UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2015
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
For the transition period from ________ to _______
Commission File No. 333-136247
Domark International, Inc.
(Name of small business issuer as specified in its charter)
Nevada |
| 204647578 |
(State of Incorporation) |
| (IRS Employer Identification No.) |
34 King Street, East Suite 1102 Toronto, Ontario M5C 1E9
(Address of principal executive offices)
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation ST (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer or a smaller reporting company.
Large accelerated filer | ¨ | Accelerated Filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act) Yes ¨ No x
As of August 31, 2015, there were 8,681,112,367 shares of Common Stock, $0.001 par value per share, issued and outstanding and there were 50,000 shares of Series A Preferred Stock, $0.001 par value per share, issued and outstanding and there are zero shares of Series B Preferred Stock, $0.001 par value per share, issued and outstanding.
DOMARK INTERNATIONAL, INC.
TABLE OF CONTENTS PAGE PART I - FINANCIAL INFORMATION Item 1. Consolidated Balance Sheets August 31, 2015 (unaudited & unreviewed) and May 31, 2015 (audited ) Consolidated Statements of Operations three months ending August 31, 2015 and three months ended August 31, 2014 (unaudited & unreviwed) Consolidated Statements of Cash Flows three months ending August 31, 2015 and three months ended August 31, 2014 (unaudited & unreviwed) Notes to Consolidated Financial Statements (unaudited) Item 2. Management Discussion & Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures
3 5 6 7-17 18 19 20
PART II - OTHER INFORMATION |
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Item 1. |
| Legal Proceedings |
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| 21 |
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Item 1A. |
| Risk Factors |
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| 21 |
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Item 2. |
| Unregistered Sales of Equity Securities and Use of Proceeds |
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| 21 |
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Item 3. |
| Defaults Upon Senior Securities |
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| 21 |
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Item 4. |
| Mine Safety Disclosure |
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| 21 |
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Item 5. |
| Other information |
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| 21 |
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Item 6. |
| Exhibits |
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| 22 |
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2 |
DOMARK INTERNATIONAL, INC. | |||||||||||
CONSOLIDATED BALANCE SHEETS |
| August 31, |
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| May 31, |
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| 2015 |
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| 2015 |
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| Unaudited/Unreviewed |
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ASSETS | ||||||||
CURRENT ASSETS |
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Cash and cash equivalents |
| $ | - |
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| $ | - |
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Loan receivable from consultant |
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| 36,203 |
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| 36,203 |
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Prepaid expenses |
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| 24,500 |
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| 4,500 |
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TOTAL CURRENT ASSETS |
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| 60,703 |
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| 40,703 |
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INVESTMENTS |
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| 1,144,166 |
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| 1,144,166 |
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OTHER ASSETS |
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Patents, net of accumulated amortization |
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of $16,105 and $13,605 respectively |
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| 54,397 |
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| 56,897 |
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Licenses, net of accumulated amortization |
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of $304,698 and $270,338 respectively |
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| 5,302 |
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| 41,662 |
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TOTAL OTHER ASSETS |
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| 59,699 |
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| 98,559 |
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TOTAL ASSETS |
| $ | 1,264,568 |
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| $ | 1,283,428 |
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The accompanying notes are an integral part of these consolidated financial statements.
3 |
DOMARK INTERNATIONAL, INC. | ||
CONSOLIDATED BALANCE SHEETS | ||
| August 31, |
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| May 31, |
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| 2015 |
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| 2015 |
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| Unaudited/Unreviewed |
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LIABILITIES AND STOCKHOLDERS' (DEFICIT) | ||||||||
CURRENT LIABILITIES |
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Amounts payable to Bank |
| $ | 22 |
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| $ | 115 |
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Note payable to bank |
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| 198,000 |
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| 198,000 |
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Accounts payable and accrued expenses |
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| 249,817 |
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| 855,665 |
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Amounts due under Licensing Agreement with Wazzamba SA |
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| 224,924 |
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| 224,924 |
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Loans payable to consultants and stockholders |
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| 126,993 |
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| 189,928 |
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Convertible notes payable (net of unamortized discounts |
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of $152,694 and $674,886 respectively) |
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| 631,575 |
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| 580,956 |
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Derivative liability for convertible notes payable |
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| 2,988,218 |
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| 2,564,280 |
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TOTAL CURRENT LIABILITIES AND TOTAL LIABILITIES |
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| 4,419,549 |
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| 4,613,868 |
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STOCKHOLDERS' DEFICIT |
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Preferred stock, $0.001 par value, authorized 10,000,000 shares: |
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Series A convertible preferred stock - issued and outstanding |
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50,000 shares as of August 31, 2015 and May 31, 2015 |
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| 50 |
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| 50 |
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Preferred stock, $0.001 par value, authorized 2,000,000 shares |
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Series B convertible preferred stock - issued and outstanding |
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1,950,000 shares as of August 31, 2015 and "0" as of May 31, 2015 |
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| 1,950 |
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| - |
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Common stock, $0.001 par value, authorized 14,000,000,000 shares: |
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8,805,932,169 and 8,805,932,169 shares issued, |
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and 8,681,112,367 and 8,681,112,367 shares outstanding, |
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as of August 31, 2015 and May 31, 2015 |
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| 8,805,932 |
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| 8,805,932 |
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Less: Treasury stock (124,819,802 shares) as of Aug. 31, 2015 and May 31, 2015 |
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| (124,820 | ) |
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| (124,820 | ) |
Common stock payable |
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| 858,000 |
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| 858,000 |
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Additional paid in capital |
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| 37,788,799 |
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| 36,219,642 |
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Accumulated other comprehensive income (loss) |
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| (131,453 | ) |
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| (126,453 | ) |
Accumulated deficit |
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| (50,353,439 | ) |
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| (48,962,791 | ) |
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TOTAL STOCKHOLDERS' DEFICIT |
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| (3,154,981 | ) |
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| (3,330,440 | ) |
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT |
| $ | 1,264,568 |
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| $ | 1,283,428 |
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The accompanying notes are an integral part of these consolidated financial statements
4 |
DOMARK INTERNATIONAL, INC. |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(UNAUDITED & UNREVIEWED) |
| For three months |
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| For three months |
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| ended |
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| ended |
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| August 31, |
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| August 31, |
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| 2015 |
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| 2014 |
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Sales |
| $ | - |
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| $ | - |
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Cost of sles |
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| - |
