FORM 10-Q. QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the period ended JUNE 30, 2000
Commission File Number: 0-19409
SYNERGY BRANDS, INC.
(Exact name of registrant as it appears in its charter)
Delaware 22-2993066
(State of incorporation) (I.R.S. Employer
identification no.)
40 Underhill Blvd., Syosset NY 11791
(Address of principal executive offices) (zip code)
516-682-1980
(Registrant's telephone number, including area code)
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.
[x] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. On August 8, 2000
there were 15,611,135 shares outstanding of the registrant's common stock.
<PAGE>
SYNERGY BRANDS, INC.
FORM 10-Q SB
JUNE 30, 2000
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION Page
Consolidated Balance sheets as of June 30, 2000 2 - 3
(Unaudited) and December 31, 1999
Consolidated Statements of operations for the six
months ended June 30, 2000 and 1999 (Unaudited) 4
Consolidated Statements of operations for the three months
ended June 30, 2000 and 1999 (Unaudited) 5
Consolidated Statements of Cash Flows for the six months
ended June 30, 2000 and 1999 (Unaudited) 6 - 7
Notes to Consolidated Financial Statements 8 - 14
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5 - 18
Forward Looking Information and Cautionary 19 - 23
Statements
PART II: OTHER INFORMATION
Item VI: Exhibits and Reports on Form 8-K 24
<PAGE>
SYNERGY BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2000 AND DECEMBER 31, 1999
June 30, 2000 December 31, 1999
------------- -----------------
(Unaudited)
ASSETS
----------
Current Assets:
---------------
Cash and cash equivalents $ 437,012 $1,156,032
Accounts Receivable, less allowance for
doubtful accounts of $69,965 833,175 788,077
Inventory (note 4) 1,887,569 1,868,572
Other Current Assets 709,485 6,505
---------- ----------
Total Current Assets 3,867,241 3,819,186
Collateral and Security Deposit (note 2) 404,811 400,900
Property and Equipment - Net (note 3) 682,256 687,493
Trade Names, net of accumulated amortization of 2,379,961 2,657,440
========== ==========
Total Assets 7,334,269 $7,565,019
See Accompanying Notes to Consolidated Financial Statements
-2-
<PAGE>
SYNERGY BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, 2000 December 31, 1999
------------- -----------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
--------------------
Note Payable (Note 5) $ 391,958 $ 150,000
Accounts Payable & Accrued Expenses (note 7) 2,341,107 2,916,388
------------- -----------------
Total Current Liabilities 2,733,065 3,066,338
Long-term debt (note 5) 465,000 465,000
Commitments and Contingencies (note 8) -- --
Minority Interest (note 6) 546,648 682,394
Preferred Stock of Subsidiary (note 6 ) 172,375 160,125
Stockholders' Equity: (Note 7)
------------------------------
Class A Preferred stock - $.001 par value; 100,000 shares
authorized 100 100
Common stock - $.001 par value; 29,900,000 Shares
authorized 15,358,435 and 13,455,510 Shares were outstanding at
6/30/00 and 12/31/99 respectively: 15,358 13,456
Additional paid-in capital 28,458,585 25,219,431
Deficit (21,456,733) (18,542,575)
Stockholders' notes receivable (432,629) (331,750)
Advertising and in-kind services receivable from stockholder (3,000,000) (3,000,000)
------------- -----------------
3,584,681 3,358,662
Less treasury stock at cost, (167,500) (167,500)
------------- -----------------
Total stockholders' equity 3,417,181 3,191,162
Total Liabilities and Stockholder's Equity $7,334,269 $7,565,019
============= =================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-3-
<PAGE>
SYNERGY BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
-------------- -----------
Net Sales 8,618,948 6,660,045
Cost of Sales 8,052,579 5,518,853
-------------- -----------
Gross Profit 566,369 1,141,192
Selling General and Administrative Expense 3,281,100 535,620
Depreciation and Amortization 322,076 11,738
-------------- -----------
Operating Income (Loss): (3,036,807) 593,834
-------------- -----------
Other Income (Expense):
Miscellaneous Income (Expense) 34,950 1,860
Interest Income 4,055 45,075
Interest Expense (39,852) (98,578)
-------------- ------------
Total Other Income (Expense) (847) (51,643)
-------------- -----------
Income (Loss) Before Income Tax and Minority Interest (3,037,654) 542,191
Minority interest & dividends on preferred stock of subsidiary 123,496 --
-------------- -----------
Net Income (Loss) (2,914,158) 542,191
============== ===========
Income (Loss) Applicable to Common Stock $( 2,914,158) $542,191
============== ===========
Basic Earnings (Loss) Per Common Share $ (.20) $.07
-------------- -----------
Net Income (Loss) Per Common Share $ (.20) $.07
============== ===========
Weighted Average Number of Shares Outstanding 14,486,795 8,266,859
</TABLE>
See Accompanying Notes To Consolidated Financial Statements
-4-
<PAGE>
SYNERGY BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
------------- --------------
Net Sales 5,035,140 3,399,726
Cost of Sales 4,711,551 2,777,547
------------- --------------
Gross Profit 323,589 622,179
Selling General and Administrative Expense 1,531,265 364,098
Depreciation and Amortization 187,539 5,869
------------- --------------
Operating Income (Loss): (1,395,215) 252,212
------------- --------------
Other Income (Expense):
Miscellaneous Income (Expense) (1,128) 84
Interest Income 4 22,538
Interest Expense (22,444) (50,826)
------------- --------------
Total Other Income (Expense) (23,568) (28,204)
------------- --------------
Income (Loss) Before Income Tax and Minority Interest (1,418,783) 224,008
Minority interest & dividends on preferred stock of subsidiary 48,055 -
------------- --------------
Net Income (Loss) (1,370,728) 224,008
============= ==============
Income (Loss) Applicable to Common Stock (1,370,728) $ 224,008
============= ==============
Basic Earnings (Loss) Per Common Share $ (.09) $.03
------------- --------------
Net Income (Loss) Per Common Share $ (.09) $.03
============= ==============
Weighted Average Number of Shares Outstanding 14,614,902 8,956,296
</TABLE>
See Accompanying Notes To Consolidated Financial Statements
-5-
<PAGE>
SYNERGY BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
---------------- --------------
Cash Flows From Operating Activities:
Net Income (Loss) (2,914,158) $ 542,191
