UNITED STATES
COMMISSION AND EXCHANGE COMMISSION
COMMISSION AND EXCHANGE COMMISSION
Washington, D. C. 20549
http://www.Commission.gov
http://www.Commission.gov
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Commission Exchange Act of 1934
Pursuant to Section 13 or 15(d) of the Commission Exchange Act of 1934
For the Period-Ended: February 28, 2011
DMS FLORIDA, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware (State of Incorporation) |
0-27539 (Commission File Number) |
27-4933758 (IRS FEIN) |
2171 Monroe Avenue
Suite 204
Rochester, New York 14618-2432
(Address of Principal Executive Offices)
Suite 204
Rochester, New York 14618-2432
(Address of Principal Executive Offices)
(877) 383-7396
(Registrants Telephone Number)
(Registrants Telephone Number)
(585) 360-2031
(Registrants Telecopier Address)
(Registrants Telecopier Address)
DISTRIBUTION MANAGEMENT SERVICES, INC.
2029 Taft Street
Suite 5
Hollywood, Florida 33020-2724
(Registrants Former Name and Address)
2029 Taft Street
Suite 5
Hollywood, Florida 33020-2724
(Registrants Former Name and Address)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the Registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Commission Act (17 CFR 230.425) | ||
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13a-4(c)) |
ANY INVESTMENT IN OUR COMMISSION REPRESENTS A HIGH DEGREE OF RISK. DO NOT INVEST IN OUR COMMISSION
UNLESS YOU ARE PREPARED TO, AND CAPABLE OF, LOSING YOUR ENTIRE INVESTMENT. ANY STATEMENT OR
REPRESENTATION TO THE CONTRARY BY ANY PERSON IS A CRIMINAL VIOLATION OF U. S. FEDERAL COMMISSION
LAWS. WE ENCOURAGE YOU TO CONSULT WITH A LICENSED INVESTMENT ADVISOR OR OTHER LICENSED LEGAL OR
FINANCIAL PROFESSIONAL PRIOR TO INVESTING IN OUR COMMISSION.
NOTHING IN THIS REPORT SHOULD BE CONSIDERED AN OFFER TO SELL OR AN OFFER TO BUY ANY COMMISSION OF
THE REGISTRANT.
Due to a number of factors beyond our control (as the disclaimer underlying said phrase is
defined in Rule 12b-22 of the Exchange Act), we are unable to submit all of the information
required by the Commission to be filed in this report because we cannot obtain our general and
financial records without unreasonable effort and expense.
The principal factor beyond our control is that our records were placed in a storage facility
under our former senior executive management, which makes it extremely difficult to view or access
all of the information that we require to respond to all of the items in this current report;
particularly, in respect of our accounting information, which we need
to timely and accurately file this report. To that extent, we are relying on the disclaimer more fully described in Rule 12b-21
of the Exchange Act.
SECTION 2 FINANCIAL INFORMATION.
ITEM 2.02. RESULTS OF OPERATION AND FINANCIAL CONDITION.
ITEM 2.02. RESULTS OF OPERATION AND FINANCIAL CONDITION.
Some of the statements we are making in this section of this report, and in certain exhibits
incorporated by reference herein and made a part a hereof, are subjective and written in our favor.
We consider these types of statements to be forward-looking. Consequently, we are claiming
safe harbor for these statements. Please refer to Section 27A of the Commission Act of 1933 (15
U. S. C. 77z-2) and Section 21E of the Commission Exchange Act of 1934 (15 U. S. C. 78u-5) for
additional definitions and information on forward-looking statements and eligibility by any
Registrant for safe harbor.
The forward-looking statements of which we speak to ARE NOT HISTORIC FACTS; rather, these
statements are based upon OPINIONS AND ESTIMATES OF OUR SENIOR EXECUTIVE MANAGEMENT and ARE ONLY
VALID ON THE DATE WE MAKE SUCH STATEMENTS. EVERY FORWARD-LOOKING STATEMENT REFLECTS AN INHERENT
UNCERTAINTY THAT COULD CAUSE THE ACTUAL RESULTS OF ANY SUCH EVENT TO DIFFER MATERIALLY FROM THE
PLANS, PROJECTIONS, OR EXPECTATIONS EXPRESSED OR IMPLIED IN SUCH STATEMENT MADE BY OUR SENIOR
EXECUTIVE MANAGEMENT ON THE DATE ANY SUCH STATEMENT IS OR WAS MADE. WE MAY BE OVERLY OPTIMISTIC IN OUR STATEMENTS TO YOU ABOUT OUR BELIEFS
AND EXPECTATIONS OF ANY PLAN OR EVENT ASSOCIATED WITH THESE FORWARD-LOOKING STATEMENTS. These
forward-looking statements may be identified by words we use, like expect, anticipate,
intend, plan, believe, seek, estimate, contemplate, prospective, attempt,
propose, and similar expressions or terms, any of which imply our use of a forward-looking
statement.
WE ADVISE YOU TO NOT PLACE TOO MUCH INFLUENCE OR RELIANCE ON ANY MATTER WHERE WE USE
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE ONLY GOOD ON THE DATE WE MAKE THEM. WE UNDERTAKE
NO OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS, OR ANY INFORMATION ASSOCIATED WITH THEM,
IN THIS OR IN ANY FUTURE FILING, SCHEDULE, OR REPORT.
2
We are furnishing this report and the accompanying financial information to our
securityholders to inform them of our financial position, which will also inform them of certain
recent developments as to our operations and business.
We suggest that our security holders review our statements of financial condition for the
seven months-ended December 31, 2010. We are making available certain data for comparison for the
same period ended December 31, 2009.
These statements are contained in Section 9, Item 9.01, Financial Statements and Exhibits,
hereof.
The information contained in items 2.02 and 9.01, including any information that we are
incorporating by reference, is being furnished to the Commission. Such information shall not be
deemed filed for purposes of Section 18 of the Commission Exchange Act of 1934 or otherwise
subject to the liabilities of that Commission. The information shall not be deemed incorporated by
reference into any registration statement or other document filed pursuant to the Commission Act of
1933, or the Commission Exchange Act of 1934, whether made before or after the date hereof and
regardless of any general incorporation language in such filings, except to the extent expressly
set forth by specific reference in such a filing.
SECTION 9 FINANCIAL STATEMENTS AND EXHIBITS.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
A. FINANCIAL STATEMENTS.
The following are our unaudited statements of financial condition for the quarter-ended
February 28, 2011. The advice of forward-looking statements presented under Item 2.02 is
incorporated by reference into this Item 9.01.
3
DISTRIBUTION MANAGEMENT SERVICES, INC.
BALANCE SHEET
As of December 31, 2009
(Unaudited)
BALANCE SHEET
As of December 31, 2009
(Unaudited)
ASSETS
CURRENT ASSETS |
||||||||
Cash |
$ | (73.05 | ) | |||||
Accounts receivable, net of doubtful accounts |
170,938.00 | |||||||
Investments |
||||||||
Military Air Parts |
305,000.00 | |||||||
Airbourne Security |
20,005.00 | |||||||
Total Current Assets |
$ | 495,869.94 | ||||||
PROPERTY AND EQUIPMENT |
||||||||
Plant |
71,500.00 | |||||||
Office Equipment |
6,543.00 | |||||||
Reserved for Depreciation, Office Equipment |
(1,113.70 | ) | ||||||
Recycling Center |
16,791.00 | |||||||
Land |
489,353.00 | |||||||
Land, Parcel 2 |
3,993,081.00 | |||||||
Organizational Costs, Chancellor Properties |
12,100.00 | |||||||
Acquisition Costs |
30,000.00 | |||||||
Property and Equipment, net |
4,558,254.30 | |||||||
OTHER ASSETS |
||||||||
Deposits, Cash |
50,000.00 | |||||||
Total Other Assets |
50,000.00 | |||||||
TOTAL ASSETS |
$ | 5,104,124.24 | ||||||
(See Notes Accompanying Unaudited Financial Statements.)