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| - |
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Gross profit |
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| - |
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| - |
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Operating expenses: |
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General and administrative |
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| (462,770 | ) |
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| 209,643 |
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Stock-based compensation - Consultants |
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| 1,326,000 |
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| 55,623 |
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Stock-based compensation - Salaries and wages |
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| - |
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| - |
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Amortization expense |
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| 38,860 |
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| 53,360 |
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Total operating expenses |
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| 902,090 |
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| 318,626 |
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Loss from operations |
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| (902,090 | ) |
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| (318,626 | ) |
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Other income (expense): |
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Other income |
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| - |
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| - |
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Revaluation of derivative liablilty for convertible notes |
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| (423,938 | ) |
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| (192,890 | ) |
Interest and accretion expense |
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| (64,620 | ) |
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| (147,433 | ) |
Total other income (expense) |
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| (488,558 | ) |
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| (340,323 | ) |
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Net Loss |
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| (1,390,648 | ) |
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| (658,949 | ) |
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Statement of Comprehensive Loss: |
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Net Loss |
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| (1,390,648 | ) |
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| (658,949 | ) |
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Other Comprehensive loss |
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Foreign currency translation adjustment |
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| (5,000 | ) |
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| (11,650 | ) |
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| (5,000 | ) |
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| (11,650 | ) | |
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Total Comprehensive Loss |
| $ | (1,395,648 | ) |
| $ | (670,599 | ) |
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Net loss per common shares, basic and diluted |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
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Weighted average common shares outstanding |
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| 8,681,112,367 |
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| 1,077,885,876 |
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The accompanying notes are an integral part of these consolidated financial statements.
5
DOMARK INTERNATIONAL, INC. | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
(UNAUDITED & UNREVIEWED) |
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| For the three months ended |
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| August 31, |
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| August 31, |
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| 2015 |
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| 2014 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net Loss |
| $ | (1,390,648 | ) |
| $ | (658,949 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Amortization expense |
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| 38,860 |
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| 53,360 |
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Series B Preferred stock issued as compensation - consultants |
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| 1,326,000 |
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| 55,623 |
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Series B Preferred stock issued for loans payable - consultants |
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| 62,935 |
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| - |
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Non cash interest expense |
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| 64,620 |
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| 147,433 |
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Loss (gain) on revalutaion of derivative liability - convertible notes |
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| 423,938 |
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| 192,890 |
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Change in operating assets and liabilities: |
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Prepaid expenses |
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| 20,000 |
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| - |
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Accounts payable and accrued expenses |
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| (605,848 | ) |
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| 4,801 |
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Accounts payable - related party |
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| (62,935 | ) |
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| (21,336 | ) |
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Net cash used in operating activities |
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| (123,078 | ) |
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| (226,178 | ) |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Cash paid for investments |
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| - |
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| - |
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Cash paid for loan receivable from consultant |
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| - |
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| - |
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Net cash used in investing activities |
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| - |
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| - |
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Other Comprehensive income (loss) |
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| (5,000 | ) |
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| (11,650 | ) |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from convertible notes payable |
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| 128,171 |
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| 128,448 |
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Proceeds from loans payable to consultants and stockholders |
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| - |
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| 108,885 |
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Net cash provided by financing activities |
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| 128,171 |
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| 237,333 |
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Net increase (decrease) in cash and cash equivalents |
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| 93 |
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| (495 | ) |
CASH BALANCE (BANK OVERDRAFT) BEGINNING OF PERIOD |
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| (115 | ) |
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| 460 |
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CASH BALANCE (BANK OVERDRAFT) END OF PERIOD |
| $ | (22 | ) |
| $ | (35 | ) |
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Cash paid for interest |
| $ | 4,500 |
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| $ | 20,424 |
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Cash paid for taxes |
| $ | - |
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| $ | - |
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SUPPLEMENT SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Shares issued for settlement of loans payable to consultants |
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and stockholders |
| $ | 1,326,000 |
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| $ | 55,623 |
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Shares issued for settlement of convertible notes payable |
| $ | - |
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| $ | 237,940 |
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The accompanying notes are an integral part of these consolidated financial statements.
6 |
DOMARK INTERNATIONAL, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDING AUGUST 31, 2015 AND AUGUST 31, 2014
(Unaudited & Unreviewed)
NOTE 1 – DESCRIPTION OF BUSINESS
DOMARK INTERNATIONAL, INC. ("DoMark" or the "Company") was incorporated under the laws of the State of Nevada on March 30, 2006. During 2008 and 2009, the Company acquired several operating businesses. On May 21, 2009, the Company entered into an acquisition agreement (the "Victory Lane Agreement") with Victory Lane Financial Elite, LLC ("Victory Lane") with respect to a real estate lifestyle business known as "Victory Lane" (the "Victory Lane Business"). Shortly thereafter, a dispute arose between the Company and the principals of Victory Lane regarding the representations of the principals of Victory Lane and the Victory Lane Business and the Victory Lane Agreement.
On March 5, 2012, the Company entered into an Asset Purchase Agreement with its then controlling shareholder, R. Thomas Kidd, for the sale of the Company's subsidiary Armada Armada/The Golf Championships and certain assets related thereto. The Company relied upon Accounting Standards Codification ("ASC") Topic Nos, 8602025 and 8602040 to record the sale. The fair value of the transaction was measured at the fair value of the assets less any liabilities sold.
On February 29, 2012, the Company formed a new wholly owned subsidiary, Solarwerks, Inc. in the state of Nevada, for the purposes of entering the business of marketing specialized solar consumer electronics. Solarwerks' current focus is to develop and distribute the SolaPad, a combined cover and charging system for Apple's iPad; and the SolaCase, a combined cover and charging system for all versions of Apple's iPhone. Solarwerks competes in a market that also includes 3D Systems (DDD), Dell (DELL) and Hewlett Packard (HPQ). Solarwerks, Inc. is currently in default with the Nevada Secretary of State.
