<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
--- Exchange Act of 1934 for the Quarterly period ended June 30, 2000
Transition Report pursuant to Section 13 or 15 (d) of the Securities
--- Exchange Act of 1934 for the transition period from to .
Commission File Number 000-24789
SYNERGY 2000, INC.
(Exact name of small business issuer as specified in its Charter)
Delaware 64-0872630
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2815 Cox Neck Road, Chester, Maryland 21619
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(Address of principal executive officers)
(410) 643-5563
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(Telephone)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of July 1, 2000, Registrant had outstanding 10,651,500 shares of Common
Stock, $.001 par value.
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SYNERGY 2000, INC.
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Report of Independent Accountant
Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999
Consolidated Statements of Operations for the three and six months ended
June 30, 2000 and 1999.
Consolidated Statements of Retained Earnings as of June 30, 2000
Consolidated Statements of Cash Flows for the six months ended June 30,
2000 and 1999.
Consolidated Notes to Financial Statements
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
SIGNATURES
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8Q
1. EXHIBITS
27 Financial Data Schedule
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REPORT OF INDEPENDENT ACCOUNTANT
Board of Directors
Synergy 2000, Inc.
I have reviewed the accompany consolidated balance sheet of Synergy 2000, Inc.
and subsidiary as of June 30, 2000, and the related consolidated statements of
operations, stockholders' equity and cash flows for the six months ended June
30, 2000 and 1999. These financial statements are the responsibility of the
Company's management.
I conducted my review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, I do not express such an opinion.
Based upon my review, I am not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
STEPHEN D. MILNER, CPA, PA
Greenville, South Carolina
August 9, 2000
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
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(Unaudited)
<S> <C> <C>
ASSETS
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Current Assets
Cash $ 490,803 $ 418,976
Accounts Receivable 295,946 272,595
Common Stock Subscriptions Receivable -- --
Prepaid Expenses -- --
Other Current Assets 21,261 13,184
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Total Current Assets $ 808,010 $ 704,755
Equipment, Net 19,903 13,338
Other Assets:
Intangible Assets, Net 768,627 816,667
Organization Costs, Net 29 50
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Total Other Assets 768,656 816,717
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Total Assets $ 1,596,569 $ 1,534,810
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 178,163 $ 193,679
Deferred Income Taxes 12,946 5,747
Accrued Income Taxes 19,638 1,526
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Total Current Liabilities $ 210,747 $ 200,952
Minority Interest in Consolidated Subsidiary 378,441 402,340
Stockholder's Equity:
Common Stock, Par Value $.001:
Authorized 25,000,000 Shares
Issued and Outstanding 10,851,500 Shares 10,651 10,651
Common Stock Subscribed, 112,500 Shares 112,500 112,500
Capital in Excess of Par Value of Common Stock 969,549 969,549
Retained Earnings 27,181 (48,682)
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1,119,881 1,044,018
Less: Subscriptions Receivable (112,500) (112,500)
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Total Stockholders' Equity 1,007,381 931,518
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Total Liabilities and Stockholders' Equity $ 1,596,569 $ 1,534,810
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</TABLE>
See accompanying Consolidated Notes to Financial Statements
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SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
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June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---------------------------- ----------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Fees Billed $ 615,641 $ 517,450 $ 1,177,516 $ 1,380,134
Operating Expenses:
Salaries 59,909 83,261 119,159 149,791
Contract Services 390,469 238,828 770,351 889,407
Taxes and Licenses 5,264 7,751 11,297 14,371
Auto and Truck 0 0 0 0
Travel and Business 16,571 23,506 17,523 42,211
