U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2004
COMMISSION FILE NUMBER: 1-9431
SUNNINGDALE, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 94-3012230
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
936A BEACHLAND BOULEVARD, SUITE 13, VERO BEACH, FL 32963
(Address of principal executive offices)
(772) 231-7544
(Issuer's telephone number)
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 [_].
As of June 30, 2004, there were 225,344 shares of common stock, par value
$0.0001 per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes [_] No [X].
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of June 30, 2004
(unaudited) and September 30, 2003 1
Consolidated Condensed Statements of Operations for the
three month and nine month periods ended June 30, 2004
and 2003 (unaudited) 2
Consolidated Condensed Statements of Cash Flows for the
nine month periods ended June 30, 2004 and 2003 (unaudited) 3
Notes to Consolidated Financial Statements (unaudited) 4-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-13
Item 3. Controls and Procedures 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Certifications 16-18
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Statements made in this Form 10-QSB (the "Quarterly Report") that are not
historical or current facts are "forward-looking statements" made pursuant to
the safe harbor provisions of Section 27A of the Securities Act of 1933, as
amended (the "Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These statements often can be identified by the
use of terms such as "may", "will", "expect", "believe", "anticipate",
"estimate", "approximate", or "continue", or the negative thereof. Sunningdale,
Inc. (the "Company") intends that such forward-looking statements be subject to
the safe harbors for such statements. The Company wishes to caution readers not
to place undue reliance on any such forward-looking statements, which speak only
as of the date made. Any forward-looking statements represent management's best
judgment as to what may occur in the future. However, forward-looking statements
are subject to risks, uncertainties and important factors beyond the control of
the Company that could cause actual results and events to differ materially from
historical results of operations and events and those presently anticipated or
projected. These factors include adverse economic conditions, entry of new and
stronger competitors, inadequate capital and unexpected costs. Except as
required by law, the Company disclaims any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after the date of
such statement or to reflect the occurrence of anticipated or unanticipated
events.
SUNNINGDALE, INC.
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JUNE 30, 2004
(Unaudited)
SUNNINGDALE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30,
2004 September 30,
(unaudited) 2003
------------- -------------
ASSETS
Current assets
Cash $ 1,063 $ 6,000
Prepaid expenses 382 --
------------- -------------
Total current assets 1,445 6,000
------------- -------------
Total assets $ 1,445 $ 6,000
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 3,335 $ 2,000
Accrued expenses 7,108 7,000
------------- -------------
Total current liabilities 10,443 9,000
Stockholders' deficit
Preferred stock, $0.01 par value,
1,000,000 shares authorized, no shares
issued or outstanding -- --
Common stock $0.0001 par value,
100,000,000 shares authorized,
225,344 and 200,000 shares issued and
outstanding 23 7,000
Additional paid-in capital 511,484 454,000
Accumulated deficit (520,505) (464,000)
------------- -------------
Total stockholders' deficit (8,998) (3,000)
------------- -------------
Total liabilities and stockholders' deficit $ 1,445 $ 6,000
============= =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
1
SUNNINGDALE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
Ending June 30, Ending June 30,
2004 2003 2004 2003
--------- --------- --------- ---------
Revenue
Miscellaneous income $ -- $ -- $ -- $ --
Operating Expenses
General and administrative 6,698 26,675 8,598 31,292
Professional fees 5,961 17,254 47,966 33,658
--------- --------- --------- ---------
Total operating expenses 12,659 43,929 56,564 64,950
--------- --------- --------- ---------
Net loss $ (12,659) $ (43,929) $ (56,564) $ (64,950)
========= ========= ========= =========
Net loss per share $ (0.06) $ (0.42) $ (0.27) $ (0.62)
========= ========= ========= =========
Weighted average number of
common shares outstanding 225,344 104,861 208,829 104,861
========= ========= ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
2
SUNNINGDALE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ending
June 30,
2004 2003
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (56,564) $ (64,950)
Adjustments to reconcile net loss to net
cash used in operations:
Prepaid expenses (382) --
Accounts payable 1,335 1,033
Accrued expenses 108 13,100
Stock issued in lieu of compensation -- 24,500
--------- ---------
Net cash used in operating activities (55,503) (26,317)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 50,566 42,670
--------- ---------
Net cash flows from financing activities 50,566 42,670
--------- ---------
Net increase (decrease) in cash (4,937) 16,353
Cash at beginning of period 6,000 123
--------- ---------
Cash at end of period $ 1,063 $ 16,476
========= =========
SCHEDULE OF NON-CASH
FINANCING ACTIVITIES
Conversion of promissory note and
accrued interest to common stock $ -- $ 253,100
--------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
SUNNINGDALE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Month Periods Ended June 30, 2004 and 2003
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of
Sunningdale, Inc. (the "Company") are presented in accordance with the
requirements for Form 10-Q and Article 10 of Regulation S-X and Regulation
S-B. Accordingly, they do not include all of the disclosures required by
generally accepted accounting principles. In the opinion of management,
all adjustments (all of which were of a normal recurring nature)
considered necessary to fairly present the financial position, results of
operations, and cash flows of the Company on a consistent basis, have been
made.
