<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, 1997 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 29, 1997, 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.
Both of these loans have been repaid.
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
3
<PAGE>
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.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
4
<PAGE>
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 29, 1997, there were 24 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.
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
5
<PAGE>
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>
Cumulative
August 1, 1986
(Date of
Inception) to
1997 1996 1995 1994 1993 July 31, 1997
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues (loss) $ 163,495 $ 3,156 $ 3,787 $ (47,741) $ (48,420) $ 174,983
Net income
(loss) 140,573 (16,299) (32,636) (120,954) (135,668) (528,722)
Income
(loss) per
common share .01 -- -- (.01) (.01) (.03)
Total assets 205,222 61,744 73,510 99,374 170,018 205,222
Long-term debt 159,961 153,961 147,961 141,961 -- 159,961
</TABLE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Income reflected in revenues for the fiscal year ended July 31, 1997
increased from that reported for the year ended July 31, 1995 by $159,708.
Income reported during the years ended July 31, 1995 through 1997 consisted
primarily of interest received on Company cash balances and the subsequent
recovery of a promissory note, and related accrued interest, which is reflected
in income for the fiscal year ended July 31, 1997. The note and accrued interest
had been written off prior to 1995.
Revenues for fiscal years ended July 31, 1994 and 1993 reflect
amortization of goodwill and equity in losses of an investment aggregating
$11,062 and $9,467, respectively. In addition, $39,760 was reflected during the
year ended July 31, 1994 for a write-down of an impaired loan 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.
6
<PAGE>
During the year ended July 31, 1997, revenue includes recognition of
the recovery of the principal amount of a note previously written off, together
with accrued interest thereon. Shareholders' equity during the year ended July
31, 1997 increased by $140,573, resulting primarily from the recovery of
principal and accrued and unpaid interest on a note previously written off.
Management expects losses to continue however, unless the Company is
successful in acquiring or merging with a profitable business operation. In an
attempt to reduce losses, the president has agreed to render his 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 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, declined to $8,233 in the fiscal
year ended July 31, 1996, and increased to $37,891 in the fiscal year ended July
31, 1997. 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 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 professional fees. The change from a
negative cash flow for the year ended July 31, 1996 of $8,233 to a positive cash
flow of $37,891 for the year ended July 31, 1997 amounted to $46,124 and
resulted principally from the recovery of a promissory note and accrued interest
previously written off.
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.
7
<PAGE>
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 39 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 Fahnestock & 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 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.
8
<PAGE>
Item 11. Executive Compensation
Allan P. Rothstein, President of the Company, was employed by the
Company under an Employment Agreement ending August 1, 1997. Mr. Rothstein
currently serves as President of the Company under an employment agreement and
receives no compensation. During the fiscal year ended July 31, 1997, 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, 1998 and
he has advised the Company orally that he will continue to serve the Company
without payment of salary.
In the past, the Company's policy was to compensate directors who were
not employees of the Company in the amount of $150 per meeting and reimburse
them for the reasonable expenses incurred by them in connection with the
Company's business. At present, there are no directors who are not 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 was 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. No options were ever granted under the
Plan and, in accordance with its terms the Plan terminated on April 7, 1997.
Item 12. Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth certain information as of November 1,
1997 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
10
<PAGE>
- --------------
(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.
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 was in default for a second time. On October 13, 1997 the principal
was collected in full, together with accrued and unpaid interest.
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,
11
<PAGE>
they beneficially own in the aggregate 1,565,625 common shares, or 29% of the
issued and outstanding shares of H Power.
12
<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 12th day of November, 1997.
