ITEM 1. BUSINESS
Except for historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements include, but are not limited to, statements regarding future events and the Company's plans and expectations. Actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed elsewhere in this Form 10-K or incorporated herein by reference, including those set forth in MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
HISTORY AND GENERAL OVERVIEW
DOMARK INTERNATIONAL, INC. ("DoMark" or "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 has abandoned it prior business of exotic furniture sales and is acquiring operating entities through acquisition that will bring value to the company and then providing marketing and management services in support of the acquired entities.
On July 16, 2008, DoMark executed a purchase agreement with JAVACO, Inc. an Ohio corporation ("Javaco") whereby pursuant to the terms and conditions of that Agreement we completed the purchase of all the issued and outstanding shares of Javaco. Judith Vazquez, the President of Javaco, is the sister-in-law of R. Thomas Kidd, our former Chief Executive Officer. The Closing of the transaction occurred on July 18, 2008. Javaco, Inc. is engaged in the business of distributing equipment and tools for the Cable TV and Telecommunications industry. The company distributes to major telecom systems and their contractors in North and Latin America.
On July 24, 2008, we executed an asset purchase agreement (the "Agreement") with TotalMed Systems, Inc., a Florida corporation ("TotalMed"), whereby pursuant to the terms and conditions of that Agreement, we completed the purchase of certain assets. The Closing of the transaction occurred on August 6, 2008 (the "Closing"). As consideration for the certain assets of TotalMed, we agreed to pay TotalMed issued and outstanding shares of our common stock that will have the aggregate value of six million Dollars ($6,000,000), determined by dividing the average closing price for the 5 days prior to the Closing ($2.34), which sum may be reduced based on contingencies described in the Agreement. This agreement was subsequently rescinded and the stock was not issued.
On August 4, 2008, DoMark entered into an investment agreement and registration rights agreement with Dutchess Private Equities, LTD. The investment agreement, in the form of an equity funding commitment, provides for the right by the company at its discretion to require Dutchess to purchase up to $50 million of the Company's common stock at a seven percent discount to market over the 36 months following the registration statement being declared effective by the Securities and Exchange Commission. Add rescission and re engagement dates
On October 20, 2008, we executed an agreement between Mecanismo Corp., a Nevada Corporation, Domark and R. Thomas Kidd (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Mecanismo Corp. acquired nine million, nine hundred and seventy three thousand, three hundred and ninety seven
(9,973,397) shares of SportsQuest, Inc. common stock and one hundred thousand (100,000) shares of SportsQuest, Inc. preferred stock held by us. As consideration for this acquisition, a judgment arising from CASE BC 359831 LOS ANGELES SUPERIOR COURT Veridigm Inc (f/k/a E-Notes Systems Inc (DE) ("the Plaintiff"), against TotalMed Systems, Inc., (The "Defendant") shall be assigned to Domark and Domark shall receive a promissory note in the amount of One Hundred Thousand Dollars ($100,000). Consequently, Domark ceased being a controlling shareholder of SportsQuest, Inc.
On November 6, 2008, we executed an asset purchase agreement between Emerging Growth Advisors, LLC, a Florida limited liability company ("EGA") and Domark (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired the right, title, and interest of EGA in and to all of the assets of EGA used exclusively in their business in return for one million (1,000,000) shares of Domark common stock. The closing of the transactions in the agreement are contingent upon satisfaction of closing conditions listed in the Agreement. In addition, on December 29, 2008, the Agreement was amended to waive the closing condition of minimum capital raise of $250,000. This agreement was subsequently rescinded on August 19, 2009 and the stock was not issued.
EGA is engaged in the business of marketing, designing and distributing consulting services for small cap public companies and owns certain hardware, software and other assets and intellectual property in connection with their business
On December 3, 2008, we executed an agreement for the exchange of common stock between Executive Sports Tickets and Entertainment, Inc. a Georgia Corporation ("EST") and Domark (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired all the shares in EST in return for an initial issuance of Fifty Thousand (50,000) shares of Domark common stock and the right to an additional Fifty Thousand (50,000) shares of Domark common stock in the event that a current pending contract concerning EST's management of a Junior World Series endorsed by Major League Baseball becomes a written binding agreement between EST and the appropriate entities in the face amount of $1.5 million, and all terms of the contract are performed and payment received. Accordingly, EST became a wholly owned subsidiary of Domark.
EST is engaged in the business of Hi-Profile Executive Concierge & Event Management handling all aspects in facilitating attendance at any corporate or personal events, as well as any major sporting events, domestic or international.
On December 3, 2008, the Company entered into a consulting agreement with Mirador Consulting, Inc. for market support services. Terms of the agreement included the issuance of 100,000 shares of common stock of the Company to Mirador for cash consideration of $500. The Company was also obligated to issue an additional 200,000 shares according to certain terms of the agreement. On July 16, 2009, we entered into a Settlement Agreement with Mirador whereby Mirador would retain a total of 150,000 shares of our stock and return the balance to treasury for cancellation. On December 11, 2008, we executed an asset purchase agreement between Crowley and Company Advertising, Inc., a Florida corporation ("C&C") and Domark (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired the right, title, and interest of C&C in and to all of the assets of C&C used exclusively in their business in return for one hundred thousand (100,000) shares of Domark common stock. This Agreement was subsequently rescinded on August 12, 2009 and the stock was not issued.
On December 16, 2008, we executed an agreement for the exchange of common stock between ECFO Corporation, a Florida Corporation ("ECFO") and Cathryn L. Walker, the sole shareholder of Company, (the "Shareholder") and Domark (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired all the shares in ECFO in return for an issuance of One Hundred Thousand (100,000) shares of Domark common stock in return for all outstanding capital securities of ECFO. Accordingly, ECFO became a wholly owned subsidiary of Domark. ECFO is an accounting firm who provides accounting and tax services to public and private entities.
On April 27, 2009, we executed an Agreement for the Exchange of Common Stock Between Motivation Advantage, Inc., a Florida corporation ("Motivation Advantage") and its sole shareholder, Suzanne Winfield (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired the right, title, and interest of Motivation Advantage in and to all of the shares and assets of Motivation Advantage used exclusively in their business in return for common stock valued at Two Million Dollars ($2,000,000) based on a formula as described in the Agreement. In addition, for a period of five (5) years, commencing with the calendar year 2010, Suzanne Winfield shall be entitled to additional shares of common stock based on certain earn out provisions as described in the Agreement. The Closing underlying the Agreement, subject to certain due diligence and closing requirements is intended to be on or before May 15, 2009 (unless both parties agree to a permissible extension of seven days). After the closing this transaction was subsequently rescinded on August 12, 2009 and the stock was not issued.
Motivation Advantage, Inc. is a national travel incentive company offering individual incentive travel packages for small, medium and large companies. Motivation Advantage, Inc. offers travel incentives to organizations seeking to show appreciation to customers, motivate personnel or reward performance. The staff has more than 20 years of experience in travel and promoting the use of travel as an incentive reward for manufacturers, distributors and corporations throughout the country. Motivation Advantage offers programs as individual incentive travel awards, sweepstakes awards, and group incentive travel awards. The senior executives are seasoned professionals and are known throughout the industry for integrity and ethics.
On May 13, 2009, we executed an Agreement for the Exchange of Common Stock with Victory Lane LLC, a Colorado limited liability corporation ("Victory Lane") and its members, whereby pursuant to the terms and conditions of that Agreement, Domark acquired the right, title, and interest of Victory Lane in and to all of the member interests and assets of Victory Lane in return for our common stock valued at Ten Million Dollars ($10,000,000) based on a formula as described in the Agreement. Victory Lane is a unique and exclusive Lifestyle Development on 3,000 acres approximately 75 miles from Savannah Georgia, which includes exclusive home sites, a 4.5-mile grand prix circuit, a Davis Love III designed golf course and a 6,000' private runway. . On August 10, 2009 legal proceeding were initiated by both parties ( see item 3 Legal Proceedings)
ADDITIONAL INFORMATION
DoMark files reports and other materials with the Securities and Exchange Commission. These documents may be inspected and copied at the Commission's Public Reference Room at 100 F Street, N.E., 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 the Company files with the Commission through the Commission's Internet site at www.sec.gov.
EMPLOYEES
As of fiscal year end May 31, 2009, the Company had one employee.
ITEM 1A.
ITEM 1A. RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING INFORMATION ABOUT THESE RISKS, TOGETHER WITH THE OTHER INFORMATION CONTAINED IN THIS ANNUAL REPORT ON FORM 10-K, BEFORE INVESTING IN OUR COMMON STOCK. IF ANY OF THE EVENTS ANTICIPATED BY THE RISKS DESCRIBED BELOW OCCUR, OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED WHICH COULD RESULT IN A DECLINE IN THE MARKET PRICE OF OUR COMMON STOCK, CAUSING YOU TO LOSE ALL OR PART OF YOUR INVESTMENT.
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, in part because it does not have a national quotation system by which potential investors can follow the market price of shares except through information received and generated by a limited number of broker-dealers that make markets in particular stocks. There is a greater chance of volatility for securities that trade on the OTCBB as compared to a national exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations in the market price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative effect on the market price for our securities. Accordingly, our stockholders may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial period of time until the market for our common stock improves.
FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS.
It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. If we are unable to comply with these requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies.
If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, beginning with our annual report on Form 10-K for our fiscal period ending December 31, 2007, 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 December 31, 2008, 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 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.
RISKS RELATING TO OWNERSHIP OF OUR COMMON STOCK
Although there is presently a market for our common stock, the price of our common stack may be extremely volatile and investors may not be able to sell their shares at or above their purchase price, or at all. We anticipate that the market may be potentially highly volatile and may fluctuate substantially because of:
* Actual or anticipated fluctuations in our future business and operating results; * Changes in or failure to meet market expectations; * Fluctuations in stock market price and volume
WE DO NOT INTEND TO PAY DIVIDENDS
We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are rapid, there is no assurance with respect to the amount of any such dividend.
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 OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE PRICE.
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.
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.
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.
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.
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 SIGNIFICANT FOCUS ON ACQUISITIONS IN OUR BUSINESS SUBJECTS INVESTORS TO A GREATER RISK OF LOSSES
A significant portion of our efforts are focused on the development and growth of the Company and its subsidiaries by acquisitions. Although the Company believes there are significant acquisition opportunities available, we can make no assurances that the Company will be able to execute its acquisition strategy.