4
DISTRIBUTION MANAGEMENT SERVICES, INC.
BALANCE SHEET
(Continued)
As of December 31, 2009
(Unaudited)
BALANCE SHEET
(Continued)
As of December 31, 2009
(Unaudited)
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES |
||||||||
Back Payroll Taxes |
$ | 51,992.00 | ||||||
Accrued Interest Payable |
7,827.00 | |||||||
Accounts Payable, less for doubtful accounts |
391,847.53 | |||||||
Rent Payable |
43,710.00 | |||||||
Notes Payable |
635,837.70 | |||||||
International Investments |
25,000.00 | |||||||
Federal Withholding, current |
9,218.69 | |||||||
F. I. C. A., current |
6,933.28 | |||||||
Real Estate Taxes Payable |
218,580.09 | |||||||
Total Current Liabilities |
$ | 1,390,746.29 | ||||||
LONG-TERM LIABILITIES |
||||||||
Loan Payable, to banks |
4,445,564.00 | |||||||
Total Long-Term Liabilities |
4,445,564.00 | |||||||
Total Liabilities |
5,835,310.29 | |||||||
STOCKHOLDERS EQUITY |
||||||||
Common Stock; 5,000,000,000 Shares
Authorized, $0.001 par value per share |
8,753.00 | |||||||
Additional Paid-in Capital |
1,987,583.00 | |||||||
Retained Earnings |
(2,674,825.08 | ) | ||||||
Common Earnings |
(53,696.97 | ) | ||||||
Total Stockholders Equity |
(732,186.05 | ) | ||||||
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY |
$ | 5,104,124.24 | ||||||
(See Notes Accompanying Unaudited Financial Statements.)
5
DISTRIBUTION MANAGEMENT SERVICES, INC.
INCOME STATEMENT
December 31, 2009
(Unaudited)
INCOME STATEMENT
December 31, 2009
(Unaudited)
Period-Ended | ||||||||
December 31, 2009 | ||||||||
Income |
||||||||
Miscellaneous Income |
$ | 608.21 | ||||||
Total Income |
608.21 | |||||||
Gross Profit |
$ | 608.21 | ||||||
Operating Expenses |
||||||||
Salaries Office |
3,715.33 | |||||||
Auto Expenses |
1,124.27 | |||||||
Bank Charges |
1,146.76 | |||||||
Consulting Fees |
1,170.00 | |||||||
Legal Fees |
450.00 | |||||||
Lot Maintenance Fees |
6,230.00 | |||||||
Lot Real Estate Taxes |
25,542.00 | |||||||
Office Supplies |
2,750.00 | |||||||
Postage and Shipping |
315.69 | |||||||
Rent |
11,710.00 | |||||||
Payroll Taxes |
284.24 | |||||||
Telephone |
868.89 | |||||||
Total Operating Expenses |
54,305.18 | |||||||
Operating Income (Loss) |
$ | (53,696.97 | ) | |||||
Net Income (Loss) |
$ | (53,696.97 | ) | |||||
(See Notes Accompanying Unaudited Financial Statements.)
6
NOTES TO FINANCIAL STATEMENTS
7 Months Ended December 31, 2009
7 Months Ended December 31, 2009
NOTE 1
NATURE OF OPERATIONS, BASIS OF PRESENTATION, AND DISCONTINUED OPERATIONS
NATURE OF OPERATIONS, BASIS OF PRESENTATION, AND DISCONTINUED OPERATIONS
BASIS OF PRESENTATION
The
accompanying unaudited condensed financial statements have been prepared by the Company
pursuant to the rules and regulations of the U. S. Securities and Exchange Commission (the
Commission) and, in the opinion of management, include
all adjustments (consisting of normal
recurring accruals) necessary for fair presentation of financial position, results of operations and
cash flows for the secured. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Commission. The Company believes
that the disclosures contained herein are adequate to make the information presented not misleading.
The statements of operations for the secured are not necessarily indicative of the results to be
expected for the full year-ended May 31, 2010.
The condensed financial statements have been prepared on a going concern basis, which
contemplated the realization of assets and satisfaction of liabilities in the normal course of
business. Recurring losses from operations and operating cash
constraints are potential factors,
which, among others, may indicate that the Company will be unable to continue as a going concern for
a reasonable period of time. The independent auditors report on the May 31, 2005 financial
statements (the most recent audited report we filed with the Commission stated that the
Companys dependence on outside financing, lack of sufficient working capital, recurring losses from
operations, and the discontinued operations raise substantial doubt about the Companys ability
to continue as a going concern. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
The financial statements do not include adjustments relating to recoverability and
classification of recorded assets amounts, or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern. The Companys
ability to continue as a going concern is dependent upon its ability to generate sufficient cash
flow to finance the movies for which it has rights and meet its obligations on a timely basis and
ultimately attain profitable operations.
NATURE OF OPERATIONS
The Company was organized for the purpose of operating a transfer station for recycling of
construction and demolition materials in Miami, Florida. From the date of incorporation, the Company
was principally engaged in organizational activities, construction of its recycling facility, and
raising capital until approximately May 1999. Accordingly, the Company was considered to be in
the development stage throughout that period.
During May and July 2005, the Company acquired 264 single-family residential building sites
located in Central Florida for the total sum of $4,734,000. The Company financed this acquisition
by Commission a mortgage on the property of approximately $4.7 million. The Company intends to
orderly dispose of such sites.
Losses from operations for the secured were$53,696.97.
7
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis. The Company
has generated minimal revenue in the last three years and has an accumulated deficit of
approximately $2.675 million. Although the Company had revenues and therefore generated cash from
operations, the majority of the revenues are derived from one customer whom the Company had entered
into a contract of sale. However, on April 28, 2006, this customer notified the Company of default
under the contract and is therefore terminating the contract (see Note 8). There could be no
assurances that the Company will continue to recognize similar revenues in the future. The
Companys ability to continue as a going concern is dependent upon its ability to obtain the
necessary financing to meet its obligations and repay its liabilities arising from normal business
operations when they come due, to fund possible future acquisitions, and to generate profitable
operations in the future. Management plans to continue to provide for its capital requirements by
issuing additional equity Commission and debt. The outcome of these matters cannot be predicted at
this time and there are no assurances that if achieved, the Company will have sufficient funds to
execute its business plan or generate positive operating results.
IMPACT OF INFLATION
Although the Registrant has not attempted to calculate the effect of inflation, management
does not believe inflation has had or will have a material effect on its results of operations.
CONCENTRATION OF CREDIT RISKS
The Company is subject to concentrations of credit risk primarily from cash. The Companys
cash and cash equivalents accounts are held at financial institutions and are insured by the
Federal Deposit Insurance Corporation (FDIC) up to $100,000. During the secured, the Company
has not reached bank balances exceeding the FDIC insurance limit. However, when and if it reaches
bank balances exceeding the FDIC insurance limit and to reduce its risk associated with the failure
of such financial institutions, the Company periodically evaluates the credit quality of the
financial institutions in which it holds deposits.
REVENUE CONCENTRATION
For the secured, one customer accounted for 99% of the Companys revenues.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash, accounts payable and accrued expenses, note payable, and
convertible debenture approximate their fair value due to their short-term maturities.
LAND RESERVE
The Company recorded a land reserve calculated at cost of $489,353 on certain disputed parcels
of lots which the Company claims as being fraudulently conveyed to third parties that participated
during the closing and financing of the acquisition of the land held for sale. Accordingly, during
the secured, the Company recorded an impairment on assets of $489,353.
