8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)  October 15, 2004

DYNTEK, INC.

(Exact name of Registrant as Specified in Its Charter)

Delaware	1-11568	95-4228470
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No)

18881 Von Karman Avenue, Suite 250, Irvine, California   92612

(Address of principal executive offices)

(949) 955-0078

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01                     Entry into a Material Definitive Agreement.

                      On October 15, 2004 DynTek, Inc. (the “Company”) entered into a 9% Senior Subordinated Convertible Note Purchase Agreement (the “Agreement”) with certain investors (the “Purchasers”) to sell and issue to the Purchasers an aggregate of $4,500,000 in principal amount of the Company’s Senior Subordinated Convertible Notes (the “Notes”), bearing 9% interest per annum with a maturity of three (3) years (the “Financing”).  The Notes are convertible into shares of the common stock of the Company, $.0001 par value per share (the “Common Stock”), at a conversion price of $.65 per share, subject to certain adjustments.

                      As part of the issuance of the Notes, the Company also issued to the Purchasers warrants to purchase 3,461,538 shares of the Common Stock at an exercise price of $.7475 per share (the “Warrants”).  The Warrants may be exercised immediately and will expire on September 30, 2009.  In addition, the Company issued to the Purchasers who have not previously participated in any financing of the Company warrants to purchase up to 384,615 shares of the Common stock at an initial exercise price of $1.25 per share (the “Additional Warrants”).  The Additional Warrants may be exercised immediately and will expire on June 10, 2005.

                      Pursuant to the Agreement, the Company issued to Duncan Capital LLC, the placement agent in connection with the transaction, warrants to purchase up to 692,308 shares of the Company’s Common Stock at an initial exercise price of $.67 per share (the “Placement Warrants”) and paid a cash fee of $360,000.  The Placement Warrants may be exercised immediately and will expire on September 30, 2009.

                      In connection with the issuance of the Notes and the warrants, the Company entered into a Registration Rights Agreement with the Purchasers obligating the Company to register for resale the shares of the Common Stock issuable upon the conversion of the Notes and the exercise of the associated warrants discussed above on a registration statement on Form S-3 to be filed with the Securities and Exchange Commission within thirty (30) days after the closing date.

Item 2.01                     Completion of Acquisition or Disposition of Assets.

                      The Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated October 14, 2004, by and among the Company, ITI Acquisition Corp., a California corporation and wholly owned Subsidiary of the Company (“Merger Sub”), Integration Technologies, Inc., a California corporation (“ITI”), the shareholders of ITI (the “Shareholders”) and Casper Zublin, Jr., in his capacity as the shareholder representative (the “Representative”).

                      On October 18, 2004, the Merger Sub will be merged with an into ITI with ITI becoming a wholly-owned subsidiary of the Company (the “Merger”).  The consideration paid or payable to the Shareholders in connection with the Merger is comprised of: (i) an initial cash payment of $2,500,000; (ii) an earn-out cash payment up to a maximum amount of $1.5 million, based upon ITI’s EBITDA for the period between July 1, 2004 through June 30, 2005 to be paid on or before July 30, 2005; (iii) a earn-out cash payment up to a maximum amount of $1.5 million, based upon ITI’s revenue for the period between July 1, 2004 through June 30, 2005 to be paid on or before July 30, 2005; and (iv) an aggregate number of whole shares of the Common Stock of the Company (“Company Common Stock”) based on the average closing sale price per share (the “Share Price”) of Company Common Stock reported on the Nasdaq SmallCap Market (the “Nasdaq”) for the thirty (30) trading days prior to (and not including) June 28, 2005 determined as follows: (a) 2,140,000 shares if the Share Price is greater than $1.00 but less than $1.50; (b) that number of shares equal to $2,140,000 divided by the Share Price if the Share Price is less than $1.00, provided that the

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maximum number of shares issuable pursuant to this clause (b) shall be no more than 4,280,000 shares; or (c) that number of shares equal to $3,210,000 divided by the Share Price if the Share Price is greater than $1.50 (the “Stock Consideration”).  At the option of the Representative, up to fifty percent (50%) of the Stock Consideration may be paid in cash instead of Company Common Stock.  In no event will the Company be required to issue shares of Company Common Stock if such issuance would require stockholder approval under applicable Nasdaq Marketplace Rules.  In the event the number of shares issuable as Stock Consideration is so limited, the Company will pay the difference to the Shareholders in cash.

Item 3.02                     Unregistered Sales of Equity Securities

                      The information set forth on Item 1.01 of this Form 8-K is incorporated by reference into this Item 3.02 with respect to the agreements to issue equity securities described therein.  In connection with the securities issued or issuable in connection with the Financing, the Company relied upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder.  The Purchasers are accredited investors as defined in Rule 501 of Regulation D and the Purchasers had access to information about the Company.  Each of the Purchasers represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof.