Adjustments to Reconcile Net Income (Loss) - -
From Continuing Operations to Net Cash
Flows From Continuing Operating Activities:
Depreciation and Amortization 322,076 11,738
Non-Cash Expenses 1,605,048 2,631,501
Changes in Operating Assets and Liabilities:
Minority Interest &Dividends on preferred stock subsidiary (123,496) -
Accounts Receivable (45,098) (1,278,156)
Inventory (18,997) 19,270
Other Current Assets (283,012) (428,655)
Other Assets - (625,239)
Accounts Payable & Accrued Expenses (321,615) (401,795)
Income Taxes Payable - (56)
---------------- --------------
Net Cash Flows provided by (used in) operation activities (1,779,252) 470,799
Cash Flows From Investing Activities:
Purchase of Furniture and Equipment (42,135) (10,148)
Purchase of Security Deposit (1,136) -
---------------- --------------
Net Cash Flows (used in)
in Investing activities (43,271) (10,148)
Cash Flows From Financing Activities:
Net Borrowing (Payments) on Notes Payable 241,958 (200,000)
Proceeds from Issuance of Common Stock 861,545 -
Long Term Debt - -
---------------- --------------
Net Cash Flows Provided by Financing Activities 1,103,503 (200,000)
---------------- --------------
Net Increase (Decrease) in Cash (719,020) 260,651
Cash - Beginning of Period 1,156,032 325,699
---------------- --------------
Cash - End of Period $ 437,012 $ 586,350
================ ==============
</TABLE>
See Accompanying Notes To Consolidated Financial Statements
-6-
<PAGE>
SYNERGY BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
---------------- --------------
Supplemental Disclosure of Cash Flow Information:
Interest Paid $ 34,492 $ 98,578
Income Taxes Paid 9,781 -
Supplemental Disclosure of Non-Cash Operating,
Investing and Financing Activities:
Stock issued in exchange for notes receivable 189,629 -
Stock issued in exchange for prepaid expenses 419,968 -
Stock issued in exchange for accounts payable 253,616 -
---------------- --------------
Total Non-Cash Operating, Investing and
Financing Activities 863,213 -
================ ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-7-
<PAGE>
SYNERGY BRANDS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Synergy Brands, Inc. (Synergy), (formerly Krantor Corporation) and its
subsidiaries have developed and operate Internet platform operations
and Internet-based businesses designed to sell a variety of products,
including health and beauty aids and premium handmade cigars, directly
to consumers (business to consumer) and to business (business to
business). A summary of the related organizations and operations is
provided below.
In September 1996, Synergy formed a wholly-owned subsidiary, New Era
Foods, Inc. (NEF), which represented manufacturers, retailers and
wholesalers in connection with distribution of frozen seafood, grocery
and general merchandise products.
In October 1997, NEF formed a subsidiary, Premium Cigar Wrappers, Inc.
(PCW), for the purpose of producing premium cigar wrappers in the
Dominican Republic. NEF owns 66% of the common stock and approximately
22% of the preferred stock of PCW (see note 6).
In October 1998, NEF formed a wholly-owned subsidiary, PHS Group, Inc.
(PHS), which is a wholesale distributor of premium beauty salon
products and such subsidiary was later transferred to BB (see note 7).
In January 1999, Synergy formed a wholly-owned subsidiary, Sybr.com,
Inc. (Sybr), which is engaged in the development of Internet-based
business to consumer and business to business opportunities focused on
beauty, personal care, cigars and other consumer products through its
subsidiaries, BB and NetCigar.com, Inc.
In May 1999, Sybr formed a wholly-owned subsidiary, NetCigar.com, Inc.
(NetCigar), which is engaged in the development of Internet-based
business to consumer opportunities focused on cigars and related
products.
In June 1999, Sybr formed a wholly-owned subsidiary, BeautyBuys.com,
Inc. (BB), which is engaged in the development of Internet-based
business to consumer and business to business opportunities focused on
beauty, personal care and other consumer products.
In April 2000, Synergy formed a wholly-owned subsidiary, DealByNet.com,
Inc., to engage in Internet-based business activities designed to
create an integrated supply chain from manufactures of a variety of
products to business customers.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Synergy,
its wholly-owned subsidiaries, its majority-owned subsidiary and BB
(collectively, the Company). All significant intercompany accounts and
transactions have been eliminated in consolidation. Revenue recognition
The Company recognizes revenue at the time merchandise is shipped to
the customer. The Company issues credits to the customer for any
returned items at the time the returned products are received.
CASH AND CASH EQUIVALENTS
The Company considers time deposits with maturities of three months or
less when purchased to be components of cash.
-8-
<PAGE>
MARKETABLE SECURITIES
Management determines and appropriate classification of its investments
in debt and equity securities at the time of purchase and re-evaluates
such determination at each balance sheet date. No securities were
outstanding at June 30, 2000.
INVENTORY
Inventory is stated at the lower of cost or market. The Company uses
the first-in, first-out (FIFO) cost method of valuing its inventory.
All tobacco inventory is included in current assets in conformity with
standard industry practice, not withstanding the fact that significant
quantities of inventory may be carried for several years for purposes
of the curing process.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash
equivalents and accounts receivable. The Company places its cash and
cash equivalents with financial institutions it believes to be of high
credit quality. The concentration of credit risk with respect to
receivables is mitigated by the credit worthiness of the Company's
major customers. The Company maintains an allowance for losses based
upon the expected collectibility of all receivables. Fair value
approximates carry value for all financial instruments.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated
useful lives of the assets, ranging from 3 to 10 years. Leasehold
improvements are amortized over the shorter of the lease term or their
estimated useful lives.
