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PART I
Forward-Looking Information
This Annual Report of Sync2 Networks Corp. on Form 10-K contains forward-looking statements, particularly those identified with the words, “anticipates,” “believes,” “expects,” “plans,” “intends,” “objectives,” and similar expressions. These statements reflect management’s best judgment based on factors known at the time of such statements. The reader may find discussions containing such forward-looking statements in the material set forth under “Management’s Discussion and Analysis and Plan of Operations,” generally, and specifically therein under the captions “Liquidity and Capital Resources” as well as elsewhere in this Annual Report on Form 10-K. Actual events or results may differ materially from those discussed herein. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.
ITEM 1. BUSINESS
BACKGROUND
We were incorporated on January 16, 2008 under the laws of the state of Nevada as Plethora Resources Inc. to commence operations in the business of consulting to oil & gas exploration companies interested in obtaining exploration and production licenses at auction for oil and gas properties in Russia. We were unable to fund our intended business and, on May 28, 2009 but effective February 1, 2009, we acquired a wholly owned subsidiary, Sync2 International Ltd, for the assumption of the debts of Sync2 Agency Ltd, a wholly owned subsidiary of Sync2 International Ltd. Sync2 Agency Ltd is an internet marketing and website development company.
On May 14, 2009 we changed our name to Sync2 Networks Corp. On December 15, 2009, we shut down the operations of Sync2 Agency Ltd. after incurring substantial operating losses, and subsequently wrote-off the investment in Sync2 Agency Ltd.
Change in Control
On approximately August 14, 2013, there was a change in our control. In accordance with the terms and provisions of that certain escrow agreement dated March 31, 2012 (the "Escrow Agreement"), Warren Gilbert, who is the current President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and sole member of the Board of Directors, acquired in a private transaction an aggregate of 62,863,800 shares of our restricted common stock representing an equity interest of 61% of the total issued and outstanding shares. The amount of consideration paid was $325,000 and were outside funds from unrelated parties. The shares of common stock were acquired as follows: (i) 51,000,000 shares from Artur Etozov; and (ii) 11,863,800 shares from approximately ten separate shareholders each holding less than 5% of the total issued and outstanding.
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BUSINESS OF ISSUER
We are engaged in the business of acquiring and developing internet marketing and web site development entities and/or their individual software programs to assist third-party clients in marketing their products and in maximizing the use of the internet to achieve those third-party clients' ultimate business objectives. More recently we expanded our on-line business consulting activities, by entering into a strategic alliance with prominent systems and infrastructure providers such as "IBM" (attaining IBM Business Partner Status), "Apple" (a part of the I-phone Developer Program), and more complex tri-partite business arrangements with Telus Communications Company and Cisco Systems developing specialized industry-specific software applications.
This new orientation compliments our existing on-line asset management, on-going maintenance and support endeavors, and on-line systems analysis business permitting us to broaden our business activities throughout Canada in turn creating the potential for the development of a more unique array of products and services in an industry with growth potential.
PATENTS AND TRADE MARKS
To date there are no aspects of our business plan that require a patent or trademark or product license. We have not entered into any vendor agreements or contracts that give or could give rise to any obligations or concessions for patents or trademarks.
RESEARCH AND DEVELOPMENT
During the last three fiscal years no time was spent on specialized research and development activities and has no plans are contemplated in the future.
EMPLOYEES AND EMPLOYMENT AGREEMENTS
As of the date of this Annual Report, we have no employees other than our one officer, Warren Gilbert. We do not currently have a formal employment agreement with Mr. Gilbert. We anticipate that we will retain independent contractors as consultants to support our expansion and business development. We are not a party to any employment agreements.
ITEM 1A. RISK FACTORS
An investment in these securities involves an exceptionally high degree of risk and is extremely speculative in nature. Following are what we believe are all the material risks involved if you decide to purchase shares in this offering.
The risks described below are the ones we believe are most important for you to consider. These risks are not the only ones that we face. If events anticipated by any of the following risks actually occur, our business, operating results or financial condition could suffer and the price of our common stock could decline.
Risks Relating To Our Business
We Have a History of Operating Losses and There Can Be No Assurance We Will Be Profitable in the Future.