PREPAID INTEREST
Prepaid interest reflects the cost of parcels of lots conveyed to the mortgagor and certain
third parties that participated during the closing and financing of the acquisition of certain
parcels of lots located in
8
Central Florida. The prepaid interest is being amortized over the term
of the respective mortgages obtained from the acquisition of such parcels of lots. In connection
with the purchase of 264 lots in July
2005, the Company recorded a prepaid interest of $605,119 to be amortized over 24 months. During
the secured, we did not record an interest expense in the accompanying statement of operations.
LAND HELD FOR SALE
Land held for sale at August 31, 2005 is recorded at cost, which consist of $4,700,000
mortgage and an initial deposit made by a general contractor of approximately $451,000 adjusted for
certain closing costs, prepaid homeowners association (HOA) fees and prepaid interest. During the
secured, the Companys land held for sale net of land reserve of $489,353 amounted to $3,923,081.
INCOME TAXES
Income taxes are accounted for in accordance with SFAS No. 109, Accounting for Income Taxes.
SFAS No. 109 requires the recognition of deferred tax assets and liabilities to reflect the future
tax consequences of events that have been recognized in the Companys financial statements or tax
returns. Measurement of the deferred items is based on enacted tax laws. In the event the future
consequences of differences between financial reporting bases and tax bases of the Companys assets
and liabilities result in a deferred tax asset, SFAS No. 109 requires an evaluation of the
probability of being able to realize the future benefits indicated by such assets. A valuation
allowance related to a deferred tax asset is recorded when it is more likely than not that some or
the entire deferred tax asset will not be realized.
SEGMENT REPORTING
The Companys chief operating decision-maker evaluates the performance of the Company based
upon revenues and expenses by functional areas as disclosed in the Companys statements of
operations.
BASIC AND DILUTED LOSS PER SHARE
Basic loss per share is calculated by dividing income available to stockholders by the
weighted-average number of common shares outstanding during each period. Diluted loss per share is
computed using the weighted average number of common and dilutive common share equivalents
outstanding during the period. There are no outstanding shares issuable pursuant to common shares
equivalents at December 31, 2009.
USE OF ESTIMATES
The preparation of financial statements in accordance with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the
reporting periods. Significant estimates made by management include, but are not limited to, the
useful life of property and equipment and whether the value attributed to the movie scripts is
impaired. Actual results will differ from these estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets for impairment whenever circumstances and situations
change such that there is an indication that the carrying amounts may not be recovered. In such
circumstances, the Company will estimate the future cash flows expected to result from the use of
the asset and its eventual disposition. Future cash flows are the future cash inflows expected to
be generated by an asset less the future outflows expected to be necessary to obtain those inflows.
If the sum of the
9
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, the Company will recognize an impairment loss to adjust to
the fair value of the asset.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with maturities of three
months or less when purchased.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2009, the FASB issued a new accounting standard related to subsequent events, which
provides guidance on events that occur after the balance sheet date but prior to the issuance of
the financial statements. The new accounting standard distinguishes events requiring recognition in
the financial statements and those that may require disclosure in the financial statements.
Furthermore, the new accounting standard requires disclosure of the date through which subsequent
events were evaluated. The new accounting standard is effective for interim and annual periods
after June 15, 2009. We adopted the new accounting standard for the quarter ended June 30, 2009,
and have evaluated subsequent events through February 19, 2010.
In June 2009, the FASB issued a new accounting standard which provides guidance related to the
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles a replacement of a previously issued standard. The new accounting standard stipulates
the FASB Accounting Standards Codification is the source of authoritative U.S. GAAP recognized by
the FASB to be applied by nongovernmental entities. The new accounting standard is effective for
financial statements issued for interim and annual periods ending after September 15, 2009. The
implementation of this standard during the quarter ended September 30, 2009 did not have a material
impact on our statements of operations or financial position.
In May 2008, the FASB issued a new accounting standard which provides guidance relating to
accounting for convertible debt instruments that may be settled in cash upon conversion (including
partial cash settlement). This new standard requires recognition of both the liability and equity
components of convertible debt instruments with cash settlement features. The debt component is
required to be recognized at the fair value of a similar instrument that does not have an
associated equity component. The equity component is recognized as the difference between the
proceeds from the issuance of the note and the fair value of the liability. The standard also
requires an accretion of the resulting debt discount over the expected life of the debt.
Retrospective application to all periods presented is required and a cumulative-effect adjustment
is recognized as of the beginning of the first period presented. This standard was effective for us
in the first quarter of fiscal year 2010. The adoption of this standard did not have a material
impact on our financial statements.
In June 2008, the FASB issued a new accounting standard which provides guidance relating to
determining whether an instrument (or embedded feature) is indexed to an entitys own stock and is
effective for financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. This standard specifies that a contract that would
otherwise meet the definition of a derivative but is both (a) indexed to our own stock and (b)
classified in stockholders equity in the statement of financial position would not be considered a
derivative financial instrument. The standard provides a new two-step model to be applied in
determining whether a financial instrument or an embedded feature is indexed to an issuers own
stock and thus able to qualify for the standards scope exception.
We adopted this new standard effective April 1, 2009. The adoption of the standards
requirements can affect the accounting for warrants or convertible debt that contain provisions
that protect holders from a decline in the stock price (or down-round protection). For example,
warrants with such provisions will
10
no longer be recorded in equity. Down-round protection provisions reduce the exercise price of
a warrant or convertible instrument if a company either issues equity shares for a price that is
lower than the exercise price of those instruments or issues new warrants or convertible
instruments that have a lower exercise price.
In April 2009, the FASB issued an amendment to an existing standard which provides guidance
relating to interim disclosures about fair value of financial instruments. This new standard
requires the disclosure of the carrying amount and the fair value of all financial instruments for
interim reporting periods and annual financial statements of publicly traded companies (even if the
financial instrument is not recognized in the balance sheet), including the methods and significant
assumptions used to estimate the fair values and any changes in such methods and assumptions. This
new standard is effective for interim reporting periods ending after June 15, 2009. We adopted this
pronouncement during the quarter ended June 30, 2009 without material impact to our financial
statements.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task
Force), the American Institute of Certified Public Accountants, and the Securities and Exchange
Commission did not or are not believed by management to have a material impact on the Companys
present or future consolidated financial statements.
PROPRIETY INTEREST IN MOVIE RIGHTS
In May 2003, the Company acquired the rights to two (2) movie scripts which are recorded at
the trading value of the shares issued in consideration thereof. The scripts were acquired from two
individuals who had contracted with the Company to produce the film, including the use of certain
equipment to produce these films.
PROPERTY AND EQUIPMENT HELD FOR SALE
Pursuant to a settlement agreement with Delta Dade Recycling Corp. (DD), the Company
received certain equipment with a carrying value of $70,000, which is included in its equipment
held for sale at December 31, 2009. The Company intends to dispose or lease the property and
equipment.
NOTE 3
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS
The Company is leasing its office space from a company owned by our chief executive officer
for approximately $9,000 during the secured. The Company does not owe any amount to such related
party at December 31, 2009.
Through the years, funds have been advanced to the Company by Mr. Leo Greenfield (the
President) and or affiliates in which he has an interest. The interest bearing balances have been
presented as loans payables to related parties in the accompanying Balance Sheet. During the seven
month period-ended ended December 31, 2009 approximately $201,000 ($100,000 in stock and $101,000 in
cash) has been repaid on these advances.
During the
period ended August 31, 2003, the President agreed not to receive any compensation
or collect any rent for the space occupied by the Company at his personal office. During the period
ended December 31, 2009, the value of his compensation and the rent was recorded at fair market
value as contributions to additional paid in capital.
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NOTE 4
DEBENTURE AND NOTE PAYABLE
DEBENTURE AND NOTE PAYABLE
We issued a debenture and note payable that was outstanding at August 31, 2005. The terms of
the transaction are as follows:
The $20,000 debenture was issued to an unrelated party, bearing interest at 6% per annum,
payable at the Companys option at any time or convertible through April 2002 at the holders
option in 100,000 shares of the Companys common stock. The convertible debenture is payable on
demand and is unsecured. The debenture is no longer convertible. On August 31, 2005, accrued
interest in connection with this debenture amounted to $7,826.