On June 20, 2012, the Company formed a new whollyowned subsidiary, MuscleFoot Inc. in the state of Nevada for the purpose of distributing, marketing, and acting as sales agent for the patented foot care system of Barefoot Science. MuscleFoot Inc. is currently in default with the Nevada Secretary of State.
On July 20, 2012, the Company formed a new whollyowned subsidiary, DoMark Canada Inc. in the province of Ontario for the purpose of supporting the Company's corporate operations based in Toronto, Ontario, Canada.
On February 28, 2013, the Company entered into a Memorandum of Understanding to purchase 44% of Zaktek Ltd. ("Zaktek"). Zaktek's main product is the phonepad+, an Apple Inc. approved tablet device that works with smartphones, including the Apple iPhoneÒ and Samsung Galaxy products to improve functionality including video and gaming abilities.
On April 23, 2013, the Company received notification that Zaktek was ending discussions in regards to the definitive purchase agreement with DoMark.
On June 11, 2013, the Company then purchased 100% of South Hill Ltd., an English private limited company, which owns approximately 19% of Zaktek.
NOTE 2 – GOING CONCERN
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. Furthermore, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors, promissory notes from lenders, and the support of certain stockholders.
These factors raise substantial doubt about the ability of the Company to continue as a going concern. These condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. In this regard, management is planning to raise any necessary additional funds through loans and additional sales of its common stock. There isn't any assurance that the Company will be successful in raising additional capital to meet its operating needs.
7 |
NOTE 3 – BASIS OF PRESENTATION
The unaudited consolidated financial statements as of August 31, 2015 and for the three months ended August 31, 2014 have been prepared in accordance with accounting principles generally accepted in the United States for interim consolidated financial information and with instructions to Form 10-Q. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the consolidated financial position as of August 31, 2015 and the results of operations and cash flows for the three months ended August 31, 2015 and 2014. The financial data and other information disclosed in these notes to the interim consolidated financial statements related to these periods are unaudited. The results for the three month period August 31, 2015 are not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending May 31, 2015. The consolidated balance sheet at August 31, 2015 has been derived from the unaudited consolidated financial statements at that date.
Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited consolidated financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended May 31, 2014 as included in our annual report on Form 10-K.
NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECENT ACCOUNTNG PRONOUNCEMENTS
In June 2014, The Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 201410, "Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation" ("ASU 2014-10"). ASU 201410 removes the financial reporting distinction between development stage entities and other reporting entities and eliminates the requirements for development stage entities to (1) present inceptiontodate information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. As permitted by ASU 2014-10, the Company has elected early application of this standard for the accompanying consolidated financial statements for the Quarter ended February 28, 2015 and year ended May 31, 2014. The Company has reviewed other recently issued accounting pronouncements and plans to adopt those that are applicable to it. It does not expect the adoption of these pronouncements to have a material impact on its financial position, results of operations or cash flows.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements represent the consolidated financial position and results of operations of the Company and include the accounts and results of operations of the Company and its subsidiaries. The accompanying consolidated financial statements include the parent entity of DoMark International, Inc. and its wholly owned subsidiaries, Domark Canada, Inc., Solarwerks, Inc., MuscleFoot, Inc. The Company has relied upon the guidance provided by ASC Topic No. 810-10-15-3.
Foreign Currency Translation and Transaction Gains and Losses
We record foreign currency translation adjustments and transaction gains and losses in accordance with SFAS 52, Foreign Currency Translation. For our operations that have a functional currency other than the U.S. dollar, gains and losses resulting from the translation of the functional currency into U.S. dollars for financial statement presentation are not included in determining net loss but are accumulated in the cumulative foreign currency translation adjustment account as a separate component of shareholders' deficit. The Company and its subsidiaries also have transactions in foreign currencies other than the functional currency. We record transaction gains and losses in our consolidated statements of income related to the recurring measurement and settlement of such transactions. The translation rates as of August 31, 2015 were $1.00 US equaled $1.33 Canadian.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.
8 |
The primary management estimates included in these condensed consolidated financial statements are the fair value of Company stock tendered in various nonmonetary transactions and the fair value of the derivative liability for convertible notes payable.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At August 31, 2015 there weren't any cash or cash equivalents. At August 31, 2015 and May 31, 2015, cash and cash equivalents consisted only of cash in the bank, or a bank over draft.
LOANS RECEIVABLE CONSULTANT
The loan receivable consultants are a short term, less than one year note, due February 28, 2016 and non-interest bearing.
NET LOSS PER COMMON SHARE
Basic net loss per common share is computed by dilutive net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially dilutive securities (such as convertible notes payable, convertible preferred stock, and warrants) outstanding during the relevant period. Dilutive securities having an anti-dilutive effect on diluted net loss per common share are excluded from the calculation.
For the three months ending August 31, 2015 and 2014, diluted common shares outstanding excluded the following dilutive securities as the effect of their inclusion was anti-dilutive:
| Common Shares Equivalents |
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| Three Months Ended August 31, |
| ||||||
| 2015 |
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| 2014 |
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Convertible Notes Payable |
|
| 29,793,433,824 |
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| 307,459,536 |
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| |
Serie A Convertible Preferred Shares |
|
| 50,000,000 |
|
|
| 50,000,000 |
|
|
|
|
|
|
|
|
| |
Serie B Convertible Preferred Shares |
|
| 15,600,000,000 |
|
|
| - |
|
|
|
|
|
|
|
|
| |
Warrants |
|
| 850,000 |
|
|
| 850,000 |
|
|
|
|
|
|
|
|
| |
Total Common Shares Equivalents |
|
| 45,444,283,824 |
|
|
| 358,309,536 |
|
INTANGIBLE ASSETS
Intangible assets are carried at cost less accumulated amortization. Amortization is recorded over the estimated useful lives of the respective assets.
IMPAIRMENT OF LONGLIVED ASSETS
In accordance with ASC Topic No. 360-10-40, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.
