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================================================================================
U.S. SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB/A
AMENDMENT NO.1
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from
________________to ________________
Commission file number: 0-24640
SYNERGY 2000, INC.
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(Exact name of small business issuer in its charter)
Delaware 64-0872630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2815 Cox Ned Road, Chester Maryland, 21619
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (410) 643-5563
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes__X__ No._____
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained herein, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Issuer's revenues for the year ended December 31, 1998 are $1,920,885.
The aggregate market value of the common stock held by nonaffiliates of
the issuer is $3,053,000 (as of May 7, 1999).
The number of shares outstanding of the issuer's common stock is
10,651,500 (as of May 7, 1999).
DOCUMENTS INCORPORATED BY REFERENCE
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INFORMATION REQUIRED
Item 1. Description of Business.
Reference is made to the Glossary at the end of this Business section
for a definition of certain terms.
Introduction
Synergy 2000 Inc. (the "Company") since January, 1997 has been engaged in the
business of providing consulting and management services relating to information
systems. It is also a reseller of software in most instances arising from its
consulting service. To date, a substantial portion of revenues have been
provided from clients and customers seeking solution to problems relating to the
year 2000 ("Y2K"). The Company also provides broad based advisory services in
connection with the organization and management of information departments of
clients. ("Management Advisory Services")
Some computer applications and computer software recognize any year ending in
"00" as "1900". Additionally, many computers were manufactured with built-in
programs or embedded chips which recognize twentieth century dates only. As a
result there is potential for computer programs and hardware not to function or
function incorrectly upon January 1, 2000. For example, a billing system that
does not recognize a date containing 2000 may not send bills or notices after
December 31, 1999. For example, medical equipment which operates on a computer
with timing software may cease to function altogether. This problem could result
in the inability of a client to operate its business profitability or possibly
not at all. Industry and government have undertaken significant programs to make
certain that computer systems are Y2K complaint. The Securities & Exchange
Commission requires disclosure of Y2K problems of public companies.
Finally, the Company is seeking to diversify its business and in June, 1998
formed a joint venture corporation - Argos 2000, Inc. ("Argos") to market
software for certain aspects of the auto insurance industry (See Item 7). The
Company also desires to increase its Management Advisory Services.
The Company's principal office is located at 2815 Cox Neck Road, Chester,
Maryland 21619 and its telephone number is 410-643-5563. The Company was formed
in February 1996 and began operations in 1997. It has not experienced a
consolidation, merger, bankruptcy or other material reclassification.
Nature of Company's Products or Services Offered.
Each client's needs are unique and potentially complex, and with the Company's
Year 2000 and Beyond products and services, the Company creates a unique
solution to meet their specific needs.
The Company has identified multiple niche tools and services specifically for
the Year 2000 marketplace for each computer platform (mainframe, PC's and client
server). The identification of these multiple products and services allows the
Company to pick and chose the best solutions for the client's needs. The Company
provides comprehensive Year 2000 hardware and software solutions for PC, LAN,
and Client Server environments. The Company's solution, Desktops Unlimited,
includes automated tools, project management and technical staff, as needed, for
inventory, impact analysis, detailed analysis, remediation and testing of Year
2000 issues. A network of senior information technology executives is available
through the Company to manage large scale information technology; develop
information technology strategies and implement tactical plans; serve as a
temporary chief information officer. The Company provides mainframe and embedded
systems Year 2000 solutions using third party technology services and engineers.
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The Company's strategy for its Y2K business includes entering into arrangements
with software developers providing products to solve Y2K problems. These
arrangements are generally oral and informal. A part of the arrangement the
Company acts as a reseller of software in connection with its contracts with
clients and in some instances merely resells the software. The supplier on the
other hand may provide technical support and training either directly to the
Company or to the Company's clients.
To perform its agreements the Company utilizes a pool of independent
consultants, generally programmers, engineers and project managers, who act as
independent contractors or are subcontracted to the client. The costs of
consultants are paid pursuant to the agreement with or directly by the client.
The personnel are hired as independent contractors on a "per contract" or "task
order" basis; whereby, the scope of work given and payment made to each person
is based upon the work assignment in Synergy's project scope of work.
The Company has entered into a variety of arrangements to assist its clients to
solve their Y2K problems. These range from simply providing software developed
by others, consulting on various aspects of Y2k compliance program or managing
the entire program. In some instances the Company may sell the required software
and provide consulting and management services.
