<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K
(Mark One)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended July 31, 1996 or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from __________________ to _________________
Commission File Number 33-18218-NY
-----------
DYNAMARK CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3376786
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
56 Dune Road, Atlantic Beach, New York 11509
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 889-3690
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
None
----------------
(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
----- -----
<PAGE>
The voting stock of Dynamark Corporation (consisting of
Common Stock, $.0001 par value) is traded in the over-the-counter market.
However, no trades have been reported by the National Quotation Bureau, Inc.
and any limited trading may not be reflective of the market value for the
Company's voting stock held by non-affiliates. There were 18,000,000 shares of
Common Stock of the Registrant outstanding on October 18, 1996, of which
approximately 3,500,000 were held by non-affiliates.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/
Certain exhibits listed in Item 14 of Part IV have been
incorporated by reference. The index to exhibits appears on page 14.
2
<PAGE>
PART I
Item 1. Business
General
Dynamark Corporation (hereinafter referred to as "the Company") was
organized under the laws of the State of Delaware on August 1, 1986, under the
name of Crack Rehabilitation, Inc. for the purpose of owning and operating drug
rehabilitation centers. In August 1987 the Company changed its name to Dynamark
Corporation after management elected to shift its business purpose to that of
offering product, marketing, business and real estate development, and
financial consulting services, as well as to that of acquiring an operating
business or businesses.
The Company completed a public offering of its securities in August
1988, receiving net proceeds of approximately $557,000. Since that time, the
business purpose of the Company has evolved to that of developing or acquiring
an operating business. To date, the Company has not succeeded in accomplishing
any of its goals. In fact, during this period, only two incidental business
transactions have taken place, both related to participating in other
companies' private placements for bridge loans. In both cases the Company
received some stock from those companies as well as notes evidencing the loans,
and in both cases the participation was not in excess of 10% of the total
private placement. One of these loans has been repaid, while the other is in
default. Neither the Company nor any other private placement participant has
taken any action relating to the defaulted loans, since it is considered to be
in everyone's best interest to provide the defaulting company with time to
arrange for additional financing.
3
<PAGE>
Competition
Management is of the opinion that it will be very difficult, but not
impossible, to accomplish its present goal of acquiring an operating business.
The Company's resources are extremely limited. The funds resulting from its
public offering have been depleted by operating expenses and by business
commitments. The time management can devote to the Company's operations has
been drastically reduced. Additionally, there are numerous persons and firms,
who have greater financial resources, more experienced personnel and a lot more
available time that they can devote to a project, then the Company has or can.
Employees
The Company presently employs one person who is the Company President
and who can devote only a minimum amount of time to the Company's activities.
Item 2. Properties
The Company currently maintains its principal offices at 56 Dune Road,
Atlantic Beach, New York, New York 11509, on a month to month basis with a
monthly rent of $500. The premises are owned by Allan P. Rothstein, President
of the Company. (See "Certain Transactions"). The Company may consider
establishing other permanent offices. However, the present facilities are
adequate for the Company's present operation.
Item 3. Legal Proceedings
There are no material legal proceedings pending to which the Company
is a party or by which any of its property may be subject.
4
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
The Company's Common Stock is traded in the "pink sheet" over-the-counter
market. The Company's Warrants Series A and Series B Warrants expired on March
10, 1992 and are void. The Company's Common Stock is not actively trading and
there are no available bid prices. There is no assurance that any trading
market for the Company's securities will develop.
Dividends
The Company has never paid a dividend on its Common Stock, and it presently
intends to retain any earnings for use in its business. Accordingly, it is
anticipated that dividends will not be paid to the holders of Common Stock in
the foreseeable future.
Approximate Number of Equity Security Holders
As of October 18, 1996, there were 25 holders of record of the Company's
Common Stock. Such number of record owners was determined from the Company's
stockholders' records and does not include beneficial owners of the Company's
Common Stock, which shares are held in the names of various security holders,
dealers and clearing agencies.
5
<PAGE>
Item 6. Selected Financial Data.
The following selected data for the period indicated has been derived
from the financial statements of the Company, a development stage entity. This
information should be read in conjunction with the related financial statements
and notes thereto included elsewhere in this report.
AS OF JULY 31, AND FOR THE PERIODS THEN ENDED
<TABLE>
<CAPTION>
Period from
Inception
(August 1, 1986)
through
1996 1995 1994 1993 1992 July 31, 1996
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues (loss) $ 3,156 $ 3,787 $(47,741) $(48,420) $ 6,314 $ 11,488
Net loss during the
development stage (16,299) (32,636) (120,954) (135,668) (92,518) (669,295)
Net loss per
common share -- -- (.01) (.01) (.01) (.04)
Total assets 61,744 73,510 99,374 170,018 244,558 61,744
Long-term debt 153,961 147,961 141,961 -- -- 153,961
</TABLE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Income reflected in Revenues for fiscal years ended July 31, 1989
through 1996 were derived principally from interest received or accrued from
outstanding loans. Reported interest has declined from $35,024 for fiscal year
ended July 31, 1989 to $3,156 for fiscal year ended July 31, 1996. The
principal reason for this decline is certain outstanding loans have been repaid
during that period and there was a default on one such loan during 1994.
