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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-KSB
[ X ] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended December 31, 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: 0-50754
SYNERTECK INCORPORATED
(Exact name of small business issuer as specified in its charter)
Delaware 20-0929024
- ---------------------------------------------------- --------------------------------------
(State or other jurisdiction (IRS Employer
of 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.)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock
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 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
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The Company's revenues for the fiscal year ending December 31, 2004
were $207,080.
The aggregate market value of the Company's voting stock held by
non-affiliates computed by reference to the closing price as quoted on the NASD
Electronic Bulletin Board on March 7, 2005, was approximately $366,720. For
purposes of this calculation, voting stock held by officers, directors, and
affiliates has been excluded.
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 March 7, 2005, the
Company had outstanding 500,000 shares of common stock, par value $0.001 per
share.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure Format (check one) [ ] Yes [x] No
TABLE OF CONTENTS
PART I.........................................................................1
ITEM 1: DESCRIPTION OF BUSINESS...............................................1
ITEM 2: DESCRIPTION OF PROPERTY...............................................10
ITEM 3: LEGAL PROCEEDINGS.....................................................10
ITEM 4: SUBMISSION ON MATTERS TO A VOTE OF SECURITY HOLDERS...................11
PART II.......................................................................12
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..............12
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS
OF OPERATIONS.................................................................12
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE..........................................................30
ITEM 8A: CONTROLS AND PROCEDURES..............................................29
PART III......................................................................31
ITEM 9: DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT.............................................31
ITEM 10: EXECUTIVE COMPENSATION...............................................33
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS...................................................34
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................36
ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K.....................................36
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES...............................37
INDEX TO EXHIBITS.............................................................38
SIGNATURES....................................................................39
FORWARD LOOKING STATEMENTS
THIS ANNUAL REPORT ON FORM 10-KSB, IN PARTICULAR "ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND
"ITEM 1. BUSINESS," INCLUDE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE STATEMENTS
REPRESENT THE COMPANY'S EXPECTATIONS OR BELIEFS CONCERNING, AMONG OTHER THINGS,
FUTURE REVENUE, EARNINGS, AND OTHER FINANCIAL RESULTS, PROPOSED ACQUISITIONS AND
NEW PRODUCTS, ENTRY INTO NEW MARKETS, FUTURE OPERATIONS AND OPERATING RESULTS,
FUTURE BUSINESS AND MARKET OPPORTUNITIES. THE COMPANY WISHES TO CAUTION AND
ADVISE READERS THAT THESE STATEMENTS INVOLVE RISK AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE EXPECTATIONS AND BELIEFS
CONTAINED HEREIN. FOR A SUMMARY OF CERTAIN RISKS RELATED TO THE COMPANY'S
BUSINESS, SEE "RISK FACTORS." UNDER "ITEM 1. DESCRIPTION OF BUSINESS."
Unless the context requires otherwise, references to the Company are to
Synerteck Incorporated.
PART I.
ITEM 1: DESCRIPTION OF BUSINESS
Cautionary Factors That May Affect Future Results (Cautionary Statements Under
the Private Securities Litigation Reform Act of 1995)
The disclosure and analysis set forth herein contains certain forward
looking statements, particularly statements relating to future actions,
performance or results of current and anticipated products and services, sales
efforts, expenditures, and financial results. From time to time, the Company
also provides forward-looking statements in other publicly-released materials,
both written and oral. Forward-looking statements provide current expectations
or forecasts of future events such as new products or services, product
approvals, revenues, and financial performance. These statements are identified
as any statement that does not relate strictly to historical or current facts.
They use words such as "anticipates," "intends," "plans," "expects," "will," and
other words and phrases of similar meaning. In all cases, a broad variety of
assumptions can affect the realization of the expectations or forecasts in those
statements. Consequently, no forward-looking statement can be guaranteed. Actual
future results may vary materially.
The Company undertakes no obligation to update any forward-looking
statements, but investors are advised to consult any further disclosures by the
Company on this subject in its subsequent filings pursuant to the Securities
Exchange Act of 1934. Furthermore, as permitted by the Private Securities
Litigation Reform Act of 1995, the Company provides these cautionary statements
identifying risk factors, listed below, that could cause the Company's actual
results to differ materially from expected and historical results. It is not
possible 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
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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, 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.
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 for information 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 lower 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
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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.
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. Prior to this
registration statement, 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
3
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.
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.
CORPORATE ORGANIZATION
Synerteck Incorporated was formed in the state of Utah on March 2, 2001,
and was subsequently reincorporated in Delaware on March 30, 2004. Synerteck was
a wholly-owned subsidiary of SportsNuts. Inc., a Delaware corporation traded on
the OTC Electronic Bulletin Board, until Synerteck was spun off on November 15,
2004.
THE BUSINESS OF SYNERTECK
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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. We do not have any plans to modify or change the
website in the near future to modify or change the website.
Our Approach
Data Gathering. We approach new clients and projects by collecting
from them the following information:
o Existing hardware and configuration;
o Existing software and procedures;
o Business processes; and
o Personnel requirements.
Project Kickoff. After gathering and analyzing the initial data
supplied by the client, we then initiate a planning session with the
client's key technology staff and management to discuss the scope of the
project, objectives, and implementation timelines. We seek to have these
personnel comprise the team with which we primarily interface and update on
a regular basis. We also attempt to gain consensus among this team for
formulating the strategy and tactics for our engagement. Unless the project
or service contemplated requires additional analysis, we typically
negotiate the client agreement during this phase. Synerteck uses a standard
form agreement for most service arrangements and projects, although the
terms of any formal agreement are generally modified through the
negotiation process prior to execution.
Client Interviews and Information Analysis. After Synerteck has been
formally retained, we intensify our analysis of the needs of the client by
conducting in-depth interviews with management, information technology
staff, security personnel, and other key employees. Depending upon the
scope of the project or service contemplated, we may also distribute
questionnaires to other client personnel. Our interviews and questions
attempt to discern a variety of factors, including:
o Potential efficiencies and workflow improvements that can be
gained through technology improvements and processes;
o Challenges to effective implementation; and
o Available financial resources to allocate to ongoing service or
one-time projects.
Delivery. We commence implementation of our recommended strategy with
a client presentation and collaborative discussion regarding the following:
o Plan of service delivery and site, network, or software
configuration;
o Timeline and delivery milestones;
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o Agreed reporting and responsibility mechanisms; and
o Additional hardware and software requirements.
Products and Services
We bring value to our clients from our access to key relationships in the
information technology industry. These relationships help Synerteck offer a
comprehensive and cost-effective technology solution to almost any organization.