These results have been determined on the basis of generally accepted
accounting principles and practices applied consistently with those used
in the preparation of the Company's Annual Financial Statements for the
years ending September 30, 2003 and 2002. Operating results for the nine
months ending June 30, 2004 are not necessarily indicative of the results
that may be expected for the year ended September 30, 2004.
The Company recommends that the accompanying condensed financial
statements for the interim period be read in conjunction with the audited
financial statements and notes for the years ending September 30, 2003 and
2002, previously filed.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Sunningdale,
Inc. (the "Company") and its majority and wholly owned subsidiaries,
PHYTOpharmaceuticals, Inc. and SRE ESCAgenetics Corporation, after
elimination of all significant intercompany accounts and transactions. The
Company's subsidiaries did not have any significant operating activities
during the periods presented, and PHYTOpharmaceuticals, Inc. was dissolved
in April 2003.
USE OF ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the
statements of financial condition and revenues and expenses for the year
then ended. Actual results may differ significantly from those estimates.
NET LOSS PER SHARE
Basic loss per weighted average common share is computed by dividing the
net loss by the weighted average number of common shares outstanding
during the period. Common stock equivalents are excluded from the
computation, as their effect is anti-dilutive.
4
SUNNINGDALE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Month Periods Ended June 30, 2004 and 2003
(Unaudited)
NOTE 2 - NATURE OF BUSINESS
Formed in 1986, the Company was organized to develop and commercialize
high-value, plant-derived products for the agricultural and pharmaceutical
markets. The Company changed its name to ESCAgenetics Corporation in 1988.
In January 1995, the Company scaled back its business activities and
became largely a dormant business. In January 1996, the Company filed a
bankruptcy petition for protection under Chapter 11 of the U.S. Bankruptcy
Code, and the Company's plan of reorganization became effective on August
22, 1996. The bankruptcy proceeding was officially closed effective March
31, 1997.
Prior to April 2003, Genesee Holdings, Inc. ("Genesee") owned
approximately 90% of the outstanding common stock of the Company. During
April 2003, Genesee sold its interest to Kevin R. Keating.
On August 22, 2003, the Company, Shecom Acquisition Corp., a wholly owned
subsidiary of the Company ("Mergerco"), and Shecom Corporation ("Shecom")
entered into an Agreement and Plan of Reorganization (the "Merger
Agreement"). Pursuant to the Merger Agreement, which became effective on
November 5, 2003, Mergerco was merged with and into Shecom (the "Merger"),
with Shecom as the surviving corporation of the Merger. The Company
changed its name to Krystal Digital Corporation in October 2003.
On February 29, 2004 the Company's Board of Directors unanimously adopted
and shareholders holding a majority of the common stock approved a
resolution authorizing and approving a Mutual Termination Agreement (the
"Agreement") pursuant to which the Merger would be rescinded. The Board
and shareholders believed the termination and rescission of the Merger was
in the best interest of the Company and its shareholders because Shecom
was unable to produce audited financial statements, which resulted in the
Company's inability to comply with the Commission's requirements for
reporting entities.
