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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 September 30,
1999.
_________ Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from to .
Commission File Number 000-24789
SYNERGY 2000, INC.
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(Exact name of small business issuer as specified in its Charter)
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<S> <C>
Delaware 64-0872630
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
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2815 Cox Neck Road, Chester, Maryland 21619
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(Address of principal executive officers)
(410) 643-5563
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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 _________
As of October 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 September 30, 1999 and December
31, 1998
Consolidated Statements of Operations for the three and nine months
ended September 30, 1999 and 1998.
Consolidated Statements of Retained Earnings as of September 30, 1999
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and September 30, 1998
Consolidated Notes to Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
SIGNATURES
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8Q
1 EXHIBITS
27 Financial Data Schedule
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
SYNERGY 2000, INC.
CONSOLIDATED BALANCE SHEETS
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September December 31,
1999 1998
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(Unaudited)
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ASSETS
- ------
Current Assets
Cash $ 182,894 $ 90,212
Accounts Receivable 476,640 214,718
Common Stock Subscriptions Receivable -- --
Prepaid Expenses 30,909 --
Other Current Assets -- 11,261
---------- ----------
Total Current Assets $690,443 $316,191
Equipment, Net 14,077 9,388
Other Assets:
Intangible Assets, Net 840,686 912,745
Organization Costs, Net 61 93
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Total Other Assets 840,747 912,838
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Total Assets $1,545,267 $1,238,417
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable $ 152,938 $ 15,841
Accrued Payroll Taxes 131 --
---------- ----------
Total Current Liabilities $ 153,069 $ 15,841
Deferred Income Taxes 64,170 8,281
Minority Interest in Consolidated Subsidiary 414,264 450,768
Stockholder's Equity:
Common Stock, Par Value $.001:
Authorized 25,000,000 Shares
Issued and Outstanding 10,851,500 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 141,464 (8,773)
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1,026,264 876,027
Less: Subscriptions Receivable (112,500) (112,500)
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Total Stockholders' Equity 913,764 763,527
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Total Liabilities and Stockholders' Equity $1,545,267 $1,238,417
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See accompanying Consolidated Notes to Financial Statements
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SYNERGY 2000, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
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Three Months Ended Nine Months Ended
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Sept. 30 Sept. 30 Sept 30, Sept. 30
1999 1998 1999 1998
------------------------------ -------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Fees Billed $795,488 $458,912 $2,175,622 $1,458,581
Operating Expenses:
Salaries 89,617 60,760 239,408 182,280
Contract Services 553,449 406,044 1,442,856 853,972
Taxes and Licenses 7,245 3,886 21,616 14,476
Auto and Truck 3,266 19 6,270 1,414
Travel and Business 2,387 15,934 41,594 42,718
Meals and Entertainment 2,063 178 6,247 1,455
Advertising 2,800 4,578 28,850 62,838
Professional Fees 10,149 28,392 39,693 42,640
Rent 2,470 2,863 8,285 8,777
Telephone 6,552 9,793 18,226 20,368
Supplies 6,261 2,583 17,201 11,874
Insurance 8,065 7,121 53,622 27,239
Postage and Shipping 915 1,876 2,408 3,678
Dues and Publications 744 38 1,360 690
Investor Relations 172 201 3,522 4,617
Amortization 24,030 24,030 72,091 24,052
Depreciation 739 224 2,217 668
Mscellaneous 260 3,141 534 3,539
-------- -------- ---------- ----------
Total Operating Exoenses 721,184 571,661 2,006,000 1,307,295
-------- -------- ---------- ----------
Net Income (Loss) Before Income Taxes 74,304 (112,749) 169,622 151,286
Income Tax (Expense) Benefit (31,305) 43,934 (55,889) (50,230)
-------- -------- ---------- ----------
Net Income (Loss) Before Minority Interest 42,999 (68,815) 113,733 101,056
Minority Interest in Net loss 12,231 7,717 36,504 7,056
-------- -------- ---------- ----------
Consolidated Net Income (Loss) $ 55,230 ($61,098) $ 150,237 $ 108,112
-------- -------- ---------- ----------
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See accompanying Consolidated Notes to Financial Statements
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SYNERGY 2000, INC.
