SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-QSB
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2004
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ________ to ___________
Commission file number: 000-50754
SYNERTECK INCORPORATED
(Exact name of small business issuer as specified in its charter)
Delaware 20-0929024
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11585 South State Street, Suite 102
Draper, Utah 84020
(Address of principal executive offices) (Zip Code)
(801) 816-2505
Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name or former address and former fiscal year, if changed since last
report.)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13, or 15(d) of the Exchange Act of 1934 after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of September 30, 2004, the Company
had outstanding 500,000 shares of common stock, par value $0.001 per share.
Transitional Small Business Disclosure Format (check one) [ ] Yes [x ] No
2
PART I
FINANCIAL INFORMATION
The Financial Statements of the Company are prepared as of September 30, 2004.
ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-QSB
CONTENTS
Condensed Balance Sheets..................................................... 4
Condensed Statements of Operations........................................... 6
Condensed Statements of Stockholders' Equity................................. 8
Condensed Statements of Cash Flows........................................... 9
Notes to the Condensed Financial Statements................................. 11
3
SYNERTECK INCORPORATED
Condensed Balance Sheets
ASSETS
September 30, December 31,
2004 2003
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 44,051 $ 7,940
Accounts receivable, net 19,290 5,095
Prepaid expenses 715 -
------------------ -----------------
Total Current Assets 64,056 13,035
------------------ -----------------
PROPERTY AND EQUIPMENT 21,749 3,119
------------------ -----------------
OTHER ASSETS
Receivable - related parties 18,374 16,497
------------------ -----------------
Total Other Assets 18,374 16,497
------------------ -----------------
TOTAL ASSETS $ 104,179 $ 32,651
=============== ===============
The accompanying notes are an integral part of these condensed financial
statements.
4
SYNERTECK INCORPORATED
Condensed Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
2004 2003
------------ ------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 11,031 $ 12,698
Accrued expenses 9,166 1,801
Income tax payable - related parties 11,720 9,580
------------------ -----------------
Total Current Liabilities 31,917 24,079
------------------ -----------------
LONG TERM LIABILITIES
Notes payable 15,000 -
Notes payable - related parties 35,000 -
------------------ -----------------
Total Long Term Liabilities 50,000 -
------------------ -----------------
TOTAL LIABILITIES 81,917 24,079
------------------ -----------------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 100,000,000 shares
authorized, 500,000 shares issued and outstanding 500 500
Additional paid-in capital (500) (500)
Retained Earnings 22,262 8,572
------------------ -----------------
Total Stockholders' Equity 22,262 8,572
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 104,179 $ 32,651
=============== ===============
The accompanying notes are an integral part of these condensed financial
statements.
5
SYNERTECK INCORPORATED
Condensed Statements of Operations
(Unaudited)
For the Three Months Ended
September 30,
---------------------------------
2004 2003
------------- -----------------
NET REVENUES
Product revenue $ 1,907 $ -
Service revenue 27,435 4,089
Related party revenue 31,410 21,000
------------------ -----------------
Total Net Revenues 60,752 25,089
------------------ -----------------
OPERATING EXPENSES
Cost of sales-product 1,488 -
Cost of sales-service 1,364 359
Cost of sales-related party 2,901 1,500
General and administrative 23,740 7,161
Selling and marketing 16,731 6,748
Research and development 7,037 2,853
------------------ -----------------
Total Operating Expenses 53,261 18,621
------------------ -----------------
INCOME FROM OPERATIONS 7,491 6,468
------------------ -----------------
OTHER INCOME (EXPENSES)
Interest expense (1,008) -
Interest income 80 50
------------------ -----------------
Total Other Income (Expenses) (928) 50
------------------ -----------------
NET INCOME BEFORE INCOME TAXES 6,563 6,518
PROVISION FOR INCOME TAXES (1,263) (1,255)
------------------ ------------------
NET INCOME $ 5,300 $ 5,263
=============== ===============
BASIC NET INCOME PER SHARE $ 0.01 $ 0.01
=============== ===============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 500,000 500,000
=============== ===============
The accompanying notes are an integral part of these condensed financial
statements.
