<PAGE>
FORM 10-QSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ..........March 31, 1996........................
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
OF THE EXCHANGE ACT
For the transition period from ................ to ............................
Commission file number................1-12856..................................
.............................SYNERGISTIC HOLDINGS CORP.. ......................
(Name of Small Business Issuer)
........Delaware.............................................42-1358036........
(State of Incorporation) (IRS Employer Identification Number)
......405 Sixth Avenue, Suite 200, Des Moines, Iowa 50309......
......(515) 247-8100......
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act 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........
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: ........5,949,535 common
shares as of April 30, 1996........
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SYNERGISTIC HOLDINGS CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
----------- ------------
ASSETS
Cash and cash equivalents $269,411 $264,427
Receivables from brokers, dealers and clearing
organizations 924,593 1,190,345
Securities owned, at market value 582,482 1,689,637
Investment in Electronic Designs, Inc., at cost 1,100,000 1,300,000
Investment in Salex Holding Corp., at cost 2,000,000 1,500,000
Receivables from officers, employees and
others, net 256,269 283,444
Furniture, fixtures and equipment, net 435,802 462,799
Deferred income taxes 889,000 889,000
Other assets 198,023 275,122
----------- ------------
TOTAL $6,655,580 $ 7,854,774
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Securities sold, but not yet purchased, at
market value 16,414 337,502
Accounts payable and accrued expenses 1,590,760 2,183,191
Long-term debt 1,000,000 2,909,690
----------- ------------
2,607,174 5,430,383
----------- ------------
Excess of fair value of assets acquired over cost 757,944 798,549
----------- ------------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value; authorized,
1,000,000 shares; none issued or outstanding
Common stock, $.01 par value; authorized,
10,000,000 shares; 5,949,535 and 3,085,000
shares issued and outstanding, respectively 59,495 30,850
Treasury stock, 15,440 shares, at cost (20,802) (20,802)
Additional paid-in capital 6,481,694 4,576,809
Accumulated deficit (3,225,388) (2,877,201)
Common stock and warrants owned by subsidiary,
at cost; No common shares and 10,800 warrants
and 21,622 common shares and 68,815 warrants,
respectively (4,537) (83,814)
----------- ------------
Total stockholders' equity 3,290,462 1,625,842
----------- ------------
TOTAL $6,655,580 $7,854,774
----------- ------------
----------- ------------
See notes to consolidated financial statements.
2
<PAGE>
SYNERGISTIC HOLDINGS CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
QUARTER ENDED
---------------------------
MARCH 31, MARCH 31,
1996 1995
----------- ------------
REVENUES
Principal transactions $1,512,475 $1,889,184
Commissions 1,117,904 1,604,995
Investment banking 81,440 87,685
Interest and dividends 32,629 64,992
Other 416,161 622,771
----------- -----------
Total revenues 3,160,609 4,269,627
----------- -----------
EXPENSES
Employee compensation 2,034,153 3,198,576
Commissions and floor brokerage 294,013 483,015
Communications 349,277 695,399
Interest 66,329 7,848
Occupancy and equipment 442,048 591,606
Promotional 42,165 119,206
Litigation and legal costs 150,311 130,060
Other 130,500 281,568
----------- -----------
Total expenses 3,508,796 5,507,278
----------- -----------
LOSS BEFORE INCOME TAXES (348,187) (1,237,651)
BENEFIT FOR INCOME TAXES (430,000)
----------- -----------
NET LOSS $(348,187) $ (807,651)
----------- -----------
----------- -----------
LOSS PER SHARE AND EQUIVALENT SHARE:
Net loss per share $ (0.11) $ (0.26)
----------- -----------
----------- -----------
Weighted average shares and share
equivalents outstanding 3,116,478 3,085,000
----------- -----------
----------- -----------
See notes to consolidated financial statements.
