<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, 2000 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
2
<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 26, 2000, 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 (ss.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.
3
<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 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.
4
<PAGE>
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.
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
5
<PAGE>
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 26, 2000, 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 conjunction with the related financial statements
and notes thereto included elsewhere in this report.
6
<PAGE>
AS OF JULY 31, AND FOR THE PERIODS THEN ENDED
<TABLE>
<CAPTION>
Cumulative
August 1, 1986
(Date of Inception)
2000 1999 1998 1997 1996 to July 31, 2000
-------- -------- -------- -------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Revenues (loss) $ 7,473 $ 8,421 $ 9,584 $163,495 $ 3,156 $227,349
Net Income
(loss) $(22,471) $(18,457) (8,803) 140,573 (16,299) (578,453)
Basic and diluted
earnings (loss)
per common
share * * * .01 * (.03)
Total Assets $179,074 $203,212 201,865 205,222 61,744 179,074
Long-term debt $177,961 $171,961 168,961 159,961 153,961 177,961
</TABLE>
----------------
*Basic and diluted loss per share was less than $.01 during these years.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The Company is a development stage company and has had minimal revenue to
date. The Company is relying on existing resources to fund its continuing
operation. Additional sources of liquidity are expected to be available from the
Company's investment in H Power Corp.'s common shares. During the year ended
July 31, 1995, the Company wrote down the carrying value of this investment to
zero due to H Power Corp.'s continuing losses. On August 10, 2000, H Power Corp.
consummated an initial public offering (IPO). In connection with this IPO, H
Power Corp. authorized a five to one split, which increased the number of the
Company's shares to 125,000. At October 26, 2000, the quoted market value of H
Power Corp.'s shares was $20.1875 per share.
Revenues consist primarily of interest and dividends related to the
Company's investments and interest bearing cash accounts. Interest and dividend
revenue was $7,473, $8,421, $9,584, and $65,995
7
<PAGE>
earned in the fiscal years ended July 31, 2000, 1999, 1998 and 1997
respectively. The decrease in interest and dividends is primarily due to the
decreasing amounts of cash and investments held by the Company during those
years and changes in interest rates. In addition, interest earned in the fiscal
year ended July 31, 1997 included the recovery of approximately $24,000 of
unpaid interest previously written off. Expenses during the same period
consisted primarily of professional fees. After fiscal 1994, the President
agreed to waive salary and benefits due under an employment agreement.
Management expects losses from operation 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.
Management anticipates that negative cash flows from operations will not
exceed approximately $30,000 in the immediate future. 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.
Cash and investments totaled $179,074 and $202,987 at July 31, 2000 and
1999. The decrease in fiscal 2000 was due to its use for Company operations in
the absence of new funding. Cash and investments did not materially change in
fiscal 1999.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk related to changes in interest rates relates
primarily to cash and our investment portfolio. Cash totaling $24,200 was
maintained in a money market fund with a stock brokerage firm and is insured for
up to $500,000 by the Securities Investor Protection Corporation. At July 31,
2000, our investments consisted of $145,592 invested in a six month U.S.
Treasury Bill which is due in November
8
<PAGE>
2000. We do not believe short term fluctuations in interest rates would
materially affect the value of this security.
The equity investments (total fair value of $2,523,438 at October 26, 2000)
are sensitive to equity price changes. For example, if the price per common
share increases or decreases 10%, the Company would record an increase or
decrease in shareholder's equity (deficiency), net of tax, of $166,547.
We did not use derivative instruments in our investment portfolio.
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 42 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.
9
<PAGE>
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, 2000. During the fiscal year
ended July 31, 2000, Mr. Rothstein was entitled to a salary of $50,000, 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 has waived
all compensation under the Employment Agreement and has advised the Company that
he will continue to serve the Company without payment of salary.
Item 12. Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth certain information as of October 26, 2000
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.