                      The information set forth on Item 2.01 of this Form 8-K is incorporated by reference into this Item 3.02 with respect to the agreement to issue equity securities described therein.  In connection with Company Common Stock issuable pursuant to the Agreement, the Company relied upon the exemptions from registration provided by Section 4(2) of the Securities Act of 1933, as amended.  The Sellers are all sophisticated investors and have had access to information about the Company.  Each of the Shareholders represented their intention to acquire the Company Common Stock for investment only and not with a view to or for sale in connection with any distribution thereof.

Item 9.01                     Financial Statements and Exhibits.

(a)           Financial Statements of Business Acquired.

                                      Not applicable.

                      (b)           Pro Forma Financial Statements.

                                      Not applicable.

                      (c)           Exhibits.

99.1         Press release issued by DynTek, Inc. on October 15, 2004.

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SIGNATURES

                      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	DYNTEK, INC.
Date: October 15, 2004	By:	/s/ Robert Webber
		Robert Webber
		Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description of Exhibit
99.1	Press released issued by DynTek, Inc. on October 15, 2004.

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EX-99.1

Exhibit 99.1

PRESS RELEASE

For more information, contact:

Linda Ford

DynTek, Inc.

949-798-7215

linda.ford@dyntek.com

DynTek Announces Business Combination with Integration Technologies, Inc.

Integration Technologies Brings Profitable $18 Million Revenue Stream, Solid Base of Operations in Southern California, and Extensive Expertise in IT Security and Access Infrastructure Practices

Irvine, CA –October 15, 2004– DynTek, Inc. (Nasdaq: DYTK, DYTKP, DYTKW), a leading provider of technology, management and IT security solutions, announced today that it has entered into a definitive agreement for a business combination with Integration Technologies, Inc, a privately-held, Irvine, Calif.-based professional technology services organization specializing in Citrix access infrastructure, Microsoft infrastructure and IT security solutions.

As a Citrix Platinum Partner and Microsoft Gold Certified Partner, Integration Technologies, Inc. (ITI) is a leading provider of complex infrastructure solutions in Southern California.  ITI was recently recognized as Citrix’s North American Partner of the Year in 2003, as well as Citrix’s Authorized Learning Center of the Year in 2003.

For the twelve months ended June 30, 2004, ITI realized revenues in excess of $13.2 million, representing a 79% year-over-year revenue growth rate.  ITI is currently on a $18.4 million revenue run rate for the fiscal year ending June 30, 2005.  The company’s broad client base includes Pacific Life, Avery Dennison, Mattel and the City of Los Angeles.

“ITI’s accretive, profitable revenue stream and technology leadership further accelerates our growth strategy,” said Steve Ross, DynTek’s chief executive officer. “In conjunction with our recent acquisition of Redrock Communications, we believe DynTek now has the critical mass, technical expertise and sales infrastructure to be a major player in the Southern California market.  We feel ITI will be a tremendous asset to further expand our security practice, while augmenting our ability to provide additional services, especially in the advanced infrastructure arena.”

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“The combination with DynTek increases the breadth of value-added solutions we can provide to our client base, especially in the area of IT security and converged network solutions,” said Casper Zublin, ITI’s president and chief executive officer.  “We believe DynTek enables ITI to rapidly extend our advanced infrastructure practice to clients on a national scale, which would accelerate our growth rate.”

“Our combination with ITI represents another example of our strategic growth strategy to establish relevant density in top IT spending markets, to expand from our state and local government business into regional mid-market and enterprise opportunities, and to develop practice areas with high intellectual capital,” stated Robert Webber, DynTek’s chief financial officer.  “We look forward to becoming a leading professional services firm with strong multi-disciplinary competencies in IT security solutions, access infrastructure, WAN/LAN and network management, all of which will enable us to provide additional value to our clients.”

About DynTek

DynTek is a leading provider of dynamic technology, management and cyber security solutions to states, local governments and commercial organizations.  Our broad range of services is designed to help organizations meet their critical business needs through the effective and innovative use of technology.  Each of our offerings incorporates an approach and methodology derived from over 18 years of experience in the assessment, design, implementation, management and support of secure technology solutions.  For more information, visit www.dyntek.com.

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Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby.  Investors are cautioned that certain statements in this release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks, uncertainties and other factors.  Such uncertainties and risks include, among others, success in reaching target markets for services and products in a highly competitive market and the ability to attract future customers,  the ability to finance and sustain operations, including the ability to maintain the Textron Factoring Facility and/or the amended Laurus Funds Note  when either  becomes due, respectively, or to replace it with alternative financing, the ability to raise equity capital in the future, despite historical losses from operations, the ability to fulfill the Company’s obligations to third parties, and ability to resolve successfully certain ongoing litigation over contract performance, the size and timing of additional significant orders and their fulfillment, the ability to turn contract backlog into revenue and net income, the continuing desire of state and local governments to outsource to private contractors, the ability to successfully implement an acquisition growth strategy,  the performance of governmental services, the ability to develop and upgrade our technology, and the continuation of general economic and business conditions that are conducive to governmental outsourcing of service performance and the acquisition of other services and products.  The Company has no obligation to publicly release the results of any revisions, which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements.