SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended: Commission File No.:
December 31, 1998 0-6421
<PAGE>
SYNERGISTICS, INC.
Massachusetts 04-2283157
(State of Incorporation) (IRS Employer I.D.
Number)
9 Tech Circle, Natick, MA 01760
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number,
including area code (508) 655-1340
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $0.01 Par Value
(Title of Class)
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 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 ______
To the Company's knowledge, only a limited public market for its
securities existed as of December 31, 1998 and there was no
aggregate market value of registrant's securities as of that
date.
State issuer's revenues for its most recent fiscal year
$2,917,792
Indicate the number of shares outstanding of each of the
registrant's classes of Common Stock, as of the last practical
date.
Common Stock, $0.01 Par Value 9,632,561
(Title of Class) (Shares Outstanding at March 1, 1999)
Exhibit Index is located on pages 11 and 38 of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
Form 10-QSB filed with the Commission by the Company for period
ending September 30, 1998.
<PAGE>
PART I-FINANCIAL INFORMATION
ITEM 1. DESCRIPTION OF BUSINESS
(a) General Development of Business
Synergistics, Inc. a Massachusetts corporation (the "Company")
organized on May 13, 1960 is located at 9 Tech Circle, Natick,
Massachusetts 01760, telephone (508) 655-1340. The Company's
principal activity consists of manufacturing and marketing access
control systems, which it sells to banks, and other commercial
customers.
Current Products:
MSLR1 - ATM Vestibule Access Control: The MSLR1 product line continues to be a
substantial revenue producer for the Company. It is a minimal security access
control system utilizing a single reader and controller to control access to a
single door in an automatic teller machine (ATM) lobby installation. The
Company currently sells to over 20,000 bank installations worldwide.
ATM-III - ATM Vestibule Access Control: This product controls access to ATM
vestibule installations similar to the MSLR1 product. It offers high security
to the installations and has currently found a new market in banks located in
shopping malls.
ATM Access - ATM Vestibule Access Control: ATM Access is a distributed
processing access control system developed in 1994 to meet the requirements
for New York City's Local Law 70, a law passed to increase security in ATM
installations. The ATM Access system meets the requirements of the law by
using a database supplied to the banks by NYCE which provides reasonable
assurance that only bank card gain entrance to ATM vestibule installations.
Today, there are over 1,500 installations in and around New York City.
Citicorp ATM Access - ATM Vestibule Access Control: This product uses the ATM
Access product as a base controller for a customized, networked access control
system for all Citibank ATM installations in New York City. This product was
first shipped in 1998 and will be installed in 1999. It played a major part in
the sales increase between 1997 and 1998.
PC-PAC - Central Processing Access Control System: The PC-PAC system provides
alarm security and monitoring capability for complete facility management. It
has the capability of controlling 256 access controlled areas, supporting
over 35,000 authorized persons, while providing monitoring capability for 1,600
alarm points in the system. PC-PAC utilizes a desk top PC as a central
processing unit. It is available in a single computer version or with a
redundant computer running in hot standby. PC-PAC is currently being phased
out of the product line, to be replaced by WaPac for Windows.
WA-PAC - A DOS based distributed processing building management system: WA-PAC
is an access control system which supports a network of buildings or sites from
a desk top PC host computer over dial-up or direct voice grade telephone lines
or fiber optics communications. WA-PAC operates as a distributed intelligent
network of card access readers and controllers which control access to
buildings or sitesin the network as well as monitorin perimeter security. Each
building or site can have up to 64 card access readers and over 4,000 alarm
input and output points. It will support databases of over 50,000 users.
WA-PAC FOR WINDOWS - A Windows NT based distributed processing building
management system: This product is a modern version of the WA-PAC DOS system
described above. This product was released for Beta test and installed in
several sites for test and evaluation in 1998. It was released for general
distribution in February, 1999 and is intended to be our premium building
management and access control product into the 21st century.
WA-PAC TRACKER - An asset tracking enhancement to WA-PAC. This system protects
against asset theft from buildings secured with WA-PAC access control security.
Assets are defined as any object or person that can be tagged for identification
with Tracker's long range proximity security tags. Assets may be laptop
computers or other equipment, babies, or even elderly persons. Tagged assets
are associated with tagged personnel by the system and recorded as they pass
monitoring points. If the asset is unauthorized, an alarm is sent to security
and a record is made of the transaction. If the asset is authorized to be
carried by the tagged person, a record is made of it's passing. WA-PAC Tracker
is currently being added to WaPac for Windows as an enhancement.
BUILDING WATCH - A distributed processing access control system:
Building Watch is a distributed processing access control product designed for
securing commercial or industrial facilities at low cost. This system shares a
personal computer with other programs, thereby making it a very cost effective
security system that is easy to implement and expand. Building Watch offers
direct local access control and remote access management over dial-up phone
lines. It also supports input point monitoring and reporting capabilities.
Building Watch supports all popular card technologies.
BUILDING WATCH FOR WINDOWS - This access control system is a Windows 3.1 based
clone of the DOS Building Watch system above. It supports access control in an
unlimited number of buildings and operates under Windows 3.1, 95 and NT
platforms.
