of sales			-				-
Gross profit			-				-
Operating expenses:
General and administrative			209,643				259,443
Stock-based compensation - consultants			55,623				453,825
Depreciation expense			53,360				360
Total operating expenses			318,626				713,628
Loss from operations			(318,626	)			(713,628	)
Other income (expense):
Revaluation of derivative liability for convertible notes			(192,890	)			14,976
Interest expense			(147,433	)			(64,958	)
Total other income (expense)			(340,323	)			(49,982	)
Net loss		$	(658,976	)		$	(763,610	)
Statement of Comprehensive Loss
Net loss			(658,949	)			(763,610	)
Other Comprehensive Loss
Foreign Currency Adjustment			(11,650	)			-
Total Comprehensive Loss			(670,599	)			(763,610	)
Net loss per common share, basic and diluted		$	(0.00	)		$	(0.01	)
Weighted average common shares outstanding			1,077,885,876				64,522,176

 

See notes to interim consolidated financial statements.

 

5

 

DOMARK INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		For the three months ended
		August 31, 2014				August 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss		$	(658,976	)		$	(763,610	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			53,360				360
Common stock issued as compensation			55,623				453,825
Non cash interest expense			147,433				64,958
Loss (gain) on derivative valuation			192,890				(14,976	)
Changes in operating assets and liabilities:
Prepaid expenses			-				1
Accounts payable and accrued expenses			4,801				(10,509	)
Accounts payable -related party			(21,336	)			-
Net cash used in operating activities			(226,178	)			(259,951	)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for investments			-				(127,902	)
Cash paid for loan receivable from consultant			-				(36,203	)
Net cash used in investing activities			-				(164,105	)
Total Comprehensive Loss			(11,650	)			-
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible notes payable			128,448				282,500
Proceeds from loans payable to consultants and stockholders			108,885				155,199
Net cash provided by financing activities			237,333				437,699
Net increase (decrease) in cash and cash equivalents			(495	)			13,643
CASH BALANCE BEGINNING OF PERIOD			460				20
CASH BALANCE/(BANK OVERDRAFT) END OF PERIOD		$	(35	)		$	13,663
Cash paid for interest		$	20,424			$	-
Cash paid for taxes		$	-			$	-
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Shares issued for settlement of loans payable to consultants and stockholders		$	55,623			$	-
Shares issued for settlement of convertible notes payable		$	237,940			$	147,941
Shares issued for patent acquisition		$	-			$	35,500
Shares issued for equity interests in Imagic Ltd		$	-			$	697,500

 

See notes to interim consolidated financial statements.

 

6

  

DOMARK INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED AUGUST 31, 2014 AND AUGUST 31, 2013

 (Unaudited)

 

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. During 2008 and 2009, the Company acquired several operating businesses. On May 21, 2009, the Company entered into an acquisition agreement (the "Victory Lane Agreement") with Victory Lane Financial Elite, LLC ("Victory Lane") with respect to a real estate lifestyle business known as "Victory Lane" (the "Victory Lane Business"). Shortly thereafter, a dispute arose between the Company and the principals of Victory Lane regarding the representations of the principals of Victory Lane and the Victory Lane Business and the Victory Lane Agreement.

 

On March 5, 2012, the Company entered into an Asset Purchase Agreement with its then controlling shareholder, R. Thomas Kidd, for the sale of the Company’s subsidiary Armada Armada/The Golf Championships and certain assets related thereto. The Company relied upon Accounting Standards Codification (“ASC”) Topic Nos, 860-20-25 and 860-20-40 to record the sale. The fair value of the transaction was measured at the fair value of the assets less any liabilities sold.

 

On February 29, 2012, the Company formed a new wholly owned subsidiary, Solarwerks, Inc. in the state of Nevada, for the purposes of entering the business of marketing specialized solar consumer electronics. Solarwerks' current focus is to develop and distribute the SolaPad, a combined cover and charging system for Apple's iPad; and the SolaCase, a combined cover and charging system for all versions of Apple's iPhone. Solarwerks competes in a market that also includes 3D Systems (DDD), Dell (DELL) and Hewlett Packard (HPQ). Solarwerks, Inc. is currently in default with the Nevada Secretary of State.

 

On June 20, 2012, the Company formed a new wholly-owned subsidiary, MuscleFoot Inc. in the state of Nevada for the purpose of distributing, marketing, and acting as sales agent for the patented foot care system of Barefoot Science. MuscleFoot Inc. is currently in default with the Nevada Secretary of State.