DYNAMARK CORPORATION
By: /s/ Allan P. Rothstein
---------------------------------
Allan P. Rothstein, President,
principal executive and financial
officer
Dated: November 12, 1997
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Allan P. Rothstein President, Treasurer November 12, 1997
- -------------------------- and Director (principal executive
Allan P. Rothstein and financial officer)
</TABLE>
13
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1997, 1996 AND 1995
AND THE PERIOD AUGUST 1, 1986 (DATE OF INCEPTION)
TO JULY 31, 1997
AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1997, 1996 AND 1995 AND THE PERIOD
AUGUST 1, 1986 (DATE OF INCEPTION) TO JULY 31, 1997
PART IV
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:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-1
Balance Sheet - July 31, 1997 and 1996 F-2
Statement of Operations - years ended July 31, 1997,
1996 and 1995 and the period August 1, 1986
(date of inception) to July 31, 1997 F-3 - F-4
Statement of Changes in Shareholders' Equity (Deficiency) -
years ended July 31, 1997, 1996 and 1995 and the
period August 1, 1986 (date of inception) to July 31, 1997 F-5
Statement of Cash Flows - years ended July 31, 1997,
1996 and 1995 and the period August 1, 1986
(date of inception) to July 31, 1997 F-6 - F-7
Notes to Financial Statements F-8 - F-14
2. Exhibits
Incorporated by reference to the Exhibit Index at the end of
this Report.
(b) Reports on Form 8-K F-15 - F-16
</TABLE>
<PAGE>
[FRIEDMAN ALPREN & GREEN LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF DYNAMARK CORPORATION
We have audited the accompanying balance sheet of DYNAMARK
CORPORATION (a development stage company) as of July 31, 1997 and 1996, and the
related statements of operations, changes in shareholders' equity (deficiency)
and cash flows for the years ended July 31, 1997, 1996 and 1995 and for the
period August 1, 1986 (date of inception) to July 31, 1997. 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
statement 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, 1997 and 1996, and the results of
its operations and its cash flows for the years ended July 31, 1997, 1996 and
1995, and for the period August 1, 1986 (date of inception) to July 31, 1997, in
conformity with generally accepted accounting principles.
October 7, 1997, except for
Note 10, as to which the date is
October 13, 1997
F-1
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JULY 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets
Cash - Note 3 $ 99,593 $ 61,702
Note receivable - Note 10 97,500 --
Accrued interest receivable - Note 10 7,734 --
Prepaid income taxes - Notes 2 and 11 395 42
--------- ---------
Total current assets 205,222 61,744
Computer equipment - at cost, less accumulated
depreciation of $13,556 in 1997 and 1996 - Note 2 -- --
--------- ---------
$ 205,222 $ 61,744
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Accrued expenses $ 15,432 $ 18,527
--------- ---------
Due to officer - Note 7 159,961 153,961
--------- ---------
Commitments - Notes 6 and 8 -- --
Shareholders' equity (deficiency) - Note 9 Preferred stock, $.0001 par value;
5,000,000 shares
authorized, none issued -- --
Common stock, $.0001 par value; 50,000,000 shares
authorized, 18,000,000 shares issued and outstanding 1,800 1,800
Additional paid-in capital 556,751 556,751
Deficit accumulated during the development stage (528,722) (669,295)
--------- ---------
29,829 (110,744)
--------- ---------
$ 205,222 $ 61,744
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
August 1,
1986
(Date of
Inception)
Year Ended July 31, To
-------------------------------------- July 31,
1997 1996 1995 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues
Interest income $ 65,995 $ 3,169 $ 3,787 $ 200,402
Licensing revenue -- -- -- 1,469
Amortization of excess of investment over
net assets acquired - Note 2 -- -- -- (17,500)
Equity in operating losses of investee -
Note 2 -- -- -- (14,894)
Write-downs of investments - Note 2 -- (13) -- (91,994)
Recovery of note receivable written off -
Note 10 97,500 -- -- 97,500
--------- --------- --------- ---------
Total revenues 163,495 3,156 3,787 174,983
--------- --------- --------- ---------
Expenses
Salaries
Officer -- -- -- 282,980
Other -- -- -- 29,820
Automobile rental and expenses -- -- -- 28,618
Professional fees 12,244 9,749 27,049 172,395
Other, including rent expense incurred
to officer of $6,000 in 1997, 1996 and
1995 and $66,000 for the period from
inception to July 31, 1997 10,678 9,706 9,374 177,185
