**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**AmendmentNo. 2 to**

**FORM 10-KSB**

 

**(MarkOne)**

 

**x****ANNUAL REPORT UNDER SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGEACT OF 1934**

 

**For thefiscal year ended December 31, 2007**

 

**o****TRANSITION REPORT UNDER SECTION 13 OR 15(d) OFTHE EXCHANGE ACT**

 

**For thetransition period from**

 

**Commission file number: 333-131722**

 

**SYNERGYPHARMACEUTICALS, INC.**

(Exactname of small business issuer as specified in its charter)

 

**FLORIDA**

(Stateor other jurisdiction of incorporation or organization)

 

**20-3823853**

(IRSEmployer Identification No.)

 

**420 Lexington Avenue, Suite 1609, New York, New York 10170**

(Addressof principal executive offices) (Zip Code)

 

**(212) 297-0010**

(Issuer’stelephone number)

 

 

(Formername, former address and former fiscal year,if changed since last report)

 

**SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OFTHE ACT: (None)**

 

**SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OFTHE ACT: (None)**

 

Check whether the issuer (1) filedall reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports); and (2) has been subject tosuch filing requirements for the past 90 days. Yes x No o

 

Check if there is nodisclosure of delinquent filers pursuant to Item 405 of Regulation S-B is notcontained in this form, and no disclosure will be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or anyamendment to this Form 10-KSB. x

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act.) Yes o No x

 

State issuer’s revenues forits most recent fiscal year. $0.00

 

The market value of thecommon stock held by non-affiliates cannot be estimated since there is nomarket for the company’s shares.

 

There were 2,181,000 sharesof common stock outstanding as of February 29, 2008.

 

**DOCUMENTSINCORPORATED BY REFERENCE: None.**

 

Transitional Small BusinessDisclosure Format (check one): Yes o No x

 

 

 

----

 

**EXPLANATORY NOTE**

 

**This****Amendment No. 2 to****our Annual Report on Form 10-KSBfor the year ended December 31, 2007 is being filed solely for the purposeof responding to comments received by us from the Staff of the Securities andExchange Commission on August 14, 2008 with respect to the proper datingof our evaluation of internal controls over financial reporting discussed in Item8A(T) of Form 10-KSB/A filed on August 12, 2008.  This Amendment speaks as of the originalfiling date of our Annual Report on Form 10-KSB and has not been updatedto reflect events occurring subsequent to the original filing date.**

 

2

----

 

**PART III**

 

**ITEM 8A(T)    CONTROLSAND PROCEDURES.**

 

*Evaluationof disclosure controls and procedures.*     Based on an evaluation of our disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15d-15(e) ofthe Securities Exchange Act of 1934, as amended) required by paragraph (b) ofRule 13a-15 or Rule 15d-15, as of December 31, 2007, our ChiefExecutive Officer and Principal Financial Officer have concluded that, due tothe material weaknesses in our internal control over financial reporting notedbelow, our disclosure controls and procedures were not effective.

 

*Management’sannual report on internal control over financial reporting.*     We are responsiblefor establishing and maintaining adequate internal control over our financialreporting. As defined by the Securities and Exchange Commission, internalcontrol over financial reporting is a process designed by, or under thesupervision of our principal executive and principal financial officers andeffected by our Board of Directors, management and other personnel, to providereasonable assurance regarding the reliability of financial reporting and thepreparation of the financial statements in accordance with accountingprinciples generally accepted in the United States of America. Our internalcontrol over financial reporting includes those policies and procedures that:

 

(1)          pertain to the maintenance of records that,in reasonable detail, accurately and fairly reflect our transactions anddispositions of our assets;

 

(2)          provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, andthat our receipts and expenditures are being made only in accordance withauthorizations of our management and board of directors; and

 

(3)          provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use, or dispositionof our assets that could have a material effect on the financial statements.

 

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

 

In connection with thepreparation of our annual financial statements, we have assessed theeffectiveness of internal control over financial reporting as of December 31,2007, based on criteria established in Internal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission,or the COSO Framework. Management’s assessment included an evaluation of thedesign of our internal control over financial reporting and testing of theoperational effectiveness of those controls. Based on this evaluation,management has determined that as of December 31, 2007, there werematerial weaknesses in our internal control over financial reporting. Thematerial weaknesses identified during management’s assessment were (i) alack of sufficient internal accounting expertise to provide reasonableassurance that our financial statements and notes thereto, are prepared inaccordance with generally accepted accounting principles (GAAP) and (ii) alack of segregation of duties to ensure adequate review of financial statementpreparation.

 

In light of these materialweaknesses, management has concluded that, as of December 31, 2007, we didnot maintain effective internal control over financial reporting. As defined bythe Public Company Accounting Oversight Board Auditing Standard No. 5, amaterial weakness is a deficiency or a combination of deficiencies, such thatthere is a reasonable possibility that a material misstatement of the annual orinterim financial statements will not be prevented or detected. As part of theacquisition of Synergy Pharmaceuticals Inc. on July 14, 2008, we retainedBernard Denoyer as Senior Vice President, Finance who will assist us to ensurethe effectiveness of our disclosure controls in the future.

 

This report does not includean attestation report of our registered public accounting firm regarding ourinternal controls over financial reporting. The disclosure contained under thisItem 8A(T) was not subject to attestation by our registered publicaccounting firm pursuant to temporary rules of the SEC that permit us toprovide only the disclosure under this Item 8A(T) in this annualreport.

