SYNDICATION NET. COM, INC. AND SUBSIDIARY (A Development Stage Company) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT UNDER 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 0-28955 SYNDICATION NET.COM, INC. (Exact name of registrant as specified in its charter) Delaware 57-2218873 ---------- ----------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1250 24th Street, NW Suite 300 Washington, D.C. 20037 (Address of principal executive offices (zip code)) (202) 467-2788 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the last 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [_] Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Issued and Outstanding at September 30, 004 Common Stock, $0.0001 14,360,088 shares PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SYNDICATION NET.COM, INC. AND SUBSIDIARY (A Development Stage Company) CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2004 AND DECEMBER 31, 2003 SYNDICATION NET. COM, INC. AND SUBSIDIARY (A Development Stage Company) Consolidated Balance Sheets ASSETS SEPTEMBER 30, DECEMBER 31, 2004 2003 -------- -------- (Unaudited) CURRENT ASSETS Cash $ -- $ 14 Notes receivable - related party 221,526 -- Interest receivable - related party 13,157 -- -------- -------- Total Current Assets 234,683 14 -------- -------- OTHER ASSETS Investment (Note 4) 276,431 -- -------- -------- Total Other Assets 276,431 -- -------- -------- TOTAL ASSETS $511,114 $ 14 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 2 SYNDICATION NET. COM, INC. AND SUBSIDIARY (A Development Stage Company) Consolidated Balance Sheets (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) SEPTEMBER 30, DECEMBER 31, 2004 2003 ----------- ----------- (Unaudited) CURRENT LIABILITIES Cash overdraft $ 152 $ -- Accounts payable 323,524 306,008 Accounts payable-related party 1,750 1,000 Note payable - related party 206,000 113,100 Interest payable - related party 31,887 32,965 Note payable 150,500 30,000 Interest payable 18,230 5,295 Convertible debenture 200,000 -- Interest payable - convertible debenture 4,750 -- Accrued directors fees 34,000 12,000 ----------- ----------- Total Current Liabilities 970,793 500,368 ----------- ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIT) Preferred stock: 20,000,000 shares authorized of $0.0001 par value, no shares issued and outstanding -- -- Common stock: 100,000,000 shares authorized of $0.0001 par value, 14,360,088 and 12,075,088 shares issued and outstanding, respectively 1,436 1,207 Additional paid-in capital 3,033,980 2,021,958 Deferred fees (276,500) (292,000) Deficit accumulated prior to the development stage (2,231,519) (2,231,519) Deficit accumulated during the development stage (987,076) -- ----------- ----------- Total Stockholders' Equity (Deficit) (459,679) (500,354) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 511,114 $ 14 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 3 SYNDICATION NET. COM, INC. AND SUBSIDIARY (A Development Stage Company) Consolidated Statements of Operations (Unaudited) FROM INCEPTION OF THE DEVELOPMENT FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED STAGE ON SEPTEMBER 30, SEPTEMBER 30, JANUARY 1, 2004 ------------ ------------ ------------ ------------ THROUGH 2004 2003 2004 2003 SEPTEMBER 30, 2004 ------------ ------------ ------------ ------------ ------------ CONSULTING REVENUE $ -- $ 1,600 $ -- $ 3,420 $ -- ------------ ------------ ------------ ------------ ------------ OPERATING EXPENSES General and administrative 94,015 172,170 257,069 184,845 257,069 Consulting 152,400 31,500 692,900 571,338 692,900 ------------ ------------ ------------ ------------ ------------ Total Operating Expenses 246,415 203,720 949,969 756,183 949,969 ------------ ------------ ------------ ------------ ------------ OPERATING LOSS (246,415) (202,120) (949,969) (752,763) (949,969) ------------ ------------ ------------ ------------ ------------ OTHER (EXPENSES) Interest income 3,945 4,000 8,370 4,000 8,370 Interest expense (12,996) (3,590) (45,477) (10,130) (45,477) ------------ ------------ ------------ ------------ ------------ Total Other (Expenses) (9,051) 410 (37,107) (6,130) (37,107) ------------ ------------ ------------ ------------ ------------ LOSS BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS (255,466) (201,710) (987,076) (758,893) (987,076) ------------ ------------ ------------ ------------ ------------ INCOME TAX EXPENSE -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ LOSS BEFORE DISCONTINUED OPERATIONS (255,466) (201,710) (987,076) (758,893) (987,076) ------------ ------------ ------------ ------------ ------------ Income