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
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Capital Total
Common In Excess Retained Stock-
Common Stock of Par Earnings Subscriptions Holders'
Stock Subscribed Value (Deficit) Receivable Equity
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Balance- September 30, 1998 $10,637 $112,500 $726,663 $ 49,544 (112,500) $786,844
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) (112,500) $763,527
Net Income -- -- -- 52,497 -- $52,497
------- -------- -------- -------- -------- --------
Balance- March 31, 1999 $10,651 $112,500 $761,649 $ 43,724 $112,500 $816,024
Shares sold -- -- -- -- -- $0
Net Income -- -- -- 42,510 -- $42,510
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Balance- June 30, 1999 $10,651 $112,500 $761,649 $ 86,234 $112,500 $858,534
Shares Sold -- -- -- -- -- $0
Net Income -- -- -- 55,230 -- $55,230
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Balance - September 30, 1999 $10,651 $112,500 $761,649 $141,464 $112,500 $913,764
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See accompanying Consolidated Notes to Financial Statements
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SYNERGY 2000, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Nine Months Ended
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Sept. 30 Sept. 30
1999 1998
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(Unaudited) (Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $113,733 $101,056
Adjustments to Reconcile Net Income (Loss) to Net Cash
Cash Provided by (Used) in Operating Activities:
Depreciation 2,217 668
Amortization 72,091 24,052
Dec (Inc) in Accounts receivable (261,922) (208,817)
Inc. (Dec.) in Other Assets 11,261 --
Inc. (Dec.) in Prepaid Expenses (30,909) --
Inc. (Dec.) in Accounts Payable 137,098 39,372
Inc. (Dec.) in Payroll Taxes 131 1,375
Inc. (Dec.) in Deferred Income Taxes 55,889 (1,007)
Inc. (Dec.) in Accrued Income Taxes -- 51,237
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Net Cash Provided by (Used) in Operating Activities $99,589 $5,186
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment (6,907) (1,566)
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Net Cash Used in Investing Activities (6,907) (1,566)
-------- --------
NET INCREASE (DECREASE) IN CASH $92,682 $3,620
CASH - BEGINNING 90,212 137,612
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CASH - ENDING $182,894 $141,232
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See accompanying Consolidated Notes to Financial Statements
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SYNERGY 2000, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 financials 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
nine months ended September 30, 999 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
financials 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 prepare 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 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 issued 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
Synergy 2000, Inc. as of June 30, 1998.
Since the Company's clients include all industries, its ability to collect
amounts due from them as a result of extending credit, is not affect by economic
fluctuations in any particular industry.
Principles of Consolidation - The consolidated financials statements include the
accounts of the company and its 51% owned subsidiary, Argos 2000, Inc. All
significantly intercompany transactions and balanced have been eliminated.
Revenue Recognition - Revenue from contracts consulting services are recognized
on the percentage-to-completion method. Revenue from sales of software and
software documentation products is generally recognized upon product shipment
provided that no significant vendor obligations remain and collection of the
resulting receivable is deemed probable.
Depreciation - The Company's equipment is depreciated using the straight line
method. Depreciation expense totaled $2,217 for the nine months ended September
30, 1999 and $668 for the nine months ended September 30, 1998.
<PAGE>
SYNERGY 2000, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
September 30, 1999
Intangible Assets - In June of 1998, Argos 2000 Inc. acquired an exclusive,
non-transferable, license throughout the world, to market a fully automated year
2000 compatible, policy administration system designed for the auto insurance
industry. This intangible asset is amortized using the straight line method over
10 years. Amortization expense totaled $72,058 for the nine months ended
September 30, 1999 and 24,019 for the nine months ended September 30, 1998.
Organization Costs - Organization costs ($215) are being amortized using the
straight-line method over 60 months. Amortization expense charged to operations
amounts to $33 for the nine months ended September 30, 1999 and 1998.
Accumulated amortization was $154 at September 30, 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 recognized 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 $18,235
Accumulated Depreciation (4,158
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$14,077
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NOTE 3 - INCOME TAXES
The income tax provision consists of the following
1999 1998
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Current $ -- $ --
Deferred 55,889 50,230
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$55,889 $50,230
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The income tax provision differs from the expense that would result from
applying statutory rates to income before income taxes because of nondeductible
meals and entertainment of $3,124 in 1999 and $728 in 1998.
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock Subscribes - 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 as of September 30, 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 RESULT
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 additional contracts. The Company's results may vary
from quarter to quarter based upon the number of contacts performed and the
stage of completion during those quarters.