DOOR WATCH - 2 Door, Stand alone, Full Featured Access Control System: This
product is sold mainly to small, industrial and commercial users who require
only one or two doors of access control, but wish to control doors with time
zones and keep a printed record of system activity. Door Watch supports all
popular card reader technologies.
SENTRY - Single door, stand-alone access control system, expandable to 2 doors.
Sentry was introduced in 1997 as a low end to our access control product line.
It is marketed to locksmiths due to it's simplicity and ease of installation.
The Company designs all of its products. The Company's computer based products
use personal computers and standard peripherals to provide access control and
building management to secured sites.
These products are acquired from a variety of third party sources. Components
are procured from electronics distributors. Board and assembly houses
manufacture and assemble circuit boards. Final assembly, test and shipping
functions are performed by Company personnel. The Company solicits bids for
components, subassemblies and outside assembly. The Company has not
experienced difficulty obtaining components for its products.
(b) Financial Information About Industry Segments
The Company has been in a single business segment for the past year: The
manufacturing and marketing of access control and facility management systems.
All of the Company's revenue, operating profit or loss and identifiable assets
are attributable to one industry segment.
(c) Narrative Description of Business
Y2K issues relating to products:
All listed products manufactured by the Company are currently Y2K compliant.
Products which were installed by users in the past are Y2K compliant or have a
proposed upgrade path to becoming Y2K compliant.
Description of Products
Bank ATM Access Control: The Company has been marketing bank ATM access
control products since 1977. These products consisted of MSLR1, ATM III, and
ATM Access. In 1998, the Company added a customized networked product expressly
customized for Citibank sites in Greater New York City. Bank ATM access control
revenue represented approximately 32% of all Company revenue in 1998, 30%
in 1997 and 35% in 1996. The Company has sold ATM access control products to
over 20,000 bank installations in the United States and abroad.
PC-PAC: PC-PAC, a central processing access control and building management
system was introduced in 1984. PC-PAC provides access
control and building security using a personal computer. PC-PAC
controls up to 256 doors using a variety of card reader technologies and keypads
plus monitors perimeter alarm points in secured building environments. PC-PAC
provides hard disk storage for permanent records of all transactions, an
instantaneous check of personnel in a given area and retains a record of those
cards which have been used to attempt access to an area where the cardholder was
not authorized. Product options include zoned anti-passback; alarm, elevator
and relay control. PC-PAC revenue approximated 1% of all Company revenue
in 1998, 1% in 1997 and 3% 1996. The Company believes that the PC-PAC system
will be replaced with WaPac for Windows due to its DOS operating system.
WaPac: The Company introduced WA-PAC in 1988 as a DOS based, distributed
processing access control system which controls multiple building sites through
the use of a single host computer.
WaPac has been the Companies premier computer system over the past years and is
generally installed in Colleges and Universities as well as large corporate
buildings. WaPac supports a great number of features and it's reliable
operation and reasonable pricing is the main reason for it's success in
controlling access and securing perimeters in these buildings. WaPac uses
either direct or dialup telephone lines for communications and will support
any number of building sites. Product shipments began in 1988. WA-PAC revenue
approximated 10% in 1998, 16% of total company revenue in 1997, and 10% in 1996.
WaPac for Windows: The Company introduced WaPac for Windows in late 1998. This
Windows NT based product will take the place of WA-PAC (DOS version) as time
goes on. WA-PAC for Windows is written to operate on a Windows NT platform.
Further development of WaPac for Windows in 1999 will make it a networked
product which will support WA-PAC Tracker, video image badging, floor plan
mapping and many other features which were not possible with the DOS based
WA-PAC system. The main market for this product is colleges and universities
and large corporate buildings as it was with WA-PAC DOS. WaPac for Windows
was released as a beta test version only in 1998. A fully released version
will be released in early 1999.
Building Watch: The Company developed and announced Building Watch in 1990.
Initial product shipments began in December 1990. Building Watch is an
economical access control product which controls access to 32 doors in many
buildings from a single computer which may be shared with other computer
programs. The Company announced Building Watch for Windows in 1997. Building
Watch revenues approximated 12% of all Company revenue in 1998, 14% in 1997
and 14% in 1996.
Door Watch: The Company announced Door Watch in December of 1992 and began
shipping the product in December of that year. Door Watch revenues approximated
2% of total Company revenue in 1998, 1% in 1997, and 2% in 1996.
The Company introduced and began selling Sentry in 1997. Sentry was not a
significant contributor to revenue in 1997. In 1998, Sentry contributed 1%
of all Company revenue.
MARKETS
The primary market for the ATM access control product line is banks with
automatic teller machine (ATM) vestibules. The Company believes that its
access control and building management product lines are applicable to a wide
variety of commercial, government and institutional markets; i.e., military
bases, hospitals, colleges and universities, research and computer
facilities, office buildings, and office or manufacturing complexes.
RAW MATERIAL
The Company purchases components for its products from electronics distributors.
The Company designed printed circuit boards are purchased from board
manufacturers and outside assembly houses manufacture the completed printed
circuit boards. Final assembly, test and shipping as well as any customization
is performed by the Company. The Company is not dependent upon any one firm
for components or assembly work and duel sourcing is a company policy. The
Company solicits bids for its work and awards business based upon quality of
workmanship, price and lead time. The Company has not experienced difficulty
obtaining parts or outside assemblers for its products.