THE REPORT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONTAINS EXPLANATORY LANGUAGE THAT SUBSTANTIAL DOUBT EXISTS ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN
The independent auditor's report on our financial statements contains explanatory language that substantial doubt exists about our ability to continue as a going concern. The report states that we depend on the continued contributions of our executive officers to work effectively as a team, to execute our business strategy and to manage our business. The loss of key personnel, or their failure to work effectively, could have a material adverse effect on our business, financial condition, and results of operations. If we are unable to obtain sufficient financing in the near term or achieve profitability, then we would, in all likelihood, experience severe liquidity problems and may have to curtail our operations. If we curtail our operations, we may be placed into bankruptcy or undergo liquidation, the result of which will adversely affect the value of our common shares.
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
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.
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.
SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED.
FORWARD-LOOKING STATEMENTS
This Annual Report contains certain forward-looking statements regarding management's plans and objectives for future operations including plans and objectives relating to our planned marketing efforts and future economic
performance. The forward-looking statements and associated risks set forth in this Annual Report include or relate to, among other things, (a) our growth strategies, (b) anticipated trends in our industry, (c) our ability to obtain and retain sufficient capital for future operations, and (d) our anticipated needs for working capital. These statements may be found under "Management's Discussion and Analysis or Plan of Operations" and "Business," as well as in this Annual Report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under "Risk Factors" and matters described in this Annual Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Annual Report will in fact occur.
The forward-looking statements herein are based on current expectations that involve a number of risks and uncertainties. Such forward-looking statements are based on assumptions described herein. The assumptions are based on judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Accordingly, although we believe that the assumptions underlying the forward-looking statements are reasonable, any such assumption could prove to be inaccurate and therefore there can be no assurance that the results contemplated in forward-looking statements will be realized. In addition, as disclosed elsewhere in the "Risk Factors" section of this prospectus, there are a number of other risks inherent in our business and operations which could cause our operating results to vary markedly and adversely from prior results or the results contemplated by the forward-looking statements. Management decisions, including budgeting, are subjective in many respects and periodic revisions must be made to reflect actual conditions and business developments, the impact of which may cause us to alter marketing, capital investment and other expenditures, which may also materially adversely affect our results of operations. In light of significant uncertainties inherent in the forward-looking information included in this prospectus, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.
Some of the information in this prospectus contains forward-looking statements that involve substantial risks and uncertainties. Any statement in this prospectus and in the documents incorporated by reference into this prospectus that is not a statement of an historical fact constitutes a "forward-looking statement". Further, when we use the words "may", "expect", "anticipate", "plan", "believe", "seek", "estimate", "internal", and similar words, we intend to identify statements and expressions that may be forward- looking statements. We believe it is important to communicate certain of our expectations to our investors. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions that could cause our future results to differ materially from those expressed in any forward-looking statements. Many factors are beyond our ability to control or predict. You are accordingly cautioned not to place undue reliance on such forward-looking statements. Important factors that may cause our actual results to differ from such forward-looking statements include, but are not limited to, the risk factors discussed herein.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable to small business issuers.
ITEM 2.
ITEM 2. PROPERTIES
As of fiscal year end May 31, 2009, the Company maintains its corporate executive office in Lake Mary, Florida. As of September 30, 2009, the ECFO a subsidiary of the Company has been providing the office space at no charge to the Company as a courtesy to the Company.
ITEM 3.
ITEM 3. 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 herein, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position, results of operations, or liquidity.
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.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company submitted no matters to a vote of its security holders during the fiscal year ended May 31, 2009.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
DoMark common stock is traded in the over-the-counter market, and quoted in the National Association of Securities Dealers Inter-dealer Quotation System ("Electronic Bulletin Board) and can be accessed on the Internet at www.otcbb.com under the symbol "DOMK.OB"
At May 31, 2009, there were 141,695,383 shares of common stock of DoMark outstanding and there were approximately 60 shareholders of record of the Company's common stock.
The following table sets forth for the periods indicated the high and low bid quotations for DoMark's common stock. These quotations represent inter-dealer quotations, without adjustment for retail markup, markdown or commission and may not represent actual transactions.
Fiscal Year Ended May 31, 2009
High Low ---- ---
First Quarter (June - August, 2008) $1.75 $ .50 Second Quarter (September - November 2008) $2.05 $1.75 Third Quarter (December - February 2009) $2.25 $1.875 Fourth Quarter (March - May 2009) $2.35 $1.50
On October 7, 2009, the closing bid price of our common stock was $0.04.
DIVIDENDS
DoMark has never paid dividends on any of its common stock shares. DoMark does not anticipate paying dividends at any time in the foreseeable future and any profits will be reinvested in DoMark's business.
RECENT SALES OF UNREGISTERED SECURITIES
Quarter Ended Stock issued Stock issued for Cash Cash Received for Assets -------- ------------- ----------
Year Ended May 31, 2008 -- $ -- --
Year Ended May 31, 2009 150,000 $100,500 --
On November 5, 2008, the Company issued 100,000 shares of its common stock for cash. The shares were issued to a third party in a private placement of the Company's common stock. On December 4, 2008, the Company issued 200,000 shares of its common stock for cash. The shares were issued to a third party as a private placement of the Company's common stock. The offers and sales of such shares of our common stock were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act and in Section 4(2) of the Securities Act, based on the following: (a) the investors confirmed to us that they were "accredited investors," as defined in Rule 501 of Regulation D promulgated under the Securities Act and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering; (c) the investors were provided with certain disclosure materials and all other information requested with respect to our company; (d) the investors acknowledged that all securities being purchased were "restricted securities" for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act; and (e) a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.
TRANSFER AGENT
The Company engaged Signature Stock Transfer, 2220 Coit Road, suite 480, Plano Texas 75075to serve in the capacity of transfer agent.
STOCK SPLITS
On June 27, 2008, the Company enacted a 2-for-1 forward split and share data in this report has been adjusted to reflect the stock split relating to the Company's common stock.
On January 22, 2009 the Company enacted a 2-for-1 forward split and share data in this report has been adjusted to reflect the stock split relating to the Company's common stock.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following information has been summarized from financial information included elsewhere and should be read in conjunction with such financial statements and notes thereto.
Summary of Statements of Operations of DOMK Year Ended May 31, 2009 and 2008
Statement of Operations Data
Years Ended Years Ended May 31, 2009 May 31, 2008 ------------ ------------
Revenues $ 6,617,675 $ 15,750 Operating and Other Expenses (20,033,721) (1,434,920) ------------ ------------
Net Loss $(13,416,046) $ (1,419,170)
Balance Sheet Data:
Years Ended Years Ended May 31, 2009 May 31, 2008 ------------ ------------
Current Assets $ 1,840,515 $ 165,181 Total Assets 5,887,668 14,796,347 Current Liabilities 1,411,629 3,993,436
Non Current Liabilities -- 988,513 Total Liabilities 1,411,629 4,981,949 Working Capital (Deficit) 428,886 (3,828,255) Shareholders'Equity (Deficit) $ 4,476,039 $ (9,814,398)
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OR PLAN OF OPERATION
The following is management's discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current 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-K.
CRITICAL ACCOUNTING POLICIES
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.
REVENUE RECOGNITION
Revenue from product sales is recognized upon shipment to customers at which time such customers are invoiced. Units are shipped under the terms of FOB shipping point when determination is made that collectability is probable. Revenues for services are recognized upon completion of the services. For consulting services and other fee-for-service arrangements, revenue is recognized upon completion of the services. The Company has adopted the Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 104, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements.
STOCK BASED COMPENSATION
FSP FAS 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 anti-dilution 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.
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.
REVENUES
The Company has adopted the Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 104, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements.
RECENT DEVELOPMENTS
Effective June 27, 2008, DoMark International, Inc., a Nevada corporation (the "Company"), changed its name from DoMark Exotic Furnishings Inc. to DoMark International, Inc, increased the authorized common stock of the Corporation to 200,000,000 shares, created and authorized 2,000,000 shares of preferred stock, the rights and preferences of which can be designated by the Board of Directors and enacted a forward stock split of our common stock on a two for one basis, payable upon surrender of our shareholders' stock certificates. Our authorized stock is as follows: The number of shares of common stock authorized that may be issued by the Corporation is Two Hundred Million (200,000,000) shares, with a par value of One Tenth of One Cent ($0.001) per share and Two Million (2,000,000) shares of Preferred Stock, $0.001 par value, the rights and preferences of which may be determined by the Board of Directors. Said shares may be issued by the Corporation from time to time for such considerations as may be fixed by the Board of Directors.
On July 16, 2008, we executed an agreement with JAVACO, Inc, an Ohio corporation ("Javaco") and Judith Vazquez (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement we completed the purchase of all the issued and outstanding shares of Javaco. Judith Vazquez is the sister-in-law of R. Thomas Kidd, our former Chief Executive Officer. The Closing of the transaction occurred on July 18, 2008 (the "Closing").
As consideration for all the issued and outstanding shares of Javaco, we issued the shareholders of Javaco, seven hundred and fifty thousand shares of our common stock, and common stock purchase warrants as follows: 20,000 common stock purchase warrants at an exercise price of $3.00 per share, expiring on December 31, 2008; 20,000 common stock purchase warrants at an exercise price of $4.00 per share, expiring on 40,000 common stock purchase warrants at an exercise price of $5.00 per share, expiring on December 31, 2010.
On July 24, 2008, we executed an asset purchase agreement (the "Agreement") with TotalMed Systems, Inc., a Florida corporation ("TotalMed"), whereby pursuant to the terms and conditions of that Agreement, we completed the purchase of certain assets. The Closing of the transaction occurred on August 6, 2008 (the "Closing"). As consideration for the certain assets of TotalMed, we agreed to pay TotalMed issued and outstanding shares of our common stock that will have the aggregate value of six million Dollars ($6,000,000), determined by dividing the average closing price for the 5 days prior to the Closing ($2.34), which sum may be reduced based on contingencies described in the Agreement. This agreement was subsequently rescinded and the stock was not issued.
On July 29, 2008, DoMark entered into an investment agreement and registration rights agreement with Dutchess Private Equities, LTD. The investment agreement, in the form of an equity funding commitment, provides for the right by the company at its discretion to require Dutchess to purchase up to $50 million of the Company's common stock at a seven percent discount to market over the 36 months following the registration statement being declared effective by the Securities and Exchange Commission. On November 21, 2008, we amended the Investment Agreement to increase the Investor's commitment to purchase our common stock over the course of thirty-six (36) months to $100,000,000. On December 17, 2008, our Board of Directors determined that it was in our best interest to terminate the Investment Agreement and then on April 30, 2009, our Board of Directors determined that it was in our best interest to reinstate the Investment Agreement.
On August 18, 2008, DoMark retained E & E Communications, Laguna Hills, Ca. to assist with its investor and public relations activities. The agreement was subsequently terminated.
