UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10 - QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended February 28, 1998
OR
[ ] 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 0-22969
SYNAPTX WORLDWIDE, INC.
(Exact Name of Small Business Issuer as specified in its charter)
Utah 87-0375342
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
168 E. Highland Avenue, Suite 300, Elgin, IL 60120
(Address of Principal Executive Offices)
Registrant's telephone no., including area code: (847) 622-0200
(Issuers telephone number)
385 Airport Road, Suite A, Elgin, IL 60123
(Former name, former address, and former fiscal year if changed
since last report)
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 registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date.
Outstanding as of
Class March 31, 1998
Common Stock, $ .001 par value 5,537,375
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TABLE OF CONTENTS
Heading Page
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements 3
Consolidated Balance Sheets - February 28,
1998 and August 31, 1997 4
Consolidated Statements of Operations -
three months ended February 28, 1998 and 1997 5
Consolidated Statements of Operations -
six months ended February 28, 1998 and 1997 6
Consolidated Statements of Cash Flows -
six months ended February 28, 1998 and 1997 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis
and Results of Operations 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 15
2
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PART I
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Condensed Consolidated Financial
Statements for the three and six month periods ended February 28,
1998 and 1997 have been prepared by the Company.
3
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SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF FEBRUARY 28, 1998 AND AUGUST 31, 1997
FEBRUARY 28, 1998 AUGUST 31, 1997
(UNAUDITED) (AUDITED)
----------------- --------------
ASSETS
CURRENT ASSETS:
Cash $ 122,064 $ 58,265
Accounts receivable 920,448 1,001,638
Prepaid expenses and
deposits 93,096 44,662
---------- ----------
Total current assets 1,135,608 1,104,565
PROPERTY AND EQUIPMENT 333,563 254,990
Less accumulated depreciation (116,508) (69,041)
---------- ----------
Net property and equipment 217,055 185,949
COSTS IN EXCESS OF NET ASSETS
ACQUIRED
(net of accumulated amortization
of $268,876 and $129,372) 2,463,859 1,631,673
OTHER ASSETS 274,198 60,998
---------- ----------
TOTAL ASSETS $4,090,720 $2,983,185
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 923,336 $ 679,477
Accrued expenses and taxes 346,649 199,644
Notes payable 294,173 295,482
Current portion of
long-term debt 131,283 8,120
Deferred revenue 144,000 414,700
---------- ----------
Total current liabilities 1,839,441 1,597,423
LONG-TERM DEBT,
NET OF CURRENT PORTION 266,900 21,200
COMMITMENTS -- --
STOCKHOLDERS' EQUITY
Cumulative, convertible
preferred stock;
$.001 par value;
10,000,000 shares
authorized, 137,143
issued and outstanding 137 --
Common stock; $.001 par value;
25,000,000 shares authorized,
5,537,375 and 5,193,660
issued and outstanding 5,538 5,194
Additional paid in capital 3,070,140 2,052,977
Deficit (1,091,436) (693,609)
---------- ----------
Total stockholders'
equity 1,984,379 1,364,562
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $4,090,720 $2,983,185
========== ==========
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SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998 AND 1997
1998 1997
(UNAUDITED) (UNAUDITED)
--------- ---------
NET SALES AND REVENUES:
Marketing services and
production $1,008,547 $ 958,482
Commission income 447,033 --
Executive placement fees 22,000 --
---------- ----------
Total revenues 1,477,580 958,482
COST OF SALES AND REVENUES 1,245,653 696,637
---------- ----------
GROSS PROFIT 231,927 261,845
Selling, general and administrative
expenses 530,376 357,062
Depreciation and amortization 81,099 49,415
---------- ----------
LOSS FROM OPERATIONS (379,548) (144,632)
Interest expense 12,741 8,449
---------- ----------
NET LOSS (392,289) (153,081)
Cumulative convertible
preferred stock dividend
requirements 6,800 --
---------- ----------
Net loss applicable to
common shareholders $ (399,089) $ (153,081)
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 5,377,518 4,107,753
BASIC AND DILUTED NET LOSS PER SHARE $ (0.07) $ (0.04)
========== ==========
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SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998 AND 1997
1998 1997
(UNAUDITED) (UNAUDITED)
--------- ---------
NET SALES AND REVENUES:
Marketing services and
production $2,230,980 $1,551,408
Commission income 712,123 --
Executive placement fees 37,330 --
---------- ----------
Total revenues 2,980,433 1,551,408
COST OF SALES AND REVENUES 2,273,858 1,135,927
---------- ----------
GROSS PROFIT 706,575 415,481
Selling, general and administrative
expenses 937,916 606,023
Depreciation and amortization 143,690 81,545
---------- ----------
LOSS FROM OPERATIONS (375,031) (272,087)
Interest expense 22,796 31,542