MARKETING AND CUSTOMERS
The company sells its products through the efforts of district sales managers
who market the product through independent security dealers and locksmiths
world wide. The Company markets its products primarily through trade shows,
advertising in selected industry journals and magazines, government supply
contracts, selected direct mailings, the Internet and supporting dealer bids
and proposals.
The Company continues to expand its base of distribution by increasing the
number of dealers authorized to sell the Company's products. The Company
sells direct to certain large banks and government agencies. The Company's
business is not seasonal in any material respect. The Company has no dependence
upon a single customer or a few customers.
PATENTS AND TRADEMARKS
The Company holds no patents on any of its current products.
WORKING CAPITAL ITEMS
Manufacturing cycle time approximates 2 weeks. The Company feels that this is
not unusual for a company that uses outside contractors for manufacturing and
assembly.
The Company provides a one year warranty after a product is shipped. Normal
payment terms are 30 days.
BACKLOG
The ending backlog was $54,237 in 1998, $78,187 in 1997, $34,864 in 1996.
RESEARCH AND DEVELOPMENT
The Company expends monies on technical support , research and development of
new products, and the enhancement of existing products. Such expenditures are
consistent with the Company's overall product development, maintenance and
enhancement strategies. In 1997, a significant engineering effort was entered
into where development of new Windows based products occupied most of our
engineering effort. This effort continued through 1998 concluding with the
release of WA-PAC for Windows to beta test in the field and a custom ATM access
control system designed exclusively for Citicorp.
GOVERNMENT CONTRACTS
The Company does not actively pursue government contracts, but does have a GSA
contract and sells to the government whenever it is advantageous. Government
revenue approximated 2% of total revenue in 1998, 3% in 1997 and 1% in 1996.
None of the Company's sales under government contracts are subject to
renegotiation of profits or termination of contracts or subcontracts, to the
best of the Company's knowledge.
COMPETITORS
Over 150 companies compete in the card based access control marketplace. The
principle Company competitors include Cardkey Systems, Sensormatic,
Westinghouse, CASI-RUSCO, Corby Industries, and Northern Computers. The Company
believes its sales volume is a small fraction of the combined sales of the
Company's major competitors.
A competitor that chooses to devote substantial economic resources toward
acquiring a dominant position in the access control devices market might
seriously injure the Company's market position and jeopardize its viability,
but the product line has proven to be reliable and competitive over the years
and should survive this type of competition. The Company believes that
competition in our marketplace is based upon reliability, price, service, and
product capability. The Company believes that it can compete on such terms.
ENVIRONMENTAL MATTERS
The nature of the Company's manufacturing operation is such that no materials
are discharged into the environment. Under the terms of the Company's lease
for its operating facility, it is obligated for the normal maintenance and
repair of building systems. No additional capital expenditures are
anticipated by the Company.
PERSONNEL
At December 31, 1998, the Company had twenty four (24 ) full and part time
employees.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
REVENUE
The Company operates from a headquarters facility located in Natick,
Massachusetts and a sales office in Atlanta Georgia.
Export revenue approximated 17% of total revenue in 1998, 20% in 1997 and 19%in
1996. The Company sells to American brokers doing business abroad and directly
to end users and foreign dealers. The currency used for all sales to foreign
firms is the U.S. Dollar.
ITEM 2. PROPERTIES
The Company currently leases approximately 7,160 square feet of office and
manufacturing space in a one story brick and masonry building located at 9 Tech
Circle, Natick, Massachusetts under the terms of a five year lease which expires
June 1, 1999. The current monthly base rate is $3878. Additionally the Company
is required to pay utility charges and insurance costs as well as the Company's
portion of taxes and common space charges.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings are pending to which the Company is a party or to
which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the security holders during the Fourth
Quarter of 1997.
ITEM 5. MARKET OF THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
As of December 31, 1998, to the Company's knowledge, only a limited public
market for its Common Stock existed. The Common Stock is not presently
registered on any stock exchange. The Company is not aware of any
over-the-counter trading in its stock in the past two years.
Prior to December 31, 1993, the Company had 656 stockholders of record of Common
Stock and 13 stockholders of Preferred Stock. Due to the Company's inability to
pay the required semiannual dividends, this Preferred Stock and the accumulated
unpaid dividends were converted to 1,367,040 shares of Common Stock.
Immediately after this conversion, additional shares of common stock were
issued to a principal shareholder and director in payment of certain demand
notes and accrued interest.
PART 11
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
1998 Compared to 1997
Revenues for 1998 were $2,917,792, an increase of $537,825 compared with 1997.
Cost of Sales as a percentage of revenue decreased to 58.16% from 70.17% and
selling expenses for 1998 increased by $77,209 when compared to 1997. The
decrease in Cost of Sales was due to reduced engineering and R&D spending. The
increase in Sales & Marketing expenses relate to the Company's development of
new promotional materials and an aggressive advertising campaign.
At December 31, 1998, current assets exceeded current liabilities by $155,038
including cash in commercial checking and money market accounts of $84,376.
1997 Compared to 1996
Revenues for 1997 were $2,379,967, an increase of $91,692 compared with 1996.
