10-K 1 b314676_10k.txt ANNUAL REPORT 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, 2001 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 --- --- 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, 2001, 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. 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 shares of 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, than the Company has or can. 3 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. 4 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 26 2001, 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. 5

*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 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. 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 accounted for the investment as available-for sale marketable equity securities. In prior periods the investment was accounted for using the equity method. At July 31, 2001, the H Power Corp. shares had a quoted market price of $6.03, for a total investment of $753,750. On this basis, the Company reported for the fiscal year ended July 31, 2001 other comprehensive income from unrealized gain on securities of $ 497,475, net of income taxes of $256,275. The increase in its investment in H Power Corp. shares was partially offset by a deferred income tax liability of $256,275, comprising of gross deferred tax liabilities from such unrealized gain ($753,750) less the income tax benefit ($128,350) available from net loss carry forwards of approximately $479,000. 6 Revenue consist primarily of interest and dividends related to the Company's investments and interest bearing cash accounts. Interest and dividend revenue was $10,672, $7,473, and $8,421 earned in the fiscal years ended July 31, 2001, 2000, and 1999, respectively. The changes in interest and dividend revenue is due to changes in the principal amount of cash and investment held by the Company during those years, as well as changes in rates of interest. 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 approximately $30,000 per year. 7 Management anticipates that negative cash flow 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 $897,231 and $179,074 at July 31, 2001 and 2000. This increase results from the ability of the Company to account for its investment in H Power, beginning with the fiscal quarter ending October 31, 2000, as available-for sale marketable equity securities. 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 $14,300 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, 2001, our investments consisted of $150,000 invested in a six month U.S. Treasury Bill which is due in February 2002. We do not believe short term fluctuations in interest rates would materially affect the value of this security. The equity investments (fair value of $377,500 at October 19, 2001) are sensitive to equity price changes. For example, if the price per common share increases or decreases 10%, the Company would record and increase or decrease in shareholder's equity (deficiency), net of tax of $24,915. 8 Our investment portfolio does not include derivative instruments. 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 43 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. 9 Item 11. Executive Compensation Allan P. Rothstein, President of the Company, was employed by the Company under an Employment Agreement ending August 1, 2001. During the fiscal year ended July 31, 2001, 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. 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. Item 12. Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information as of October 26, 2001 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

(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. 11 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 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 agreed 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, 2001 was $3.04. 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 1,650,000 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 8,003,125 common shares, or 15% of the issued and outstanding shares of H Power. 12 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 30th day of October, 2001. DYNAMARK CORPORATION By: /s/ Allan P. Rothstein ------------------------------- Allan P. Rothstein, President, principal executive and financial officer Dated: October 30, 2001 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.

13 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 DYNAMARK CORPORATION FORM 10-K For the fiscal year ended July 31, 2001 DYNAMARK CORPORATION (A DEVELOPMENT STAGE COMPANY) FINANCIAL STATEMENTS YEARS ENDED JULY 31, 2001, 2000 AND 1999 AND THE PERIOD AUGUST 1, 1986 (DATE OF INCEPTION) TO JULY 31, 2001 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: Page ---- Independent Auditors' Report F-1 Balance Sheet - July 31, 2001 and 2000 F-2 Statement of Operations and Comprehensive Income (Loss) - years ended July 31, 2001, 2000 and 1999 and the period August 1, 1986 (date of inception) to July 31, 2001 F-3 Statement of Changes in Shareholders' Equity (Deficiency) - years ended July 31, 2001, 2000 and 1999 and the period August 1, 1986 (date of inception) to July 31, 2001 F-4 Statement of Cash Flows - years ended July 31, 2001, 2000 and 1999 and the period August 1, 1986 (date of inception) to July 31, 2001 F-5 - F-6 Notes to Financial Statements F-7 - F-10 2. Exhibits Incorporated by reference to the Exhibit Index at the end of this Report. (b) Reports on Form 8-K None [LETTERHEAD OF FRIEDMAN, ALPREN & GREEN LLP] 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, 2001 and 2000, and the related statements of operations and comprehensive income (loss), changes in shareholders' equity (deficiency) and cash flows for the years ended July 31, 2001, 2000 and 1999 and for the period August 1, 1986 (date of inception) to July 31, 2001. 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 auditing standards generally accepted in the United States of America. 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, 2001 and 2000, and the results of its operations and its cash flows for the years ended July 31, 2001, 2000 and 1999, and for the period August 1, 1986 (date of inception) to July 31, 2001, in conformity with accounting principles generally accepted in the United States of America. /s/ Friedman Alpren & Green LLP September 26, 2001, except for Note 6, as to which the date is October 19, 2001 F-1 DYNAMARK CORPORATION (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET JULY 31, 2001 AND 2000