The Company offers its services to clients with diverse operating systems,
computer language and hardware systems, operating systems included. Microsoft
Windows 3.1, 95 and 97, MVS/ESA, OS/390, AS/400, and other related systems.
Language support includes COBOL, RPG/400, PL/1, Natural, Assembler, Visual Basic
and some 4GLs. Major databases supported include Oracle, Sybase, DB2/400,
Informix, Ingres, and Access. Hardware serviced includes, Pentium PC's, SUN,
Hewlett-Packard, NCR, and IBM platforms.
Synergy 2000 offers the newly introduced "DESKTOPS Unlimited" service which,
through the use of automated tools, scans the hard drive of desktop computers
for recognizable software programs which are known to be vulnerable to date
dependencies. The system provides an on-screen display of the risks identified,
compiles lists of programs which need fixes and suggests remedial action.
Synergy 2000 resells various third party software to analyze PC spreadsheets,
analyze and remediate PC based computer languages to correct potential Year 2000
problems. The third party software utilized is selected based on a specific
client's technology environment. Most of the software sales are made in
conjunction with consulting services.
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During 1998 the Company derived approximately 30% of its revenues from the sale
of Y2K software unrelated to the performance of consulting services. Most of
these revenues were derived from the sale of software from 1st Development Inc.
The software consisted of analysis tools for client services and PC to embedded
Y2K problems. The Company anticipates deriving a lower proportion of its
revenues from software sales and insignificant revenues from 1st Development
Inc. in 1999.
Management Consulting Services, project management, organizational and workforce
issues related to company reorganizations, mergers and acquisitions, growth and
general process improvement, employee relations and development are provided to
clients in a variety of industries. These services are offered independently or
in conjunction with our technology services as a part of a totally integrated
technology and organizational solution.
Marketing
The Company markets its products through the efforts of its President and
Executive Vice President and independent sales representation who are paid a
retainer and commission on clients introduced to the Company by them. It has
been endorsed by or named as a preferred provides of Year 2000 solutions by the
National Food Processor Association, Counsel of Insurance Agent and Brokers
(CIAB), and the Professional Insurance and Agents of America (PIA), among
others.
During 1997 and 1998 the Company derived more than 5% of its revenues from
several customers. In 1997 the Company derived over $160,000 of its revenues
from a contract for Management Advisory Services with Jefferson Pilot Insurance
Company. In 1998 based on unaudited results the Company derived approximately
$300,000 (approx. 22%) of its revenues from Marsh and McLennen Companies, Inc.,
$635,000 (approx. 45%) from Zenith Insurance Company and $100,000 from
Burlington Insurance Group, Inc. The Company, however, does not believe this to
be necessarily significant as the Company derives its revenues from performing
agreements all of which are relatively short term. Once a project is complete
the Company must obtain a new project to replace it. To date, the Company
generally has been able to enter into new projects with new clients.
The Company believes its multi platform approach utilizing different products
and approach for the Y2K solution, enables it provide services to a broad range
of clients.
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Synergy 2000 marketing endorsements enable the Company to reduce the cost of
sale and have direct contact with over 24,000 customers. These Affinity
Marketing Endorsements include: National Food Processors Association (NFPA):
Membership 500; Council of Insurance Agents and Brokers (CIAB): Membership 270;
National Association of Professional Insurance Agents (PIA): Membership 22,000;
Guy Carpenter (a Marsha & McLennan Company): Client Base of 1,500.
Employees
The Company has only four full-time employees. Two of these employees are the
President and Executive Vice President, a third is an administrative assistant
and the fourth is a newly hired management employee. The Company's services are
provided by independent consultants engaged by the Company or client as needed
to perform the Company's contracts. The Company also engages independent sales
representatives to market its services.
Intellectual Property
The Company does not develop its own software and has no copyrights or patents
or other proprietary rights. Certain aspects of the Company's insurance program
are copyrighted by the developer. The Company has received a license for the
marketing of this product.
Competition
The Computer consulting business and management advisory business are highly
competitive. Competition in the industry is generally based on cost and
technical ability. The Company competitive strategies include offering a wide
array of software solutions for the clients problems through its knowledge of
the available software and its relationships with independent engineering and
software firms. Therefore, the Company is not wedded to a particular solution
and is able to utilize new products. The Company also competes by offering a
package which includes personnel. The Company's endorsements reduce sales costs
and enables the Company to provide service at a lower price. The Company is not
a significant factor in the business in which it operates. Many of the Company's
competitors have significantly greater financial and other resources.