We issued a $47,000 note payable to an unrelated party, bearing interest at 10%, through
February 2005 and 18% thereafter, payable in February 2005, Commission by the Companys equipment
for sale and certain real estate property located in Central Florida which is owned by an affiliate
controlled by the Companys chief executive officer. While the note is past due, the note holder
has not notified company of its default. On May 31, 2010, accrued interest in connection with this
note payable amounted to $15,832 and is included in accrued expenses.
NOTE 5
MORTGAGE PAYABLE
MORTGAGE PAYABLE
The Company partly secured the financing of the land held for sale it acquired in May 2005
with a mortgage of $1,000,000, bearing interest at 12% per annum. The Company will pay regular
monthly payments of all accrued unpaid interest due beginning June 1, 2005. The entire unpaid
principal and accrued interest are payable on June 1, 2008. This mortgage may be partially prepaid
or in full upon payment of a prepayment fee of 3% of the amount of the principal prepaid. This
mortgage is secured by certain real estates owned by the Company located in Central Florida.
Additionally, the Company shall pay for the release of an individual lot of $25,000 toward the
principal amount plus a $500 release fee upon sale of such lots. The Company intends to orderly
dispose of such sites.
During July 2005, the Company Secured the acquisition of single-family residential building
sites located in Central Florida Secured by a mortgage of $3.7 million bearing interest at 12% per
annum. The Company will pay regular monthly payments of all accrued unpaid interest due beginning
September 1, 2005. The entire unpaid principal and accrued interest are payable on August 1, 2007.
This mortgage may be partially prepaid or in full upon payment of a prepayment fee of 5% of the
amount of the principal prepaid plus an exit fee of 2% of the original balance of the mortgage.
This mortgage is secured by certain real estates owned by the Company located in Central Florida.
Additionally, the Company shall pay for the release of an individual lot of $25,000 toward the
principal amount upon sale of such lots. The Company intends to orderly dispose of such sites.
During the secured, the Company paid a total of $225,000 towards the principal balances of
these mortgages for the release of sold lots. As of December 31, 2009, the total balance of these
mortgages payable was $4,445,564.
NOTE 6
LITIGATION
LITIGATION
The purchaser of the recycling center claims that the Company and its chief executive officer
owe them approximately $25,000 pursuant to the sale agreement. The Company counterclaims the
recovery of the recycling center or the receipt of the balance due under the initial sale contract
of $450,000. The Company has provided for a full valuation on the receivable of $450,000 due from
the purchaser. Management cannot predict the outcome of such litigation at this time but it
believes that it will not have a significant impact on its financial statements.
12
The Company is a party to the following legal proceedings:
A. The action was instituted on July 20, 2005, against Eric P. Stein, City First Mortgage, MSJ
Investors, LLC and Eric P. Stein Trustee of the Poinciana Trust Agreement, and arose as result of
the fraudulent conduct of the Defendants in falsely attaching to certain Deed descriptions of lots
conveying 30 lots owned by the Company to Eric P. Stein Trustee of the Poinciana Trust Agreement,
MSJ Investors, LLC and Eric. P. Stein.
The Company is seeking recovery of the lots as well as damages and is further asserting that
the false actions by the mortgagor lender employees in conveying the valuable lots to the benefit of
the mortgagor constituted a bonus to the lender which has caused the mortgage by City First to be
usurious and therefore subject to the provisions of Fla.Stat. 687.071 or in the alternative subject
to a violation of Fla.Stat. 687.04, which provides for an award of damages of double the interest
charge which would approximate two million dollars. The litigation is presently ongoing.
B. A lawsuit pending in the Circuit Court of the 11th Judicial Circuit, in and for Miami-Dade
County, Florida, Case No. 05-3063 CA 01 5, wherein the company is a Defendant/Counter-plaintiff and
its President is a Cross-plaintiff.
The Counterclaim and Cross-claim seek recovery of the recycling center or payment of $450,000,
the balance due since the Company has received only $1,050,000 of the sale price of $1,500,000.
The
original contract of sale provided for recovery of the property in the event of default of
payment by the purchaser. Pursuant to the agreement the Company has recorded the Deed which was
placed in escrow as security and is now the owner of the property subject to the final adjudication
of the matter by the Court.
C. A
lawsuit instituted by the Company and its President in the Circuit Court of the 11th Judicial
Circuit, in and for Miami-Dade County, Florida, Case No. 05-17984 CA for abuse of process, breach of
contract and conspiracy to defraud as against Karen Thomas
Christensen Trust; Quality Affordable
Construction, LLC, Southwest Management Affiliates, Inc., Gerry Christensen, William Moon and Wynn
Westmoreland, resulting from the filing by The Karen Thomas Christensen Trust, Quality Affordable
Construction, LLC and Southwest Management Affiliates, Inc. of Case No. 2005 CA 2390, in Polk
County, Florida, seeking to falsely impose upon the Company payment of
interest paid by them which
accrued prior to the time the Company was assigned the purchase contract of the 266 lots in
Poinciana, Florida, in consideration of the Company obtaining financing for purchase of the lots.
The
company fulfilled its obligations and provided the financing and it now seeks damages
against the Defendants for abuse of process by the Defendants.
D. A
lawsuit instituted by Quality Affordable Construction, LLC, Southwest Management Affiliates,
Inc. and Karen Thomas Christensen Trust against us, on July 6, 2005 in the Circuit Court of the 10th
Judicial Circuit in and for Polk County, Florida for the repayment of its $85,000 initial deposit on
certain lots located in Polk County, Florida. The initial deposit is
included in the other liability
in the accompanying financial statement. Management contends that
this amount is not immediately due
but will be repaid as a percentage of the return on the sale of the land held for sale. On August
22, 2006, the Company was released from further action and has been
dismissed from this lawsuit
with prejudice.
E.
Distribution Management Services, Inc., a Florida Corporation and Leo Greenfield vs. City First
Mortgage, a Florida Corporation; Eric Stein, ESQ; Eric Stein, PA, a Professional Association; Eric
P. Stein Trustee of the Poinciana Trust Agreement U/A/D May 6, 2005; MSJ Investors, LLC, a Florida
Limited liability Company; Howard Podolsky; BJJS Investment, LLC; Scheck Alpha, LP; Gary M.
Mars Revocable Trust; Ariella V. Mars; Quality Affordable
Constructions, LLC, a Florida Limited
Liability Company; Southwest Management Affiliates, Inc., a Nevada Corporation; and Karen Thomas
Christensen
13
Trust
Cases No. 05-14663 CA 22, 05-24653 CA 22 and 06-16126 CA 11 (now 22), Miami-Dade
County, Florida.
F. The
Company filed a complaint against Defendant City First Mortgage, Howard Podolsky, Eric Stein
and MSJ Investors for violation of the Florida Criminal Usury Statute by exceeding 45% interest per
annum by transferring certain parcel of lots to themselves and the fraudulent conveyance of
additional lots during the closing and acquisition of certain land in Polk County, Florida through
a mortgage that we have obtained from City First Mortgage.
Additionally, we filed a complaint against
City First Mortgage for breach of contract for failure and refusal to conform to the provisions of
the mortgage. We also filed a complaint against City First Mortgage, Eric Stein, Eric Stein, PA,
Stein Trustee, MSJ Investor, Howard Podolsky, BJJS Investment, Scheck Alpha, Gary Mars
Revocable Trust and Ariella Mars for conspiracy to defraud us from the
wrongful conveyance of certain
parcel of lots in Polk County, Florida. We plan to vigorously continue to endeavor our position to
seek damages that was caused by these violations.