Revenues for fiscal years ended July 31, 1994, 1993 and 1992 reflect
amortization of goodwill and equity in losses of an investment aggregating
$11,062, $9,467 and $11,865, respectively. In addition, $39,760 was reflected
during the year ended July 31, 1994 for a write-down of an impaired loan
6
<PAGE>
in default. In the fiscal year ended July 31, 1993, the Company recorded a
write-down amounting to $52,221 relative to this defaulted loan. There were no
additional write-downs for loan impairment subsequent to the year ended July
31, 1994 since the loan had been fully written-down as of July 31, 1994.
During the year ended July 31, 1996, revenue includes a charge in the
amount of $13 representing a write-down in the Company's investment in common
stock of Phoenix Laser Systems, Inc., a publicly traded company. Shareholders'
equity during the year ended July 31, 1996 decreased by $3,112 resulting from
the reversing of unrealized market holding gains reflected in prior years on
the shares of Phoenix Laser written off during the current year.
Management expects losses to continue, unless the Company is
successful in acquiring or merging with a profitable business operation. In an
attempt to reduce losses, management has agreed to render its services to the
Company without further compensation until there has been a turnaround. The
amount of future losses will depend upon administrative expenses, which
management believes should not exceed $30,000 per year.
Cash and cash equivalents utilized has declined from $19,840 in fiscal
year ended July 31, 1993 to $18,747 in fiscal year ended July 31, 1994, but
increased in fiscal year ended July 31, 1995 to $28,794 and declined to $8,233
in the fiscal year ended July 31, 1996. The decrease in negative cash flow
during the year ended July 31, 1994 from the year ended July 31, 1993 amounted
to $1,093 and resulted principally from decreased costs professional fees and
operating costs. The increase in negative cash flow during the year ended July
31, 1995 from the year ended July 31, 1994 amounted to $10,047 and resulted
from increased cost for professional fees. The decrease in negative cash flow
during the year ended July 31, 1996 from the year ended July 31, 1995 amounted
to $20,561 and resulted principally from decreased cost for professional fees.
7
<PAGE>
Management anticipates that negative cash flows in the immediate
future will not exceed approximately $30,000. Based upon this anticipated
negative cash flow, Management is of the opinion that it has sufficient
liquidity to operate for not less than the next twelve months.
Item 8. Financial Statements.
Reference is made to the Financial Statements which are annexed hereto
immediately following the signature page to this Report.
Item 9. Changes in and Disagreement with Accountants
on Accounting and Financial Disclosure
Not applicable.
Item 10. Directors and Executive Officers.
The directors and executive officers of the Company are as follows:
Name Age Position
- ------------------ --- ---------------------------------
Allan P. Rothstein 38 President, Treasurer and Director
All Directors serve for a term of one year and until their successors
are duly elected and qualified. All officers serve at the discretion of the
Board of Directors.
Allan P. Rothstein has been President and a director of the Company since
its inception in August, 1986. From December, 1985 to the present, Mr.
Rothstein has served as President and Chairman of the Board of Directors of
Brown Wharton & Co., Inc., a financial services firm. From July 1990 to present
Mr. Rothstein has been a securities trader for Fahnstock & Co. From November
1984 to May 1985, Mr. Rothstein was employed at Nash Weiss & Co., a registered
broker-dealer. From May 1982 to December 1985, Mr. Rothstein was a Floor
Trader, Floor Broker and Member of the New York
8
<PAGE>
Futures Exchange. Mr. Rothstein received a B.A. degree from the University of
Pennsylvania in May of 1980. The portion of business time of Mr. Rothstein
devoted to the affairs of the Company varies. However, as a general matter, the
amount of time is generally less than 10% of his business time.
Item 11. Executive Compensation
Allan P. Rothstein, President of the Company, was employed by the
Company under an Employment Agreement ending August 1, 1996. Mr. Rothstein
currently serves as President of the Company under an employment agreement and
receives no compensation. During the fiscal year ended July 31, 1996, Mr.
Rothstein was entitled to a salary of $50,000, which has been waived. Mr.
Rothstein is also entitled, during the term of his employment agreement, to
health insurance benefits, life insurance with premiums not to exceed $2,500
per annum with his wife and children as beneficiaries, the use of a Company
owned or leased vehicle, and reimbursement for expenses which he may incur on
behalf of the Company. Furthermore, if Mr. Rothstein dies at any time during
the term of his employment agreement, the Company is obligated to pay to Mr.
Rothstein's estate or wife, if married, a death benefit of $15,000. Mr.
Rothstein's employment contract has been extended for another year until August
1, 1997 and he has advised the Company orally that he will continue to serve
the Company without payment of salary.
In the past, the Company compensated directors who are not full time
employees of the Company in the amount of $150 per meeting and reimbursed them
for the reasonable expenses incurred by them in connection with the Company's
business. At present, there are no directors who are not full-time employees of
the Company.
9
<PAGE>
Employee Incentive Stock Option Plan
In April, 1987, the Company adopted an Employee Incentive Stock Option
Plan (the "Plan") intended to qualify under the provisions of the Internal
Revenue Code of 1986. Pursuant to the Plan, the Company is authorized to grant
stock options to purchase up to 2,500,000 shares of the Company's Common Stock
to key personnel, including eligible officers, directors, employees and
independent consultants of the Company. Shares that by reason of the expiration
of an option (other than by reason of exercise or payment of cash in lieu of
receiving stock) or which otherwise are no longer subject to purchase pursuant
to an option granted under the Plan may be reoptioned thereunder. Options
granted under the Plan are intended to qualify as "incentive stock options" as
defined in Section 422A of the Internal Revenue Code of 1986, as amended. The
Plan is currently administered by the Board of Directors who have the authority
to determine the options, the number of shares to be covered by each option,
the time at which each option is exercisable, the method of payment, and
certain other terms of the option. No director will participate in any decision
to grant such director an award under the Plan.