9 |
STOCK-BASED COMPENSATION
The Company accounts for share based payments in accordance with ASC Topic No. 718, Compensation - Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with ASC 718-10-30-9, Measurement Objective - Fair Value at Grant Date, the Company estimates the fair value of the award using a valuation technique. For stock options, the Company uses the Black-Scholes option pricing model. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as stock volatility, interest rates, and to allow for actual exercise behavior of option holders. Compensation cost is recognized over the requisite service period which is generally equal to the vesting period. Upon exercise, shares issued will be newly issued free trading shares from the Company's authorized common stock.
ASC Topic No. 505, "Compensation-Stock Compensation", establishes standards for the accounting for transactions in which an entity exchanges its equity instruments to non-employees for goods or services. Under this method, stock compensation expense includes compensation expense for all stock-based compensation awards granted on or after January 1, 2006, based on the grantdate fair value estimated in accordance with the provisions of ASC 505.
RESEARCH AND DEVELOPMENT
All research and development expenditures are expensed as incurred.
REVENUE RECOGNITION
The Company recognizes revenues when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured.
NOTE 5 – INVESTMENTS
Investments consist of:
| August 31, 2015 |
|
| August 31, 2014 |
| |||
|
|
|
|
|
|
| ||
Imagic Ltd. - 40% equity interest |
| $ | 1,094,166 |
|
| $ | 1,094,166 |
|
Barefoot Science Products & Services Inc. - 15% equity interest |
|
| 50,000 |
|
|
| 50,000 |
|
Total |
| $ | 1,144,166 |
|
| $ | 1,144,166 |
|
The cost of the 40% equity interest in Imagic Ltd. at August 31, 2015 consists of:
July 22, 2013 issuance of 7,500,000 shares of DoMark common stock to Imagic Ltd. |
| $ | 697,500 |
|
December 3, 2013 issuance of 8,000,000 shares of DoMark common stock to Meadow Grove Ltd. in exchange for 9% equity interest in Imagic Ltd. |
|
| 96,005 |
|
Cash payments to or for the benefit of Imagic Ltd. |
|
| 150,661 |
|
Payments from Foremark Holdings to Imagic Ltd. in exchange for DoMark notes payable to Foremark Holdings |
|
| 150,000 |
|
Total |
| $ | 1,094,166 |
|
Imagic is a privately owned company registered in Gibraltar which owns proprietary product designs for its Digilink and Game Control products. Imagic shares are not quoted or traded on any securities exchange or in any recognized over-the counter market. Imagic is accounted for on the equity method of accounting. The Company consolidates entities that we control. The Company accounts for investments in joint ventures using the equity method of accounting when we exercise significant influence over the venture. If the Company does not exercise significant influence, we account for the investment using the cost method of accounting. Imagic did not have any revenues or expenses for the period ended February 28, 2015.
10 |
NOTE 6 – LICENSING AGREEMENT WITH WAZZAMBA SA
During the three months ended February 28, 2014, the Company executed a Licensing Agreement with Wazzamba SA (the "Licensor"). The agreement provides the Company an exclusive license to use certain technology (which permits third-party subscribers to integrate a fully equipped online shop into their websites) in Canada and the United States for an initial term ending July 31, 2015. The agreement provides for the Company to pay the Licensor "Flat Fee" compensation of $ 300,000 in 3 installments of $100,000 each (first installment payable within 5 days of the signing of the agreement, second installment payable on July 1, 2014, and third installment payable on February 1, 2015) plus "Revenue Share" compensation equal to 50% of Net Commissions generated by the Company payable monthly. In the event that the Company does not generate $500,000 in Net Commissions by January 31, 2015, the Licensor has the right to cancel the agreement with one month notice (in which case the third $100,000 installment will no longer be due). With respect to an Extended License Term after July 31, 2015, the agreement provides the Company a right of first refusal to match any offer received by the Licensor from a third party.
At August 31, 2015, the Company has a recorded intangible asset for "Licensing Agreement with Wazzamba SA" in the amount of $300,000, and included the liability under the Licenses net of accumulated amortization. Commencing March 1, 2014, the Company will amortize the $300,000 intangible asset on a straight line basis over the remaining 17 months of the Initial Term ending July 31, 2015 (approximately $17,647 per month).
On March 27, 2014, the Company paid $75,000 of the first $300,000 "Flat Fee" installment due the Licensor under the agreement. The other $225,000 due is presently past due.
Licenses, net of accumulated amortization are as follows:
| August 31, |
|
| May 31, |
| |||
| 2015 |
|
| 2015 |
| |||
|
|
|
|
|
| |||
Wazzamba S.A. |
| $ | 300,000 |
|
| $ | 300,000 |
|
Bioharmonics |
|
| 10,000 |
|
|
| 10,000 |
|
Subtotal |
|
| 310,000 |
|
|
| 310,000 |
|
Accumulated amortization |
|
| (304,698 | ) |
|
| (270,338 | ) |
|
|
|
|
|
|
|
| |
Totals |
| $ | 5,302 |
|
| $ | 41,662 |
|
NOTE 7 – NOTE PAYABLE TO BANK
In December 2013, the Company entered into a Loan Agreement with a bank located in Maryland. The related Promissory Note in the amount of $180,000 bears interest at a rate at 10% payable monthly, and is due in full on December 31, 2014, and is secured by a 25,000,000 shares of Domark International, Inc (Common Stock Reserve as defined in the Loan Agreement), a Guaranty of Payment from the Company's chief financial officer and his wife, and certain real property owned by the Company's chief financial officer and his wife. The loan has been modified and the lender has extended a six month extension for the loan repayment, with a July 1, 2015 balloon due date.