Through Synerteck and its partners, our clients can access the following range
of services:
o Network Engineering, Architecture, and Design. Our team has experience
building complex local area and wide area network configurations for
small and large businesses. Since we have worked primarily with
service-based organizations, our expertise is necessarily specialized
with respect to service-based architecture and design solutions. We
have designed networks for eight clients, including networks for our
three largest clients, Moore Clayton & Co., Inc., Healthcare
Enterprise Group PLC and SportsNuts, Inc.
o Website and E-Mail Hosting. We currently host 19 websites for a wide
variety of organizations,including the websites of our three largest
clients, Moore Clayton & Co., Inc., Healthcare Enterprise Group PLC,
and SportsNuts, Inc. We can host websites using Linux/ApacheTM or
through MicrosoftTM protocols and server extensions, including
Microsoft Front PageTM. Depending on the complexity and memory
requirements of the site, our hosting fees range from $199 per month
to a free component of a larger service contract. We also provide
point-of-presence and full MicrosoftTM exchange e-mail access;
o Network Hosting. We have the ability to host entire networks on our
system. We currently host the networks of three clients, Moore Clayton
& Co., Inc., Healthcare Enterprise Group PLC and SportsNuts, Inc.
Depending on the geographic location of our clients and their
personnel, we can host a local- or wide-area network that provides
worldwide access to other computers, devices, drives, and folders.
Based upon financial resources and needs of the client, we can
supplement this service with continuous or periodic support,
including:
o Data storage and backup;
o Desktop user support;
o Active directory maintenance and support; and
o Network device maintenance and support.
o Website Design. We can design and build a website for any budget or
type of organization. We have designed websites for eighteen clients,
including the websites of two of our largest clients, Moore Clayton &
Co., Inc. and SportsNuts, Inc. Our range includes simple website
templates to highly interactive and application-heavy sites requiring
substantial memory. We can incorporate database interface, FlashTM
development, or other components to enable our clients to use their
websites as primary marketing tools for their products and services.
o Application Programming. Depending upon the budget, timetable, and
business rules that govern a project, we partner with local and
offshore programmers to build customized enterprise applications. Our
programming partners are proficient in MySQLTM, OracleTM, and SequelTM
database applications, as well as PHPTM, JAVATM, and MicrosoftTM .NET
web application programming languages. We have created database
6
applications for five clients including two of our largest clients,
Moore Clayton & Co., Inc. and SportsNuts, Inc.
o Telecommunication Systems Services and Integration. The increasing use
by our clients of communications devices that interact with networks
and e-mail servers has required a service strategy from Synerteck that
includes mobile phone and wireless device support. In addition, we can
also provide voice-over internet protocol access for our clients that
want to enhance the use of their network services and minimize their
long distance telephone charges. We have implemented telecommunication
systems that interact with networks and e-mail servers for one client,
Moore, Clayton & Co., Inc.
o Hardware Sales and Hardware Lease Brokering. When a client's
recommended solution requires the procurement of hardware, we can
obtain computer equipment from local vendors at a discount to the
prices offered to retail customers. We can then sell such equipment to
our clients at a retail price. Alternatively, we can broker a computer
equipment lease where Synerteck serves as the vendor to the lease
financing company acting as the lessor to our client. Ingram Micro,
Inc., a Salt Lake City-based computer hardware sales company, is the
principal supplier of hardware components, including laptops, servers,
desktops, networking devices, and software that we sell to or arrange
lease financing for our customers. Ingram also supplies the hardware
and software that we use in performing our engineering, hosting,
design, and telecommunications systems services. We also procure
computer hardware for resale directly from the manufacturer by
ordering from their websites or dealing with a local manufacturer's
representative. We have not experienced any difficulties in obtaining
requested hardware or software from Ingram or from the hardware
manufacturers, and consequently do not anticipate any difficulties in
obtaining such hardware or software for future sales and service
contracts. We have brokered equipment leases and have sold computer
equipment to 20 clients, including our three largest clients, Moore
Clayton & Co., Inc., Healthcare Enterprise Group PLC and SportsNuts,
Inc.
Principal Clients
Synerteck is heavily dependent upon three principal clients for most of its
revenue. During the calendar year 2004, for example, one client (Moore, Clayton
& Co.) generated in excess of 55% of our total revenue. We have executed monthly
engagements with other clients for ongoing information technology services,
which in turn is expected to reduce, but not eliminate our dependence upon a
single client. The following is a brief description of our three principal
clients and our service agreements with them:
Moore, Clayton & Co. Moore, Clayton & Co., Inc. is an international
strategic advisory firm with offices in London, Santa Monica, Tampa, and
New York. Moore, Clayton & Co. is also engaged in joint ventures with
various worldwide partners in North America, Europe, and now recently in
South Africa. Moore, Clayton & Co. personnel require round-the-clock access
to e-mail and shared access to a wide-area network which is housed in our
Draper, Utah offices. We have had a continuous monthly service agreement
with Moore, Clayton & Co. since March, 2002. Depending on the level of
service, we typically receive between $4,000 and $9,000 per month,
exclusive of intermittent project-based fees. Commencing in May, 2004, we
began receiving $9,000 per month under our service agreement with Moore,
Clayton & Co., and, based upon our operating history with this client,
expect that this level of compensation will continue for at least six
months. Kenneth Denos, a director of Synerteck, is also a director of
Moore, Clayton & Co.
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Because we have maintained a continuous agreement with Moore, Clayton & Co.
for two years, we do not anticipate any difficulties with continuing to
provide them information technology services for the foreseeable future.
Healthcare Enterprise Group. Healthcare Enterprise Group PLC is a
London-based healthcare products and services company that requires
international access to protected data and communication systems from its
offices in the United Kingdom, Germany, and the United States. Healthcare
Enterprise Group is also traded on the Alternative Investment Market of the
London Stock Exchange. We have provided services to Healthcare Enterprise
Group intermittently over the past twelve months, and, in March 2004,
agreed to a six-month service contract which automatically renews for
successive monthly periods if not cancelled sixty days in advance. We
receive $1,470 per month under this agreement, plus travel expenses and
other costs as agreed from time to time. Kenneth Denos, a director of
Synerteck, is also a director of Healthcare Enterprise Group. Because of
our level of service and the relationships we have cultivated with
management of Healthcare Enterprise Group, we do not anticipate any
difficulties with continuing to provide them information technology
services for the foreseeable future.
SportsNuts. SportsNuts, Inc. is a sports event management company that
provides a range of services to various amateur athletic events throughout
the United States. Some of these services include website hosting, online
registration and merchandise sales, and information management such as
team/league statistics, media attachments, and participant/event profiling.
SportsNuts' complex database-driven technology applications require service
and support personnel to implement, maintain, and improve. SportsNuts has
used Synerteck personnel to perform these functions since its inception.
Recently, SportsNuts has entered into a service contract to formalize this
relationship. The service contract provides for a monthly payment of
$2,000, which can increase intermittently depending on the level of service
we are providing. Kenneth Denos, a director of Synerteck, is also a
director of SportsNuts, Inc. We anticipate providing these services to
SportsNuts for the foreseeable future. Synerteck is a wholly-owned
subsidiary of SportsNuts.
Research and Development
We attempt to stay abreast of changes in the information technology
industry and also attempt to increase the level of proficiency of our current
staff. During the calendar year 2004, both of our two full-time employees
received 120 hours of training in MicrosoftTM .Net programming by an outside
instructor. Other research and development activities include the use of
instructional software programming and collateral materials. We estimate that we
have spent approximately 100 hours in each of our two prior fiscal years on
research and development activities. None of the expenses associated with these
activities has been borne directly by our customers.
