10-Q 1 fm10q-022809.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended February 28, 2009 [_] Transition Report under Section 13 or 15(d) of the Exchange Act for the Transition Period from ________ to ___________ Commission File Number: 0-50333 DEMATCO, INC. (FORMERLY ADVANCED MEDIA TRAINING, INC.) ------------------------------------------ (Exact name of small business issuer as specified in its charter) Delaware 95-4810658 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 17337 Ventura Boulevard, Suite 208 Encino, California 91316 Issuer's Telephone Number: (818) 784-0040 (Address and phone number of principal executive offices) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 [_] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [_] Accelerated filer [X] Non-accelerated filer [_] Smaller reporting company [X] (Do not check if smaller reporting company) Check whether the issuer is a "shell company" as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes [_] No [X] The Registrant has 178,103,524 shares of Common stock, par value $.001 per share issued and outstanding as of February 28, 2009. Based on the closing bid price of the issuer's common stock on February 28, 2009 the aggregate market value of the voting stock held by non-affiliates of the registrant on that date was approximately $643,000. Traditional Small Business Disclosure Format (check one) Yes [ ] No [X] INDEX TO QUARTERLY REPORT ON FORM 10-Q PART I FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements (Unaudited) 3 Condensed Consolidated Balance Sheets February 28, 2009 (Unaudited) and May 31, 2008 4 Condensed Consolidated Statements of Operations For the Three and Nine Months Ended February 28, 2009 and February 29 2008 (Unaudited) and for the period from November 1, 2005 (Date of Inception) to February 28, 2009 (Unaudited) 5 Condensed Consolidated Statements of Stockholders' Deficit For the Period from November 1, 2005 (Date Of Inception) to February 28, 2009 (Unaudited) 6 Condensed Consolidated Statements of Cash Flows For the Nine Months Ended February 28, 2009 and February 29 2008 and for the period from November 1, 2005 (Date of Inception) to February 28, 2009 (Unaudited) 7 Notes to Condensed Consolidated Financial Statements (Unaudited) 8 Item 2. Management's Discussion and Analysis or Plan of Operation 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 Item 4T. Controls and Procedures 16 PART II OTHER INFORMATION Item 1. Legal Proceedings 18 Item 2. Changes in Securities and Use of Proceeds 18 Item 3. Defaults upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 18 Item 6. Exhibits 18 Signatures 19 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (Financial Statements Commence on Following Page) 3 DEMATCO, INC. AND SUBSIDIARY (A Development Stage Company) CONDENSED CONSOLIDATED BALANCE SHEETS February 28, 2009 May 31, (Unaudited) 2008 ----------- ----------- ASSETS Current Assets Cash ......................................... $ 64,677 $ 2,284 ----------- ----------- Total Current Assets ......................... 64,677 2,284 ----------- ----------- Total Assets ..................................... $ 64,677 $ 2,284 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses ........ $ 56,726 $ 81,829 Unearned revenue ............................. 601,154 -- Due to shareholders .......................... 305,719 393,502 ----------- ----------- Total Current Liabilities .................... 963,599 475,331 ----------- ----------- Stockholders' Deficit Common Stock, authorized 200,000,000 shares, par value $0.001, issued and outstanding; 193,103,524 and 178,103,524 shares, respectively ............. 193,103 178,103 Additional Paid-in Capital ................... 4,145,900 3,410,900 Deficit accumulated during the development stage ............................ (5,240,904) (4,061,056) Cumulative translation adjustment ............ 2,979 (994) ----------- ----------- Total Stockholders' Deficit .................. (898,922) (473,047) ----------- ----------- Total Liabilities and Stockholders' Deficit ...... $ 64,677 $ 2,284 =========== =========== The accompanying notes are an integral part of these financial statements 4 DEMATCO, INC. AND SUBSIDIARY (A Development Stage Company) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 28, 2009 AND FEBRUARY 29, 2008 (UNAUDITED)