On October 20, 2008, we executed an agreement between Mecanismo Corp., a Nevada Corporation, Domark and R. Thomas Kidd (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Mecanismo Corp. acquired nine million, nine hundred and seventy three thousand, three hundred and ninety seven (9,973,397) shares of SportsQuest, Inc. common stock and one hundred thousand (100,000) shares of SportsQuest, Inc. preferred stock held by us. As consideration for this acquisition, a judgment arising from CASE BC 359831 LOS ANGELES SUPERIOR COURT Veridigm Inc (f/k/a E-Notes Systems Inc (DE) ("the Plaintiff"), against TotalMed Systems, Inc., (The "Defendant") shall be assigned to Domark and Domark shall receive a promissory note in the amount of One Hundred Thousand Dollars ($100,000). Consequently, Domark ceased being a controlling shareholder of SportsQuest, Inc.
On November 6, 2008, we executed an asset purchase agreement between Emerging Growth Advisors, LLC, a Florida limited liability company ("EGA") and Domark (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired the right, title, and interest of EGA in and to all of the assets of EGA used exclusively in their business in return for one million (1,000,000) shares of Domark common stock. The closing of the transactions in the agreement are contingent upon satisfaction of closing conditions listed in the Agreement. In addition, on December 29, 2008, the Agreement was amended to waive the closing condition of minimum capital raise of $250,000. This agreement was subsequently rescinded on August 19, 2009 and the stock was cancelled.
EGA is engaged in the business of marketing, designing and distributing consulting services for small cap public companies and owns certain hardware, software and other assets and intellectual property in connection with their business.
On December 3, 2008, we executed an agreement for the exchange of common stock between Executive Sports Tickets and Entertainment, Inc. a Georgia Corporation ("EST") and Domark (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired all the shares in EST in return for an initial issuance of Fifty Thousand (50,000) shares of Domark common stock and the right to an additional Fifty Thousand (50,000) shares of Domark common stock in the event that a current pending contract concerning EST's management of a Junior World Series endorsed by Major League Baseball becomes a written binding agreement between EST and the appropriate entities in the face amount of $1.5 million, and all terms of the contract are performed and payment received. Accordingly, EST became a wholly owned subsidiary of Domark.
EST is engaged in the business of Hi-Profile Executive Concierge & Event Management handling all aspects in facilitating attendance at any corporate or personal events, as well as any major sporting events, domestic or international.
On December 11, 2008, we executed an asset purchase agreement between Crowley and Company Advertising, Inc., a Florida corporation ("C&C") and Domark (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired the right, title, and interest of C&C in and to all of the assets of C&C used exclusively in their business in return for one hundred thousand (100,000) shares of Domark common stock. This agreement was subsequently rescinded on August 12, 2009, however the shares remain outstanding as compensation for services.
C&C is a full-service advertising, promotion and public relations agency located in Citrus County, Florida, north of the Tampa Bay area. Their services include traditional retail, industrial, and professional services advertising, website design and management, radio and television production, trade and consumer displays, public relations campaigns, sales promotion and all forms of marketing communications Their business plan is to assist small to medium sized businesses get the most out of their advertising and marketing efforts in the most cost-effective ways.
On December 16, 2008, we executed an agreement for the exchange of common stock between ECFO Corporation, a Florida Corporation ("ECFO") and Cathryn L. Walker, the sole shareholder of Company, (the "Shareholder") and Domark (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired all the shares in ECFO in return for an issuance of One Hundred Thousand (100,000) shares of Domark common stock in return for all outstanding capital securities of ECFO. Accordingly, ECFO became a wholly owned subsidiary of Domark.
On April 27, 2009, we executed an Agreement for the Exchange of Common Stock Between Motivation Advantage, Inc., a Florida corporation ("Motivation Advantage") and its sole shareholder, Suzanne Winfield (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired the right, title, and interest of Motivation Advantage in and to all of the shares and assets of Motivation Advantage used exclusively in their business in return for common stock valued at Two Million Dollars ($2,000,000) based on a formula as described in the Agreement. In addition, for a period of five (5) years, commencing with the calendar year 2010, Suzanne Winfield shall be entitled to additional shares of common stock based on certain earn out provisions as described in the Agreement. The Closing underlying the Agreement, subject to certain due diligence and closing requirements is intended to be on or before May 15, 2009 (unless both parties agree to a permissible extension of seven days). After the closing this transaction was subsequently rescinded on August 12, 2009 and the stock was cancelled.
Motivation Advantage, Inc. is a national travel incentive company offering individual incentive travel packages for small, medium and large companies. Motivation Advantage, Inc. offers travel incentives to organizations seeking to show appreciation to customers, motivate personnel or reward performance. The staff has more than 20 years of experience in travel and promoting the use of travel as an incentive reward for manufacturers, distributors and corporations throughout the country. Motivation Advantage offers programs as individual incentive travel awards, sweepstakes awards, and group incentive travel awards. The senior executives are seasoned professionals and are known throughout the industry for integrity and ethics.
On May 13, 2009, we executed an Agreement for the Exchange of Common Stock with Victory Lane LLC, a Colorado limited liability corporation ("Victory Lane") and its members, whereby pursuant to the terms and conditions of that Agreement, Domark acquired the right, title, and interest of Victory Lane in and to all of the member interests and assets of Victory Lane in return for our common stock valued at Ten Million Dollars ($10,000,000) based on a formula as described in the Agreement.
Victory Lane is a unique and exclusive Lifestyle Development on 3,000 acres approximately 75 miles from Savannah Georgia, which includes exclusive home sites, a 4.5-mile grand prix circuit, a Davis Love III designed golf course and a 6,000' private airport runway.
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.
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.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED MAY 31, 2009, COMPARED TO FISCAL YEAR ENDED MAY 31, 2008
Revenues for Fiscal 2009 increased to $6,617,675 from $15,750 during fiscal 2008 a 420.17% increase.. This rise in revenue is directly the result of changes in the Company's strategic direction in core operations. Revenues are primarily attributable to our July 2008 acquisition of Javaco, Inc., representing 97% of the Company's income. We continue to aggressively pursue and devote our resources and focus our direction in building asset value. We have further refocused in new acquisitions to increase our revenues and cash flow.
General and administrative expenses for the fiscal 2009 increased to $4,347,598 as compared to fiscal 2008 of $1,007,476. This increase is a result of the inclusion of general and administrative expenses of our acquired subsidiaries into the consolidated financial statements as of the acquisition date as
compared to no expenses for those subsidiaries in prior years as a result of the Company not owning the subsidiaries prior to May 31, 2008.. There was also an increase of stock issued as compensation during the current fiscal year
Interest expense for fiscal 2009 increased to $41,958 as compared to fiscal 2008 of $245,643. The significant decrease is a result of the removal of embedded warrants in certain bond and loan payables of our late subsidiary SportsQuest, Inc., which required us to accrue for the beneficial conversations feature in these derivatives. On October 20, 2008, the Company executed an agreement between Mecanismo Corp, Domark, and R. Thomas Kidd whereby Mecanismo Corp acquired 9,973,397 common shares of SportsQuest held by the Company and 100,000 preferred shares of SportsQuest held by R Thomas Kidd. Consequently, Domark is no longer a controlling shareholder of SportsQuest and no longer consolidates the financial statements of SportsQuest.
The loss for fiscal 2009 increased to ($13,825,546) as compared to fiscal 2008 of ($1,422,478). The increase is due to the increase in non-cash transactions for assets and services delivered, and the impairment of goodwill and assets. The Company has adjusted its valuation of goodwill and other assets to reflect the fair value of those assets at fiscal year-end.
No tax benefit was recorded for fiscal 2009 and 2008 as required by Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. The Company has provided for a 100% allowance of its deferred tax assets as it is uncertain that there will be sufficient net profits in the future to fully realize the tax benefit of its net operating loss carry-forwards.
LIQUIDITY AND CAPITAL RESOURCES
Our operating requirements have been funded primarily through financing facilities,sales of our common stock, and loans from shareholders. Currently the Company's cashflows do not adequately support the operating expenses of the Company. We received $100,000 in fiscal year 2009 from the sale of our common stock as compared to $0 in fiscal year 2008. .
Cash provided (used) by operating activities for the fiscal year 2009 was $23,114 compared to $75,490 for fiscal year 2008. Depreciation expense for fiscal 2009 was $49,054 as compared to $449 for fiscal 2008.
Cash (used) provided in investing activities was ($26,953) for fiscal 2009, compared to $(7,493) for Fiscal 2008.
Cash provided by financing activities was $9,348 for fiscal 2009 as compared to $(69,763) for fiscal 2008. Financing activities primarily consisted of proceeds from the sale of stock to third parties and cash paid on notes payable. We received proceeds from affiliates in the amount of $44,000.
On July 29, 2008, DoMark entered into an investment agreement and registration rights agreement with Dutchess Private Equities, LTD. The investment agreement, in the form of an equity funding commitment, provides for the right by the company at its discretion to require Dutchess to purchase up to $50 million of the Company's common stock at a seven percent discount to market over the 36 months following the registration statement being declared effective by the Securities and Exchange Commission. On November 21, 2008, we amended the Investment Agreement to increase the Investor's commitment to purchase our common stock over the course of thirty-six (36) months to $100,000,000.
On December 17, 2008, our Board of Directors determined that it was in our best interest to terminate the Investment Agreement and then on April 30, 2009, our Board of Directors determined that it was in our best interest to reinstate the Investment Agreement.
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.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not hold any derivative instruments and do not engage in any hedging activities. We are in the business of acquiring successfully operating subsidiaries to build the value of our Company.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS
DOMARK INTERNATIONAL, INC.
PAGE ----
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: 25 Larry O'Donnell CPA P.C
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheet at May 31, 2009 and 2008 26
Consolidated Statements of Operations for the years ended May 31, 2009 and 2008 28
Consolidated Statements of Stockholders' Equity for the years ended May 31, 2009 and 2008 29
Consolidated Statements of Cash Flows for the years ended May 31, 2009 and 2008 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 33
Larry O'Donnell, CPA, P.C. Telephone (303)745-4545 2228 South Fraser Street Fax (303)369-9384 Unit 1 e-mail larryodonnelcpa@msn.com Aurora, Colorado 80014 www.larryodonnellcpa.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors Domark International, Inc. Oviedo, Florida
I have audited the accompanying consolidated balance sheets of Domark International, Inc. and subsidiaries as of May 31, 2009 and 2008, and the related consolidated statements of operations, changes in stockholders' deficiency, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Domark International, Inc. and subsidiaries as of May 31, 2009 and 2008, and the results of their operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
These consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has operating and liquidity concerns, has incurred an accumulated deficit of approximately $13,416,046 through the period ended May 31, 2009.. This condition raises substantial doubt about the Company's ability to continue as a going concern. Management's plans as to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.