Maintenance and repairs of a routine nature are charged to operations
as incurred. Betterments and major renewals that substantially extend
the useful life of an existing asset are capitalized and depreciated
over the asset's estimated useful life. Upon retirement or sale of an
asset, the cost of the asset and the related accumulated depreciation
or amortization are removed from the accounts and any resulting gain or
loss is credited or charged to income.
TRADE NAMES
Trade names consist of the "Proset" and "Gran Reserve" trade names
acquired in November 1999, which are being amortized over their
expected useful lives not to exceed 5 years.
LONG-LIVED ASSETS
Long-lived assets and intangible assets are reviewed for impairment
whenever events or changes in circumstances indicate the carrying value
may not be recoverable. Impairment is measured by comparing the
carrying value of the long-lived assets to the estimated undiscounted
future cash flows expected to result from use of the assets and their
ultimate disposition. In instances where impairment is determined to
exist, the Company will write down the asset to its fair value based on
the present value of estimated future cash flows.
PREFERRED STOCK OF SUBSIDIARY
Changes in preferred stock of the subsidiary are accounted for as
equity transactions and thus no gain or loss is recognized. Upon each
new issuance of the subsidiary's preferred stock, the Company will
evaluate whether or not its investment has been impaired and adjust
accordingly.
ADVERTISING
The Company expenses advertising and promotional costs as incurred.
Advertising expense for the six months ended June 30, 2000 was
$541,421.
-9-
<PAGE>
INCOME TAXES
The Company uses the asset and liability method of computing deferred
income taxes. In the event differences between the financial reporting
bases and the tax bases of an enterprise's assets and liabilities
result in deferred tax assets, an evaluation of the probability of
being able to realize the future benefits indicated by such assets is
required. A valuation allowance is provided for a portion or all of the
deferred tax assets when it is more likely than not that such portion,
or all of such deferred tax assets, will not be realized.
EARNINGS PER SHARE
The Company calculates earnings per share pursuant to Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS
128). SFAS 128 requires dual presentation of basic and diluted earnings
per share (EPS) on the face of the statement of income for all entities
with complex capital structures, and requires a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. Basic EPS calculations
are based on the weighted-average number of common shares outstanding
during the period, while diluted EPS calculations are based on the
weighted-average of common shares and dilutive common share equivalents
outstanding during each period.
MANAGEMENT ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses during the reporting period. Actual results may
vary from managements estimates.
STOCK-BASED COMPENSATION PLANS
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), encourages, but does not require,
companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has elected to continue
to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "
Accounting for Stock Issued to Employees" (APB 25) and related
interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair market value of the
Company's stock at the date of the grant over the amount the employees
or non-employees must pay to acquire the stock.
2. COLLATERAL SECURITY
At June 30, 2000, the Company had a $404,811 security deposit with a
major supplier, which serves as collateral for credit purchases made by
the Company from the supplier.
3. PROPERTY AND EQUIPMENT
Property and equipment as of June 30, 2000 consisted of the following:
Office equipment $ 246,214
Machinery and equipment 48,825
Furniture and fixtures 75,000
Leasehold improvements 416,248
------------
Less accumulated depreciation and amortization (104,031)
------------
$ 682,256
4. INVENTORY
Inventory as of June 30, 2000 consisted of the following:
Salon finished goods $ 878,618
Tobacco raw materials 495,534
Tobacco finished goods 513,417
--------------
$ 1,887,569
==============
-10-
<PAGE>
5. LINE OF CREDIT AND LONG-TERM DEBT
Revolving line-of-credit with a finance company, with
interest at prime plus 2%; collateralized by accounts
receivable and corporate guarantees. $ 391,958
Unsecured note payable to minority stockholder,
with interest at 7.5%; payable semi-annually beginning
June 1, 2000 through maturity on November 23, 2002. $ 465,000
-------------
$ 856,958
=============
6. MINORITY INTERESTS
PCW was incorporated in October 1997 with 7,750 shares of authorized
$.001 par value common stock. At December 31, 1998, PCW had 1,000
shares of common stock outstanding, which were issued at par value. The
Company owns 66% of the common stock and an outside investor owns the
minority interest. For financial reporting purposes, the assets,
liabilities, results of operations and cash flows for PCW are included
in the Company"s consolidated financial statements and the outside
investor's interest is reflected in the preferred stock of subsidiary.
PCW had 2,250 shares of authorized $.001 par value preferred stock
issued and outstanding at December 31, 1998. PCW issued 1,750 shares of
preferred stock at inception to two unrelated individuals at $60 per
share, and 500 shares to the Company for a 22% minority interest in the
preferred stock. The holders of PCW preferred stock are entitled to
receive cumulative dividends at the rate of $14 per share before any
dividends on the common stock are paid. Included in preferred stock of
subsidiary is $67,375 of preferred stock dividends payable at June 30,
2000. The Company"s portion of the dividend has been eliminated in
consolidation. In the event of dissolution of PCW, the holders of the
referred shares are entitled to receive $60 per share together with all
accumulated dividends, before any amounts can be distributed to the
common stockholders. The shares are convertible only at the option of
PCW at $120 per share.
BB was formed in June 1999 and in November 1999 was authorized to isuue
50,000,000 shares of $.001 par value common stock, of which 49,100,000
shares are Class A common stock and 900,000 shares are Class B common
stock. At June 30, 2000, BB had 9,000,000 shares of Class A common
stock and 900,000 shares of Class B common stock outstanding. The
Company owns all of the Class A common stock and the Class B common
stock is owned by the minority interest (see Note 7). For financial
reporting purposes, the assets, liabilities, results of operations and
cash flows of BB are included in the Company's consolidated financial
statements, and the outside investor's interest in BB is reflected in
minority interest liability.