Statement of Operations September 30, 1999 to September 30, 1998 (unaudited)
The Company's revenues or fees billed was approximately $795,000 for the quarter
ended September 30, 1999 compared to approximately $458,000 for the comparable
period in 1998. The increase was due primarily to an increase in the number of
and size of the consulting arrangements entered into by the Company. Two of the
large contracts negotiated during prior period were signed with a significant
amount of increase in revenue being derived from those contracts.
The Company's operating expenses during the quarter ended September 30, 1999
were approximately $721,100 compared to $571,600 during the comparable period in
1998. The increased expenses were primarily attributable to the increased
volume. The Company had net income of approximately $55,200 for the quarter
ended September 30, 1999 and sustained a loss of approximately $61,100 for the
comparable quarter in 1998. The increase in net income is primarily the result
of increased volume.
The Company's revenues or fees billed was approximately $2,175,600 for the nine
month period ended September 30, 1999 compared to approximately $1,458,500 for
the comparable period in 1998. The increase was due primarily to an increase in
the number of and size of the consulting arrangements entered into by the
Company.
The Company's operating expenses during the nine month period ended September
30, 1999 were approximately $2,006,000 compared to $1,307,000 during the
comparable period in 1998. The increased expenses were primarily attributable to
the increased volume. The Company had net income of $150,200 for the nine month
period ended September 30, 1999 and net income of approximately $108,100 for the
comparable quarter in 1998. The increase in net income is primarily the result
of increased volume.
The Company is not aware of any trend that will adversely affect its revenues in
1999. The Company relies on programmers and consultants to perform 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 has continued to diversify its consulting and product development
activities so it will not be dependent Y2K services. The Company will continue
to diversify its product and customer base in order to accomplish its goal of
diversification beyond offering Year 2000 services.
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SYNERGY 2000, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
(Continued)
Liquidity
The Company's working capital was approximately $537,400 as of September 30,
1999 as compared to approximately $309,200 at September 30, 1998. The increase
was primarily attributable to cash and accounts receivable rising from the
accumulation of increased revenues and profits over the last twelve months.
The Company has derived its cash from operations and the sale of shares. The
Company has no commitments for capital expenditures and believes its available
cash is adequate to cover its financial commitments for the next twelve (12)
months.
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunder duly authorized.
(Registrant) Synergy 2000, Inc.
Date: November 12, 1999
By: /S/ Eli Dabich, J.
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Eli Dabich, Jr. as President
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<LEGEND>
This schedule contains summary financial information extracted from the Audited
and Unaudited Consolidated Balance Sheet and Statement of Operations as of
December 31, 1998 and for the three month and six months period ended March 31
and June 30, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 MAR-31-1999 JUN-30-1999 SEP-30-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999 JUN-30-1999 SEP-30-1999
<CASH> 90,212 326,983 198,999 182,894
<SECURITIES> 0 0 0 0
<RECEIVABLES> 214,718 290,137 307,926 476,640
<ALLOWANCES> 0 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 316,191 628,456 506,925 690,443
<PP&E> 11,329 11,329 18,235 18,235
<DEPRECIATION> 1,941 2,468 3,419 4,158
<TOTAL-ASSETS> 1,238,417 1,526,125 1,386,519 1,545,267
<CURRENT-LIABILITIES> 474,890 710,101 527,985 631,503
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 10,651 10,651 10,651 10,651
<OTHER-SE> 752,876 805,373 847,883 903,113
<TOTAL-LIABILITY-AND-EQUITY> 1,238,417 1,526,125 1,386,519 1,545,267
<SALES> 0 0 0 0
<TOTAL-REVENUES> 1,920,885 862,684 1,380,134 2,175,622
<CGS> 0 0 0 0
<TOTAL-COSTS> 1,883,832 813,479 1,284,816 2,006,000
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 0
<INCOME-PRETAX> 37,053 49,205 95,318 169,622
<INCOME-TAX> 7,274 9,543 24,584 (55,889)
<INCOME-CONTINUING> 29,779 39,662 70,734 113,733
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 20,016 12,835 24,273 36,504
<CHANGES> 0 0 0 0
<NET-INCOME> 49,795 52,497 95,007 150,237
<EPS-BASIC> 0 0 0 0
<EPS-DILUTED> 0 0 0 0
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