Licensing agreement:
Costs -- -- -- 11,238
Loss on termination -- -- -- 1,469
--------- --------- --------- ---------
Total expenses 22,922 19,455 36,423 703,705
--------- --------- --------- ---------
Net income (loss) $ 140,573 $ (16,299) $ (32,636) $(528,722)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative
August 1,
1986
(Date of
Inception)
Year Ended July 31, To
--------------------------------------- July 31,
1997 1996 1995 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income (loss) per common share - Note 2 $ .01 $ -- $ -- $ (.03)
========== ========== ========== ==========
Weighted average number of shares
outstanding - Note 2 18,000,000 18,000,000 18,000,000 17,684,550
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED JULY 31, 1997, 1996 AND 1995 AND THE PERIOD
AUGUST 1, 1986 (DATE OF INCEPTION) TO JULY 31, 1997
<TABLE>
<CAPTION>
Common Stock
$.0001 Par Value Additional
------------------------- Paid-In
Shares Amount Capital
---------- ---------- ----------
<S> <C> <C> <C>
Issuance of common stock 15,000,000 $ 1,500 $ --
Issuances of common stock pursuant to a public offering - Note 9 3,000,000 300 556,751
Net loss for the period August 1, 1986 (date of inception)
to July 31, 1994 -- -- --
---------- ---------- ----------
Balance, July 31, 1994 18,000,000 1,800 556,751
Cumulative effect of change in accounting principle - valuation
of marketable securities at fair value at beginning of year -- -- --
Decrease in unrealized gain on marketable securities -- -- --
Net loss for year ended July 31, 1995 -- -- --
---------- ---------- ----------
Balance, July 31, 1995 18,000,000 1,800 556,751
Decrease in unrealized gain on marketable securities -- -- --
Net loss for year ended July 31, 1996 -- -- --
---------- ---------- ----------
Balance, July 31, 1996 18,000,000 1,800 556,751
Net income for year ended July 31, 1997 -- -- --
---------- ---------- ----------
Balance, July 31, 1997 18,000,000 $ 1,800 $ 556,751
========== ========== ==========
<CAPTION>
Deficit Unrealized
Accumulated Gain (Loss)
During the on
Development Marketable
Stage Securities Total
---------- ---------- ----------
<S> <C> <C> <C>
Issuance of common stock $ -- $ -- $ 1,500
Issuances of common stock pursuant to a public offering - Note 9 -- -- 557,051
Net loss for the period August 1, 1986 (date of inception)
to July 31, 1994 (620,360) -- (620,360)
---------- ---------- ----------
Balance, July 31, 1994 (620,360) -- (61,809)
Cumulative effect of change in accounting principle - valuation
of marketable securities at fair value at beginning of year -- 10,925 10,925
Decrease in unrealized gain on marketable securities -- (7,813) (7,813)
Net loss for year ended July 31, 1995 (32,636) -- (32,636)
---------- ---------- ----------
Balance, July 31, 1995 (652,996) 3,112 (91,333)
Decrease in unrealized gain on marketable securities -- (3,112) (3,112)
Net loss for year ended July 31, 1996 (16,299) -- (16,299)
---------- ---------- ----------
Balance, July 31, 1996 (669,295) -- (110,744)
Net income for year ended July 31, 1997 140,573 -- 140,573
---------- ---------- ----------
Balance, July 31, 1997 $ (528,722) $ -0- $ 29,829
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
August 1,
1986
(Date of
Inception)
Year Ended July 31, To
--------------------------------------- July 31,
1997 1996 1995 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 140,573 $ (16,299) $ (32,636) $(528,722)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities
Equity in operating losses of investee -- -- -- 14,894
Amortization of excess of investment
over net assets acquired -- -- -- 17,500
Write-down of investments -- 13 -- 91,994
Recovery of note receivable written off (97,500) -- -- (97,500)
Depreciation and amortization -- -- 172 22,155
Changes in assets and liabilities
Accrued interest receivable (7,734) -- -- (32,109)
Prepaid income taxes (353) 408 10 (395)
Deferred lease costs -- -- -- (7,200)
Deposits -- -- -- (797)
Deposits repaid -- -- -- 797
Accrued expenses (3,095) 1,645 (2,340) 15,432
Due to officer 6,000 6,000 6,000 159,961
Other -- -- -- 549
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities 37,891 (8,233) (28,794) (343,441)
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
August 1,
1986
(Date of
Inception)
Year Ended July 31, To
-------------------------------------- July 31,
1997 1996 1995 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash flows from investing activities
Investments and related advances $ -- $ -- $ -- $(225,013)
Proceeds from repayment of advances -- -- -- 125,000