from discontinued operations -- 12,861 -- 40,831 -- ------------ ------------ ------------ ------------ ------------ Total income from discontinued operations -- 12,861 -- 40,831 -- ------------ ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (255,466) $ (188,849) $ (987,076) $ (718,062) $ (987,076) ============ ============ ------------ ============ ============ BASIC AND LOSS PER SHARE Loss before discontinued operations $ (0.02) $ (0.02) $ (0.07) $ (0.07) Income from discontinued operations 0.00 0.00 0.00 0.00 ------------ ------------ ------------ ------------ Total Income (Loss) Per Share $ (0.02) $ (0.02) $ (0.07) $ (0.07) ============ ============ ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 15,022,208 11,512,815 13,843,247 11,053,636 ============ ============ ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 4 SYNDICATION NET. COM, INC. AND SUBSIDIARY (A Development Stage Company) Consolidated Statement of Stockholders' Equity (Deficit) COMMON STOCK ADDITIONAL -------------------------- PAID-IN DEFERRED ACCUMULATED SHARES AMOUNT CAPITAL FEES DEFICIT ------------ ------------ ------------ ------------ ------------ Balance, December 31, 2003 12,075,088 $ 1,207 $ 2,021,958 $ (292,000) $ (2,231,519) Common stock issued for cash at $1.00 per share on February 16, 2004 (unaudited) 50,000 5 49,995 -- -- Common stock issued for deferred fees at $0.80 per share on February 16, 2004 (unaudited) 30,000 3 23,997 (24,000) -- Common stock issued for assets at $0.90 per share on February 28, 2004 (unaudited) 120,000 12 107,988 -- -- Common stock issued for assets at $0.65 per share on March 17, 2004 (unaudited) 160,000 16 103,984 -- -- Common stock issued for assets at $0.65 per share on March 17, 2004 (unaudited) 15,000 2 9,749 -- -- Common stock issued for assets at $0.65 per share on March 17, 2004 (unaudited) 60,000 6 38,994 -- -- Common stock issued for deferred fees at $0.40 per share on May 18, 2004 (unaudited) 600,000 60 239,940 (240,000) -- Common stock issued for services at $0.35 per share on June 1, 2004 (unaudited) 1,200,000 120 419,880 -- -- Common stock issued for additional interest on default on note payable at $0.35 per share (unaudited) 50,000 5 17,495 -- -- Amortization of deferred fees (unaudited) -- -- -- 279,500 -- Net loss for the nine months ended September 30, 2004 (unaudited) -- -- -- -- (987,076) ------------ ------------ ------------ ------------ ------------ Balance, September 30, 2004 (unaudited) 14,360,088 $ 1,436 $ 3,033,980 $ (276,500) $ (3,218,595) ============ ============ ============ ============ ============ Deficit accumulated prior to development stage $ (2,231,519) Deficit accumulated during the development stage (987,076) ------------ Accumulated deficit $ (3,218,595) ============ The accompanying notes are an integral part of these consolidated financial statements. 5 SYNDICATION NET. COM, INC. AND SUBSIDIARY (A Development Stage Company) Consolidated Statements of Cash Flows (Unaudited) FROM INCEPTION OF THE DEVELOPMENT FOR THE NINE MONTHS ENDED STAGE ON SEPTEMBER 30, JANUARY 1, 2004 -------------------------- THROUGH 2004 2003 SEPTEMBER 30, 2004 --------- --------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $(987,076) $(718,062) $(987,076) Adjustments to reconcile net loss to net cash provided (used) in operating activities: Common stock issued for services 437,500 185,550 437,500 Amortization of deferred fees 279,500 -- 279,500 Changes in operating assets and liabilities: (Increase) in interest receivable - related party (6,337) -- (6,337) (Increase) in accounts receivable -- (595,742) -- Increase in accounts payable - related party 750 -- 750 Increase (decrease) in accounts payable 17,516 564,946 17,516 Increase in accrued expenses 17,685 6,258 17,685 Increase in accrued expenses - related party 20,922 551,160 20,922 --------- --------- --------- Net Cash Provided (Used) in Operating Activities (219,540) (5,890) (219,540) --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Increase in investments (117,500) -- (117,500) --------- --------- --------- Net Cash Used in Investing Activities (117,500) -- (117,500) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Cash overdraft 152 -- 152 Stock issued for cash 50,000 7,000 50,000 Increase in notes payable 190,500 40,000 190,500 Payments on notes payable (20,000) -- (20,000) Increase in notes payable - related party 56,500 1,000 56,500 Payments on notes payable - related party (13,600) -- (13,600) Increase in convertible debenture 200,000 -- 200,000 Increase in notes receivable - related party (126,526) -- (126,526) --------- --------- --------- Net Cash Provided