Cost of Sales as a percentage of revenue increased to70.17% from 63.07% and
selling expenses for 1997 increased by $82,476 when compared to 1996. The
increase in Cost of Sales was due to aggressive engineering and R&D spending to
bring Windows into the product line.
Increases in Sales & Marketing expenses relate to the Company's development of
new promotional materials , an aggressive advertising campaign and the hiring of
sales managers in various sections of the U.S.
At December 31, 1997, current assets exceeded current liabilities
by $446,373 including cash in commercial checking and money market accounts of
$36,686.
1996 Compared to 1995
Revenues for 1996 were $2,288,275, an increase of $14,628 compared with 1995.
Cost of Sales as a percentage of revenue increased to 63.07% from 54.26% and
selling expenses for 1996 increased by $87,774 when compared to 1995. The
increase in Cost of Sales was due to necessary product enhancement expenditures.
Increases in Sales & Marketing expenses relate to the Company's development of
new promotional materials and an aggressive advertising campaign.
At December 31, 1996, current assets exceeded current liabilities by $427,802
including cash in commercial checking and money market accounts of $101,550.
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LIQUIDITY AND CAPITAL RESOURCES
During 1998, the Company sold an additional 100,000 shares of common stock at
$1.00 per share to certain holders of common stock. Proceeds of this sale were
used to help fund R&D development of it's WA-PAC for Windows product line and
it's customized ATM access system for Citicorp. No other capital requirements
were necessary.
During 1997, the Company sold an additional 160,000 shares of common stock at
$1.00 per share to certain holders of common stock.Pro-ceeds of this sale were
used to fund R&D development of it's Windows product lines. No other capital
requirements were necessary.
During 1996, the Company operated on it's own cash flow without any additional
outside capital requirements.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements years ended Page Number
December 31, 1998 and 1997.
Independent Auditors' Report - March 22, 1999 1
Balance Sheets as of December 31, 1998 and
December 31, 1997 2
Statements of Operations for years ended
December 31, 1998 and 1997 3
Statements of Stockholders' Equity
for years ended December 31, 1998 and 1997 4
Statements of Cash Flows for years ended
December 31, 1998 and 1997 5
Notes to Financial Statements 6 -11
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
No Form 8-KSB has been filed within 24 months prior to the date of the most
recent financial statements reporting a change of accountants and/or reporting
disagreement on any matter of accounting principle or financial statement
disclosure.
<PAGE>
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTOR OTHER POSITION
NAME AGE SINCE WITH COMPANY
David S. Longworth 64 1981 President and Chief
Operations Officer
Robert Pogorelc 64 1997 Vice President and
Sales Manager
William M. Tetrick 83 1967 CEO and Chairman of the
Board
J. Thomas Gehman 52 1981 None
Lawrence A. Bishop 54 1984 None
David S. Longworth, a Director, is President and Chief Operating Officer since
August, 1994. Prior to that he has served as Executive Vice President and has
provided various engineering and consulting services to the company since 1973
until joining the Company on a full time basis in 1984. Mr. Longworth was
manager of Compliance Engineering at Applicon, Inc. of Burlington,
Massachusetts, a Computer Aided Design Systems manufacturer since January 1983.
From 1973 to 1983, he was employed by Nixdorf Computer Corp. of Burlington,
Massachusetts, a computer manufacturer, as an electrical engineer.
William M. Tetrick, a Director, retired as President in August, 1994 but
remains Chief Executive Officer and Chairman of the Board of Directors of the
Company since December 1967.
Robert Pogorelc, a Director, was elected Vice President in 1994. He joined the
Company as Sales Manager in 1986 and currently is manager of Sales and
Marketing. Mr. Pogorelc was formerly New England District Manager for Bristol
Laboratories, Division of Bristol Myers; National Sales and Marketing Manager
of Irathane Systems, Director of Sales and Marketing for Trancoa Chemical
Corporation; Regional Sales Manager of Incon, Division of Transitron, and
Sales Manager of Apahouser.
J. Thomas Gehman, a Director, is currently vice president of Wolf Technology of
Framingham, MA. Mr. Gehman was Director of Engineering for Amnet, Inc. a
Watertown, Massachusetts computer network control systems manufacturer. Prior
to that, he was a design engineer with Applicon , Inc. from 1981 to 1983 and an
engineering manager at Nixdorf Computer from 1976-1981.
Lawrence A. Bishop, a Director, is Executive Vice President of Gray, Seifert &
Co., Inc., an investment and financial advisory firm, as well as a Director of
several privately held firms.
During the past five years, none of the Company's Directors has been
(1) involved in any petition under the Bankruptcy Act or Bankruptcy Code or
state insolvency proceeding or any criminal proceeding, (2) the subject of any
order, judgment or decree enjoining him from engaging in or limiting his
involvement in any type of business practice, including securities related
activities, or (3) found by any court or the Securities and Exchange
Commission to have violated any securities law.
Item 10. MANAGEMENT REMUNERATION AND TRANSACTIONS
The following is a table of compensation paid to all executive officers and the
sales manager as a group:
CASH COMPENSATION TABLE (1998)
(A) Name of Individual (B) Capacities in which (C) Cash
or Number in Group Served Compensation
All executive officers (1) President and COO
and sales manager as a (2) Treasurer and Clerk
group (3 persons). (3) Vice President and
Sales Manager
$234,000
CERTAIN TRANSACTIONS
As of December 31, 1998, the Company owed Mr. Tetrick approximately $34,470 for
unpaid expenses over the past nineteen years. The total amount of money owed
will be paid in weekly installments of $1057.69 until the debt is cleared.