Meals and Entertainment 0 3,444 32 4,184
Advertising 671 1,050 1,593 26,050
Professional Fees 40,179 27,720 56,821 29,544
Rent 756 2,776 1,681 5,815
Telephone 3,614 6,497 5,368 11,674
Supplies 2,924 8,862 4,360 10,940
Insurance 32,212 40,751 45,029 45,557
Postage and Shipping 728 978 1,013 1,493
Dues and Publications 1,099 616 1,245 616
Investor Relations 0 191 975 3,350
Amortization 24,030 24,031 48,060 48,061
Depreciation 1,201 951 2,113 1,478
Bad Debts 7,298 0 11,815 0
Miscellaneous 631 124 1,805 274
----------- ----------- ----------- -----------
Total Operating Expenses 587,556 471,337 1,100,240 1,284,816
----------- ----------- ----------- -----------
Net Income (Loss) Before Income Taxes 28,085 46,113 77,276 95,318
Income Tax (Expense) Benefit (13,578) (15,041) (25,311) (24,584)
----------- ----------- ----------- -----------
Net Income (Loss) Before Minority Interest 14,507 31,072 51,965 70,734
Minority Interest in Net loss 11,924 11,438 23,898 24,273
----------- ----------- ----------- -----------
Consolidated Net Income (Loss) $ 26,431 $ 42,510 $ 75,863 $ 95,007
----------- ----------- ----------- -----------
</TABLE>
See accompanying Consolidated Notes to Financial Statements
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SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Capital Total
Common In Excess Retained Stock-
Common Stock of Par Earnings Holders'
Stock Subscribed Value (Deficit) Equity
<S> <C> <C> <C> <C> <C>
Balance- December 31, 1998 10,651 112,500 969,549 (215,665) $ 877,035
Net Income -- -- -- 166,983 $ 166,983
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Balance- December 31, 1999 $ 10,651 $ 112,500 $ 969,549 $ 48,682 $1,044,018
Shares sold -- -- -- -- --
Net Income -- -- -- 75,863 $ 75,863
---------- ---------- ---------- ---------- ----------
Balance - June 30, 2000 $ 10,651 $ 112,500 $ 969,549 $ 27,181 $1,119,881
---------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying Consolidated Notes to Financial Statements
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
--------------------------
June 30, June 30,
2000 1999
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(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 51,965 $ 70,734
Adjustments to Reconcile Net Income (Loss) to Net Cash
Cash Provided by (Used) in Operating Activities:
Depreciation 2,113 1,478
Amortization 48,060 48,061
Dec (Inc) in Accounts receivable (23,351) (93,208)
Inc. (Dec.) in Other Current Assets (8,077) 11,261
Inc. (Dec.) in Prepaid Expenses -- --
Inc. (Dec.) in Accounts Payable (15,516) 50,475
Inc. (Dec.) in Payroll Taxes -- --
Inc. (Dec.) in Deferred Income Taxes 7,199 24,584
Inc. (Dec.) in Accrued Income Taxes 18,112 2,309
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Net Cash Provided by (Used) in Operating Activities $ 80,505 $ 115,694
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment (8,678) (6,907)
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Net Cash Used in Investing Activities (8,678) (6,907)
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NET INCREASE (DECREASE) IN CASH $ 71,827 $ 108,787
CASH - BEGINNING 418,976 90,212
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CASH - ENDING $ 490,803 $ 198,999
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</TABLE>
See accompanying Consolidated Notes to Financial Statements
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SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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The accompanying unaudited consolidated financial statements of Synergy 2000,
Inc and subsidiary (The Company) have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
regulations of the Securities and Exchange Commission. Accordingly, they do not
include all the information and footnotes required by generally accepted
accounting principles for complete financials statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
six month period ended June 30, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. These
interim consolidated financial statements should be read in conjunction with the
financials statements and notes for the year ended December 31, 1999.
Organization and Business - The Company is an information systems integrator and
management consulting firm providing value added technology and management
solutions for companies to prepare them tactically and strategically to compete
in the 21st Century. . The Company offers a variety of products and services for
solving clients' problems related to their rapidly changing technology needs and
the management thereof..