11 |
NOTE 8 – LOANS PAYABLE TO CONSULTANTS AND STOCKHOLDERS
Loans payable to consultants and stockholders consist of ;
| August 31, |
|
| May 31, |
| |||
| 2015 |
|
| 2015 |
| |||
Consultant and stockholder |
| $ | 80,796 |
|
| $ | 80,796 |
|
President of Domark |
|
| - |
|
|
| 45,850 |
|
Chairman of Barefor Science and affilliate |
|
| 21,500 |
|
|
| 21,500 |
|
Consultant |
|
| 16,097 |
|
|
| 16,097 |
|
Consultant |
|
| - |
|
|
| 17,085 |
|
Consultant |
|
| 8,600 |
|
|
| 8,600 |
|
|
|
|
|
|
|
|
| |
Totals |
| $ | 126,993 |
|
| $ | 189,928 |
|
NOTE 9 – CONVERTIBLE NOTES PAYABLE
At August 31, 2015 the convertible notes payable consisted of;
Date of | Interest | Maturity | Principal | Unamortized | Net | ||||||||
Note | Noteholder | Rate | Date | Amount | Discount | Note | |||||||
12/19/13 | JMJ Financial Inc | 10% | 12/19/14 | $24,842 | (i) | $0 | $24,842 | ||||||
3/7/14 | JSJ Investments, Inc. | 12% | 10/7/14 | 12,130 | (g) | 0 | 12,130 | ||||||
3/28/14 | Redwood Fund III | 10% | 9/28/14 | 35,122 | (f) | 0 | 35,122 | ||||||
3/18/14 | Redwood Managament, LLC. | 10% | 9/28/14 | 50,000 | (g) | 0 | 50,000 | ||||||
4/14/14 | WHC Capital, Inc | 12% | 10/14/14 | 38,200 | (i) | 0 | 38,200 | ||||||
4/11/14 | Tonaquint, Inc | 12% | 10/11/14 | 40,559 | (g) | 0 | 40,559 | ||||||
4/24/14 | JSJ Investments, Inc. | 12% | 10/24/14 | 50,000 | (g) | 0 | 50,000 | ||||||
5/12/14 | Iconic Holdings, LLC | 10% | 11/12/14 | 46,645 | (g) | 0 | 46,645 | ||||||
5/16/14 | KBM Worldwide, Inc | 8% | 11/14/14 | 9,410 | (l) | 0 | 9,410 | ||||||
6/3/14 | Adar Bays, Inc | 8% | 12/12/14 | 48,654 | (g) | 0 | 48,654 | ||||||
6/23/14 | JMJ Financial Inc | 10% | 12/23/14 | 50,000 | (i) | 0 | 50,000 | ||||||
7/3/14 | LG Capital, Inc | 8% | 1/3/15 | 36,750 | (a) | 0 | 36,750 | ||||||
7/22/14 | Redwood Fund III | 10% | 1/22/15 | 100,082 | (g) | 0 | 100,082 | ||||||
8/14/14 | KBM Worldwide, Inc | 8% | 2/14/15 | 27,500 | (l) | 0 | 27,500 | ||||||
10/8/14 | LG Capital, Inc | 8% | 4/8/15 | 3,000 | (a) | 0 | 3,000 | ||||||
12/2/14 | Tonaquint, Inc | 12% | 6/2/15 | 10,000 | (g) | 0 | 10,000 | ||||||
12/5/14 | LG Capital, Inc. | 8% | 6/5/15 | 9,500 | (a) | 0 | 9,500 | ||||||
1/7/15 | LG Capital Inc | 8% | 7/7/15 | 22,500 | (a) | 0 | 22,500 | ||||||
3/15/15 | Curran | 10% | 3/15/15 | 25,000 | (l) | 18,231 | 6,769 | ||||||
7/22/15 | LG Capital, Inc | 8% | 1/22/16 | 60,375 | (a) | 57,060 | 3,315 | ||||||
7/22/15 | JMJ Financial Inc | 10% | 1/22/16 | 20,000 | (i) | 18,401 | 1,599 | ||||||
7/17/15 | Iconic Holdings, LLC | 8% | 1/17/16 | 22,000 | (g) | 20,302 | 1,698 | ||||||
7/22/15 | Redwood Fund III | 10% | 1/22/16 | 22,000 | (f) | 20,302 | 1,698 | ||||||
7/15/15 | Tonaquint, Inc | 12% | 1/15/16 | 20,000 | (g) | 18,398 | 1,602 | ||||||
Totals | $784,269 | $152,694 | $631,575 |
12 |
Legend
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.081 or 50% of the average of the three lowest closing prices during the 10 trading days prior to the notice of conversion. At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.085 or 60% of the lowest closing price during the 25 trading days prior to the notice of conversion. At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.08 or 50% of the lowest closing price during the 10 trading days prior to the notice of conversion. At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.0725 or 34% of the lowest closing price during the 20 trading days prior to the notice of conversion. At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 55% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion. At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.00929 or 50% of the average of the three lowest trading prices during the 10 trading days prior to the notice of conversion. At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 25% of the lowest trading price during the 20 trading days prior to the notice of conversion. At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 58% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion. At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 40% of the lowest closing price during the 25 trading days prior to the notice of conversion. At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 40% of the lowest closing price during the 20 trading days prior to the notice of conversion. At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 58% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion. (l) At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 49% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion.
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k)
13 |
NOTE 10 – STOCKHOLDERS' EQUITY
Series A Convertible Preferred Stock
Each share of Series A Convertible Preferred Stock has 1,000 voting rights and is convertible into 1,000 shares of the Company's common stock.
Series B. Convertible Preferred Stock
Each share of Series B Convertible Preferred Stock has 8,000 voting rights and is convertible into 8,000 shares of the Company's common stock.
Common Stock Issuances
On August 13, 2015, the Company issued 994,500 shares of Series B convertible preferred shares in satisfaction of $365,708 of unpaid compensation.
On August 13, 2015, the Company issued 663,000 shares of Series B convertible preferred shares in satisfaction of $203,121 of unpaid compensation.
On August 13, 2015, the Company issued 175,500 shares of Series B convertible preferred shares in satisfaction of $45,850 of unpaid loans payable.