3
<PAGE>
SYNERGISTIC HOLDINGS CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL COMMON STOCK AND
---------------------- PAID-IN ACCUMULATED TREASURY WARRANTS OWNED BY STOCKHOLDERS
SHARES AMOUNT CAPITAL DEFICIT STOCK SUBSIDIARY, AT COST EQUITY
---------- ---------- ---------- ----------- -------- -------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
January 1, 1996 3,085,000 $30,850 4,576,809 ($2,877,201) ($20,802) ($83,814) $1,625,842
Sale of common stock and
warrants by subsidiary,
at cost -- -- 23,840 -- -- 79,277 103,117
Conversion of long-term debt -- 28,645 1,881,045 -- -- -- 1,909,690
Net loss -- -- -- (348,187) -- -- (348,187)
--------- -------- ---------- ------------ --------- ---------- -----------
Balances,
March 31, 1996 5,949,535 $59,495 $6,481,694 ($3,225,388) ($20,802) ($4,537) $3,290,462
--------- -------- ---------- ------------ --------- ---------- -----------
--------- -------- ---------- ------------ --------- ---------- -----------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
SYNERGISTIC HOLDINGS CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
-----------------------------
MARCH 31, MARCH 31,
1996 1995
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($348,187) ($807,651)
----------- -----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Amortization (40,605) (40,604)
Depreciation 47,731 66,685
Benefit for deferred income taxes (459,500)
Changes in:
Receivables from brokers, dealers and
clearing organizations 265,752 406,608
Securities owned, at market value 1,107,155 1,195,523
Receivables from officers, employees and
others, net 27,175 (95,210)
Other assets 77,099 (103,730)
Securities sold, but not yet purchased, at
market value (321,088) 68,848
Accounts payable and accrued expenses (592,431) (107,716)
----------- -----------
Total adjustments 570,788 930,904
----------- -----------
Net cash provided by operating activities 222,601 123,253
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of common stock of Salex Holding Corp. (500,000)
Sale of common stock of Electronic Designs, Inc. 200,000
Purchase of furniture, fixtures and equipment (20,734) (127,401)
----------- -----------
Net cash used in investing activities (320,734) (127,401)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock (9,590)
Sale of common stock and warrants
owned by subsidiary 103,117 103,318
----------- -----------
Net cash provided by financing activities 103,117 93,728
----------- -----------
Net change in cash and cash equivalents 4,984 89,580
Cash and cash equivalents at beginning of period 264,427 350,918
----------- -----------
Cash and cash equivalents at end of period $269,411 $440,498
----------- -----------
----------- -----------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In connection with the conversion of $1,909,690 in long-term debt, the Company
issued 2,864,535 shares of $.01 par value common stock.
See notes to consolidated financial statements.
5
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SYNERGISTIC HOLDINGS CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AS OF MARCH 31, 1996 AND DECEMBER 31, 1995; AND FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1995
- - --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying Unaudited Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
of Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for interim periods are not necessarily indicative of the results that may
be expected for the entire year. For further information, refer to the
consolidated financial statements and notes thereto of Synergistic Holdings
Corp. and Subsidiary (the "Company") for the years ended December 31, 1995
and 1994, as included within Form 10-KSB filed with the Securities and
Exchange Commission on March 28, 1996.
Per share data is determined based on the weighted average number of common
shares and common share equivalents assumed to be outstanding for the
period. Common shares issued during the period are treated as outstanding
from the trade date of issuance. Common Stock equivalents relating to
stock options and warrants have been excluded in determining per share data
as they are antidilutive.
2. SECURITIES OWNED AND SECURITIES SOLD, BUT NOT YET PURCHASED
Securities owned and securities sold, but not yet purchased are valued at
quoted market prices or fair value (primarily using dealer quotes or market
prices of comparable securities), as appropriate. Securities owned valued
at fair value, for which market quotations are not readily available,
totaled approximately $31,000 at December 31, 1995. Market quotations were
readily available at March 31, 1996 for all securities owned valued at fair
value. At December 31, 1995 and March 31, 1996, the Company owned
securities approximating $157,000 and $104,000, respectively, (all of which
were corporate stocks, options and warrants) which it considered thinly
traded. Securities owned that may be thinly traded are reviewed
periodically to determine if their valuation should be less than at market.
As of December 31, 1995 and March 31, 1996, no valuations below market were
considered necessary.
3. LONG-TERM DEBT
In August 1995 as consideration for a loan in the principal amount of
$1,909,690, the Company issued to Falstaff, Ltd, ("Falstaff") a 10%
convertible note (the "Note"). The Note was due on August 31, 1997 and was
convertible at the rate of $.666 of
6
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principal amount per share.
On March 31, 1996, Falstaff elected to convert the principal amount of the
Note into 2,864,535 shares of the Company's $.01 par value common stock.
Following the conversion, the Company has 5,949,535 shares of common stock
outstanding.
4. SALEX
On May 1, 1996, the Company executed a letter of intent with Salex Holding
Corp.("Salex") with respect to the acquisition of the balance of the
outstanding shares of Salex in exchange for a 51% interest in the Company
and a $1 million, 2 year promissory note payable to the majority
shareholder in Salex.