 

On July 20, 2012, the Company formed a new wholly-owned subsidiary, DoMark Canada Inc. in the province of Ontario for the purpose of supporting the Company’s corporate operations based in Toronto, Ontario, Canada.

 

On February 28, 2013, the Company entered into a Memorandum of Understanding to purchase 44% of Zaktek Ltd. (“Zaktek”). Zaktek’s main product is the phonepad+, an Apple Inc. approved tablet device that works with smartphones, including the Apple iPhone® and Samsung Galaxy products to improve functionality including video and gaming abilities.

 

On April 23, 2013, the Company received notification that Zaktek was ending discussions in regards to the definitive purchase agreement with DoMark.

 

On June 11, 2013, the Company then purchased 100% of South Hill Ltd., an English private limited company, which owns approximately 19% of Zaktek.

 

NOTE 2 – GOING CONCERN

 

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. Furthermore, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders.

 

7

  

These factors raise substantial doubt about the ability of the Company to continue as a going concern. These condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. In this regard, management is planning to raise any necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital.

 

NOTE 3 – BASIS OF PRESENTATION

 

The unaudited consolidated financial statements as of August 31, 2014 and for the three months ended August 31, 2013 have been prepared in accordance with accounting principles generally accepted in the United States for interim consolidated financial information and with instructions to Form 10-Q. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the consolidated financial position as of August 31, 2014 and the results of operations and cash flows for the three months ended August 31, 2014 and 2013. The financial data and other information disclosed in these notes to the interim consolidated financial statements related to these periods are unaudited. The results for the three month period August 31, 2014 are not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending May 31, 2015. The consolidated balance sheet at May 31, 2014 has been derived from the audited consolidated financial statements at that date.

 

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited consolidated financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended May 31, 2014 as included in our annual report on Form 10-K.

 

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

RECENT ACCOUNTNG PRONOUNCEMENTS

 

In June 2014, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation” (“ASU 2014-10”). ASU 2014-10 removes the financial reporting distinction between development stage entities and other reporting entities and eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. As permitted by ASU 2014-10, the Company has elected early application of this standard for the accompanying consolidated financial statements for the Quarter ended August 31, 2014 and year ended May 31, 2014. The Company has reviewed other 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.

 

PRINCIPLES OF CONSOLIDATION

 

The accompanying consolidated financial statements represent the consolidated financial position and results of operations of the Company and include the accounts and results of operations of the Company and its subsidiaries. The accompanying consolidated financial statements include the parent entity of DoMark International, Inc. and its wholly owned subsidiaries, Domark Canada, Inc., Solarwerks, Inc., MuscleFoot, Inc. The Company has relied upon the guidance provided by ASC Topic No. 810-10-15-3.

 

8

  

Foreign Currency Translation and Transaction Gains and Losses

 

We record foreign currency translation adjustments and transaction gains and losses in accordance with SFAS 52, Foreign Currency Translation. For our operations that have a functional currency other than the U.S. dollar, gains and losses resulting from the translation of the functional currency into U.S. dollars for financial statement presentation are not included in determining net loss but are accumulated in the cumulative foreign currency translation adjustment account as a separate component of shareholders’ deficit. The Company and its subsidiaries also have transactions in foreign currencies other than the functional currency. We record transaction gains and losses in our consolidated statements of income related to the recurring measurement and settlement of such transactions. The translation rates as of August 31, 2014 were $1.00 US to $.92 Canadian.

 

USE OF ESTIMATES

 

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

 

The primary management estimates included in these condensed consolidated financial statements are the fair value of Company stock tendered in various non-monetary transactions and the fair value of the derivative liability for convertible notes payable.

 

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, 2014 there weren’t any cash or cash equivalents. At May 31, 2014, cash and cash equivalents, or amounts due bank, consisted only of cash overdraft in the bank.

 

LOANS RECEIVABLE CONSULTANT

 

The loan receivable consultants are a short term, less than one year note, due July 15, 2015, non-interest bearing

 

NET LOSS PER COMMON SHARE

 

Basic net loss per common share is computed by dilutive net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially dilutive securities (such as convertible notes payable, convertible preferred stock, and warrants) outstanding during the relevant period. Dilutive securities having an anti-dilutive effect on diluted net loss per common share are excluded from the calculation.

 

For the three months ended August 31, 2014 and 2013, diluted common shares outstanding excluded the following dilutive securities as the effect of their inclusion was anti-dilutive: 

 

		Common Shares Equivalent
		Three Months Ended August 31,
		2014				2013
Convertible notes payable			307,459,536				2,163,265
Series A convertible preferred stock			50,000,000				50,000,000
Warrants			850,000				850,000
Total common shares equivalent			358,309,536				53,013,265

 

9

 

INTANGIBLE ASSETS

 

Intangible assets are carried at cost less accumulated amortization. Amortization is recorded over the estimated useful lives of the respective assets.

 

IMPAIRMENT OF LONG-LIVED ASSETS

 

In accordance with ASC Topic No. 360-10-40, 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.

 

STOCK-BASED COMPENSATION

 

The Company accounts for share based payments in accordance with ASC Topic No. 718, Compensation - Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with ASC 718-10-30-9, Measurement Objective - Fair Value at Grant Date, the Company estimates the fair value of the award using a valuation technique. For stock options, the Company uses the Black-Scholes option pricing model. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders. Compensation cost is recognized over the requisite service period which is generally equal to the vesting period. Upon exercise, shares issued will be newly issued shares from authorized common stock.

 

ASC Topic No. 505, "Compensation-Stock Compensation", establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non-employees for goods or services. Under this method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 505.

 

RESEARCH AND DEVELOPMENT

 

All research and development expenditures are expensed as incurred.

 

REVENUE RECOGNITION

 

The Company recognizes revenues when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured.

 

10

  

NOTE 5 – INVESTMENTS

 

Investments consist of:

 

		August 31, 2014				May 31, 2014
Imagic Ltd. - 40% equity interest		$	1,094,166			$	1,094,166
Barefoot Science Products & Services Inc. - 15% equity interest			50,000				50,000
Total		$	1,144,166			$	1,144,166

 

The cost of the 40% equity interest in Imagic Ltd. at August 31, 2014 consists of:

 

July 22, 2013 issuance of 7,500,000 shares of DoMark common stock to Imagic Ltd.		$	697,500
December 3, 2013 issuance of 8,000,000 shares of DoMark common stock to Meadow Grove Ltd. in exchange for 9% equity interest in Imagic Ltd.			96,005
Cash payments to or for the benefit of Imagic Ltd.			150,661
Payments from Foremark Holdings to Imagic Ltd. in exchange for DoMark notes payable to Foremark Holdings			150,000
Total		$	1,094,166

 

Imagic is a privately owned company registered in Gibraltar which owns proprietary product designs for its Digilink and Game Control products. Imagic shares are not quoted or traded on any securities exchange or in any recognized over-the counter market. Imagic is accounted for on the equity method of accounting. The Company consolidates entities that we control. The Company accounts for investments in joint ventures using the equity method of accounting when we exercise significant influence over the venture. If the Company does not exercise significant influence, we account for the investment using the cost method of accounting. Imagic did not have any revenues or expenses for the period ended August 31, 2014.

 

NOTE 6 – LICENSING AGREEMENT WITH WAZZAMBA SA

 

During the three months ended February 28, 2014, the Company executed a Licensing Agreement with Wazzamba SA (the “Licensor”). The agreement provides the Company an exclusive license to use certain technology (which permits third-party subscribers to integrate a fully equipped online shop into their websites) in Canada and the United States for an initial term ending July 31, 2015. The agreement provides for the Company to pay the Licensor “Flat Fee” compensation of $ 300,000 in 3 installments of $100,000 each (first installment payable within 5 days of the signing of the agreement, second installment payable on July 1, 2014, and third installment payable on February 1, 2015) plus “Revenue Share” compensation equal to 50% of Net Commissions generated by the Company payable monthly. In the event that the Company does not generate $500,000 in Net Commissions by January 31, 2015, the Licensor has the right to cancel the agreement with one month notice (in which case the third $100,000 installment will no longer be due). With respect to an Extended License Term after July 31, 2015, the agreement provides the Company a right of first refusal to match any offer received by the Licensor from a third party.

 

11

 

At August 31, 2014, the Company has a recorded intangible asset for “Licensing Agreement with Wazzamba SA” in the amount of $300,000, and included the liability under the Licenses net of accumulated amortization. Commencing March 1, 2014, the Company will amortize the $300,000 intangible asset on a straight line basis over the remaining 17 months of the Initial Term ending July 31, 2015 (approximately $17,647 per month).

 

On March 27, 2014, the Company paid $25,000 of the first $100,000 “Flat Fee” installment due the Licensor under the agreement. The other $75,000 due is presently past due.