Description of Y-2K Arrangements
The Company has contracted with Nevamar, a Division of International Paper to
provide Y2K conversion of the client's mainframe program. The Company will
utilize mainframe tools from Computer Information Services. Day to day
management of the project will be provided by consultants to the Company. The
project involves several phases from analysis of database, to modification of
applications and data and testing. The Company will be paid a fee upon
completion of every phase.
An agreement was entered with Zenith Insurance. The project involved Y2K
solution multiple client servers and P.C. workstations. The Company will use IST
Year 2000 Analysis Suite for the project. The Company will be paid a fee for
services in various installments. The projects will be managed by independent
consultants contracted by the Company(Synergy). The project was completed ahead
of schedule.
The Company has entered into an agreement with Stanislaus Food Products to
provide Y2K conversion services for their client server and embedded systems
using Convert-Tech analysis and remediation capabilities and EQE engineering
services for the embedded systems. The Company will be paid a fixed fee for a
fixed scope of work.
The Company entered into agreement with Marsh and McLennen Companies, Inc. to
sell software for Y-2K solution to this client and provide training. It is also
entered into agreement with American Power for the sale of software.
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Management Advisory Services Agreement
In 1997 the Company completed a Management Advisory Services agreement with
Jefferson Pilot Insurance Company. Pursuant to the Agreement the Company
provided advise concerning the clients' information technology department
recommending selection of technology and software and advisory of staff
organization and personal choices.
Insurance
Carnet Insurance Agency an insurance agency located in Los Angeles, California
through its wholly owned subsidiary Argos Technology, Inc. ("ATI") developed
software processing system ("Argos System"). Carnet Insurance Agency is owned by
an affiliate of the Company. This system provides a fully automated policy
administration system for non-standard automobile insurance policies.
Non-standard insurance include insurance for high risk drivers, drivers with
traffic violations and drivers not able to obtain a good driver discount. It
also includes less affluent insureds requiring installment payments of premiums.
The system was developed from approximately September of 1996 until April 1997.
After one month of testing, the system went live on May 1, 1997 at Carnet
Insurance Agency and is still operational. The system has processed over 70,000
insurance policies and all related activities since that date. The system
processes the binding of insurance, underwriting, rating, policy issuance,
billing and claims administration required by an automobile insurance company.
It interfaces with all outside rating services as well as electronic
transference of information to motor vehicles. The Argos System is proprietary
to Carnet and it has copyrighted certain aspects of the Argos System. ATI has
granted Argos the exclusive marketing right, Carnet has the right to utilize the
Argos System in connection with the administration of Carnet's operations. It
has no right to market the System in competition with Argos. See Item 7 Certain
Relationships and Related Transactions.
The Company through Argos 2000 intends to introduce the Argos System at the
Insurance Accounting and Systems Association conference in early June 1999. In
conjunction with its marketing, Argos 2000 has prepared sales literature and
will introduce a web site. The Company's newly hired manager will devote a
portion of his time to Argos 2000 for the marketing of this product. The
Company's independent sales agents will also be utilized to solicit sales for
the Argos System on behalf of Argos 2000. The Company will utilize its existing
personal and independent contractor network to provide technical services for
Argos 2000. The Company will be able to introduce and sell and service products
without major funding. As is customary in software licensing and sales. The
system will need to be modified for each customer to meet the unique
characteristics and requirements of the customer. It is contemplated that
deposits will be made by the customer to offset expenses of each sale. This
product is the first product for the Company's planned entrance into the
insurance marketplace. The target clients are small insurance companies and
managing general agents (large insurance agencies that represent various
insurance companies in the market place). The Company believes that the Argos
System will enable any Company clients to rapidly enter the non standard
automobile insurance market. The system has the technical flexibility to scale
up or down according to client size and to expand to other produce lines beyond
non-standard auto line. The non-standard auto insurance market is a unique niche
with a lack of software providers.
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Glossary
Applications: Software programs that enable the computer to provide useful work,
usually industry or company specific, such as inventory control, attendance
tracking, policy processing, etc.
Applications Maintenance: Once an evaluation is developed, any activity to keep
programs running and in satisfactory condition: including upgrades, elimination
of faults and bugs and other corrections and repairs.
Automated Tools: A software program that will aid a programmer in the
development or repairing of software or hardware.
Client/Server: The relationship between machines in a communications network.
The client is the requesting machine; the server is the supplying machine.
Computer Code: The set of statements that outlines the way in which functions
may be performed and date represented. The computer rules used to convert data
from one representation to another.
Databases: A collection of data in a centralized library, made up of related
date and records.