On June 25, 1998, the Company and Argos Technologies, Inc. (an unrelated
company) agreed to form Argos 2000, Inc. for the purpose of marketing Year 2000
compatible policy administration software to the auto insurance industry. The
Company received 51% of the newly issued common stock of Argos 2000, Inc. in
exchange for 200,000 shares of its $.001 par value common stock. This common
stock is not reflected as issued and outstanding in the accompanying unaudited
financial statements since it is eliminated in consolidation. Argos
Technologies, Inc., received 49% of the newly issued common stock of Argos 2000,
Inc., plus certain contingent commissions based on sales, in exchange for an
exclusive non-transferable license, throughout the world, to market certain
proprietary software. This transaction was valued at $980,785 which was the
estimated fair value of the common stock issued by Synergy 2000, Inc. as of June
25, 1998.
Since the Company's clients include all industries, its ability to collect
amounts due from them as a result of extending credit, is not affect by economic
fluctuations in any particular industry.
Principles of Consolidation - The consolidated financials statements include the
accounts of the company and its 51% owned subsidiary, Argos 2000, Inc. All
significantly intercompany transactions and balanced have been eliminated.
Revenue Recognition - Revenue from contracts consulting services are recognized
on the percentage-to-completion method. Revenue from sales of software and
software documentation products is generally recognized upon product shipment
provided that no significant vendor obligations remain and collection of the
resulting receivable is deemed probable.
Depreciation - The Company's equipment is depreciated using the straight line
method. Depreciation expense totaled $2,113 for the six months ended June 30,
2000 and $1,478 for the six months ended June 30, 1999.
<PAGE>
SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
(Continued)
Intangible Assets - In June of 1998, Argos 2000 Inc. acquired an exclusive,
non-transferable, license throughout the world, to market a fully automated year
2000 compatible, policy administration system designed for the auto insurance
industry. This intangible asset is amortized using the straight line method over
10 years. Amortization expense totaled $48,039 for the six months ended June 30,
2000 and 1999. Accumulated amortization was $192,157 at June 30, 2000.
Organization Costs - Organization costs ($215) are being amortized using the
straight-line method over 60 months. Amortization expense charged to operations
amounted to $21 for the six months period June 30, 2000 and 1999. Accumulated
amortization was $186 at June 30, 2000.
Deferred Income Taxes - For income tax reporting, the Company uses accounting
methods that recognize depreciation sooner than for financial statement
reporting and does not recognized income and certain expenses until received or
paid. As a result, the basis of equipment, accounts receivable, and certain
accrued expenses for financial reporting exceeds its tax basis. Deferred income
taxes have been recorded for the excess, which will be taxable in future periods
through reduced depreciation deductions, and increased income for tax purposes.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain amounts and disclosures. Accordingly, actual
results could differ from those estimates.
NOTE 2 - EQUIPMENT
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Equipment consists of the following:
Computer Equipment $ 26,913
Accumulated Depreciation (7,010)
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$ 19,903
NOTE 3 - INCOME TAXES
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The income tax provision consists of the following
2000 1999
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Current $ 18,112 $ --
Deferred 7,199 24,584
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$ 25,311 $ 24,584
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The income tax provision differs from the expense that would result from
applying statutory rates to income before income taxes as follows:
Income Tax Expense Computed at the
Statutory Federal Income Tax Rate $ 26,274 $ 32,408
Increase (Decrease) in Income Taxes
Resulting From:
Subsidiary Losses Not Recognized 8,125 --
Surtax Exemption (11,750) (10,970)
State Income Tax-Net of Federal
Tax Benefit 3,339 4,016
Other (677) (870)
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$ 25,311 $ 24,584
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SYNERGY 2000, INC. AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
(Continued)
The components of deferred income tax expense result from the following
temporary differences between earnings reported for financial reporting and
income tax purposes:
2000 1999
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Method of Revenue and Expense
Recognition $ 6,766 $32,017
Additional Depreciation for Income
Tax Purposes: 6,160 848
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$12,946 $32,865
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NOTE 4 - STOCKHOLDERS' EQUITY
-----------------------------
Common Stock Subscribes - On December 31, 1998, 250,000 shares of the Company's
$.001 par value common stock was subscribed to for a total price of $250,000.