6
SYNERTECK INCORPORATED
Condensed Statements of Operations (Continued)
(Unaudited)
For the Nine Months Ended
September 30,
-------------------------------
2004 2003
------------- ----------------
NET REVENUES
Product revenue $ 20,022 $ 12,505
Service revenue 56,532 34,603
Related party revenue 71,340 51,706
------------------ -----------------
Total Net Revenues 147,894 98,814
------------------ -----------------
OPERATING EXPENSES
Cost of sales-product 14,137 6,098
Cost of sales-service 11,442 4,582
Cost of sales-related party 7,829 7,500
General and administrative 50,941 22,591
Selling and marketing 31,367 19,431
Research and development 13,138 7,948
------------------ -----------------
Total Operating Expenses 128,854 68,150
------------------ -----------------
INCOME FROM OPERATIONS 19,040 30,664
------------------ -----------------
OTHER INCOME (EXPENSES)
Interest expense (2,301) -
Interest income 214 50
------------------ -----------------
Total Other Income (Expenses) (2,087) 50
------------------ -----------------
NET INCOME BEFORE INCOME TAXES 16,953 30,714
PROVISION FOR INCOME TAXES (3,263) (5,912)
------------------ -----------------
NET INCOME $ 13,690 $ 24,802
=============== ===============
BASIC NET INCOME PER SHARE $ 0.03 $ 0.05
=============== ===============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 500,000 500,000
=============== ===============
The accompanying notes are an integral part of these condensed financial
statements. SYNERTECK INCORPORATED
7
SYNERTECK INCORPORATED
Condensed Statements of Stockholders' Equity
Additional
Paid-in Accumulated
Shares Amount Capital Deficit
--------------- --------------- --------------- ----------------
Balance, December 31, 2002 500,000 $ 500 $ (500) $ (9,056)
Net income for the year ended
December 31, 2003 - - - 17,628
--------------- ---------------- --------------- ----------------
Balance, December 31, 2003 500,000 500 (500) 8,572
Net income for the nine months ended September
30, 2004 (unaudited) - - - 13,690
--------------- ---------------- --------------- ----------------
Balance, September 30, 2004 (unaudited) 500,000 $ 500 $ (500) $ 22,262
=============== ================ =============== ================
The accompanying notes are an integral part of these condensed financial
statements.
8
SYNERTECK INCORPORATED
Condensed Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
-------------------------------------
2004 2003
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,690 $ 24,802
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation 2,767 201
Changes in operating assets and liabilities:
Accounts receivable (14,195) 17
Due to/from related parties 263 (22,088)
Other current assets (715) -
Accounts payable (1,667) 1,065
Accrued expenses 7,365 (826)
---------------- -----------------
Net Cash Provided by Operating Activities 7,508 3,171
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (21,397) (3,622)
---------------- -----------------
Net Cash Used in Investing Activities (21,397) (3,622)
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 15,000 -
Proceeds from issuance of notes payable - related parties 35,000 -
---------------- -----------------
Net Cash Provided by Financing Activities 50,000 $ -
---------------- -----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 36,111 $ (451)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 7,940 2,839
---------------- -----------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 44,051 $ 2,388
=============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest $ - $ -
Income taxes $ - $ -
The accompanying notes are an integral part of these condensed financial
statements.
9
SYNERTECK INCORPORATED
Notes to the Condensed Financial Statements
September 30, 2004 and December 31, 2003
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements have
been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted in
accordance with such rules and regulations. The information
furnished in the interim condensed financial statements include
normal recurring adjustments and reflects all adjustments, which,
in the opinion of management, are necessary for a fair
presentation of such financial statements. Although management
believes the disclosures and information presented are adequate
to make the information not misleading, it is suggested that
these interim condensed financial statements be read in
conjunction with the Company's audited financial statements and
notes thereto included in its Form 10SB filed on September 15,
2004. Operating results for the three and nine months ended
September 30, 2004 are not necessarily indicative of the results
to be expected for the year ending December 31, 2004.