/s/ Larry O'Donnell, CPA, P.C. - ------------------------------------- Larry O'Donnell, CPA, P.C. October 13, 2009
DOMARK INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEET As of May 31, 2009 and 2008
ASSETS
5/31/2009 5/31/2008 ----------- ----------- CURRENT ASSETS Cash $ 24,451 $ 38,906 Accounts Receivable 1,262,334 -- Loans and Notes Receivable 3,352 -- Prepaid Expenses 16,023 125,043 Inventory 534,355 1,232 ----------- -----------
Total Current Assets 1,840,515 165,181 ----------- -----------
FIXED ASSETS Property & Equipment, Net 184,218 7,340 ----------- -----------
Total Fixed Assets 184,218 7,340 ----------- -----------
OTHER ASSETS Deposits 6,608 3,000 Due From Affiliate 106,561 717,076 Prepaid Media 1,002,866 10,000,000 Investment in unconsolidated subsidiary -- 3,903,750 Goodwill 2,746,900 -- ----------- -----------
Total Other Assets 3,862,935 14,623,826 ----------- -----------
TOTAL ASSETS $ 5,887,668 $14,796,347 =========== ===========
The accompanying notes are an integral part of these financial statements.
DOMARK INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEET As of May 31, 2009 and 2008
LIABILITIES AND STOCKHOLDERS' EQUITY
The accompanying notes are an integral part of these financial statements.
DOMARK INTERNATIONAL, INC. STATEMENTS OF OPERATIONS For the twelve months ending May 31, 2009 and 2008
The accompanying notes are an integral part of these financial statements.
DOMARK INTERNATIONAL, INC. STATEMENT OF STOCKHOLDERS' EQUITY As of May 31, 2009
The accompanying notes are an integral part of these financial statements.
DOMARK INTERNATIONAL, INC. STATEMENT OF STOCKHOLDERS' EQUITY As of May 31, 2009 cont'd
The accompanying notes are an integral part of these financial statements.
DOMARK INTERNATIONAL, INC. STATEMENT OF STOCKHOLDERS' EQUITY As of May 31, 2009 cont'd
The accompanying notes are an integral part of these financial statements.
DOMARK INTERNATIONAL, INC. STATEMENTS OF CASH FLOWS For the twelve months ending May 31, 2009 and 2008
The accompanying notes are an integral part of these financial statements.
DOMARK INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the year ended May 31, 2009 and 2008 - --------------------------------------------------------------------------------
NOTE 1 - BACKGROUND
DoMark International, Inc. ("DoMark" or "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 has abandoned it prior business of exotic furniture sales and is acquiring through acquisition and reverse merger operating entities that will bring value to the company.
On May 27, 2009, we executed an Agreement for the Exchange of Common Stock with Victory Lane LLC, a Colorado limited liability corporation ("Victory Lane") and its members, whereby pursuant to the terms and conditions of that Agreement, Domark acquired the right, title, and interest of Victory Lane in and to all of the member interests and assets of Victory Lane in return for our common stock valued at Ten Million Dollars ($10,000,000) based on a formula as described in the Agreement.
Victory Lane is a unique and exclusive Lifestyle Development on 3,000 acres approximately 75 miles from Savannah Georgia, which includes exclusive home sites, a 4.5-mile grand prix circuit, a Davis Love III designed golf course and a 6,000' private runway.
On May 20, 2009, we executed an Agreement for the Exchange of Common Stock Between Motivation Advantage, Inc., a Florida corporation ("Motivation Advantage") and its sole shareholder, Suzanne Winfield (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired the right, title, and interest of Motivation Advantage in and to all of the shares and assets of Motivation Advantage used exclusively in their business in return for 956,938 shares of our common stock valued at Two Million Dollars ($2,000,000), based on a formula as described in the Agreement. In addition, for a period of five (5) years, commencing with the calendar year 2010, Suzanne Winfield shall be entitled to additional shares of common stock based on certain earn out provisions as described in the Agreement. The Closing underlying the Agreement, subject to certain due diligence and closing requirements is intended to be on or before May 15, 2009 (unless both parties agree to a permissible extension of seven days). This agreement was subsequently rescinded on August 12, 2009 and the stock was cancelled.
Motivation Advantage, Inc. is a national travel incentive company offering individual incentive travel packages for small, medium and large companies. Motivation Advantage, Inc. offers travel incentives to organizations seeking to show appreciation to customers, motivate personnel or reward performance. The staff has more than 20 years of experience in travel and promoting the use of travel as an incentive reward for manufacturers, distributors and corporations throughout the country. Motivation Advantage offers programs as individual incentive travel awards, sweepstakes awards, and group incentive travel awards. The senior executives are seasoned professionals and are known throughout the industry for integrity and ethics.
On December 15, 2008, we executed an agreement for the exchange of common stock between ECFO Corporation, a Florida Corporation ("ECFO") and Cathryn L. Walker, the sole shareholder of Company, (the "Shareholder") and Domark (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired all the shares in ECFO in return for an issuance of One Hundred Thousand (100,000) shares of Domark common stock valued at $410,000 in return for all outstanding capital securities of ECFO. Accordingly, ECFO became a wholly owned subsidiary of Domark.
On December 11, 2008, we executed an asset purchase agreement between Crowley and Company Advertising, Inc., a Florida corporation ("C&C") and Domark (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired the right, title, and interest of C&C in and to all of the assets of C&C used exclusively in their business in return for one hundred thousand (100,000) shares of Domark common stock, valued at $410,000. This agreement was subsequently rescinded on August 12, 2009 and the stock was cancelled.
C&C is a full-service advertising, promotion and public relations agency located in Citrus County, Florida, north of the Tampa Bay area. Their services include traditional retail, industrial, and professional services advertising, website design and management, radio and television production, trade and consumer displays, public relations campaigns, sales promotion and all forms of marketing communications Their business plan is to assist small to medium sized businesses get the most out of their advertising and marketing efforts in the most cost-effective ways.
On December 3, 2008, we executed an agreement for the exchange of common stock between Executive Sports Tickets and Entertainment, Inc. a Georgia Corporation ("EST") and Domark (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired all the shares in EST in return for an initial issuance of Fifty Thousand (50,000) shares of Domark common stock valued at $205,000 and the right to an additional Fifty Thousand (50,000) shares of Domark common stock in the event that a current pending contract concerning EST's management of a Junior World Series endorsed by Major League Baseball becomes a written binding agreement between EST and the appropriate entities in the face amount of $1.5 million, and all terms of the contract are performed and payment received. Accordingly, EST became a wholly owned subsidiary of Domark.
EST is engaged in the business of Hi-Profile Executive Concierge & Event Management handling all aspects in facilitating attendance at any corporate or personal events, as well as any major sporting events, domestic or international.
On November 6, 2008, we executed an asset purchase agreement between Emerging Growth Advisors, LLC, a Florida limited liability company ("EGA") and Domark (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Domark acquired the right, title, and interest of EGA in and to all of the assets of EGA used exclusively in their business in return for one million (1,000,000) shares of Domark common stock, valued at $4,100,000. The closing of the transactions in the agreement are contingent upon satisfaction of closing conditions listed in the Agreement. In addition, on December 29, 2008, the Agreement was amended to waive the closing condition of minimum capital raise of $250,000. This agreement was subsequently rescinded on August 19, 2009 and the stock was cancelled.
EGA is engaged in the business of marketing, designing and distributing consulting services for small cap public companies and owns certain hardware, software and other assets and intellectual property in connection with their business.
On October 20, 2008, we executed an agreement between Mecanismo Corp., a Nevada Corporation, Domark and R. Thomas Kidd (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement, Mecanismo Corp. acquired nine million, nine hundred and seventy three thousand, three hundred and ninety seven (9,973,397) shares of SportsQuest, Inc. common stock and one hundred thousand (100,000) shares of SportsQuest, Inc. preferred stock held by us. As consideration for this acquisition, a judgment arising from CASE BC 359831 LOS ANGELES SUPERIOR COURT Veridigm Inc (f/k/a E-Notes Systems Inc (DE) ("the Plaintiff"), against TotalMed Systems, Inc., (The "Defendant") shall be assigned to Domark and Domark shall receive a promissory note in the amount of One
Hundred Thousand Dollars ($100,000). Consequently, Domark is no longer a controlling shareholder of SportsQuest, Inc.
On July 24, 2008, we executed an asset purchase agreement with TotalMed Systems, Inc., a Florida corporation. However, TotalMed assets are not included in the financial statements of the Company at May 31, 2008. This agreement was subsequently rescinded on September 8, 2008 and the stock was not issued.
On July 18, 2008, we closed an agreement with JAVACO, Inc., an Ohio corporation ("Javaco") and Judith Vazquez (the "Agreement"), whereby pursuant to the terms and conditions of that Agreement we completed the purchase of all the issued and outstanding shares of Javaco in return for the issuance of 750,000 shares of our common stock, valued at $2,625,000. Accordingly, Javaco became a wholly owned subsidiary of Domark. Judith Vazquez is the sister-in-law of R. Thomas Kidd, our Chief Executive Officer.
Javaco, Inc. is engaged in the business of distributing equipment and tools for the Cable TV and Telecommunications industry. The company distributes to major television systems and their contractors in North and Latin America.
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. During the year ended May 31, 2009 and 2008 the Company incurred consolidated net losses of $13,825,546 and $1,422,478 respectively. Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders.
These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. In this regard, Management is planning to raise any necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows:
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements represent the consolidated financial position and results of operations of the Company and include the accounts and results of operations of the Company and its subsidiaries. The accompanying financial statements include the active entity of DoMark International, Inc., Javaco, Inc., ECFO Corporation, and Executive Sports & Entertainment. The Company has relied upon the guidance provided by Statements of Financial Accounting Standards 94, 141(R) and 160.
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 estimates included in these financial statements are the impairment reserves applied to various long-lived assets, allowance for doubtful accounts for gateway access fees and licensing fees, and the fair value of its stock tendered in various non-monetary transactions.
RECLASSIFICATION
Certain prior period amounts have been reclassified to conform to current year presentations.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At May 31, 2009 and 2008, cash and cash equivalents include cash on hand and cash in the bank.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized. The range of estimated useful lives used to calculated depreciation for principal items of property and equipment are as follow:
Depreciation/ Asset Category Amortization Period -------------- ------------------- Computer Equipment 3 Years Office equipment 5 Years Vehicle 5 Years Leasehold Improvements 15 Years
INCOME TAXES
The Company accounts for income taxes using SFAS No. 109, "Accounting for Income Taxes," which requires recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109." This interpretation provides guidance for recognizing and measuring uncertain tax positions, as defined in SFAS No. 109, "Accounting for Income Taxes." FIN No. 48 prescribes a threshold condition that a tax position must meet for any of the benefit of an uncertain tax position to be recognized in the financial statements. Guidance is also provided regarding de-recognition, classification, and disclosure of uncertain tax positions. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.
