The accompanying notes are an integral part of these consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDING FEBRUARY 29, 2016 AND FEBRUARY 28, 2015
(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, 860-20-25 and 860-20-40 to record the sale. The fair value of the transaction was measured at the fair value of the assets less any liabilities sold.
On February 29, 2012, the Company formed a new wholly owned subsidiary, Solarwerks, Inc. in the state of Nevada, for the purposes of entering the business of marketing specialized solar consumer electronics. Solarwerks' current focus is to develop and distribute the SolaPad, a combined cover and charging system for Apple's iPad; and the SolaCase, a combined cover and charging system for all versions of Apple's iPhone. Solarwerks competes in a market that also includes 3D Systems (DDD), Dell (DELL) and Hewlett Packard (HPQ). Solarwerks, Inc. is currently in default with the Nevada Secretary of State.
On June 20, 2012, the Company formed a new wholly-owned subsidiary, MuscleFoot Inc. in the state of Nevada for the purpose of distributing, marketing, and acting as sales agent for the patented foot care system of Barefoot Science. MuscleFoot Inc. is currently in default with the Nevada Secretary of State.
On July 20, 2012, the Company formed a new wholly-owned subsidiary, DoMark Canada Inc. in the province of Ontario for the purpose of supporting the Company's corporate operations based in Toronto, Ontario, Canada.
On February 28, 2013, the Company entered into a Memorandum of Understanding to purchase 44% of Zaktek Ltd. ("Zaktek"). Zaktek's main product is the phonepad+, an Apple Inc. approved tablet device that works with smartphones, including the Apple 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.
NOTE 3 – BASIS OF PRESENTATION
The unaudited consolidated financial statements as of February 29, 2016 and for the nine months ended February 28, 2015 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 February 29, 2016 and the results of operations and cash flows for the nine months ended February 29, 2016 and February 28, 2015. 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 nine month period February 29, 2016 are not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending May 31, 2016. The consolidated balance sheet at February 29, 2016 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, 2015 as included in our annual SEC report on Form 10-K.
NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECENT ACCOUNTNG PRONOUNCEMENTS
In June 2014, The Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-10, "Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation" ("ASU 2014-10"). ASU 2014-10 removes the financial reporting distinction between development stage entities and other reporting entities and eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. As permitted by ASU 2014-10, the Company has elected early application of this standard for the accompanying consolidated financial statements for the Quarter ended February 29, 2016 and year ended May 31, 2015. 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 rate as of February 29, 2016 was $.75 US equaled $1.00 Canadian.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.
The primary management estimates included in these condensed consolidated financial statements are the fair value of Company stock tendered in various 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 February 29, 2016 there weren't any cash or cash equivalents. At February 29, 2016 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 September 30, 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 nine months ending February 29, 2016 and February 28, 2015, diluted common shares outstanding excluded the following dilutive securities as the effect of their inclusion was anti-dilutive:
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 Share Equivalents
|
|
|
15,942,795,445
|
|
|
2,712,570,333
|
|
INTANGIBLE ASSETS
Intangible assets are carried at cost less accumulated amortization. Amortization is recorded over the estimated useful lives of the respective assets.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with ASC Topic No. 360-10-40, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.
STOCK-BASED COMPENSATION
The Company accounts for share based payments in accordance with ASC Topic No. 718, Compensation - Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award. In accordance with ASC 718-10-30-9, Measurement Objective - Fair Value at Grant Date, the Company estimates the fair value of the award using a valuation technique. For stock options, the Company uses the Black-Scholes option pricing model. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as 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 grant-date fair value estimated in accordance with the provisions of ASC 505.
RESEARCH AND DEVELOPMENT
All research and development expenditures are expensed as incurred.
REVENUE RECOGNITION
The Company recognizes revenues when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. In the nine month periods ending February 29, 2016 and February 28, 2015 there weren't any revenues.