NOTE 2 - MATERIAL EVENTS
During the nine months ended September 30, 2004, the Company
received a total of $15,000 proceeds from notes payable issued to
unrelated individuals and $35,000 proceeds from notes payable to
related individuals. These notes are unsecured, bear interest at
8% per annum with principal and interest due on March 1, 2007.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
You should read the following discussion of the company's financial
condition and results of operations in conjunction with the audited financial
statements and related notes included in this report. This discussion may
contain forward-looking statements, including, without limitation, statements
regarding our expectations, beliefs, intentions, or future strategies that are
signified by the words "expects," "anticipates," "intends," "believes," or
similar language. Actual results could differ materially from those projected in
the forward looking statements. You should carefully consider the information
set forth above under the caption "Risk Factors" in addition to the other
information set forth in this report. We caution you that Synerteck's business
and financial performance is subject to substantial risks and uncertainties.
Overview
Synerteck is an integrator of business strategy with technology solutions.
We attempt to understand the business of our clients principally from their
customer's point of view, in order to properly position ourselves to advocate
and implement measures that achieve the client's organizational objectives. Our
clients consist of small to medium sized organizations, operating in North
America and Europe. Currently, we service eight clients on a continuous monthly
basis and average ten additional clients for one-time or intermittent projects
over the course of a year. You can learn more about our business at our website
located at www.synerteck.com.
Results of Operations
Following is our discussion of the relevant items affecting results of
operations for the periods ended September 30, 2004 and 2003.
Revenues. Revenue is recognized upon completion of services or delivery of
goods. Advance customer payments are recorded as deferred revenue until such
time as they are recognized. Product sales are not warranted by the Company and
may be subject only to warranties that may be provided by the product
manufacturer. Therefore, product warranties have no effect on the financial
statements.
Synerteck generated net revenues of $60,752 during the three months ended
September 30, 2004, a 142% increase compared to $25,089 in net revenues during
the third quarter of 2003. For the nine month period ended September 30, 2004,
net revenues were 147,894, representing a 50% increase compared to $98,814 in
net revenues during the first nine months of 2003. This increase was due to a
sales initiative started in 2004 which provided incentives on new sales.
Furthermore, hardware sales increased 60% over the prior year and several new IT
service contracts were established in the first nine months of 2004. Along with
web site design and hosting, other sources of revenue were information
technology systems support and equipment leases. We anticipate that these three
areas will constitute the principal source of Synerteck's revenue for the
foreseeable future.
Our business model and objective is to receive recurring revenue from
long-term contracts with established clients. Over the past twelve months, we
have provided networking, programming, and hosting services for eight clients on
a continuous basis and approximately ten clients for one-time projects. In
addition, we procure and resell hardware and software packages to our clients as
well as single transaction customers. Sales of software and hardware products
are inherently unpredictable, but we anticipate that revenues from this activity
will become more consistent as we grow our client base. During the first nine
11
months of 2004 and 2003, we received $122,272 and $84,497, respectively, in
gross revenues from information technology services, and $25,622 and $14,317,
respectively, in gross revenues from software and hardware product resales and
equipment leasing.
Cost of Sales. Expenses which comprise cost of sales are the wholesale cost
of hardware, software, any accompanying licenses, product sales commissions, and
commissions paid in connection with information technology consulting contracts.
Also included in cost of sales are personnel and materials costs to administer
these information technology services. As more organizations utilize our
technology services, future expenses included in cost of goods sold will
increase as well as potential fee sharing expenses to organizations that assist
us in providing these services.
Cost of sales for the three months ended September 30, 2004 were $5,753, a
209% increase from $1,859 during the third quarter of 2003. For the nine month
period ended September 30, 2004, cost of sales were $33,408, a 84% increase from
$18,180 during the first nine months of 2003. This increase corresponds with the
increase of revenues associated with the sales initiative started in 2004 and is
mainly due to commission incentives on new sales. Furthermore, the sales of
computer hardware during the nine months ended September 30, 2004 increased 60%
compared to the same period in the prior year. Hardware sales do not yield as
high a margin as other products offered by the Company, thus contributing to the
higher cost of sales percentage. Cost of sales is attributable to (i) expenses
incurred pursuant to the delivery of our information technology support, and
(ii) sales commissions paid in connection with technology consulting projects.
General and Administrative Expenses. Our general and administrative
expenses have been comprised of administrative wages and benefits; occupancy and
office expenses; outside legal, accounting and other professional fees; travel
and other miscellaneous office and administrative expenses. General and
administrative expenses for the three months ended September 30, 2004 were
$23,740, a 232% increase from $7,161 during the third quarter of 2003. General
and administrative expenses for the nine month period ended September 30, 2004
were $50,941, a 125% increase from $22,591 during the first nine months of 2003.
This increase was primarily due to accounting and legal fees associated with the
audit of the financial statements and filings with the Securities and Exchange
Commission. Furthermore, as noted in the notes to the financial statements, the
Company also entered into a management services agreement with its sole
shareholder, SportsNuts, Inc. Although we endeavor to decrease certain costs
associated with personnel salaries and benefits, professional fees, contract
labor, and rent and occupancy-related expense, as the business grows, these
expenses will increase. Our payroll expense accounted for approximately $57,886
of general and administrative expenses during the nine month period ended
September 30, 2004, as compared to $38,278 during the first nine months of 2003.
Because we sublease our office facilities from our parent corporation, we do not
anticipate any material commitments for capital expenditures in the foreseeable
future.
Selling and Marketing Expenses. Our selling and marketing expenses include
selling/marketing wages and benefits; advertising and promotional expenses;
travel and other miscellaneous related expenses. Selling and marketing expenses
for the three months ended September 30, 2004 were $16,731, a 148% increase from
$6,748 during the third quarter of 2003. For the nine month period ended
September 30, 2004, selling and marketing expenses were $31,367, a 61% increase
from $19,431 during the first nine months of 2003. This increase was primarily
attributable to increased salaries of sales personnel as well as additional
expenditures for advertising and marketing. We expect that our sales and
marketing expenditures will increase as we continue to develop our client base
and expand our efforts in computer hardware and software leasing.
12
Product Development. Product research and development expenses for the
three months ended September 30, 2004 were $7,037, a 147% increase from $2,853
during the third quarter of 2003. For the nine month period ended September 30,
2004, product development expenses were $13,138, a 65% increase from $7,948
during the first nine months of 2003. Our product development expenses relate
primarily to payroll and systems development for our programming and web site
hosting services. We believe that significant investments in product development
are required to remain competitive. Accordingly, we expect to incur increased
expenditures with respect to product development in future periods.
Other Income (Expense). We incurred net other expense of $2,087 for the
nine months ended September 30, 2004 compared to net other income of $50 during
the first nine months of 2003. The expenses incurred in this category were
comprised primarily of interest expenses related to the $50,000 in notes payable
issued by the Company during the first half of 2004. Income tax expense of
$3,263 was also recorded during the first nine months of 2004 compared to $5,912
during the first nine months of 2003.
Off-Balance Sheet Arrangements
Synerteck is not subject to any off-balance sheet arrangements.
Personnel
Synerteck has two full-time employees, two part-time employees, and
numerous project-based contract personnel that we utilize to carry out our
business. We utilize contract personnel on a continuous basis, primarily in
connection with service contracts which require a high level of specialization
for one or more of the service components offered. We expect to hire one more
full-time employee during 2004. Although competition for technology personnel in
the metropolitan Salt Lake City area is intense, because we offer competitive
compensation, maintain a productive and collegial work environment, and work
with internationally-based clients, we don't believe we will have significant
difficulty retaining additional employees or contract personnel in the future.