G. The
Company filed a complaint against Quality Affordable Constructions, LLC, a Florida Limited
Liability Company; Southwest Management Affiliates, Inc., a Nevada Corporation; and Karen Thomas
Christensen Trust for wrongful filing of a Notice of Lis Pendens and was recorded on the Polk County
lots in June 2005. On August 22, 2006, we were released from further action and have been
dismissed from this lawsuit with prejudice.
H. The
Company and Leo Greenfield filed a lawsuit vs. Gerald J. Houlihan, Thomas J. Northcutt and
Kayelynne Northcutt-Florida Bar No. 186866 Miami-Dade County, Florida.
The
Company filed a complaint for wrongfully and maliciously use of the legal processes of the
Court to garnish and freeze our bank accounts on or about December 19, 2005 against the defendants.
The Court, upon Motion made by us dissolved the wrongful Writ of Garnishment and ordered that our
bank accounts be released from the Writ of Garnishment. We plan to
vigorously continue to endeavor
our position to seek damages that was caused by this violation.
I. The
Company filed a suit filed in June 2004 in the Circuit Court, in and for Miami-Dade County,
Florida, Case No.04-13256 CA 20, Distribution Management Services,
Inc. v. Sun Recycling, LLC,
alleging wrongful possession, unlawful entry and detention and seeking possession of the property,
damages and attorneys fees.
J. A suit
was filed in February 2004 in the Circuit Court, in and for Miami-Dade County, Florida,
Case No. 04-3063-CA015, Southern Waste Systems, Ltd. v. Distribution Management Services, Inc., for
payment of recycling related fees allegedly due SWS which are being held by DMS. On May 19, 2004, a
hearing was held before a special master seeking a temporary restraining order against
these individuals so that DMS can have access to and continue the
business at the recycling center.
The court deferred any ruling and the entire matter before the court will be heard by the special
master on July 26, 2004 with a final ruling expected soon thereafter. The assignment of the
operators permit to DMS by DERM is currently pending. There are no assurances given that DMS will
prevail in the litigation.
K. A lawsuit was instituted on October 3, 2005 by Newgate Atlantic Holdings, Inc. against the
Company for specific preference of the sale of two lots located in Polk County, Florida for
$25,000. The lawsuit is pending in the Circuit Court of the 10th Judicial Circuit in and for Polk
County, Florida. The Company asserts that the lots were not specified timely by the purchaser, and
accordingly, the Company is not obligated to sell such lots at the specified price. Should an
adverse judgment be entered against the Company, it would recognize a loss of approximately
$10,000. The Company believes that this lawsuit is without merit and that it will not result in
losses material to it.
L. On April 8, 2010, one of our principal shareholders, Christopher Cardillo, filed an action in
the Superior Court of New jersey, Camden Vicinage, against the Company, Chancellor Development
14
Properties, Inc., a Florida corporation, our President, Leo Greenfield, our Vice-President, Barbara
Greenfield, our Corporate Secretary and Director, Maria Elena Lopez de Mendoza, and the Executive
Advisor to the Companys Chairman of the Board, Randolph S. Hudson. The action seeks damages
related to the Companys alleged default under a real estate agreement and alleging fraud against
certain of the Companys offices.
On May 13, 2010, the Plaintiff was awarded a judgment-by-default against the defendants. The
Company and the defendants, respectively, are considering their options and remedies available at
law in order to appropriately respond to the Complaint and the subsequent default judgment.
On June 10, 2010, the Plaintiff motioned the Circuit Court in the Seventh Judicial Circuit in
and for Putnam County, Florida to enter the New Jersey judgment against the defendant in Putnam
County, Florida. The Florida Court subsequently entered said judgment, although without a
sister-state proceeding, against all of the defendants.
NOTE 7
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS
On or about October 5, 2010, our Board of Directors unanimously resolved to employ two new
senior executive officers. Randolph S. Hudson was elected and appointed to serve as our
Co-President and Chief Executive Officer and Michael P. Grande was elected and appointed to serve
as our Co-President and Chief Operating Officer.
On or about October 5, 2010, our Board of Directors unanimously resolved to issue 9,000,000
shares to each of Randolph S. Hudson and Michael P. Grande or to their respective assigns, in
consideration of a sign-on incentive to become employed by the Company.
On or about October 25, 2010, our Board of Directors nominated and appointed Shotzie Doran to
serve as our Senior Vice-President and Director of Communications, Dean M. Denton to serve as our
Senior Vice-President, Acting Chief Administrative Officer, and Acting Corporate Secretary, Ben
Morgan to serve as our Vice-President of Construction and Development, Kenneth Brown to serve as
our Vive-President of Facilities Management, and Sherry Chaffin to serve as our Senior
Vice-President and Director of Real Estate.
On October 5, 2010, the Company relocated its principal executive offices to 2171 Monroe
Avenue, Suite 204, Rochester, New York.
15
DISTRIBUTION MANAGEMENT SERVICES, INC.
BALANCE SHEET
As of December 31, 2010
(Unaudited)
BALANCE SHEET
As of December 31, 2010
(Unaudited)
ASSETS
CURRENT ASSETS |
||||||||
Cash, on-hand and in banks |
$ | 1,456.94 | ||||||
Accounts receivable, net of doubtful accounts |
85,888.00 | |||||||
Investments |
||||||||
Military Air Parts |
305,000.00 | |||||||
Airbourne Security |
20,005.00 | |||||||
Total Current Assets |
$ | 412,349.00 | ||||||
PROPERTY AND EQUIPMENT |
||||||||
Plant |
71,500.00 | |||||||
Office Equipment |
6,543.00 | |||||||
Reserved for Depreciation, Office Equipment |
(1,113.70 | ) | ||||||
Recycling Center |
16,791.00 | |||||||
Acquisition Costs |
12,786.00 | |||||||
Property and Equipment, net |
106,506.30 | |||||||
OTHER ASSETS |
||||||||
Subsidiary, gross of partners |
2,028,328.00 | |||||||
Deposits, Cash |
50,000.00 | |||||||
Total Other Assets |
2,078,328.00 | |||||||
TOTAL ASSETS |
$ | 2,597,183.30 | ||||||
(See Notes Accompanying Unaudited Financial Statements.)
16
DISTRIBUTION MANAGEMENT SERVICES, INC.
BALANCE SHEET
(Continued)
As of December 31, 2010
(Unaudited)
BALANCE SHEET
(Continued)
As of December 31, 2010
(Unaudited)
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES |
||||||||
Back Payroll Taxes |
$ | 51,992.00 | ||||||
Accrued Interest Payable |
7,827.00 | |||||||
Accounts Payable, less for doubtful accounts |
307,206.12 | |||||||
Salaries due to Officers, accruing |
48,749.94 | |||||||
Loans from Officers |
55,000.00 | |||||||
Notes Payable |
660,837.70 | |||||||
International Investments |
25,000.00 | |||||||
Judgments, gross awards |
7,657,387.75 | |||||||
Real Estate Taxes Payable |
218,580.09 | |||||||
Total Current Liabilities |
||||||||
Total Liabilities |
$ | 9,032,580.60 | ||||||
STOCKHOLDERS EQUITY |
||||||||
Common
Stock; 5,000,000,000 Shares
Authorized, $0.001 par value per share |
31,204.13 | |||||||
Additional Paid-in Capital |
(3,764,157.12 | ) | ||||||
Retained Earnings |
(2,674,825.08 | ) | ||||||
Common Earnings |
(27,619.23 | ) | ||||||
Total Stockholders Equity |
(6,435,397.30 | ) | ||||||
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY |
$ | 2,597,183.30 | ||||||
(See Notes Accompanying Unaudited Financial Statements.)
17
DISTRIBUTION MANAGEMENT SERVICES, INC.