NOVEMBER 1, 2005 (INCEPTION) TO THREE MONTHS ~~SIX~~ENDED NINE MONTHS ~~NOVEMBER~~ENDED 30FEBRUARY 28, ~~2008~~02/28/2009 ~~2007~~ 02/29/2008 ~~2007~~02/28/2009 02/29/2008 2009 ------------- ------------- ------------- ------------- ------------- OPERATING EXPENSES: General and administrative .... $ ~~514~~128,~~441~~516 $ ~~127~~179,~~881~~032 $ ~~674~~802,~~140~~656 $ ~~257~~561,~~152~~184 $ 23,~~881~~009,~~402~~918 Research and development ...... 7290,~~102~~930 ~~62,500~~-- ~~237~~328,~~102~~032 ~~125,000~~-- ~~737~~828,~~102~~032 Interest expense, related party ~~518~~762 1,~~170~~168 12,~~866~~628 23,~~353~~521 9,~~195~~957 Interest expense .............. -- 3135,~~015~~720 -- 5793,~~939~~667 1,345,665 Loss on investment ............ ~~45,732~~-- -- 45,732 -- 45,732 ------------- ------------- ------------- ------------- ------------- Total expenses ................ ~~632~~220,~~793~~208 ~~222~~215,~~566~~928 ~~958~~1,~~840~~179,048 ~~442~~658,~~444~~372 5,~~019~~239,~~096~~304 ------------- ------------- ------------- ------------- ------------- LOSS BEFORE INCOME TAXES ...... (~~632~~220,~~793~~208) (~~222~~215,~~566~~928) (~~958~~1,~~840~~179,048) (~~442~~658,~~444~~372) (5,~~019~~239,~~096~~304) Income tax .................... ~~800~~-- ~~800~~-- 800 800 1,600 ------------- ------------- ------------- ------------- ------------- NET LOSS ...................... $ (~~633~~220,~~593~~208) $ (~~223~~215,~~366~~928) $ (~~959~~1,~~640~~179,848) $ (~~443~~659,~~244~~172) $ (5,~~020~~240,~~696~~904) ============= ============= ============= ============= ============= BASIC AND DILUTED LOSS PER SHARE ......................... $ (0.00) $ (0.00) $ (0.01) $ (0.0001) ============= ============= ============= ============= WEIGHTED AVERAGE SHARES OUTSTANDING ................... ~~188~~193,~~510~~103,~~117~~524 ~~116~~117,~~753~~019,~~524~~458 ~~183~~186,~~278~~517,~~387~~443 116,~~735~~841,~~524~~845 ============= ============= ============= =============

The accompanying notes are an integral part of these financial statements. 5 DEMATCO, INC. AND SUBSIDIARY (A Development Stage Company) CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT From November 1, 2005 (Inception) to February 28, 2009 (Unaudited)

DEFICIT ACCUMULATED COMMON STOCK DURING TOTAL -------------------------~~---~~ PAID-IN CURRENCY DEVELOPMENT EQUITY SHARES AMOUNT CAPITAL TRANSLATION STAGE (DEFICIT) ------------ ------------ ------------ ------------ ------------ ------------ Common Shares issued to Founders for intangibles at $0.00573 per share ................... 101,000,000 $ 1,762,450 $ (1,762,450) $ -- $ -- $ -- Currency Translation ........... -- -- -- (17) -- (17) Net Loss ....................... -- -- -- -- (1,412) (1,412) ------------ Net Comprehensive Loss ...... (1,429) ------------ ------------ ------------ ------------ ------------ ------------ BALANCE, DECEMBER 31, 2005 ..... 101,000,000 $ 1,762,450 $ (1,762,450) $ (17) $ (1,412) $ (1,429) Recapitalization ............... 15,753,524 (1,645,697) 1,379,096 -- -- (266,601) Shares of subsidiary cancelled in exchange for debt payment .. -- -- 80,000 -- -- 80,000 Contribution of services ....... -- -- 401,271 -- -- 401,271 Currency Translation ........... -- -- -- 3 -- 3 Net Loss ....................... -- -- -- -- (616,701) (616,701) ------------ Net Comprehensive Loss ...... (616,689) ------------ ------------ ------------ ------------ ------------ ------------ BALANCE, MAY 31, 2007 .......... 116,753,524 $ 116,753 $ 97,917 $ (14) $ (618,113) $ (403,457) Common stock issued for cash ... 1,100,000 1,100 53,900 -- -- 55,000 Common stock issued for services 35,250,000 35,250 1,374,750 -- -- 1,410,000 Common stock issued for debt ... 25,000,000 25,000 1,454,244 -- -- 1,479,244 Related party debt forgiveness.. -- -- 30,089 -- -- 30,089 Contribution of services ....... -- -- 400,000 -- -- 400,000 Currency Translation ........... -- -- -- (980) -- (980) Net Loss ....................... -- -- -- -- (3,442,943) (3,442,943) ------------ Net Comprehensive Loss ...... (3,443,923) ------------ ------------ ------------ ------------ ------------ ------------ BALANCE, MAY 31, 2008 .......... 178,103,524 $ 178,103 $ 3,410,900 $ (994) $ (4,061,056) $ (473,047) Common stock issued for services 15,000,000 15,000 370,000 -- -- 385,000 Contribution of services ....... -- -- ~~235~~365,000 -- -- ~~235~~365,000 Currency Translation ........... -- -- -- 3,973 -- 3,973 Net Loss ....................... -- -- -- -- (~~959~~1,~~640~~179,848) (~~959~~1,~~640~~179,848) ------------ Net Comprehensive Loss ...... (~~955~~1,~~667~~175,875) ------------ ------------ ------------ ------------ ------------ ------------ BALANCE, ~~NOVEMBER~~FEBRUARY 3028, ~~2008~~2009 ..... 193,103,524 $ 193,103 $ 4,~~015~~145,900 $ 2,979 $ (5,~~020~~240,~~696~~904) $ (~~808~~898,~~714~~922) ============ ============ ============ ============ ============ ============

