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U.S. SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
(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, 1999
[ ] 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, 21614
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (410) 643-8320
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, 1999 are $3,427,475.
The aggregate market value of the common stock held by nonaffiliates of
the issuer is 1,526,500 (as of April 13, 2000).
The number of shares outstanding of the issuer's common stock is
10,651,500 (as of April 13, 2000).
DOCUMENTS INCORPORATED BY REFERENCE
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<PAGE>
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. Through 1999, 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"). The Company has acquired experience
in software voluntarily for liability insurance indemnity.
Some computer applications and computer software, including imbedded chips
recognize any year ending in "00" as "1900". As a result there, was a potential
for computer programs and hardware not to function or function incorrectly upon
January 1, 2000. This problem could have resulted in the inability of a client
to operate its business profitability or possibly not at all.
The Company, since 1998, has sought to develop its operations so that it is not
dependent on Y2K. During 1999 a significant portion of its revenues were derived
from non Y2K matters. All the Company is presently providing services in the
years 2000 for non Y2K matters. Its efforts to diversify started in June, 1998
the Company 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 is also in the process of introducing a website for the marketing
and administration of liability insurance products on the internet.
The Company's principal office is located at 2815 Cox Neck Road, Chester,
Maryland 21614 and its telephone number is 410-643-8320. 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
utilization of a combination of 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.
<PAGE>
The Company's strategy for its business includes entering into arrangements with
software developers providing products to solve programming 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 programming problems. These range from simply providing software
developed by others, consulting on various aspects of 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.
The Company offers Management Consulting Services relating 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.
<PAGE>
During 1999 and 1998 the Company derived more than 5% of its revenues from
several customers. 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.
During 1999 the Company derived more than 5% of its revenues from several
customers including:
CCC Information Services $656,533 (20%)
PSE&G $402,529 (12%)
Guy Carpenter $462,411 (14%)
Bell South $336,357 (10%)
Ribi ImmunoChem $165,923 ( 5%)
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 solution, enables it provide services to a broad range of
clients.
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 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
Prior to developing its website, the Company did not develop it products. It
generally does not own software and has no copyrights or patents or other
proprietary rights. Certain aspects of the Company's insurance program are
copyrighted by the Argo. The Company has received a license for the marketing of
this product. The Company has developed the website.
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.
<PAGE>
Description of Arrangements for Software Developments
The Company typically contracts clients to provide day to day management of the
project will be provided by consultants to the Company. Most projects involve
several phases from analysis to modification of applications and data and
testing. The Company generally will be paid a fee upon completion of every
phase.
The Company is currently building a very large ORACLE based web enabled claims
Systems for a leading edge insurance vendor and was awarded this opportunity
because of Year 2000 services provided to the client.
The Company also ofers broad based advisory services in connection with
organization and management of its clients' business.
Insurance
Argos
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 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.
Website Development
The Company, employing its specialized and intellectual knowledge of the
insurance industry has extended its business plans to include an internet
website for the insurance indicated that solves cost inefficiencies and poor
customer service that becomes a problem.
The purpose of this plan is to create a new website for personal lines insurance
starting with the underwriting process through the settlement claims which will
improve service and satisfaction to the customer and improve insurance company
profitability. InsuranceWrite.comTM has developed a unique offering for small
and medium sized Property and Casualty insurance company that includes space.
<PAGE>
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.
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 officers also operate offices from their homes. Mr. Dabich office is
considered the principal executive office. No property is owned directly by the
Company.
<PAGE>
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.
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
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High Low
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March 31, 1999 4 3/4 2
June 31, 1999 3 3/4 1 3/4
September 31, 1999 2 3/4 1 1/4
December 31, 1999 2 3/4
1998
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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 now, there were 171 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.
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, 1999 to December 31, 1998 (unaudited)
The Company's revenues or fee bills was approximately $1,920,885 for the year
ended December 31, 1998 compared to approximately $3,427,475. 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.
<PAGE>
The Company's operating expenses during the year ended December 31, 1998 were
$1,883,832 compared to $478,975 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 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 in 2000 are dependent upon its continued ability to
diversify is products and serves to non Y2K service products.
Liquidity
The Company's working capital was approximately $549,550 as of December 31,
1998.
Except for the introduction of the website the Company has no commitments for
capital expenditures and believes its available cash is available for its
present operations for the next twelve months. The Company requires additional
capital to market its websites.
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
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
No change in accountants has occurred and no disagreements have occurred.
Item 9. Directors, Executive Officers, Promoters and Control Persons.
Eli Dabich, Jr. - President and Director
Jeanette Tebrich Smith - Exec. Vice President, Secretary and
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
<PAGE>
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 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.