Certifications and Licenses
The following is a brief summary of certifications and licenses held by
individual members of our staff and/or by our contract personnel:
o MicrosoftTM Certified Systems Engineer. This credential is the premier
certification for information technology professionals who are
required to analyze business
8
requirements in a MicrosoftTM software environment, and is one of the
most widely recognized technical certifications in the information
technology industry. Individuals who hold this credential have
demonstrated that they possess the necessary skills to design,
implement, administer, and troubleshoot the most advanced Microsoft
WindowsTM operating system and Microsoft Windows ServersTM system. One
of our employees has this certification and one of our contract
personnel has this certification.
o MicrosoftTM Certified Professional. This qualification is for
information technology professionals who possess the skills to install
and operate a MicrosoftTM product or application as part of a business
solution in an organization. This qualification generally requires a
hands-on approach to MicrosoftTM products to achieve certification.
One of our employees and one of our contract personnel has this
certification.
o MicrosoftTM Certified Solution Developer. This is the highest level
certification for advanced software programmers who design and develop
leading edge enterprise solutions that use MicrosoftTM products,
applications, development tools and programming languages. Two of our
contract personnel have this certification.
o CiscoTM Certified Network Associate. This designation indicates a
foundation in and apprentice knowledge of networking with CiscoTM
products. An individual holding a CiscoTM Certified Network Associate
designation should be able to install, configure, and operate local
area networks, wide area networks, and dial access services for small
networks including but not limited to use of these protocols: internet
protocol, interior gateway routing protocol, serial, frame relay,
internet protocol routing information protocol, virtual local area
networks, routing information protocol, ethernet, and access lists.
One of our contract personnel has this certification.
o CiscoTM Certified Internetwork Expert. This qualification is the most
rigorous certification of CiscoTM and identifies the upper echelon of
networking experts in these systems. A holder of this designation is
expected to be able to tackle the most challenging assignments in the
field of computer networking. One of our contract personnel has this
certification.
GOVERNMENT REGULATION
The business of Synerteck is not currently subject to substantial federal,
state, or local government regulation. Because the principal component of
Synerteck's business consists of services, we are not subject to any significant
environmental laws or regulations, and do not anticipate excessive levels of
U.S. federal or state government regulation of Synerteck's business. Synerteck
is subject to standard taxation rates for sales, income, and other activities in
the United States and does not pay taxes overseas. Nevertheless, because two of
Synerteck's principal clients are headquartered in the United Kingdom, the
government of the United Kingdom could impose taxes, duties, or other fees upon
Synerteck as a foreign supplier of services in the United Kingdom, which in turn
could reduce the gross profit we receive in connection with our ongoing service
contracts. Any such imposition by the government of the United Kingdom could
materially affect our business, financial condition, and results of operations.
Because we
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do not have an office in the United Kingdom and provide almost all of our
services for our United Kingdom-based clients from our offices in the United
States, we do not believe it reasonably likely that the U.K. Inland Revenue or
other U.K. governmental agencies will impose taxes, duties, or other fees upon
Synerteck.
COMPETITION
The proliferation of technology service companies with similar service
offerings as Synerteck has increased the competitiveness of the fees, rates, and
levels of service that can be charged. Because our business is small and our
resources are relatively limited, we do not focus our business development
activities on large enterprises. These organizations tend to be serviced by an
in-house information technology staff, together with larger, well-known
outsourced providers such as Electronic Data Systems, Inc. or Computer
Associates International, Inc.
We instead focus on small and medium-sized businesses that either (i) do
not have in-house information technology staff, or (ii) have staff whom do not
possess the capability to provide the types of technology solutions required. In
choosing this approach, we compete with many similar small information
technology service companies, as well as a variety of other groups, including:
o Freelance website designers;
o Graphic design firms;
o Organizations that want to lease their excess server capacity;
o Organizations that want to lease their excess telecommunications
bandwith;
o Offshore programmers; and
o Retail computer hardware vendors that provide installation and
configuration services;
In addition to the above-mentioned groups, smaller business owners and
executives tend to underestimate the benefit of efficient technology solutions
and therefore require more interpersonal selling and hands-on commitment to
differentiate our services and build lasting commercial relationships.
ITEM 2: DESCRIPTION OF PROPERTY
Synerteck's headquarters are located within a 5,000 square foot facility in
Draper, Utah. Synerteck subleases office space from Sportnuts, Inc. SportsNuts,
Inc., holds a leasehold interest in the premises, with a written lease agreement
commencing January, 2003 at a rate of $4,250 per month, excluding allocations
for heat and electricity. We utilize approximately one-fifth of these premises
for Synerteck's operations. These premises are in good condition. Our client's
hardware and communication systems, together with other hardware and systems
owned by SportsNuts and used in our business, are located within an
air-conditioned room on the premises, in which we house eight racks of computer
servers and maintain two T-1 telecommunication lines. We have recently executed
a month-to-month sublease with SportsNuts for continued use of this facility and
its common areas for Synerteck's operations in exchange for $1,000 per month.
ITEM 3: LEGAL PROCEEDINGS
None.
10
ITEM 4: SUBMISSION ON MATTERS TO A VOTE OF SECURITY HOLDERS
None.
11
PART II.
ITEM 5: MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market for Common Equity and Related Stockholder Matters.
(1) Market Information.
The Company's shares have recently been granted approval for trading on the
NASD Electronic Bulletin Board. As of March 7, 2005, the closing price per share
of Synerteck stock was $1.25. In 2004, there was no public trading market for
the company's shares.
(2) Holders.
As of March 7, 2005, the Company had approximately 274 holders of record of
its Common Stock.
(3) Dividends.
The Company has not paid any cash dividends on its Common Stock since
inception and does not anticipate paying cash dividends in the foreseeable
future. The Company anticipates that any future earnings will be retained for
use in developing and/or expanding the business.
(b) Recent Sales of Unregistered Securities.
None
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 registration statement. 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 Item 1 of this Part I
under the caption "Risk Factors" in addition to the other information set forth
in this registration statement. 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.
12
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 years ended December 31, 2004 and 2003.
Revenues. Our products and services are broken down into two categories for
revenue recognition purposes - (i) services, and (ii) off-the-shelf
hardware/software product sales. Our revenue recognition policy for these
categories is as follows:
o Revenue is recognized upon completion of services or delivery of goods
where the sales price is fixed or determinable and collectibility is
reasonably assured. Revenue is not recognized until persuasive
evidence of an arrangement exists. Advance customer payments are
recorded as deferred revenue until such time as they are recognized.
o Product sales are solely derived from the resale of off-the-shelf
hardware and software packages. Product sales are not warranted by
Synerteck 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. We have no sales arrangements
encompassing multiple deliverables.
Synerteck generated net revenues of $207,080 during the year ended December
31, 2004, a 67% increase compared to $123,806 in net revenues during the
previous year ended December, 31 2003. This increase was due to a sales
initiative started in 2004 which provided incentives on new sales as well as the
addition of new service contracts. 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 2004 and 2003, we
received $156,667 and $70,806, respectively, in gross revenues from information
technology services, and $31,984 and $32,452, 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.