Options may be granted for a term not to exceed 10 years (5 years with
respect to a 10% shareholder) and are not transferable or assignable other than
by will or the laws of descent and distribution. An option may be exercised
within twelve months after the death or disability of the optionee, to the
extent the option was then exercisable. The exercise price of all options must
be at least equal to the fair market value of the Common Stock on the date of
grant, or 110% of such fair market value with respect to any optionee who is a
10% shareholder of the Company.
The Plan will terminate on April 7, 1997. The Board of Directors of
the Company may, however, terminate the Plan at any time prior to such date.
Termination of the Plan will not alter or impair, without the consent of the
optionee, any of the rights or obligations and any option theretofore granted
under the Plan. As of the date hereof, no options have been granted under the
Plan.
10
<PAGE>
Item 12. Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth certain information as of November 1,
1993 with respect to the ownership of the Company's Common Stock by each person
known by the Company to own beneficially more than 5% of such Common Stock, by
each officer and director of the Company and by officers and directors as a
group.
Amount and Percent-
age of Beneficial
Ownership (1)
-------------------
Directors, Officers Number of
and 5% Shareholders Shares Percent
- ------------------- --------- -------
Allan P. Rothstein (2) 1,000,000 5.5%
56 Dune Road
Atlantic Beach, New York 11909
Cynthia Rothstein (2) 11,375,000 63.2
311 Links Drive West
Oceanside, New York 11572
Brown Wharton & Co., Inc. (2) 1,000,000 5.5
56 Dune Road
Atlantic Beach, New York 11909
All Directors and Officers
as a Group (1 in number) 1,000,000 5.5
- ---------------
(1) Each officer, director and each 5% shareholder has sole voting and
sole investment power with respect to all shares that he or she
beneficially owns.
(2) Cynthia Rothstein is the mother of Allan P. Rothstein, President of
the Company. Such beneficial ownership does not include shares of
the Company's Common Stock owned by Brown Wharton & Co., Inc., a
company in which Allan P. Rothstein is the President and a principal
shareholder. Mr. Rothstein may be deemed the beneficial owner of all
but a nominal portion of the shares owned by Brown Wharton & Co., Inc.
11
<PAGE>
Item 13. Certain Relationships and Related Transactions
The Company currently maintains its principal offices at 56 Dune Road,
Atlantic Beach, New York 11509, on a month to month basis with rent of $500 per
month. The premises are owned by Allan P. Rothstein, President of the Company.
The Company believes that the amount of monthly rent paid to Mr. Rothstein is
comparable to the amount of rent which would be charged to unaffiliated
companies for the same or similar space.
In February 1991, the Company purchased for $100,000, $97,500
principal amount of 10% Promissory Notes of H-Power Corp., a Delaware
corporation, headquartered in Bloomfield, New Jersey, and 25,000 common shares,
par value $.001 per share of H-Power. H-Power is a developmental stage
enterprise engaged in the development and exploitation of certain fuel cell and
metal hydride technologies which involve alternative energy systems. The
Promissory Notes, originally payable on February 3, 1993, were extended to be
payable on the earlier of August 1, 1994 or the closing of any public offering
by H-Power. However, H-Power failed to make payment when due on August 1, 1994
and consequently is now currently in default for a second time. The Company,
along with other participants, has not taken any action relating to the
defaulted loans, since it is considered to be in all the parties best interest
to provide the defaulting company with time to arrange for additional
financing.
Allan P. Rothstein, director and president of the Company beneficially
owns 300,000 shares of H-Power and the Company owns 25,000 shares; together
with other members of his immediate family, they beneficially own in the
aggregate 1,565,625 common shares, or 29% of the issued and outstanding shares
of H-Power.
12
<PAGE>
PART IV
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
JULY 31, 1996
<PAGE>
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 10-K
(a) 1. Financial Statements:
The following indicated Financial Statements of the Company
are annexed hereto immediately following the signature page to this
Report:
Page
Independent Auditors' Report F-1
Balance Sheets - July 31, 1996 and 1995 F-2
Statements of Operations - years ended
July 31, 1996, 1995, 1994 and for the
period from inception (August 1, 1986)
through July 31, 1996 F-3 - F-4
Statements of Changes in Shareholders'
Equity (Deficiency) - years ended
July 31, 1996, 1995, 1994 and for the
period from inception (August 1, 1986)
through July 31, 1996 F-5
Statements of Cash Flows - years ended
July 31, 1996, 1995, 1994 and for the
period from inception (August 1, 1986)
through July 31, 1996 F-6 - F-7
Notes To Financial Statements F-8 - F-16
2. Exhibits
Incorporated by reference to the Exhibit
Index at the end of this Report.