5
SUNNINGDALE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Month Periods Ended June 30, 2004 and 2003
(Unaudited)
NOTE 2 - NATURE OF BUSINESS (CONTINUED)
The Agreement became effective on April 15, 2004. The Company no longer
has any ownership interest in Shecom; and the shareholders of Shecom have
no ownership interest in the Company. As a result of the termination and
rescission of the Merger, the accompanying financial statements are
presented as if the Merger had never occurred.
On April 15, 2004 the Company changed its name to Sunningdale, Inc. The
Company plans to pursue and negotiate a business combination or other
strategic transaction. Ultimately, the continuation of the Company as a
going concern is dependent upon the establishment of profitable
operations. Because the achievement of these plans in dependent on future
events, there can be no assurance that future profitable operations will
occur as planned.
NOTE 3 - STOCKHOLDERS' EQUITY
The Company has authorized 100,000,000 shares of Common Stock with a par
value of $0.0001 per share and 1,000,000 shares of Preferred Stock with a
par value of $0.01 per share. On March 30, 2004, the Company issued 25,000
shares of the Company's restricted common stock to Keating Reverse Merger
Fund, LLC at a purchase price of $2.00 per share for an aggregate
consideration of $50,000. There were 225,344 shares of Common Stock issued
and outstanding at June 30, 2004. No shares of preferred stock are
outstanding.
The Company declared a one-for-140 reverse stock split of all outstanding
shares of common stock during April 2003 and a one-for-five reverse stock
split during January 2004. All periods presented have reflected the
reverse stock splits.
NOTE 4 - INCOME TAXES
The Company has accumulated net operating loss carryforwards of
approximately $333,000 that are available to offset future taxable income,
if any, through 2020. Realization of the net operating loss carryforwards
is dependent upon future profitable operations. In addition, the
carryforwards may be limited upon a change of control as described in
Internal Revenue Code Section 381. Accordingly, management has recorded a
valuation allowance to reduce deferred tax assets associated with net
operating loss carryforwards to zero at June 30, 2004.
6
SUNNINGDALE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Month Periods Ended June 30, 2004 and 2003
(Unaudited)
NOTE 5 - RELATED PARTY TRANSACTIONS
The sole director of the Company, Kevin R. Keating, is the father of the
principal stockholder of Keating Investments, LLC, the investment-banking
firm that rendered services to the Company in connection with the Merger.
Keating Investments, LLC is the managing member of Keating Reverse Merger
Fund, LLC ("KRM Fund"), which is the majority shareholder of the Company.
Keating Investments, LLC received no compensation in the Merger. KRM Fund
owns approximately 83.7% of the outstanding shares of the Company's common
stock as of June 30, 2004. Kevin R. Keating is not affiliated with and has
no equity interest in Keating Investments, LLC and KRM Fund and disclaims
any beneficial interest in the shares of the Company's stock owned by KRM
Fund. Similarly, Keating Investments, LLC and KRM Fund disclaims any
beneficial interest in the shares of the Company's common stock currently
owned by Kevin R. Keating.
On March 30, 2004, the Company issued 25,000 shares of the Company's
restricted common stock to KRM Fund (see Note 3).
In April 2004, the Company reimbursed Keating Securities, LLC for legal
expenses incurred by the Company in connection with the Merger, which were
initially paid by Keating Securities, LLC. Keating Securities, LLC is the
register broker-dealer affiliate of Keating Investments, LLC. Kevin R.
Keating is not affiliated with and has no equity interest in Keating
Securities, LLC.
On June 10, 2004, the Company entered into a contract with Vero
Management, L.L.C. ("Vero") for managerial and administrative services.
Vero has not been engaged to provide, and Vero does not render, legal,
accounting, auditing, investment banking or capital formation services.