NOTE 5 – INVESTMENTS
Investments consist of:
|
|
February 29,
|
|
|
February 28,
|
|
|
|
2016
|
|
|
2015
|
|
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 November 30, 2014 consists of:
July 22, 2013 issuance of 7,500,000 shares of DoMark common stock to Imagic Ltd.
|
|
$
|
697,500
|
|
December 3, 2013 issuance of 8,000,000 shares of DoMark common stock to Meadow Grove Ltd. in exchange for 9% equity interest in Imagic Ltd.
|
|
|
96,005
|
|
Cash payments to or for the benefit of Imagic Ltd.
|
|
|
150,661
|
|
Payments from Foremark Holdings to Imagic Ltd. in exchange for DoMark notes payable to Foremark Holdings
|
|
|
150,000
|
|
Total
|
|
$
|
1,094,166
|
|
Imagic is a privately owned company registered in Gibraltar which owns proprietary product designs for its Digilink and Game Control products. Imagic shares are not quoted or traded on any securities exchange or in any recognized over-the counter market. Imagic is accounted for on the equity method of accounting. The Company consolidates entities that we control. The Company accounts for investments in joint ventures using the equity method of accounting when we exercise significant influence over the venture. If the Company does not exercise significant influence, we account for the investment using the cost method of accounting. Imagic did not have any revenues or expenses for the period ended November 30, 2015.
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 November 30, 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:
|
|
February 29,
|
|
|
May 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Wazzamba S.A.
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Bioharmonics
|
|
|
10,000
|
|
|
|
10,000
|
|
Subtotal
|
|
|
310,000
|
|
|
|
310,000
|
|
Accumulated amortization
|
|
|
(305,418
|
)
|
|
|
(268,338
|
)
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
4,582
|
|
|
$
|
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 2,500,000 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 twelve month extension for the loan repayment, with a December 31, 2016 balloon due date.
NOTE 8 – LOANS PAYALE TO CONSULTANTS AND STOCKHOLDERS
Loans payable to consultants and stockholders consist of;
|
|
February 29,
|
|
|
May 31,
|
|
|
|
2016
|
|
|
2015
|
|
Consultant and stockholder
|
|
$
|
80,796
|
|
|
$
|
90,402
|
|
President of Domark
|
|
|
-
|
|
|
|
47,500
|
|
Non-exec Chairman of Domark
|
|
|
-
|
|
|
|
11,875
|
|
Chairman of BarefoOT Science and affilliate
|
|
|
21,500
|
|
|
|
21,500
|
|
Consultant
|
|
|
16,097
|
|
|
|
16,097
|
|
Consultant
|
|
|
8,600
|
|
|
|
2,554
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
126,993
|
|
|
$
|
189,928
|
|
These loans are informal and do not provide for interest or a stated maturity date.
NOTE 9 – CONVERTIBLE NOTES PAYABLE
At February 29, 2016 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
|
|
|
$
|
26,557
|
(i)
|
|
$
|
0
|
|
|
$
|
26,557
|
|
3/7/14
|
|
|
JSJ Investments, Inc.
|
|
|
|
12
|
%
|
|
10/7/14
|
|
|
|
11,886
|
(g)
|
|
|
0
|
|
|
|
11,886
|
|
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
|
|
|
|
37,830
|
(i)
|
|
|
0
|
|
|
|
37,830
|
|
4/11/14
|
|
|
Tonaquint, Inc
|
|
|
|
12
|
%
|
|
10/11/14
|
|
|
|
39,681
|
(g)
|
|
|
0
|
|
|
|
39,681
|
|
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
|
|
|
|
46,356
|
(g)
|
|
|
0
|
|
|
|
46,356
|
|
5/16/14
|
|
|
KBM Worldwide, Inc
|
|
|
|
8
|
%
|
|
11/14/14
|
|
|
|
11,240
|
(l)
|
|
|
0
|
|
|
|
11,240
|
|
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
|
|
|
|
35,000
|
(a)
|
|
|
0
|
|
|
|
35,000
|
|
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
|
|
7/22/15
|
|
|
LG Capital Inc
|
|
|
|
8
|
%
|
|
1/22/15
|
|
|
|
60,375
|
(a)
|
|
|
7
|
|
|
|
60,368
|
|
7/22/15
|
|
|
JMJ Financial Inc
|
|
|
|
10
|
%
|
|
1/22/15
|
|
|
|
20,000
|
(i)
|
|
|
0
|
|
|
|
20,000
|
|
7/17/15
|
|
|
Iconic Holdings, LLC
|
|
|
|
10
|
%
|
|
1/17/15
|
|
|
|
22,000
|
(g)
|
|
|
0
|
|
|
|
22,000
|
|
7/22/15
|
|
|
Redwood Fund III
|
|
|
|
10
|
%
|
|
1/22/15
|
|
|
|
22,000
|
(g)
|
|
|
0
|
|
|
|
22,000
|
|
7/18/15
|
|
|
Tonaquint, Inc
|
|
|
|
12
|
%
|
|
1/18/15
|
|
|
|
20,000
|
(g)
|
|
|
0
|
|
|
|
20,000
|
|
|
|
|
Totals
|
|
|
|
|
|
|
|
|
|
$
|
759,283
|
|
|
$
|
7
|
|
|
$
|
759,276
|
|
Legend
(a)
|
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.081 or 50% of the average of the three lowest closing prices during the 10 trading days prior to the notice of conversion.