(b) Reports on Form 8-K
None
<PAGE>
[PUTTERMAN, RUSH & SHAPIRO LLP Letterhead]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Dynamark Corporation
We have audited the accompanying balance sheets of Dynamark
Corporation (a development stage company) as of July 31, 1996 and
1995, and the related statements of operations, changes in share
holders' equity (deficiency) and cash flows for the years ended July
31, 1996, 1995 and 1994 and for the period from inception (August 1,
1986) through July 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial state
ments presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Dynamark Corporation (a development stage company) as of July 31, 1996
and 1995, and the results of its operations and its cash flows for the
years ended July 31, 1996, 1995 and 1994, and for the period from
inception (August 1, 1986) through July 31, 1996, in conformity with
generally accepted accounting principles.
New York, New York
October 18, 1996
F-1
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY - NOTE 1)
BALANCE SHEETS
JULY 31, 1996 AND 1995
ASSETS
1996 1995
---- ----
Current assets:
Cash (Note 3) $ 61,702 $ 69,935
Prepaid income taxes (Notes 2, 10 and 11) 42 450
- -------- --------
Total current assets $ 61,744 $ 70,385
Marketable equity securities available
for sale (Notes 2 and 4) - 3,125
Computer equipment - at cost, less
accumulated depreciation of $13,556
in 1996 and 1995 (Note 2) - -
- -------- --------
$ 61,744 $ 73,510
======== ========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Accrued liabilities and total
current liabilities $ 18,527 $ 16,882
- -------- --------
Due to officer (Note 7) 153,961 147,961
- -------- --------
Commitments (Notes 6 and 8)
Shareholders' deficiency (Note 9):
Preferred stock - par value $.0001:
Authorized - 5,000,000 shares
Issued and outstanding - none
Common stock - par value $.0001:
Authorized - 50,000,000 shares
Issued and outstanding - 18,000,000 shares 1,800 1,800
Additional paid-in capital 556,751 556,751
Deficit accumulated during the development stage (669,295) (652,996)
- -------- --------
(110,744) (94,445)
Unrealized gain to reflect marketable
equity securities available for sale
at market (Notes 2 and 4) - 3,112
- -------- --------
(110,744) (91,333)
- -------- --------
$ 61,744 $ 73,510
======== ========
The accompanying notes are an integral part of these financial
statements.
F-2
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY - NOTE 1)
STATEMENTS OF OPERATIONS
YEARS ENDED JULY 31, 1996, 1995 AND 1994 AND FOR THE PERIOD
FROM INCEPTION (AUGUST 1, 1986) THROUGH JULY 31, 1996
Period
from
inception
(August 1,
1986)
through
Years ended July 31, July 31,
------------------------ 1996
1996 1995 1994 ----------
---- ---- ----
Revenue:
Interest income $ 3,169 $ 3,787 $ 3,081 $ 134,407
Licensing revenue - - - 1,469
Amortization of excess
of fair value of invest-
ment over its book value
at acquisition (Note 2) - - (5,000) (17,500)
Equity in operating losses
of investee (Note 2) - - (6,062) (14,894)
Loss on write down
for impairments of
investments (Note 2) (13) - (39,760) (91,994)
-------- -------- --------- ---------
Total revenue (loss) 3,156 3,787 (47,741) 11,488
-------- -------- --------- ---------
Expenses:
Salaries:
Officer's - - 37,500 282,980
Other - - - 29,820
Automobile rental
and expenses - - - 28,618
Professional fees 9,749 27,049 21,463 160,151
Other, including rent
expense incurred to
officer and director
of $6,000 in 1996, 1995
and 1994 and $60,000 for
the period from inception
to July 31, 1996 9,706 9,374 14,250 166,507
Licensing agreement:
Costs - - - 11,238
Loss on termination - - - 1,469
-------- -------- --------- ---------
Total expenses 19,455 36,423 73,213 680,783
-------- -------- --------- ---------
Net loss during the
development stage $(16,299)$(32,636)$(120,954) $(669,295)
======== ======== ========= =========
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY - NOTE 1)
STATEMENTS OF OPERATIONS
YEARS ENDED JULY 31, 1996, 1995 AND 1994 AND FOR THE PERIOD
FROM INCEPTION (AUGUST 1, 1986) THROUGH JULY 31, 1996
<TABLE>
<CAPTION>
Period
from
inception
(August 1,
1986)
through
Years ended July 31, July 31,
------------------------------------------------------
1996 1995 1994 1996
---- ---- ---- ---------
<S> <C> <C><C> <C>
Loss per common
share (Note 2) $ - $ - $ (.01) $ (.04)
======== ======== ========== =========
Weighted average
number of shares
outstanding (Note 2) 18,000,000 18,000,000 18,000,000 17,653,005
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY - NOTE 1)
STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED JULY 31, 1996, 1995 AND 1994 AND FOR THE PERIOD
FROM INCEPTION (AUGUST 1, 1986) THROUGH JULY 31, 1996
Issuance of common stock
Issuances of common stock pursuant to a public offering (Note 9)
Net loss from inception (August 1, 1986) to July 31, 1993
Balance - July 31, 1993
Net loss for year ended July 31, 1994
Balance - July 31, 1994
Cumulative effect of change in accounting principle -
valuation of marketable equity securities available
for sale at market at beginning of year
Unrealized loss from change in market value of marketable
securities available for sale during year ended July 31, 1995
Net loss for year ended July 31, 1995
Balance - July 31, 1995
Unrealized loss from change in market value of marketable equity
securities available for sale during the year ended July 31, 1996
Net loss for year ended July 31, 1996
Balance - July 31, 1996
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
Unrealized