---------- ----------
NET LOSS (397,827) (303,629)
CUMULATIVE CONVERTIBLE PREFERRED
STOCK DIVIDEND REQUIREMENTS 6,800 --
---------- ----------
NET LOSS APPLICABLE TO
COMMON SHAREHOLDERS $ (404,627) $ (303,629)
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 5,300,864 3,572,304
========== ==========
BASIC AND DILUTED NET LOSS PER SHARE $ (0.08) $ (0.09)
========== ==========
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SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998 AND 1997
1998 1997
(UNAUDITED) (UNAUDITED)
--------- ---------
Net cash provided by (used in)
operating activities 8,987 (321,787)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant
and equipment (52,297) (63,782)
Cash acquired from acquisitions 33,452 --
Additions to other assets (211,520) (13,257)
---------- ----------
Net cash used in
investing activities (230,364) (77,039)
CASH FROM FINANCING ACTIVITIES
(Reductions in) bank lines of credit (1,309) (127,000)
Additions to long term debt 140,300 --
Reductions in short term debt (1,837) (80,406)
Decrease in restricted cash -- 10,000
Decrease in liability to
private placement subscribers -- (10,000)
Decrease in deferred
placement costs -- 5,000
Decrease in due from Impulse -- 50,000
Increase in due to officer -- 9,700
Issuance of common stock-net 148,023 666,213
---------- ----------
Cash provided by financing
activities 285,176 523,507
---------- ----------
NET INCREASE IN CASH 63,799 124,681
Cash at beginning of period $ 58,265 $ --
---------- ----------
CASH AT END OF PERIOD $ 122,064 $ 124,681
========== ==========
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SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1. BASIS OF PRESENTATION
The financial information included herein is unaudited;
however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which,
in the opinion of management, are necessary for a fair
statement of results for the interim periods. The
accompanying financial statements include estimated amounts
and disclosures based on management's assumptions about
future events. Actual results may differ from those
estimates.
The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the
full year. Basic and diluted earnings per share are the
same due to the anti-dilutive nature of the options.
The condensed consolidated financial statements have been
prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the
disclosures are adequate to make information presented not
misleading.
These financial statements should be read in conjunction
with the financial statements included in the Company's Form
10-SB/A for the fiscal year ended August 31, 1997, as filed
with the Securities and Exchange Commission and available
under the EDGAR reporting system or from the Company.
The Company's financial statements are presented on a going
concern basis, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of
business.
The Company has experienced recurring losses from operations
as a result of its investment in personnel necessary to
achieve its operating plan which is long-range in nature. In
addition to the net loss of $397,827 for the six-month
period ended February 28, 1998, as included herein, for the
years ended August 31, 1997 and 1996 the Company realized
net losses of $602,555 and $72,541, respectively. For the
ten months ended August 31, 1995 (initial period of
operation), the Company experienced a net loss of $18,513.
At February 28, 1998, the Company has a working capital
deficit of $703,833, supported by positive stockholders'
equity of $1,984,379.
The Company's ability to continue as a going concern is
contingent upon its ability to secure additional financing
and attain profitable operations. In addition, the
Company's ability to continue as a going concern must be
considered in light of the problems, expenses and
complications frequently encountered by entrance into
established markets and the competitive environment in which
the Company operates.
Although the Company is pursuing an additional private
equity placement plus the refinancing and expansion of
outstanding debt, there can be no assurance that the Company
will be able to secure financing when needed or obtain such
terms satisfactory to the Company, if at all, or raise any
additional equity investment. Failure to secure such
financing or raise additional equity investment may result
8
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in the Company rapidly depleting its available funds and not
being able to comply with its payment obligations under its
bank loans. In addition, if the Company is unable to meet
its obligations under its credit agreements, such creditors
shall have the right to foreclose on the assets of the
Company, which will be prior to the interests of the holders
of Preferred Stock and Common Stock.
The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability
and classification of assets or the amounts and
classification of liabilities that may result from the
possible inability of the Company to continue as a going
concern.
NOTE 2. PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries.