INCOME STATEMENT
December 31, 2010
(Unaudited)
INCOME STATEMENT
December 31, 2010
(Unaudited)
Period-Ended | ||||||||
December 31, 2009 | ||||||||
Revenue |
||||||||
Income from Operations |
50,000.00 | |||||||
Total Income |
50,000.00 | |||||||
Gross Profit |
$ | 50,000.00 | ||||||
Operating Expenses |
||||||||
Salaries to Due to Officers, accrued |
48,749.94 | |||||||
Auto Expenses |
4,567.00 | |||||||
Bank Charges |
300.00 | |||||||
Legal Fees |
3,700.00 | |||||||
Public Relations |
1,485.00 | |||||||
Stock Transfer Agent |
4,000.00 | |||||||
Office Supplies |
5,285.69 | |||||||
Postage and Shipping |
3,907.45 | |||||||
Rent |
4,200.00 | |||||||
Telephone |
1,424.15 | |||||||
Total Operating Expenses |
77,619.23 | |||||||
Operating Income (Loss) |
$ | (27,619.23 | ) | |||||
Net Income (Loss) |
$ | (27,619.23 | ) | |||||
(See Notes Accompanying Unaudited Financial Statements.)
18
NOTE 1
NATURE OF OPERATIONS, BASIS OF PRESENTATION, AND DISCONTINUED OPERATIONS
NATURE OF OPERATIONS, BASIS OF PRESENTATION, AND DISCONTINUED OPERATIONS
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared by the Company
pursuant to the rules and regulations of the U. S. Securities and Exchange Commission (the
Commission) and, in the opinion of management, include all adjustments (consisting of normal
recurring accruals) necessary for fair presentation of financial position, results of operations
and cash flows for the secured. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Commission. The Company believes
that the disclosures contained herein are adequate to make the information presented not
misleading. The statements of operations for the secured are not necessarily indicative of the
results to be expected for the full year-ended May 31, 2011.
The condensed financial statements have been prepared on a going concern basis, which
contemplated the realization of assets and satisfaction of liabilities in the normal course of
business. Recurring losses from operations and operating cash constraints are potential factors,
which, among others, may indicate that the Company will be unable to continue as a going concern
for a reasonable period of time. The independent auditors report on the May 31, 2005 financial
statements (the most recent audited report we filed with the Commission stated that the Companys
dependence on outside financing, lack of sufficient working capital, recurring losses from
operations, and the discontinued operations raise substantial doubt about the Companys ability to
continue as a going concern. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
The financial statements do not include adjustments relating to recoverability and
classification of recorded assets amounts, or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern. The Companys
ability to continue as a going concern is dependent upon its ability to generate sufficient cash
flow to finance the movies for which it has rights and meet its obligations on a timely basis and
ultimately attain profitable operations.
NATURE OF OPERATIONS
The Company was organized for the purpose of operating a transfer station for recycling of
construction and demolition materials in Miami, Florida. From the date of incorporation, the
Company was principally engaged in organizational activities, construction of its recycling
facility, and raising capital until approximately May 1999. Accordingly, the Company was
considered to be in the development stage throughout that period.
From May 31, 2010, the Company has been operating through its principal subsidiary, Chancellor
Properties Building, Ltd., a British Columbia (Canada) corporation.
During May and July 2005, the Company acquired 264 single-family residential building sites
located in Central Florida for the total sum of $4,734,000. The Company financed this acquisition
by Commission a mortgage on the property of approximately $4.7 million. The Company intends to
orderly dispose of such sites.
On or about November 24, 2010, a final order of foreclosure was awarded against us in the
Circuit Court of Florida; whereby, we were dispossessed of our 264 single-family lots in Poinciana,
Florida. As
19
the result of this dispossession, we incurred direct losses against from our real estate operations
in the amount of $7,657,387.75.
Losses from operations for the period-ended were$26,619.23
.
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis. The Company
has generated minimal revenue in the last three years and has an accumulated deficit of
approximately $2.675 million. Although the Company had revenues and therefore generated cash from
operations, the majority of the revenues are derived from one customer whom the Company had entered
into a contract of sale. However, on April 28, 2006, this customer notified the Company of default
under the contract and is therefore terminating the contract (see Note 8). There could be no
assurances that the Company will continue to recognize similar revenues in the future. The
Companys ability to continue as a going concern is dependent upon its ability to obtain the
necessary financing to meet its obligations and repay its liabilities arising from normal business
operations when they come due, to fund possible future acquisitions, and to generate profitable
operations in the future. Management plans to continue to provide for its capital requirements by
issuing additional equity Commission and debt. The outcome of these matters cannot be predicted at
this time and there are no assurances that if achieved, the Company will have sufficient funds to
execute its business plan or generate positive operating results.
IMPACT OF INFLATION
Although the Registrant has not attempted to calculate the effect of inflation, management
does not believe inflation has had or will have a material effect on its results of operations.
CONCENTRATION OF CREDIT RISKS
The Company is subject to concentrations of credit risk primarily from cash. The Companys
cash and cash equivalents accounts are held at financial institutions and are insured by the
Federal Deposit Insurance Corporation (FDIC) up to $100,000. During the secured, the Company
has not reached bank balances exceeding the FDIC insurance limit. However, when and if it reaches
bank balances exceeding the FDIC insurance limit and to reduce its risk associated with the failure
of such financial institutions, the Company periodically evaluates the credit quality of the
financial institutions in which it holds deposits.
REVENUE CONCENTRATION
For the secured, one customer accounted for 99% of the Companys revenues.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash, accounts payable and accrued expenses, note payable, and
convertible debenture approximate their fair value due to their short-term maturities.
LAND RESERVE
The Company recorded a land reserve calculated at cost of $489,353 on certain disputed parcels
of lots which the Company claims as being fraudulently conveyed to third parties that participated
during the
20
closing and financing of the acquisition of the land held for sale. Accordingly, during the
secured, the Company recorded an impairment on assets of $489,353.
PREPAID INTEREST
Prepaid interest reflects the cost of parcels of lots conveyed to the mortgagor and certain
third parties that participated during the closing and financing of the acquisition of certain
parcels of lots located in Central Florida. The prepaid interest is being amortized over the term
of the respective mortgages obtained from the acquisition of such parcels of lots. In connection
with the purchase of 264 lots in July 2005, the Company recorded a prepaid interest of $605,119 to
be amortized over 24 months. During the secured, we did not record an interest expense in the
accompanying statement of operations.
LAND HELD FOR SALE
Land held for sale at August 31, 2005 is recorded at cost, which consist of $4,700,000
mortgage and an initial deposit made by a general contractor of approximately $451,000 adjusted for
certain closing costs, prepaid homeowners association (HOA) fees and prepaid interest. During the
secured, the Companys land held for sale net of land reserve of $489,353 amounted to $3,923,081.
INCOME TAXES
Income taxes are accounted for in accordance with SFAS No. 109, Accounting for Income Taxes.
SFAS No. 109 requires the recognition of deferred tax assets and liabilities to reflect the future
tax consequences of events that have been recognized in the Companys financial statements or tax
returns. Measurement of the deferred items is based on enacted tax laws. In the event the future
consequences of differences between financial reporting bases and tax bases of the Companys assets
and liabilities result in a deferred tax asset, SFAS No. 109 requires an evaluation of the
probability of being able to realize the future benefits indicated by such assets. A valuation
allowance related to a deferred tax asset is recorded when it is more likely than not that some or
the entire deferred tax asset will not be realized.
SEGMENT REPORTING
The Companys chief operating decision-maker evaluates the performance of the Company based
upon revenues and expenses by functional areas as disclosed in the Companys statements of
operations.
BASIC AND DILUTED LOSS PER SHARE
Basic loss per share is calculated by dividing income available to stockholders by the
weighted-average number of common shares outstanding during each period. Diluted loss per share is
computed using the weighted average number of common and dilutive common share equivalents
outstanding during the period. There are no outstanding shares issuable pursuant to common shares
equivalents at December 31, 2009.
USE OF ESTIMATES
The preparation of financial statements in accordance with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the
reporting periods. Significant estimates made by management include, but are not limited to, the
useful life of property and equipment and whether the value attributed to the movie scripts is
impaired. Actual results will differ from these estimates.