 

*Changes ininternal control over financial reporting.*     There were nochanges in our internal controls over financial reporting during the fourthquarter of the year ended December 31, 2007 that have materially affectedor are reasonably likely to materially affect our internal controls overfinancial reporting.

 

3

----

 

 

**ITEM13.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES ANDREPORTS ON FORM 8-K**

 

| ** **           | ** ** | ** **                                                                                                                                               | ** ** | ** ** | ** ** | **INCORPORATED BY REFERENCE** | ** ** | ** **  |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|-------------------------------|------------|-------------|
| **EXHIBIT   NUMBER** | ** ** | **EXHIBIT  DESCRIPTION**                                                                                                                                 | ** ** | **FORM**   | ** ** | **FILE   NUMBER**             | ** ** | **EXHIBIT** | ** ** | **FILING   DATE** | ** ** | **FILED   HEREWITH** |
| 3.1                  |       | Articles of Incorporation  of the Registrant.                                                                                                            |       | SB-2       |       | 333-131722                    |       | 3.1         |   | 2/20/06 |   |   |
|                 |       |                                                                                                                                                     |       |       |       |                          |       |        |   |   |   |   |
| 3.2                  |       | By-Laws of the Registrant.                                                                                                                               |       | SB-2       |       | 333-131722                    |       | 3.2         |   | 2/20/06 |   |   |
|                 |       |                                                                                                                                                     |       |       |       |                          |       |        |   |   |   |   |
| 4.1                  |       | Specimen of Common Stock  Certificate.                                                                                                                   |       | SB-2       |       | 333-131722                    |       | 4.1         |   | 2/20/06 |   |   |
|                 |       |                                                                                                                                                     |       |       |       |                          |       |        |   |   |   |   |
| 10.1                 |       | Capital Stock Purchase  Agreement between Biotech Initiative of Chelsea, Ltd., and Charles Monahan  dated July 16, 2007                                  |       | 8-K        |       | 333-131722                    |       | 10.1        |   | 7/20/07 |   |   |
|                 |       |                                                                                                                                                     |       |       |       |                          |       |        |   |   |   |   |
| 10.2*                |       | Offer letter between the  registrant and Pietro Gattini dated November 13, 2007                                                                          |       | 10-QSB     |       | 333-131722                    |       | 10.1        |   | 11/19/07 |   |   |
|                 |       |                                                                                                                                                     |       |       |       |                          |       |        |   |   |   |   |
| 10.3                 |       | Month to month lease  between the registrant and Steinway Group LLC dated November 13, 2007                                                              |       | 10-QSB     |       | 333-131722                    |       | 10.2        |   | 11/19/07 |   |   |
|                 |       |                                                                                                                                                     |       |       |       |                          |       |        |   |   |   |   |
| 10.4                 |       | Form of Grid Promissory  note dated March 11, 2008 between Pawfect Foods, Inc. and Biotech Initiative  of Chelsea, Ltd.                                  |       | 10-KSB     |       | 333-131722                    |       | 10.4        |   | 3/28/2008 |   |   |
|                 |       |                                                                                                                                                     |       |       |       |                          |       |        |   |   |   |   |
| 10.5                 |       | Form of Grid Promissory  note dated March 11, 2008 between Pawfect Foods, Inc. and Pietro Gattini                                                        |       | 10-KSB     |       | 333-131722                    |       | 10.5        |   | 3/28/2008 |   |   |
|                 |       |                                                                                                                                                     |       |       |       |                          |       |        |   |   |   |   |
| 21                   |       | Subsidiaries of the  Registrant.                                                                                                                         |       |       |       |                          |       |        |   | None |   |   |
|                 |       |                                                                                                                                                     |       |       |       |                          |       |        |   |   |   |   |
| 31.1                 |       | Certification of Chief  Executive Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange  Act.                                               |       |       |       |                          |       |        |   |   |   | X |
|                 |       |                                                                                                                                                     |       |       |       |                          |       |        |   |   |   |   |
| 31.2                 |       | Certification of Principal  Financial Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange  Act.                                           |       |       |       |                          |       |        |   |   |   | X |
|                 |       |                                                                                                                                                     |       |       |       |                          |       |        |   |   |   |   |
| 32.1                 |       | Certification of Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act 0f 2002.     |       |       |       |                          |       |        |   |   |   | X |
|                 |       |                                                                                                                                                     |       |       |       |                          |       |        |   |   |   |   |
| 32.2                 |       | Certification of Principal  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act 0f 2002. |       |       |       |                          |       |        |   |   |   | X |

 

 

*Compensation plans orarrangements in which directors or executive officers are eligible toparticipate.

 

 

4

----

 

 

**SIGNATURES**

 

Pursuant to the requirementsof Section 13 or 15(d) of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized

 
|   | Dated:                                              | August 14, 2008    | Synergy Pharmaceuticals, Inc.  |
|--------|-----------------------------------------------------|-------------------------|--------------------------------|
|   |                                                |                    | (formerly Pawfect Foods, Inc.) |
|   |                                                |                    |                           |
|   | By:                                                 | /s/ Bernard  F. Denoyer |
|   | Bernard F. Denoyer, Senior  Vice President, Finance |
|   | (Principal Financial  Officer)                      |

 

 

 

5

----