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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
- ----- Exchange Act of 1934 for the quarterly period ended March 31, 1999
Transition Report pursuant to Section 13 or 15 (d) of the Securities
- ----- Exchange Act of 1934 for the transition period from _________ to
__________.
Commission Fle Number 000-24789
SYNERGY 2000, INC.
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(Exact name of small business issuer as specfied in its Charter)
Delaware 64-0872630
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2815 Cox Neck Road, Chester, Maryland, 21614
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(Address of principal executve offices)
(410) 643-8320
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(Telephone)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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
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As of May 1, 1999, Registrant had outstanding 10,651,500 shares of Common Stock,
$.001 par value.
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SYNERGY 2000, INC.
Table of Contents
PART I FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998
Consolidated Statements of Operations for the three months ended
March 31, 1999 and March 31, 1998
Consolidated Statements of Retained Earnings as of December 31, 1998
and March 31, 1999.
Consolidated Statements of Cash Flows for the three months ended
March 31, 1999 and March 31, 1998
Consolidated Notes to Financial Statements
ITEM 2. Management 's Discussion and Analysis of Financial Condition
and Results of Operations.
SIGNATURES
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
SYNERGY 2000, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
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(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 326,983 $ 90,212
Accounts Receivable 290,137 214,718
Common Stock Subscriptions Receivable 112,500 112,500
Other Current Assets 11,336 11,261
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Total Current Assets $ 740,956 $ 428,691
Equipment, Net 8,861 9,388
Other Assets:
Intangible Assets, Net 888,725 912,745
Organization Costs, Net 83 93
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Total Other Assets 888,808 912,838
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Total Assets $1,638,625 $1,350,917
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 254,344 $ 15,841
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Total Current Liabilities $ 254,344 $ 15,841
Deferred Income Taxes 17,824 8,281
Minority Interest in Consolidated Subsidiary 437,933 450,768
Stockholder's Equity:
Common Stock, Par Value $.001:
Authorized 25,000,000 Shares
Issued and Outstanding 10,651,500 Shares 10,651 10,651
Common Stock Subscribed, 112,500 Shares 112,500 112,500
Capital in Excess of Par Value of Common Stock 761,649 761,649
Retained Earnings 43,724 -8,773
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Total Stockholders' Equity 928,524 876,027
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Total Liabilities and Stockholders' Equity $1,638,625 $1,350,917
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</TABLE>
See accompanying Consolidated Notes to Financial Statements
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SYNERGY 2000, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
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March 31, March 31,
1999 1998
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(Unaudited) (Unaudited)
<S> <C> <C>
Fees Billed $ 862,684 $ 73,222
Operating Expenses:
Salaries 66,530 60,760
Contract Services 650,579 9,870
Taxes and Licenses 6,620 4,698
Auto and Truck -- 1,395
Travel and Business 18,705 11,557
Meals and Entertainment 740 835
Advertising 25,000 48,325
Professional Fees 1,824 9,748
Rent 3,039 2,929
Telephone 5,177 5,435
Supplies 2,078 6,262
Insurance 4,806 3,683
Postage and Shipping 515 1,105
Dues and Publications -- 532
Investor Relations 3,159 4,090
Amortization 24,030 --
Depreciation 527 218
Mscellaneous 150 87
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Total Operating Exoenses 813,479 171,529
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Net Income (Loss) Before Income Taxes 49,205 (98,307)
Income Tax (Expense) Benefit -9,543 1,007
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Net Income (Loss) Before Minority Interest 39,662 (97,300)
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Minority Interest in Net loss 12,835 0
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Consolidated Net Income (Loss) $ 52,497 ($ 97,300)
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</TABLE>
See accompanying Consolidated Notes to Financial Statements
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SYNERGY 2000, INC.