 

Licenses, net of accumulated amortization are as follows:

 

		August 31, 2014				May 31, 2014
Wazzamba, S.A .		$	300,000			$	300,000
Bioharmonics			10,000				10,000
Subtotal			310,000				310,000
Accumulated amortization			(111,758	)			(60,898	)
Total		$	198,242			$	249,102

 

NOTE 7 – NOTE PAYABLE TO BANK

 

In December 2013, the Company entered into a Loan Agreement with a bank located in Maryland. The related Promissory Note in the amount of $180,000 bears interest at a rate at 10% payable monthly, and is due in full on December 31, 2014, and is secured by a 25,000,000 shares of Domark International, Inc (Common Stock Reserve as defined in the Loan Agreement), a Guaranty of Payment from the Company’s chief financial officer and his wife, and certain real property owned by the Company’s chief financial officer and his wife.

 

NOTE 8 – LOANS PAYABLE TO CONSULTANTS AND STOCKHOLDERS

 

Loans payable to consultants and stockholders consist of:

 

		August 31, 2014				May 31, 2014
Consultant and stockholder		$	80,068			$	90,402
President of DoMark			47,368				47,500
Non - Exec Chairman of Domark			-				11,875
Chairman of Barefoot Science and affiliate			21,500				21,500
Consultant			16,097				16,097
Consultant			2,603				1,598
Total		$	167,636			$	188,972

 

The loans are informal and do not provide for interest or a stated maturity date.

 

12

  

NOTE 9 – CONVERTIBLE NOTES PAYABLE

 

At August 31, 2014, the convertible notes payable consisted of

 

Date of Note		Noteholder		Interest Rate			Maturity Date		Principal Amount				Unamortized Debt Discount				Net Carrying Amount
12/09/13		JMJ Financial Inc.			10	%	12/09/14			50,000	(i)			46,585				3,415
02/13/14		JMJ Financial Inc.			10	%	08/13/14			10,364	(i)			10,364				0
02/19/14		Iconic Holdings, LLC			10	%	09/19/14			30,000	(a)			29,065				935
2/26/14		LG Capital, Inc.			8	%	09/26/14			25,475	(a)			25,475				0
03/07/14		JSJ Investments, Inc			12	%	10/07/14			30,000	(g)			27,278				2,722
03/28/14		Redwood Fund, III			10	%	09/28/14			50,000	(f)			48,757				1,243
03/28/14		Redwood Management			10	%	09/28/14			50,000	(g)			48,757				1,243
03/28/14		Asher Enterprises, Inc			8	%	09/28/14			42,500	(l)			34,060				8,440
04/14/14		WHC Capital, Inc			12	%	10/14/14			53,000	(i)			51,716				1,284
04/11/14		Tonaquint Inc			12	%	10/11/14			47,000	(g)			45,797				1,203
04/24/14		JSJ Investments, Inc					10/24/14			50,000	(g)			48,757				1,243
05/12/14		Iconic Holdings, LLC.			10	%	11/12/14			55,000	(g)			54,625				375
05/14/14		KGM Worldwide, Inc			8	%	11/14/14			32,500	(l)			32,187				313
06/12/14		Adar Bays, LLC.			8	%	12/12/15			52,500	(g)			52,363				137
06/23/14		JMJ Financial, Inc.			10	%	12/23/14			50,000	(i)			49,864				136
07/03/14		LG Capital, Inc			8	%	01/03/15			36,750	(a)			36,622				128
07/22/14		Redwood Fund, III			10	%	01/22/15			100,082	(f)			99,963				119
Totals									$	765,171			$	742,235			$	22,936

 

Legend

 

(a)	At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.081 or 50% of the average of the three lowest closing prices during the 10 trading days prior to the notice of conversion.

 

(b)	At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.085 or 60% of the lowest closing price during the 25 trading days prior to the notice of conversion.

 

(c)	At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.08 or 50% of the lowest closing price during the 10 trading days prior to the notice of conversion.

 

(d)	At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.0725 or 34% of the lowest closing price during the 20 trading days prior to the notice of conversion.

 

(e)	At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 55% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion.

 

(f)	At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.00929 or 50% of the average of the three lowest trading prices during the 10 trading days prior to the notice of conversion.

 

(g)	At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 25% of the lowest trading price during the 20 trading days prior to the notice of conversion.

 

13

 

(h)	At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 58% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion.

 

(i)	At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 40% of the lowest closing price during the 25 trading days prior to the notice of conversion.

 

(j)	At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 40% of the lowest closing price during the 20 trading days prior to the notice of conversion.

 

(k)	At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 58% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion.

 

(l)	At noteholder’s option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 49% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion.

 

NOTE 10 – STOCKHOLDERS’ EQUITY

 

Series A Convertible Preferred Stock

 

Each share of Series A Convertible Preferred Stock has 1,000 voting rights and is convertible into 1,000 shares of common stock.