Dead Code: Computer code that is no longer used but still resides on the system.
Generally, should be identified and eliminated or archived.
Hardware: The physical equipment of the technology world including magnetic,
electronic and mechanical devices such as mainframes, PC's, servers, printers,
etc.
Languages: A way of passing information to the computer other than through
direct code. Set of rules, conventions and representations used to convey
information, process and procedures. Examples include FoxPro, PowerBuilder,
COBOL, and RPG..
Local Area Networks: A communications network linking various hardware devices
within a facility using continuous cable or in-house voice/data system.
Mainframe: The largest and most costly class of computers used for running large
data processing operations with millions of transactions and large databases.
Open Systems: A computer or operating design for which detailed specifications
are provided by the manufacturer, allowing other vendors to produce compatible
hardware and software.
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Operating System: The master set of programs that manage the computer. Controls
input and output to peripherals such as screens, keyboards, etc., among other
things.
Proprietary Hardware: Specific hardware dedicated to a set of pre-defined
applications that cannot be used for other purposes.
Software: Instructions that direct the hardware to do work.
Software Applications: Programs that are written to perform specific tasks.
Item 2. Description of Property.
The Company rents executive office space in Washington, D.C. and Pasadena, CA on
a month-to-month basis. The officers also operate offices from their homes. No
property is owned directly by the Company.
Item 3. Legal Proceedings.
No legal proceedings are currently on-going, contemplated or threatened.
Item 4. Submission of Matters to a Vote of Securities Holders.
No matter was submitted to shareholders.
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Item 5. Market for Common Equity and Related Stockholder Matters.
The common stock of Synergy 2000 began trading in October of 1997 on the
Over-the-Counter stock market known as the NASDAQ Election Bulletin Board. The
quarterly high and low closing bid prices for the quarters recently ended
provided is shown below.
1997
----
High Low
---- ---
4th Quarter 4.437 2.125
1998
----
1st Quarter 5.50 4.375
2nd Quarter 5.593 5.00
3rd Quarter 5.50 5.00
4th Quarter 4.50 2.375
These Over-The-Counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.
As of February 28, 1999 there were 98 recordholders of the Company's common
stock.
Transfer Agent
The transfer agent and registrar for the Company's Common and Preferred Stock is
Securities Transfer Corporation, P. O. Box 701629, Dallas, TX 75370.
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Item 6. Management Discussion and Analysis
Introduction
The Company 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.
Statement of Operations December 31, 1998 to December 31, 1997 (unaudited)
The Company's revenues or fee bills was approximately $1,920,885 for the year
ended December 31, 1998 compared to approximately $480,335 comparable period in
1997. The increase was due primarily to 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 year ended December 31, 1998 were
$1,883,832 compared to $686,875 during the comparable period. The increased
expenses were primarily attributable to the increased volume. The increase in
pre tax and after tax net income is primarily the result of increased volume.
The Company does not believe that 1997 is a representative year as the Company
did not commence operations until January 1997. A substantial portion of its
activities in 1997 were devoted to start-up activities. During this period the
Company incurred marketing and other expenses arising prior to substantial
income producing activities.
The Company is not aware of any trend that will adversely affect its revenues in
1999. The Company relies on programmers to perform its contracts and from time
to time there have been shortages of 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 to consultants.
The Company revenues beyond 1999 are dependent upon its ability to diversify
beyond offering Y2K services.
Liquidity
The Company's working capital was approximately $300,350 as of December 31, 1998
compared to approximately $186,000 at December 31, 1997. The increase was
primarily attributable to accounts receivable arising from increased revenues.
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 available for its present operations for the next twelve months.
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Item 7. Financial Statements and Exhibits.
(1) 1996 and 1997 Audited Financial Statement including Income
Statement, Cash Flows and Changes in Shareholder Equity, including
1998 Interim Unaudited Financial Statement for September 30 and
the nine period then enter including Balance Sheet and Statements
of Income, Cash Flows and Changes in Shareholder Equity.
Item 7. Financial Statements. See Item 13
F-1. Audit Report for 1997 and 1998.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
No change in accountants has occurred and no disagreements have occurred.
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Item 9. Directors, Executive Officers, Promoters and Control Persons.
Eli Dabich, Jr. - President and Director
Jeanette Tebrich Smith - Exec. Vice President, Secretary and
Director
Virgil Pittman - Director
ELI DABICH, JR., age 59, is President and a Director of Synergy 2000. He
oversees operations and participates in sales and marketing activities. A 1963
graduate of the U. S. Naval Academy, Dabich earned his B.S. in Engineering and
served in the Navy, initially as a naval aviator. He earned the M. S. degree in
Administration from George Washington University in 1970, and during the period
from 1968-1970, he taught chemistry and computer science at the Naval Academy.