On August 13, 2015, the Company issued 117,000 shares of Series B convertible preferred shares in satisfaction of $17,085 of unpaid loans payable
Warrants to Purchase Common Stock
A summary of warrant activity from May 31, 2012 until the three months ending August 31, 2015 are as follows:
|
| Weighted Average Number of Warrants |
|
| Exercise Price |
| ||
Outstanding at May 31, 2012 |
| $ | - |
|
|
| - |
|
Granted |
|
| 850,000 |
|
|
| 0.42 |
|
Exercised |
|
| - |
|
|
| - |
|
Cancelled |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
| |
Outstanding at May 31, 2013 |
|
| 850,000 |
|
|
| 0.42 |
|
Granted |
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
Cancelled |
|
| - |
|
|
| - |
|
Outstanding at August 31, 2015 |
| $ | 850,000 |
|
|
| 0.42 |
|
Warrants outstanding at August 31, 2015 consist of:
Date Granted |
| Number Outstanding |
|
| Exercise price |
| Expiration Date | |||
May 25, 2012 |
|
| 100,000 |
|
| $ | 1.00 |
|
| May 25, 2015 |
June 12, 2012 |
|
| 150,000 |
|
| $ | 1.00 |
|
| June 12, 2015 |
June 26, 2012 |
|
| 100,000 |
|
| $ | 1.00 |
|
| June 26, 2015 |
January 1, 2012 |
|
| 500,000 |
|
| $ | 0.01 |
|
| January 1, 2015 |
|
|
|
|
|
|
|
|
|
| |
Totals |
|
| 850,000 |
|
|
|
|
|
|
|
14 |
NOTE 11— FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILIITY
The Company evaluates all of it financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then revalued at each reporting ate, with changes in the fair value reported as charges or credits to income. For optionbased derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period derivative instrument liabilities are classified in the balance sheet as current or noncurrent based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
During the period ended August 31, 2015 the Company entered into several convertible note agreements. The conversion option and the outstanding common stock warrants on that date which were tainted by the convertible note were classified as derivative liabilities at their fair value on the date of issuance.
Under ASC815 the conversion options embedded in the notes payable described in Note 9 require liability classification because they do not contain an explicit limit to the number of shares that could be issued upon settlement.
As defined in FASB ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date.
Level 3 Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value.
Derivative liability — the Company's derivative liability is classified within Level 3 of the fair value hierarchy.
The Company uses the Black Scholes Option Pricing Model to value its option based derivatives predicated upon the following assumptions: dividend yield of -0-%, volatility of stock price =100%, risk free interest rate varying from 8 to 12 % and an expected term equal to the remaining conversion period of the note.
15 |
The following table sets forth by level within the fair value hierarchy the Company's financial assets and liabilities that were accounted for at fair value as of August 31, 2015.
Recurring Fair Value Measurements |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative liability August 31, 2015 |
|
| - |
|
|
| - |
|
|
| 2,988,218 |
|
|
| 2,988,218 |
|
Derivative liability May 31, 2015 |
|
| - |
|
|
| - |
|
|
| 2,564,280 |
|
|
| 2,564,280 |
|
NOTE 12 – COMMITMENTS AND CONTINGENCIES
License Agreements
On February 29, 2012, the Company entered into a Memorandum of Agreement with Xiamen Taiyang Neng Gongsi and Michael Franklin. For and in consideration of the payment of an initial license fee of $10,000, and for the future payment of royalties of $5.00 per SolaPad unit sold, Xiamen granted an exclusive worldwide license and joint patent rights to the Company for a solar charging case for IPAD, including IPAD 3. The license under the Agreement expires on December 31, 2018.
On April 19, 2013, our subsidiary DoMark Canada Inc. executed an agreement with Bioharmonics Technologies Cop. ("Bioharmoniecs"). The agreement provided for the acquisition of certain inventions and related patents and patent applications in exchange for 500,000 shares of DoMark common stock (which was delivered April 19, 2013) and $30,000 cash payable no later than October 17, 2013 (which was satisfied through the delivery of an additional 500,000 shares of DoMark common stock to Bioharmonics on August 15, 2013). The agreement also provides for a royalty obligation payable quarterly to Bioharmonics equal to 10% of the wholesale price for each unit using infrared and solar charging.
In January 2014, the Company executed a Licensing Agreement with Wazzamba SA. See Note 6.
Employment Agreements
On May 25, 2012, the Company entered into an employment agreement with its President, R. Brentwood Strasler, for an indefinite period or until terminated. Mr.
Strasler is entitled to an annual salary of $150,000 USD and 100,000 stock purchase warrants exercisable to purchase shares of common stock of the Company at $1.00 per share. The warrants are exercisable for a three year period and can be vested quarterly on a pro rata basis over twelve months from the date of issue. Additionally, Mr. Strasler is to be enrolled in a long term Executive Option Plan and is entitled to term life insurance in the face amount of $2,500,000, payable to the beneficiary designated by Mr. Strasler. On December 1, 2014 Mr, Strasler resigned from the Company, mutually accepted by Mr. Ritchie, CEO and President.
On June 15, 2012, the Company entered into an employment agreement with its Chief Executive Officer Andrew Ritchie, for an indefinite period or until terminated. Mr. Ritchie is entitled to an annual salary of $240,000 USD and 150,000 stock purchase warrants exercisable to purchase shares of common stock of the Company at $1.00 per share. The warrants are exercisable for a three year period and can be vested quarterly on a pro rata basis over twelve months from the date of issue. Additionally, Mr. Ritchie is to be enrolled in a long term Executive Option Plan and is entitled to term life insurance in the face amount of $2,500,000, payable to the beneficiary designated by Mr. Richie.
16 |
Lease Agreement
On August 1, 2013, the Company entered into an office lease in Toronto, Ontario, Canada for a five year period. At August 31, 2015, the future lease commitments on this lease for the years ended May 31, are as follows, and are in U.S. dollars:
2015 |
| $ | 11,264 |
|
2016 |
|
| 47,616 |
|
2017 |
|
| 47,616 |
|
2018 |
|
| 47,616 |
|
Thereafter |
|
| 7,936 |
|
|
|
|
| |
Total |
| $ | 162,047 |
|
NOTE 13 – SUBSEQUENT EVENT
In September 22, 2015 the Company applied to FINRA to enact a 1:6000 (one for six thousand) one common share for six thousand common shares, reverse stock split. The Company already had the form 14C approved by the SEC to apply for the reverse stock split. Since there are two shareholders with over 50% (fifty percent) voting control, there wasn't any need for a proxy vote on the reverse stock split. The Company's ahareholder's were notified of the reverse stock split application, Due to the fact the Company's stock value was significantly low, the Company needed to do a reverse stock split to raise potential capital, through promissory note and investment vehicle funding, to continue operations. Mr Andrew Ritchie, is still the Company's CEO, President, and board director.