Liquidity and Capital Resources
Since inception, we have financed Synerteck's operations from its business
cash flows and the issuance of $50,000 of promissory notes. As of September 30,
2004, Synerteck's primary source of liquidity consisted of $44,051 in cash and
cash equivalents. Because Synerteck is profitable, we do not expect to require
additional investment capital during the next twelve months to continue our
operations at their current level. Nevertheless, we may seek to secure
additional debt or equity capital to finance substantial business development
initiatives or acquire another information technology firm. At present, however,
we have no plans to seek any such additional capital or to engage in any
business development or acquisition activity.
Related Party Transactions
Synerteck provides various services including network and server
maintenance and support, user support and website maintenance to its sole
shareholder, SportsNuts, Inc. In exchange for these services, Synerteck receives
$2,000 per month. No minimum or specific performance is required by the terms of
this agreement and we do not foresee any negative trends that would impact
future revenues or operations.
13
FORWARD LOOKING STATEMENTS AND RISK FACTORS
Forward Looking Statements
When used in this report, the words, "believes," "plans," "expects," and
similar expressions are intended by us to identify forward-looking statements
within the meaning of and Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements are subject to certain risks and uncertainties,
including those discussed below, that could cause actual results to differ
materially from those we have projected. These forward-looking statements speak
only as of the date hereof. All of these forward-looking statements are based on
our estimates and assumptions, which although we believe them to be reasonable,
are inherently uncertain and difficult to predict. We cannot assure you that the
benefits anticipated in these forward-looking statements will be achieved.
We undertake no obligation to update any forward-looking statements, but
you are advised to consult any further disclosures by the Synerteck on this
subject in its subsequent filings pursuant to the Securities Exchange Act of
1934. Furthermore, we are providing these cautionary statements identifying risk
factors, listed below, that could cause our actual results to differ materially
from expected and historical results. It is not possible for our management to
foresee or identify all such factors. Consequently, this list should not be
considered an exhaustive statement of all potential risks, uncertainties and
inaccurate assumptions.
RISK FACTORS
Operating Risks
We are Heavily Dependent Upon our Key Personnel. Synerteck's success
depends, in large part, upon the talents and skills of its management and key
personnel. In addition, to the extent that any of our key personnel are unable
or refuse to continue their association with Synerteck, a suitable replacement
would have to be found. The competition for qualified personnel in the computer
networking is intense, and there are limited numbers of such qualified personnel
in the metropolitan Salt Lake City area. We cannot assure you that we would be
able to find suitable replacements for our existing management personnel or
technical personnel or that we could retain such replacements for an affordable
amount.
You May Not Agree With The Decisions of Our Management Team. Although
Synerteck's directors and officers will endeavor to make decisions as they
reasonably deem consistent with their fiduciary duties under Delaware corporate
law, you may disagree with these decisions. Synerteck's management has
significant control over stockholder matters, which may affect the ability of
minority stockholders to influence our activities.
We are Heavily Dependent Upon a Few Key Clients. Three client accounts
comprise a substantial majority of Synerteck's monthly revenues, one of which is
serviced on an oral agreement on a month-to-month basis. Although we believe we
will continue to service these accounts at the current billing rate for the
remainder of 2004 and into 2005, economic and other factors beyond our control
may result in a loss of one or all three of these accounts. If we lost one or
all of these clients, we would be required to immediately replace these clients
with similar sized accounts, or dramatically cut our operating costs to remain
in business. If Synerteck were to cease its operations, you would likely lose
the entire value of your investment.
14
Our Business is Inherently Risky. Service based businesses in the computer
networking and hosting industries are inherently risky. If our services do not
generate enough cash flow to meet our operating expenses (such as debt service,
capital expenditures, and legal and accounting fees), our ability to develop and
expand our business and become profitable will be adversely affected.