From 1970-74, Dabich served as a marketing representative with IBM. From
1974-82, he worked as senior vice president of Sun Life Insurance Company in
Baltimore, where he was responsible for data processing and administrative
services. From 1982-88, Dabich served as executive vice president for
administration and finance for Maryland Casualty Company. There, he was
responsible for over 600 people and a budget of $50 million. Responsibilities
included information systems, human resources, agency automation, software
development, and systems and administration. From 1988-90, he served as National
Director of Insurance Consulting for Coopers & Lybrand.
From 1990-93, Dabich was senior vice president of Nationale Nederlanden, North
American Corporation, in Washington, DC. There, he was responsible for the
operations of thirteen property and casualty insurance companies in the US and
Canada having $2.5 billion in premium revenue. From 1993-95, Dabich served as
senior vice president and Chief Administrative Officer for TIG Insurance Company
(a TransAmerica Insurance company), where he was responsible for administrative
services, human resources, information systems and other related duties. In 1996
in Baltimore, Dabich started a personal consulting practice in the field of
information processing, which ultimately led into the development of a network
of professional information systems practitioners and the development of Synergy
2000.
JEANETTE TEBRICH SMITH, age 50, Executive Vice President, Secretary and a
Director of Synergy 2000 serves the company in operations and administration.
She earned the B. A degree in History/Education at UCLA and worked for Greyhound
Personnel Services from 1977-80, where she served as regional manager. From
1980-86, Smith served as Vice President Human Resources & Administration for
Bekins Moving and Storage in Glendale, CA. There, she directed human resources
for headquarters and field locations. From 1986-95, Smith served as Assistant
Vice President, Human Resources, for TransAmerica Insurance Company in Los
Angeles, CA, where she provided support to field
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human resource managers nationally. Her key responsibilities included
enhancement of employee relations, training, salary and benefits administration,
organization development and employment.
In 1995, Jeanette Tebrich Smith formed a personal consulting practice and
network in association with Eli Dabich and others. She consulted in the areas of
corporate restructures and relocation, human resources, team building,
recruiting, resolution of employee conflicts, and other related topics. The
consulting practice led to recruiting of computer programming specialists needed
by customers to resolve computer date-change program problems. In 1997, she
joined Synergy 2000.
VIRGIL L. PITTMAN, JR., age 57, is a director of Synergy 2000. He received his
B. S. degree in Physics and Math from Northwestern Louisiana State University in
Natchitoches, LA in 1964. He joined the Navy and worked in data gathering and
systems development. He has held several management positions in the insurance
field including vice presidential posts with USAA, Equitable, and Nationwide
Insurance. In 1987, he joined Fireman's Fund Insurance where he serves today as
Senior Vice President. There, he is responsible for management of billing and
collection of $3 billion in annual premiums for the company. He is widely known
for his experience and capability in the information management field. He became
a director of Synergy 2000 in 1997.
Each director holds office for a term of one year or until his or her successor
is elected and qualified.
Item 10. Executive Compensation.
The following table sets forth all compensation paid by the Company during 1997
and 1998 to those persons who were employed during such year as (i) the chief
executive officer and (ii) an executive (other than the chief executive officer)
whose annual compensation exceeded $100,000.
Name and Principal Annual
Position Year Compensation
------------------------- ---- ------------
Eli Dabich, Jr. 1997 $110,000
President, Chief Executive
Officer
1998 $100,000
Jeanette Tebrich Smith 1997 $113,780
Executive Vice President
1998 $108,520
The Company entered into one year employment agreements with Eli Dabich Jr. and
Jeanette Tebrich Smith as president and executive vice president respectively.
The agreement provide for the payment of an annual salary of $110,000 and
$106,000 to Jeanette Tebrich Smith. The agreements expires in March, 1999 . It
is anticipated that new employment agreements will be entered into upon terms to
be determined.
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Item 11. Security Ownership of Certain Beneficial Owners and Management.