7. STOCKHOLDERS' EQUITY
In 1994, Synergy adopted the 1994 Services and Consulting Compensation
Plan (the Plan). Under the Plan, as amended, 8,400,000 shares of common
stock have been reserved for issuance. Since the inception of the Plan,
Synergy has issued 7,381,613 shares for payment of services to
employees and professional service providers such as legal, marketing,
promotional and investment consultants. Common stock issued in
connection with the Plan was valued at the fair value of the common
stock at the date of issuance at an amount equal to the service
provider's invoice amount. Under the Plan, Synergy granted options to
selected employees and professional service providers. In November
1999, Synergy entered into a stock purchase agreement with Sinclair
Broadcast Group, Inc. (Nasdaq symbol SBGI) ("SBG") whereby SBG
purchased 2,200,000 shares of Synergy's restricted $.001 par value
common stock for $4,400,000. The purchase price consists of $1,400,000
cash, a credit for a minimum of $2,000,000 of radio advertising and a
credit for a minimum of $1,000,000 of certain in-kind services, as
defined.
In November 1999, BB entered into a stock purchase agreement with SBG,
whereby SBG purchased 900,000 shares of $.001 par value Class B common
stock in BB for $765,000 cash. The Class B common shares constitute 50%
of the voting power of the common stock issued and outstanding. At June
30, 2000 Sybr owned 9,000,000 shares of Class A common stock and SBG
owned 900,000 shares of Class B common stock.
-11-
<PAGE>
Simultaneously with the purchase of the Class B shares, BB and SBG
entered into a Class A Common Stock Option Agreement providing of a
grant by BB to SBG of the right to purchase 8,100,000 shares of its
Class A common stock. In consideration for the grant, SBG agreed to
provide $50,000,000 of radio and/or television advertising and
promotional support, as defined, to be used from November 1999 through
December 31, 2004. The Company may not use more than $10,000,000 of
such advertising in any one calendar year and may carryover any unused
advertising time from all previous calendar years through December 31,
2005. SBG may terminate its obligation to carryover any unused
advertising time after December 31, 2001, by providing 90 days prior
written notice to BB. As further consideration for the grant, SBG also
agreed to provide $18,623,535 in certain in-kind services, as defined,
at request of BB.
In November 1999, BB acquired all of the outstanding $.001 par value
common stock of PHS from NEF for an 8% convertible subordinated note
payable of $750,000. Simultaneously with the transaction, $600,000 of
PHS's convertible subordinated debentures were converted to Synergy
common stock.
The Company has also reserved 100,000 shares for a stock option plan
(Option Plan) for non-employee, independent directors, which entitles
each non-employee, independent director an option to purchase 10,000
shares of the Company's stock immediately upon election or re-election
of the Board of Directors. Options granted under the Option Plan will
be at the fair market value on the date of grant, immediately
exercisable, and have a term of ten years.
The following is a summary of such stock option transactions for the
three months ended June 30, 2000 in accordance with the Plan and other
restricted stock option agreements:
Weighted
Average
Number of exercise
Shares price
------------- ---------
Outstanding at December 31, 1999 4,565,600 $ .60
Granted 665,000 $ 2.94
Exercised (534,980) $ .90
Outstanding at June 30, 2000 4,695,620 $ 1.65
==============
Option price $ .40 - 4.00
==============
Available for grant:
December 31, 1999 -
==============
June 30, 2000 -
==============
The Company applies APB 25 in accounting for its stock options.
Compensation costs related to options and charged to operations were
$212,650 in the six months ended June 30, 2000. Had compensation costs
for the stock options been determined based on the fair value at the
grant date consistent with the method of SFAS 123, the Company's net
income and earnings per share would have been reduced to the pro forma
amounts indicated below:
2000
----------------
Net income (loss):
As reported $ (2,914,158)
================
Pro forma $ (3,587,044)
================
Net income (loss) per common share:
As reported $ (.20)
================
Pro forma $ (.25)
================
-12-
<PAGE>
The weighted-average contractual life of options outstanding at June
30, 2000 was approximately 4 years. The fair value of each option grant
is estimated using the Black-Shoales option-pricing model with the
following weighted-average assumptions used:
2000
-----------
Dividend yield 0%
Expected volatility 0%
Risk-free rated of return 6.17-6.74%
Expected life 1 to 5 years
8. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases office and warehouse space in Wexford, Pennsylvania,
Syosset, New York, and Miami, Florida under operating leases expiring
in July 2002, April 2001, and January 2001, respectively. The Company
is also leasing vehicles under operating leases expiring in 2004.
Future minimum lease payments under non-cancelable operating leases as
of June 30, 2000.
Year ending December 31,
------------------------
2000 $ 61,464
2001 88,386
2002 57,208
2003 22,871
2004 553
-----------
230,482
===========
SERVICE AGREEMENT
BB's inventory is maintained in a public warehouse in South Kearny, New
Jersey. The Company is required to make rental payments based on 4% of
the Company's sales of inventory stored in the warehouse. The agreement
expires in October 2018 and may be cancelled by either party with a 90
day written notice under certain circumstances, as defined.
DISTRIBUTION AGREEMENTS
In December 1997, NEF entered into a 25-year exclusive worldwide
distribution agreement with a Dominican Republic corporation (DR) for
the sale and distribution of premium handmade cigars manufactured in
the Dominican Republic. There is an option to extend the term of the
distribution agreement up to an additional 25 years.
LITIGATION
The Company is subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to these actions will not
materially affect the financial position, results of operations or cash
flows of the Company.
GUARANTEE
In March 1998, The Company guaranteed a $1,000,000 line-of-credit
facility to a Dominican cigar manufacturer, which is owned by a PCW
stockholder. The purpose of the line-of-credit is to provide financing
to the cigar manufacture to which PCW will supply cigar wrappers.