Kevin R. Keating, the sole director of the Company, is the manager of
Vero. The term of the contract is for one year. In consideration of the
services provided, Vero will be paid $1,000 for each month in which
services are rendered. Accounts payable at June 30, 2004 includes $1,000
payable to Vero pursuant to the terms of this agreement.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements contained in this report, including statements
concerning the Company's future cash and financing requirements, and other
statements contained herein regarding matters that are not historical
facts, are forward looking statements; actual results may differ
materially from those anticipated.
COMPANY BACKGROUND
Formed in 1986, the Company was organized to develop and commercialize
high-value, plant-derived products for the agricultural and pharmaceutical
markets. The Company changed its name to ESCAgenetics Corporation in 1988.
In January 1995, the Company scaled back its business activities and
became largely a dormant business. In January 1996, the Company filed a
bankruptcy petition for protection under Chapter 11 of the U.S. Bankruptcy
Code, and the Company's plan of reorganization became effective on August
22, 1996. The bankruptcy proceeding was officially closed effective March
31, 1997.
Prior to April 2003, Genesee Holdings, Inc. ("Genesee") owned
approximately 90% the outstanding shares of common stock of the Company.
During April 2003, Genesee sold its interest to Kevin R. Keating.
On August 22, 2003, the Company, Shecom Acquisition Corp., a wholly owned
subsidiary of the Company ("Mergerco"), and Shecom Corporation ("Shecom")
entered into an Agreement and Plan of Reorganization (the "Merger
Agreement"). Pursuant to the Merger Agreement, which became effective on
November 5, 2003, Mergerco was merged with and into Shecom (the "Merger"),
with Shecom as the surviving corporation of the Merger. The Company
changed its name to Krystal Digital Corporation in October 2003.
On February 29, 2004 the Company's Board of Directors unanimously adopted
and shareholders holding a majority of the common stock approved a
resolution authorizing and approving a Mutual Termination Agreement (the
"Agreement") pursuant to which the Merger would be rescinded. The Board
and shareholders believed the termination and rescission of the Merger was
in the best interest of the Company and its shareholders because Shecom
was unable to produce audited financial statements, which resulted in the
Company's inability to comply with the Commission's requirements for
reporting entities.
The Agreement became effective on April 15, 2004. The Company no longer
has any ownership interest in Shecom; and the shareholders of Shecom have
no ownership interest in the Company. As a result of the termination and
rescission of the Merger, the accompanying financial statements are
presented as if the Merger had never occurred.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
On April 15, 2004 the Company changed its name to Sunningdale, Inc. The
Company plans to pursue and negotiate a business combination or other
strategic transaction. Ultimately, the continuation of the Company as a
going concern is dependent upon the establishment of profitable
operations. Because the achievement of these plans in dependent on future
events, there can be no assurance that future profitable operations will
occur as planned.
RESULTS OF OPERATIONS
For the nine months ended June 30, 2004 the Company had no activities that
produced revenues from operations.
For the nine months ending June 30, 2004 and 2003 the Company had
operating expenses and net losses of $56,564 and $64,950 respectively. The
decrease in net loss from 2003 to 2004 was primarily due to a reduction in
general and administrative expenses, which was partially offset by an
increase in professional fees during 2004.
LIQUIDITY AND CAPITAL RESOURCES
The Company's total assets as June 30, 2004 are $1,445, which is comprised
of $382 prepaid rental expense and $1,063 in cash. The Company's current
liabilities are $10,443. The Company has no long-term debt. The
accumulated deficit as of June 30, 2004 is $520,505.
On March 30, 2004, the Company issued 25,000 shares of the Company's
restricted common stock to Keating Reverse Merger Fund, LLC at a purchase
price of $2.00 per share for an aggregate consideration of $50,000. These
funds were used to pay operating expenses.
The following is a summary of the Company's cash flows from operating,
investing, and financing activities:
Nine months ended June 30,
2004 2003
---------- -----------
Operating activities $ (55,503) $ (26,317)
Financing activities 50,566 42,670
---------- -----------
Net effect on cash $ (4,937) $ 16,353
========== ===========
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
PLAN OF OPERATIONS
The Company's Plan of Operations is based on attracting a suitable
privately held company, one that has both a business history and operating
assets, with which to effect a business combination or strategic
transaction.