For the year ended December 31, 2004, cost of sales was $41,831, a 40%
increase from $29,914 during the year 2003. This increase corresponds with the
increase of revenues associated with the new
13
technology maintenance contracts referred to above. 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 year ended December 31, 2004 were $87,963, a
148% increase from $35,473 during the year 2003. This increase was principally
due to increased professional fees associated with the filing of Form 10-SB in
conjunction with the registration of our common stock. Furthermore, the Company
incurred additional legal and accounting fees for the spin-off from our parent
corporation, SportsNuts, Inc. We endeavor to decrease certain costs associated
with personnel salaries and benefits, contract labor, and rent and
occupancy-related expense. Our payroll expense accounted for approximately
$26,589 of general and administrative expenses during 2004, as compared to
$14,772 during 2003. Because we sublease our office facilities from our previous
parent corporation, we do not anticipate any material commitments for capital
expenditures in the foreseeable future.
For the years ended December 31, 2004 and 2003, bad debts expense was
$15,392 and $7,047, respectively. Certain accounts which were deemed
uncollectible at December 31, 2004 were written off in order to present a
conservative balance in our accounts receivable. New customers are now more
closely scrutinized for credit worthiness and therefore we do not anticipate any
large bad debts expense in the 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. For the year ended December 31,
2004, selling and marketing expenses were $48,321, a 93% increase from $25,086
during the year 2003. This increase was primarily attributable to increased
payroll and advertising expenses during 2004. 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.
Product Development. For the year ended December 31, 2004, product
development expenses were $20,132, a 95% increase from $10,314 during the year
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 income of $56,816 for the
year ended December 31, 2004 compared to $133 during 2003. The increase in this
category was mainly due to the gain on forgiveness of debt of $60,310 which was
eliminated because of a creditor going out of business during the year. Most
other income and expense related items were minimal except for income tax
expense of $14,300 and $5,524, respectively during 2004 and 2003.
Off-Balance Sheet Arrangements
Synerteck is not subject to any off-balance sheet arrangements.
14
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 2005. 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. As of December 31, 2004, Synerteck's primary source of liquidity
consisted of $36,376 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.
15
ITEM 7: FINANCIAL STATEMENTS REQUIRED BY FORM 10-KSB
CONTENTS
Report of Independent Registered Public Accounting Firm...................... 17
Balance Sheets............................................................... 18
Statements of Operations..................................................... 20
Statements of Stockholders' Equity........................................... 21
Statements of Cash Flows..................................................... 22
Notes to the Financial Statements............................................ 23
16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Synerteck Incorporated
We have audited the accompanying balance sheets of Synerteck Incorporated as of
December 31, 2004 and 2003 and the related statements of operations,
stockholders' equity and cash flows for the years ended December 31, 2004 and
2003. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company has
determined that it is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Synerteck Incorporated as of
December 31, 2004 and 2003 and the results of its operations and its cash flows
for the years ended December 31, 2004 and 2003 in conformity with accounting
principles generally accepted in the United States of America.
Bouwhuis, Morrill & Company, LLC
Layton, Utah
March 17, 2005
17
SYNERTECK INCORPORATED
Balance Sheets
ASSETS
December 31,
2004
------------------
CURRENT ASSETS
Cash and cash equivalents (Note 2) $ 36,376
Accounts receivable, net (Note 2) 9,934
------------------
Total Current Assets 46,310
------------------
PROPERTY AND EQUIPMENT, NET (Note 2) 20,008
------------------
OTHER ASSETS
Receivable - related parties 75,945
------------------
Total Other Assets 75,945
------------------
TOTAL ASSETS $ 142,263
==================
18
The accompanying notes are an integral part of these condensed financial
statements.
SYNERTECK INCORPORATED
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
2004
-----------------
CURRENT LIABILITIES
Accounts payable $ 7,885
Accrued expenses 24,457
------------------
Total Current Liabilities 32,342
------------------
LONG TERM LIABILITIES
Notes payable 15,000
Notes payable - related parties 35,000
------------------
Total Long Term Liabilities 50,000
------------------
TOTAL LIABILITIES 74,851
------------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; 10,000,000 shares
authorized, -0- shares issued and outstanding -
Common stock, $0.001 par value; 100,000,000 shares
authorized, 500,000 shares issued and outstanding 500
Additional paid-in capital (deficit) (500)
Retained Earnings 59,921
------------------
Total Stockholders' Equity 59,921
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 142,263
==================
19
The accompanying notes are an integral part of these condensed financial
statements.
SYNERTECK INCORPORATED
Statements of Operations
For the Years Ended
December 31,
--------------------------------------
2004 2003
------------------ ------------------
NET REVENUES
Product revenue $ 31,984 $ 29,228
Service revenue 72,346 19,872
Related party revenue 102,750 74,706
------------------ -----------------
Total Net Revenues 207,080 123,806
------------------ -----------------
OPERATING EXPENSES
Cost of sales-product 7,973 6,098
Cost of sales-service 14,753 8,816
Cost of sales-related party 19,105 15,000
General and administrative 87,963 35,473
Selling and marketing 48,321 25,086
Research and development 20,132 10,314
------------------ -----------------
Total Operating Expenses 198,247 100,787
------------------ -----------------
INCOME FROM OPERATIONS 8,833 23,019
------------------ -----------------
OTHER INCOME (EXPENSES)
Interest expense (3,722) -
Other income - 50
Gain on forgiveness of debt 60,310 -
Interest income 228 83
------------------ -----------------
Total Other Income (Expenses) 56,816 133
------------------ -----------------
NET INCOME BEFORE INCOME TAXES 65,649 23,152
PROVISION FOR INCOME TAXES (Note 6) (14,300) (5,524)
------------------ -----------------
NET INCOME $ 51,349 $ 17,628
================== =================
BASIC NET INCOME PER SHARE $ 0.10 $ 0.04
================== =================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 500,000 500,000
================== =================
20
The accompanying notes are an integral part of these condensed financial
statements.
SYNERTECK INCORPORATED
Statements of Stockholders' Equity
Common Stock
------------------------------
Additional
Paid-in Retained
Shares Amount Capital(Deficit) Earnings
------------ ------------- -------------------- ------------------
Balance, December 31, 2001 500,000 $ 500 $ (500) $ (15,857)
Net income for the year ended
December 31, 2002 - - - 6,801
------------ ------------- -------------------- ------------------
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 year ended
December 31, 2004 - - - 51,349
------------ ------------- -------------------- ------------------
Balance, December 31, 2004 500,000 $ 500 $ (500) $ 59,921
============ ============= ==================== ==================
21
The accompanying notes are an integral part of these condensed financial
statements.
SYNERTECK INCORPORATED
Statements of Cash Flows
For the Years Ended
December 31,
--------------------------------------
2004 2003
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 51,349 $ 17,628
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation 4,509 503
Bad debts expense 11,597 7,047
Gain on forgiveness of debt (60,310) -
Changes in operating assets and liabilities:
Accounts receivable (16,436) (3,454)
Due to/from related parties (1,227) (20,576)
Accounts payable (4,813) 8,399
Accrued expenses 15,165 (824)
----------------- -----------------
Net Cash Provided (Used) by Operating Activities (166) 8,723
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (21,398) (3,622)
----------------- -----------------
Net Cash Used in Investing Activities (21,398) (3,622)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 15,000 -
Proceeds from notes payable - related parties 48,000 -
Payments on notes payable - related parties (13,000) -
----------------- -----------------
Net Cash Provided by Financing Activities 50,000 $ -
----------------- -----------------
NET INCREASE IN CASH & CASH EQUIVALENTS 28,436 $ 5,101
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 7,940 2,839
----------------- -----------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 36,376 $ 7,940
================= =================
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ -
22
The Accompanying notes are an integral part of these condensed financial
statements.