-13-
<PAGE>
9. SEGMENT AND GEOGRAPHICAL INFORMATION
The Company offers a broad range of Internet access services and
related products to businesses and consumers throughout the United
States and Canada. All of the Company's identifiable assets and results
of operations are located in the United States. Management evaluates
the various segments of the Company based on the types of products
being distributed which were, as of June 30, 2000 as shown below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Grocery,
Beauty Health &
Products Beauty B2B B2C Total
----------------------------------------------------------------------------------------------------
Revenue
1999 $ 1,367,578 4,954,334 - 338,133 6,660,045
2000 1,406,105 - 6,559,911 652,932 8,618,948
----------------------------------------------------------------------------------------------------
Net earnings
1999 $ 48,460 470,541 - 23,190 542,191
2000 (651,898) - 86,518 (2,348,778) (2,914,158)
----------------------------------------------------------------------------------------------------
Identifiable assets
1999 $ 1,221,465 8,104,488 - - 9,325,953
2000 3,840,752 - 818,910 2,674,607 7,334,269
----------------------------------------------------------------------------------------------------
Interest expense
1999 $ 35,703 62,875 - - 98,578
2000 14,473 - 5,067 20,312 39,852
----------------------------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company and its consolidated subsidiaries have developed Internet
properties that strategically partner with off-line and on-line
companies to capture e-commerce markets within the Internet arena.
Synergy Brands's Internet strategy includes the internal development
and operation of subsidiaries as well as taking positions in other
Internet companies that have demonstrated synergies with its own core
businesses. The strategy also fosters opportunities for synergistic
business relationships among the Internet companies within its
portfolio. Additionally, management will focus the Company's resources
on creating a diversified network of Internet businesses that would be
potentially attractive IPO on M&A candidates.
Synergy Brands launched two Internet subsidiaries in 1999:
BeautyBuys.com Inc. and Netcigar.com, Inc., each of which has B2C
operations. DealByNet.com, the Company's third e-commerce venture, was
launched in late 2000. The distribution expertise of each entity's
management and the facilities they currently operate also create an
opportunity to offer order fulfillment services to other e-commerce
ventures.
1. BEAUTYBUYS.COM
Synergy Brands and Sinclair Broadcast Group, Inc. (NASDAQ: SBGI)
jointly own BeautyBuys.com. The B2C e-commerce site - accessible via
www.BeautyBuys.com- is a virtual beauty department store consisting of
over 7,000 unique brands, including salon hair and skin care items,
designer fragrances and cosmetics and consumer health and beauty care
products.
Sinclair Broadcast Group (NASDAQ: SBGI), the largest independent TV
network in the United States, acquired a 50% voting interest in
BeautyBuys.com for up to $69.4 million in advertising, cash and in-kind
services. Advertising credits are valued at the best rates a cash
customer received for the aired spots in their time slots.
*Sinclair covers 61 stations in 40 markets reaching 80 million viewers
in the United States and Canada.
*Sinclair is the largest affiliate network for the FOX, WB and UPN
television networks in the United States.
* BeautyBuys.com handles approximately 100,000 unique visitors, 3.5
million hits per month an average of 15 minutes stay per unique
visitors. It is estimated that over 60% of the traffic comes from TV
advertising.
In addition to beauty and health items, BeautyBuys.com has added a wide
selection of gift products, including seasonal, holiday and special
occasion items that will provide customers the opportunity to purchase
unique gifts. Management believes its early entry into this market may
enable the Company to gain a significant share of the on-line gift
market before competitors have an opportunity to imitate their
programs.
In just one year of operation, BeautyBuys.com has been recognized as
one of the top Web sites of its kind by such publications as
FamilyCircle, Mademoiselle, WWWD Friday, Drug Store News and Business
2.0 magazine. The Web site is continuously being improved to provide
photos of products, full product description and color shading of
makeup. It will also provide order history, automatic reorder, gift
certificates, message boards, upselling techniques and an "ask the
expert" section.
-15-
<PAGE>
2. DEALBYNET.COM
Synergy Brands launched its DealByNet.com B2B e-commerce Web site in
June 2000. DealByNet is believed to be the first Electronic Commerce
Network (ECN) that intends for manufacturers, supermarket chains, chain
drug stores and distributors to seamlessly integrate their product
needs within an e-commerce environment. DealByNet should allow the
manufactures of the major grocery and health and beauty aid products to
offer their promotional merchandise through DealByNet via a UCCnet
based system that is expected to handle all the logistical, financial
and merchandising details for the products offered on its system.
DealByNet is being developed to become an end-to-end solution that
makes the grocery and health and beauty aids business as efficient as
the other ECN markets created in the brokerage business such as
Instinet and Island that utilize state-of-the-art SQL technology to
provide the necessary data for its vendors and customers to streamline
the market place via an efficient electronic network.
3. NETCIGAR.COM
The premium cigar market is estimated to be $1 billion in annual sales
according to RTDA. In 1999, Synergy Brands expanded its premium cigar
business by establishing NetCigar.com as a Web site for the sale of
premium cigars and luxury related products. In less then a year
NetCigar has built a site with;
* Strong male demographics for advertising and marketing purposes with
approximately 10,000 customers.
* Approximately 60% of all orders are repeat customers, an estimated
10% of unique visitors choose to purchase from Netcigar.com
* Netcigar.com receives about 1 million hits per month with about
25,000 unique visitors spending an average of 25 minutes per session.
* Netcigar.com fulfills orders from its own distribution center.
Average order exceeds $100.
* The mail order portion of the premium cigar industry accounts for 40%
of the $1 billion market, thereby creating an opportunity for efficient
e-commerce conversion for $400 million worth of orders.
Results Of Operations For The Six Months Ended June 30, 2000
Total second quarter revenues were $5 million representing a 48%
increase over the 3.4 million reported for the same period in 1999, and
a 40% increase over first quarter 2000 revenues of $3.6 million.
Revenues for the six-month period ended June 30, 2000 totaled $8.6
million compared to $6.7 million reported in 1999. Pro-Forma net loss
for the second quarter was $632,232, or $0.04 per share, compared with
a Pro-Forma profit of $224,008, or $0.03 per share, in the second
quarter of 1999. For the six-month period ended June 30, 2000, Pro -
Forma net loss was $670,891, or $0.05 per share, compared with a
Pro-Forma profit of $542,191, or $0.07 per share for the first six
months of 1999. Pro-Forma net loss and net loss per share excludes
non-cash and one-time charges.