|
(b)
|
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.085 or 60% of the lowest closing price during the 25 trading days prior to the notice of conversion.
|
(c)
|
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.08 or 50% of the lowest closing price during the 10 trading days prior to the notice of conversion.
|
(d)
|
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.0725 or 34% of the lowest closing price during the 20 trading days prior to the notice of conversion.
|
(e)
|
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 55% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion.
|
(f)
|
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to the lower of $0.00929 or 50% of the average of the three lowest trading prices during the 10 trading days prior to the notice of conversion.
|
(g)
|
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 25% of the lowest trading price during the 20 trading days prior to the notice of conversion.
|
(h)
|
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 58% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion.
|
(i)
|
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 40% of the lowest closing price during the 25 trading days prior to the notice of conversion.
|
(j)
|
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 40% of the lowest closing price during the 20 trading days prior to the notice of conversion.
|
(k)
|
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 58% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion.
|
(l)
|
At noteholder's option, the principal amount (and accrued interest) are convertible into shares of DoMark common stock at a conversion price equal to 49% of the average of the two lowest closing prices during the 15 trading days prior to the notice of conversion.
|
NOTE 10 – STOCKHOLDERS' EQUITY
Series A Convertible Preferred Stock
Each share of Series A Convertible Preferred Stock has .67 share voting rights and is convertible into .67 shares of the Company's common stock.
Series B Convertible Preferred Stock
Each share of Series B Convertible Preferred Stock has 1,333 voting rights and is convertible into 1,333 shares of the Company's common stock.
Common Stock Issuances
On January 22, 2016, the Company issued 192,667 shares of common shares on behalf of Iconic Holdings LLC. in satisfaction of $289 unpaid debt.
On January 29, 2016, the Company issued 5,000,000 common shares on behalf of Curran in satisfaction of $25,000 of unpaid debt.
On February 25, 2016, the Company issued 1,526,728 common shares on behalf of LG Capital, Inc. in satisfaction of $1,908 of unpaid debt.
Warrants to Purchase Common Stock
A summary of warrant activity from May 31, 2012 until the nine months ending February 29, 2016 are as follows:
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
Warrants
|
|
|
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 February 29, 2016
|
|
|
850,000
|
|
|
$
|
0.42
|
|
Warrants outstanding at February 29, 2016 consist of:
Date Granted
|
|
|
Number Outstanding
|
|
|
Exercise price
|
|
|
Expiration Date
|
May 25, 2012
|
|
|
100,000
|
|
|
$
|
1.00
|
|
|
May 25, 2016
|
June 12, 2012
|
|
|
150,000
|
|
|
$
|
1.00
|
|
|
June 12, 2016
|
June 26, 2012
|
|
|
100,000
|
|
|
$
|
1.00
|
|
|
June 26, 2016
|
January 1, 2012
|
|
|
500,000
|
|
|
$
|
0.01
|
|
|
January 1, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
850,000
|
|
|
|
|
|
|
|
NOTE 11 – FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILIITY
The Company evaluates all of it financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting ate, with changes in the fair value reported as charges or credits to income. For option-based 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 re-assessed at the end of each reporting period derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.
During the period ended February 29, 2016 the Company entered into $144,375 of 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 ASC-815 the conversion options embedded in the notes payable described in Note 9 require liability classification because they do not contain an explicit limit to the number of shares that could be issued upon settlement.
As defined in FASB ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date.
Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value.
Derivative liability — the Company's derivative liability is classified within Level 3 of the fair value hierarchy.
The Company uses the Black Scholes Option Pricing Model to value its option based derivatives predicated upon the following assumptions: dividend yield of -0-%, volatility of stock price =200%, risk free interest rate varying from 8 to 12% and an expected term equal to the remaining conversion period of the note.
The following table sets forth by level within the fair value hierarchy the Company's financial assets and liabilities that were accounted for at fair value as of February 29, 2016.
Recurring Fair Value Measurements
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability- February 29, 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
3,516,450
|
|
|
|
3,516,450
|
|
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.
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 63% (sixty three per cent) 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 sole board director.
The Company is actively seeking a sale, joint venture, marketing partnership, or any other related venture opportunity with Simba Deals.