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in an operating business presented to it by
persons or firms who or which desire to seek the advantages of an issuer
who has complied with the reporting requirements of the Securities Act of
1934 ("1934 Act"). The Company will not restrict its search to any
specific business, industry, or geographical location, and may participate
in a business venture of virtually any kind or nature. This discussion of
the proposed business is purposefully general and is not meant to be
restrictive of the Company's virtually unlimited discretion to search for
and enter into potential business opportunities. Management anticipates
that it may be able to participate in only one potential business venture
because the Company has nominal assets and limited financial resources.
The Company may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public
marketplace in order to raise additional capital in order to expand into
new products or markets, to develop a new product or service, or for other
corporate purposes. The Company may acquire assets and establish wholly
owned subsidiaries in various businesses or acquire existing businesses as
subsidiaries.
The Company anticipates that the selection of a business opportunity in
which to participate will be complex and extremely risky. Due to general
economic conditions, rapid technological advances being made in some
industries and shortages of available capital, the Company's management
believes that there are numerous firms seeking the benefits of an issuer
who has complied with the reporting requirements of the 1934 Act. Such
benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for
incentive stock options or similar benefits to key employees, providing
liquidity (subject to restrictions of applicable statutes), for all
shareholders and other factors. Potentially, available business
opportunities may occur in many different industries and at various stages
of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely
difficult and complex. The Company has, and will continue to have, limited
capital with which to provide the owners of business opportunities with
any significant cash or other assets. However, the Company's management
believes the Company will be able to offer owners of acquisition
candidates the opportunity to acquire a controlling ownership interest in
an issuer who has complied with the reporting requirements of the 1934 Act
without incurring the cost and time required to conduct an initial public
offering.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The analysis of new business opportunities will be undertaken by, or under
the supervision of, the officers and directors of the Company. The
Company's management intends to concentrate on identifying preliminary
prospective business opportunities which may be brought to its attention
through present associations of the Company's officers and directors, or
by the Company's shareholders. The Company may engage financial advisors
and investment banking firms to assist it in identifying and analyzing
prospective business opportunities.
In analyzing prospective business opportunities, the Company's management
will consider such matters as the available technical, financial and
managerial resources; working capital and other financial requirements;
history of operations, if any; prospects for the future; nature of present
and expected competition; the quality and experience of management
services which may be available and the depth of that management; the
potential for further research, development or exploration; specific risk
factors not now foreseeable but which then may be anticipated to impact
the proposed activities of the Company; the potential for growth or
expansion; the potential for profit; the public recognition of acceptance
of products, services or trades; name identification; and other relevant
factors. Officers and directors of the Company expect to interview and/or
meet personally with management and key personnel of the business
opportunity as part of their investigation. To the extent possible, the
Company intends to utilize written reports and personal investigation to
evaluate the above factors, including such reports and investigations
prepared by its financial advisors.
As part of the Company's compliance with the reporting requirement of the
1934 Act, the Company intends to furnish information about significant
acquisitions, including audited financial statements for the target
company, covering one, two or three years depending upon the revenue of
the target company. Consequently, acquisition prospects that do not have
or are unable to obtain the required audited statements will not be
appropriate for acquisition candidiates.
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization,
joint venture, or licensing agreement with another corporation or entity.
The Company may alternatively purchase the capital stock or the operating
assets of an existing business.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The structure of the business combination will depend on, among other
factors:
o the nature of the target business,
o the Company's needs and desires and the needs and desires of
those persons controlling of the target business,
o the management of the target business, and
o the Company's relative negotiating strength compared to the
strength of the persons controlling the target business.