by Financing Activities 337,026 48,000 337,026 --------- --------- --------- NET INCREASE (DECREASE) IN CASH (14) 42,110 (14) CASH, BEGINNING OF PERIOD 14 31 14 --------- --------- --------- CASH, END OF PERIOD $ -- $ 42,141 $ -- ========= ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 6 SYNDICATION NET. COM, INC. AND SUBSIDIARY (A Development Stage Company) Consolidated Statements of Cash Flows (Continued) (Unaudited) FROM INCEPTION OF THE DEVELOPMENT FOR THE NINE MONTHS ENDED STAGE ON SEPTEMBER 30, JANUARY 1, 2004 -------------------------- THROUGH 2004 2003 SEPTEMBER 30, 2004 --------- --------- ----------------- SUPPLEMENTAL CASH FLOW INFORMATION Cash Payments For: Income taxes $ -- $ -- $ -- Interest $ 11,370 $ -- $ 11,370 Non-Cash Financing Activities Common stock issued for deferred fees $264,000 $728,000 $264,000 Common stock issued for services $437,500 $185,550 $437,500 Common stock issued to convert debt to related parties $ -- $545,788 $ -- The accompanying notes are an integral part of these consolidated financial statements. 7 SYNDICATION NET. COM, INC. AND SUBSIDIARY (A Development Stage Company) Notes to the Consolidated Financial Statements September 30, 2004 and December 31, 2003 NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying unaudited consolidated 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 accounting principles generally accepted in the United States of America have been or omitted in accordance with such rules and regulations. The information furnished in the interim consolidated 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 consolidated financial statements be read in conjunction with the Company's most recent audited financial statements and notes thereto included in its December 31, 2003 Annual Report on Form 10-KSB. Operating results for the nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. NOTE 2 - RECLASSIFICATIONS Certain reclassifications have been made to the September 30, 2004 financial statements to conform to the current quarter's presentation. NOTE 3 - GOING CONCERN The Company's consolidated financial statements are prepared using accounting principals generally accepted in the Unites States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company does not have cash or other material assets, nor does it have an established source of revenues to cover its operating costs and to allow it to continue as a going concern. The consolidated financial statements do not reflect any adjustments that might result from the outcome of this uncertainty. It is management's intent to seek growth by way of a merger or acquisition. It is the belief that over the next 12 months that Company will acquire at least one or more of acquisition candidates. The acquisition process should provide capital, revenue and incomes as a result. There is no assurance that the Company will be successful in its acquisition efforts or in raising the needed capital. NOTE 4 - MATERIAL EVENTS STOCK ISSUANCES On February 16, 2004, the Company issued 50,000 share of common stock for $50,000 cash. This stock issuance is part of the private placement to issue up to 50,000 units. Each unit consists of one share of common stock and three warrants to purchase three additional shares of common stock. Each warrant has an exercise price of $0.10 per share. On February 16, 2004, the Company issued 30,000 shares for deferred legal fees at $0.80 per share. 8 SYNDICATION NET. COM, INC. AND SUBSIDIARY (A Development Stage Company) Notes to the Consolidated Financial Statements September 30, 2004 and December 31, 2003 NOTE 4 - MATERIAL EVENTS (Continued) STOCK ISSUANCES (CONTINUED) During the six months ended June 30, 2004, the Company issued 355,000 shares of common stock and paid out $52,500 in exchange for 575 class "A" common shares and 1,500 common shares in Tri-State Metro Territories, LLC, Inc. (TSMT) and notes receivable with principal balances of $95,000 plus accrued interest. On May 18, 2004, the Company issued 600,000 shares of common stock for deferred legal fees at $0.40 per share. On June 1, 2004, the Company issued 1,200,000 shares of common stock for consulting services at $0.35 per share. On June 15, 2004, the Company issued 50,000 shares of common stock for defaulting on a note payable at $0.35 per share. NOTES RECEIVABLES During the nine months ended September 30, 2004, the Company lent $125,526 to (TSMT) and purchased four notes receivables from TSMT by the issuance of common stock to three unrelated parties for notes receivables of $125,526. All notes are unsecured and due on demand. Interest rates range from prime + 1% to 10% per