Shareholders owning more than 5% of the common stock of the corporation and the
number and percent of outstanding shares owned as of December 31, 1998 are as
follows:
Percentage
Number of Of Company
Name of Shareholder Shares Owned Owned
------------------- ------------ ----------
Eli Dabich, Jr. 3,780,000 36%
2815 Cox Neck Road
Chester, Maryland 21614
Jeanette T. Smith 2,520,000 24%
225 South Lake Avenue
Pasadena, CA 91101
Michael York 2,200,000 21%
160 Cypress Avenue
Hermosa Beach, CA 90254
William Tabor* 625,000 6.1%
1479 Old Robinson Road
Louisville, Mississippi 39339
*These Shares are beneficially owned by William Tabor but held of record by Mr.
Tabor and other affiliates or associates of Mr. Tabor
Item 12. Certain Relationships and Related Transactions.
Disclosure as to relationships existing among officers, directors and
shareholders:
On the date of incorporation, February 21, 1996, five million (5,000,000) shares
were issued to the initial officer, director, and founder of the corporation,
William E. Tabor. On October 1, 1996, four million shares (4,000,000) were
issued to Corporate Service Group (controlled by Tabor) for corporate
development and management support.
On January 17, 1997, current management joined the company and obtained control
of the company from Corporate Service Group and Tabor. Of the 9,000,000 shares
owned by Corporate Service Group and William E. Tabor, a total of 8,500,000
shares were returned to the treasury and canceled for a consideration of
$67,000. Eli Dabich, Jr., current President and Director, was issued 3,780,000
shares of common stock, par value of $3,780 and a fair market value totaling
$124,740, and Jeanette T. Smith, current Executive Vice President, was issued
2,520,000 shares of common stock, par value of $2,520 and a fair market value of
$83,160. The issuance was treated as a salary expense based upon the estimated
fair market value of the shares transferred. At the same time, Michael York
acquired 2,200,000 shares for a consideration of $100,000.
All future transactions between the Company and its officers, directors,
principal shareholders and affiliates will be approved by a majority of the
independent and disinterested outside directors who will have access, at the
Company's expense, to the Company's legal counsel, and must be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties
under similar circumstances.
Corporate Service Group ("Corporate Services"), an affiliate of Mr. Tabor,
performed services for Synergy 2000 for a fee. The services were generally
related to compliance and shareholder matters. Total fees earned by Corporate
Service Group from Synergy Securities 2000 in 1997 and 1998 were $77,451 and
$33,000. An additional $67,000 was paid to the Tabor Group in January, 1997 for
redemption and cancellation of shares as described above.
In June, 1998 the Company formed Argos to market software programs for the
insurance industry. In connection with the formation the Company contributed
200,000 shares of its common stock and received 51% of Argos. Argos Technology,
Inc. ("ATI") the other major shareholder received 39% of the shares of Argos and
granted Argos an exclusive license to market the Argos Systems. A majority of
the shares of ATI are owned by CarNet a corporation controlled by Michael York,
a principal shareholder of the Company.
The license is for an initial term of ten years and provides for a royalty
payable to ATI of 10% of the gross sales revenue of Argos System. The license
contains sales commitments of Argos Systems by June 30, 2000. If the Company has
not sold ten of the Argos Systems by June, 1999, ATI will receive 75,000 shares
of the Company's common stock contributed to Argos by the Company. If the
additional ten units are not sold by June 30, 2000 an additional 75,000 shares
will be transferred to ATI. Upon any inability to meet such sales requirements
the exclusive license would remain in effect. The Agreement may be terminated by
Licensor upon an uncured breach of the License, bankruptcy of Argos 2000 or sale
of more than 50% of the outstanding shares of Argos 2000. Upon termination Argos
2000 will be prohibited from marketing the System but will remain liable for
unpaid royalties. The rights of end uses would not be affected by termination.
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Item 13. Exhibits & Reports (reciting exhibit numbers on Form 8-K).
3.02(5) Articles of Incorporation and By-laws.*
10. Material Contracts.*
10.1 Employment Agreements of Eli Dabich, Jr. and Jeanette T.
Smith.*
10.2 Company Contract with International Paper.*
10.3 Company Contract with Marsh and McLennan Companies, Inc.*
10.4 Company Contract with Zenith Insurance Company.*
10.5 License Agreement of Argos 2000, a majority-owned subsidiary.*
21. Schedule of Subsidiaries.*
27. Financial Data Schedule.
* Previously Filed with the Company's Form 10-SB and incorporated
herein by reference.
14
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STEPHEN D. MILNER, CPA, PA
--------------------------------------------------------------------------------
Certified Public Accountant
17 Toy Street - Greenville, SC 29601 Phone (864) 233-5984
- Fax (864) 233-7751
REPORT OF INDEPENDENT AUDITOR
-----------------------------
Board of Directors
Synergy 2000, Inc.