The accompanying notes are an integral part of these financial statements 6 DEMATCO, INC. AND SUBSIDIARY (A Development Stage Company) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

November 1, Nine Nine 2005 ~~Six~~Months Months ~~Ended~~ (Inception) Ended Ended to ~~November~~February 3028, ~~November~~February 3029, ~~November~~February 3028, ~~2008~~2009 ~~2007~~ 2008 2009 ------------- ------------- ------------- Operating Activities Net Loss ................................................. $ (~~959~~1,~~640~~179,848) $ (~~443~~659,~~244~~172) $ (5,~~020~~240,~~696~~904) Adjustments to Reconcile Net (Loss) Currency translation adjustment ....................... 3,973 (1,~~757~~248) 2,979 Stock issued for services ............................. 385,000 -- 1,795,000 Interest expense ...................................... -- -- 1,208,333 Contributed services .................................. ~~235~~365,000 ~~200~~300,000 1,~~036~~166,271 Amortization of debt discount ......................... -- 5793,~~940~~667 137,331 Loss on investment in securities ...................... 45,732 -- 45,732 Changes in Operating Assets and Liabilities ~~Prepaid~~Accounts payable and accrued expenses .................~~......~~ -- (25,~~000~~103) ~~-- Accounts payable and accrued expenses .. (3~~23,~~152)~~262 3556,~~544~~902 ~~78,852~~ Unearned revenue ...................................... ~~297~~601,~~834~~154 -- ~~297~~601,~~834~~154 Due to related party .................................. 6070,000 6090,000 ~~229~~239,000 Due to related entity ................................. -- (35,~~800~~700) 30,090 Accrued interest due to shareholder ................... 12,~~865~~628 23,~~352~~522 9,~~195~~957 ------------- ------------- ------------- Net Cash Provided/(Used) by Operating Activities ......... 66268,~~612~~536 (~~117~~155,~~965~~669) ~~(150~~51,~~079)~~845 ------------- ------------- ------------- Investing Activities Purchase of securities ................................... (45,732) -- (45,732) ------------- ------------- ------------- Net Cash (Used) by Investing Activities .................. (45,732) -- (45,732) ------------- ------------- ------------- Financing Activities Net repayments on line of credit ......................... -- -- (19,094) Net proceeds (repayments)on notes payable, Shareholders .......................................... (21160,~~661~~411) 17100,~~017~~715 ~~138,707~~(43) Net proceeds from common stock ........................... -- ~~100~~55,~~311~~000 55,000 Cash proceeds from Progressive ........................... -- -- 22,701 ------------- ------------- ------------- Net Cash Provided/(Used) by Financing Activities ......... (21160,~~661~~411) ~~117~~155,~~328~~715 ~~197~~58,~~314~~564 ------------- ------------- ------------- Net Increase (Decrease) in Cash .............................. ~~(781)~~62,393 ~~(637)~~46 164,~~503~~677 Cash, Beginning of Period .................................... 2,284 1,853 -- ------------- ------------- ------------- Cash, End of Period .......................................... $ 164,~~503~~677 $ 1,~~216~~899 $ 164,~~503~~677 ============= ============= ============= Supplemental Information: Interest Paid ............................................ $ -- $ -- $ -- Income Taxes Paid ........................................ $ -- $ -- $ -- Schedule of Non-Cash Activities: Related party debt forgiveness ........................... $ -- $ -- $ 30,090

The accompanying notes are an integral part of these financial statements 7 DEMATCO, INC. AND SUBSIDIARY (A Development Stage Company) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2009 (UNAUDITED) NOTE 1. GENERAL ORGANIZATION AND BUSINESS Dematco, Inc. (formerly Advanced Media Training, Inc.; the "Company") is engaged in the business of dematerializing or converting financial instruments from paper form to electronic form so as to enable such instruments to be traded electronically on exchanges or exchange platforms on a peer to peer basis. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Dematco, Inc. and its wholly-owned subsidiary, Dematco, Ltd., which is a United Kingdom registered private company based in London. All material inter-company accounts and transactions have been eliminated. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES PRESENTATION AND GOING CONCERN The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company is in its development stage, has incurred significant losses since inception and has a working capital deficit. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty. The Company has survived through borrowings from shareholders and through the sale of company stock. The Company must raise funds or continue borrowings in the near future to survive. There is no assurance that management can find investors or continue borrowings to cover the losses generated. Management feels that the Company is well positioned to take advantage of the recent move within the securities industry towards eliminating physical stock certificates as proof of security ownership. During the nine months ended February 28, 2009, the Company entered into contracts for the dematerialization of Life Settlement Policies. As a result of these contracts management anticipates that upon the fulfillment of the Company's responsibilities pursuant to the terms of these agreements, the Company will generate sufficient revenue from the above referenced contracts to satisfy the Company's budgeted cash requirements through February 28, 2010. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. 8 CASH AND CASH EQUIVALENTS Cash and cash equivalents include all short-term liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. RECLASSIFICATIONS The Company reclassified certain amounts on the consolidated balance sheet for prior periods to conform to the current year presentation. PREPARATION OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS These interim condensed consolidated financial statements for the periods ended February 28, 2009 and February 29, 2008 have been prepared by the Company's management, without audit, in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). In the opinion of management, these interim condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments, unless otherwise noted) necessary to present fairly the Company's financial position, results of operations and cash flows for the fiscal periods presented. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in these interim financial statements pursuant to the SEC's rules and regulations, although the Company's management believes that the disclosures are adequate to make the information presented not misleading. The financial position, results of operations and cash flows for the interim periods disclosed herein are not necessarily indicative of future financial results. These interim condensed consolidated financial statements should be read in conjunction with the annual financial statements and the notes thereto included in the Company's most recent Annual Report on Form 10-K for the fiscal year ended May 31, 2008. STOCK BASED COMPENSATION The Company accounts for its stock based compensation based upon provisions in SFAS No. 123, Accounting For Stock-Based Compensation. In this statement stock based compensation is divided into two general categories, based upon who the stock receiver is, namely: Employees/directors and non-employees/directors. The employees/directors category is further divided based upon the particular stock issuance plan, namely compensatory and non-compensatory. The employee/directors non-compensatory securities are recorded at the sales price when the stock is sold. The compensatory stock is calculated and recorded at the securities' fair value at the time the stock is given. SFAS 123 also provides that stock compensation paid to non-employees be recorded with a value which is based upon the fair value of the services rendered or the value of the stock given, whichever is more reliable. The Company has selected to utilize the fair value of shares issued. FOREIGN CURRENCY TRANSLATION The financial statements of Dematco, Ltd. are measured using the Great Britain Pound as the functional currency. Assets, liabilities and equity accounts of Dematco, Ltd. are translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates of exchange in effect during the period. The resulting cumulative translation adjustments have been recorded as a separate component of stockholders' deficit. The consolidated financial statements are presented in United States of America dollars. 9 INCOME TAXES The provision for income taxes is the total of the current taxes payable and the net of the change in the deferred income taxes. Provision is made for the deferred income taxes where differences exist between the period in which transactions affect current taxable income and the period in which they enter into the determination of net income in the financial statements. NET LOSS PER SHARE Basic and diluted net loss per share has been computed by dividing net loss by the weighted average number of common shares outstanding during the applicable fiscal periods. At February 28, 2009, the Company had no potentially dilutive shares outstanding. Potentially dilutive shares are excluded from the computation in loss periods, as their effect would be anti-dilutive. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments consist of cash and cash equivalents, accounts payable, and notes payable. Pursuant to SFAS No. 107, "DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS," the Company is required to estimate the fair value of all financial instruments at the balance sheet date. The Company considers the carrying values of its financial instruments in the financial statements to approximate their fair values due to the short term nature of the instruments. RECENTLY ISSUED ACCOUNTING STANDARDS SFAS No. 141(R) - In December 2007, the FASB issued Statement No. 141(R), Business Combinations. This Statement replaces FASB Statement No. 141, Business Combinations. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. Statement 141 did not define the acquirer, although it included guidance on identifying the acquirer, as does this Statement. This Statement's scope is broader than that of Statement 141, which applied only to business combinations in which control was obtained by transferring consideration. By applying the same method of accounting - the acquisition method - to all transactions and other events in which one entity obtains control over one or more other businesses, this Statement improves the comparability of the information about business combinations provided in financial reports. This Statement applies prospectively to 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, 2008. An entity may not apply it before that date. The Company is currently evaluating SFAS 141(R), and has not yet determined its potential impact on its future results of operations or financial position. SFAS No. 160 - In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements - an Amendment of ARB No. 51. This Statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this Statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This Statement improves comparability by eliminating that diversity. 10 This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The effective date of this Statement is the same as that of the related Statement 141(R). This Statement shall be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied, except for the presentation and disclosure requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods presented. The Company is currently evaluating SFAS 160 and has not yet determined its potential impact on its future results of operations or financial position. SFAS No. 161 - In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities--an amendment of FASB Statement No. 133. This Statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. This Statement is intended to enhance the current disclosure framework in Statement 133. The Statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. This disclosure better conveys the purpose of derivative use in terms of the risks that the entity is intending to manage. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format should provide a more complete picture of the location in an entity's financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Disclosing information about credit-risk-related contingent features should provide information on the potential effect on an entity's liquidity from using derivatives. Finally, this Statement requires cross-referencing within the footnotes, which should help users of financial statements locate important information about derivative instruments. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The Company is currently evaluating SFAS 161 and has not yet determined its potential impact on its future results of operations or financial position. NOTE 3. INVESTMENT IN SECURITIES On August 11, 2008, the Company purchased 1,600,000 shares of Private Trading Systems, PLC, ("PTS"), for (pound)24,000, or $45,732. The Company's Chief Executive Officer, and its principal shareholder are shareholders of PTS. Additionally, the Company's Chief Financial Officer is an officer of PTS. As of February 28, 2009, the shares of PTS had been suspended from trading in London and the company was delinquent in its required filings. Accordingly, the investment in PTS was determined to have had an other-than-temporary decline in value and was written down to $-0-. NOTE 4. UNEARNED REVENUE During the nine months ended February 28, 2009, the Company entered into contracts for the dematerialization of Life Settlement Policies and received $618,484 in deposits from the customers. Of this amount, $17,330 has been applied to the reimbursement of research and development expenses. As of February 28, 2009, the Company has not brought the dematerialization process to a commercial stage of operation. 