gain (loss)
Deficit to reflect
$.0001 par value accumulated marketable
common stock Additional during the equity
------------------------------ paid-in development securities
Shares Amount capital stage at market Total
------ ------ ----------- ------------ -------------------
<S> <C> <C>
15,000,000 $1,500 $ - $ - $ - $ 1,500
3,000,000 300 556,751 - - 557,051
- - - (499,406) - (499,406)
---------- ------ -------- --------- ------- ---------
18,000,000 1,800 556,751 (499,406) - 59,145
- - - (120,954) - (120,954)
---------- ------ -------- --------- ------- ---------
18,000,000 1,800 556,751 (620,360) - (61,809)
- - - - 10,925 10,925
- - - - (7,813) (7,813)
- - - (32,636) - (32,636)
---------- ------ -------- --------- ------- ---------
18,000,000 1,800 556,751 (652,996) 3,112 (91,333)
- - - - (3,112) (3,112)
- - - (16,299) - (16,299)
---------- ------ -------- --------- ------- ---------
18,000,000 $1,800 $556,751 $(669,295) $ - $(110,744)
========== ====== =========== ========= ======= =========
</TABLE>
F-5
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY - NOTE 1)
STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31, 1996, 1995 AND 1994 AND FOR THE PERIOD
FROM INCEPTION (AUGUST 1, 1986) THROUGH JULY 31, 1996
Operating activities:
Net loss
Adjustments to reconcile net loss to net
cash required by operating activities:
Equity in operating losses of investee
Amortization of excess of fair value of investment
over its book value at acquisition
Loss on write down for impairments of investments
Depreciation and amortization
Payment of deferred lease costs
Payment of deposits
Repayment in deposits
Changes in operating assets and liabilities:
Increase in accrued interest receivable
(Increase) decrease in prepaid income taxes
Increase (decrease) in accrued liabilities
Increase in due to officer
Other business taxes paid by affiliate on behalf of the Company
Net cash required by operating activities
Investing activities:
Purchase of investments and related advances
Proceeds of repayment of advances related to investments
Acquisition of computer equipment
Net cash required by investing activities
Financing activities:
Proceeds of sale of common stock pursuant to public offering
Payments of notes payable - affiliate
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents - beginning
Cash and cash equivalents - end
Cash paid (received) during the periods for:
Income taxes
Interest
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
<CAPTION>
Period from
inception
Y e a r s e n d e d J u l y 3 1, (August 1,
----------------------------------------- 1986) through
1996 1995 1994 July 31, 1996
---- ---- ---- -------------
<S> <C> <C> <C>
$(16,299) $(32,636) $(120,954) $(669,295)
- - 6,062 14,894
- - 5,000 17,500
13 - 39,760 91,994
- 172 1,535 22,155
- - - (7,200)
- - - (797)
- - - 797
- - - (24,375)
408 10 (460) (42)
1,645 (2,340) 6,810 18,527
6,000 6,000 43,500 153,961
- - - 549
-------- -------- --------- ---------
(8,233) (28,794) (18,747) (381,332)
-------- -------- --------- ---------
- - - (225,013)
- - - 125,000
- - - (13,556)
-------- -------- --------- ---------
- - - (113,569)
-------- -------- --------- ---------
- - - 576,030
- - - (19,427)
-------- -------- --------- ---------
- - - 556,603
-------- -------- --------- ---------
(8,233) (28,794) (18,747) 61,702
69,935 98,729 117,476 -
-------- -------- --------- ---------
$ 61,702 $ 69,935 $ 98,729 $ 61,702
======== ======== ========= =========
$ 384 $ 411 $ 1,013 $ 5,893
======== ======== ========= =========
$ (3,169) $ (3,787) $ (3,081) $(110,032)
======== ======== ========= =========
</TABLE>
F-6
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY - NOTE 1)
STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31, 1996, 1995 AND 1994 AND FOR THE PERIOD
FROM INCEPTION (AUGUST 1, 1986) THROUGH JULY 31, 1996
Supplementary disclosures from noncash
investing and financing activities:
. Deferred registration costs,
organization costs, notes
payable - affiliate and
shareholders' equity:
During the period from inception (August 1, 1986) to July
31, 1987, the Company incurred deferred registration costs of
$10,000 in connection with its then anticipated initial public
offering. These costs were paid for by the Company's affiliate
on behalf of the Company. During the aforementioned period, the
affiliate also paid $90 of the other business taxes on behalf of
the Company. In consideration for the above described disburse
ments of $10,090, the Company issued its noninterest bearing note
payable of $9,990 to this affiliate plus 1,000,000 shares of its
$.0001 common stock for $100.
During the year ended July 31, 1988, the Company's affiliate
paid an additional $9,437 on behalf of the Company, consisting of
$459 of other business taxes and $8,978 of stock registration
costs, for which the Company issued an interest bearing note
payable to this affiliate.
During the period from inception (August 1, 1986) to July
31, 1987, the Company issued 14,000,000 shares of its $.0001
common stock for $1,400, representing organization costs paid by
the person to whom the shares were issued.
. Transfer of accrued liabilities
due to officer for salaries and
rent to long-term liability:
During the year ended July 31, 1995, liabilities aggregating
$141,961 for salary and rent incurred to the president and
director of the Company were transferred to a long-term liability
based upon the officer's intent not to demand payment of these
obligations for a period of at least one year from the then
balance sheet date.