As part of the stock purchase agreement, the Company has agreed to exchange
100% of the shares in its wholly-owned subsidiary, Dickinson & Co., and
400,000 shares of Electronic Designs, Inc.("Electronic Designs") for
approximately $3 million of Company shares owned by Dickinson Holding
Corp.("DHC"). DHC is owned and controlled by management and certain
shareholders of the Company. Closing of the stock purchase agreement is
subject to completion of due diligence and preparation and execution of a
definitive stock purchase agreement.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
Total revenues for the three months ended March 31, 1996 were $3,160,609, a
decrease of $1,109,018, or 26.0%, compared to total revenues of $4,269,627 for
the three months ended March 31, 1995. Revenues from principal transactions
decreased to $1,512,475 for the three months ended March 31, 1996, compared to
$1,889,184 for the prior comparable period. The decrease is mainly attributable
to the closing and consolidation of certain branch offices during 1995.
Revenues from commissions decreased to $1,117,904 for the three months ended
March 31, 1996, compared to $1,604,995 for the prior comparable period primarily
for the same reasons. Revenues from investment banking activities decreased to
$81,440 for the three months ended March 31, 1996, compared to $87,685 for the
prior comparable period. Interest and dividends decreased to $32,629 for the
three months ended March 31, 1996 compared to $64,992 for the prior comparable
period as a result of a decrease in funds available for investing. Other
revenue decreased to $416,161 for the three months ended March 31, 1996,
compared to $622,771 for the prior comparable period primarily as a result of a
decrease in fees charged to customers for postage, handling and transfer fees.
Postage, handling and transfer fees vary with the level of principal
transactions and commissions.
Total expenses for the three months ended March 31, 1996 were $3,508,796, a
decrease of $1,998,482 or 36.3%, compared to total expenses of $5,507,278 for
the three months ended March 31, 1995. Employee compensation and benefits
decreased to $2,034,153 for the three months ended March 31, 1996, compared to
$3,198,576 for the prior comparable period, as a result of the decrease in
revenues and related commissions paid to registered representatives.
Compensation expense also decreased as a result of branch office closings and
consolidations, staffing reductions and salary decreases. Commissions and floor
brokerage decreased to $294,013 for the three months ended March 31, 1996,
compared to $483,105 for the prior comparable period as a result of a decrease
in principal transactions and commissions. Communications expense decreased to
$349,277 for the three months ended March 31, 1996, compared to $695,399 for the
prior comparable period primarily as a result of branch office closings and
consolidations. Interest expense increased to $66,329 for the three months
ended March 31, 1996 compared to $7,848 for the prior comparable period
primarily as a result of interest accrued on long-term debt. Occupancy and
equipment expenses decreased to $442,048 for the three months ended March 31,
1996, compared to $591,606 for the prior comparable period primarily as a result
of branch office closings and consolidations. Promotional expenses decreased to
$42,165 for the three months ended March 31, 1996, compared to $119,206 for the
comparable prior period, primarily as a result of a decrease in travel and
advertising. Litigation and legal costs, net of recoveries increased to
$150,311 for the three months ended March 31, 1996, compared to $130,060 for the
prior comparable period. Other expenses decreased to $130,500 for the three
months ended March 31, 1996, compared to $281,568 for the prior comparable
period, primarily as a result of branch office closings and consolidations.
8
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Although the Company believes that it will generate sufficient profits to
realize the benefit of the deferred tax asset, management elected to record no
income tax benefit for the losses generated during the three months ended March
31, 1996. The Company has determined that no valuation allowance is required
for the deferred tax asset of $889,000. Factors that management considered in
evaluating the need for a valuation allowance as of March 31, 1996 include:
The Company implemented significant cost cutting measures during the second
quarter of 1995 including salary reductions, layoffs and branch office
closings and consolidations. The Company has recognized the benefits of
these cost cutting measures and anticipates a continued positive effect on
the Company's future earnings.
Although the Company's investment banking activities were minimal during
the three months ended March 31, 1996, management anticipates investment
banking activity, which it considers highly profitable, to increase.
The expiration dates of the net operating loss carryforwards with no
valuation allowance begin in the year 2006 and end in the year 2011.