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Capital Total
Common In Excess Retained Stock-
Common Stock of Par Earnings Holders'
Stock Subscribed Value (Deficity) Equity
<S> <C> <C> <C> <C> <C>
Balance- September 30, 1998 $ 10,637 $112,500 $726,663 $ 49,544 $899,344
Shares sold 14 -- 34,986 -- 35,000
Net Income -- -- -- -58,317 -58,317
Balance- December 31, 1998 10,651 112,500 761,649 -8,773 876,027
Net Income -- -- -- 52,497 52,497
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Balance- March 31, 1999 $ 10,651 $112,500 $761,649 $ 43,724 $928,524
-------- -------- -------- -------- --------
</TABLE>
See accompanying Consolidated Notes to Financial Statements
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SYNERGY 2000, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1999 1998
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(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 39,662 ($ 97,300)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Cash Provided by (Used) in Operating Activities:
Depreciation 527 218
Amortization 24,030 11
Dec (Inc) in Accounts receivable -75,419 -29,681
Inc. (Dec.) in Other Assets -75 --
Inc. (Dec.) in Accounts Payable 238,503 --
Inc. (Dec.) in Payroll Taxes -- 4,286
Inc. (Dec.) in Deferred Income Taxes 9,543 -1,007
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Net Cash Provided by (Used) in Operating Activities $ 236,771 ($123,473)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment -- -863
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Net Cash Used in Investing Activities -- -863
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NET INCREASE (DECREASE) IN CASH $ 236,771 ($124,336)
CASH - BEGINNING 90,212 137,612
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CASH - ENDING $ 326,983 $ 13,276
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</TABLE>
See accompanying Consolidated Notes to Financial Statements
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SYNERGY 2000, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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The accompanying unaudited consolidated financial statements of Synergy 2000,
Inc. and subsidiary (the Company) have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the regulations of the Securities and Exchange Commission. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999. These interim consolidated financial statements should be read in
conjunction with the financial statements and notes for the year ended December
31, 1998.
Organization and Business - The Company is an information systems integrator and
management consulting firm providing value added technology and management
solutions for companies to prepared them tactically and strategically for the
Year 2000 and beyond. The Company offers a variety of products and services for
solving systems' problems related to the Year 2000 and the inability to process
computer application code with date- related fields.
On June 25, 1998, the Company and Argos Technologies, Inc. (an unrelated
company) agreed to form Argos 2000, Inc. for the purpose of marketing Year 2000
compatible policy administration software to the auto insurance industry. The
Company received 51% of the newly issued common stock of Argos 2000, Inc. in
exchange for 200,000 shares of its $.001 par value common stock. This common
stock is not reflected as issed and outstanding in the accompanying unaudited
financial statements since it is eliminated in consolidation. Argos
Technologies, Inc. received 49% of the newly issued common stock of Argos 2000,
Inc., plus certain contingent commissions based on sales, in exchange for Argos
2000, Inc., receiving an exclusive non-transferable, license, throughout the
world, to market certain proprietary software. This transaction was valued at
$980,785 which was the estimated fair value of the common stock issued by Argos
2000, Inc. as of June 25, 1998.
Since the Company's clients include all industries, its ability to collect
amounts due from them as a result of extending them credit, is not affected by
economic fluctuations in any particular industry.
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its 51% owned subsidiary, Argos 2000, Inc. All
significant intercompany transactions and balances have been eliminated.
Revenue Recognition - Revenue from contract consulting services are recognized
on the percentage-to-completion method. Revenue frm sales of software and
software documentation products is generally recognized upon product shipment
provided that no significant vendor obligations remian and collection of the
resulting receivable is deemed probable.
Depreciation - The company's equipment is depreciated using the straight-line
method. Depreciation expense totalled $527 for the three months ended March 31,
1999 and $218 for the three months ended March 31, 1998.
Intangible Assets - In June 1998, Argos 2000, Inc, acquired an exclusive,
non-transferable, license, throughout the world, to market a fully automated
year 2000 compatible, policy administration sysatem designed for the auto
insurance industry. This intangible asset is amortized using the straight-line
method over 10 years. Amortization expense totalled $24,020 for the three months
ended March 31, 1999.