 

Common Stock Issuances

 

On May 14, 2014, the Company reversed 15,483,636 shares of common stock for JSJ Investments, Inc. in cancellation of $8,516 principal amount of convertible notes payable.

 

On June 3, 2014, the Company issued 19,408,888 shares of common stock for JSJ Investments, Inc. in satisfaction of $8,734 principal amount of convertible notes payable.

 

On June 4, 2014, the Company issued 8,111,111 shares of common stock for Asher Enterprises, Inc. in satisfaction of $7,300 of principal amount of convertible notes payable.

 

On June 11, 2014, the Company issued 14,423,077 shares of common stock for Gel Properties, Inc. in satisfaction of $7,500 of principal amount of convertible notes payable.

 

On June 20, 2014, the Company issued 11,363,636 shares of common stock for Gel Properties, Inc. in satisfaction of $5,000 of principal amount of convertible noted payable.

 

On June 22, 2014, the Company issued 20,000,000 shares of common stock for JMJ Financial, Inc. in satisfaction of $14,400 of principal amount of convertible notes payable.

 

On June 25, 2014, the Company issued 13,200,479 shares of common stock (valued at $14,521) in connection with consulting services rendered for Meadow Grove, LTD.

 

On June 26, 2014, the Company issued 12,500,000 shares of common stock for Gel Properties, Inc. in satisfaction of $17,500 of principal amount of convertible notes payable.

 

On June 30, 2014, the Company issued 66,920,560 shares of common stock for Iconic Holdings, LLC. in satisfaction of $16,730 of principal amount of convertible notes payable.

 

14

  

On June 30, 2014, the Company issued 12,750,000 shares of common stock to Gel Properties, Inc. in satisfaction of $5,100 of principal amount of convertible noted payable.

 

On July 2, 2014, the Company issued 28,771,780 shares of common stock to LG Capital, Inc. in satisfaction of $11,509 principal amount of convertible notes payable.

 

On July 10, 2014, the Company issued 28,571,429 shares of common stock to Gel Properties, Inc.in satisfaction of $8,000 principal amount of convertible notes payable..

 

On July 14, 2014, the Company issued 34,090,909 shares of common stock to Asher Enterprises, Inc. in satisfaction of $ 15,000 principal amount of convertible notes payable.

 

On July 14, 2014, the Company issued 31,807,632 shares of common stock to LG Capital, Inc. in satisfaction of $8,906 principal amount of convertible notes payable.

 

On July 14, 2014, the Company issued 42,857,143 shares of common stock to Asher Enterprises, Inc. in satisfaction of $15,000 principal amount of principal amount of convertible notes payable.

 

On July 18, 2014, the Company issued 26,660,687 shares of common stock to Gel Properties, Inc. in satisfaction of $4,400 principal amount of convertible notes payable.

 

On July 17, 2014, the Company issued 31,034,483 shares of common stock to Asher Enterprises, Inc. in satisfaction of $9,000 principal amount of convertible notes payable.

 

On July 25, 2014, the Company issued 32,832,191 shares of common stock to LG Capital, Inc. in satisfaction of $5,253 principal amount of convertible notes payable.

 

On July 31, 2014 the Company issued 52,630,136 shares of common stock to LG Capital, Inc in satisfaction of $8,000 principal amount of convertible notes payable..

 

On July 31, 2014, the Company issued 41,000,000 shares of common stock to JMJ Financial, Inc. in satisfaction of $38,084 principal amount of convertible notes payable.

 

On August 4, 2014, the Company issued 59,358,732 shares of common stock to LG Capital, Inc. in satisfaction of $9,497 principal amount of convertible notes payable.

 

On August 6, 2014, the Company issued 56,659,863 shares of common stock to LG Capital, Inc in satisfaction of $9,065 principal amount of convertible noted payable.

 

On August 7, 2014,, the Company issued 57,000,000 shares of common stock to JMJ Financial, Inc. in satisfaction of $13,680 principal amount of convertible notes payable.

 

On August 13, 2014, the Company issued 140,000,000 shares of common stock to Davis in satisfaction of $41,102 principal amount of loan payable.

 

On August 14, 2014 the Company issued 57,692,308 shares of common stock to Asher Enterprises, Inc. in satisfaction of $15,000 principal amount of convertible notes payable.

 

On August 16, 2014, the Company issued 59,130,435 shares of common stock to Asher Enterprises, Inc. in satisfaction of $15,374 principal amount of convertible notes payable.

 

On August 18, 2014, the Company issued 78,000,000 shares of common stock to JMJ Financial, Inc. in satisfaction of $14,040 principal amount of convertible notes payable.