History: Wm. M. Tetrick
The Company and Mr. Tetrick entered into an agreement on December 31, 1981,
regarding payment of accrued compensation, which was amended on
September 30, 1983 (the "Agreement"). The Agreement provided for repayment
of $100,000 of accrued salary to Mr. Tetrick prior to April 15, 1984, (2) an
increase in Mr. Tetrick's salary from $25,000 to $50,000 a year as of the date
of the amendment, and (3) repayment of remaining accrued compensation to
Mr. Tetrick at the rate of $50,000 per year. Pursuant to the Agreement,
Mr. Tetrick converted $116,000 of accrued salary owed him by the Company
into 202,000 shares of Common Stock. On December 1, 1984, Mr. Tetrick
received payment of $88,529 of accrued salary. Mr. Tetrick accrued his 1984
salary of $50,000. Beginning January 1, 1985, Mr. Tetrick began drawing his
annual salary on a weekly basis.
As of December 31, 1995, the Company had a note receivable from its former
Treasurer in the amount of $148,541.72 to reimburse the Company for certain
expenses incurred and to formalize various cash advances. No payment has been
made to satisfy payment of the note since the Treasurer left the Company
in 1996. The note is receivable over ten (10) years with annual interest
of 7.5% and weekly payments of $150. The balance is due at the end of ten
years and the loan is secured by a second mortgage on the borrower's personal
residence. As collection of amounts outstanding on this note is questionable,
a reserve has been established for the full amount of the outstanding loan.
COMPENSATION PURSUANT TO PLANS
The following table sets forth for each officer who has received options, the
number of options granted under both the 1983 and 1988 stock plans, the year of
grant and the option price:
Year of Option Number
Name Grant Price of Shares
William M. Tetrick 1986 $2.75 12,034 Expired in 1996
David S. Longworth 1986 $2.50 7,776 Expired in 1996
William M. Tetrick 1987 $2.75 14,697 Expired in 1996
David S. Longworth 1987 $2.50 9,019 Expired in 1997
William M. Tetrick 1988 $1.10 74,000 Expired in 1996
David S. Longworth 1988 $1.00 20,000 Expired in 1998
David S. Longworth 1988 $2.50 9,805 Expired in 1998
Robert Pogorelc 1988 $2.50 1,131 Expired in 1998
David S. Longworth 1989 $2.50 10,417
Robert Pogorelc 1989 $2.50 5,000
David S. Longworth 1990 $2.50 10,822
Robert Pogorelc 1990 $2.50 1,850
William M. Tetrick 1991 $2.75 12,963 Expired in 1996
David S. Longworth 1991 $2.50 11,643
Robert Pogorelc 1991 $2.50 2,498
David S. Longworth 1993 $2.50 23,084
Robert Pogorelc 1993 $2.50 4,981
As of March 1, 1999, unexercised options for the purchase of an aggregate of
125,378 shares were held by all employees of the Company (including those held
by Officers and Directors).
No incentive stock option granted by the Company has included any tandem rights,
such as appreciation rights, nor has any incentive stock option granted by the
Company been exercised during 1998.
The Company has established a 401K plan for all employees. During the year
ended December 31, 1998, the Company had contributed $6000 to that plan.
OTHER COMPENSATION
The Company has no other plan or arrangement whereby any person will receive
remuneration upon the termination of his status as an employee, officer or
director of the Company. The Company had paid, as of March 1, 1999, no forms of
contingent compensation.
Other than the transactions described herein, there were no material
transactions during 1998 to which any of the following persons has a direct
or indirect interest: (1) any director or officer of the Company, (2) any
nominee for election as a director, (3) any person who, to the Company's
knowledge, owns 5% or more of the Company's stock, or (4) any relative or
spouse (or relative of such spouse) of the foregoing persons.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the holdings of Common Stock by each person who,
as of December 31, 1998 held of record or was known by the Company to own
beneficially more that 5% of the outstanding Common Stock, by each director and
by all directors and officers as a group.
AMOUNT AND NATURE PERCENTAGE OF
OF BENEFICIAL COMMON STOCK
NAME AND ADDRESS OWNERSHIP (1) (9) OUTSTANDING
William M. Tetrick
2 Ridgeway Drive 423,577(2) (3) (4) 4.40%
Wellesley Hills, MA
02181
David S. Longworth
65 School Street Ext. 59,541 (5) 0.62%
Natick, MA 01760
Robert L. Pogorec 14,329 (6) 0.15%
J. Thomas Gehman
141 Marked Tree Road 2,000 0%
Needham, MA 02192
Lawrence Bishop
c/o Gray, Seifert & Co. Inc. 0 (7) 0%
380 Madison Avenue
New York, NY 10017
Legg Mason, Inc.
c/o Gray Seifert & Co., Inc.
380 Madison Ave.
New York, NY 10017 6.353,846 (8) 65.96%
All Directors and Officers
as a Group (10 persons) 499,447 5.18%
(1) Unless otherwise indicated in the following footnotes, ownership is both
beneficial and of record.