The subsidiaries consist of Synaptx Access, Inc. ("Access"),
acquired in June, 1996, Synaptx Impulse, Inc. ("Impulse"),
acquired in October, 1996, ORAYCOM, Inc. ("ORAYCOM"),
acquired in June, 1997 and WG Controls, Inc. ("WG"),
acquired in January, 1998. Upon consolidation, significant
intercompany accounts, transactions and profits are
eliminated.
NOTE 3. ACQUISITION
On January 5, 1998, the Company acquired WG Controls, Inc.,
an Illinois Corporation, for 285,715 shares of the Company's
$.001 par value common stock, 137,143 shares of the
Company's $.001, Series A, cumulative, convertible preferred
stock and $270,000 in cash payable as follows: $125,000 on
the first anniversary date of the Agreement, $125,000 on the
second anniversary date of the Agreement, and $20,000 on the
third anniversary date of the Agreement. Dividends on the
preferred stock are $40,800 annually. As of February 28,
1998, cumulative unpaid dividends are approximately $6,800.
The acquisition is being accounted for using the purchase
method of accounting. The total initial cost of the
acquisition is approximately $ 1,100,000, which exceeded the
fair value of the net assets being acquired by approximately
$928,500. The excess is being amortized on the straight-
line method over twenty years.
Additionally, pursuant to the terms of the acquisition, the
former shareholders of WG may earn additional purchase price
consideration in the form of additional common stock of the
Company based on the attainment of both "commission
revenues" and "earnings" above specified levels by WG
beginning January 1, 1998 through December 31, 1999. The
additional consideration is specified as fixed amounts for
the attainment of specified annual "commission revenues" and
"earnings" for the subsequent calendar years ending December
31, 1998 and 1999. If WG meets the specified "commission
revenues" and "earnings" amounts the additional
consideration could amount to $1,000,000. The additional
consideration, if any, would be added to the cost in excess
of net assets acquired and will be amortized on the
straight-line method over the remaining life of the twenty
year amortization period, described above.
WG is a sales representative firm based in Illinois
(approximately fifteen miles northwest of Chicago) that
provides field sales and business development support for
specified product lines and/or territories for clients under
contract who include RELTEC, Thomas & Betts and Johanson in
addition to approximately 15 other clients. Revenues
represent the earning of commissions on its customers'
sales.
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If the acquisition had occurred on September 1, 1997,
management estimates that on an unaudited, pro forma basis,
the following would have been reported on a consolidated
basis for the periods ended February 28, 1998:
Three Months Six Months
------------ ------------
Revenues $ 1,562,580 $ 3,339,719
Net loss $ (406,789) $ (428,231)
Basic and diluted
net loss per share $ (0.07) $ (0.08)
NOTE 4. PRIVATE PLACEMENTS
On October 22, 1997, the Board of Directors authorized a
second private placement of up to $2,000,000 in either
shares of the Company's common stock at $2.30 per share or
of units at $3.00 per unit consisting of one share of the
Company's common stock and a warrant to purchase an
additional share of the Company's common stock at $2.30 per
share with an exercisable life of five years. The period of
this offering extended through February 28, 1998. Through
February 28, 1998, 43,000 shares of the Company's common
stock plus stock warrants representing the right to purchase
30,000 shares of the Company's common stock at $2.30 per
share have been issued resulting in proceeds of $89,900, all
received prior to February 28, 1998, the date the offering
was discontinued.
NOTE 5. SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for interest was approximately $19,700 and $18,500
for the six month periods ended February 28, 1998 and 1997,
respectively.
On October 1, 1996 the Company purchased all of the capital
stock of Maxwell Partners, Inc. (N/K/A Synaptx Impulse,
Inc.), for $690,000 utilizing the Company's $.001 par value
common stock. On January 5, 1998 the Company purchased all
of the capital stock of WG Controls, Inc. for approximately
$1,100,000 utilizing common stock, preferred stock, and
future cash payouts. (See note 3). In conjunction with
these acquisitions, liabilities assumed were as follows:
Six Months Ended
----------------
February 28, 1998 February 28, 1997
----------------- -----------------
Fair value of
assets acquired $ 1,126,776 $ 1,895,026
Cash acquired 33,452 -
Value of stock issued (869,621) (690,000)
----------- ------------
Liabilities assumed $ 290,607 $ 1,205,026
=========== ============
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is a fully integrated service provider of
consulting, marketing, sales advice and implementation strategies
serving customers in the telecommunications and information
industries. The Company operates in one business segment. The
Company's fiscal year ends August 31.