Acquisition of computer equipment -- -- -- (13,556)
--------- --------- --------- ---------
Net cash used in investing activities -- -- -- (113,569)
--------- --------- --------- ---------
Cash flows from financing activities
Proceeds of sale of common stock pursuant
to a public offering -- -- -- 576,030
Payments of notes payable, affiliate -- -- -- (19,427)
--------- --------- --------- ---------
Net cash provided by financing
activities -- -- -- 556,603
--------- --------- --------- ---------
Net increase (decrease) in cash and
cash equivalents 37,891 (8,233) (28,794) 99,593
Cash and cash equivalents, beginning
of period 61,702 69,935 98,729 --
--------- --------- --------- ---------
Cash, end of period $ 99,593 $ 61,702 $ 69,935 $ 99,593
========= ========= ========= =========
Supplemental cash flow disclosures
Income taxes paid $ 453 $ 384 $ 411 $ 6,346
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1 - DEVELOPMENT STAGE COMPANY
The Company, a Delaware corporation, has been in the development stage
since its formation on August 1, 1986. It has not generated operating
revenues as of July 31, 1997, and no assurance can be given that it will
generate operating revenues and earnings in the future.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Stock Registration Costs
Stock registration costs of $42,949 incurred by the Company in
connection with its initial public offering were charged to additional
paid-in capital.
Amortization of Excess of Investment in H Power Corp. over Net Assets
Acquired and Related Matters
The $100,000 excess of the cost of the investment in H Power Corp.,
which consisted of common stock acquired and interest-bearing loans made by
the Company, over net assets acquired, was amortized in a manner similar to
goodwill over an estimated life of 20 years under the straight-line method
until July 31, 1995.
The Company accounted for its investment in H Power Corp. 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 investment
was written off as an impairment loss. From the acquisition date of the
investment until the balance was written off, the following amounts relating
to the investment were included as reductions of revenues:
Amortization of excess of investment over
net assets acquired $ 17,500
Equity in operating losses 14,894
Write-down, including accrued interest receivable,
of $24,375 91,981
---------
$ 124,375
=========
F-8
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 of losses per share, since inclusion
would be anti-dilutive.
Depreciation
Depreciation on computer equipment was computed over its estimated
useful life of five years using the straight-line method.
Deferred Income Taxes
At July 31, 1997 and 1996, deferred income tax assets include the
future benefits of net operating loss carryforwards and temporary
differences resulting from write-downs on an investment, which are
nondeductible for tax purposes. The deferred tax assets in each year have
been reduced by a valuation allowance equal to the total of such assets.
New Financial Accounting Standards
During the year ended July 31, 1994, the Company changed its method of
accounting for income taxes to conform to the requirements of Statement on
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". This change had no effect on the net loss reported by the Company
for the year ended July 31, 1994.
The Company elected to change its method of accounting for marketable
equity securities for the year ended July 31, 1995 to conform to the
requirements of SFAS No. 115. The cumulative effect of this adoption was an
unrealized gain of $10,925, and was reported as a component of shareholders'
deficiency at August 1, 1994.
F-9
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
New Financial Accounting Standards (Continued)
At July 31, 1995, marketable equity securities, which were classified
as available-for-sale, were valued at the fair value of the securities and
the unrealized gain was reflected in shareholders' deficiency.
A summary of changes in unrealized gains and losses on
available-for-sale securities is as follows:
1996 1995
-------- --------
Balance, beginning of year $ 3,112 $ -
Cumulative effect of change in accounting
principle - 10,925
Decrease in unrealized gain (3,112) (7,813)
-------- --------
Balance, end of year $ -0- $ 3,112
======== ========
3 - CONCENTRATION OF CREDIT RISK
The Company maintains a money market fund with a stock brokerage firm.
The balance is insured up to $500,000 by the Securities Investor Protection
Corporation.
