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SECURITIES & EXCHANGE COMMISION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: July 31, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from: to
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Commission file number: 1-12856
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SYNERGISTIC HOLDINGS CORP.
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(Exact Name of Registrant as Specified in its Charter
Delaware 42-1358036
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(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
50 Laser Court, Hauppauge, New York 11788
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(Address of Principal Executive Offices)
(516)436-5000
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(Issuer's telephone number)
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(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 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 fi1ing requirements for the past 90 days. [ ] Yes [x] No
The number of shares of Common Stock of the issuer outstanding as of December 8,
1997 was 9,206,100.
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SYNERGISTIC HOLDINGS CORP.
INDEX TO 10-Q
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1.
<S> <C>
Condensed Combined Consolidated Balance Sheets
July 31, 1997 and April 30, 1997 ...................................... 3
Condensed Combined Consolidated Statements of Operations
Three Months Ended July 31, 1997 and 1996 ............................. 4
Condensed Combined Consolidated Statements of Cash Flows
Three Months Ended July 31, 1997 and 1996 ............................. 5
Notes to Financial Statements ............................................ 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures about Market Research
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
ITEM 2. Changes in Securities and Use of Proceeds
ITEM 3. Defaults Upon Senior Securities
ITEM 4. Submission of Matters to a Vote of Security Holders
ITEM 5. Other Information
ITEM 6. Exhibits and Reports on Form 8-K
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PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS SYNERGISTIC HOLDINGS CORP.
AND SUBSIDIARIES AND AFFILIATE
CONDENSED COMBINED CONSOLIDATED
BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, 1997 April 30, 1997
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<S> <C> <C>
ASSETS
Current Assets:
Cash $ 145,024 $ 125,769
Accounts Receivable, net 3,089,120 3,451,589
Prepaid expenses and other current assets 43,634 77,263
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Total Current Assets 3,277,778 3,654,621
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Property and Equipment net 1,733,173 1,746,120
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Other Noncurrent Assets:
Goodwill, net 1,186,250 1,210,625
Noncompetition and consulting agreement, net 161,667 186,667
Other assets 48,635 48,635
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Total Other Noncurrent Assets 1,396,552 1,445,927
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TOTAL ASSETS $ 6,407,503 $ 6,846,668
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Bank overdraft $ 869,034 $ 471,236
Note payable - finance company 1,062,370 1,283,699
Accounts payable 3,925,199 4,161,585
Accrued expenses and other 352,298 487,260
Current portion of long-term debt 1,078,227 1,179,906
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Total Current Liabilities 7,287,128 7,583,686
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Long-Term Debt & Capital Lease Obligations 771,622 781,103
Deferred income taxes 10,000 10,000
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TOTAL LIABILITIES 8,068,750 8,374,789
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Stockholders' (Deficit) Equity:
Preferred stock-series A, $.01 par value-shares 737,387 737,387
authorized 20,000, issued and outstanding
10,625 (liquidation preference $100 per share)
Preferred stock-series B, $.01 par value-shares 10 10
authorized, issued and outstanding 1,000
Preferred stock-series C, $.01 per value-shares 250
authorized, issued and outstanding 25,000
Common stock, $.01 par value-shares 91,873 91,873
authorized 10,000,000
Additional Paid-in Capital 3,501,163 3,501,163
Accumulated deficit & proprietor's capital deficiency (5,491,930) (5,358,554)
Less: Note receivable (500,000) (500,000)
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Total stockholders (deficit) equity (1,661,247) (1,528,121)
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LIABILITIES AND STOCKHOLDERS' DEFICIT $ 6,407,503 $ 6,846,668
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</TABLE>
3
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SYNERGISTIC HOLDINGS CORP.
AND SUBSIDIARIES AND AFFILIATE
CONDENSED COMBINED CONSOLIDATED
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
7/31/97 7/31/96
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<S> <C> <C>
Net Sales $ 5,379,799 $ 5,720,520
Cost of Sales 4,314,277 4,628,929
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Gross Profit 1,065,522 1,091,591
Selling, General & Administrative Expenses 1,137,145 1,248,123
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Loss from Operations (71,623) (156,532)
Interest Expense, Net 61,752 72,400
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Loss before taxes on income (133,375) (228,932)
Provision for income taxes 0 0
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Net (Loss) $ (133,375) $ (228,932)
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Net Loss per Share of Common Stock (0.01) (0.02)
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Weighted Average Common Shares 11,246,366 11,246,366
Outstanding ============ ============
</TABLE>
4
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SYNERGISTIC HOLDINGS CORP.