21
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets for impairment whenever circumstances and situations
change such that there is an indication that the carrying amounts may not be recovered. In such
circumstances, the Company will estimate the future cash flows expected to result from the use of
the asset and its eventual disposition. Future cash flows are the future cash inflows expected to
be generated by an asset less the future outflows expected to be necessary to obtain those inflows.
If the sum of the expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, the Company will recognize an impairment loss to adjust to
the fair value of the asset.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with maturities of three
months or less when purchased.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2010, the FASB amended its existing guidance for goodwill and other intangible
assets. This authoritative guidance modifies Step 1 of the goodwill impairment test for reporting
units with zero or negative carrying amounts. For those reporting units, an entity is required to
perform Step 2 of the goodwill impairment test if there are qualitative factors indicating that it
is more likely than not that a goodwill impairment exists. The qualitative factors are consistent
with the existing guidance which requires goodwill of a reporting unit to be tested for impairment
between annual tests if an event occurs or circumstances change that would more likely than not
reduce the fair value of a reporting unit below its carrying amount. This authoritative guidance
becomes effective for the Company in fiscal 2012. The implementation of this authoritative guidance
is not expected to have a material impact on the Companys financial position or results of
operations.
In December 2010, the FASB issued authoritative guidance on business combinations. This
authoritative guidance requires a public entity that presents comparative financial statements to
disclose the revenue and earnings of the combined entity as though the business combinations that
occurred during the current year had occurred as of the beginning of the prior annual reporting
period. In addition, this authoritative guidance expands the supplemental pro forma disclosures to
include a description of the nature and amount of material, nonrecurring pro forma adjustments
directly attributable to the business combination included in the reported pro forma revenue and
earnings. This authoritative guidance is effective prospectively for business combinations for
which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2010. The Company will comply with this authoritative guidance
in fiscal 2012.
In January 2010, the FASB issued authoritative guidance for fair value measurements, which
requires additional disclosures and clarifications to existing disclosures. This authoritative
guidance requires a reporting entity to disclose separately the amounts of significant transfers in
and out of Level 1 and Level 2 fair value measurements and also to describe the reasons for these
transfers. This authoritative guidance also requires enhanced disclosure of activity in Level 3
fair value measurements. The new disclosures and clarifications of existing disclosures for Level 1
and Level 2 fair value measurements became effective for the Company in the second quarter of
fiscal 2010. Disclosures regarding activity within Level 3 fair value measurements become effective
the first interim reporting period beginning after December 15, 2010. The Company will comply with
this authoritative guidance in the second quarter of fiscal 2011.
Other accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are not expected to have
a material impact on the consolidated financial statements upon adoption.
22
PROPRIETY INTEREST IN MOVIE RIGHTS
In May 2003, the Company acquired the rights to two (2) movie scripts which are recorded at
the trading value of the shares issued in consideration thereof. The scripts were acquired from two
individuals who had contracted with the Company to produce the film, including the use of certain
equipment to produce these films.
There can be no assurance that we will be able to develop these scripts into motion pictures,
and, if were able to do that, there can be no assurance that any such movies would be profitable to
us.
PROPERTY AND EQUIPMENT HELD FOR SALE
Pursuant to a settlement agreement with Delta Dade Recycling Corp. (DD), the Company
received certain equipment with a carrying value of $70,000, which is included in its equipment
held for sale at December 31, 2009. The Company intends to dispose or lease the property and
equipment.
RECLASSIFICATIONS
Certain Reclassifications of the prior years financial statements have been made to conform
to the current years presentation.
NOTE 3
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS
From October 5, 2010 through the December 31, 2010, the Company is leasing its office space
from a company owned by our Chief Operating Officers company; namely, Electronic Merchant Systems
Rochester, Inc., for approximately $1,800 during the subject period.
During the period ended December 31, 2010, the Companys Co-President and Chief Executive
Officer and the Companys Co-President and Chief Operating Officer extended the Company various
advances between October 5, 2010 and December 31, 2010. These advances totaled $55,000. The
repayment of these advances has not been formally arranged as of the date of this report; however,
these advances will not bear interest and will not have a definitive repayment schedule.
More likely than not, the Company will settle with its principal senior executive offices by
issuing them stock, respectively, for their advances.
NOTE 4
NOTE PAYABLE
NOTE PAYABLE
We issued a note payable to one of our non-affiliated shareholders, Panetta Development Corp.,
a Florida corporation, for $25,000, which represented its further investment in us.
We do not have any formal arrangement or understanding with Panetta Development Corp., and, we
expect to settle that certain note by issuing Panetta Development Corp. shares in us.
NOTE 5
LITIGATION
LITIGATION
The purchaser of the recycling center claims that the Company and its chief executive officer
owe them approximately $25,000 pursuant to the sale agreement. The Company counterclaims the
recovery of the recycling center or the receipt of the balance due under the initial sale contract
of $450,000. The
23
Company has provided for a full valuation on the receivable of $450,000 due from the
purchaser. Management cannot predict the outcome of such litigation at this time but it believes
that it will not have a significant impact on its financial statements.
The Company is a party to the following legal proceedings:
A. The action was instituted on July 20, 2005, against Eric P. Stein, City First Mortgage, MSJ
Investors, LLC and Eric P. Stein Trustee of the Poinciana Trust Agreement, and arose as result of
the fraudulent conduct of the Defendants in falsely attaching to certain Deed descriptions of lots
conveying 30 lots owned by the Company to Eric P. Stein Trustee of the Poinciana Trust Agreement,
MSJ Investors, LLC and Eric. P. Stein.
The Company is seeking recovery of the lots as well as damages and is further asserting that
the false actions by the mortgagor lender employees in conveying the valuable lots to the benefit
of the mortgagor constituted a bonus to the lender which has caused the mortgage by City First to
be usurious and therefore subject to the provisions of Fla.Stat. 687.071 or in the alternative
subject to a violation of Fla.Stat. 687.04, which provides for an award of damages of double the
interest charge which would approximate two million dollars. The litigation is presently ongoing.
B. A lawsuit pending in the Circuit Court of the 11th Judicial Circuit, in and for Miami-Dade
County, Florida, Case No. 05-3063 CA 01 5, wherein the company is a Defendant/Counter-plaintiff and
its President is a Cross-plaintiff.
The Counterclaim and Cross-claim seek recovery of the recycling center or payment of $450,000,
the balance due since the Company has received only $1,050,000 of the sale price of $1,500,000.
The original contract of sale provided for recovery of the property in the event of default of
payment by the purchaser. Pursuant to the agreement the Company has recorded the Deed which was
placed in escrow as security and is now the owner of the property subject to the final adjudication
of the matter by the Court.
C. A lawsuit instituted by the Company and its President in the Circuit Court of the 11th Judicial
Circuit, in and for Miami-Dade County, Florida, Case No. 05-17984 CA for abuse of process, breach
of contract and conspiracy to defraud as against Karen Thomas Christensen Trust; Quality Affordable
Construction, LLC, Southwest Management Affiliates, Inc., Gerry Christensen, William Moon and Wynn
Westmoreland, resulting from the filing by The Karen Thomas Christensen Trust, Quality Affordable
Construction, LLC and Southwest Management Affiliates, Inc. of Case No. 2005 CA 2390, in Polk
County, Florida, seeking to falsely impose upon the Company payment of interest paid by them which
accrued prior to the time the Company was assigned the purchase contract of the 266 lots in
Poinciana, Florida, in consideration of the Company obtaining financing for purchase of the lots.
The company fulfilled its obligations and provided the financing and it now seeks damages
against the Defendants for abuse of process by the Defendants.