 

15

  

On August 29, 2014, the Company issued 62,753,278 shares of common stock to LG Capital, Inc. in satisfaction of $4,706 principal amount of convertible notes payable.

 

Warrants to Purchase Common Stock

 

A summary of warrant activity for the three months ended August 31, 2014 and for the year ended May 31, 2014 are as follows:

 

		Number of Warrants				Weighted Average Exercise Price
Outstanding at May 31, 2012			-			$	-
Granted			850,000				0.42
Exercised			-				-
Cancelled			-				-
Outstanding at May 31, 2013			850,000				0.42
Granted			-				-
Exercised			-				-
Cancelled			-				-
Outstanding at August 31, 2014			850,000			$	0.42

 

Warrants outstanding at August 31, 2014 consist of:

 

Date Granted		Number Outstanding				Exercise price			Expiration Date
May 25, 2012			100,000			$	1.00		May 25, 2015
June 12, 2012			150,000			$	1.00		June 12, 2015
June 26, 2012			100,000			$	1.00		June 26, 2015
January 1, 2012			500,000			$	0.01		January 1, 2015
Totals			850,000

 

NOTE 11— FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILIITY

 

The Company evaluates all of it financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based derivative financial instruments, the Companyuses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

 

Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

During the period ended August 31,, 2014 the Company entered into several convertible note agreements. The conversion option and the outstanding common stock warrants on that date which were tainted by the convertible note were classified as derivative liabilities at their fair value on the date of issuance.

 

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Under ASC-815 the conversion options embedded in the notes payable described in Note 9 require liability classification because they do not contain an explicit limit to the number of shares that could be issued upon settlement.

 

As defined in FASB ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

 

The three levels of the fair value hierarchy are as follows:

 

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

 

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date.

 

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

 

Derivative liability — the Company’s derivative liability is classified within Level 3 of the fair value hierarchy.

 

The Company uses the Black Scholes Option Pricing Model to value its option based derivatives based upon the following assumptions: dividend yield of -0-%, volatility of stock price =100%, risk free rate varying from 8 to 12 % and an expected term equal to the remaining conversion of the note.

 

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as at August 31, 2014.

 

Recurring Fair Value Measurements		Level 1				Level 2				Level 3				Total
LIABILITIES:
Derivative liability- August 31, 2014			-				-				1,941,872				1,941,872
Derivative liability- May 31, 2014			-				-				1,748,982				1,748,982

 

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NOTE 12 – COMMITMENTS AND CONTINGENCIES

 

License Agreements

 

On February 29, 2012, the Company entered into a Memorandum of Agreement with Xiamen Taiyang Neng Gongsi and Michael Franklin. For and in consideration of the payment of an initial license fee of $10,000, and for the future payment of royalties of $5.00 per SolaPad unit sold, Xiamen granted an exclusive worldwide license and joint patent rights to the Company for a solar charging case for IPAD, including IPAD 3. The license under the Agreement expires on December 31, 2018.

 

On April 19, 2013, our subsidiary DoMark Canada Inc. executed an agreement with Bioharmonics Technologies Cop. (“Bioharmoniecs”). The agreement provided for the acquisition of certain inventions and related patents and patent applications in exchange for 500,000 shares of DoMark common stock (which was delivered April 19, 2013) and $30,000 cash payable no later than October 17, 2013 (which was satisfied through the delivery of an additional 500,000 shares of DoMark common stock to Bioharmonics on August 15, 2013). The agreement also provides for a royalty obligation payable quarterly to Bioharmonics equal to 10% of the wholesale price for each unit using infrared and solar charging.

 

In January 2014, the Company executed a Licensing Agreement with Wazzamba SA. See Note 6.

 

Employment Agreements

 

On May 25, 2012, the Company entered into an employment agreement with its President, R. Brentwood Strasler, for an indefinite period or until terminated. Mr. Strasler is entitled to an annual salary of $150,000 USD and 100,000 stock purchase warrants exercisable to purchase shares of common stock of the Company at $1.00 per share. The warrants are exercisable for a three year period and can be vested quarterly on a pro rata basis over twelve months from the date of issue. Additionally, Mr. Strasler is to be enrolled in a long term Executive Option Plan and is entitled to term life insurance in the face amount of $2,500,000, payable to the beneficiary designated by Mr. Strasler.

 

On June 15, 2012, the Company entered into an employment agreement with its Chief Executive Officer Andrew Ritchie, for an indefinite period or until terminated. Mr. Ritchie is entitled to an annual salary of $240,000 USD and 150,000 stock purchase warrants exercisable to purchase shares of common stock of the Company at $1.00 per share. The warrants are exercisable for a three year period and can be vested quarterly on a pro rata basis over twelve months from the date of issue. Additionally, Mr. Ritchie is to be enrolled in a long term Executive Option Plan and is entitled to term life insurance in the face amount of $2,500,000, payable to the beneficiary designated by Mr. Richie.