SYNERTECK INCORPORATED
Notes to the Financial Statements
December 31, 2004 and 2003
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Synerteck Incorporated (the Company) was incorporated under the laws
of the State of Delaware on March 30, 2004 with authorized common
stock of 100,000,000 shares and authorized preferred stock of
10,000,000 shares. Both classes of stock have a par value of $0.001
per share. The Company was originally formed as Synerteck Incorporated
under the laws of the State of Utah on March 2, 2001 prior to its
reincorporation into Delaware.
A wholly owned subsidiary of SportsNuts, Inc. until November 15, 2004,
the Company was created to be a technology partner with SportsNuts,
Inc. for a variety of organizations, both sports and non-sports
related, that require information technology services. These services
include website hosting, website design and maintenance, computer
hardware leasing, hardware and software programming and configuration,
wide area network and local area network configuration, and other
related services.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is
presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of
the Company's management who are responsible for their integrity and
objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America and have
been consistently applied in the preparation of the financial
statements. The following policies are considered to be significant:
a. Accounting Method
The Company recognizes income and expenses based on the accrual method
of accounting. The Company has elected a calendar year-end.
b. Cash and Cash Equivalents
Cash equivalents are generally comprised of certain highly liquid
investments with original maturities of less than three months.
c. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
d. Basic Net Loss per Share of Common Stock
In accordance with Financial Accounting Standards No. 128, "Earnings
per Share," basic net loss per common share is based on the weighted
average number of shares outstanding during the periods presented.
Diluted earnings per share is computed using the weighted average
number of common shares plus dilutive common share equivalents
outstanding during the period. There are no common stock equivalents
as of
23
SYNERTECK INCORPORATED
Notes to the Financial Statements
December 31, 2004 and 2003
December 31, 2004 and 2003.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Allowance for Doubtful Accounts
Accounts receivable are recorded net of the allowance for doubtful
accounts. The Company generally offers 30-day credit terms on sales to
its customers and requires no collateral. The Company maintains an
allowance for doubtful accounts which is determined based on a number
of factors, including each customer's financial condition, general
economic trends and management judgement. As of December 31, 2004 and
2003, the allowance for doubtful accounts was $14,263.
f. Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets. When assets are
disposed of, the cost and accumulated depreciation (net book value of
the assets) are eliminated and any resultant gain or loss reflected
accordingly. Betterments and improvements are capitalized over their
estimated useful lives whereas repairs and maintenance expenditures on
the assets are charged to expense as incurred.
Life 2004 2003
--------- ------------------ ------------------
Computer Equipment 3 Years $ 14,718 $ 3,622
Furniture and Fixtures 5 Years 10,301 -
Less - Accumulated Depreciation (5,012) (503)
------------------ ------------------
Net Property and Equipment $ 20,007 $ 3,119
================== ==================
Depreciation expense for the years ended December 31, 2003 and 2002 was
$4,509 and $503, respectively.
g. Revenue Recognition
Products and services provided by the Company are broken down into two
categories for revenue recognition purposes, they are: services, and
off-the-shelf hardware/software sales. The revenue recognition policy
for these categories is as follows:
Revenue is recognized upon completion of services or delivery of goods
where the sales price is fixed or determinable and collectibility is
reasonably assured. Revenue is not recognized until persuasive
evidence of an arrangement exists. Advance customer payments are
recorded as deferred revenue until such time as they are recognized.
Product sales were solely derived from the resale of off-the-shelf
hardware and software packages. Product sales are not warranted by the
Company and may be subject only to warranties that may be provided by
the product manufacturer.
h. Recent Accounting Pronouncements
In April 2002, the Financial Accounting Standards Board issued
Statement No. 145 ("SFAS 145"), "Rescission of FASB Statements Nos. 4,
44, and 64 and Amendment of FASB Statement No. 13." SFAS 145 addresses
the presentation for losses on early retirements of debt in the
statement of operations. The Company has adopted SFAS 145 and will not
present losses on early retirements of debt as an extraordinary item.
24
SYNERTECK INCORPORATED
Notes to the Financial Statements
December 31, 2004 and 2003
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
h. Recent Accounting Pronouncements (Continued)
In June 2002, the Financial Accounting Standards Board issued
Statement No. 146 ("SFAS 146"), "Accounting for Costs Associated with
Exit or Disposal Activities." The provisions of SFAS 146 become
effective for exit or disposal activities commenced subsequent to
December 31, 2002. The adoption of SFAS 146 had no impact on the
Company's financial position, results of operations or cash flows.
In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others." This interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under certain guarantees
that it has issued. It also clarifies (for guarantees issued after
January 1, 2003) that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the
obligations undertaken in issuing the guarantee. At December 31, 2004,
the Company does not have any outstanding guarantees and accordingly
does not expect the adoption of FIN 45 to have any impact on its
financial position, results of operations or cash flows.
i. Reclassifications
Certain amounts in the accompanying financial statements have been
reclassified to conform to the current year presentation. These
reclassifications had no material effect on our financial statements.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company was a wholly owned subsidiary of SportsNuts, Inc. until
November 15, 2004. During the ordinary course of business there may
have been amounts due to or from any of the companies in the then
consolidated entity. These amounts are classified as either net
receivables or net payables - related parties. Synerteck records all
expenses related to their operations in their financial statements,
therefore, there are no adjustments which would be required to present
the Company's financial statements as if it had operated as an
unaffiliated entity for the entire year. At December 31, 2004, the
Company has a net related party receivable of $75,945.
Service Agreements
On March 1, 2002, the Company entered into an oral agreement to
provide IT related services to a company affiliated by common
management and shareholders. These services include network
engineering, architecture and design, website and e-mail hosting,
network hosting and website design. The fee for these services varies
depending on the level of service but ranges between $4,000 and $7,000
per month. Additional project based fees may be negotiated.
Effective April 1, 2004, the Company entered into a service agreement
with SportsNuts, Inc., to provide various services including network
and server maintenance and support, user support and website
maintenance. In exchange for these services SportsNuts, Inc. will pay
to the Company a non-refundable fee of $2,000 per month. No minimum or
specific performance is required by the terms of this agreement.
25
SYNERTECK INCORPORATED
Notes to the Financial Statements
December 31, 2004 and 2003
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued)
Management Services Agreement
Effective April 1, 2004, the Company entered into a management
services agreement with SportsNuts, Inc., to receive various services
including use of information technologies, accounting and bookkeeping
services, and limited legal, business development and administrative
services for a non-refundable fee of $750 per month. No minimum or
specific performance is required by the terms of this agreement.