Our Business Could be Adversely Affected by Many Factors. Income from
outsourced networking, hosting, and programming services may be adversely
affected by a number of factors, including, but not limited to:
o the general economic climate (such as too much supply or too little
demand fo rinformation technology services, as well as changes in market
rates);
o the increasing tendency of medium sized businesses to rely on internal
personnel to service and maintain computer networks, even if such
personnel are not properly trained to perform the tasks required;
o intense competition and rapid and significant technological change in
the information technology industry;
o increasing competition from outsourced lowre overhead firms in India,
Russia, and other rapidly developing technology sectors around the world;
or
o damage from fire, earthquakes, prolonged power outages, or other
natural or man-made disasters.
We will Require Additional Financing for Expansion and other Functions.
Although Synerteck is currently profitable, we will likely require substantial
additional capital in the future for expansion, business development, marketing,
computer software and systems, overhead, administrative, and other expenses. We
cannot assure you that we will be able to raise additional funds or that
financing will be available to Synerteck on acceptable terms. Lack of additional
funds could significantly affect our business. Further, funds raised through
future equity financing could be substantially dilutive to you and other
existing shareholders.
We Compete With Substantially Larger Companies. In attempting to market our
services to medium and larger organizations, we compete with substantially
larger companies which have greater name recognition and financial resources to
price their services and, in particular, computer products which are purchased
through them. Accordingly, we may not be able to effectively compete for larger
outsourcing and purchasing contracts unless and until we possess additional
financial, marketing, and technical resources.
Our Computer Systems May Fail. Synerteck's success is substantially
dependent upon our ability to deliver our clients high quality, uninterrupted
access to their websites, their networks, their e-mail systems, and technology
applications, which requires that we actively maintain our computer hardware and
software systems, as well as the data and information stored therein. Our
systems are vulnerable to damage by fire, natural disaster, power loss,
telecommunications failures, unauthorized intrusion, and other catastrophic
events. Any substantial interruption in our systems would have a material
adverse effect on our business, operating results, and financial condition. In
addition, our systems may be vulnerable to computer viruses, physical or
electronic break-ins, sabotage, or other problems caused by third parties which
could lead to interruptions, delays, loss of data, or cessation in service to
persons desiring to access their networks and internet properties. The
occurrence of any of these risks could have a material adverse effect upon
Synerteck's business, results of operations, and financial condition.
15
Investment Risks
A Purchase of Synerteck Shares is a Speculative Investment. Synerteck's
shares are a speculative investment. To date, Synerteck has generated a modest
amount of profits and we cannot guarantee that it will continue to do so or that
the level of profits will increase in the future. If Synerteck were to lose one
or more of its principal customers, it would likely generate losses, and we
would be forced to scale down Synerteck's operations or raise investment capital
to continue operations. If Synerteck were to generate losses and we were
unsuccessful at decreasing Synerteck's operating costs or raising investment
capital, it is unlikely that Synerteck would be able to meet its financial
obligations and you could lose your entire investment.
There has Never Been a Public Market For Our Shares. There has been no
public market for the common stock of Synerteck. If a public market for the
common stock does develop at a future time, sales of shares by shareholders of
substantial amounts of common stock of Synerteck in the public market could
adversely affect the prevailing market price and could impair our future ability
to raise capital through the sale of our equity securities.
You May Lack Liquidity in Your Shares. Because in the future, our stock may
trade on the over-the-counter bulletin board, our stockholders may have greater
difficulty in selling their shares when they want and for the price they want.