 

Lease Agreement

 

On August 1, 2013, the Company entered into an office lease in Toronto, Ontario, Canada for a five year period. At August 31, 2014, the future lease commitments on this lease for the years ended May 31, are as follows, and are in U.S. dollars:

 

2015		$	33,793
2016			47,616
2017			47,616
2018			47,616
Thereafter			7,936
Total		$	184,576

 

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ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following is management's discussion and analysis of certain significant factors that have affected our condensed consolidated financial position and operating results during the periods included in the accompanying condensed consolidated financial statements, as well as information relating to the current plans of our management. This report includes forward-looking statements. Generally, the words "believes", "anticipates", "may", "will", "should", "expect", "intend", "estimate", "continue", and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.

 

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information contained elsewhere in this Form 10-Q.

 

RECENT DEVELOPMENTS

 

The main operations of the Company have been to search, negotiate and acquire ownership interests in companies with products at an advanced stage of their development or products already in production.

 

In December 2013, the Company increased its equity interest in Imagic Ltd. to 40%. Imagic is a company registered in Gibraltar which owns proprietary product designs for its Digilink and Game Control products.

 

In January 2014, the Company acquired United States and Canada marketing rights to certain online shop technology pursuant to a Licensing Agreement with Wazzamba SA.

 

On February 24, 2014, the Company increased the number of authorized shares of common stock to 900,000,000 shares.

 

On July 22, 2014 the Company increased the number of authorized shares of common stock to 4,000,000,000.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our operating requirements have been funded primarily through financing facilities, sales of our common stock, and loans from shareholders and 3rd party financiers. Currently, the Company's cash flows do not adequately support the operating expenses of the Company. We received $0 in the three months ended August 31, 2014 from the sale of our common stock. The Company will continue to require financing from loans and notes payable until such time as our business has generated income sufficient to carry our operating costs.

 

Cash used by operating activities for the three month period ended August 31, 2014 was $226,178 compared to $269,951 for the same period in 2013. Stock-based compensation for the three month period ended August 31, 2014 was $55,623 as compared to $453,825 for the three month period ended August 31, 2013.

 

Cash used in investing activities was $0 for the three month period ended August 31, 2014 compared to $154,105 for the three month period ended August 31, 2013. Cash provided by financing activities was $237,333 for the three month period ended August 31, 2014 versus $437,699 for the three month period ended August 31, 2013. Financing activities consisted of cash received from related parties and promissory convertible notes payable.

 

19

  

OTHER CONSIDERATIONS

 

There are numerous factors that affect the Company's business and the results of its consolidated operations. Sources of these factors include general economic and business conditions, federal and state regulation of business activities, the level of demand for services, the level and intensity of competition, and our ability to continue to improve our infrastructure, including personnel and systems, to keep pace with our anticipated rapid growth in the development of our business.

 

RESULTS OF CONDENSED CONSOIDATED OPERATIONS

 

THREE MONTHS ENDED AUGUST 31, 2014 VS. AUGUST 31, 2013

 

The Company did not have any revenues for the three months ending August 31, 2014, and August 31, 2013.

 

Total operating expenses for the three months ending August 31, 2014 were $209,643 compared to $259,443 for the same three month period in 2013. The decrease is primarily due to the lesser consulting amounts for the period ending August 31, 2014.

 

The net loss for the three months ending August 31, 2014 amounted to $670,599 for a net loss per share of $0.00, vs. a net loss of $763,610 and a net loss per share of $0.01 for the same three month period ending in 2013.

 

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable to smaller reporting companies.

 

ITEM 4 - CONTROLS AND PROCEDURES

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

Our management team, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"), as of the last day of the fiscal period covered by this report, November 30, 2013. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of August 31, 2014. Management is working on hiring other responsibilities to add some internal control procedures.

 

Our principal executive officer and our principal financial officer are responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Management is required to base its assessment of the effectiveness of our internal control over financial reporting on a suitable, recognized control framework, such as the framework developed by the Committee of Sponsoring Organizations ("COSO"). The COSO framework, published in INTERNAL CONTROL-INTEGRATED FRAMEWORK, is known as the COSO Report. Our principal executive officer and our principal financial officer have chosen the COSO framework on which to base its assessment. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of August 31, 2014.

 

20

  

There were no changes in our internal control over financial reporting that occurred during the period ended August 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Controls are being put in place for daily operations which will allow for controlled cash management and oversite.