The Company is actively seeking a sale, joint venture, marketing partnership, or any other related venture opportunity with Simba Deals.
17 |
ITEM 2 MANAGEMENT DISCUSSION AND ANALYSIS OF THE CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant factors that have affected our condensed consolidated financial position and operating results during the periods included in the accompanying condensed consolidated financial statements, as well as information relating to the current plans of our management. This report includes forward-looking statements. Generally, the words "believes", "anticipates", "may", "will", "should", "expect", "intend", "estimate", "continue", and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information contained elsewhere in this Form 10-Q.
RECENT DEVELOPMENTS
The main operations of the Company have been to search, negotiate and acquire ownership interests in companies with products at an advanced stage of their development or products already in production.
In December 2013, the Company increased its equity interest in Imagic Ltd. to 40%. Imagic is a company registered in Gibraltar which owns proprietary product designs for its Digilink and Game Control products.
In January 2014, the Company acquired United States and Canada marketing rights to certain online shop technology pursuant to a Licensing Agreement with Wazzamba SA.
On February 24, 2014, the Company increased the number of authorized shares of common stock to 900,000,000 shares.
On August 11, 2014 the Company increased the number of authorized shares of common stock to 7,500,000,000.
On December 15, 2014, R. Brent Strasler (non Exec. Chariman) tendered his resignation to the Company, mutually agreed upon by the President/CEO.
On August 11, 2014 the Company increased the number of authorized shares of common stock to 7,500,000,000.
On December 9, 2014 the Company increased the number of authorized shares of common stock to 14,000,000,000.
In January 2015, the Company entered into a joint venture agreement with Mobil Lads, Corp, to acquire 75% of Simbadeals North American licensing rights, for $700,000 value of Mobile Lads Corp common stock and $225,000 in cash. The cash will be used by Domark to pay off the existing licensing responsibilities to Wazzamba (the program developer of Simbadeals). Mobil Lads Corp will manage the future of Simbadeals and will be fully responsible for all future funding of the operation. Domark will retain the 25% interest in the Joint Venture.
On August 13, 2015, the Company issued 1,170,000 Preferred Series B convertible shares, to Mr. Andrew Ritchie (CEO & President), and 780,000 Preferred Series B convertible shares to Mr. Thomas Crompton ( CFO), with a conversion rate of 8,000 common shares to one preferred share. These shares were issued for unpaid compensation and unpaid loans to Mr. Ritchie and Mr. Crompton. The unpaid compensation for Mr. Ritchie and Mr. Crompton were $365,708 and $203,121 respectively. The unpaid loans, at the time of preferred share issuance for Mr. Ritchie and Mr. Crompton were $45,480 and $30,723 respectively.
On September 8, 2015, the Company has filed an S-8 for the announcement of a reverse stock split. The SEC has approved the 14C filing, for the application. Currently the Company is applying for a 6000: 1 (six thousand common shares for one common share) reverse stock split on the Company's voting common stock. Since Mr, Ritchie and Mr. Crompton have over 50% (fifty percent) voting control of the Company (See Item #2, recent developments below), the shareholders are being notified, and no proxy is required.
18 |
LIQUIDITY AND CAPITAL RESOURCES
Our operating requirements have been funded primarily through financing facilities, sales of our common stock, and loans from shareholders and 3rd party financiers. Currently, the Company's cash flows do not adequately support the operating expenses of the Company. We received $0 in the nine months ended February 28, 2015 from the sale of our common stock. The Company will continue to require financing from loans and notes payable until such time as our business has generated income sufficient to carry our operating costs.
Cash used by operating activities for the three month period ended August 31, 2015 was $123,078 compared to $226,178 for the same period in 2014. Stock-based compensation for the three month period ended August 31, 2015 was $1,326,000 as compared to $55.623 for the three month period ended August 31, 2014.
Cash used in investing activities was $0 for the three month period ended August 31, 2015 compared to $0 for the three month period ended August 31, 2014. Cash provided by financing activities was $128,171 for the three month period ended August 31, 2015 versus $237,333 for the three month period ended August 31, 2014. Financing activities consisted of cash received from related parties, promissory convertible notes payable, and notes payable.
OTHER CONSIDERATIONS
There are numerous factors that affect the Company's business and the results of its consolidated operations. Sources of these factors include general economic and business conditions, federal and state regulation of business activities, the level of demand for services, the level and intensity of competition, and our ability to continue to improve our infrastructure, including personnel and systems, to keep pace with our anticipated rapid growth in the development of our business.
RESULTS OF CONDENSED CONSOLIDATED OPERATIONS
THREE MONTHS ENDED AUGUST 31, 2015 VS AUGUST 31, 2014
The Company did not have any revenues for the three months ending August 31, 2015 and August 31, 2014
Total general and administrative expenses for the three months ending August 31, 2015 were $(462,770) compared to $209,643 for the same three month period in 2014. The decrease is primarily due to the lesser operational expense amounts for the period ending August 31, 2015.
The net loss for the three months ending August 31, 2015 amounted to $1,395,648 for a net loss per share of $0.00, vs. a net loss of $676,599 and a net loss per share of $0.00 for the same three month period ending in 2014. The increase was primarily due to increased stock based compensation and general and administrative costs.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
19 |
ITEM 4 CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management team, under the supervision and with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"), as of the last day of the fiscal period covered by this report, August 31, 2015. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of August 31, 2015. Management is working on hiring other responsibilities to add some internal control procedures.
Our principal executive officer and our principal financial officer are responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Management is required to base its assessment of the effectiveness of our internal control over financial reporting on a suitable, recognized control framework, such as the framework developed by the Committee of Sponsoring Organizations ("COSO"). The COSO framework, published in INTERNAL CONTROLINTEGRATED FRAMEWORK, is known as the COSO Report. Our principal executive officer and our principal financial officer have chosen the COSO framework on which to base its assessment. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of August 31, 2015.