D. A lawsuit instituted by Quality Affordable Construction, LLC, Southwest Management Affiliates,
Inc. and Karen Thomas Christensen Trust against us, on July 6, 2005 in the Circuit Court of the
10th Judicial Circuit in and for Polk County, Florida for the repayment of its $85,000 initial
deposit on certain lots located in Polk County, Florida. The initial deposit is included in the
other liability in the accompanying financial statement. Management contends that this amount is
not immediately due but will be repaid as a percentage of the return on the sale of the land held
for sale. On August 22, 2006, the Company was released from further action and has been dismissed
from this lawsuit with prejudice.
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E. Distribution Management Services, Inc., a Florida Corporation and Leo Greenfield vs. City First
Mortgage, a Florida Corporation; Eric Stein, ESQ; Eric Stein, PA, a Professional Association; Eric
P. Stein Trustee of the Poinciana Trust Agreement U/A/D May 6, 2005; MSJ Investors, LLC, a Florida
Limited liability Company; Howard Podolsky; BJJS Investment, LLC; Scheck Alpha, LP; Gary M. Mars
Revocable Trust; Ariella V. Mars; Quality Affordable Constructions, LLC, a Florida Limited
Liability Company; Southwest Management Affiliates, Inc., a Nevada Corporation; and Karen Thomas
Christensen Trust Cases No. 05-14663 CA 22, 05-24653 CA 22 and 06-16126 CA 11 (now 22),
Miami-Dade County, Florida.
F. The Company filed a complaint against Defendant City First Mortgage, Howard Podolsky, Eric Stein
and MSJ Investors for violation of the Florida Criminal Usury Statute by exceeding 45% interest per
annum by transferring certain parcel of lots to themselves and the fraudulent conveyance of
additional lots during the closing and acquisition of certain land in Polk County, Florida through
a mortgage that we have obtained from City First Mortgage. Additionally, we filed a complaint
against City First Mortgage for breach of contract for failure and refusal to conform to the
provisions of the mortgage. We also filed a complaint against City First Mortgage, Eric Stein, Eric
Stein, PA, Stein Trustee, MSJ Investor, Howard Podolsky, BJJS Investment, Scheck Alpha, Gary Mars
Revocable Trust and Ariella Mars for conspiracy to defraud us from the wrongful conveyance of
certain parcel of lots in Polk County, Florida. We plan to vigorously continue to endeavor our
position to seek damages that was caused by these violations.
G. The Company filed a complaint against Quality Affordable Constructions, LLC, a Florida Limited
Liability Company; Southwest Management Affiliates, Inc., a Nevada Corporation; and Karen Thomas
Christensen Trust for wrongful filing of a Notice of Lis Pendens and was recorded on the Polk County
lots in June 2005. On August 22, 2006, we were released from further action and have been dismissed
from this lawsuit with prejudice.
H. The
Company and Leo Greenfield filed a lawsuit vs. Gerald J. Houlihan, Thomas J. Northcutt and
Kayelynne, Northcutt- Florida Bar No. 186866 Miami-Dade County, Florida.
The Company filed a complaint for wrongfully and maliciously use of the legal processes of the
Court to garnish and freeze our bank accounts on or about December 19, 2005 against the defendants.
The Court, upon Motion made by us dissolved the wrongful Writ of Garnishment and ordered that our
bank accounts be released from the Writ of Garnishment. We plan to vigorously continue to endeavor
our position to seek damages that was caused by this violation.
I. The Company filed a suit filed in June 2004 in the Circuit Court, in and for Miami-Dade County,
Florida, Case No.04-13256 CA 20, Distribution Management Services, Inc. v. Sun Recycling, LLC,
alleging wrongful possession, unlawful entry and detention and seeking possession of the property,
damages and attorneys fees.
J. A suit was filed in February 2004 in the Circuit Court, in and for Miami-Dade County,
Florida, Case No. 04-3063-CA015, Southern Waste Systems, Ltd. v. Distribution Management Services,
Inc., for payment of recycling related fees allegedly due SWS which are being held by DMS. On May
19, 2004, a hearing was held before a special master seeking a temporary restraining order against
these individuals so that DMS can have access to and continue the business at the recycling center.
The court deferred any ruling and the entire matter before the court will be heard by the special
master on July 26, 2004 with a final ruling expected soon thereafter. The assignment of the
operators permit to DMS by DERM is currently pending. There are no assurances given that DMS will
prevail in the litigation.
K. A lawsuit was instituted on October 3, 2005 by Newgate Atlantic Holdings, Inc. against the
Company for specific preference of the sale of two lots located in Polk County, Florida for
$25,000. The lawsuit is pending in the Circuit Court of the 10th Judicial Circuit in and for Polk
County, Florida. The Company asserts that the lots were not specified timely by the purchaser, and
accordingly, the Company is not
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obligated to sell such lots at the specified price. Should an adverse judgment be entered against
the Company, it would recognize a loss of approximately $10,000. The Company believes that this
lawsuit is without merit and that it will not result in losses material to it.
L. On April 8, 2010, one of our principal shareholders, Christopher Cardillo, filed an action in
the Superior Court of New jersey, Camden Vicinage, against the Company, Chancellor Development
Properties, Inc., a Florida corporation, our President, Leo Greenfield, our Vice-President, Barbara
Greenfield, our Corporate Secretary and Director, Maria Elena Lopez de Mendoza, and the Executive
Advisor to the Companys Chairman of the Board, Randolph S. Hudson. The action seeks damages
related to the Companys alleged default under a real estate agreement and alleging fraud against
certain of the Companys offices.
On May 13, 2010, the Plaintiff was awarded a judgment-by-default against the defendants. The
Company and the defendants, respectively, are considering their options and remedies available at
law in order to appropriately respond to the Complaint and the subsequent default judgment.
On June 10, 2010, the Plaintiff motioned the Circuit Court in the Seventh Judicial Circuit in
and for Putnam County, Florida to enter the New Jersey judgment against the defendant in Putnam
County, Florida. The Florida Court subsequently entered said judgment, although without a
sister-state proceeding, against all of the defendants.
NOTE 6
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS
On or about January 31, 2010, the Companys principal senior executive officers, with
unanimous approval by the Board of Directors, re-domiciled the Company from Florida to Delaware.
Following its re-domestication to Delaware, the Company chose to use the name DMS Florida, Inc.
(the Company)in the State of Delaware. Contemporaneously with that re-domestication, the Company
formed two subsidiaries in Delaware. The first subsidiary was named DMS Merger Subsidiary, Inc.
(DMSD) and the second subsidiary was named Corporate Management Solutions, Inc. (CMS).
Pursuant to the terms of Section 251(g) of the General Corporation Law of Delaware, we
effected a reorganization; whereby, the Company merged into DMSD and, thereafter, with CMS.
CMS survived the merger and reorganization.
On February 15, 2011, CUSIP Global Services issued DMSD a new CUSIP number. DMSDs new CUSIP
number is 233257 104, and our new ISN number is US2332571049.
On January 31, 2011, as the result of the Companys re-domestication to Delaware and the
subsequent reincorporation therein the only remaining officers of the Company are our
Co-President and Chief Executive Officer, Randolph S. Hudson, our Co-President and Chief Operating
Officer, Michael P. Grande, and our Senior Vice-President, Acting Chief Administrative Officer, and
Acting Corporate Secretary, Dean M. Denton.
Mr. Hudson and Mr. Grande are the only two persons serving on our Board of Directors following
the reorganization and merger.
NOTE 7
SHAREHJOLDERS EQUITY
SHAREHJOLDERS EQUITY
As the result of our extraordinary losses due to those certain judgments awarded against us
(and certain other defendants), our shareholders equity is negative.
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Pursuant to the requirements of the Commission Exchange Act of 1934, the Registrant has caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
BY ORDER OF THE BOARD OF DIRECTORS:
Dated: February 28, 2011
DMS FLORIDA, INC. |
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Randolph S. Hudson | ||||
Acting Chairman of the Board Co-President Chief Executive Officer Acting Treasurer Acting Chief Financial Officer |
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