In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, DEFINITION OF SETTLEMENT IN FASB INTERPRETATION NO. 48 ("the FSP"). The FSP provides guidance
about how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under the FSP, a tax position could be effectively settled on completion of examination by a taxing authority if the entity does not intend to appeal or litigate the result and it is remote that the taxing authority would examine or re-examine the tax position. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed in accordance with SFAS No. 128, "Earnings per Share". Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale or liquidation.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and cash equivalents, licensing receivable, prepaid expenses, other assets, and accounts payable, income tax payable, and other current liabilities carrying amounts approximate fair value or held-to-maturity value, if management intends to hold to maturity.
STOCK-BASED COMPENSATION
Financial Statement Position ("FSP") FAS No. 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 anti-dilution 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 No. 123(R)-5, but it did not have a material impact on its consolidated results of operations and financial condition.
GOODWILL AND OTHER INTANGIBLE ASSETS
The Company adopted Statement of Financial Accounting Standard No.142, GOODWILL AND OTHER INTANGIBLE ASSETS, effective July 1, 2002. As a result, the Company discontinued amortization of goodwill, and instead annually evaluates the carrying value of goodwill and other intangible assets for impairment, in accordance with the provisions of SFAS No. 142. A reduction of the value of goodwill is expensed as an impairment loss.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.
CONCENTRATION OF CREDIT RISK
The Company maintains its operating cash balances in banks in Florida, Ohio and Georgia. The Federal Depository Insurance Corporation (FDIC) insures accounts at each institution up to $100,000.
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily trade accounts receivable. The trade accounts receivable are due primarily from small business customers in numerous geographical locations throughout the United States.
The Company estimates and provides an allowance for uncollectible accounts receivable.
REVENUE RECOGNITION
Revenue includes sponsorship and media sales. The Company recognizes revenue from product sales in accordance with Staff Accounting Bulletin (SAB) No. 104, "Revenue Recognition in Financial Statements" which is at the time customers are invoiced at shipping point, provided title and risk of loss has passed to the customer, evidence of an arrangement exists, fees are contractually fixed or determinable, collection is reasonably assured through historical collection results and regular credit evaluations, and there are no uncertainties regarding customer acceptance.
RECONCILING ADJUSTMENTS TO CASH FLOW
The Company is using the indirect method of reporting cash flow. Information about all investing and financing activities of the Company that affect recognized assets or liabilities but that do not result in cash receipts or cash payments in the period are reported in the cash flow statement as adjustments for charges not requiring outlay of cash and receipt of cash.
RECENT ACCOUNTING PRONOUNCEMENTS
DETERMINING WHETHER INSTRUMENTS GRANTED IN SHARE-BASED PAYMENT TRANSACTIONS ARE PARTICIPATING SECURITIES
In June 2008, the FASB issued FSP Emerging Issues Task Force ("EITF") Issue No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities." The FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. The FSP affects entities that accrue dividends on share-based payment awards during the awards' service period when the dividends do not need to be returned if the employees forfeit the award. This FSP is effective for fiscal years beginning
after December 15, 2008. The Company is currently assessing the impact of FSP EITF 03-6-1 on its consolidated financial position and results of operations.
DETERMINING WHETHER AN INSTRUMENT (OR AN EMBEDDED FEATURE) IS INDEXED TO AN ENTITY'S OWN STOCK
In June 2008, the FASB ratified EITF Issue No. 07-5, "Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock" (EITF 07-5). EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument's contingent exercise and settlement provisions. It also clarifies on the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of EITF 07-5 on its consolidated financial position and results of operations.
ACCOUNTING FOR CONVERTIBLE DEBT INSTRUMENTS THAT MAY BE SETTLED IN CASH UPON CONVERSION (INCLUDING PARTIAL CASH SETTLEMENT)
In May 2008, the FASB issued FSP Accounting Principles Board ("APB") Opinion No. 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)." The FSP clarifies the accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion. The FSP requires issuers to account separately for the liability and equity components of certain convertible debt instruments in a manner that reflects the issuer's nonconvertible debt (unsecured debt) borrowing rate when interest cost is recognized. The FSP requires bifurcation of a component of the debt, classification of that component in equity and the accretion of the resulting discount on the debt to be recognized as part of interest expense in our consolidated statement of operations. The FSP requires retrospective application to the terms of instruments as they existed for all periods presented. The FSP is effective as of January 1, 2009 and early adoption is not permitted. The Company is currently evaluating the potential impact of FSP APB 14-1 upon its consolidated financial statements.
THE HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" (FAS No.162). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles". The implementation of this standard will not have a material impact on the Company's consolidated financial position and results of operations.
DETERMINATION OF THE USEFUL LIFE OF INTANGIBLE ASSETS
In April 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position on Financial Accounting Standard ("FSP FAS") No. 142-3, "Determination of the Useful Life of Intangible Assets", which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of intangible assets under SFAS No. 142 "Goodwill and Other Intangible Assets". The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of the expected cash flows used to measure the fair value of the asset under SFAS No. 141 (revised 2007)"Business Combinations" and other
U.S. generally accepted accounting principles. The Company is currently evaluating the potential impact of FSP FAS No. 142-3 on its consolidated financial statements.
DISCLOSURE ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In March 2008, the FASB issued SFAS No. 161, "Disclosure about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133"(SFAS 161). This statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. The Company is required to adopt SFAS No. 161 on January 1, 2009. The Company is currently evaluating the potential impact of SFAS No. 161 on the Company's consolidated financial statements.
DELAY IN EFFECTIVE DATE
In February 2008, the FASB issued FSP FAS No. 157-2, "Effective Date of FASB Statement No. 157". This FSP delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The impact of adoption was not material to the Company's consolidated financial condition or results of operations.
BUSINESS COMBINATIONS
In December 2007, the FASB issued SFAS No. 141(R) "Business Combinations" (SFAS 141(R)). This Statement replaces the original SFAS No. 141. This Statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the PURCHASE METHOD) be used for all business combinations and for an acquirer to be identified for each business combination. The objective of SFAS No. 141(R) is to improve the relevance, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, SFAS No. 141(R) establishes principles and requirements for how the acquirer:
a. Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. b. Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase. c. Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.
This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and may not be applied before that date. The Company does not expect the effect that its adoption of SFAS No. 141(R) will have on its consolidated results of operations and financial condition.
NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS--AN AMENDMENT OF ARB NO. 51
In December 2007, the FASB issued SFAS No. 160 "Non-controlling Interests in Consolidated Financial Statements - an amendment of ARB No. 51" (SFAS No. 160). This Statement amends the original Accounting Review Board (ARB) No. 51 "Consolidated Financial Statements" to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008 and may not be applied before that date. The does not expect the effect that its adoption of SFAS No. 160 will have on its consolidated results of operations and financial condition.
FAIR VALUE OPTION FOR FINANCIAL ASSETS AND FINANCIAL LIABILITIES
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of SFAS No. 115" (SFAS No. 159), which becomes effective for the Company on February 1, 2008, permits companies to choose to measure many financial instruments and certain other items at fair value and report unrealized gains and losses in earnings. Such accounting is optional and is generally to be applied instrument by instrument. The Company does not anticipate that the election, of this fair-value option will have a material effect on its consolidated financial condition, results of operations, cash flows or disclosures.
FAIR VALUE MEASUREMENTS
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS No. 157). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. SFAS No. 157 addresses the requests from investors for expanded disclosure about the extent to which companies' measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company adopted this standard and it had no material effect on its financial statements.
ACCOUNTING CHANGES AND ERROR CORRECTIONS
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections" (SFAS No. 154), which replaces Accounting Principles Board (APB) Opinion No. 20, "Accounting Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements - An Amendment of APB Opinion No. 28". SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections, and it establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS No. 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The Company adopted SFAS No. 154 in the first quarter of fiscal year 2007 and does not expect it to have a material impact on its consolidated results of operations and financial condition.
In December 2007, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 110. This guidance allows companies, in certain circumstances, to utilize a simplified method in determining the expected term of stock option grants when calculating the compensation expense to be recorded under Statement of Financial Accounting Standards (SFAS) No. 123(R), SHARE-BASED PAYMENT . The simplified method can be used after December 31, 2007 only if a company's stock option exercise experience does not provide a reasonable basis upon which to estimate the expected option term. Through 2007, we utilized the simplified method to determine the expected option term, based upon the vesting and original contractual terms of the option. On January 1, 2008, we began calculating the expected option term based on our historical option exercise data. This change did not have a significant impact on the compensation expense recognized for stock options granted in 2008.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity's derivative instruments and hedging activities and their effects on the entity's financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161
must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement; however, the new statement will not have an impact on the determination of our financial results.
In April 2008, the FASB issued FSP No. FAS 142-3, "Determination of the Useful Life of Intangible Assets." This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). The objective of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R), and other principles of GAAP. This FSP applies to all intangible assets, whether acquired in a business combination or otherwise, and shall be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years and applied prospectively to intangible assets acquired after the effective date. Early adoption is prohibited. We have evaluated the new statement and have determined that it will not have a significant impact on the determination or reporting of our financial results.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" (SFAS 162). This statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in accordance with GAAP. With the issuance of this statement, the FASB concluded that the GAAP hierarchy should be directed toward the entity and not its auditor, and reside in the accounting literature established by the FASB as opposed to the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards No. 69, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." This statement is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." We have evaluated the new statement and have determined that it will not have a significant impact on the determination or reporting of our financial results.
In May 2008 the FASB issued FASB Staff Position (FSP) APB 14-1, "ACCOUNTING FOR CONVERTIBLE DEBT INSTRUMENTS THAT MAY BE SETTLED IN CASH UPON CONVERSION (INCLUDING PARTIAL CASH SETTLEMENT). " APB 14-1 requires the issuer to separately account for the liability and equity components of convertible debt instruments in a manner that reflects the issuer's nonconvertible debt borrowing rate. The guidance will result in companies recognizing higher interest expense in the statement of operations due to amortization of the discount that results from separating the liability and equity components. APB 14-1 will be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting APB 14-1 on its consolidated financial statements.