OVERVIEW
--------
The Company plans marketing programs and develops sales and
marketing literature for print and electronic media for which
consulting fees are charged and production revenues are
generated. It also represents certain product lines of customers
serving the telecommunications (both voice and data networking)
and cable TV industries as sales representatives for which
commission income is being earned. Additionally the Company
places executives in positions at telecommunications clients,
primarily in sales and marketing positions, for which executive
placement fees are being realized as revenues based upon an
agreed upon percentage of salary and other compensation of the
individuals so hired.
The Company's objective is to use its knowledge of and its
sales and marketing resources focused on the telecommunications
industry to acquire and improve equipment manufacturers and
software developers. Targeted acquisition candidates would
potentially include companies that have demonstrated the ability
to envision, design and commercialize unique telecommunications
products and services. Once such an entity is acquired, the
Company will direct its sales, marketing and managerial resources
toward achieving increased revenues and earnings. To date, the
Company has only acquired companies that support its core
services of consulting, marketing and sales. They will be the
foundation to help create the potential revenues and earnings
growth for target acquirees.
The Company's ability to continue as a going concern is
contingent upon its ability to secure additional financing,
conduct an additional private placement, and attain profitable
operations. In addition, the Company's ability to continue as a
going concern must be considered in light of the problems,
expenses and complications frequently encountered by entrance
into established markets and the competitive environment in which
the Company operates.
RESULTS OF OPERATIONS
---------------------
The following table sets forth the percentage relationship
to total revenues of principal items contained in the Company's
Condensed Consolidated Statements of Operations for the three and
six month periods ended February 28, 1998 and 1997. It should be
noted that percentages discussed throughout this analysis are
stated on an approximate basis.
Three Months Ended Six Months Ended
February 28, February 28,
1998 1997 1998 1997
--------------- ---------------
(unaudited)
Net sales and
revenues . . . . . 100% 100% 100% 100%
Cost of sales . . . . 84% 73% 76% 73%
--- --- --- ---
Gross Profit . . . . . 16% 27% 24% 27%
Selling, general and
administrative
expenses . . . . . 41% 42% 36% 45%
--- --- --- ---
Operating loss . . . . (25%) (15%) (12%) (18%)
Interest expense . . . 1% 1% 1% 2%
--- --- --- ---
Net loss . . . . . . . (26%) (16%) (13)% (20)%
=== === === ===
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NET SALES AND REVENUES
----------------------
The Company's net sales and revenues increased by $519,098
or 54%, from $958,482 for the three months ended February 28,
1997 ("2Q/97") to $1,477,580 for the three months ended February
28, 1998 ("2Q/98"). The increase was attributable to increases of
$50,065 from Marketing Services and Production, $447,033 from
Commission Income, and $22,000 from Executive Placement Fees. The
increases are primarily due to 2Q/98 figures having a full three
months of activity of ORAYCOM and two months of activity for WG,
while 2Q/97 revenues included no activity for ORAYCOM, or WG.
For the six month period ended February 28, 1998, the
Company's net sales and revenues increased by $1,429,025 or 92%,
from $1,551,408 for the six months ended February 28, 1997 to
$2,980,433 for the six months ended February 28, 1998. The
increase was attributable to increases of $679,572 from Marketing
Services and Production, $712,123 from Commission Income, and
$37,330 from Executive Placement Fees. The increases are
primarily due to the six months ended February 28, 1998 figures
having a full six months of activity for ORAYCOM and Impulse and
two months of revenue for WG, while the comparable period in the
prior year included no activity for ORAYCOM or WG and only five
months of activity for Impulse.
COST OF SALES
-------------
Cost of sales and revenues increased by $549,016 in 2Q/98,
or 79%, from $696,637 in 2Q/97 to $1,245,653 in 2Q/98. The
increase was primarily due to 2Q/98 figures having a full three
months of activity of Synaptx Impulse ("Impulse"), Synaptx Access
("Access"), and ORAYCOM and two months of revenue for WG, while
2Q/97 revenues included no activity for ORAYCOM, or WG.
Cost of sales and revenues increased by $1,137,931 or 100%
from $1,135,927 in the six months ending February 28, 1997 to
$2,273,858 on the six months ending February 28, 1998. The
increase was primarily due to the six months ending February 28,
1998 figures having a full six months of activity of Impulse and
ORAYCOM and two months of activity for WG, while the comparable
period in the prior year included no activity for ORAYCOM or WG
and only five months of activity for Impulse.