I have audited the accompanying consolidated balance sheet of Synergy 2000, Inc.
and subsidiary as of December 31, 1998, and the related consolidated statements
of operations, stockholders' equity and cash flows for the years ended December
31, 1998 and 1997. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Synergy 2000, Inc., at
December 31, 1998, and the consolidated results of its operations and its
consolidated cash flows for the years ended December 31, 1998 and 1997, in
conformity with generally accepted accounting principles.
STEPHEN D. MILNER, CPA, PA
Greenville, South Carolina
March 31, 1999
F-1
<PAGE>
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
December 31,
1998
---------------
<S> <C>
ASSETS
------
Current Assets:
Cash $ 90,212
Accounts Receivable 214,718
Other Current Assets 11,261
---------------
Total Current Assets 316,191
Equipment, Net 9,388
Other Assets
Intangible Assets, Net 912,745
Organization Costs, Net 93
---------------
Total Other Assets 912,838
---------------
Total Assets $ 1,238,417
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts Payable $ 15,841
---------------
Total Current Liabilities 15,841
Deferred Income Taxes 8,281
Minority Interest in Consolidated Subsidiary 450,768
Stockholders' Equity:
Common Stock, Par Value $.001;
Authorized 25,000,000 Shares;
Issued and Outstanding 10,651,500 Shares 10,651
Common Stock Subscribed, 112,500 Shares 112,500
Capital in Excess of Par Value of Common Stock 969,549
Retained (Deficit) (216,673)
---------------
876,027
Less Subscriptions Receivable (112,500)
---------------
Total Stockholders' Equity 763,527
---------------
Total Liabilities and Stockholders' Equity $ 1,238,417
===============
</TABLE>
See accompanying consolidated notes to financial statements.
F-2
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Year Year
Ended Ended
December 31, December 31,
1998 1997
-------------------------- -------------------------
<S> <C> <C>
Fees Billed $ 1,920,885 $ 480,335
Operating Expenses:
Salaries 243,582 430,291
Contract Services 1,233,433 37,451
Taxes and Licenses 20,757 12,044
Auto and Truck 3,628 7,661
Travel and Business 69,029 92,225
Meals and Entertainment 1,465 7,748
Advertising 63,175 28,177
Professional Fees 57,005 15,279
Rent 12,499 5,778
Telephone 25,306 11,607
Supplies 15,713 11,343
Insurance 29,042 11,163
Postage and Shipping 4,126 2,449
Dues and Subscription 3,634 2,079
Investor Relations 5,079 5,125
Amortization 48,082 ---
Depreciation 1,536 404
Bad Debts 44,915 ---
Miscellaneous 1,826 6,051
-------------------------- -------------------------
1,883,832 686,875
-------------------------- -------------------------
Net Income (Loss) Before Income Taxes 37,053 (206,540)
Income Tax Expense (8,281) ---
-------------------------- -------------------------
Net Income (Loss) Before Minority Interest 28,772 (206,540)
Minority Interest in Net Loss 20,016 ---
-------------------------- -------------------------
Consolidated Net Income (Loss) $ 48,788 $ (206,540)
========================== =========================
</TABLE>
See accompanying consolidated notes to financial statements.
F-3
<PAGE>
CONDSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
<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, 1996 $ 10,500 $250,000 $ 1,500 $ (421) $ 261,579
Shares Sold 9,380 --- 312,320 --- 321,700
Subscriptions Received 137 (137,500) 137,363 --- ---
Shares Redeemed (9,380) --- (6,620) (58,500) (74,500)
Net Loss --- --- --- (206,540) (206,540)
-------------- ------------- -------------- ------------- ------------------------------
Balance -
December 31, 1997 10,637 112,500 444,563 (265,461) 302,239
Sale of Subsidiary
Common Stock --- --- 490,000 --- 490,000
Shares Sold 14 --- 34,986 --- 35,000
Net Income --- --- --- 48,788 48,788
-------------- ------------- -------------- ------------- ------------------------------
Balance -
December 31, 1998 $ 10,651 $ 112,500 $ 969,549 $ (216,673) $ 876,027
============== ============= ============== ============= ==============================
</TABLE>
See accompanying consolidated notes to financial statements.