In June 2008, the FASB issued FSP No. EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities". This FASB Staff Position (FSP) addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described in paragraphs 60 and 61 of FASB Statement No. 128, Earnings per Share. This FSP provides that unvested share-based payment awards that contain non forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. The provisions of FSP No. 03-6-1 shall be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall be adjusted retrospectively (including interim financial
statements, summaries of earnings, and selected financial data) to conform with the provisions of this FSP. Early application is not permitted. The provisions of FSP No. 03-6-1 are effective for the Company retroactively in the first quarter ended March 31, 2009. The Company is currently assessing the impact of FSP No. EITF 03-6-1 on the calculation and presentation of earnings per share in its' consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
NOTE 4 - RECLASSIFICATIONS
Certain prior periods' balances have been reclassified to conform to the current period's financial statement presentation. These reclassifications had no impact on previously reported results of operations or stockholders' equity.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment, net at May 31, consists of the following:
2009 2008 --------- --------- Computer Equipment $ 195,777 $ 8,402 Furniture & Fixtures 39,912 0 Machinery & Equipment 142,535 0 Vehicles 6,021 0 Leasehold Improvements 9,016 0 --------- ---------
Total Fixed Assets 393,261 8,402 --------- ---------
Less: Accum Depreciation (209,043) (1,060) --------- ---------
Fixed Assets, net $ 184,218 $ 7,340 ========= =========
The Company occupies premises under month to month rental arrangements. Total rental payments under the lease agreement totaled $12,000 and $24,000 for the years ended in May 31, 2009 and 2008, respectively.
NOTE 6 - PREPAID ASSETS
In April 2007, the Company's then majority owned subsidiary SportsQuest, entered into an agreement with Media4Equity, Inc. ("M4E") for media production and placement. M4E produces and distributes nationally syndicated print and radio features for its clients in exchange for equity in its clients' business. The agreement stipulates that the sponsorship value of each aired radio feature and each published print feature shall be equivalent to each respective radio station's or newspaper's official ad rate policy, for a total value of $10M. In consideration of M4E's performance, the Company shall transfer to M4E a number of restricted shares of common stock, which shall have a market value of $3.3M. If the market value of all stock transferred to M4E is below $3.3M, the Company shall transfer to M4E a number of restricted common shares necessary for M4E's stock position in the Company to have a value of $3.3M. The share valuation is calculated as 90% of the closing prices of the Company's common stock for the five trading days immediately preceding the initial transfer or any subsequent valuation day. This agreement was terminated on August 15, 2008 and reassigned on same date to Domark under a new agreement. At the time of reassignment, the Company had not redeemed any credits for media advertising.
The terms of the new agreement are as follows:
* In consideration of M4E's commitment of the Media Credit, the Company shall transfer to M4E, within five business days of the Effective Date, 2,640,000 restricted shares of Company's common stock ("Compensation Shares"), which are valued at $3.79 per share. * The terms of this Agreement shall be effective as of the Effective Date, and continue until the later of (i) one (1) year from the date the Company first approves media for placement (which approval shall not be unreasonably withheld); or (ii) four (4) years from the Effective Date. * Intrinsic Value of Compensation Shares. The Parties acknowledge and agree: (i) the market value of Company shares, calculated using a price quoted on the exchange on which such shares trade, may not necessarily reflect a true and accurate valuation of the Shares; (ii) the Media Value may bear no relationship to the current or future value of the Compensation Shares.
On August 24, 2009, the Company assigned $9,997,134 of M4E media credits to 310 Holdings, Inc. in exchange for the issuance of 1,000,000 shares of 310 Holding's common stock. As a result, the Company has impaired its asset to reflect only the unused portion of advertisement as of May 31, 2009 and the value received for the credits.
NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS - Adoption of Statement 142
As of May 31, 2009 Gross Carrying Accumulated Amount Amortization ---------- ------------ Amortized intangible assets $ -- $ -- None -- -- ---------- ---------- Total $ -- $ -- ========== ==========
Unamortized intangible assets Goodwill 2,746,900 ---------- Total $2,746,900 ==========
The changes in the carrying amounts of goodwill for the year ended May 31, 2009 are as follows:
JAVACO ESE ECFO ----------- -------- --------- Balance as of June 1, 2008 $ -- $ -- $ -- Goodwill acquired during year 4,348,750 69,900 408,000 Impairment Loss (1,698,750) -- (381,000) Goodwill written off related to sale of business unit -- -- -- ----------- -------- --------- Balance as of May 31, 2009 $ 2,650,000 $ 69,900 $ 27,000 =========== ======== =========
* JAVACO
The Company has adjusted the carrying amount of goodwill as of May 31, 2009 as a result of the subsequent sale of the Company's wholly owned subsidiary on August 24, 2009. The amount of the impairment loss was determined by adjusting the carrying amount to the quoted market price of the acquirer's stock at the time of sale.
* ECFO
The Company has impaired the carrying amount of goodwill as of May 31, 2009 according to the guidance in FAS 142, GOODWILL AND OTHER INTANGIBLE ASSETS. The amount of the impairment was determined by adjusting the carrying amount to the present value of the reporting unit.
NOTE 8 - NOTES PAYABLE
* JAVACO
During May of 2005 the Company entered into a loan for an auto for a term of 5 years that requires payments of $586 which includes interest at a rate of 4%. The balance at May 31, 2009 is $6,325.
On March 6, 2003 the Company entered into an annual renewable revolving credit agreement in the amount $350,000 which terms are accrual of interest at a rate of .50% above prime. The current balance as of May 31, 2009 is $199,550.
The Company entered into an installment note for a principle amount of $205,000 and interest of 6.75%. The monthly payments are $4,060 and the remaining balance at May 31, 2009 is $166,907.
The Company entered into a lease purchase for computer equipment. The balance of the lease at May 31, 2009 is $1,832.
The Company entered into an installment note for computer equipment. The remaining balance at May 31, 2009 is $3,066.
The Company entered into an operating lease. The balance of the lease at May 31, 2009 is $1,500.
The Company from time to time receives product samples provided by its vendors. At May 31, 2009, there was a value of $9,236 in samples loaned to the Company.
* ECFO
On December 27, 2006, ECFO entered into a loan for an auto purchase. Financing was for a term of 3 years and requires monthly payments of $198, which includes interest at a rate of 12.95%. The balance at May 31, 2009 is $1,441.
NOTE 9 - STOCKHOLDER'S EQUITY
During the year ended May 31, 2009 and 2008:
Stock issued Stock issued for Cash Cash Received for Assets -------- ------------- ---------- Year Ended May 31, 2008 -- --
Year Ended May 31, 2009 150,000 $100,500 --
For the year ended May 31, 2009, the Company issued 150,000 shares of its common stock. Consideration for the shares issued was $100,500 cash to the Company.
NOTE 10 - INCOME TAXES
The Company has available net operating loss carry-forwards for financial statement and federal income tax purposes. These loss carry-forwards expire if not used within 20 years from the year generated. The Company's management has decided a valuation allowance is necessary to reduce any tax benefits because the available benefits are more likely than not to expire before they can be used. The tax based accumulated deficit create tax benefits in the amount of $1,880,434 from inception through May 31, 2009.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of May 31, 2009 are as follows:
Deferred tax assets: Federal $ 1,880,434 State 0 -----------
Total Deferred Tax Asset 1,880,434 Less valuation allowance (1,880,434) -----------
$ 0 ===========
The Company has provided a 100% valuation allowance on the deferred tax assets at May 31, 2009 to reduce such tax asset to $0 as there is no assurance that the Company will generate future taxable income to utilize such asset. Management will review this valuation allowance requirement periodically and make adjustments as warranted.
NOTE 11 - 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, it is anticipated that the company will terminate this agreement.
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. 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 orginal acquisition agreement dated May 13, 2009. Both venues are proceeding.
NOTE 12 - NET LOSS PER SHARE
Net loss per share is calculated using the weighted average number of shares of common stock outstanding during the year. The company considers the outstanding warrants granted for diluted earnings per share for the year ended May 31, 2009 and 2008 respectively because the effect of their inclusion would be anti-dilutive.
NOTE 13 - RELATED PARTY TRANSACTIONS
On September 1, 2008 the Company issued 500,000 common shares to its Director, Richard Altman, as compensation.
On July 16, 2008, we executed an agreement with JAVACO, Inc, an Ohio corporation ("Javaco") whereby pursuant to the terms and conditions of that Agreement we completed the purchase of all the issued and outstanding shares of Javaco. Judith Vazquez is the sister-in-law of R. Thomas Kidd, our Chief Executive Officer. The Closing of the transaction occurred on July 18, 2008.
In July 2008, DoMark issued 500,000 shares to SportsQuest, Inc. as consideration for the assignment of SportsQuest rights to acquire Javaco, Inc. DoMark closed on the acquisition in July 2008 and Javaco became a wholly owned subsidiary of DoMark.
NOTE 14 - STOCK BASED COMPENSATION
The Company issues stock options from time to time to executives, key employees and members of the Board of Directors. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," and continues to account for stock based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". Accordingly, no compensation cost has been recognized for the stock options granted to employees.
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.
Financial Statement Position ("FSP") FAS No. 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 anti-dilution 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 No. 123(R)-5 but it did not have a material impact on its consolidated results of operations and financial condition.
There were no options granted in the year ended May 31, 2009 and 2008 and all options previously granted have been fully vested and therefore there is no proforma effect for the year then ended. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model.
The Company accounts for stock awards issued to nonemployees in accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force ("EITF") Issue No. 96-18 ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN CONJUNCTION WITH SELLING GOODS OR SERVICES. Under SFAS No. 123 and EITF 96-18, stock awards to nonemployees are accounted for at their fair value as determined under Black-Scholes option pricing model.
NOTE 15 - SUBSEQUENT EVENTS
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.
On August 12, 2009, the parties rescinded the Motivation Advantage transaction and agreed to return any consideration issued.
On August 12, 2009, the parties rescinded the Crowley & Company transaction and agreed to consider the stock issued as compensation for services rendered..
On August 12, 2009, Joseph Vittoria, resigned as a member of the Board of Directors. There were no disagreements with Joseph Vittoria on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
On August 13, 2009, Dr. Louis Corrnachia and Richard Smith resigned as members of the Board of Directors. There were no disagreements with Louis Corrnachia or Richard Smith, on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
On August 14, 2009, Greg Jaclin and Terry Carlson resigned as members of the Board of Directors. There were no disagreements with Greg Jaclin or Terry Carlson on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
On August 19, 2009, the parties rescinded the EGA transaction and agreed to return any consideration issued.
On August 24, 2009, 310 Holdings, Inc.("310") and the company closed a Securities Purchase Agreement whereby the 310 purchased 100% of the issued and outstanding common shares of Javaco in exchange for $150,000 and the issuance of 2,500,000 shares of 310's common stock to Domark. We also entered into a separate agreement and have assigned $9,997,134 of media credits in print and radio to 310 Holdings in exchange for the issuance of 1,000,000 shares of 310 Holding's common stock.