Each director holds office for a term of one year or until his or her successor
is elected and qualified.
Compliance with Section 16(a) of the Exchange Act.
Forms 3, 4 and 5 have not yet been filed by any officer, director or
beneficial owner of more than ten (10%) percent of our common stock. Reports for
officers and directors will be filed by May 31, 20000. The Company will
encourage beneficial owners of more than ten (10%) percent of the Company's
common stock to file their reports by the same date.
Item 10. Executive Compensation.
The following table sets forth all compensation paid by the Company during 1999
through 1997 and 1998 to those persons who were employed during such year as (i)
the chief executive officer and (ii) and executive (other than the chief
executive officer) whose annual compensation exceeded $100,000.
Name and Principal Annual FMV of Shares
Position Year Compensation Issued
Eli Dabich, Jr. 1999 121,000
President, Chief 1998 100,000
Executive Officer 1997 110,000 96,000(1)
Jeanette Tebrich Smith 1999 116,000
Executive Vice President 1998 108,520
1997 113,780 64,000(1)
(1) the above represents the fair market value of shares of common stock of the
company issued to the above-mentioned executives at the time they entered into
employment agreements with the Company. These amounts are considered
compensation for financial reporting purposes.
<PAGE>
The Company entered into one year employment agreements with Eli Dabich Jr., and
Jeannette Tebrich Smith as president and executive vice president respectively.
The agreement provide for the payment of an annual salary of $121,000 and
$116,000 to Jeanette Tebrich Smith. The agreement expires in June 2000. The
Company has authorized the modification and extensions of these agreements for a
three year term. Each will also receive 100,000 options for five years. Mr.
Dabich will also receive a definite salary of $10,000 a year.
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, 1999 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.%
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.
Mr. Eli Dabich was a director of Carnet at the time of the transaction with
Argos Technologies Inc. See "Insurance - Argos" in Item 1 Business. Mr. Dabich
is a defendant in an action brought by a shareholder of Carnet in Delaware
alleging that the approval of the transaction breached of certain fiduciary
duties owed by the directors to Carnet. The Company will reimburse Mr. Dabich's
for expenses in connection with the defendant of this action to the extent he is
not remembered by Carnet. Mr. Michael York is a principal stockholder of Carnet
and also a defendant in this action.
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.*
<PAGE>
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.
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
Consolidated Financial Statements
December 31, 1999
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
Consolidated Financial Statements
Contents Page No.
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Report of Independent Auditor 1
Consolidated Balance Sheet 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Consolidated Notes to Financial Statements 6
<PAGE>
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, 1999, and the related consolidated statements
of operations, stockholders' equity and cash flows for the years ended December
31, 1999 and 1998. 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, 1999, and the consolidated results of its operations and its
consolidated cash flows for the years ended December 31, 1999 and 1998, in
conformity with generally accepted accounting principles.
STEPHEN D. MILNER, CPA, PA
Greenville, South Carolina
March 24, 2000
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
Consolidated Balance Sheet
December 31,
1999
------------
ASSETS
Current Assets:
Cash $ 418,976
Accounts Receivable 272,595
Other Current Assets 13,184
----------
Total Current Assets 704,755
Equipment, Net 13,338
Other Assets
Intangible Assets, Net 816,667
Organization Costs, Net 50
----------
Total Other Assets 816,717
----------
Total Assets $1,534,810
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 193,679
Accrued Income Taxes 1,526
----------
Total Current Liabilities 195,205
Deferred Income Taxes 5,747
Minority Interest in Consolidated Subsidiary 402,340
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) (48,682)
----------
1,044,018
Less Subscriptions Receivable (112,500)
----------
Total Stockholders' Equity 931,518
----------
Total Liabilities and Stockholders' Equity $1,534,810
==========
See accompanying consolidated notes to financial statements.
-2-
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
Consolidated Statement of Operations
Year Year
Ended Ended
December 31, December 31,
1999 1998
------------ ------------
Fees Billed $3,427,475 $1,920,885
Operating Expenses:
Salaries 328,255 243,582
Contract Services 2,506,725 1,233,433
Taxes and Licenses 27,988 20,757
Auto and Truck 6,746 3,628
Travel and Business 72,831 69,029
Meals and Entertainment 6,480 1,465
Advertising 29,089 63,175
Professional Fees 67,627 57,005
Rent 11,298 12,499
Telephone 23,317 25,306
Supplies 19,616 15,713
Insurance 55,239 29,042
Postage and Shipping 3,412 4,126
Dues and Subscription 2,088 3,634
Investor Relations 4,237 5,079
Amortization 96,121 48,082
Depreciation 2,956 1,536
Bad Debts 44,307 44,915
Miscellaneous 588 1,826
---------- ----------
3,308,920 1,883,832
---------- ----------
Net Income Before Income Taxes 118,555 37,053
Income Tax Expense -- (7,274)
---------- ----------
Net Income Before Minority Interest 118,555 29,779
Minority Interest in Net Loss 48,428 20,016
---------- ----------
Consolidated Net Income $ 166,983 $ 49,795
========== ==========
See accompanying consolidated notes to financial statements.