4 - MARKETABLE EQUITY SECURITIES
The Company held 125,000 publicly traded shares of Phoenix Laser
Systems, Inc., 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, 1997 and 1996, the Company is holding 12,500 shares of
this entity's $.000001 par value common stock, as a result of a 10 for 1
reverse stock split. The shares had a market value of $1 per share on August
17, 1989, when they were sold to the public. At July 31, 1994, the
securities were recorded at a cost of $13. At August 1, 1994 and July 31,
1995, the securities were recorded at their fair values of $10,938 and
$3,112, respectively, under the provisions of SFAS No. 115, resulting in a
decrease in the unrealized gain of $7,813 for the year ended July 31, 1995.
During the year ended July 31, 1996, Phoenix Laser Systems, Inc. ceased
operations and the Company recognized a realized loss of $13 on the
permanent decline in value of this investment. Accordingly, there was no
remaining unrealized gain at July 31, 1996.
F-10
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
5 - LICENSING AGREEMENT
During the year ended July 31, 1991, the Company entered into a
licensing agreement to distribute a video cassette. For the 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 of $1,469.
6 - CONSULTING AGREEMENT
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 financing and/or potential merger candidates.
Under the agreement, the Company paid a $5,000 nonrefundable fee to that
entity, which was included in professional fees for the year ended July 31,
1992. Pursuant to the agreement terms, the Company will be obligated to pay
an additional $5,000 upon identification of a potential source of financing
or a merger/acquisition candidate. 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. In addition,
the agreement 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 specifies that it will
terminate upon successful identification of financing or a
merger/acquisition, or when it is terminated by one of the parties.
During the year ended July 31, 1992, the Company entered into a
transaction covered by the consulting agreement, which resulted in a letter
of intent qualifying for compensation under the agreement. During that year,
the transaction was aborted. The Company incurred consulting fees of $2,500
to this consultant in settlement of its obligation concerning the letter of
intent.
As of July 31, 1997, there are no currently pending financings or
merger/acquisitions subject to this agreement, which remains in effect.
F-11
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
7 - RELATED PARTY TRANSACTIONS
Rent
The Company rents its principal office space from its president.
Rentals began August 1, 1988 on a month-to-month basis at $500 per month.
Rent expense incurred was $6,000 for the years ended July 31, 1997, 1996 and
1995. As of July 31, 1997 and 1996, $34,000 and $28,000, respectively, of
unpaid rent expense is included in due to officer.
Due to Officer
At July 31, 1997 and 1996, due to officer consists of
noninterest-bearing amounts due to the president of the Company as follows:
1997 1996
-------- --------
Officer's salary (see Note 8) $125,961 $125,961
Rent 34,000 28,000
-------- --------
$159,961 $153,961
======== ========
8 - COMMITMENT
In August 1997, the Company renewed the contract with its president for
a period of one year, commencing August 1, 1997, at a minimum annual salary
of $50,000 a year, plus certain guaranteed fringe benefits. These benefits
include medical and life insurance coverage, use of a Company-owned vehicle
and reimbursement of related expenses, and a death benefit 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
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 president has agreed to provide his services
without compensation. At July 31, 1997 and 1996, approximately $126,000 of
the president's salary for the period prior to April 30, 1994 is unpaid and
is included in due to officer.
F-12
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
9 - COMMON AND PREFERRED STOCK
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 $.0001 common stock and the related A
and B warrants to purchase additional common shares of 939,900 each. The
proceeds of the sale were $93,990.
None of the A or B warrants were exercised or redeemed through March
10, 1992, when the warrants expired.
Preferred Stock
The Company has authorized 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. At July 31, 1997, none of the preferred
stock has been issued.
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 were
authorized for issuance to key personnel, including eligible officers,
directors, employees and independent consultants. The Plan terminated on
April 7, 1997. No options were granted under the Plan.
F-13
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
10 - RECOVERY OF NOTE RECEIVABLE WRITTEN OFF
During the year ended July 31, 1997, the Company collected
approximately $24,000 of interest on a note receivable of $97,500
previously written off. On October 13, 1997, the principal was collected in
full. The recovery is reflected as of July 31, 1997 in the accompanying
financial statements.