10
<PAGE>
Amount and
Percentage of Beneficial
Ownership(1)
---------------------------
Directors, Officers Number of
and 5% Shareholders Shares Percent
------------------- --------- -------
Allan P. Rothstein (1 & 2) 2,000,000 11.0%
Director and Officer
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
(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,
11
<PAGE>
and 125,000 common shares (as adjusted for stock splits), par value $.001 per
share of H Power. H Power was a developmental stage enterprise engaged in the
development and exploitation of certain fuel cell and metal hydride technologies
which involve alternative energy systems. In August 2000, H Power completed an
initial public offering and is currently traded on NASDAQ. National Market. The
shares are subject to a 6 month Lock-Up agreement executed in connection with
the closing of the public offering. Under the agreement, the Company agrees not
to sell or otherwise dispose of any of it shares of H Power for a period of 6
months ending in February 2001. The last reported sale price for shares of H
Power on October 26, 2000 was $20.1875. 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
1,625,000 shares of H Power and the Company owns 125,000 shares; together with
other members of his immediate family, they beneficially own in the aggregate
approximately 8,750,000 common shares, or 18% 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 26th day of October, 2000.
DYNAMARK CORPORATION
By: /s/ Allan P. Rothstein
-------------------------------
Allan P. Rothstein, President,
principal executive and
financial officer
Dated: October 26, 2000
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 October 26, 2000
----------------------- and Director (principal executive
Allan P. Rothstein and financial officer)
</TABLE>
13
<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)
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.
14
<PAGE>
DYNAMARK CORPORATION
FORM 10-K
For the fiscal year ended July 31, 2000
15
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 2000, 1999 AND 1998
AND THE PERIOD AUGUST 1, 1986 (DATE OF INCEPTION)
TO JULY 31, 2000
AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 2000, 1999 AND 1998 AND THE PERIOD AUGUST 1, 1986
(DATE OF INCEPTION) TO JULY 31, 2000
PART IV
<TABLE>
<CAPTION>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 10-K
----------------------------------------------------------------
<S> <C> <C>
(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 Sheet - July 31, 2000 and 1999 F-2
Statement of Operations - years ended July 31, 2000, 1999 and
1998 and the period August 1, 1986
(date of inception) to July 31, 2000 F-3
Statement of Changes in Shareholders' Equity (Deficiency) -
years ended July 31, 2000, 1999 and 1998 and the
period August 1, 1986 (date of inception) to July 31, 2000 F-4
Statement of Cash Flows - years ended July 31, 2000, 1999 and
1998 and the period August 1, 1986
(date of inception) to July 31, 2000 F-5 - F-6
Notes to Financial Statements F-7 - F-12
2. Exhibits
Incorporated by reference to the Exhibit Index at the end of
this Report.
(b) Reports on Form 8-K
None
</TABLE>
<PAGE>
FRIEDMAN 1700 BROADWAY
ALPREN & NEW YORK, NY 10019
GREEN LLP 212-582-1600
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS FAX 212-265-4761
www.nyccpas.com
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, 2000 and 1999, and the related
statements of operations, changes in shareholders' equity (deficiency) and cash
flows for the years ended July 31, 2000, 1999 and 1998 and for the period August
1, 1986 (date of inception) to July 31, 2000. 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
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
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, 2000 and 1999, and the results of its
operations and its cash flows for the years ended July 31, 2000, 1999 and 1998,
and for the period August 1, 1986 (date of inception) to July 31, 2000, in
conformity with generally accepted accounting principles.
/s/ Friedman Alpren & Green LLP
--------------------------------
October 1, 2000, except
for Note 8, as to which
the date is October 26, 2000
F-1
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JULY 31, 2000 AND 1999
ASSETS
------
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Current assets
Cash $ 33,482 $ 202,987
Investments 145,592 -
Prepaid income taxes - 225
--------- ---------
$ 179,074 $ 203,212
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
-------------------------------------------------
Current liabilities
Accrued expenses $ 21,015 $ 28,682
--------- ---------
Due to officer 177,961 171,961
--------- ---------
Commitment - -
Shareholders' equity (deficiency)
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 (578,453) (555,982)
--------- ---------
(19,902) 2,569
--------- ---------
$ 179,074 $ 203,212
========= =========
</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,
2000 1999 1998 2000
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Interest and dividend income $ 7,473 $ 8,421 $ 9,584 $225,880
Licensing revenue - - - 1,469
---------- -------- ------- --------
Total revenues 7,473 8,421 9,584 227,349
---------- -------- ------- --------
Expenses
Salaries - - - 312,800
Automobile rental and expenses - - - 28,618
Professional fees 17,036 16,960 6,599 212,990
Licensing agreement - - - 12,707
Other 12,908 9,918 11,788 211,799
---------- -------- ------- --------
Total expenses 29,944 26,878 18,387 778,914
---------- -------- ------- --------
(22,471) (18,457) (8,803) (551,565)
---------- -------- ------- --------
Losses on investment accounted for under
the equity method - - - (124,388)
Recovery of note receivable - - - 97,500
---------- -------- ------- --------
- - - (26,888)
---------- -------- ------- --------
Net loss $ (22,471) $(18,457) $(8,803) $(578,453)
========== ======== ======= =========
Basic and diluted loss per common
share $ - $ - $ - $ (.03)
========== ======== ======== =========
Weighted average number of shares
outstanding 18,000,000 18,000,000 18,000,000 17,752,146
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED JULY 31, 2000, 1999 AND 1998 AND THE PERIOD
AUGUST 1, 1986 (DATE OF INCEPTION) TO JULY 31, 2000
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
$.0001 Par Value Additional During the
--------------------------- Paid-In Development
Shares Amount Capital Stage Total
---------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
Issuance of common stock 15,000,000 $1,500 $ - $ - $ 1,500
Issuance of common stock pursuant to a public offering 3,000,000 300 556,751 - 557,051
Net loss for the period August 1, 1986 (date of
inception) to July 31, 1997 - - - (528,722) (528,722)
---------- ------ -------- --------- --------
Balance, July 31, 1997 18,000,000 1,800 556,751 (528,722) 29,829
Net loss for the year ended July 31, 1998 - - - (8,803) (8,803)
---------- ------ -------- --------- --------
Balance, July 31, 1998 18,000,000 1,800 556,751 (537,525) 21,026
Net loss for the year ended July 31, 1999 - - - (18,457) (18,457)
---------- ------ -------- --------- --------
Balance, July 31, 1999 18,000,000 1,800 556,751 (555,982) 2,569
Net loss for the year ended July 31, 2000 - - - (22,471) (22,471)
---------- ------ -------- --------- --------
Balance, July 31, 2000 18,000,000 $1,800 $556,751 $(578,453) $(19,902)
========== ====== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<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,
2000 1999 1998 2000
-------- -------- ------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss $(22,471) $(18,457) $(8,803) $(578,453)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities
Losses on investment accounted
for under the equity method - - - 124,388
Recovery of note receivable - - - (97,500)
Depreciation and amortization - - - 22,155
Changes in assets and liabilities
Accrued interest receivable - - 7,734 (24,375)
Prepaid income taxes 225 (210) 380 -
Deferred lease costs - - - (7,200)
Accrued expenses (7,667) 13,804 (554) 21,015
Due to officer 6,000 6,000 6,000 177,961
Other - - - 549
-------- -------- ------- ---------
Net cash provided by (used in)
operating activities (23,913) 1,137 4,757 (361,460)
-------- -------- ------- ---------
</TABLE>
(Continued)
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
Cumulative
August 1,
1986
(Date of
Inception)
Year Ended July 31, To
--------------------------------------------- July 31,
2000 1999 1998 2000
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Cash flows from investing activities
Investments $(145,592) $ - $ - $(245,605)
Collection of note receivable - - 97,500 97,500
Acquisition of computer equipment - - - (13,556)
--------- -------- -------- ---------
Net cash provided by (used in)
investing activities (145,592) - 97,500 (161,661)
--------- -------- -------- ---------
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 (169,505) 1,137 102,257 33,482
Cash, beginning of period 202,987 201,850 99,593 -
--------- -------- -------- ---------
Cash, end of period $ 33,482 $202,987 $201,850 $ 33,482
========= ======== ======== =========
Supplemental cash flow disclosures
Income taxes paid $ 2,097 $ 365 $ 380 $ 9,188
========= ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<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, 2000, and no assurance can be given that it will generate
operating revenues and earnings in the future.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses.