-3-
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Common Capital Retained Total
Common Stock In Excess Earnings Stockholders'
Stock Subscribed of Par Value (Deficit) Equity
-------- ------------ -------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Balance -
December 31, 1997 10,637 112,500 444,563 (265,460) 302,240
Sale of Subsidiary
Common Stock -- -- 490,000 -- 490,000
Shares Sold 14 -- 34,986 -- 35,000
Net Income -- -- -- 49,795 49,795
------- -------- -------- --------- -----------
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
======= ======== ======== ========= ===========
</TABLE>
See accompanying consolidated notes to financial statements.
-4-
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Year
Ended Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $118,555 $ 29,779
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used) in Operating Activities:
Depreciation 2,956 1,536
Amortization 96,121 48,082
Dec. (Inc.) in Accounts Receivables (57,877) (150,694)
Dec. (Inc.) in Other Current Assets (1,923) (11,261)
Inc. (Dec.) in Accounts Payable 177,838 10,568
Inc. (Dec.) in Accrued Payroll Taxes -- (10,395)
Inc. (Dec.) in Accrued Income Taxes 1,526 --
Inc. (Dec.) in Deferred Income Taxes (1,526) 7,274
-------- ---------
Net Cash Provided by (Used) in
Operating Activities 335,670 (75,111)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Aquisition of Equipment (6,906) (7,289)
-------- ---------
Net Cash Used in Investing Activities (6,906) (7,289)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Stock -- 35,000
Net Cash Provided by Financing Activities -- 35,000
-------- ---------
NET INCREASE (DECREASE) IN CASH 328,764 (47,400)
CASH - BEGINNING 90,212 137,612
-------- ---------
CASH - ENDING $418,976 $ 90,212
======== =========
</TABLE>
See accompanying consolidated notes to financial statements.
-5-
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
Consolidated Notes to Financial Statements
December 31, 1999
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 for the fiscal year ended December 31, 1999, 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, 1999
Depreciation - The Company's equipment is depreciated using the straight-line
method. Depreciation expense totalled $2,956 for the year ended December 31,
1999 and $1,536 for the year ended December 31, 1998.
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 $96,078 for the year ended
December 31, 1999 and $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, 1999 and $43 for the year ended
December 31, 1998. Accumulated amortization was $165 at December 31, 1999 and
$122 at December 31, 1998.
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 $18,235
Accumulated Depreciation (4,897)
-------
$13,338
=======
NOTE 3 - INCOME TAXES
The income tax provision consists of the following:
1999 1998
-------- --------
Current $ 1,526 $ --
Deferred (1,526) 7,274
------- ------
$ -- $7,274
======= ======
-7-
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
Consolidated Notes to Financial Statements (Continued)
December 31, 1999
The income tax provision differs from the expense that would result from
applying statutory rates to income before taxes as follows:
1999 1998
-------- --------
Income Tax Expense Computed at the
Statutory Federal Income Tax Rate $ 40,309 $ 12,598
Increase (Decrease) in Income Taxes
Resulting From:
Subsidiary Losses Not Recognized 33,603 --
Net Operating Losses Recognized (70,412) --
Prior Year Tax Adjustments (2,696) --
Surtax Exemption -- (6,820)
State Income Tax - Net of Federal Tax Benefit -- 1,247
Other (804) 249
-------- --------
$ -- $ 7,274
======== ========
The components of deferred income tax expense result from the following
temporary differences between earnings reported for financial reporting and
income tax purposes:
1999 1998
-------- --------
Method of Revenue and Expense Recognition $ 3,708 $ 6,348
Additional Depreciation for Income Tax Purposes 2,039 926
-------- ---------
$ 5,747 $ 7,274
======== =========
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.
Net Income (Loss) Per Share - Net income (loss) per common share has not been
computed since it is not significant.
-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 14th day of April, 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 April 13, 2000
- ------------------ Officer (Principal Executive Officer, Principal
Eli Dabach Financial and Accounting Officer)
/s/ Jeanette Tebrich Director April 14, 2000
- ---------------------
Jeanette Tebrich
</TABLE>