Office Space
The Company is subject to a month-to-month rental agreement for its
office space with SportsNuts, Inc. Currently, the rental fee is $1,000
per month and is subject to increase as more space is needed or due to
economic factors. During the years ended December 31, 2004 and 2003
the Company paid SportsNuts, Inc. $12,000 for office space. The terms
of this agreement are similar to those of other, unrelated, companies
renting office space from SportsNuts, Inc.
NOTE 4 - NOTES PAYABLE
Notes payable consisted of the following:
December 31,
2004
--------------
Note payable to a company, interest at 8% per
annum, due in full on March 1, 2007, unsecured $ 10,000
Note payable to a company, interest at 8% per
annum, due in full on March 1, 2007, unsecured 5,000
--------------
Total Notes Payable 15,000
Less: Current Portion ( - )
--------------
Long-Term Notes Payable $ 15,000
==============
Future minimum payments consist of the following at December 31,:
2005 $ -
2006 -
2007 15,000
2008 and thereafter -
----------------
Total $ 15,000
================
26
SYNERTECK INCORPORATED
Notes to the Financial Statements
December 31, 2004 and 2003
NOTE 5 - NOTES PAYABLE - RELATED PARTIES
Notes payable - related parties consisted of the following:
December 31,
2004
--------------
Note payable to a related individual, interest at 8%
per annum, due in full on March 1, 2007, unsecured $ 10,000
Note payable to a related individual, interest at 8%
per annum, due in full on March 1, 2007, unsecured 10,000
Note payable to a related individual, interest at 8%
per annum, due in full on March 1, 2007, unsecured 5,000
Note payable to a related individual, interest at 8%
per annum, due in full on March 1, 2007, unsecured 5,000
Note payable to a related individual, interest at 8%
per annum, due in full on March 1, 2007, unsecured 5,000
-------------
Total Notes Payable - Related Parties 35,000
Less: Current Portion ( - )
-------------
Long-Term Notes Payable - Related Parties $ 35,000
=============
Future minimum payments consist of the following at December 31,:
2005 $ -
2006 -
2007 35,000
2008 and thereafter -
-----------
Total $ 35,000
===========
NOTE 6 - EQUITY TRANSACTIONS
100,000 common shares of Synerteck (Utah) were issued to the
incorporator upon incorporation. The shares were issued at no value.
500,000 common shares of Synerteck (Delaware) were issued on the basis
of 5-for-1 for all of the outstanding shares of Synerteck (Utah) as
part of the Company's reincorporation into the State of Delaware. All
references to shares issued and outstanding in the financial
statements have been retroactively restated to reflect the effects of
this change in capital structure.
On February 9, 2004, the Board of Directors approved the Company's
amended and restated Articles of Incorporation (Amendment). The
Amendment increases the authorized shares of common stock from
1,000,000 to 100,000,000 shares. The Amendment also provides for a new
class of stock. The new class of stock is preferred stock with
10,000,000 shares authorized. Both common and preferred stock have no
par value.
On December 15, 2004, the Company's then parent, SportsNuts, Inc.,
distributed all of their shares of Synerteck Incorporated to the
shareholders of SportsNuts, Inc. on a pro-rata basis by way of an
exchange and distribution of 100% of Synerteck's outstanding
27
SYNERTECK INCORPORATE
Notes to the Financial Statements
December 31, 2004 and 2003
shares. The total number of shares outstanding has not changed due to
this transaction which terminated the parent/subsidiary relationship.
NOTE 7 - FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 (SFAS 107),
"Disclosures about Fair Value of Financial Instruments" requires
disclosure of the fair value of financial instruments held by the
Company. SFAS 107 defines the fair value of a financial instrument as
the amount at which the instrument could be exchanged in a current
transaction between willing parties. The following methods and
assumptions were used to estimate fair value:
The carrying amount of cash equivalents, accounts receivable, accounts
payable and notes payable approximate fair value due to their
short-term nature.
NOTE 8 - INCOME TAXES
The Company was a wholly-owned subsidiary of SportsNuts, Inc. until
November 15, 2004 and has been filing a consolidated tax return. For
the purposes of these financial statements income tax expense has been
calculated on the separate return basis as if the Company were not a
part of a consolidated entity.
The provision for income taxes as of December 31, 2004, 2003 and 2002 is
detailed in the following summary:
December 31,
------------------------
2004 2003
----------- -----------
Current:
Federal income taxes $ 10,586 $ 4,089
State income taxes 3,714 1,435
Income tax expense $ 14,300 $ 5,524
=========== ===========
A reconciliation of income taxes at the state and federal statutory rate to
the effective tax rate is as follows:
December 31,
------------------------
2004 2003
----------- -----------
Income taxes computed at the state
and federal statutory rates (5% and
15%, respectively) $ 12,905 $ 4,630
Increase in allowance for bad debts 1,952 1,109
State income taxes (557) (215)
----------- ------------
Income Tax Expense $ 14,300 $ 5,524
=========== ============
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Major Customers
For the year ended December 31, 2004, two customers generated revenues
in excess of 10% of the Company's total revenues. Revenues from these
customers totaled $113,682 (a related party) and $22,868 (a related
party) or 55% and 11%, respectively.
For the year ended December 31, 2003, one customer generated revenues
in excess of
28
SYNERTECK INCORPORATED
Notes to the Financial Statements
December 31, 2004 and 2003
10% of the Company's total revenues. Revenue from this customer
totaled $96,428 (a related party) or 78%.
29
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 8A: CONTROLS AND PROCEDURES
The Company's principal executive officer and principal financial officer,
based on their evaluation of the Company's disclosure controls and procedures
(as defined in Rules 13a-14 (c) and 15d-14 (c) of the Securities Exchange Act of
1934) as of December 31, 2004 have concluded that the Company's disclosure
controls and procedures are adequate and effective to ensure that material
information relating to the Company and its consolidated subsidiaries are
recorded, processed, summarized and reported within the time periods specified
by the SEC's rules and forms, particularly during the period in which this
annual report has been prepared.
The Company's principal executive officer and principal financial officer
have concluded that there were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls for
the year ended December 31, 2004, the date of their most recent evaluation of
such controls, and that there were no significant deficiencies or material
weaknesses in the Company's internal controls.
30
PART III
ITEM 9: DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT.
Directors and Executive Officers
Name Age Position(1)
- ---- --- --------
Clayton B. Barlow 33 President and Director
Chene Gardner 40 Chief Financial Officer and Director
Kenneth I. Denos 37 Director
(1) Officers hold their position at the pleasure of the board of directors,
absent any employment agreement.
Clayton B. Barlow, age 33, is the President of Synerteck and is a member of
the Synerteck board of directors. Mr. Barlow was appointed to the board of
directors of Synerteck in January, 2004 for a one-year term expiring January,
2005 and has been the President of Synerteck prior to its corporate formation
(as a division of SportsNuts, Inc., the former parent corporation of Synerteck)
since December, 2000. Prior to his association with Synerteck, from October,
1999 to December, 2000, Mr. Barlow was an international project manager for
STSN, Inc., a Salt Lake City-based provider of high speed internet access for
the hospitality industry with a focus on business hotels. At STSN, Mr. Barlow
was responsible for designing and integrating hotel internet infrastructure with
access units in each hotel room. From September, 1997 to October, 1999, Mr.