(2) Excludes 13,350 shares owned of record by Mr. Tetrick's wife and 4,840
shares owned by his son, Paul Tetrick, who resides with him, as to which he
disclaims beneficial ownership.
(3) Excludes 131,883 shares owned of record by Gary Cramer, Mr. Tetrick's
son-in-law; 3,200 shares owned by Gary and/or Margaret Cramer, Mr. Tetrick's
daughter, and 2,200 shares owned by the children of Mr. and Mrs. Cramer as to
which Mr. Tetrick disclaims beneficial ownership.
(4) Excludes 18,876 shares owned of record by other children and grand children
of Mr. Tetrick not already disclosed in points (2) and (3) above as to which Mr.
Tetrick disclaims beneficial ownership.
(5) Includes 45,549 shares of Common Stock acquirable on exercise of stock
options.
(6) Includes 14,329 shares of Common Stock acquirable on exercise of stock
options.
(7) Excludes 6,353,846 shares of Common Stock owned by customers of Legg Masson,
Inc., the parent company of Gray Seifert & Co., Inc.
(8) Consists of 6,353,846 shares of Common Stock owned by customers of Gray
Siefert & Co., Inc., an affiliate of Legg Mason, Inc.; however, through
agreements with these customers, Gray Seifert has the discretionary power to
vote and dispose of all such shares.
(9) All options are considered non-dillutive since exercise price exceeds last
known market price.
ITEM 12. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following financial statements of Synergistics, Inc.
are included in Part II Item 7:
Index to Financial Statements years ended Page Number
December 31, 1998 and 1997
Independent Auditors' Report - March 14, 1998 1
Balance Sheets as of December 31, 1998 and
December 31, 1997 2
Statements of Operations for years ended
December 31, 1998 and 1997 3
Statements of Stockholders' Equity (Deficit) for
years ended December 31, 1998 and 1997 4
Statements of Cash Flows for years ended
December 31, 1998 and 1997 5
Notes to Financial Statements 6-11
(b) Exhibits
3.1 Articles of Organization and amendments thereto, as amended through
December 31, 1985 are incorporated by reference from Form 10-K for the year
ended December 31, 1982
3.2 Amendment to Articles of Organization is incorporated by reference from
Form 10-K for the year ended December 31, 1987
3.3 By-Laws, as amended, are incorporated by reference from Form 10-K for the
year ended December 31, 1982
3.4 Amendment to Articles of Organization is incorporated by reference from
Form 10-K for the year ended December 31, 1988
3.5 Amendment to Articles of Organization is incorporated by reference from
Form 10-K for the year ended December 31, 1990
3.6 Amendment to Articles of Organization is incorporated by reference from
Form 10-K for the year ended December 31, 1991
10.1 Sale of Imaging Assets is incorporated by reference from Form 10-KSB for
the year ended December 31, 1995.
10.2 Agreement with William M. Tetrick, dated December 30, 1981, is
incorporated by reference from Form 10-K for the year ended December 31, 1983
10.3 Forms of Incentive Stock Option Plan of 1982 and Incentive Stock Option
Agreement are incorporated by reference from Form 10-Q for the period ended
March 31, 1983
10.4 Forms of Incentive Stock Option Plan of 1983 and Incentive Stock Option
Agreement are incorporated by reference from Form 10-Q for the period ended
March 31, 1984
10.5 Forms of Directors Stock Option Plan of 1987 and Directors Stock Option
Agreement are incorporated by reference from Form 10-K for the period ended
March 31, 1987
27 Financial Data Schedule
Supplemental Information
The Company plans to furnish proxy materials and an Annual Report to
Stockholders to its stockholders subsequent to the date of this Form 10K, at
which time copies shall be furnished to the Commission.
SYNERGISTICS, INC.
By /S/DAVID S. LONGWORTH______________________________
David S. Longworth
President and Chief Operations Officer
Date_March 29, 1999____________________________
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Synergistics, Inc. has caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
By_/S/DAVID S. LONGWORTH_________________
David S. Longworth
President and Chief Operations Officer
In accordance with the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the registrant and in the
capacities indicated.
By_/S/DAVID S. LONGWORTH__________
David S. Longworth
President, COO and Director
Date_3/30/99___________________
By___________________
William M. Tetrick
Director
___________________________
By/S/LAWRENCE BISHOP______________________
Lawrence Bishop
Director
Date_3/30/99 ___________________________
By/S/J. THOMAS GEHMAN_____________________
J. Thomas Gehman
Director
Date_3/30/99 __________________________
By/S/ROBERT L. POGORELC___________________
Robert L. Pogorelc
Director
Date_3/30/99 ___________________________
<PAGE>
SYNERGISTICS, INC.
NATICK, MASSACHUSETTS
FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 1998 AND 1997
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Synergistics, Inc.
Natick, Massachusetts
We have audited the accompanying balance sheets of Synergistics, Inc.
as of December 31, 1998 and 1997, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Synergistics, Inc.
as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/S/LIVINGSTON & HAYNES, P.C.
Livingston & Haynes, P.C.