The accompanying notes are an integral part of these financial
statements.
F-7
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996, 1995 AND 1994
Note 1: Development stage company:
The Company has been in the development stage since its
inception on August 1, 1986, when it was formed in the state
of Delaware. The Company has not generated operating reve
nues as of July 31, 1996, and no assurance can be given that
the Company will generate revenues and earnings in the future.
Note 2: Summary of significant
accounting policies:
. Deferred costs:
Stock registration costs incurred by the Company in
connection with its initial public offering, which
amounted to $42,949, were charged to paid-in capital.
. Amortization of excess
of investment made in H
Power Corp. over the book
value of that investment
at the date of acquisition
and related matters:
The excess of the original cost of the investment
in H Power Corp., which consisted of shares of common
stock acquired and interest bearing loans made by the
Company, over the book value of that investment, which
aggregated $100,000, was amortized in a fashion similar
to goodwill over an estimated life of 20 years under
the straight-line method until July 31, 1995, as
further discussed in the next paragraph.
The Company had been recording its investment in H
Power under the equity method, pursuant to Accounting
Principles Board Opinion No. 18, until the year ended
July 31, 1995 when the remaining balance of the invest
ment was written off as a loss due to an impairment of
the investment. From the date of the original
acquisition of the investment until the remainder
balance was written off as impaired, operations
include the following amounts relating to the H Power
investment:
F-8
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996, 1995 AND 1994
Note 2: Summary of significant
accounting policies: (continued)
. Amortization of excess
of investment made in H
Power Corp. over the book
value of that investment
at the date of acquisition
and related matters: (continued)
Amortization of excess of fair
value over its book value $ 17,500
Equity in operating losses 14,894
Loss on write-down for impairment,
including interest income accrued
due to the Company of $24,375 91,981
--------
$124,375
========
. Loss per share of common stock:
Loss per share of common stock is computed as
if all shares had been outstanding as of the beginning
of the year. Stock options and warrants have not been
included in the calculation, since inclusion of such
shares would be anti-dilutive.
. Depreciation:
Depreciation on property and equipment, which
consists of computer equipment, is computed over its
estimated useful life of five years using the straight-
year have been recorded net of a valuation allowance.
F-9
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996, 1995 AND 1994
Note 2: Summary of significant
accounting policies: (continued)
. Newly adopted financial standards:
During the years ended July 31, 1992 and 1991,
the Company elected not to adopt the provisions of SFAS
No. 96, "Accounting for Income Taxes". SFAS No. 96,
which standard was to take effect in 1993, required a
change from the deferred method to the liability method
of accounting for income taxes. During the year ended
July 31, 1993, the Company elected not to adopt SFAS
No. 109, also entitled "Accounting for Income Taxes",
which stan dard superseded SFAS No. 96 and required a
change to the modified asset liability method. During
the year ended July 31, 1994, the Company elected to
change its method of accounting for income taxes to
conform with the new requirements of the Financial
Accounting Standards Board (FASB) No. 109. The
aforementioned standard required that the change be
made effective as of the beginning of the year in which
it is made. This change had no effect on the amount of
income report by the Company during the year ended July
31, 1994.
The Company elected to change its method of
accounting for marketable equity securities, to conform
with the new requirements of the Financial Accounting
Standards Board Statement (FASB) No. 115, for the year
ended July 31, 1995.
The cumulative effect of this adoption
amounted to $10,925 and was reported in shareholders'
deficiency at the beginning of the year ended July 31,
1995.
At July 31, 1995, marketable equity
securities, which were classified as available for sale
securities, were valued at the fair value of the
securities and the unrealized gain on the securities
are reflected in shareholders' deficiency. During the
year ended July 31, 1995, unrealized loss on available
for sale secur ities amounted to $7,813. Furthermore,
cash flows from purchases and sales of available for
sale securities, if any, were to be classified as
investing activities in the statement of cash flows.
Below is a summary of changes in unrealized
gains and losses on holding available for sale
securities:
F-10
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996, 1995 AND 1994
Note 2: Summary of significant
accounting policies: (continued)
. Newly adopted financial
standards: (continued)
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Balance of unrealized gains
at August 1, 1995 and 1994 $3,112 $ -
Cumulative effect of change in
accounting principle to reflect
marketable equity securities
available for sale at their mar-
ket value as of July 31, 1994 - 10,925
Unrealized loss in market
value of available for sale
securities for the years
ended July 31, 1996 and 1995 (3,112) (7,813)
------- -------
Balance of unrealized gains
at July 31, 1996 and 1995 $ - $ 3,112
======= =======
</TABLE>
Note 3: Concentration of credit risk:
The Company maintains an account with a stock brokerage
firm. The account contains a Money Market Fund. The balance
is insured up to $500,000 by the Securities Investor
Protection Corporation.