On August 26, 2009, R. Thomas Kidd resigned as Chief Executive Officer and President and as a member of the Board of Directors. There were no disagreements with R. Thomas Kidd on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. R. Thomas Kidd will remain in his position as Principal Financial Officer.
On August 26, 2009, in a Debt Settlement Agreement by and between the Company and R. Thomas Kidd, any and all debt owed to Mr. Kidd for expenses, advances, or loans has been settled. The Company agrees to pay Mr. Kidd $150,000 cash and transfer 3.5 million shares of common stock of TRTN, OTCBB held by us. Furthermore, the Company shall execute an assignment of all claims against Victory Lane Financial Elite, et al as known or shall become known in the course of the litigation entitled DOMK vs Victory Lane Elite, LLC, Costello, et al in the US District Court, Middle District of Florida, and the case in Tattnall County, Georgia. In addition, the parties shall execute an assignment of the repurchase agreement entered into by and between the Company and TRTN, OTCBB. Upon payment and assignment of TRTN shares and assignment of the Company's claims, Mr. Kidd shall surrender 111,438,394 common shares of Domark, to be returned to treasury and cancelled.
On August 26, 2009, Scott Sieck, a member of the Board of directors and Chief Operating Officer, was appointed as our Chief Executive Officer.
On September 4, 2009, Richard Altmann resigned as member of the Board of Directors.
On September 14, 2009, R. Thomas Kidd resigned as Principle Accounting Officer of the Company to pursue other interests. Mr. Kidd has provided no written disagreement with the Company on any matter related to the Company's operations, policies or practices. Scott Sieck, our current Chief Executive Officer, has been appointed as Principle Accounting Officer.
On September 18, 2009, Scott Sieck entered into an employment agreement with our Company. The employment agreement provided that the Executive has agreed to waive his compensation until such time as the Board of Directors determines the Company has sufficient assets to repay the Executive or receive compensation in equity and accepts from the corporation 100,000 shares it its authorized Series "A" Preferred stock during the interim period. Subsequently, on September 21, 2009, Mr. Sieck choose to receive 100,000 shares of Series A Preferred Stock which have a voting rights in all matters to be voted upon by shareholders of common stock of 1,000 votes per share of Series A Preferred Stock .
On August 26,2009 the Company executed a Securities purchase agreement with R. Thomas Kidd, whereby pursuant to the terms of the agreement, the Company agreed to transfer its ownership of 100 Units of Victory lane LLC to R. Thomas Kidd in exchange for 25 million shares of Domark common stock held by Mr. Kidd. The trhansaction closed on October 15,2009, upon delivery to the Company of 25 million shares of common stock owned by Mr. Kidd.
The issuance of the securities above were effected in reliance on the exemptions for private sales of securities not involving a public offering pursuant to in Section 4(2) and Section 4(6) of the Securities Act.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On September 8, 2008, Kramer Wiseman and Associates, LLP ("KWA") was appointed as the independent auditor for DoMark International, Inc. (the "Company") commencing with the year ending May 31, 2008, and Chang G. Park, CPA, Ph.D. ("Chang") were dismissed as the independent auditors for the Company as of September 8, 2008. On October 6, 2009, Larry O'Donnell CPA P.C. was appointed as the independent auditor for Domark International ( the Company" commencing with a re audit of year ending May 31, 2008 and for the year ended May 31, 2009.
ITEM 9A.
ITEM 9A. 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, May 31, 2009. 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 effective as of May 31, 2008.
Our principal executive officer and our principal financial officer, are responsible for establishing and maintaining adequate internal control 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 has 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 effective as of May 31, 2008.
This annual report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report on Form 10-K.
There were no changes in our internal control over financial reporting that occurred during of fiscal 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Our principal executive officer and our principal financial officer, report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.
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.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the fiscal quarter ended May 31, 2009, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
LACK OF INDEPENDENT BOARD OF DIRECTORS AND AUDIT COMMITTEE
Management is aware that an audit committee composed of the requisite number of independent members along with a qualified financial expert has not yet been established. Considering the costs associated with procuring and providing the infrastructure to support an independent audit committee and the limited number of transactions, Management has concluded that the risks associated with the lack of an independent audit committee are not justified. Management will periodically reevaluate this situation.
LACK OF SEGREGATION OF DUTIES
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 re-evaluate this situation
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Our executive officers and directors, and their ages and positions as of May 31, 2009 are as follows:
DIRECTORS AND EXECUTIVE OFFICER
R. Thomas Kidd 62 Chairman, President, Chief Executive Officer, and Chief Financial Officer (1)
Scott Sieck 50 Director (2)
Richard Altmann 59 Director (3)
Joseph Vittoria 72 Director (4)
Richard Smith 52 Director (5)
Dr. Louis Cornacchia III 67 Director (6)
Gregg E. Jaclin 49 Director (7)
- ---------- (1) As of October 7, 2009, Mr. Kidd holds the position of Principal Financial Officer and is not a member of the Board of Directors. (2) As of October 7, 2009, Mr. Sieck is the sole member of the Board of Directors and holds the positions of Chief Executive Officer and Chief Operating Officer. (3) On September 4, 2009, Richard Altmann resigned as member of the Board of Directors. (4) On August 12, 2009, Joseph Vittoria, resigned as a member of the Board of Directors. (5) On August 13, 2009, Richard Smith resigned as a member of the Board of Directors (6) On August 13, 2009, Dr. Louis Corrnachia resigned as a member of the Board of Directors (7) On August 14, 2009, Gregg E. Jaclin resigned as members of the Board of Directors
The Chief Executive Officer of the Company will hold office until additional members or officers are duly elected and qualified. The background and principal occupations of the sole officer and director of the Company is as follows:
SCOTT SIECK, CHIEF EXECUTIVE OFFICER, DIRECTOR
Mr. Scott R. Sieck has been a Director of our company since inception. On August 26, 2009, Scott Sieck, a member of the Board of directors and Chief Operating Officer, was appointed as our Chief Executive Officer. From 2000 to present, Mr. Sieck has been self employed, managing his own investment portfolio. Mr. Sieck is a graduate of Penn State University with a BA in Labor Relations and graduate studies at John Hopkins University (Master's of Administrative Sciences)
R. THOMAS KIDD, PRINCIPAL FINANCIAL OFFICER
Mr. R. Thomas Kidd, as of May 2008, accepted the position of Chief Executive Officer and Director of the Company. On August 26, 2009, R. Thomas Kidd resigned as Chief Executive Officer and President and as a member of the Board of Directors. There were no disagreements with R. Thomas Kidd on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. R. Thomas Kidd will remain in his position as Principal Financial Officer.
R. Thomas Kidd was the President and Chief Executive Officer of SportsQuest, Inc., a Delaware corporation that creates, develops, owns and manages high end sports events and related operating entities. From January 2007 until August 2007, Mr. Kidd was the Chief Executive Officer of Lextra Management Group, Inc., whose assets were acquired by SportsQuest, Inc. Prior thereto from July 2005 through November 2006 he served as the Chief Executive Officer and Director of Greens Worldwide Incorporated, a publicly held company, and its subsidiary U.S. Golf Tour, primarily involved in the development of a new golf organization and sports enterprise. Prior thereto, fromApril,1999 through October 2004, Mr. Kidd served as Chief Executive Officer and President of ASGA, Inc., and the American Senior Golf Association. For approximately the past thirty (30) years, Mr. Kidd has been engaged in various capacities in developing sports organizations including, among others, two (2) national professional golf tours and one (1) senior golf tour.
RICHARD ALTMANN, DIRECTOR
Rick Altmann had served as a member of the Board of Directors of Domark, Inc. since September 14, 2007. On September 4, 2009, Richard Altmann resigned as member of the Board of Directors.
JOSEPH VITTORIA, DIRECTOR, CHAIRMAN OF THE BOARD
Joseph Vittoria was appointed as Chairman of the Board on February 20.2009. Since February, 2000, Mr. Vittoria has been Chairman of Puradyn Filter Technologies, Inc., designs, manufactures and markets a Bypass Oil Filtration System. and was named CEO in November 2006. From 1997 through 2000, Joseph Vittoria was founder of Travel Services International, a public company in the travel industry. From 1987 to 1997, he was Chairman and Chief Executive Officer of Avis, Inc. Mr. Vittoria holds a BS in civil engineering from Yale University and an MBA from Columbia Business School. He also holds an honorary doctor of laws degree from Molloy College and a Doctor of Business Administration from Roger Williams University. On August 12, 2009, Joseph Vittoria, resigned as a member of the Board of Directors.
RICHARD SMITH, DIRECTOR
Rick Smith was appoint as a director on February 20, 2009, Since in July, 1987, Mr. Smith has been Chairman and Founder of News USA, Inc.,a multi-million dollar syndicated news distributing business. Mr. Smith has a B.A. in Economics from York University in Toronto, an Honors Bachelors of Commerce in Accounting from the University of Windsor, MBA studies at the University of Toronto and the CPA program before joining Deloite and Touche. He is the author of three best-selling self-help business books: Getting Started, Getting Money and Getting Sales.
GREGG E. JACLIN, DIRECTOR
Gregg Jaclin was appoint to the board of directors on March 17, 2009. Gregg E. Jaclin is a partner at Anslow & Jaclin, LLP. Mr. Jaclin is a securities and corporate lawyer whose practice focuses on securities, financings, mergers and acquisitions and corporate representation. He graduated from University of Maryland with a B.A. degree in government and politics and received his Juris Doctor from Cardozo Law School and was the Production Editor of the CARDOZO WOMEN'S LAW JOURNAL. He is a member of both the New York and New Jersey bars. On August 14, 2009, Gregg E. Jaclin resigned as members of the Board of Directors
DR. LOUIS CORNACCHIA III, DIRECTOR
Dr. Cornacchia has been a director since May 8, 2009, Dr. Cornacchia is the President and CEO of Doctations Inc. (www.doctations.com), a web-based, multi-tenancy, integrated community for physicians and their patients that allows physicians to run their entire medical practices from any Internet-enabled computer. He is a graduate of Columbia College and NYU School of Medicine, and is a board certified neurosurgeon with a practice in Nassau County, New York. On August 13, 2009, Dr. Louis Corrnachia resigned as a member of the Board of Directors
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT 9.A. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS:
The Company is aware that some filings of Form 4 and 5 required of Section 16(a) of the Exchange Act of Directors, Officers or holders of 10% of the Company's shares have not been timely and the Company has instituted procedures to ensure compliance in the future.
On August 26, 2009 R. Thomas Kidd resigned as Chief Executive Office and President and as a member of the Board of Directors. There were no disagreements with R. Thomas Kidd on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. R. Thomas Kidd will remain in his position as Principal Financial Officer.
On August 26, 2009, Scott Sieck, a member of the Board of Directors and Chief Operating Officer, was appointed as our Chief Executive Officer.