There weren't any changes in our internal control over financial reporting that occurred during the period ended August 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Controls are being put in place for daily operations which will allow for controlled cash management and oversite.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Management is aware that there is a lack of segregation of duties at the Company due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management will periodically reevaluate this situation.
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PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
On May 21, 2009, the Company entered into an Agreement for the Exchange of Common Stock (the "Victory Lane Agreement") with Victory Lane Financial Elite, LLC ("Victory Lane") with respect to a real estate lifestyle business known as Victory Lane (the "Victory Lane Business") pursuant to which the Company intended to purchase the Victory Lane Business. Shortly thereafter, a dispute arose between the Company and Victory Lane regarding alleged misrepresentations made by Victory Lane in connection with the Victory Lane Agreement.
In August, 2009, Victory Lane Financial Elite, LLC, Legacy Development, LLC and Patrick Costello filed suit in the Superior Court of Tattnall County, Georgia (Civ. No. 2009-V-381-JW) against the Company, R. Thomas Kidd and various officers and directors of the Company, alleging that the Company was in breach of the Victory Lane Agreement and that the Company and certain of the individual defendants had committed various torts against the plaintiffs and that certain of the individual defendants had violated various fiduciary and other duties owed to the plaintiffs in connection with the Victory Lane Agreement and the handling of the Victory Lane Business (the "VLFE Case"). The plaintiffs sought a declaratory judgment to the effect that the Victory Lane Agreement had not been executed, as well as money damages from the Company and the individual defendants. The Company and Mr. Kidd have answered the Complaint, denying any liability for the plaintiff's claims and have asserted various counterclaims including fraud and other torts. In July 2010 the court dismissed all of the individual defendants, other than R. Thomas Kidd, in response to a motion to dismiss for lack of jurisdiction. The case has since been stayed.
In December, 2009, AHIFO-21, LLC filed a lawsuit in the Superior Court of Tattnall County, Georgia (Civ. No. 2009-V-672-JS) against Victory Lane, LLC, Patrick J. Costello and Stephen Brown (the "Victory Lane Defendants") alleging that the Victory Lane Defendants owe the plaintiff more than $7,740,000 in respect of one or more loans made by the plaintiff to certain Victory Lane Defendants in connection with the Victory Lane Business (the "AHIFO Case"). In February 2010, the Victory Lane Defendants filed a Third Party Complaint against the Company and R. Thomas Kidd, claiming that the Company and Mr. Kidd should be liable for any amounts the Victory Lane Defendants are required to pay to the plaintiff in this case. The Company and Mr. Kidd have answered the Complaint, denying any liability for the plaintiff's claims and Mr. Kidd has asserted various counterclaims including fraud and other torts. The Company and Mr. Kidd filed a motion to dismiss the Third Party Complaint, but the entire case was subsequently stayed.
Because each of the VLFE Case and the AHIFO Case have been stayed and because discovery in those cases is not complete, the Company has determined that the probability of any loss is remote and that the amount of any damages, if any were determined adverse to the Company, would not be reasonably estimable. The Company believes that it has meritorious claims against the opposing parties with respect to the Victory Lane Agreement and that the claims asserted against it are not meritorious. The Company intends to defend itself vigorously
ITEM 1A RISK FACTORS
Not required.
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the interim period ended August 31, 2015.
ITEM 4 MINE SAFETY DISCLOSURE
None.
ITEM 5 OTHER INFORMATION
None.
21 |
ITEM 6 EXHIBITS
Exhibit
No. |
| Document Description |
|
|
|
31.1 | Certification of CEO Pursuant to 18 U.S.C. Section 1350, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of CFO Pursuant to 18 U.S.C. Section 1350, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1* | Certification of CEO Pursuant to 18 U.S.C. Section 1350, Pursuant to Section 906 of the Sarbanes-Oxley act of 2002. | |
32.2* | Certification of CFO Pursuant to 18 U.S.C. Section 1350, Pursuant to Section 906 of the Sarbanes-Oxley act of 2002. | |
101 | Interactive data files pursuant to Rule 405 of Regulation ST. |
______________
* This exhibit shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
22 |
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 15, 2015 | By: | /s/ Andrew Ritchie |
|
| Andrew Ritchie |
| |
| Chief Executive Officer/President |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the undersigned on behalf of the registrant and in the capacities indicated on the 15th day of October 2015.
By: | /s/ Thomas Crompton |
| |
|
| Thomas Crompton |
|
|
| Chief Financial Officer |
|
23
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULES 13A-14 AND 15D-14 OF THE SECURITIES EXCHANGE ACT OF 1934
I, Andrew Ritchie, certify that:
I have reviewed this quarterly report on Form 10-Q of DoMark International, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
1. 2. 3. 4.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the small business issuer's internal control over financial reporting; and
a. b. c. d.
The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
5.
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and | |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. |
October 15, 2015 | By: | /s/ Andrew Ritchie | |
Andrew Ritchie | |||
Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULES 13A-14 AND 15D-14 OF THE SECURITIES EXCHANGE ACT OF 1934
I, Thomas Crompton, certify that:
I have reviewed this quarterly report on Form 10-Q of DoMark International, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
1. 2. 3. 4.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the small business issuer's internal control over financial reporting; and
a. b. c. d.
The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
5.
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and | |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. |
October 15, 2015 | By: | /s/ Thomas Crompton | |
Thomas Crompton | |||
Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of DoMark International, Inc. (the "Company") on Form 10-Q for the period ended August 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Andrew Ritchie, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, That to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
October 15, 2015 | By: | /s/ Andrew Ritchie | |
Andrew Ritchie | |||
Chief Executive Officer | |||
|
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of DoMark International, Inc. (the "Company") on Form 10-Q for the period ended August 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas Crompton, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, That to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
October 15, 2015 | By: | /s/ Thomas Crompton | |
Thomas Crompton | |||
Chief Financial Officer | |||
|
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