It is possible that, after the Company successfully consummates a merger
or acquisition with an unaffiliated entity, that entity may desire to
employ or retain one of the Company's officers or directors for the
purposes of providing services to the surviving entity. However, the
Company has adopted a policy whereby the offer of any post-transaction
employment to current officers and directors will not be a consideration
in the Company's decision to undertake any proposed transaction. Each
member of the Company's management has agreed to disclose to the Board of
Directors any discussions concerning possible employment by any entity
that proposes to undertake a transaction with the Company and further, to
abstain from voting on the transaction. Therefore, as a practical matter,
if each member of the Board of Directors is offered employment in any form
from any prospective merger or acquisition candidate, the proposed
transaction will not be approved by the Board of Directors as a result of
the inability of the Board of Directors to affirmatively approve the
transaction. The transaction would then be subject to the approval of a
majority of the Company's existing shareholders.
Any merger or acquisition can be expected to have a significant dilutive
effect on the percentage of shares held by the Company's existing
stockholders. The target businesses that the Company will likely consider
will, in all probability, have significantly more assets than the Company
has. Therefore, in all likelihood, the Company's management will offer a
controlling interest in the Company to the owners of the target business.
While the actual terms of a transaction to which the Company may be a
party cannot be predicted, the Company expects that the parties to the
business transaction will find it desirable to avoid the creation of a
taxable event and thereby structure the acquisition in a so-called
"tax-free" reorganization under Sections 368(a)(1) or 351 of the Internal
Revenue Code. In order to obtain tax-free treatment under the Internal
Revenue Code, the owners of the acquired business may need to own 80% or
more of the voting stock of the surviving entity. As a result, the
Company's stockholders would retain 20% or less of the issued and
outstanding shares of the surviving entity, which would result in
significant dilution in their ownership percentage of the entity after the
combination and may also result in a reduction in the net tangible book
value per share of the Company's existing stockholders. In addition, all
or a majority of the Company's current directors and officers will
probably, as part of the terms of the acquisition transaction, resign as
directors and officers.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Company will remain an insignificant player among the firms which
engage in business combinations. There are many established venture
capital and financial concerns which have significantly greater financial
and personnel resources and technical expertise than the Company has. In
view of the Company's limited financial resources and limited management
availability, the Company will continue to be at a significant
disadvantage compared to other venture capital and financial concerns that
compete with the Company. The Company will also be competing for
acquisition opportunities with other public shell companies that do not
have an operating business.
The Company's activities following a business combination with a target
company will be dependent on the nature of the acquired business, as well
as the interest acquired. It may be expected that the acquired business
will present various risks to the Company's existing stockholders. We
cannot yet appropriately assess the risks of the business at the present
time, even in general terms, as we have not restricted the Company's
search for a potential target company to any one particular field of
endeavor.
As of the date of this report, the Company has not entered into a letter
of intent or a definitive agreement for a business combination with a
target company, and the Company continues to search for, and negotiate
with, potential target companies.
ITEM 3. CONTROLS AND PROCEDURES
The Company was dormant during the fiscal quarter ended June 30, 2004. The
Company has had no employees since November 1996. Within 90 days prior to
the filing date of this report, to the extent applicable to a dormant
company, the Company carried out an evaluation of the effectiveness of the
design and operation of the Company's disclosure controls and procedures
(as defined in Exchange Act Rule 13a-14(c) and 15d-14(c)). Based upon that
evaluation, the Chief Executive and Financial Officer concluded that the
Company's disclosure controls and procedures are effective.
There are no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to
the date of the evaluation.
13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31 Certification of Chief Executive Officer and Chief Financial
Officer of the Company Accompanying Periodic Reports pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (as filed
herewith).
32 Certification of Chief Executive Officer and Chief Financial
Officer of the Company pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (as filed herewith).
(b) Reports on Form 8-K
The following current reports were filed during the quarter ended June
30, 2004:
Form 8-K filed with the Securities and Exchange Commission on
April 6, 2004, disclosing the termination and rescission of the Merger,
the change in corporate directors and officers, the relocation of the
corporate office, and the change in name from Krystal Digital
Corporation to Sunningdale, Inc.
14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
SUNNINGDALE, INC.
Date: August 12, 2004 By: /s/ Kevin R. Keating
-----------------------
Chief Executive Officer
Chief Financial Officer
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