On September 4, 2009, Richard Altman resigned as member of the Board of Directors. There were no disagreements with Richard Altman on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
TABLE OF CONTENTS FOR TABLES
PAGE NO. --------
APPENDIX C: EXECUTIVE AND DIRECTOR COMPENSATION TABLES
[FISCAL YEAR] SUMMARY COMPENSATION TABLE ................................ 56
[FISCAL YEAR] GRANTS OF PLAN-BASED AWARDS TABLE (PLEASE NOTE THIS TABLE WILL BE UPDATE BY THE SEC.) ....................................... 57
[FISCAL YEAR] OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE ........ 58
[FISCAL YEAR] OPTION EXERCISES AND STOCK VESTED TABLE ................... 59
[FISCAL YEAR] PENSION BENEFITS TABLE .................................... 60
[FISCAL YEAR] NONQUALIFIED DEFERRED COMPENSATION TABLE .................. 61
[FISCAL YEAR] DIRECTOR COMPENSATION TABLE ............................... 62
FISCAL YEAR 2009 SUMMARY COMPENSATION TABLE
PLEASE NOTE: BASED ON THE SEC CHANGES EFFECTIVE DECEMBER 29, 2006, THIS TABLE WILL BE CHANGED. UPDATED TABLE TO BE DISTRIBUTED ONCE THE SEC HAS ISSUED THE NEW TABLE.
FISCAL YEAR 2009 GRANTS OF PLAN-BASED AWARDS TABLE
FISCAL YEAR 2009 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
FISCAL YEAR 2009 OPTION EXERCISES AND STOCK VESTED TABLE
FISCAL YEAR 2009 PENSION BENEFITS TABLE
FISCAL YEAR 2009 NONQUALIFIED DEFERRED COMPENSATION TABLE
FISCAL YEAR 2009 DIRECTOR COMPENSATION TABLE
FISCAL YEAR 2009 ALL OTHER COMPENSATION TABLE
FISCAL YEAR 2009 PERQUISITES TABLE
FISCAL YEAR 2009 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE
COMPENSATION OF DIRECTORS
Mr. Kidd was also a member of the board of directors of the Company and was not compensated for those services.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial ownership of the common stock as of October 7, 2009 by (i) each person who is known by the Company to own beneficially more than 5% of the any classes of outstanding Stock, (ii) each director of the Company, (iii) each of the Chief Executive Officers and the two (2) most highly compensated executive officers who earned in excess of $100,000 for all services in all capacities (collectively, the "Named Executive Officers") and (iv) all directors and executive officers of the Company as a group.
The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 and 13d-5 of the Exchange Act, and the information is not necessarily indicative of beneficial ownership for any other purpose and is based on 62,313,805 shares beneficially owned as of October 7, 2009. We believe that each individual or entity named has sole investment and voting power with respect to the securities indicated as beneficially owned by them, subject to community property laws, where applicable, except where otherwise noted. Unless otherwise stated, the address of each person; 1809 East Broadway # 125, Oviedo, FL 32795.
Name and Address Shares Owned (1) Common Stock ---------------- ---------------- ------------
R. Thomas Kidd & Joan Kidd 32,986,500 52.9% 1809 East Broadway # 125 Oviedo, Fl 32795
Joseph Vittoria 112,500 .18% 1809 East Broadway # 125 Oviedo, Fl 32795
Gregg Jaclin 12,500 .02% 1809 East Broadway # 125 Oviedo, Fl 32795
Rick Smith 12,500 .02% 1809 East Broadway # 125 Oviedo, Fl 32795
Richard Altmann 1,000,000 1.6% 1809 East Broadway # 125 Oviedo, Fl 32795
Scott Sieck 2,025,000 3.25% 1809 East Broadway # 125 Oviedo, Fl 32795
All such directors as a group (6 persons) 36,149,000 58%
CHANGES IN CONTROL
We are not aware of any arrangements that may result in a change in control of the Company except that on September 18, 2009, Scott Sieck entered into an employment agreement with our Company. The employment agreement provided that the Executive has agreed to waive his compensation until such time as the Board of Directors determines the Company has sufficient assets to repay the Executive or receive compensation in equity and accepts from the corporation 100,000 shares it its authorized Series "A" Preferred stock during the interim period. Subsequently, on September 21, 2009, Mr. Sieck choose to receive 100,000 shares of Series A Preferred Stock which have a voting rights in all matters to be voted upon by shareholders of common stock of 1,000 votes per share of Series A Preferred Stock .
DESCRIPTION OF SECURITIES
GENERAL
Our authorized capital stock consists of 200,000,000 common stock, par value $ ..001.and 2,000,000 preferred par .001.
COMMON STOCK The shares of our common stock presently outstanding, and any shares of our common stock issues upon exercise of stock options and/or warrants, will be fully paid and non-assessable. Each holder of common stock is entitled to one vote for each share owned on all matters voted upon by shareholders, and a majority vote is required for all actions to be taken by shareholders. In the event we liquidate, dissolve or wind-up our operations, the holders of the common stock are entitled to share equally and ratably in our assets, if any, remaining after the payment of all our debts and liabilities and the liquidation preference of any shares of preferred stock that may then be outstanding. The common stock has no preemptive rights, no cumulative voting rights, and no redemption, sinking fund, or conversion provisions. Since the holders of common stock do not have cumulative voting rights, holders of more than 50% of the outstanding shares can elect all of our Directors, and the holders of the remaining shares by themselves cannot elect any Directors. Holders of common stock are entitled to receive dividends, if and when declared by the Board of Directors, out of funds legally available for such purpose, subject to the dividend and liquidation rights of any preferred stock that may then be outstanding.
SERIES A PREFERRED STOCK
The Company has 2,000,000 shares of preferred stock, the rights and preferences of which can be designated by the Board of Directors. The Board of Directors designated and issued 100,000 shares of Series A Preferred. The shares have no dividend rights and convert at the holder's or the Company's option to the Company's Common Stock at the rate of 1,000 to 1. The shares have no liquidation value, no liquidation rights, no dividend rights and no redemption rights. The shares of Series A Preferred Stock were converted to 100,000,000 shares common stock prior to May 31, 2009 pursuant to Mr. Tom Kidd's employment agreement.
DIVIDEND POLICY
We have never declared any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.
OPTIONS AND WARRANTS
As of May 31, 2009 the follow warrants were issued in conjunction with the Javaco transaction: 20,000 common stock purchase warrants at an exercise price of $3.00 per share, expiring on December 31, 2008; 20,000 common stock purchase warrants at an exercise price of $4.00 per share, expiring on December 31, 2009 and 40,000 common stock purchase warrants at an exercise price of $5.00 per share, expiring on December 31, 2010.
CONVERTIBLE SECURITIES
At May 31, 2009 we have no convertible securities issued.
AMENDMENT OF OUR BYLAWS
Our bylaws may be adopted, amended or repealed by the affirmative vote of a majority of our outstanding shares. Subject to applicable law, our bylaws also may be adopted, amended or repealed by our board of directors.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDPENDENCE.
On September 1, 2008, the Company issued 1,000,000 shares of its common stock to a Director as compensation for a value of $500.
On December 29, 2008, the Company issued 200,000 shares of its common stock to a Director as compensation for a value of $400,000. Subsequently, the Director has returned 170,940 shares to the Company and the shares were cancelled.
On April 1, 2009, the Company issued 12,500 shares of its common stock to a Director as compensation for a value of $29,375.
On April 14, 2009, the Company issued 12,500 shares of its common stock to a Director as compensation for a value of $25,000.
On April 14, 2009, the Company issued 12,500 shares of its common stock to a Director as compensation for a value of $25,000.
On May 15, 2009, the Chief Executive Officer at the time, converted to common 100,000 shares of the Company's preferred stock, convertible at a rate of 1000:1.
From time to time, the Company's officers would lend the Company money. At May 31, 2009, there was an outstanding loan payable in the amount of $44,000.
As of May 31, 2009, there were no formal executive compensation agreements in effect.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES. The aggregate fees billed by Larry O'Donnell CPA P.C. for professional services rendered for the audit of the Company's annual financial statements for fiscal years ended May 31, 2009 and 2008 approximated $10,000 and $6,000respecitvely. The aggregate fees billed by Larry O'Donnell CPA P.C.for the review of the financial statements included in the Company's Forms 10-Q for fiscal year 2008 approximated $0 per year.
The aggregate fees billed by Larry O'Donnell CPA for professional services rendered for the audit of the Company's annual financial statements for fiscal years ended May 31, 2009 and May 31, 2008 approximated $10,000 and $6,000 respectively.
AUDIT-RELATED FEES. The aggregate fees billed by Larry O'Donnell CPA P.C. for assurance and related services that are reasonably related to the performance of the audit or review of the Company's financial statements for the fiscal years ended May 31, 2009 and 2008, and that are not disclosed in the paragraph captioned "Audit Fees" above, were $0? and $0?, respectively.
TAX FEES. The aggregate fees billed by Larry O'Donnell CPA P.C. for professional services rendered for tax compliance, tax advice and tax planning for the fiscal year ended May 31, 2009 and 2008 were $0? and $0 respectively.
ALL OTHER FEES. The aggregate fees billed by Larry O Donnell CPA P.C. for products and services, other than the services described in the paragraphs "Audit Fees," "Audit-Related Fees," and "Tax Fees" above for the fiscal years ended May 31 2009 and 2008 approximated $10,000 and $6,000 respectively.
PART IV
ITEM 15.
ITEM 15. EXHIBITS AND REPORTS
Exhibits 3.1 Articles of Incorporation (1)
3.1 Amendments to Articles of Incorporation - Fourth Article (1)
3.1 Amendment to Articles of Incorporation - Name Change (1)
14.1 Financial Code of Ethics (2)
21 Subsidiaries (2)
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act. (2)
31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act (2)
32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes Oxley Act. (2)
32.2 Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes Oxley Act (2)
99.1 Audit Committee Charter (2)
99.2 Compensations Committee Charter (2)
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(1) Incorporated by reference to the same exhibit filed with the Company's Annual Report on Form 10-KSB for the year ending May 31, 2006.
(2) Filed herewith
ITEM 15: SIGNATURES
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 16, 2009 By: /s/ Scott R. Sieck ------------------------------------------- Scott R. Sieck Chairman, President Chief Executive Officer
Date: October 16, 2009 By: /s/ R. Thomas Kidd ------------------------------------------- R Thomas Kidd Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 16th day of October 2009.
/s/ Scott R. Sieck Chief Executive Officer, Director - --------------------------------- Scott R. Sieck
/s/ R. Thomas Kidd Principle Financial Officer - --------------------------------- R Thomas Kidd