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SYNERGY 2000, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
March 31, 1999
Organization Costs - Organization cost ($215) are being amortized using the
straight-line method over 60 months. Amortization expense charged to operations
amounted to $11 for the three months ended March 31, 1999 and 1998. Accumulated
amortization was $133 at March 31, 1999.
Deferred Income Taxes - For income tax reporting, the Company uses accounting
methods that recognize depreciation sooner than for financial statement
reporting and does not recognize income and certain expenses until received or
paid. As a result, the basis of equipment, accounts receivable, and certain
accrued expenses for financial reporting exceeds its tax basis. Deferred income
taxes have been recorded for the excess, which will be taxable in future periods
through reduced depreciation deductions, and increased income for tax purposes.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain amounts and disclosures. Accordingly, actual
results could differ from those estimates.
NOTE 2 - EQUIPMENT Equipment consists of the following:
Computer Equipment $11,329
Accumulated Depreciation -2,468
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$8,861
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NOTE 3 - INCOME TAXES
The income tax provision consists of the following:
1999 1998
Current $ -- $ --
Deferred 9,543 -1,007
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$9,543 -$1,007
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The income tax provision differes from the expense that would result from
applying statutory rates to income befre income taxes because of nondeductible
meals and entertainment of $370 in 1999 and $418 in 1998.
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock Subscribed - On December 31, 1998, 250,000 shares of the Company's
$.001 par value common stock was subscribed to for a total price of $250,000.
For the year ended December 31, 1997, $137,500 of the subscriptions were
received. The remaining $112,500 was outstanding at March 31, 1999.
Net Income Per Share - Net income per common share has not been computed since
it is not significant.
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SYNERGY 2000, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company's revenues are derived from the performance of consulting and
management arrangements. These arrangements generally last several months and
generally are not with the same client. The Company's future revenues are always
dependent upon obtaining additonal contracts.
Statement of Operations March 31, 1999 to March 31, 1998 (unaudited)
The Company's revenues or fees billed was approximately $862,000 for the quarter
ended March 31, 1999 compared to approximately $73,000 for the comparable period
in 1998. The increase was due primarily to an increase in the number of
consulting arrangements entered into by the Company as well as increased
revenues derived from the sale of software.
The Company's operating expenses during the quarter ended March 31, 1999 were
approximately $813,500 compared to $171,500 during the comparable period in
1998. The increased expenses were primarily attributable to the increased
volume. The Company had net income of $52,497 for the quarter ended March 31,
1999 and sustained a loss of approximately $97,300 in the comparable quarter in
1998. The increase in net income is primarily the result of increase volume.
The Company does not believe the first quarter of 1998 is a representative
quarter as the Company was just beginning to derive revenues from income
producing activities prior to such period. A substantial portion of its
operations were devoted to start-up activities until 1998.
The Company is not aware of any trend that will adversely affect its revenues in
1999. The Company relies on programmers and consultants to peform its contracts
and from time to time there have been shortages of such programmers. The Company
has not in the past nor does it anticipate any difficulty in the immediate
future in obtaining programmers. Any change could result in increased fees paid
for outside technical help.
The Company's revenues beyond 1999 are dependent upon its ability to diversify
beyond offering Year 2000 services, which it is currently doing.
Liquidity
The Company's working capital was approximately $298,000 as of December 31, 1997
as compared to approximately $413,000 at December 31, 1998. The increase was
primarly attributable to cash and accounts receivable rising from increase
revenues.
The Company has derved its cash from operation and the sale of shares. The
Company has no commtments for capital expenditures and believes its available
cash is adequate to cover its financial commitments for the next 12 months.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
(Registrant) Synergy 2000, Inc.
Date 17-May-99
By /S/ Eli Dabich, Jr.
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Eli Dabich, Jr. as Presidnet