The accompanying notes are an integral part of these financial statements. F-2 DYNAMARK CORPORATION (A DEVELOPMENT STAGE COMPANY) STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

The accompanying notes are an integral part of these financial statements. F-3 DYNAMARK CORPORATION (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY) YEARS ENDED JULY 31, 2001, 2000 AND 1999 AND THE PERIOD AUGUST 1, 1986 (DATE OF INCEPTION) TO JULY 31, 2001

The accompanying notes are an integral part of these financial statements. F-4 DYNAMARK CORPORATION (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS

(Continued) The accompanying notes are an integral part of these financial statements. F-5 DYNAMARK CORPORATION (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS (Continued)

The accompanying notes are an integral part of these financial statements. F-6 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, 2001, 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. Revenue Recognition Interest income is recognized on the accrual basis. Dividends are recognized on the ex-dividend date. 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. Earnings (Loss) Per Common Share The Company applies Financial Accounting Standards Board ("FASB") Statement 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 and 1999, basic and diluted loss per share was less than $.01. The Company has not issued any dilutive potential common stock since inception. (Continued) F-7 DYNAMARK CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments At July 31, 2001, the Company held a twelve-month U.S. Treasury bill with a face value of $150,000 that matures in February 2002. 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, 2001, the Company also held 125,000 common shares of H Power Corp., which are classified as available-for-sale securities. 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. At the time of sale, any gains or losses are calculated using the specific identification method and are recognized as a component of operating results. 3 - INVESTMENT IN H POWER CORP. Prior to August 1, 2000, 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. 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 exercised significant influence over H Power Corp. and, beginning in the quarter ended October 31, 2000, the Company accounted for the investment as available-for-sale marketable equity securities. The unrealized holding gain on the H Power Corp. shares, which is reflected in other comprehensive income, was $753,750 for the year ended July 31, 2001. At July 31, 2001, the H Power Corp. shares had a quoted market price of $6.03 per share. (Continued) F-8 DYNAMARK CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS 4 - INCOME TAXES The primary components of the Company's deferred tax assets and liabilities and the related valuation allowances are as follows:

At July 31, 2001, the Company has net operating loss carryforwards of approximately $479,000, expiring during the years 2004 to 2021, available to reduce future Federal taxable income. In 2000 and 1999, the Company recorded a valuation allowance fully offsetting the deferred tax asset related to its net operating loss carryforwards. The valuation allowance was based on management's estimates and analysis that it was more likely than not that the related deferred tax assets would not be realized. At July 31, 2001, the Company recorded an accumulated unrealized gain on marketable securities of approximately $750,000, which is presented, net of taxes, in other comprehensive income. The unrealized gain subsequently decreased significantly (see Note 6). Consequently, the Company believes that realization of part of the deferred tax asset was more likely than not and, accordingly, recorded a deferred tax asset of $128,350, at July 31, 2001. (Continued) F-9 DYNAMARK CORPORATION (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS 5 - 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, 2001, 2000 and 1999. At July 31, 2001 and 2000, the balance due to officer consists of noninterest-bearing amounts payable to the president of the Company as follows:

These liabilities have been classified as noncurrent based on the president's intent not to demand payment before August 2002. 6 - SUBSEQUENT EVENT (UNAUDITED) At October 19, 2001, the H Power Corp. common shares had a quoted market value of $3.02 per share. The Company owns 125,000 common shares of H Power Corp. F-10 DYNAMARK CORPORATION (A DEVELOPMENT STAGE COMPANY) QUARTER ENDED JULY 31, 2001 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 ___ day of ______ 2001. DATE: DYNAMARK CORPORATION By: ------------------------------------ ------------------------------------ Allan P. Rothstein President

DYNAMARK CORP 10-K