AND SUBSIDIARIES AND AFFILIATE
CONDENSED COMBINED CONSOLIDATED
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
7/31/97 7/31/96
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(133,375) $(228,932)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 84,045 74,046
Increase (decrease) in cash flows from changes in
operating assets and liabilities:
Accounts receivable 362,469 72,301
Prepaid expenses and other current assets 33,629 13,271
Accounts payable (236,386) (54,858)
Accrued expenses and other current liabilities (134,962) (245,723)
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Net cash provided by (used in) operating activities (24,580) (369,895)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (21,724) (9,549)
Increase in other assets -- 7,500
Loan to officer, net of repayments -- (55,086)
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Net cash provided by (used in) investing activities (21,724) (57,135)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Change in bank overdraft 397,798 473,089
Net proceeds from (repayments of) note payable- (221,329) 18,682
finance company
Principal payments on long-term debt (69,809) (10,004)
Payments on capital lease obligations (15,244) (14,445)
Payments on mortgage obligation (18,000) (18,000)
Proceeds from promissory note-Bank (8,107) (8,107)
Net proceeds from issuance of preferred stock 250 -
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Net cash provided by (used in) financing activities 65,559 441,215
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Net increase (decrease) in cash 19,255 14,185
Cash, at beginning of period 125,769 74,354
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Cash, at end of period $ 145,024 $ 88,539
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</TABLE>
5
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SYNERGISTIC HOLDINGS CORP.
AND SUBSIDIARIES AND AFFILIATE
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited Combined Consolidated Financial Statements
have been prepared with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and of Regulation
S-X. 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.
Per share data is determined based on the weighted average number of common
and common equivalent shares outstanding. The calculation when applicable takes
into account the shares that may be issued upon exercise of stock option and
warrants, reduced by the shares repurchased with the funds received from their
exercise.
6
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULT OF OPERATIONS
Results of Operations
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Net sales of $5.38 million decreased by $.34 million, or 6.0% from the
comparable prior year level of $5.72 million. This decrease was primarily in the
area of the Company's core operations, which accounts for over 90% of total
sales. This decrease was partially offset by a 17.7% increase in its
insurance subrogation division where the Company retains a percentage of amounts
collected from third parties.
The Company's gross margin increased to 19.8% as compared to the comparable
prior year level of 19.1%. This increase of 3.7% was attributable to increases
in those areas which yield a higher gross margin than that of its core business.
Such departments are insurance subrogation, MVR reporting and fees charged for
specialized reports available to all fleet customers.
Selling, general and administrative expenses decreased by $110,978 from the
previous year level of $1.248 million. This decrease of 8.9% was primarily
attributable to payroll decreasing by $94,000 as a result of a 16% reduction in
the Company's workforce. Such a reduction had a corresponding effect on the
Company's other administrative expenses which saw an overall decrease of
$16,877.
Interest expense of $98,348 decreased by $7,747 over the prior year. This
decrease was the result of a $26,725 reduction of interest charged on the
Company's revolving credit with a finance company. This was partially offset by
a $20,983 increase in interest charged an a note payable to a former shareholder
of the Company.
Liquidity and Capital Resources
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Net cash flows used in operating activities were $24,580 for the three
months ended July 31, 1997 compared with $369,895 for the comparable prior year
period. The decrease resulted from changes in accounts payable and accrued
expenses which were partially offset by increases in accounts receivable.
Cash used in investing activities for the three months ended July 31, 1997
totaled $21,724 as compared with $57,135 for the comparable prior year period.
Net cash flows used in investing activities decreased due to a reduction in
loans to officers which was partially offset by an increase in capital
expenditures.
Net cash provided by financing activities was $65,559 for the three months
ended July 31, 1997 compared with $441,215 for the comparable prior year period.
This was primarily due to the repayment of our note payable to our finance
company of $221,329 which was partially offset by an increase in our bank
overdraft.
The Company has negative working capital and has limited availability under
its existing credit facility and will need additional capital to have sufficient
liquidity and to meet its working capital needs for the foreseeable future. It
is the Company's intention to refinance its mortgage liability on a short term
basis. The Company expects to enter into a sale and leaseback arrangement with
respect to its property in the near future.
7
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ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RESEARCH
Not Applicable.
PART II. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not Applicable.
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 2, 1997, the Company sold 25,000 shares of Preferred Stock,
Series C (the "Preferred Stock") to Meadows Management, LLC at a
purchase price of $25,000. Each share of the Preferred Stock is
convertible at any time into 100 shares of Common Stock at a
conversion price of $0.10 per share. The sale and issuance of the
Preferred Stock was exempt from registration by virtue of Section 4(2)
of the Securities Act of 1933. The proceeds from the sale of the
Preferred Stock was used for working capital.
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 ON FORM 8-K
Exhibit 11 Statement re computation of per share earnings.
Exhibit 27 Financial data schedule.
(b) REPORTS ON FORM 8-K
(1) Current Report on Form 8-K, dated June 2, 1997.
(2) Current Report on Form 8-K, dated June 12, 1997.
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SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf of the undersigned thereunto duly authorized.
SYNERGISTIC HOLDINGS CORP.
/s/ Sal Crimi
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Sal Crimi
Chairman of the Board of Directors
And Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities on the date indicated.
Signature Title Date
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/s/ Angelo Crimi Vice Chairman, Secretary, 12/26/97
---------------------- Vice President Sales and
Angelo Crimi Director
/s/ Pershing Sun Senior Vice President, 12/26/97
---------------------- Chief Information Officer
Pershing Sun and Director
/s/ Franklin Pinter Director 12/26/97
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Franklin Pinter
/s/ Francis Fitzpatrick Director 12/26/97
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Francis Fitzpatrick