For the year ended December 31, 1997, $137,500 of the subscriptions were
received. The remaining $112,500 was outstanding as of June 30,2000.
Net Income Per Share - Net income per common share has not been computed since
it is not significant.
<PAGE>
SYNERGY 2000, INC. AND SUBSIDAIRY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
Introduction
The Company's revenues are derived from the performance of management,
consulting and information systems integration projects. The Company's future
revenues are dependent upon obtaining additional contracts and the development
of new product lines and utilizing internet opportunities. The Company's results
may vary from quarter to quarter based upon the number of contacts performed and
the stage of completion during those quarters.
Statement of Operations June 30, 2000 to June 30, 1999 (Unaudited)
The Company's revenues or fees billed was approximately $615,600 for the quarter
ended June 30, 2000 compared to approximately $517,500 for the comparable period
in 1999. The increase was due primarily to an increase in the number of and size
of the consulting arrangements entered into by the Company. The Company is also
spending a significant amount of time devoted to the development of new programs
which include web enabled information systems.
The Company's operating expenses during the quarter ended June 30, 2000 were
approximately $587,500 compared to $471,300 during the comparable period in
1999. The increased expenses were primarily attributable to the increased volume
and a slightly greater cost of "contract services" associated with the work
actually performed. The management of the Company is continuing to make a
concerted effort to decrease direct operating expenses. The Company had net
income of approximately $25,400 for the quarter ended June 30, 2000 as compared
to $42,500 for the comparable period in 1999. The decrease in net income is
primarily the result of a lower gross profit on the work actually performed.
The Company's revenues or fees billed was approximately $1,177,500 for the six
months ended June 30, 2000 compared to approximately $1,380,100 for the
comparable period in 1999. The decrease was due primarily to a decrease in the
number of and size of the consulting arrangements entered into by the Company.
The Company's operating expenses during the six month period ended June 30, 2000
were approximately $1,100,200 compared to $1,284,800 during the comparable
period in 1999. The decreased expenses were primarily attributable to the
decreased volume. The Company had net income of approximately $75,900 for the
six month period ended June 30, 2000 as compared to $95,000 for the comparable
period in 1999. The decrease in net income is primarily attributable to the
decreased volume.
Many client and prospective client companies focused on their Year 2000 issues
to the exclusion of reviewing new technologies, systems or proposed programs
during the latter half of 1999 and the first six months of 2000. Consequently,
because of this concentration by clients and prospective client companies,
Synergy 2000's marketing efforts were hampered. The Company anticipates that
client and potential clients will increase their number of development projects
by the fourth quarter of 2000.
The Company relies on programmers and consultants to perform its contracts and
from time to time there have been shortages of such programmers. The Company has
not in the past nor does it anticipate any difficulty in the immediate future in
obtaining programmers. Any change could result in increased fees paid for
outside technical help.
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SYNERGY 2000, INC. AND SUBSIDAIRY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS (CONTINUED)
The Company has continued and will continue to diversify its consulting and
product development activities as well as the development of its web and
internet enabled programs. The Company believes this is necessary to accomplish
its goal of providing new products for the 21st Century.
Liquidity
The Company's working capital was approximately $597,300 as of June 30, 2000 as
compared to approximately $503,800 at December 31, 1999. The increase was
primarily attributable to cash and accounts receivable rising from the
accumulation of increased revenues and profits over the last twelve months.
The Company derives its cash from operations. The Company has no commitments for
capital expenditures and believes its available cash is adequate to cover its
financial commitments for the next twelve (12) months. The Company, however,
will require additional funds for the further development, promotion and
marketing of its internet and web enabled programs. There is no assurance the
Company will be able to obtain these funds.
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunder duly authorized.
(Registrant) Synergy 2000, Inc.
Date: August 18, 2000
By: /S/ Eli Dabich, Jr.
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Eli Dabich, Jr. as President