annum. INVESTMENT During the nine months ended September 30, 2004, the Company purchased 575 Class "A" common stock and 1,500 common shares in Tristate Metro Territories, LLC (TSMT). The valuation of this investment was $276,431. This investment is valued at the lower of cost or market and represents 8% of TSMT. A major shareholder of the Company is also the managing member of TSMT. NOTE PAYABLE - RELATED PARTY During the nine months ended September 30, 2004, the Company borrowed an additional $56,500 from a related party and repaid $13,600. The balance at September 30, 2004 was $206,000. This note is due on demand and unsecured. AGREEMENTS As of June 1, 2004, the Company issued a Secured Convertible Debenture to an unrelated party in the principal amount of $200,000, of which $50,000 has been paid to the Company. Another $150,000 was issued during July, after the registration statement associated with the debenture was filed with the SEC. The convertible debenture 9 SYNDICATION NET. COM, INC. AND SUBSIDIARY (A Development Stage Company) Notes to the Consolidated Financial Statements September 30, 2004 and December 31, 2003 NOTE 4 - MATERIAL EVENTS (Continued) AGREEMENTS (CONTINUED) accrues interest at the rate of 5% per year and is convertible at the holder's option. At the option of the Company, the entire principal amount and all accrued interest can be either: (i) paid three years after the convertible debenture was issued, or (ii) converted into shares of the Company's common stock at a price per share that is equal to the lesser of: (i) $0.42 or (ii) an amount equal to 80% of the average of the lowest daily volume weighted average price of the common stock for the five trading days immediately preceding the conversion date. The debenture has a term of three years and is secured by all of the company's assets. As of September 30, 2004, the debenture had not been converted. There was not a beneficial conversion expense associated with this debenture. On June 15, 2004, the Company entered into standby equity distribution agreement with an unrelated party. Whereby the Company may sell common stock for up to $10,000,000. Each share of common stock sold will be sold at 98% of the lowest volume weighted average price of the common stock during the five consecutive trading days immediately following the notice date. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION FORWARD-LOOKING STATEMENTS The information in this registration statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This Act provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements other than statements of historical fact made in this registration statement are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. Forward-looking statements reflect management's current expectations and are inherently uncertain. Our actual results may differ significantly from management's expectations. The following discussion and analysis should be read in conjunction with our financial statements and summary of selected financial data, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. GENERAL We are a consulting company formed to acquire controlling interests in or to participate in the creation of, and to provide financial, management and technical support to, development stage businesses. Our strategy is to integrate affiliated companies into a network and to actively develop the business strategies, operations and management teams of the affiliated entities. It is the intent of our board of directors to develop and exploit all business opportunities to increase efficiencies between companies with which we may invest in or consult. In addition, we may acquire companies to be held as wholly owned subsidiaries. We had one wholly owned subsidiary, Kemper Pressure Treated Forest Products, Inc. Kemper was engaged in the retail brokerage business of preservative treated lumber such as utility poles, bridge pilings, timber and guardrail posts. Kemper had one customer and as a result of limited revenue we elected to wind down Kemper's operations during the fourth quarter of 2003. We have changed our focus and growth efforts towards our consulting business and/or the acquisition of an operating development company. On November 10, 2003, we entered into a Letter of Intent with Tri State Metro- Territories, LLC (Tri-State) to acquire substantially all of the assets of Tri-State. Brian Sorrentino, a major shareholder of our company as well as an executive officer and director, is also the managing member in Tri State. Tri State is in the business of selling franchised hair coloring salon units under the name of "HCX the