<PAGE>
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, 2000
___________ 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)
Delaware 64-0872630
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2815 Cox Neck Road, Chester, Maryland 21619
-------------------------------------------
(Address of principal executive officers)
(410) 643-5563
--------------
(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 May 1, 2000, Registrant had outstanding 10,651,500 shares of Common Stock,
$.001 par value.
<PAGE>
SYNERGY 2000, INC.
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Report of Independent Accountant
Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999
Consolidated Statements of Operations for the three months ended March
31, 2000 and 1999.
Consolidated Statements of Retained Earnings as of December 31, 1999
and March 31, 2000
Consolidated Statements of Cash Flows for the three months ended March
31, 2000 and 1999.
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
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANT
Board of Directors
Synergy 2000, Inc.
I have reviewed the accompany consolidated balance sheet of Synergy 2000, Inc.
and subsidiary as of March 31, 2000, and the related consolidate statements of
operations, stockholders' equity and cash flows for the three months ended March
31, 2000 and 1999. These financial statements are the responsibility of the
Company's management.
I conducted my review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, I do not express such an opinion.
Based upon my review, I am not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
STEPHEN D. MILNER, CPA, PA
Greenville, South Carolina
April 5, 2000
<PAGE>
ITEM 1. Financial Statements
SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash $321,194 $418,976
Accounts Receivable 419,944 272,595
Common Stock Subscriptions Receivable -- --
Prepaid Expenses -- --
Other Current Assets 21,261 13,184
--------------- ----------------
Total Current Assets $762,399 $704,755
Equipment, Net 12,426 13,338
Other Assets:
Intangible Assets, Net 792,647 816,667
Organization Costs, Net 40 50
--------------- ----------------
Total Other Assets 792,687 816,717
--------------- ----------------
Total Assets $1,567,512 $1,534,810
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $177,190 $193,679
Deferred Income Taxes 17,480 5,747
Accrued Income Taxes 1,526 1,526
--------------- ----------------
Total Current Liabilities $196,196 $200,952
Minority Interest in Consolidated Subsidiary 390,366 402,340
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 969,549 969,549
Retained Earnings 750 (48,682)
--------------- ----------------
1,093,450 1,044,018
Less: Subscriptions Receivable (112,500) (112,500)
--------------- ----------------
Total Stockholders' Equity 980,950 931,518
--------------- ----------------
Total Liabilities and Stockholders' Equity $1,567,512 $1,534,810
=============== ================
</TABLE>
See accompanying Consolidated Notes to Financial Statements
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
March 31, March 31,
2000 1999
------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Fees Billed $561,875 $862,684
Operating Expenses:
Salaries 59,250 66,530
Contract Services 379,882 650,579
Taxes and Licenses 6,033 6,620
Auto and Truck 0 0
Travel and Business 952 18,705
Meals and Entertainment 32 740
Advertising 922 25,000
Professional Fees 16,642 1,824
Rent 925 3,039
Telephone 1,754 5,177
Supplies 1,436 2,078
Insurance 12,817 4,806
Postage and Shipping 285 515
Dues and Publications 146 0
Investor Relations 975 3,159
Amortization 24,030 24,030
Depreciation 912 527
Bad Debts 4,517 0
Miscellaneous 1,174 150
---------- ---------
Total Operating Expenses 512,684 813,479
========== =========
Net Income (Loss) Before Income Taxes 49,191 49,205
Income Tax (Expense) Benefit (11,733) (9,543)
---------- ---------
Net Income (Loss) Before Minority Interest 37,458 39,662
Minority Interest in Net loss 11,974 12,835
---------- ---------
Consolidated Net Income (Loss) $ 49,432 $ 52,497
========== =========
</TABLE>
See Accompanying Consolidated Notes to Financial Statements
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Capital Total
Common In Excess Retained Stock-
Common Stock of Par Earnings Holders'
Stock Subscribed Value (Deficit) Equity
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance- December 31, 1998 $10,651 $112,500 $969,549 (215,665) $ 877,035
Net Income -- -- -- 166,983 $ 166,983
------- -------- -------- -------- ----------
Balance- December 31, 1999 $10,651 $112,500 $969,549 -$48,682 $1,044,018
Shares sold -- -- -- -- --
Net Income -- -- -- 49,432 $49,432
------- -------- -------- -------- ----------
Balance- March 31, 2000 $10,651 $112,500 $969,549 $ 750 $1,093,450
======= ======== ======== ======== ==========
</TABLE>
See accompanying Consolidated Notes to Financial Statements
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------
March 31, March 31,
2000 1999
--------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $37,458 $39,662
Adjustments to Reconcile Net Income (Loss) to Net Cash
Cash Provided by (Used) in Operating Activities:
Depreciation 912 527
Amortization 24,030 24,030
Dec (Inc) in Accounts receivable (147,349) (75,419)
Inc. (Dec.) in Other Assets (8,077) (75)
Inc. (Dec.) in Prepaid Expenses -- --
Inc. (Dec.) in Accounts Payable (16,489) 238,503
Inc. (Dec.) in Payroll Taxes -- --
Inc. (Dec.) in Deferred Income Taxes 11,733 9,543
Inc. (Dec.) in Accrued Income Taxes -- --
--------------- ---------------
Net Cash Provided by (Used) in Operating Activities ($97,782) $236,771
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment -- --
--------------- ---------------
Net Cash Used in Investing Activities 0 0
--------------- ---------------
NET INCREASE (DECREASE) IN CASH ($97,782) $236,771
CASH - BEGINNING 418,976 90,212
--------------- ---------------
CASH - ENDING $321,194 $326,983
=============== ===============
</TABLE>
See accompanying Consolidated Notes to Financial Statements
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2000
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
three month period ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. These
interim consolidated financial statements should be read in conjunction with the
financials statements and notes for the year ended December 31, 1999.
