<PAGE>
SECURITIES & EXCHANGE COMMISSION
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: October 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 filing 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
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1.
Condensed Combined Consolidated Balance Sheets
October 31, 1997 and April 30, 1997 .................. 3
Condensed Combined Consolidated Statements of Operations
Three Months Ended October 31, 1997 and 1996
Six Months Ended October 31, 1997 and 1996 ........... 4
Condensed Combined Consolidated Statements of Cash Flows
Six Months Ended October 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
-2-
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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>
October 31, 1997 April 30, 1997
---------------- --------------
<S> <C> <C>
ASSETS
Currents Assets:
Cash $ 192,542 $ 125,769
Accounts Receivable, net 3,670,228 3,451,589
Prepaid expenses and other current assets 49,436 77,263
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Total Current Assets 3,912,206 3,654,621
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Property and Equipment, net 1,712,146 1,746,120
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Other Noncurrent Assets:
Goodwill, net 1,161,875 1,210,625
Noncompetition and consulting agreement, net 136,667 186,667
Other Assets 48,635 48,635
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Total Other Noncurrent Assets 1,347,177 1,445,927
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TOTAL ASSETS $ 6,971,529 $ 6,846,668
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LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Bank overdraft $ 508,884 $ 471,236
Note payable - finance company 1,360,778 1,283,699
Accounts payable 4,651,394 4,161,585
Accrued expenses and other 263,477 487,260
Current portion of long-term debt 1,060,227 1,179,906
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Total Current Liabilities 7,844,760 7,583,686
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Long-Term Debt & Capital Lease Obligations 886,401 781,103
Deferred income taxes 10,000 10,000
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TOTAL LIABILITIES 8,541,161 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 par 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 (5,400,315) (5,358,554)
Less: Note receivable (500,000) (500,000)
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Total stockholders (deficit) equity (1,569,632) (1,528,121)
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LIABILITIES AND STOCKHOLDERS' DEFICIT $ 6,971,529 $ 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 Six Months Six Months
Ended Ended Ended Ended
10/31/97 10/31/96 10/31/97 10/31/96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 5,979,760 $ 5,556,075 $ 11,359,559 $ 11,276,595
Cost of Sales 4,861,676 4,599,819 9,175,953 9,228,748
------------ ------------ ------------ ------------
Gross Profit 1,118,084 956,256 2,183,606 2,047,847
Selling, General & Administrative Expenses 950,138 1,416,968 2,087,283 2,665,091
------------ ------------ ------------ ------------
Income (Loss) from Operations 167,946 (460,712) 96,323 (617,244)
Interest Expense, Net 76,331 147,322 138,083 219,722
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Income (Loss) before taxes on income 91,615 (608,034) (41,760) (836,966)
Provision for income taxes 0 0 0 0
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Net Income (Loss) $ 91,615 $ (608,034) $ (41,760) $ (836,966)
============ ============ ============ ============
Net Income (Loss) per Share of Common
Stock 0.01 (0.05) (0.00) (0.07)
============ ============ ============ ============
Weight Average Common Shares Outstanding 11,246,366 11,246,366 11,246,366 11,243,366
============ ============ ============ ============
</TABLE>
4
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SYNERGISTIC HOLDINGS CORP.
AND SUBSIDIARIES AND AFFILIATE
CONDENSED COMBINED CONSOLIDATED
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
10/31/97 10/31/96
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (41,760) $ (836,966)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 168,090 151,427
Increase (decrease) in cash flows from changes in
operating assets and liabilities:
Accounts receivable (218,639) 65,469
Prepaid expenses and other current assets 27,827 (47,597)
Accounts payable 489,809 (170,534)
Accrued expenses and other current liabilities (223,783) (222,398)
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Net cash provided by (used in) operating activities 201,544 (1,060,599)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (35,368) (35,152)
Increase in other assets -- --
Loan to officer, net of repayments -- (55,086)
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Net cash provided by (used in) investing activities (35,368) (90,238)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Change in bank overdraft 37,648 454,404
Net proceeds from (repayments of) note payable-
finance company 77,079 360,442
Principal payments of long-term debt (122,970) (65,111)
Payments on capital lease obligations (39,198) (29,879)
Payments on mortgage obligation (36,000) (36,000)
Proceeds from promissory note-Bank (16,212) (16,213)
Net proceeds from issuance of preferred stock
& warrants -- 478,000
Net proceeds from issuance of preferred stock 250 --
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Net cash provided by (used in) financing activities (99,403) 1,145,643
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Net increase (decrease) in cash 66,773 (5,194)
Cash, at beginning of period 125,769 74,354
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Cash, at end of period $ 192,542 $ 69,160
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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.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULT OF OPERATIONS
Results of Operations
Net sales of $5,980,000 and $11,360,000 for the three and six months ended
October 31, 1997 increased by 7.6% and .74%, respectively, from $5,556,000 and
$11,276,600, respectively in the comparable prior year periods. This was the
result in increases in all of the Company's core operations as well as
continued growth in its insurance subrogation division and its MVR service.
The Company's gross margin increased to 18.7% for the three months ended
October 31, 1997 and 19.2% for the six months ended October 31, 1997 as
compared to 17.2% and 18.2% respectively, in the comparable prior year
periods. These increases were 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 for the three and six months
ended October 31, 1997 decreased to $950,138 and $2,087,283 respectively, from
$1,416,968 and $2,665,091, respectively in the comparable prior year periods.
These 32.9% and 21.7% decreases were primarily attributable to a 29.9%
reduction in the Company`s workforce. Such a reduction had a corresponding
effect on the Company's other administrative expenses which resulted in a
decrease in across the board spending.
Interest expense decreased to $83,521 and $181,869 for the three and six
months ended October 31, 1997, respectively, from $131,141 and $237,236,
respectively, in the comparable prior year periods. This was primarily due to a
decrease in the amount owed to our finance company which was slightly offset
by the interest charged on a note payable to a former shareholder of the
Company.
Liquidity and Capital Resources
Net cash provided by operating activities was $201,544 for the six months
ended October 31, 1997 as compared with $1,060,599 used in operations for the
comparable prior year period. This was primarily the result of an increase in
accounts payable and accounts receivable which was partially offset with
favorable net income of almost $800,000.
Cash used in investing activities for the six months ended October 31, 1997
totaled $35,368 as compared with $90,238 for the comparable prior year period.
Net cash flows used in investing activities decreased due to a reduction in
loans to officers.
Net cash used in financing activities was $99,403 for the six months ended
October 31, 1997 compared with $1,145,643 provided by operations for the
comparable prior period. This was primarily the result of the Company selling
Series A preferred stock and warrants which resulted in net proceeds of
$478,000. In addition there were increases in the bank overdraft as well
repayment of our note payable to the finance company.
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.
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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
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 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 HOLDING CORP.
/s/ Sal Crimi
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Sal Crimi
Chairman of the Board of Directors
And Chief Executive Officer
Pursuant to the requirements or 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