11 NOTE 5. RELATED PARTY TRANSACTIONS DUE TO SHAREHOLDERS The Company has a note payable due to its former President and current shareholder which accrues interest at 8.0%. Repayment shall be made when funds are available and the balances of principal and accrued interest are due June 30, 2009. The principal balance was $38,645 at February 28, 2009. Total interest due at February 28, 2009 was $8,116. In addition, the Company also has a consulting agreement with its former President and current shareholder for $10,000 per month, which expired December 31, 2008. At February 28, 2009, the total amount due under this agreement was $239,000. The Company has a loan agreement with its principal shareholder that is due upon demand. The principal balance was $19,958 at February 28, 2009 and is non-interest bearing. NOTE 6. STOCKHOLDERS' EQUITY INCENTIVE STOCK PLAN During February 2008, the Company executed the The Dematco, Inc. 2008 Incentive Stock Plan, (the "Plan"). The Plan is designed to retain directors, executives and selected employees and consultants and reward them for making major contributions to the success of the Company. These objectives are accomplished by making long-term incentive awards under the Plan thereby providing participants with a proprietary interest in the growth and performance of the Company. The Plan shall be administered by the Company's Board of Directors. The persons who shall be eligible to receive grants shall be directors, officers, employees or consultants to the Company. Subject to adjustment as provided in the Plan, the total number of shares of stock which may be purchased or granted directly by options, stock awards or restricted stock purchase offers, or purchased indirectly through exercise of options granted under the Plan shall not exceed fifty million (50,000,000). The Company shall reserve and keep available at all times during the term of the Plan such number of shares as shall be sufficient to satisfy the requirements of the Plan. During March 2008, 35,000,000 shares were issued for services under the Plan. The shares were valued at $1,400,000. During September 2008, 13,000,000 shares were issued for services under the Plan. The shares were valued at $325,000. During November 2008, 2,000,000 shares were issued for services under the Plan. The shares were valued at $60,000. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION You should read this section together with our financial statements and related notes thereto included elsewhere in this report. In addition to the historical information contained herein, this report contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are not based on historical information but relate to future operations, strategies, financial results or other developments. Forward-looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. Certain statements contained in this Form 10-Q, including, without limitation, statements containing the words "believe," "anticipate," "estimate," "expect," "are of the opinion that" and words of similar import, constitute "forward-looking statements." You should not place any undue reliance on these forward-looking statements. You should be aware that our results from operations could materially be effected by a number of factors, which include, but are not limited to the following: economic and business conditions specific to the financial/securities industries; competition from other companies offering similar services, our ability to control costs and expenses, access to capital, and our ability to meet contractual obligations. There may be other factors not mentioned above or included elsewhere in this report that may cause actual results to differ materially from any forward-looking information. CRITICAL ACCOUNTING POLICIES Our discussion and analysis of our financial condition and results of operations are based upon our statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with our Board of Directors, we have identified four critical accounting policies that we believe are key to an understanding of our financial statements. These are important accounting policies that require management's most difficult, subjective judgments. The first critical policy relates to the preparation and disclosure of our financial statements. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company is still in its development stage and has no source of revenue from operations. This raises substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty. The Company has survived only through borrowings from shareholders. The Company must raise funds or continue borrowings in the near future to survive. There is no assurance that management can find investors or continue borrowings to cover the losses generated. 