Barlow was the President of Maxim Mortgage, Corp., a residential mortgage broker
based in Salt Lake City, Utah. Mr. Barlow holds MCSE 2000, MCP, and A+
certifications. Mr. Barlow is not a director of any other company filing reports
pursuant to the Securities Exchange Act of 1934.
Chene Gardner, age 40, is the Chief Financial Officer of Synerteck and a
member of the Synerteck board of directors. Mr. Gardner was appointed to the
board of directors of Synerteck in January, 2004 for a one-year term expiring
January, 2005 and has been the Chief Financial Officer of Synerteck since its
inception. Mr. Gardner also serves as the financial controller for SportsNuts,
Inc., the former parent corporation of Synerteck, and has served in this
capacity since September, 1999. Prior to his association with SportsNuts, from
January, 1997 to September, 1999, Mr. Gardner served as Financial Manager for
Aluminum Builders, Inc., a producer of various home improvement items. Mr.
Gardner also has five years of auditing and accounting experience with the firm
of Deloitte & Touche LLP from June 1990 to August, 1995, serving clients in the
banking, manufacturing, and retail industries. Mr. Gardner holds Bachelor and
Master of Accounting degrees from Weber State University. Mr. Gardner is not a
director of any other company filing reports pursuant to the Securities Exchange
Act of 1934.
Kenneth I. Denos, age 37, has been a member of the board of directors of
Synerteck since its formation in March, 2001, and is currently serving a
one-year term expiring January, 2005. Mr. Denos also serves as the Chief
Executive Officer and a director of SportsNuts, Inc., the former parent
corporation of Synerteck and a filer or reports pursuant to Sections 13(a) and
15(d) of the Securities Exchange Act of 1934. Mr. Denos has served as a member
of the SportsNuts, Inc. board of directors since April, 1999 and has served as
its Chief Executive Officer since March, 2000. From April, 1999 until March,
2000, he served as Executive Vice President and General Counsel for SportsNuts.
From November, 1998 until April, 1999, he served as Executive Vice President of
SportsNuts.com, Inc., a privately held corporation in which a controlling
interest was acquired by SportsNuts, Inc. (the former parent corporation of
Synerteck) in April, 1999. From March, 1996 until November, 1998, Mr. Denos was
an attorney with the Salt Lake City-based law firm of Jones, Waldo, Holbrook &
McDonough, P.C. Mr. Denos currently serves on the board of directors of
Healthcare Enterprise Group PLC (LSE:HCEG), a London-based healthcare products
distribution and advisory firm and MCC Energy PLC (LSE: MCCE), a
31
London-based energy services firm. Mr. Denos is a licensed attorney in the State
of Utah and is a member of the American Bar Association. Mr. Denos holds a
Bachelor of Science degree in Business Finance and Political Science, a Master
of Business Administration Degree, and a Juris Doctor, all received from the
University of Utah. Other than SportsNuts, Inc., Mr. Denos is not a director of
any other company filing reports pursuant to the Securities Exchange Act of
1934.
Board of Directors Meetings and Committees
Although various items were reviewed and approved by the board of directors
during 2004, the board of directors held no meetings during the fiscal year
ended December 31, 2004.
Synerteck does not have Audit or Compensation Committees of the board of
directors because each director of Synerteck reviews the financial statements
and independent audits of Synerteck.
Code of Ethics
We have adopted a code of ethics that applies to all of our executive
officers and senior financial officers (including our chief executive officer,
chief financial officer and any person performing similar functions). A copy of
our code of ethics is publicly available on our website at www.synerteck.com
under the caption "INVESTORS." If we make any substantive amendments to our code
of ethics or grant any waiver, including any implicit waiver, from a provision
of the code to our chief executive officer, chief financial officer, chief
accounting officer or controller, we will disclose the nature of such amendment
or waiver in a report on Form 8-K.
Section 16(a) Beneficial Ownership Reporting Compliance
We are required to identify each person who was an officer, director or
beneficial owner of more than 10% of our registered equity securities during our
most recent fiscal year and who failed to file on a timely basis reports
required by Section 16(a) of the Securities Exchange Act of 1934.
During the year ended December 31, 2004, we failed to file a Form 4 for the
following directors, executive officers and significant stockholders: Kenneth
Denos (one filing); Chene Gardner (one filing); Clayton Barlow (one filing);
Prestbury Investment Holdings Limited (one filing); and Gardner Management
Profit Sharing Plan and Trust (one filing).
32
ITEM 10: EXECUTIVE COMPENSATION.
The following table sets forth certain information regarding the annual and
long-term compensation for services rendered in all capacities during the fiscal
year ended December 31, 2004, 2003, and 2002 by Clayton Barlow, Synerteck's
Chief Executive Officer. No other executive officer of Synerteck received more
than $100,000 in total salary and bonus. Although Synerteck may, in the future,
adopt a stock option plan or a stock bonus plan, no such plans exist.
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------- ------------
Securities
Name and Underlying All Other
Principal Position Year Salary Bonus Options Compensation
------------------ ---- ------ ----- ------- ------------
Clayton Barlow 2004 $58,910 $6,087 0 $0
CEO 2003 $42,000 $6,516 0 $0
2002 $45,341 $628 0 $0
- ----------------------------------------------------------------------------------------------------------------
Compensation of Directors
Although the Company anticipates compensating the members of its Board of
Directors in the future at industry levels, current members are not paid cash
compensation for their service as directors. Each director may be reimbursed for
certain expenses incurred in attending Board of Directors and committee
meetings.
Employment Agreements
None of our executive officers are subject to an employment agreement with
Synerteck.
33
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
(a) Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock (par value $0.001 per share) as of May
7, 2005 by (i) each person (or group of affiliated persons) who is known by the
Company to beneficially own more than 5% of the outstanding shares of the
Company's Common Stock, (ii) each person who has served as a director or
executive officer of the Company during the calendar year 2004, and (iii) all
persons who have served as a director or executive officer of the Company during
the calendar year 2004 as a group. As of such date, the Company had 500,000
shares of Common Stock outstanding. Unless indicated otherwise, the address for
each officer, director, and 5% shareholder is c/o the Company, 11585 South State
Street, Suite 102, Draper, Utah 84020.
Common Stock
Directors and Executive Officers of Synerteck, and
5% Stockholders of SportsNuts Number Percent of Class(1)
----------------------------- ------ ----------------
Clayton Barlow(2) 11,228 2.25%
Chene Gardner(3) 11,089 2.22%
Kenneth Denos(4) 16,891 3.38%
Prestbury Investment Holdings Limited(5) 112,288 22.46%
Nigel Wray(6) 112,288 22.46%
Nicholas Leslau(7) 112,288 22.46%
Gardner Management Profit Sharing Plan and Trust(8) 55,128 11.03%
Elbert Gardner(9) 55,128 11.03%
Todd Shell(10) 33,685 6.74%
All directors and officers as a group 39,208 7.84%
(3 persons)
(1) For each shareholder, the calculation of percentage of beneficial ownership
is based upon 500,000 shares of Synerteck common stock outstanding as of March
7, 2005, and shares of SportsNuts common stock subject to options, warrants
and/or conversion rights held by the shareholder that are currently exercisable
or exercisable within 60 days, which are deemed to be outstanding and to be
beneficially owned by the shareholder holding such options, warrants, or
conversion rights. The percentage ownership of any shareholder is determined by
assuming that the shareholder has exercised all options, warrants and conversion
rights to obtain additional securities and that no other shareholder has
exercised such rights. Except as otherwise indicated below, the persons and
entity named in the table have sole voting and investment power with respect to
all shares of Synerteck common stock shown as beneficially owned by them,
subject to applicable community property laws.