Total second quarter Internet sales soared from $322,133 in 1999 to
$4.2 million for the three months ended June 30, 2000, Internet sales
jumped 20 fold to $7.2 million over the $338,133 reported for the first
six months of 1999.
Overall, the Company reported a $1.4 million loss or $.09 per share for
the second quarter as compared to a $224,000 profit or $.03 per share.
-16-
<PAGE>
Management's business strategy for the remainder of the year is to
explore the strategic sale of BeautyBuys.com by a tier one-investment.
The Company recently retained a tier one-investment banker to explore a
strategic placement of BeautyBuys.com. The Company believes that the
total value of BeautyBuys.com retail operation presents an opportunity
for mature e-commerce operations or Chain 'brick and mortar' retail
operations that can utilize television advertising and an operating
online platform. In November of 1999 Synergy Brands, Inc. sold a 50%
voting interest of BeautyBuys.com Inc. to Sinclair Broadcast Group for
approximately $70 million of television advertising, in-kind services
and cash. Sinclair currently owns approximately 15% of Synergy Brands,
Inc.
Synergy's Netcigar.com Web site grew 50% sequentially in the second
quarter of 2000 from the first quarter of 2000. The business strategy
for Netcigar.com includes partnering with media operations on a
strategic basis as well as the possible acquisition of mail order
catalog properties so that Netcigar can develop a national footprint in
the $400 million cigar mail order catalog market.
The Company's DealbyNet.com, Inc. subsidiary was launched in June of
2000. The Web site, which is designed to create a seamlessly integrated
grocery supply chain from manufacturers to business customers using a
sophisticated database platform, should allow for real-time trading of
more than 2,000 of the most popular name brand consumer products on a
B2B basis.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
3 Months 3 Months 6 Months 6 Months
Ended Ended Ended Ended
6/30/2000 6/30/1999 6/30/2000 6/30/1999
Internet Sales $ 4,224,262 $ 322,133 $ 7,212,843 $ 338,133
Non-internet sales $ 810,878 $ 3,077,593 $ 1,406,105 $ 6,321,912
Total Sales $ 5,035,140 $ 3,399,726 $ 8,618,948 $ 6,660,045
Net Profit (loss) $ (1,370,728)(a) $ 224,008 $ (2,914,158)(b) $ 542,191
Per share $ (.09) $ .03 $ (.20) $ .07
Weighted share outstanding $ 14,614,902 $ 8,956,296 $ 14,486,795 $ 8,266,859
</TABLE>
(a) Includes $738,000 of non cash charges, $275,000 one time charges in
connection with the development of the Company's sites and marketing
and advertising for the branding of the e-commerce properties for the
three months ended June 30, 2000.
(b) Includes $1,938,000 of non cash charges, $580,000 one time charges
in connection with the development of the Company's sites and marketing
and advertising for the branding of the e-commerce properties for the
six months ended June 30, 2000. (a)
-17-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased to $1.1 million at June
30, 2000, a 43% increase from the first quarter of 2000. The increase in working
capital is attributable to decreased cash, advertising, technology and marketing
costs after the completion of the Sinclair transaction and increased revenues.
As a result of the Sinclair transaction, the Company expects that
the $70 million in advertising credits utilized by BeautyBuys.com should support
its continuing advertising needs. The Company's Business to Business operation,
DealByNet is expected to be profitable in fiscal 2000. The Company's main
operating subsidiaries, BeautyBuys.com Inc. and SYBR.com are expected to incur
losses in 2000. The Company believes that it has sufficient working capital and
resources to grow and expand the businesses of its operating subsidiaries.
However, there can be no assurances that additional capital would not be
required in the event the Company's business grows beyond its operating budgets.
PHS Group (DealByNet.com) secured a line of credit from GE commercial services
to finance up to 90% of its accounts receivable. As of June 30th, its balance
totaled $400,000. The Company believes that its line of credit should be able to
finance the needs of its Business to Business operations.
The Company plans to continue to explore partnerships with media
and technology companies on a barter for equity basis. The Company believes that
this strategy allows its operating subsidiaries to brand and expand their
respective franchises without causing adverse ramifications on the Company's
working capital. In addition the Company plans to leverage its media assets to
acquire interests in related companies that would complement its expansion
strategy.
GE Capital Commercial Services, Inc., a wholly owned subsidiary of
GE Capital, the financial services arm of The General Electric Corporation
(NYSE: GE), is expected to facilitate expansion of B2B operations and finance up
to 90% of the B2B accounts receivables on a revolving secured line of credit. GE
should permit DealByNet to grow the B2B segment of its operations geometrically
annual rate from its current $15 million annual rate.
Selected Financial Date
-----------------------
June 30, 2000 March 31, 2000
------------- --------------
Working Capital 1,134,176 789,340
Long Term Debt 465,000 465,000
Shareholders Equity 3,417,181 3,204,760
SEASONALITY
The Company generally experiences lower sales volume in the fourth
quarter due to the reduced number of selling days resulting from the
concentration of holidays in the quarter.
Sales of beauty care products and fragrances increase over
traditional gift giving holidays such as Christmas, Easter, Mother's Day,
Father's Day, and Valentine's Day.
Cigar and Luxury products sales also increase during holiday
periods and summer months, but also sales spurts occur during periods of special
sporting events.
INFLATION
The Company believes that inflation, under certain circumstances,
could be beneficial to the Company's business. When inflationary pressures drive
product cost up, the Company's customers sometimes purchase greater quantities
of product to expand their inventories to protect against further pricing
increases. This enables the Company to sell greater quantities of products that
are sensitive to inflationary pressures.
However, inflationary pressures frequently increase interest
rates. Since the Company is dependent on financing, any increase in interest
rates will increase the Company's credit costs, thereby reducing its profits.
-18-
<PAGE>
FORWARD LOOKING INFORMATION AND CAUTIONARY STATEMENTS
Other than the factual matters set forth herein, the matters and
items set forth in this report are forward-looking statements that involve risks
and uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, the following:
1. INTERNET
The internet environment is new to business and is
subject to inherent risks as in any new developing business
including rapidly developing technology with which to attempt
to keep pace and level of acceptance and level of consumer
knowledge regarding its use.