Income Taxes
The Company applies the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using the enacted tax rates in effect for the year in
which those temporary differences are expected to be recovered or settled.
At July 31, 2000, the Company has net operating loss carryforwards of
approximately $444,000, expiring during the years 2004 to 2020, available to
reduce future Federal taxable income. In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", the
Company has recorded a valuation allowance fully offsetting the deferred tax
asset related to its net operating loss carryforwards. The valuation allowance
is based on management's estimates and analysis, which includes tax laws which
may limit the Company's ability to utilize its net operating loss carryforwards.
(Continued)
F-7
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loss Per Common Share
The Company applies SFAS No. 128, "Earnings per Share", which requires dual
presentation of basic and diluted earnings per share ("EPS") for complex capital
structures on the face of the statement of operations. Basic and diluted EPS has
been computed by dividing the loss by the weighted average number of common
shares outstanding for the period. During the years ended July 31, 2000, 1999,
and 1998, basic and diluted loss per share was less than $.01.
Investments
At July 31, 2000, the Company held a six-month U.S. Treasury bill with a
face value of $150,000 that matures in November 2000. This investment is
classified as held-to-maturity and is carried at amortized cost. The fair value
of the investment approximates its carrying value due to its short maturity.
At July 31, 2000, the Company also held 125,000 common shares of H Power
Corp., which were originally accounted for under the equity method. During
fiscal 2001, the Company will classify its investment as available-for-sale
securities (see Note 4). The fair value of the H Power Corp.'s common shares at
July 31, 2000 was not reasonably determinable (see Note 8).
Available-for-sale securities are recorded at fair value. Unrealized
holding gains and losses, net of the related income tax effect, are excluded
from earnings and are reported as a separate component of shareholders' equity.
Dividend and interest income are recognized when earned.
(Continued)
F-8
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Effects of Recently Issued Accounting Pronouncements
In September 1998, the Financial Accounting Standards Board issued SFAS
133, "Accounting for Derivative Instruments and Hedging Activities", which
requires entities to recognize all derivatives in their financial statements as
either assets or liabilities measured at fair value. SFAS 133 also specifies new
methods of accounting for hedging transactions, prescribes the items and
transactions that may be hedged and specifies detailed criteria to be met to
qualify for hedge accounting. SFAS 133, as amended by SFAS 137 and SFAS 138, is
effective for fiscal quarters beginning after June 15, 2000. We currently do not
use derivative instruments as defined by SFAS Nos. 133 and 138. If we continue
to not use these derivative instruments, these statements will have no effect on
our results of operations or our consolidated financial position.
In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 provides interpretive guidance on the recognition,
presentation and disclosures of revenue in the financial statements effective
for all transactions on or after January 1, 2000. The Company does not believe
that the adoption of SAB 101 will have a material effect on the Company's
financial results.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation.
3 - CONCENTRATION OF CREDIT RISK
The Company maintains a money market fund with a stock brokerage firm. The
balance is insured for up to $500,000 by the Securities Investor Protection
Corporation.
4 - INVESTMENT IN H POWER CORP.
The Company accounted for its investment in H Power Corp. using the equity
method because it was part of a group of certain related parties and affiliates
which owned approximately 18 percent of that corporation. During the year ended
July 31, 1995, the Company recognized an other-than-temporary impairment of
value in this investment due to H Power Corp.'s continuing losses and wrote the
carrying value down to zero.
(Continued)
F-9
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
4 - INVESTMENT IN H POWER CORP. (Continued)
On August 10, 2000, H Power Corp. consummated an initial public offering
("IPO"). In July 2000, in connection with the IPO, H Power Corp. authorized a
five-for-one split. In addition, in April 2000, certain parties related to the
Company agreed to resign from H Power Corp.'s Board of Directors and accept
certain restrictions on voting and transferring their shares and seeking
proxies. Consequently, the group of related parties and affiliates no longer
exercises significant influence over H Power Corp. and, beginning in the quarter
ending October 31, 2000, the Company will account for the investment as
available-for-sale marketable equity securities.
Summarized financial information of H Power Corp. at May 31, 2000 and 1999
and for the years then ended are as follows:
Balance Sheet
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Assets
------
Current assets $16,185,372 $ 1,584,717
Plant and equipment - net 1,877,728 1,438,912
Other assets 586,493 448,262
----------- ------------
Total assets $18,649,593 $ 3,471,891
=========== ============
Liabilities and Stockholders' Deficiency
----------------------------------------
Current liabilities $ 2,971,947 $ 3,540,229
Long-term debt 66,765 69,280
Deferred revenue 2,222,222 -
Minority interest 5,000,000 5,000,000
Redeemable preferred stock 15,326,766 15,326,766
Stockholders' deficiency (6,938,107) (20,464,384)
------------ ------------
Total liabilities and stockholders' deficiency $ 18,649,593 $ 3,471,891
============ ============
Revenues $ 3,680,287 $ 1,018,032
============ ============
Net loss $(17,012,406) $ (6,765,760)
============ ============
</TABLE>
(Continued)
F-10
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
5 - CONSULTING AGREEMENT
The Company has an agreement with an entity requiring the 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, 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 will terminate upon successful identification
of financing or a merger/acquisition, or when it is terminated by one of the
parties.
As of July 31, 2000, there are no pending financings or merger/acquisitions
subject to this agreement.
6 - RELATED PARTY TRANSACTIONS
The Company rents its principal office space from its president on a
month-to-month basis at $500 per month. Rent expense incurred was $6,000 for
each of the years ended July 31, 2000, 1999 and 1998.
At July 31, 2000 and 1999, the balance due to officer consists of
noninterest-bearing amounts payable to the president of the Company as follows:
2000 1999
-------- --------
Officer's salary $125,961 $125,961
Rent 52,000 46,000
-------- --------
$177,961 $171,961
======== ========
These liabilities have been classified as noncurrent based on the
president's intent not to demand payment before August 1, 2001.
(Continued)
F-11
<PAGE>
DYNAMARK CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
7 - SUPPLEMENTARY NONCASH INVESTING AND FINANCING ACTIVITIES
During the period 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 plus $90 were paid by the Company's
affiliate on behalf of the Company. The Company issued its noninterest-bearing
note payable of $9,990 to this affiliate and 1,000,000 shares of its $.0001 par
value common stock, with a total par value of $100.
During the year ended July 31, 1988, the Company's affiliate paid an
additional $9,437 on behalf of the Company, for which the Company issued an
interest-bearing note payable.
During the period 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.
8 - SUBSEQUENT EVENT (UNAUDITED)
At October 1 and 26, 2000, the H Power Corp. common shares had a quoted
market value of $32.62 and $20.1875 per share, respectively. The Company owns
125,000 common shares in H Power Corp.
F-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 26th day of October, 2000.
DYNAMARK CORPORATION
By: /s/ Allan P. Rothstein
-------------------------------
Allan P. Rothstein, President
and principal financial officer
Dated: October 26, 2000
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 October 26, 2000
-------------------------------- and Director
Allan P. Rothstein
</TABLE>