Wellesley, Massachusetts
March 22, 1999
- 1 -
<PAGE>
SYNERGISTICS, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
CURRENT ASSETS
Cash and equivalents $ 84,376 $ 36,686
Trade accounts receivable, net of reserves of
$20,000 in 1998 and 1997, respectively 619,347 484,682
Related party receivable - 25,000
Inventories 333,382 335,088
Prepaid expenses 14,415 15,026
--------- ---------
TOTAL CURRENT ASSETS 1,051,520 896,482
EQUIPMENT 152,227 142,188
Less depreciation and amortization 103,167 79,267
------- -------
49,060 62,921
DEFERRED TAXES 759,674 817,776
$1,860,254 $1,777,179
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 239,470 $ 307,033
Accrued expenses and other current liabilities 84,059 56,779
Amounts due stockholder 34,470 86,297
------- -------
TOTAL CURRENT LIABILITIES 357,999 450,109
COMMITMENTS AND CONTINGENT LIABILITIES - -
STOCKHOLDERS' EQUITY
Common Stock (authorized 12,000,000 shares;
issued 9,632,561 and 9,557,561 shares in 1998
and 1997, respectively, including 16,445 shares
held in Treasury) 96,326 95,576
Additional paid-in capital 6,873,887 6,799,637
Retained earnings (deficit) (5,460,823)(5,561,008)
--------- ---------
1,509,390 1,334,205
Cost of Common Stock held in Treasury (7,135) (7,135)
--------- --------
1,502,255 1,327,070
$1,860,254 $1,777,179
========== ==========
See accompanying notes to the financial statements.
- 2 -
SYNERGISTICS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
Revenues:
Sales - net $2,917,792 $2,379,967
Interest income 430 1,221
--------- ---------
2,918,222 2,381,188
Costs and expenses:
Costs of sales 1,696,990 1,670,022
General and administrative expenses 407,932 393,457
Selling expenses 618,304 541,095
Bad debt expense 36,400 16,385
Interest expense 309 1,026
--------- --------
2,759,935 2,621,985
INCOME (LOSS) BEFORE INCOME TAXES 158,287 (240,797)
Income taxes - deferred 58,102 -
NET INCOME (LOSS) $ 100,185 $(240,797)
========== ==========
INCOME (LOSS) PER COMMON SHARE $ 0.010 $(0.026)
======= =======
See accompanying notes to the financial statements.
- 3 -
SYNERGISTICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
COMMON STOCK
SHARES AMOUNT
Balances at January 1, 1997 9,297,561 $92,976
Net loss - -
Proceeds from issuance of Common Stock 260,000 2,600
Balances at December 31, 1997 9,557,561 95,576
Net income - -
Settlement of note for Common Stock (25,000) (250)
Proceeds from issuance of Common Stock 100,000 1,000
BALANCES AT DECEMBER 31, 1998 9,632,561 $96,326
========= =======
ADDITIONAL RETAINED
PAID-IN EARNINGS TREASURY STOCK
CAPITAL (DEFICIT) SHARES AMOUNT TOTAL
Balances at
January 1, 1997 $6,542,237 $(5,320,211) 16,445 $ 7,135 $ 1,307,867
Net loss - (240,797) - - (240,797)
Proceeds from
issuance of
Common Stock 257,400 - - - 260,000
Balances at
December 31,
1997 6,799,637 (5,561,008) 16,445 7,135 1,327,070
Net income - 100,185 - - 100,185
Settlement of
note for
Common Stock (24,750) - - - (25,000)
Proceeds from
issuance of
Common Stock 99,000 - - - 100,000
BALANCES AT
DECEMBER 31,
1998 $6,873,887 $(5,460,823) 16,445 $ 7,135 $ 1,502,255
========== ====================================
See accompanying notes to the financial statements
- 4 -
SYNERGISTICS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
Cash flows from operating activities:
Net income (loss) $ 100,185 $(240,797)
Adjustments to reconcile net income (loss)
to net cash (used) by operating activities:
Deferred taxes 58,102 -
Depreciation and amortization 23,900 18,904
(Increase) decrease in assets:
Trade accounts receivable (134,665) (17,123)
Inventories 1,706 (95,270)
Prepaid expenses and other current assets 611 5,684
Increase (decrease) liabilities:
Trade accounts payable (67,563) 86,758
Accrued expenses and other current
liabilities 27,280 (8,484)
Amounts due stockholder (51,827) (55,000)
------- -------
TOTAL ADJUSTMENTS (142,456) (64,531)
------- -------
NET CASH (USED) BY OPERATING ACTIVITIES (42,271) (305,328)
Cash flows from investing activities:
Capital expenditures (10,039) (19,536)
------- ------
NET CASH (USED) BY INVESTING ACTIVITIES (10,039) (19,536)
Cash flows from financing activities:
Proceeds of stock issuance 100,000 260,000
------ -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 100,000 260,000
NET CHANGE IN CASH 47,690 (64,864)
Cash and equivalents at beginning of year 36,686 101,550
--------- ---------
CASH AND EQUIVALENTS AT END OF YEAR $ 84,376 $ 36,686
========= =========
Cash paid for:
Interest $ 309 $ 1,026
Income taxes $ - $ -
Non-cash transactions:
In 1998, 25,000 shares of the Company's Common Stock was received in
settlement of a $25,000 note from a director.
See accompanying notes to the financial statements.