GROSS PROFIT
------------
The Company's gross profit margin, was 27% and 16% for 2Q/97
and 2Q/98, respectively. The decrease in gross profit margin of
11 points in 2Q/98 is partly attributable to a shift in the mix
from higher margin, in-house, professional services to more
externally supported database services with a corresponding lower
gross margin. Additionally, 2Q/98 includes three months of
activity for ORAYCOM and two months of activity for WG, while the
comparable period in the prior year had no activity from sales
representative firms that typically operate on lower margins than
the other business units.
The Company's gross profit margin, was 27% and 24% for the
six months ending February 28, 1997 and 1998, respectively. The
decrease in gross profit margin of 3 points in the six months
ending February 28, 1998 is partly attributable to a shift in the
mix from higher margin, in-house, professional services to more
externally supported database services with a corresponding lower
gross margin. Additionally, the six months ending February 28,
1998 includes six months of activity for ORAYCOM and Impulse and
two months of activity for WG, while the comparable period in the
prior year had no activity from sales representative firms that
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typically operate on lower margins than the other business units,
and only five months of activity of Impulse.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
Selling, general and administrative expenses, including
depreciation and amortization, increased by $204,998 in 2Q/98 or
50%, from $406,477 in 2Q/97 to $611,475 in 2Q/98. The increase
was primarily due to 2Q/98 figures having a full three months of
activity of Impulse, Access, and ORAYCOM, and two months of
activity for WG, while 2Q/97 figures included no activity for
ORAYCOM or WG. Goodwill amortization increased by approximately
$20,000 and depreciation increased by approximately $12,000 over
the prior period primarily due to the acquisitions of ORAYCOM,
which had three months of activity as compared to none in the
prior period, and WG, which had two months of activity as
compared to none in the prior period.
Selling, general and administrative expenses, including
depreciation and amortization, increased by $394,038 or 57%, from
$687,568 in the six months ending February 28, 1997 to $1,081,606
in the six months ending February 28, 1998. The increase was
primarily due to the six months ending February 28, 1998 having a
full six months of activity of Impulse, Access, and ORAYCOM, and
two months of activity for WG, while the comparable period in the
prior year included no activity for ORAYCOM or WG and only five
months of activity for Impulse. Goodwill amortization increased
by approximately $43,000 and depreciation increased by
approximately $20,000 over the prior period due to the
acquisitions of ORAYCOM and WG as well as an additional month of
activity for Impulse in the current period as compared to the
prior period.
INTEREST EXPENSE
----------------
Interest expense increased by $4,292 in 2Q/98 or 51%, from
$8,449 in 2Q/97 to $12,741 in 2Q/98. This increase is
attributable to additional borrowings on bank lines of credit as
well as interest accrued on notes payable to related parties.
Interest expense decreased by $8,746 or 28%, from $31,542 in
the six months ending February 28, 1997 to $22,796 in the six
months ended February 28, 1998. This decrease is attributable to
the prior year including $14,000 of interest attributable to
amortization of stock warrants issued at an exercise price below
fair market value. This decrease is offset by an increase
attributable to additional borrowings on bank lines of credit as
well as interest accrued on notes payable to related parties.
NET OPERATING LOSS
------------------
The Company has accumulated approximately $800,000 of net
operating loss carryforwards as of February 28, 1998, which may
be offset against taxable income and income taxes in future
years. The use of these losses to reduce future income taxes
will depend on the generation of sufficient taxable income prior
to the expiration of the net operating loss carryforwards. The
carry forwards expire in the year 2013. In the event of certain
changes in control of the Company, there will be an annual
limitation on the amount of net operating loss carryforwards
which can be used. No tax benefit has been reported in the
financial statements for the three months or the six months ended
February 28, 1998 because there is a 50% or greater chance that
the carryforward will not be utilized. Accordingly, the
potential tax benefit of the loss carryforward is offset by a
valuation allowance of the same amount.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's principal cash requirements are for operating
expenses, including employee costs, outside consultants such as
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independent contractors who provide design, copywriting and
professional marketing and sales consulting services, funding of
accounts receivable, capital expenditures and funding of
acquisitions. The Company's primary sources of cash have been
from an initial private placement of the Company's common stock
which raised $753,993 of net proceeds, a stock rights offering to
then existing shareholders which raised $7,828, a private
placement to an existing employee of the Company which raised
$30,000 and a secondary private placement which has raised
$89,900, plus cash derived from operations. The Company is
investigating various sources for additional financing, including
both equity infusion and debt facility arrangements. There is no
assurance that the Company will consummate any additional
financing or that any additional financing will not be dilutive
to shareholders.