13 The second critical policy relates to officer compensation. Our officers work for the Company on a part-time basis with no compensation. We value these services based on time contributed, services performed and comparable compensation to other companies. The third critical policy relates to shares issued for services. We value the shares issued based on the closing price of our stock on the date of grant. The fourth critical policy relates to income recognition. The Company has structured its contracts for dematerializing financial instruments on behalf of third parties to provide for a deposit of 0.25% of the face value of the financial instruments being dematerialized to be paid at commencement of the contract, and the balance of 1.75% of the face value to be paid upon completion of the dematerialization of those financial instruments, and the whole of the income arising on each contract is recognized at the point of completion of dematerialization. Until the process is commercialized and ready for sale, portions of the process that have been completed are recorded as reimbursement of research and development expenses. SELECT FINANCIAL INFORMATION For the Three Months Ended --------------------------- 02/28/09 02/29/08 (Unaudited) (Unaudited) ----------- ----------- Statement of Operations Data Total revenue .................................. $ -- $ -- Operating loss ................................. $ (220,208) $ (222,566) Net loss per share ............................. $ (0.00) $ (0.00) Balance Sheet Data Total assets ................................... $ 64,677 $ 26,216 Total liabilities .............................. $ 963,599 $ 574,363 Stockholders' deficit .......................... $ (898,922) $ (548,147) RESULTS OF OPERATIONS GENERAL On December 11, 2006, we completed the acquisition of Dematco, Ltd., and at the same time, elected a new slate of directors and appointed new corporate officers. Concurrent with the acquisition, our new management decided to change the Company's business to that of its just acquired wholly-owned subsidiary, Dematco, Ltd., , and to as soon as feasible cease all activities related to the business of producing and distributing workforce training videos. Effective March 1, 2007, we entered into an Asset and Liability Assumption Agreement with our then wholly-owned subsidiary Progressive Training, Inc., and as a result ceased all activities associated with our former business. Since that date, and for the foreseeable future, all of our efforts will be focused on the further development and marketing of our dematerialization process. During fiscal 2009, we plan to take the following steps in order to improve the process, and generate revenue from operations, (a) fulfill our existing contracts (b) attempt to sign additional contracts for the dematerialization of financial instruments within the insurance industry. 14 THREE-MONTH PERIOD ENDED FEBRUARY 28, 2009 COMPARED TO THREE-MONTH PERIOD ENDED FEBRUARY 29, 2008 REVENUES To date, we have not generated revenue from our dematerialization process. EXPENSES During the three months ended February 28, 2009 our general and administrative expenses were $128,516. Included in this amount is $120,000 fair value of unpaid compensation and $8,516 of legal and accounting expenses. During the three months ended February 29, 2008, our general and administrative expenses were $179,032. Included in this amount is $100,000 of wages to our officers whom have waived payment and applied this amount to paid in capital, $30,000 of consulting and professional services and $49,032 of legal and accounting expenses. During the three months ended February 28, 2009 we incurred $762 of interest expense related to a note payable to a shareholder. During the three months ended February 29, 2008, we incurred $1,168 of interest expense related to a note payable to a shareholder and $35,720 of interest expense related to the convertible debenture. NET LOSS As a result of the aforementioned, our net loss was $220,208 for the three months ended February 28, 2009 and $215,928 for the three months ended February 29, 2008. Our net loss was $ 1,179,848 for the nine month period ended February 28,2009 and $659,172 for the nine month period ended February 29, 2008. PLAN OF OPERATION On March 1, 2007 we ceased all activities associated with our former business of the production and distribution of workforce training videos, see "Company History" and focused all efforts on the further development and marketing of our dematerialization process. We will continue to devote our limited resources to marketing and developing