Note 4: Marketable equity securities
available for sale:
The Company originally held 125,000 publicly-traded
shares of Phoenix Laser Systems, Inc., an entity involved in
laser systems and products, in which the Company had less
than a controlling interest, of original $.0001 par value
common stock valued at the lower of cost or market. At July
31, 1996 and 1995, the Company is holding 12,500 shares of
this entity's publicly-traded $.000001 par value common stock
based on a 10 for 1 reverse stock split. The shares had a
market value of $1 per share on August 17, 1989, when they
were successfully offered and sold to the public. At July
31, 1994, the securities were recorded at cost with a value
F-11
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996, 1995 AND 1994
Note 4: Marketable equity securities
available for sale: (continued)
of $13. For the year ended July 31, 1995, the securities
were recorded at market due to the adoption of FASB No. 115.
At July 31, 1995, the market value of the securities amounted
to $3,125, resulting in an unrealized loss of $7,813
reflected in shareholders' deficiency. During the year ended
July 31, 1996, Phoenix Lazer Systems, Inc. ceased operations,
resulting in the Company reflecting a realized loss amounting
to $13 charged to operations for the year then ended on the
permanent decline in value of these securities.
Note 5: Licensing agreement:
During the year ended July 31, 1991, the Company
entered into a licensing agreement to distribute a video
cassette.
During this period in which the agreement was
operative, the Company incurred licensing costs of approximately
$11,200. During the year ended July 31, 1992, the agreement
was terminated resulting in a loss on termination in the
amount of $1,469.
Note 6: Employment of consultant:
During the year ended July 31, 1992, the Company
entered into an agreement with an entity to render consulting
services to the Company in identifying equity or debt finan
cing and/or potential merger candidates. Under the agree
ment, the Company paid a $5,000 nonrefundable fee to that
entity, which has been included within professional fees
during the year ended July 31, 1992. Pursuant to the agree
ment terms, the Company will be obligated to pay an addi
tional $5,000 upon identification of a potential source of
financing or a merger/acquisition candidate for the Company.
The Company is also obligated to make an additional $15,000
payment upon the successful closing (signed letter of intent)
of either a financing agreement or merger/acquisition for the
Company. In addition, the agreement also provides that the
consulting entity will receive shares of Dynamark
Corporation, which will be restricted pursuant to Rule 144 of
the Securities and Exchange Commission. The agreement speci
fies that it will terminate upon successful identification of
financing or a merger/acquisition or at such time as it is
terminated by one of the parties.
F-12
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996, 1995 AND 1994
Note 6: Employment of
consultant: (continued)
During the year ended July 31, 1992, the Company had
entered into a transaction covered by the consulting agree
ment described in the preceding paragraph, which resulted in
a Letter of Intent qualifying for compensation under that
agreement. During this period, the transaction giving rise
to the Letter of Intent was aborted. The Company incurred
consulting fees of $2,500 to this consultant in full and fair
settlement of the Company's obligation concerning the Letter
of Intent under the consulting agreement.
As of July 31, 1996, there are no currently pending
financings or merger/acquisitions subject to this agreement,
which agreement still remains in effect.
Note 7: Related party
transactions:
. Lease:
The Company leases its principal office
space from the president and director of the Company.
The Company began leasing this space August 1, 1988 on
a month-to- month basis at a rental of $500 per month.
Rent expense incurred to the president and director of
the Company amounts to $6,000 in the years ended July
31, 1995, 1994 and 1993. As of July 31, 1996 and 1995,
approximately $28,000 and $22,000, respectively, of
unpaid rent expense is included in due to officer.
. Due to officer:
At July 31, 1996 and 1995, due to officer
consists of noninterest bearing amounts due to the
president of the Company as follows:
1996 1995
---- ----
Officer's salary (see Note 8) $125,961 $125,961
Rent (see "lease" above) 28,000 22,000
-------- --------
$153,961 $147,961
======== ========
F-13
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996, 1995 AND 1994
Note 8: Commitment:
In August 1996, the Company renewed its contract with
the Company's president for a period of one year, commencing
August 1, 1996, at a minimum annual salary of $50,000 per
year, plus certain guaranteed fringe benefits. These bene
fits include, among other things, medical and life insurance
coverage, use of a Company-owned vehicle and reimbursement of
related expenses, and a death benefit in the amount of
$15,000 payable to the employee's estate or spouse, if the
employee dies during the term of the agreement. The Company
will recognize the cost of providing the aforementioned life
insurance benefit by charging expense at the time the death
benefit is paid. Beginning April 30, 1994 and continuing
until the Company makes a financial turnaround, the Company's
president has agreed to render his services without compen
sation. As of July 31, 1996 and 1995, approximately $126,000
of the president's salary is unpaid and is included in due to
officer.
Note 9: Shareholders' equity:
. Public offering of common
stock and related warrants:
Pursuant to a proposed public offering of
100,000 units, the Company, on July 22, 1988, sold
84,335 units (under a minimum offering) at $6.00 per
unit; consisting of 2,530,050 shares of the Company's
$.0001 par value common stock and warrants to purchase
an additional 10,120,200 shares of the authorized but
unissued $.0001 par value common stock of the Company.
Each unit consisted of 30 shares of common stock and 60
each of Series A and Series B warrants. The warrants
consisted of Series A warrants to purchase 5,060,100
shares of common stock, exercisable from the effective
date of the offering until March 10, 1992, at $.25 per
share; and Series B warrants to purchase 5,060,100
shares of common stock, exercisable from the effective
date of the offering until March 10, 1992, at $.40 per
share. The Company had the right to redeem the
warrants at $.005 each during the exercise period upon
30 days prior written notice.