haircolorxperts". The assets being acquired by us include the exclusive rights to develop the franchise chain of "HCX Tri-State Metro Territories LLC" in the District of Columbia and Maryland area as well as the interest in the prototype HCX Salon located in Columbia, Maryland. On March 18, 2004, we entered into privately negotiated exchange agreements to exchange 355,000 restricted shares of our common stock for 8% of membership interests of Tri-State. Although it is our intent to acquire all the assets of Tri-State, the specific terms and the evaluations of the potential transaction have not yet been finalized and the pending audited financial statements of Tri-State are a requirement for completion of that transaction. The transaction is also subject to customary closing conditions, including but not limited to the receipt of all definitive documents, valuations, consents, and approvals. There can be no assurance as to whether or when the transaction will close. THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2003 For the three months ended September 30, 2004, we did not produce any revenue. The General and Administrative Operating Expenses for the quarter ended September 30, 2004 decreased from $172,170 for the quarter ended September 30, 2003 to $94,015 for the quarter ended September 30, 2004. Our total operating expenses increased from $203,720 at September 30, 2003 to $246,415 for the quarter ended September 30, 2004. The net loss for the quarter ended September 30, 2004 was $255,466 compared to net loss of $188,849 for the quarter ended September 30, 2003. Total current assets were $234,683 and total assets were $511,114 at September 30, 2004. Our total current liabilities were $970,793. LIQUIDITY AND CAPITAL RESOURCES We have historically incurred losses. For the three months ended September 30, 2004, we had a net loss of $255,466. For the fiscal year ended December 31, 2003, we had a net loss of $1,088,420. On June 15, 2004, we entered into a Standby Equity Distribution Agreement with Cornell Capital Partners, L.P. Pursuant to the Standby Equity Distribution Agreement, we may, at our discretion, periodically sell to Cornell Capital Partners shares of common stock for a total purchase price of up to $10,000,000. For each share of common stock purchased under the Standby Equity Distribution Agreement, Cornell Capital Partners will pay 98% of the lowest volume weighted average price of the common stock during the five consecutive trading days immediately following the notice date. In addition, Cornell Capital Partners will retain 5% of each advance under the Standby Equity Distribution Agreement. For example, assuming that the 98% of lowest volume weighted average price of our common stock during the five consecutive trading days immediately following a notice date is $.245, if we request an advance in the amount of $200,000, Cornell Capital will be entitled to the following: o $10,000, which represents the 5% commitment fee; and o 816,327 shares of our common stock, which is calculated by dividing $200,000 by $.245. Cornell Capital Partners is restricted from owing in excess of 9.9% of our outstanding common stock. In the event that Cornell Capital Partners is unable to sell shares of common stock that it acquires under the Standby Equity Distribution Agreement and its ownership equals 9.9% of the our outstanding, then we will not be able to draw down money under the Standby Distribution Agreement. Cornell Capital Partners is a private limited partnership whose business operations are conducted through its general partner, Yorkville Advisors, LLC. In addition, we engaged Newbridge Securities Corporation, a registered broker-dealer, to advise us in connection with the Standby Equity Distribution Agreement. For its services, Newbridge Securities Corporation received 40,000 shares of our common stock. On June 15, 2004, we entered into a Securities Purchase Agreement whereby we issued $200,000 in convertible debentures to Cornell Capital Partners, L.P. of which $50,000 was received by us on June 15, 2004 and $150,000 was received by us on July 9, 2004. The debentures bear interest at 5%, mature three years from the date of issuance, and are convertible into our common stock, at the holder's option, at the lower of: (i) $.42; or (ii) eighty percent (80%) of the lowest volume weighted average price of the common stock for the five (5) trading days immediately preceding the conversion date. The issuance of the convertible debenture has resulted in the creation of a liability. However, we believe, although we cannot provide guarantees, that the convertible debenture will be