our dematerialization process. At this time these efforts are focused on fulfilling the contracts mentioned above, and seeking to acquire additional contracts for the use of our dematerialization process. There can be no assurance that we will be successful in these efforts. Management expects that revenues from our above mentioned contracts will provide sufficient funds to maintain operations, and satisfy our budgeted cash requirements through February 28, 2010. We currently have no employees and do not anticipate hiring in the near future. Mr. Robert Stevens, our Chief Executive Officer, and Chairman of the Board of Directors, Mr. Lindsay Smith, our Chief Financial Officer, and a Director, and, our principal shareholder Mr. Terence Ramsden, each work on a part-time basis. 15 LIQUIDITY AND CAPITAL RESOURCES Our working capital deficit was $888,922 at February 28, 2009, which includes liabilities due to related parties and entities of $305,719 Our cash flows provided by operating activities were $268,536 for the nine months ended February 28, 2009. This is the primary results of our net loss of $1,179,848, offset by $750,000 non-cash compensation expenses and a $601,154 increase in unearned revenue. Our cash flows used by operating activities were $155,669 for the nine months ended February 29, 2008. This is the primary results of our net loss of $659,172 which included non-cash expenses of approximately $394,000, and increases in accounts payable and accrued expenses of $23,362 and amounts due to a related party of $90,000. During the nine months ended February 28, 2009 our cash flows used by financing activities was $160,411 as a result of our repayments on notes payable to shareholders. During the nine months ended February 29, 2008 our cash flows from financing activities were $155,715, resulting primarily from our borrowings from a principal shareholder. We currently have no material commitments at this time to fund development of our dematerialization process or to acquire any significant capital equipment. We are a company with a limited operating history and a history of net losses. We had a cash balance of $64,677 on February 28, 2009. If revenues from the sale of our dematerialization process do not provide sufficient funds to maintain operations, then we believe the raising of funds through borrowings from our shareholder or the sale of additional equity will be sufficient to satisfy our budgeted cash requirements through February 28, 2010. Additionally, we may attempt a private placement sale of our common stock. Further, our ability to pursue any business opportunity that requires us to make cash payments would also depend on the amount of funds that we can secure from these various sources. If funding is insufficient at any time in the future, we may not be able to take advantage of business opportunities or respond to competitive pressures, any of which could have a negative impact on the business, operating results and financial condition. In addition, if additional shares were issued to obtain financing, current shareholders may suffer a dilutive effect on their percentage of stock ownership in the Company. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Based on the nature of our current operations, we have not identified any issues of market risk at this time. ITEM 4T. CONTROLS AND PROCEDURES The principal executive officer and principal financial officer of the Company, ("the Certifying Officers") with the assistance of advisors, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in section 240.13a-14(c) and 240.15d-14(c) under the Exchange Act) within 90 days prior to the filing of this annual report. Based upon the evaluation, the Certifying Officers conclude that the 16 Company's disclosure controls and procedures are effective in timely alerting management to material information relative to the Company which is required to be disclosed in its periodic filings with the SEC. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 17 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDSNone. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the quarter ended February 28,2009, no matters were submitted to the Company's security holders. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS 31.1 Certification of CEO Pursuant to Securities Exchange Act Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 18 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DEMATCO, INC. (Registrant) Dated: April 20, 2009 /S/ ROBERT STEVENS -------------------------------------------- Robert Stevens, President and Chief Executive Officer 19

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