2. CASH FLOW.
The Company has experienced cash shortages which
continue to adversely affect its business. See "Liquidity and
Capital Resources". The Company requires additional working
capital in order to maintain and expand its business.
3. DEPENDENCE ON PUBLIC TRENDS.
The Company's business is subject to the effects of
changing customer preferences and the economy, both of which
are difficult to predict and over which the Company has no
control. A change in either consumer preferences or a
down-turn in the economy may affect the Company's business
prospects.
4. POTENTIAL PRODUCT LIABILITY.
As a participant in the distribution chain between
the manufacturer and consumer, the Company would likely be
named as a defendant in any product liability action brought
by a consumer. To date, no claims have been asserted against
the Company for product liability; there can be no assurance,
however, that such claims will not arise in the future.
Currently, the company does not carry product liability
insurance. In the event that any products liability claim is
not fully funded by insurance, and if the Company is unable to
recover damages from the manufacturer or supplier of the
product that caused such injury, the Company may be required
to pay some or all of such claim from its own funds. Any such
payment could have a material adverse impact on the Company.
5. RELIANCE ON COMMON CARRIERS.
The Company does not utilize its own trucks in its
business and is dependent, for shipping of product purchases,
on common carriers in the trucking industry. Although the
Company uses several hundred common carriers, the trucking
industry is subject to strikes from time to time, which could
have material adverse affect on the Company's operations if
alternative modes of shipping are not then available.
Additionally the trucking industry is susceptible to various
natural disasters which can close transportation lanes in any
given region of the country. To the extent common carriers are
prevented from or delayed in utilizing local transportation
lanes, the Company will likely incur higher freight costs due
to the limited availability of trucks during any such period
that transportation lanes are restricted.
-19-
<PAGE>
6. COMPETITION.
The Company is subject to intense competition in its
promotional grocery, squid, and premium handmade cigars
businesses. While these industries may be highly fragmented,
with no one distributor dominating the industry, the Company
is subject to competitive pressures from other distributors
based on price and service and product quality and origin.
7. LITIGATION.
The Company is subject to legal proceedings and
claims which arise in the ordinary course of its business. In
the opinion of management, the amount of ultimate liability
with respect to these actions will not materially affect the
financial position, results of operations or cash flows of the
Company, but there can be no assurance as to this.
8. POSSIBLE LOSS OF NASDAQ SMALL CAP LISTING.
Synergy currently qualifies for trading on the Nasdaq
Small Cap system. Nasdaq has adopted, and the Commission has
approved, certain changes to its maintenance requirements
which became effective as of February 28, 1998, including the
requirement that a stock listed in such market have a bid
price greater than or equal to $1.00. The bid price per share
for the Common Stock of Synergy has been below $1.00 in the
past and the Common Stock has remained on the Nasdaq Small Cap
System because Synergy has complied with the alternative
criteria which are now eliminated under the new rules. If the
bid price dips below $1.00 per share, the Common Stock could
be delisted from the Nasdaq Small Cap System and thereafter
trading would be reported in the NASD's OTC Bulletin Board or
in the "pink sheets." In the event of delisting from the
Nasdaq Small Cap System, the Common Stock would become subject
to rules adopted by the Commission regulating broker-dealer
practices in connection with transactions in "penny stocks."
The disclosure rules applicable to penny stocks require a
broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized
list disclosure document prepared by the Commission that
provides information about penny stocks and the nature and
level of risks in the penny stock market. In addition, the
broker-dealer must identify its role, if any, as a market
maker in the particular stock, provide information with
respect to market prices of the Common Stock and the amount of
compensation that the broker-dealer will earn in the proposed
transaction. The broker-dealer must also provide the customer
with certain other information and must make a special written
determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser's written
agreement to the transaction. Further, the rules require that
following the proposed transaction the broker-dealer provide
the customer with monthly account statements containing market
information about the prices of the securities. These
disclosure requirements may have the effect of reducing the
level of trading activity in the secondary market for a stock
that becomes subject to the penny stock rules. If the Common
Stock became subject to the penny stock rules, many
broker-dealers may be unwilling to engage in transactions in
the Company's securities because of the added disclosure
requirements, thereby making it more difficult for purchasers
of the Common Stock to dispose of their shares. The Company's
common stock has consistently remained at NASDAQ trading
levels above $1 bidover the past year and such historical
stability combined with the Company increasing business share
in the market and its continuing establishment as a viable
force in the industries wherein it participates gives the
Company confidence that its subseptibilty to market
deficiencies is in a much lessened state then in years past.
-20-
<PAGE>
9. RISKS OF BUSINESS DEVELOPMENT.
The Company has ventured into new lines of product and product
distribution (Cigars) in 1997, salon and HBA products in 1999 and internet sales
in 1998 and such product and product distribution lines are expected to continue
to constitute a material part of the Company's revenue stream. With the addition
of these new product and product distribution lines the Company is hopeful of
reaching and hopefully exceeding prior historic levels of product sales. Because
of the newness of these lines of products to the Company, the Company's
operations in these areas should be considered subject to all of the risks
inherent in a new business enterprise, including the absence of a appreciable
operating history and the expense of new product development. Various problems,
expenses, complications and delays may be encountered in connection with the
development of the Company's new products and methods of product distribution.
These expenses must either be paid out of the proceeds of future offerings or
out of generated revenues and Company profits. There can be no assurance as to
the continued availability of funds from either of these sources.
10. RAPIDLY CHANGING MARKET MAY IMPACT OPERATIONS.
The market for the Company's products is rapidly changing with evolving industry
standards and frequent new product introductions. The Company's future success
will depend in part upon its continued ability to enhance its existing products
and to introduce new products and features to meet changing customer
requirements and emerging industry standards. The Company will have to develop
and implement an appropriate marketing strategy for each of its products. There
can be no assurance that the Company will successfully complete the development
of future products or that the Company's current or future products will achieve
market acceptance levels conducive to the Company's fiscal needs. Any delay or
failure of these products to achieve market acceptance would adversely affect
the Company's business. In addition, there can be no assurance that the products
or technologies developed by others will not render the Company's products or
technologies non-competitive or obsolete.