On August 8, 1988, the remaining 15,665
units of the offering were sold, representing 469,950
shares of
F-14
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996, 1995 AND 1994
Note 9: Shareholders' equity: (continued)
. Public offering of
common stock and
related warrants: (continued)
$.0001 common stock and the related A and B warrants to
purchase additional common shares of 939,900 each, as
described above. The proceeds of the sale amounted to
$93,990.
None of the A or B warrants were ever
exercised or redeemed by the Company through March 10,
1992, when the warrants expired.
. Preferred stock:
The Company has authorized, but unissued,
5,000,000 shares of preferred stock, which may be
issued in one or more series at the discretion of the
board of directors, and which will be entitled to a
preference over common stock as to dividends and
liquidation values.
. Incentive stock
options plan:
In April 1987, the Company adopted an Employee
Incentive Stock Option Plan under which 2,500,000
shares of the common stock of the Company are author
ized for issuance to key personnel, including eligible
officers, directors, employees and independent consult
ants. The Plan will terminate on April 7, 1997, unless
terminated prior to that date by the board of directors
of the Company. Options granted under the Plan are
intended to qualify as incentive stock options, as that
term is defined under the Internal Revenue Code of
1986, as amended. Options may be granted for a term
not to exceed ten years, except for a 10% shareholder
for which the term is five years. The exercise price
must at least be equal to the market value of the
common stock on the date of grant, or 110% of such
value for a 10% shareholder of the Company. At the
balance sheet dates, no options have been granted under
the Plan.
F-15
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996, 1995 AND 1994
Note 10: Deferred taxes:
At July 31, 1996 and 1995, amounts for deferred tax
assets are as follows:
1996 1995
---- ----
Deferred tax asset, net
of valuation allowance
of $203,000 in 1996 and
$194,000 in 1995 $ - $ -
==== ====
A full allowance has been taken for the deferred tax
asset generated from net operating loss carryforwards avail
able at July 31, 1996 and 1995 since it more likely than not
that deferred income tax assets arising from such net oper
ating loss carryforwards, recordable pursuant to FASB No.
109 are not likely to be realized in the foreseeable future.
The valuation allowance increased by $9,000 during the year
ended July 31, 1996.
Note 11: Income taxes:
The Company has net operating loss carryforwards
available to reduce future federal taxable income, amounting
to approximately $413,000, which expire as follows: 2002 -
$400; 2003 - $1,500; 2004 - $91,000; 2005 - $105,300; 2006 -
$74,000; 2007 - $37,000; 2008 - $22,900; 2009 - $32,000;
2010 - $32,600; and 2011 - $16,300.
F-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant certifies that it has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized,
in New York, New York on the 25th day of October, 1996.
DYNAMARK CORPORATION
By: /s/ Allan P. Rothstein
-------------------------------
Allan P. Rothstein, President,
principal executive and financial
officer
Dated: October 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- -------- ----
/s/ Allan P. Rothstein President, Treasurer October 25, 1996
- ----------------------- and Director (principal
Allan P. Rothstein executive and financial
officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1*Restated Certificate of Incorporation (Exhibit 3.1 to
Registration Statement on Form S-18, Registration No.
33-18218-NY (the "Registration Statement No. 33-18218-NY")
3.2*By-laws of the Company, as amended (Exhibit 3.2 to the
Registration Statement No. 33-18218-NY)
4.1* Form of Common Stock Certificate
(Exhibit 4.1 to the Registration Statement No. 33-18218-NY)
10.1*Employment Agreement dated August 25, 1987 between Allan P.
Rothstein and the Registrant (Exhibit 10.1 to the Registration
Statement No. 33-18218-NY)
10.3 Letter Agreement extending Employment Agreement between Allan
P. Rothstein and Registrant.
28.1*1987 Employee Incentive Stock Option Plan
(Exhibit 28.1 to the Registration Statement No. 33-18218-NY)
* Incorporated by reference (pursuant to 17CFR Secs 201.24 and 240.125-32)
to the document referenced in brackets following the description of such
exhibits previously filed with the Commission.
<PAGE>
DYNAMARK CORPORATION
FORM 10-K
For the fiscal year ended July 31, 1996
EXHIBITS
<PAGE>
Exhibit 10.3
DYNAMARK CORPORATION
56 Dune Road
Atlantic Beach, New York 11909
Mr. Allan P. Rothstein
56 Dune Road
Atlantic Beach, New York 11905
Dear Mr. Rothstein:
This shall confirm our agreement to extend your Employment
Agreement dated August 1, 1996 to August 1, 1997 upon the same terms and
conditions as presently in effect. Kindly confirm your agreement by signing
below where indicated.
DYNAMARK CORPORATION
By: /s/ALLAN P. ROTHSTEIN
- -----------------------------
Allan P. Rothstein, Secretary
Agreed to as of the 30th day
of July, 1996
/s/ALLAN P. ROTHSTEIN
- ---------------------
Allan P. Rothstein
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 61,702
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 61,744
<PP&E> 13,556
<DEPRECIATION> 13,556
<TOTAL-ASSETS> 61,744
<CURRENT-LIABILITIES> 18,527
<BONDS> 0
<COMMON> 1,800
0
0
<OTHER-SE> (110,744)
<TOTAL-LIABILITY-AND-EQUITY> 61,744
<SALES> 0
<TOTAL-REVENUES> 3,156
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,455
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (16,299)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,299)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