As a result of such considerations, management has determined that no
valuation allowance was required relating to the $889,000 deferred tax asset as
of March 31, 1996 as it is more likely than not such will be realized based on
current information.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, Dickinson had net capital of approximately $250,000,
which was approximately $150,000 in excess of the minimum required net capital
at such date. The Company has historically financed its operations primarily
through cash flow from operations. The Company currently does not have any
material commitments for capital expenditures.
Net cash provided by operating activities for the three months ended March
31, 1996 was $222,601, as compared to $123,253 for the three months ended March
31, 1995. The increase of $99,348 is primarily the result of a decrease in the
loss for the three months ended March 31, 1996 as compared to the prior
comparable period which was partially offset by the decrease in accounts payable
and accrued expenses and securities sold, but not yet purchased, at market
value.
Net cash used in investing activities for the three months ended March 31,
1996 increased by $193,333 primarily as a result of the acquisition of
additional shares of common stock of Salex Holding Corp which was partially
offset by the sale of a portion of the Electronic Designs, Inc. common stock.
Net cash provided by financing activities for the three months ended March 31,
1996 was $103,117 compared to $93,728 for the three months ended March 31, 1995.
9
<PAGE>
ANALYSIS OF FINANCIAL CONDITION
At March 31, 1996, the Company's total assets were $6,655,580, a decrease
of 15.3%, and stockholder's equity was $3,290,462, an increase of 102.4% from
December 31, 1995.
Receivables from brokers, dealers and clearing organizations decreased by
$265,752 and securities owned, at market value decreased by $1,107,155 during
the first three months of 1996. Amounts due from brokers, dealers and clearing
organizations, which the Company considers highly liquid, are subject to change
from time to time depending upon levels of open securities positions and the
timing of securities transactions. The Company decreased its balance in
securities owned, at market value, in order to enhance cash flow and regulatory
capital.
Long-term debt decreased by $1,909,690 and stockholder's equity increased
by $1,664,620 during the first three months of 1996 primarily as a result of the
conversion of the Falstaff note into the Company's common stock.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
Exhibit 11 Statement Re Computation of Per Share Earnings -- Page 13.
Exhibit 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
Not applicable.
11
<PAGE>
***SIGNATURES***
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYNERGISTIC HOLDINGS CORP.
---------------------------
Registrant
Date: May 10, 1996 /s/ Elizabeth R. Ring
------------------------------ ----------------------------------------
Elizabeth R. Ring
Chief Financial Officer and Treasurer
Date: May 10, 1996 /s/ Elizabeth R. Ring
------------------------------ ----------------------------------------
Elizabeth R. Ring
Principal Accounting Officer
12
<PAGE>
EXHIBIT 11
SYNERGISTIC HOLDINGS CORP. AND SUBSIDIARY
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
QUARTER ENDED
----------------------------
MARCH 31, MARCH 31,
1996 1995
------------ -----------
NET LOSS $(348,187) $(807,651)
----------- ----------
WEIGHTED AVERAGE SHARES AND
SHARE EQUIVALENTS OUTSTANDING:
Weighted average common
stock outstanding 3,116,478 3,085,000
Net effect of the assumed exercise
of stock options and warrants based on the
treasury stock method (1)
Total weighted average shares and
share equivalents outstanding: 3,116,478 3,085,000
----------- ----------
INCOME (LOSS) PER SHARE
AND EQUIVALENT SHARE
NET LOSS PER SHARE $( 0.11) $( 0.26)
----------- ----------
(1) Fully diluted earnings per share approximates primary earnings per share as
applicable. Common Stock equivalents relating to stock options and warrants
for 1996 and 1995 have been excluded in determining per share data for the
three months ended March 31, 1996 and 1995 as they are antidilutive.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 269,411
<RECEIVABLES> 924,593
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 582,482
<PP&E> 0
<TOTAL-ASSETS> 6,655,580
<SHORT-TERM> 0
<PAYABLES> 1,590,760
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 16,414
<LONG-TERM> 1,000,000
0
0
<COMMON> 59,495
<OTHER-SE> 3,230,967
<TOTAL-LIABILITY-AND-EQUITY> 6,655,580
<TRADING-REVENUE> 1,512,475
<INTEREST-DIVIDENDS> 32,629
<COMMISSIONS> 1,117,904
<INVESTMENT-BANKING-REVENUES> 81,440
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 66,329
<COMPENSATION> 2,034,153
<INCOME-PRETAX> (348,187)
<INCOME-PRE-EXTRAORDINARY> (348,187)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (348,187)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