11 - INCOME TAXES
The Company has net operating loss carryforwards of approximately
$370,000 available to reduce future Federal taxable income expiring during
the years 2004 to 2011.
A valuation allowance of $149,000 and $203,000 was reflected at July
31, 1997 and 1996, respectively, representing the full amount of the
related deferred tax assets at those dates. The allowance is required as
realization of the deferred tax asset is not assured.
12 - SUPPLEMENTARY NONCASH INVESTING AND FINANCING ACTIVITIES
During the period from August 1, 1986 (date of inception) to July 31,
1987, the Company incurred deferred registration costs of $10,000 in
connection with its initial public offering. These costs and another $90
were paid by the Company's affiliate on behalf of the Company. As
consideration for the disbursements 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.
During the period from August 1, 1986 (date of inception) to July 31,
1987, the Company issued 14,000,000 shares of its $.0001 common stock as
payment for $1,400 of organization costs.
During the year ended July 31, 1995, liabilities of $141,961 for
salary and rent incurred to the president of the Company were reclassified
as a long-term liability based on the officer's intent not to demand
payment of these obligations for a period of at least one year from the
balance sheet date.
F-14
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 31, 1997
DYNAMARK CORPORATION
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 33-18218-NY 13-3376786
__________________ _____________________ _______________________
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
56 Dune Road, Atlantic Beach, New York 11509
________________________________________ ______________
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (516) 889-3630
______________
Item 4: Changes in Registrant's Certifying Accountant
On July 31, 1997, Dynamark Corporation engaged the accounting firm of
Friedman Alpren & Green LLP, Certified Public Accountants, as its independent
public accountants to audit Registrant's financial statements for the fiscal
year ended July 31, 1997. The financial statements for the Registrant's fiscal
year ended July 31, 1996 were audited by the independent public accounting firm
of Putterman, Rush & Shapiro LLP, Certified Public Accountants, who issued an
unqualified certification for the year then ended. Putterman, Rush & Shapiro LLP
merged with Friedman Alpren & Green LLP, effective April 1, 1997, and
consequently Friedman Alpren & Green LLP has become the successor auditor.
A copy of Putterman, Rush & Shapiro LLP's letter to the Securities and
Exchange Commission, dated July 31, 1997, is filed as Exhibit I to this Form
8-K.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dynamark Corporation
(Registrant)
July 31, 1997 By ____________________________
Allan Rothstein,
President
F-15
<PAGE>
[LETTERHEAD OF PUTTERMAN, RUSH & SHAPIRO LLP]
Exhibit I
July 31, 1997
Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We are pleased to inform you that Putterman, Rush & Shapiro LLP, Certified
Public Accountants, were the independent accountants for Dynamark Corporation
for its financial statements for the years ended July 31, 1996 and 1995, upon
which our firm expressed unqualified opinions as certified public accountants.
Putterman, Rush & Shapiro LLP merged with the firm of Friedman Alpren & Green
LLP, Certified Public Accountants, effective April 1, 1997. Friedman Alpren &
Green LLP has been appointed as Dynamark Corporation's independent accountants
for that entity's financial statements for its fiscal year ended July 31, 1997,
as indicated in their Form 8-K under Item 4 as filed by them on July 31, 1997.
Friedman Alpren & Green LLP is our successor and is the surviving entity of our
CPA firm's merger with them.
Very truly yours,
/s/ Putterman, Rush & Shapiro LLP
_________________________________
Putterman, Rush & Shapiro LLP
Certified Public Accountants
F-16
<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, 1997
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, 1997 to August 1, 1998 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 October, 1997
/s/ ALLAN P. ROTHSTEIN
- ----------------------------
Allan P. Rothstein
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 99,593
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 205,222
<PP&E> 13,556
<DEPRECIATION> 13,556
<TOTAL-ASSETS> 205,222
<CURRENT-LIABILITIES> 15,432
<BONDS> 0
0
0
<COMMON> 1,800
<OTHER-SE> 28,029
<TOTAL-LIABILITY-AND-EQUITY> 205,222
<SALES> 0
<TOTAL-REVENUES> 163,495
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 22,922
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 140,573
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140,573
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