We have a history of operating losses, expect to continue to incur losses, and may never be profitable, and we must be considered to be in the developmental Further, we may be dependent on sales of our equity securities and debt financing to meet our cash requirements. Although we reflect a net profit of $466,759 for fiscal year ended June 30, 2013, we have incurred losses from operations totaling $1,366,570 since inception to June 30, 2013. As of June 30, 2013, we had an accumulated deficit of $654,223. Further, we do not expect positive cash flow from operations in the near term. We anticipate a change in business operations. Therefore, it is quite likely that additional capital may be required in the event further working capital is necessary because our operating costs will increase beyond our expectations or we encounter greater costs associated with general and administrative expenses or offering costs.
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We may need additional capital in the future, but there is no assurance that funds will be available on acceptable terms, or at all.
We may need to raise additional funds in order to achieve growth or fund other business initiatives. This financing may not be available in sufficient amounts or on terms acceptable to us and may be dilutive to existing stockholders if raised through additional equity offerings. Additionally, any securities issued to raise funds may have rights, preferences or privileges senior to those of existing stockholders. If adequate funds are not available or are not available on acceptable terms, our ability to expand, develop or enhance services or products, or respond to competitive pressures may be materially limited.
Any existing indebtedness could adversely affect our financial condition and we may not be able to fulfill our debt obligations.
Any proposed indebtedness may contain various covenants that may limit our ability to, among other things: (i) incur or guarantee additional indebtedness; (ii) pay dividends or make other distributions to our stockholders; (iii) make restricted payments; (iv) engage in transactions with affiliates; and (v) enter into proposed business transactions or combinations. These restrictions could limit our ability to withstand general economic downturns that could affect our business, obtain future financing, make acquisitions or capital expenditures, conduct operations or otherwise capitalize on business opportunities that may arise. Additionally, if we incur substantial debt for working capital purposes, we may use a significant portion of our cash flow to pay interest on our outstanding debt, limiting the amount available for working capital, capital expenditures and other general corporate purposes.
We Will Need to Restructure Our Business to Realize Any Profitability and Cash Flow.
Based upon the termination of current business operations and the unknown future business prospects, we will experience significant fluctuations in our operating results and rate of growth. Due to our limited operating history, we may not be able to accurately forecast our rate of growth. We base our current and future expense levels and our investment plans on estimates of identification of future candidates involving new business operations and consummation of contractual relations. Our current expenses and investments are to a large extent fixed, and we may not be able to adjust our spending quickly enough if our future prospects fall short of our expectations. Any potential revenue growth may not be sustainable and our company-wide percentage growth rate will decrease in the future.
We Depend on the Efforts and Abilities of Our Officers.
We currently have only one officer, Warren Gilbert. Outside demands on our officer's time may prevent him from devoting sufficient time to our operations. In addition, the demands on this individual's time will increase because of our status as a public company. Mr. Gilbert has limited experience in managing a public company, which may impact our ability to meet our financial and business objectives as potential investors may not want to invest in a company whose management has limited public company management experience. The interruption of the services of our management could significantly hinder our operations, profits and future development, if suitable replacements are not promptly obtained. We do not currently have any executive compensation agreements. We cannot guaranty that our management will remain with us.
Our Management Ranks are Thin, and Losing or Failing to Add Key Personnel Could affect Our Ability to Successfully Grow Our Business.
Our future performance depends substantially on the continued service of our management. In particular, our success depends upon the continued efforts of our management personnel, including our sole officer, Mr. Gilbert. We cannot guarantee that Mr. Gilbert will remain with us.
The Costs to Meet our Reporting Requirements as a Public Company Subject to the Securities Exchange Act of 1934 will be Substantial and May Result in Us Having Insufficient Funds to Operate our Business.
We will incur ongoing expenses associated with professional fees for accounting and legal expenses associated with being a public company. We estimate that these costs will range up to $30,000 per year for the next few years. Those fees will be higher if our business volume and activity increases. Those obligations will reduce and possibly eliminate our ability and resources to fund our operations and may prevent us from meeting our normal business obligations.