Six Months Ended February 28, 1998
Cash increased $63,799 from $58,265 at the beginning of the
period to $122,064 at the end of the period. Net cash provided
by operations was $8,987 mainly attributable to non-cash expense
items (depreciation and amortization) of $143,690 and a net
increase in accounts payable and accrued expenses of $330,658 and
a decrease in accounts receivable of $236,693, offset by the net
loss of $397,827, a decrease in deferred revenue of $270,700 and
an increase in other current assets of $33,527.
Net cash used in investing activities was $230,364
attributable to cash acquired in acquisitions of $33,452, offset
by additions to fixed assets of $52,297 and additions to other
long term assets of $211,520.
Net cash provided by financing activities was $285,176
attributable to proceeds from issuance of common stock of
$148,023 and additions to long term debt of $140,300 offset by
reductions in bank lines of credit of $1,309 and other short term
debt of $1,837.
Six Months Ended February 28, 1997
Cash balances increased by $124,681 from $0 at the beginning
of the period to $124,681 at the end of the period. Net cash
used in operations was $321,787 attributable to the net loss of
$303,629, an increase in accounts receivable of $84,391, a net
decrease in accounts payable and accrued expenses of $18,225, and
a decrease in deferred revenue of $12,500, offset by non-cash
expense items (depreciation and amortization) of $81,545, and a
decrease in other current assets of $15,413.
Net cash used in investing activities was $77,039,
attributable to additions to fixed assets of $63,782 and
additions to other long-term assets of $13,257.
Net cash provided by financing activities was $523,507,
attributable to proceeds from the issuance of common stock of
approximately $666,213, a decrease in restricted cash of $10,000,
a decrease in deferred placement costs of $5,000, a decrease in
amounts advanced to Impulse, realized upon acquisition of
$50,000, and an increase in amounts due to officers of $9,700,
offset by reductions in the bank lines of credit and other long
term debt of $207,406 and a decrease in the liability to private
placement subscribers of $10,000.
INFLATION
---------
In the opinion of management, inflation has not had a
material effect on the operations of the Company.
14
<PAGE>
RISK FACTORS AND CAUTIONARY STATEMENTS
--------------------------------------
Forward-looking statements in this report are made pursuant
to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. The Company wishes to advise
readers that actual results may differ substantially from such
forward-looking statements. Forward-looking statements involve
risks and uncertainties that could cause actual results to differ
materially from those expressed in or implied by the statements,
including, but not limited to, the following: the ability of the
Company to provide for its debt obligations and to provide for
working capital needs from operating revenues, and other risks
detailed in the Company's periodic report filings with the
Securities and Exchange Commission.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following were filed with form 8-K and are incorporated
herein by reference.
(b) No reports were filed on Form 8-K during this quarter.
The Form 8-K related to the acquisition of WG Controls, Inc.
was subsequently filed on March 23, 1998.
SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of 1934, the Registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
SYNAPTX WORLDWIDE, INC.
Date: April 13, 1998 By /s/ Ronald L. Weindruch
---------------------------------
RONALD L. WEINDRUCH, President
and Chief Executive Officer
Date: April 13, 1998 By /s/ Richard E. Hanik
---------------------------------
RICHARD E. HANIK
Chief Financial Officer
15
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SYNAPTX WORLDWIDE, INC. FORM 10-QSB FOR THE PERIOD ENDED FEBRUARY 28,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> FEB-28-1998
<CASH> 122
<SECURITIES> 0
<RECEIVABLES> 920
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,136
<PP&E> 334
<DEPRECIATION> (117)
<TOTAL-ASSETS> 4,091
<CURRENT-LIABILITIES> 1,839
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 1,978
<TOTAL-LIABILITY-AND-EQUITY> 4,091
<SALES> 1,478
<TOTAL-REVENUES> 1,478
<CGS> 1,246
<TOTAL-COSTS> 1,246
<OTHER-EXPENSES> 624
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13
<INCOME-PRETAX> (392)
<INCOME-TAX> 0
<INCOME-CONTINUING> (392)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (392)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