Management believes actions presently being taken to revise the Company's
operating and financial requirements should provide the opportunity for the
Company to continue as a going concern. However, Management cannot predict the
outcome of future operations and no adjustments have been made to offset the
outcome of this uncertainty.
11. DEPENDENCE UPON ATTRACTING AND HOLDING KEY PERSONNEL.
The Company's future success depends in large part on the
continued service of its key technical, marketing, sales and management
personnel and on its ability to continue to attract, motivate and retain highly
qualified employees. Although the Company's key employees have stock options,
its key employees may voluntarily terminate their employment with the Company at
any time. Competition for such employees is intense and the process of locating
technical and management personnel with the combination of skills and attributes
required to execute the Company's strategy is often lengthy. Accordingly, the
loss of the services of key personnel could have a material adverse effect upon
the Company's operating efforts and on its research and development efforts. The
Company does not have key person life insurance covering its management
personnel or other key employees.
-21-
<PAGE>
12. EXTENSIVE AND INCREASING REGULATION OF TOBACCO PRODUCTS
AND LITIGATION MAY IMPACT CIGAR INDUSTRY.
The tobacco industry in general has been subject to extensive
regulation at the federal, state and local levels. Recent trends have increased
regulation of the tobacco industry. Although regulation initially focused on
cigarette manufacturers, it has begun to have a broader impact on the industry
as a whole and may focus more directly on cigars in the future. The recent
increase in popularity of cigars could lead to an increase in regulation of
cigars. A variety of bills relating to tobacco issues have been introduced in
the U.S. Congress, including bills that would (i) prohibit the advertising and
promotion of all tobacco products or restrict or eliminate the deductibility of
such advertising expense, (ii) increase labeling requirements on tobacco
products to include, among others things, addiction warnings and lists of
additives and toxins, (iii) shift control of tobacco products and advertisements
from the Federal Trade Commission (the "FTC") to the Food and Drug
Administration (the "FDA"), (iv) increase tobacco excise taxes and (v) require
tobacco companies to pay for health care costs incurred by the federal
government in connection with tobacco related diseases. Future enactment of such
proposals or similar bills may have an adverse effect on the results of
operations or financial condition of the Company.
In addition, a majority of states restrict or prohibit smoking in certain public
places and restrict the sale of tobacco products to minors. Local legislative
and regulatory bodies also have increasingly moved to curtail smoking by
prohibiting smoking in certain buildings or areas or by designating "smoking"
areas. Further restrictions of a similar nature could have an adverse effect on
the Company's sales or operations, such as banning counter access to or display
of premium handmade cigars, or decisions by retailers because of public pressure
to stop selling all tobacco products. Numerous proposals also have been
considered at the state and local level restricting smoking in certain public
areas, regulating point of sale placement and promotions and requiring warning
labels.
Increased cigar consumption and the publicity such increase
has received may increase the risk of additional regulation. The Company cannot
predict the ultimate content, timing or effect of any additional regulation of
tobacco products by any federal, state, local or regulatory body, and there can
be no assurance that any such legislation or regulation would not have a
material adverse effect on the Company's business.
In addition numerous tobacco litigation has been commenced and
may in the future be instituted, all of which may adversely affect the cigar
consumption and sale and may pressure applicable government entities to
institute further and stricter legislation to restrict and possibly prohibit
cigar sale and consumption, any and all of which may have an adverse affect on
Company business.
13. RISKS RELATING TO MARKETING OF CIGARS.
The Company primarily will distribute premium handmade cigars
which are hand-rolled and use tobacco aged over one year. The Company believes
that there is an abundant supply of tobacco available through its supplier in
the Dominican Republic for the types of premium handmade cigars the Company
primarily will sell. However, there can be no assurance that increases in demand
would not adversely affect the Company's ability to acquire higher priced
premium handmade cigars.
While the cigar industry has experienced increasing demand for
cigars during the last several years, there can be no assurance that the trend
will continue. If the industry does not continue as the Company anticipates or
if the Company experiences a reduction in demand for whatever reason, the
Company's supplier may temporarily accumulate excess inventory which could have
an adverse effect on the Company's business or results of operations.
-22-
<PAGE>
14. NO DIVIDENDS LIKELY.
No dividends have been paid on the Common Stock since
inception, nor, by reason of its current financial status and its contemplated
financial requirements, does Synergy contemplate or anticipate paying any
dividends upon its Common Stock in the foreseeable future.
-23-
<PAGE>
Part II - Other Information
Item 4-Submission of matters to vote of security holders.
1. There were no reports filed on 8-k for the relevant period.
At the Company's annual meeting on July 5, 2000 the following matters were
submitted.
(a) Election of the Company's board of directors, where in the following
persons were elected, such persons being all of the same persons then
acting as directors.
The following persons:
For Against Abstain
1. Henry Platek 16,638,969 23,087 -
2. Mair Faibish 16,638,969 23,087 -
3. Mitchell Gerstein 14,438,969 23,087 2,200,000
4. Dominic Marsicovetere 16,638,969 23,087 -
5. Michael Ferrone 14,438,969 23,087 2,200,000
(b) To re-elect current auditors.
Where Belew Averitt LLP the current auditors was re-elected for
December 31, 2000:
For Against Abstain
14,436,565 2,218,291 7,200
(c) To amend its certificate of Incorporation to increase its authorized
stock to 60,000,000 shares and create a Class B preferred stock.
For Against Abstain
9,136,075 8,883,134 2,456
Item 6- Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) There were no reports filed on 8-k for the relevant period.
-24-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Synergy Brands, Inc.
/s/ Mair Faibish
----------------
By: Mair Faibish
Chief Financial
Officer
Date 08/09/00
/s/ Mitchell Gerstein
--------------------
By: Mitchell Gerstein
Treasurer
Date 08/09/00