 

It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

 

Management is aware that there is a lack of segregation of duties at the Company due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically reevaluate this situation.

 

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PART II - OTHER INFORMATION

 

ITEM 1 - LEGAL PROCEEDINGS

 

On May 21, 2009, the Company entered into an Agreement for the Exchange of Common Stock (the "Victory Lane Agreement") with Victory Lane Financial Elite, LLC ("Victory Lane") with respect to a real estate lifestyle business known as Victory Lane (the "Victory Lane Business") pursuant to which the Company intended to purchase the Victory Lane Business. Shortly thereafter, a dispute arose between the Company and Victory Lane regarding alleged misrepresentations made by Victory Lane in connection with the Victory Lane Agreement.

 

In August, 2009, Victory Lane Financial Elite, LLC, Legacy Development, LLC and Patrick Costello filed suit in the Superior Court of Tattnall County, Georgia (Civ. No. 2009-V-381-JW) against the Company, R. Thomas Kidd and various officers and directors of the Company, alleging that the Company was in breach of the Victory Lane Agreement and that the Company and certain of the individual defendants had committed various torts against the plaintiffs and that certain of the individual defendants had violated various fiduciary and other duties owed to the plaintiffs in connection with the Victory Lane Agreement and the handling of the Victory Lane Business (the "VLFE Case"). The plaintiffs sought a declaratory judgment to the effect that the Victory Lane Agreement had not been executed, as well as money damages from the Company and the individual defendants. The Company and Mr. Kidd have answered the Complaint, denying any liability for the plaintiff's claims and have asserted various counterclaims including fraud and other torts. In July 2010 the court dismissed all of the individual defendants, other than R. Thomas Kidd, in response to a motion to dismiss for lack of jurisdiction. The case has since been stayed.

 

In December, 2009, AHIFO-21, LLC filed a lawsuit in the Superior Court of Tattnall County, Georgia (Civ. No. 2009-V-672-JS) against Victory Lane, LLC, Patrick J. Costello and Stephen Brown (the "Victory Lane Defendants") alleging that the Victory Lane Defendants owe the plaintiff more than $7,740,000 in respect of one or more loans made by the plaintiff to certain Victory Lane Defendants in connection with the Victory Lane Business (the "AHIFO Case"). In February 2010, the Victory Lane Defendants filed a Third Party Complaint against the Company and R. Thomas Kidd, claiming that the Company and Mr. Kidd should be liable for any amounts the Victory Lane Defendants are required to pay to the plaintiff in this case. The Company and Mr. Kidd have answered the Complaint, denying any liability for the plaintiff's claims and Mr. Kidd has asserted various counterclaims including fraud and other torts. The Company and Mr. Kidd filed a motion to dismiss the Third Party Complaint, but the entire case was subsequently stayed.

 

Because each of the VLFE Case and the AHIFO Case have been stayed and because discovery in those cases is not complete, the Company has determined that the probability of any loss is remote and that the amount of any damages, if any were determined adverse to the Company, would not be reasonably estimable. The Company believes that it has meritorious claims against the opposing parties with respect to the Victory Lane Agreement and that the claims asserted against it are not meritorious. The Company intends to defend itself vigorously

 

ITEM 1A - RISK FACTORS

 

Not required.

 

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

22

  

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

 

There were no defaults upon senior securities during the interim period ended August 31, 2014.

 

ITEM 4 - MINE SAFETY DISCLOSURE

 

None.

 

ITEM 5 - OTHER INFORMATION

 

None.

 

ITEM 6 - EXHIBITS

 

Exhibit

 

No.		Document Description
31.1		Certification of CEO Pursuant to 18 U.S.C. Section 1350, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of CFO Pursuant to 18 U.S.C. Section 1350, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of CEO Pursuant to 18 U.S.C. Section 1350, Pursuant to Section 906 of the Sarbanes-Oxley act of 2002.
32.2*		Certification of CFO Pursuant to 18 U.S.C. Section 1350, Pursuant to Section 906 of the Sarbanes-Oxley act of 2002.
101		Interactive data files pursuant to Rule 405 of Regulation S-T.

______________ 

* This exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. 

 

23

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

 

	DOMARK INTERNATIONAL, INC. REGISTRANT
Date: October 14, 2014	By:	/s/ Andrew Ritchie
		Andrew Ritchie
		Chief Executive Officer/President

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the undersigned on behalf of the registrant and in the capacities indicated on the 14th day of October 2014.

 

	By:	/s/ Thomas Crompton
		Thomas Crompton
		Chief Financial Officer

 

 

 

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