(2) Chief Executive Officer and Director of Synerteck. Includes 11,228 shares of
Synerteck.
(3) Chief Financial Officer and Director of Synerteck. Includes 11,089 shares of
Synerteck common stock held by Mr. Gardner.
(4) Secretary and Director of Synerteck. Includes 8,983 shares of Synerteck
common stock held directly by Mr. Denos. Because Mr. Denos is a member of the
Board of Directors of Moore, Clayton & Co., Inc., this number also includes
4,812 shares held directly by Moore, Clayton & Co., Inc. Because Mr. Denos is a
member of the board of directors of Sportsnuts, Inc., this number also includes
3,096 shares held directly by Sportsnuts, Inc.
(5) Principal Shareholder of Synerteck. Includes 112,288 shares of Synerteck
common stock held directly by Prestbury Investment Holdings Limited.
(6) Member of the Board of Directors and, together with Mr. Nicholas Leslau, the
controlling shareholders of Prestbury Investment Holdings Limited. Includes
112,288 shares of Synerteck common stock held directly by Prestbury Investment
Holdings Limited.
34
(7) Member of the Board of Directors and, together with Mr. Nigel Wray, the
controlling shareholders of Prestbury Investment Holdings Limited. Includes
112,288 shares of Synerteck common stock held directly by Prestbury Investment
Holdings Limited.
(8) Principal shareholder of Synerteck. Includes 55,128 shares of Synerteck
common stock held directly by Gardner Management Profit Sharing Plan and Trust.
Gardner Management Profit Sharing Plan and Trust is not affiliated with Chene
Gardner.
(9) Trustee of the Gardner Management Profit Sharing Plan and Trust. Includes
55,128 shares of Synerteck common stock held directly by Gardner Management
Profit Sharing Plan and Trust.
(10) Principal shareholder of Synerteck. Includes 22,457 shares of Synerteck
common stock held directly by Mr. Shell and 11,228 shares of Synerteck common
stock held by Kelli Shell, the wife of Mr. Shell.
35
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Effective April 1, 2004, Synerteck entered into a management services
agreement with SportsNuts, Inc., a company in which Kenneth Denos, a director of
Synerteck, serves as the Chairman and CEO, its sole shareholder, to receive
various services, including use of computer servers and telecommunications
equipment, accounting and bookkeeping services, limited legal services and
advice, business development services, and administrative services for a fee
equal to $750 per month. For the foreseeable future, we intend to utilize these
services to assist us in maintaining Synerteck's reporting status under the
Securities Exchange Act of 1934. The management services agreement is terminable
by Synerteck or SportsNuts on ninety days written notice. The fees payable in
connection with this agreement were based upon the following:
o An average of five hours per month of bookkeeping services, valued at
$70.00 per hour;
o An average of two hours per month of routine legal services, valued at
$125.00 per hour;
o Fees for use of computer equipment and computer facilities access of
$100.00 per month, comparable with charges to other subtenants of
SportsNuts for such usage; and
o Fees for use of routine office supplies of $50.00 per month,
comparable with charges to other subtenants of SportsNuts for such
usage.
Synerteck is subject to a month-to-month sublease with SportsNuts Inc., a
company in which Kenneth Denos, a director of Synerteck, serves as the Chairman
and CEO, for the use of office and hardware facilities. We pay SportsNuts a
rental fee of $1,000 per month, which may increase as our business grows.
Synerteck's rental fee is based on exclusive usage of approximately one-fourth
of the office space of SportsNuts, which pays an aggregate rental rate of $4,250
per month and is comparable to rents charged to other subtenants of SportsNuts.
We utilize these facilities for the operation of our day-to-day business. As
Synerteck grows and expands, we may seek alternative arrangements for our
executive offices and operations elsewhere in the Salt Lake City metropolitan
area. Synerteck's sublease with SportsNuts is attached as an exhibit to this
registration statement.
ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K
(a) Documents Filed as a Part of this Report
(1) Financial Statements
See "Item 7 - Financial Statements Required by Form 10-KSB."
(2) Financial Statement Schedules
The following Financial Statement Schedules of the Company and its
subsidiaries, together with the report of Bouwhuis Morrill & Company, LLC, the
Company's independent accountants, thereon are filed as part of this Report on
Form 10-KSB as listed below and should be read in conjunction with the
consolidated financial statements of the Company:
Report of Bouwhuis Morrill & Company, LLC, Independent Accountants, on
Financial Statement Schedules.
36
(3) Exhibits
See "Index to Exhibits."
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the year ended December 31, 2004.
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees Billed For Audit and Non-Audit Services
The following table represents the aggregate fees billed for professional
audit services rendered to the Company by Bouwhuis, Morrill & Company, LLC, our
current independent auditor, ("BMC") for the audit of the Company's annual
financial statements for the years ended December 31, 2003 and 2004, and all
fees billed for other services rendered by BMC during those periods.
Year Ended December 31 2004 2003
- ---------------------- ---- ----
Audit Fees(1) $6,685 $0
Audit-Related Fees(2) 0 0
Tax Fees(3) 0 0
All Other Fees(4) 0 0
------------------ ------------------
Total Accounting Fees and Services $6,685 $00,000
(1) Audit Fees. These are fees for professional services for the audit of the
Company's annual financial statements, and for the review of the financial
statements included in the Company's filings on Form 10-QSB, and for services
that are normally provided in connection with statutory and regulatory filings
or engagements. There were no fees paid by the Company in 2003 because all fees
were paid by SportsNuts, Inc., the former parent corporation of the Company. The
amounts shown for BMC in 2004 relate to (i) the audit of the Company's annual
financial statements for the fiscal year ended December 31, 2003, and (ii) the
review of the financial statements included in the Company's filings on Form
10-QSB for the first, second and third quarters of 2004.
(2) Audit-Related Fees. These are fees for the assurance and related services
reasonably related to the performance of the audit or the review of the
Company's financial statements.
(3) Tax Fees. These are fees for professional services with respect to tax
compliance, tax advice, and tax planning.
(4) All Other Fees. These are fees for permissible work that does not fall
within any of the other fee categories, i.e., Audit Fees, Audit-Related Fees, or
Tax Fees.
37
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.
38
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SYNERTECK INCORPORATED
Dated: March 15, 2005 By: /s/ Clayton Barlow
----------------------
Clayton Barlow
President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Company and in the capacities and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/ Clayton Barlow Director and President March 15, 2005
- ----------------------------
/s/ Chene Gardner Director and Chief Financial Officer March 15, 2005
- ---------------------------
/s/ Kenneth I. Denos Director and Secretary March 15, 2005
- ------------------------------
39