The over-the-counter bulletin board is separate and distinct from the Nasdaq
stock market. The bulletin board does not operate under the same rules and
standards as the Nasdaq stock market, including, for example, order handling
rules. The absence of these rules and standards may make it more difficult for a
stockholder to obtain execution of an order to trade and to obtain the price
they wanted for a trade. This means our shareholders may not be able to sell
their shares when they want for a price they want. In addition, because stocks
traded on the bulletin board are usually thinly traded, highly volatile, have
fewer market makers and are not followed by analysts, our stockholders may have
greater difficulty in selling their shares when they want and for the price they
want. Investors may have greater difficulty in getting orders filled because it
is anticipated that if our stock trades on a public market, it initially will
trade on the over-the-counter bulletin board rather than on Nasdaq. Investors'
orders may be filled at a price much different than expected when an order is
placed. Trading activity in general is not conducted as efficiently and
effectively as with Nasdaq-listed securities. Bulletin board transactions are
conducted almost entirely manually. Because there are no automated systems for
negotiating trades on the bulletin board, they are conducted via telephone. In
times of heavy market volume, the limitations of this process may result in a
significant increase in the time it takes to execute investor orders. Therefore,
when investors place market orders - an order to buy or sell a specific number
of shares at the current market price - it is possible for the price of a stock
to go up or down significantly during the lapse of time between placing a market
order and getting execution. Because bulletin board stocks are usually not
followed by analysts, there may be lower trading volume than for Nasdaq-listed
securities. Further, a registered broker-dealer must submit an application to
the National Association of Securities Dealers to enable our stock to be listed
on the bulletin board. Because the National Association of Securities Dealers
will conduct their own review of Synerteck and its business, we cannot assure
you that we will be successful in getting Synerteck listed on the bulletin board
or any other quotation medium.
We Have Never Issued a Dividend and Don't Anticipate any Dividends in the
Future. Synerteck has never issued a dividend and we do not anticipate paying
dividends on our common stock in the foreseeable future. Furthermore, we may
also be restricted from paying dividends in the future pursuant to subsequent
financing arrangements or pursuant to Delaware law.
16
We Have Limited the Liability of Our Management. Synerteck has adopted
provisions in its Certificate of Incorporation which limit the liability of our
officers and directors and provisions in our bylaws which provide for
indemnification by Synerteck of our officers and directors to the fullest extent
permitted by Delaware corporate law. Synerteck's Certificate of Incorporation
generally provide that its directors shall have no personal liability to
Synerteck or its stockholders for monetary damages for breaches of their
fiduciary duties as directors, except for breaches of their duties of loyalty,
acts or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, acts involving unlawful payment of dividends or
unlawful stock purchases or redemptions, or any transaction from which a
director derives an improper personal benefit. Such provisions substantially
limit your ability to hold directors liable for breaches of fiduciary duty.
You Could be Diluted from the Issuance of Additional Common and Preferred
Stock. Synerteck is authorized to issue up to 100,000,000 shares of common stock
and 10,000,000 shares of preferred stock. To the extent of such authorization,
the Synerteck board of directors will have the ability, without seeking
shareholder approval, to issue additional shares of common stock in the future
for such consideration as the board may consider sufficient. The issuance of
additional common stock in the future may reduce your proportionate ownership
and voting power.
17
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the quarter ended
September 30, 2004.
The following documents are filed as exhibits to this Form
10-QSB:
INDEX TO EXHIBITS
Exhibit
Number Title of Document
3.1 Certificate of Incorporation of Synerteck Incorporated, a Delaware corporation. (1)
3.2 Bylaws of Synerteck Incorporated, a Delaware corporation. (1)
10.1 Services Agreement between the Registrant and Healthcare Enterprise Group PLC.(1)
10.2 Summary of Services Agreement between the Registrant and Moore, Clayton & Co.
Inc. (1)
10.3 Services Agreement between the Registrant and SportsNuts, Inc. (1)
10.4 Management and Business Development Agreement between the Registrant and
SportsNuts, Inc. (1)
10.5 Sublease Agreement between the Registrant and SportsNuts, Inc. (1)
99.1 Certification by Chief Executive Officer, Clayton Barlow, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
99.2 Certification by Chief Financial Officer, Chene Gardner, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
99.3 Certification by Chief Executive Officer Clayton Barlow, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
99.4 Certification by Chief Financial Officer Chene Gardner, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
(1) Filed as an Exhibit to Amendment Number 2 to the Company's registration
statement on Form 10-SB, filed with the Commission on September 15, 2004.
19
[PG NUMBER]
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SYNERTECK INCORPORATE
Date: November 4, 2004 BY: /s/ Chene Gardner
--------------------------------------
Chene Gardner
Chief Financial Officer
20