F-4
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Year
Ended Ended
December 31, December 31,
1998 1997
-------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 29,779 $(206,540)
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used) in Operating Activities:
Depreciation 1,536 404
Amortization 48,082 43
Dec. (Inc.) in Accounts Receivables (150,694) (64,024)
Dec. (Inc.) in Other Current Assets (11,261) ---
Inc. (Dec.) in Accounts Payable 10,568 4,673
Inc. (Dec.) in Accrued Payroll Taxes (10,395) 10,395
Inc. (Dec.) in Deferred Income Taxes 8,281 ---
-------------------- --------------------
Net Cash Used in Operating Activities (75,111) (255,049)
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Aquisition of Equipment (7,289) (4,039)
-------------------- --------------------
Net Cash Used in Investing Activities (7,289) (4,039)
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Stock 35,000 459,200
Redemption of Stock --- (74,500)
-------------------- --------------------
Net Cash Provided by Financing Activities 35,000 384,700
-------------------- --------------------
NET INCREASE (DECREASE) IN CASH (47,400) 125,612
CASH - BEGINNING 137,612 12,000
-------------------- --------------------
CASH - ENDING $ 90,212 $ 137,612
==================== ====================
</TABLE>
See accompanying consolidated notes to financial statements.
F-5
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
Consolidated Notes to Financial Statements
December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Synergy 2000, Inc. (the
Company) and its subsidiary is presented to assist in understanding the Company
and its subsidiary's financial statements. The financial statements and notes
are representations of the Company's management who is responsible for their
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles, and industry practices, and have been
consistently applied in the preparation of the financial statements.
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 suite 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 issued and outstanding in the accompanying
consolidated 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 products. This transaction was valued at $960,785 which was
the estimated fair value of the common stock issued by Argos 2000, Inc. as of
June 25, 1998.
The results of operations presented in the accompanying consolidated financial
statements include Argos 2000, Inc. from its formation on June 25, 1998 through
December 31, 1998, and are insignificant.
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-of-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.
-6-
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
Consolidated Notes to Financial Statements (Continued)
December 31, 1998
Depreciation - The Company's equipment is depreciated using the straight-line
method. Depreciation expense totalled $1,536 for the year ended December 31,
1998 and $404 for the year ended December 31, 1997.
Intangible Asset - 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 system designed for the auto
insurance industry. This intangible asset is amortized using the straight-line
method over 10 years. Amortization expense totalled $48,039 for the year ended
December 31, 1998.
Organization Costs - Organization costs ($215) are being amortized using the
straight-line method over 60 months. Amortization expense charged to operations
amounted to $43 for the year ended December 31, 1998 and $43 for the year ended
December 31, 1997. Accumulated amortization was $122 at December 31, 1998 and
$79 at December 31, 1997.
Deferred Income Taxes - For income tax reporting, the Company uses accounting
methods that recognizes 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 reported amounts and disclosures.
Accordingly, actual results could differ from these estimates.
NOTE 2 - EQUIPMENT
Equipment consists of the following:
Computer Equipment $ 11,329
Accumulated Depreciation (1,941)
---------------
$ 9,388
===============
NOTE 3 - INCOME TAXES
The income tax provision consists of the following:
1998 1997
---------------- ---------------
Current $ --- $ ---
Deferred 8,281 ---
---------------- ---------------
$ 8,281 $ ---
================ ===============
-7-
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
Consolidated Notes to Financial Statements (Continued)
December 31, 1998
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 $732 in 1998 and $3,874 in 1997.
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock - For the year ended December 31, 1998, the Company sold 14,000
shares of its $.001 par value common stock for a total price of $35,000.
For the year ended December 31, 1997, the Company sold 9,380,000 shares of its
$.001 par value common stock for a total price of $321,700. Additionally, the
Company redeemed 9,380,000 shares for a total price of $74,500.
Net Income (Loss) Per Share - Net income (loss) per common share has not been
computed since it is not significant.
NOTE 5 - RELATED PARTY TRANSACTIONS
For the year ended December 31, 1998, the Company paid Argos 2000, Inc. $77,769
for services provided to the Company.
F-8
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of White
Plains, State of New York, on the 29th day of June, 2000.
SYNERGY 2000, INC.
By: /s/ Eli Dabach
-------------------------------------
Eli Dabach,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Capacity Date
-------------------------- --------------------------------------------------- ------------------
<S> <C> <C>
/s/ Eli Dabach Director, President and Chief Executive June 29, 2000
------------------ Officer (Principal Executive Officer, Principal
Eli Dabach Financial and Accounting Officer)
/s/ Jeanette Tebrich Director June 29, 2000
---------------------
Jeanette Tebrich
/s/ Virgil L. Pittman, Jr. Director June 29, 2000
--------------------------
Virgil L. Pittman, Jr.
</TABLE>