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 to compete
in the 21st Century. . The Company offers a variety of products and services for
solving clients' problems related to their rapidly changing technology needs and
the management thereof..
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 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 $912 for the three months ended March 31,
2000 and $527 for the three months ended March 31, 1999.
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2000
(Continued)
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 $24,019 for the three months ended March
31, 2000 and 1999. Accumulated amortization was $168,137 at March 31, 2000.
Organization Costs - Organization costs ($215) are being amortized using the
straight-line method over 60 months. Amortization expense charged to operations
amounted to $11 for the three month period March 31, 2000 and 1999. Accumulated
amortization was $175 at March 31, 2000.
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 (5,809)
-------
$12,426
=======
NOTE 3 - INCOME TAXES
The income tax provision consists of the following
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Current $ -- $ --
Deferred 11,733 9,543
-------- --------
$ 11,733 $ 9,543
======== ========
</TABLE>
The income tax provision differs from the expense that would result from
applying statutory rates to income before income taxes as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Income Tax Expense Computed at the
Statutory Federal Income Tax Rate $ 16,725 $ 16,730
Increase (Decrease) in Income Taxes
Resulting From:
Subsidiary Losses Not Recognized 4,071 --
Surtax Exemption ` (10,664) (8,949)
State Income Tax-Net of Federal
Tax Benefit 1,595 1,636
Other 6 126
-------- --------
$ 11,733 $ 9,543
======== ========
</TABLE>
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2000
(Continued)
The components of deferred income tax expense result from the following
temporary differences between earnings reported for financial reporting and
income tax purposes:
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Method of Revenue and Expense
Recognition $ 15,534 $ 15,613
Additional Depreciation for Income
Tax Purposes: 1,946 1,204
-------- --------
$ 17,480 $ 16,617
======== ========
</TABLE>
At March 31, 2000, the Company had net operating losses totaling $143,376 for
income tax purposes.
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 March 31,2000.
Net Income Per Share - Net income per common share has not been computed since
it is not significant.
<PAGE>
SYNERGY 2000, INC. AND SUBSIDAIRY
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 and the development of new product
lines and the use of the internet opportunities. 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 March 31, 2000 to March 31, 1999 (Unaudited)
The Company's revenues or fees billed was approximately $562,000 for the quarter
ended March 31, 2000 compared to approximately $863,000 for the comparable
period in 1999. The decrease was due primarily to an decrease in the number of
and size of the consulting arrangements entered into by the Company as well as a
significant amount of time devoted to the development of new programs and our
web and internet enabled programs.
The Company's operating expenses during the quarter ended March 31, 2000 were
approximately $513,700 compared to $813,500 during the comparable period in
1999. The decreased expenses were primarily attributable to the decreased
volume; a higher gross profit percentage on the work actually performed, and a
concerted effort by management to decrease operating expenses. The Company had
net income of approximately $49,400 for the quarter ended March 31, 2000 as
compared to $52,500 for the comparable quarter in 1999. The decrease in net
income is primarily the result of decreased volume.
Many client and prospective client companies focused on their Year 2000 issues
to the exclusion of reviewing new technologies, systems or proposed programs
during the latter half of 1999 and the first quarter of 2000. Consequently,
Synergy 2000 marketing efforts were hampered by many of our customers not having
time to evaluate our business proposals. The Company anticipates that client and
potential clients will seek development unrelated to their Y2K problems by the
third quarter of 2000.
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 and will continue to diversify its consulting and
product development activities as well as the development of its web and
internet enabled opportunities. The Company believes this is necessary to
accomplish its goal of producing new products for the 21st Century.
Liquidity
The Company's working capital was approximately $566,200 as of March 31, 2000 as
compared to approximately $503,800 at December 31, 1999. The increase was
primarily attributable to cash and accounts receivable rising from the
accumulation of increased revenues and profits over the last twelve months.
<PAGE>
SYNERGY 2000, INC. AND SUBSIDAIRY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS (CONTINUED)
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. The Company, however, will require additional funds for the further
development, promotion and marketing of its internet and web enabled programs.
There is no assurance the Company will be able to obtain these funds.
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: May 15, 2000
By: /s/ Eli Dabich, Jr.
-----------------------------
Eli Dabich, Jr. as President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Audited
And Unaudited Consolidated Balance Sheet and Statement of Operations as of
December 31, 1999 and for the three month period ended March 31, 2000 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 MAR-31-2000
<PERIOD-END> DEC-31-1999 MAR-31-2000
<CASH> $418,976 $321,194
<SECURITIES> 0 0
<RECEIVABLES> 272,595 419,944
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 704,755 762,399
<PP&E> 13,338 12,426
<DEPRECIATION> 1,534,810 1,567,512
<TOTAL-ASSETS> 603,292 586,562
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 10,651 10,651
<OTHER-SE> 920,867 970,299
<TOTAL-LIABILITY-AND-EQUITY> 1,534,810 1,567,512
<SALES> 0 0
<TOTAL-REVENUES> 3,427,475 561,875
<CGS> 0 0
<TOTAL-COSTS> 3,308,920 512,684
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 118,555 49,191
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 118,555 37,458
<DISCONTINUED> 0 0
<EXTRAORDINARY> 48,428 11,974
<CHANGES> 0 0
<NET-INCOME> 166,983 49,432
<EPS-BASIC> 0.015 0.004
<EPS-DILUTED> 0 0
</TABLE>