converted by Cornell Capital into shares of our common stock thereby not impacting our cash position. In the event that Cornell Capital does not convert the debenture to shares, then we will be required to repay the principal and interest on the debenture, which will have a negative impact on our liquidity. Our future revenues and profits, if any, will depend upon various factors, including the following: o whether we will be able to effectively evaluate the overall quality and industry expertise of potential acquisition candidates; o whether we will have the funds to provide seed capital and mezzanine financing to brick-and-mortar, e-commerce and Internet-related companies; and o whether we can develop and implement business models that will enable growth companies to develop. We may not be able to effect any acquisitions of or investments in development stage companies if we are unable to secure sufficient funds to finance our proposed acquisitions costs. We expect that our current cash and cash equivalents will allow us to continue our current operation for six months. If we are unable to generate additional revenues or secure financings, we may be forced to cease or curtail operations. We intend for our management team to identify companies that are positioned to succeed and to assist those companies with financial, managerial and technical support. Over the next 12 months, we intend to increase revenue and gross profit margin by focusing and expanding its consulting services and seeking acquisition candidates. It is management's belief that potential acquisition targets can be better identified and assessed for risk if we first become involved with these candidates on a consulting capacity. Our strategy is to integrate affiliated companies into a network and to actively develop the business strategies, operations and management teams of the affiliated entities. We have recently decided to engage in the acquisition phase of our business plan. To that end, we expanded our relationship with HCX Tri-State Metro Territories and on November 7, 2003 executed a Letter of Intent pursuant to which we will acquire substantially all of the assets of Tri State. Tri State is in the business of selling franchised hair coloring salon units under the name of "HCX the haircolorxperts". NINE MONTH PERIOD ENDED SEPTEMBER 30, 2004 COMPARED TO SEPTEMBER 30, 2003 The Operating Expenses for the nine month period September 30, 2004 increased from $756,183 for the nine month period ended September 30, 2003 to $949,969 for the nine month period ended September 30, 2004. Our operating expenses increased from $184,845 for the nine month period ended September 30, 2003 to $257,069 for the nine month period ended September 30, 2004. Our total consulting revenue decreased by $3,420 from Septemeber 30, 2003 to 0 consulting revenue for the nine month period ended September 30, 2004. Our operating loss increased from ($752,763) at September 30, 2003 to ($949,969) at September 30, 2004. Our Net Loss per share remain at $.07 per share for the nine month periods ended September 30, 2003 and September 30, 2004. We do not foresee any significant changes in the number of our employees over the next twelve months except in the event we finalize our acquisition of the assets of Tri-State or complete any other acquisitions which would require us to hire additional employees related to that business. We have not paid dividends on our common stock, and intend to reinvest our earnings to support our working capital and expansion requirements. We intend to continue to utilize our earnings in the development and expansion of the business and do not expect to pay cash dividends in the foreseeable future. It is the belief of management that as we move toward an active trading status the ability to raise capital by stock issuance to effect our business plan is enhanced. We do not expect to sell any manufacturing facilities or significant equipment over the next twelve months except within the demands of potential acquisitions that we may pursue. ITEM 3. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES As of September 30, 2004, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. This evaluation was done under the supervision and with the participation of the Company`s President and Principal Financial Officer. Based upon that evaluation, he concluded that the Company`s disclosure controls and procedures are effective in gathering, analyzing and disclosing information needed to satisfy the Company`s disclosure obligations under the Exchange Act. CHANGES IN INTERNAL CONTROLS There were no significant changes in the Company`s internal controls or in other factors that could significantly affect those controls since the most recent evaluation of such controls. PART 2 - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Other than the information stated below, SyndicationNet is not a party to any litigation and management has no knowledge of any threatened or pending litigation against it. On November 26, 2001, Barry Pope ("Pope"), individually and as a shareholder of Worldwide Forest Products, Inc. ("Worldwide") commenced an action against Brian Sorrentino, Dale Hill, Worldwide Forest Products, Inc., Kemper Pressure Treated Forest Products, Inc., Life2k.com, Inc., Algonquin Acquisition Corp., Generation Acquisition Corp., SyndicationNet.com, Inc., Castle Securities Corporation and John Does 1-5, in the Circuit Court of Madison County, Mississippi. In such action, Pope claims that stock he owned and commissions owed to him by Worldwide should have been converted into shares of the common stock of our company. Worldwide was a corporation organized under the laws of the State of Mississippi that operated as a wood treatment company that worked exclusively with creosite, a wood treatment chemical, for utility wood poles and products. In 1997 the corporate charter of Worldwide expired and Worldwide no longer conducts operations. Brian Sorrentino, an officer and director and a shareholder of our company, was the chairman of the board, chief financial officer and majority shareholder of Kemper and was also the chairman of the board, chief financial officer and beneficial majority shareholder of Worldwide Forest Products, Inc. In 1996, Pope entered into a consent order settlement with Worldwide arising from claims brought by Pope against the former President of Worldwide, David Wise, and Worldwide. Pursuant to such settlement, on November 8, 1996, Pope received 30,000 shares of Worldwide common stock and received warrants, exercisable at $1.00 per share, to purchase 200,000 shares of Worldwide common stock. Worldwide never completed an initial public offering and, as such, Pope alleges losses equal to the value of his Worldwide shares had Worldwide completed a public offering, had such shares traded at a minimum of $5.00 per share and had Pope been able to sell his securities equal to or in excess of $5.00. Pope further alleges that certain defendants guaranteed the obligations of Worldwide in the amount of $2,060,000 and alleges that all shareholders of Worldwide were provided an opportunity by Worldwide to convert shares of Worldwide common stock into shares of common stock of our company. Finally, Pope alleges that Brian Sorrentino orally guaranteed payment to Pope in the amount of $200,000 representing commissions to be paid to Pope if and when Pope provided a $2,000,000 loan for Worldwide which loan was never effected. Pope is seeking compensatory and punitive damages in an amount to be determined at trial, plus an award of reasonable costs, attorneys' fees and expenses, pre-judgement and post-judgement interest, and any other relief to which Pope may be entitled. On May 2, 2002, the Circuit Court of Madison County, Mississippi, granted the plaintiff's counsel motion to withdraw as counsel for the plaintiff. As of March 2004, we continue to pursue discovery proceedings with plaintiff's newly engaged counsel. We believe that Pope's claim is without merit and we have engaged counsel to vigorously defend against the action. In 2004, Cassidy and Associates, PA, our former counsel, filed a statement of claim against us with the American Arbitration Association. The claimant claims breach of contract and is seeking damages in the amount of $35,000. ITEM 2. CHANGES IN SECURITIES We have not issued securities for the period ended June 30, 2004. ITEM 3. DEFAULTS UPON SENIOR SECURITIES: Not Applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable ITEM 5. OTHER INFORMATION Subsequent Event: In November 2004, we received confirmation from the SEC that our Registration Statement on Form SB-2, in connection with our financing from Cornell Capital, was declared effective. ITEM 6. EXHIBITS AND REPORTS ON FORM 8K (a) Exhibits 31.1 Section 302 Certification 32.1 Section 906 Certification (b) Reports on Form 8-K None 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. SYNDICATIONNET.COM, INC. By: /s/ Brian Sorrentino --------------------------------------------------- Chief Executive Officer, (Principal Executive Officer) Dated: November 12, 2004 By: /s/ Mrutyunjaya Chittavajhula --------------------------------------------------- Chief Financial Officer (Principal Accounting Officer) Dated: November 12, 2004