- 5 -
<PAGE>
SYNERGISTICS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE A - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied by
management of the Company in the preparation of the accompanying financial
statements follows.
Nature of Operations
Synergistics, Inc. is engaged in the manufacturing and marketing
of card access systems, which are sold to banks and other commercial customers.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principals requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Equivalents
Cash and equivalents consist of cash on hand, demand deposits
with commercial banks, and money market securities with initial maturities of
less than 90 days.
Inventories
Inventories are stated at the lower of first-in, first-out cost
or aggregate market.
Equipment
Equipment is stated at cost. Normal maintenance and repair
costs are expensed as incurred. Gains and losses on sales or retirements are
included in operations. Depreciation and amortization are provided using
straight-line and accelerated methods over the estimated useful lives of the
assets (5-12 years).
Common Stock Held in Treasury
When Common Stock held in Treasury is issued, Common Stock held
in Treasury is credited for the average cost of the issued securities.
Revenue
The company recognizes revenue from sales at the time products
are shipped to customers.
- 6 -
SYNERGISTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE A - SUMMARY OF ACCOUNTING POLICIES (Continued)
Advertising Costs
The Company expenses advertising costs as incurred.
Sales Commissions
The Company pays sales commissions to various agents only upon the
collection of the accounts receivable generated by the sales. The Company
accounts for these sales commissions at the time products are shipped to
customers.
Income Taxes
The Company accounts for income taxes using Statement of Financial
Accounting Standards (SFAS) 109, "Accounting for Income Taxes", which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based upon the difference between the financial statement and tax
basis of assets. Tax benefits arising from the utilization of carryforward net
operating losses, investment and research and development tax credits are
valued based upon the expected future benefit to be recognized.
(Refer to Note H)
Income Per Share of Common Stock
The weighted average number of shares of Common Stock outstanding
used in computing income per share does not include the effect of the conversion
of the stock options as the exercise price exceeds the current market value of
the security. (Refer to Note E)
Stock Options
The Company accounts for its incentive stock option plans in
accordance with APB No. 25 and does not recognize an expense when options are
issued with an exercise price in excess of market. Currently there is no public
market for this stock and estimates of future value as required by FASB 123
cannot reasonably be determined.
NOTE B - INVENTORIES
Inventories consist of the following at December 31, 1998 and 1997:
1998 1997
Finished goods and work-in-process
at aggregate market $289,066 $298,472
Raw materials 44,316 36,616
------- -------
$333,382 $335,088
======== ========
- 7 -
<PAGE>
SYNERGISTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE C - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the
following at December 31, 1998 and 1997:
1998 1997
Accrued compensation and benefits $30,396 $29,653
Accrued commissions 34,962 8,475
Accrued professional fees 17,500 17,500
Other 1,201 1,151
------ ------
$84,059 $56,779
======= =======
NOTE D - AMOUNTS DUE STOCKHOLDER
Amounts due stockholder consist of the following at December 31,
1998 and 1997:
1998 1997
Amount due stockholder for costs
and expenses incurred by majority
stockholder on Company's behalf;
payable, without interest,
on demand $ 34,470 $ 86,297
------ ------
$ 34,470 $ 86,297
======== ========
NOTE E - STOCKHOLDERS' EQUITY
Common Stock
At December 31, 1998, the Company is authorized to issue 12,000,000 shares
of $.01 par value Common Stock. At December 31, 1998, 9,632,561 shares of
such stock had been issued, including 16,445 shares held in the form of Treasury
Stock and 850,000 shares were reserved for issuance in connection with the stock
option plans discussed below.
- 8 -
SYNERGISTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE E - STOCKHOLDERS' EQUITY (Continued)
Stock Option Plans
The Company has three qualified incentive stock option plans (the "1983
Plan", the "1987 Plan" and the "1988 Plan"), which have been approved by the
Company's stockholders. The 1983 and 1987 Plans provide that options can be
granted for the purchase of 275,000 shares of Common Stock each through
June 1993 and June 1998, respectively, with the options expiring ten years from
the date they are granted, except for options issued to holders of more than ten
percent of the Company's Common Stock, which expire five years from the date
they are granted. Options previously granted under a 1982 Plan expired and
were reissued under the 1983 Plan. The 1988 Plan provides that options can be
granted for the purchase of 350,000 shares of Common Stock through 1998 under
terms similar to the 1983 Plan.
All plans provide that options can be exercised for a value (per
share), as stated by the Company's Board of Directors, as of the date the option
was granted, except for options granted to holders of more than ten percent of
the Company's Common Stock which are exercisable at 110 percent of such stated
value.
Transactions regarding the options during the years ended December
31, 1998 and 1997 are shown as follows;
1983 Plan 1987 Plan 1988 Plan
Outstanding at January 1, 1997 145,632 66,000 130,751
Grants expired during 1997 (111,293) (46,000) (1,479)
Grants forfeited during 1997 - - (736)
------- ------- -------
Outstanding at December 31, 1997 34,339 20,000 128,536
Grants expired during 1998 (21,000) (20,000) (16,238)
Grants forfeited during 1998 - - (259)
------- ------- -------
Outstanding at December 31, 1998 13,339 - 112,039
======= ======= =======
All outstanding options are exercisable at $2.50 per share.
Income Per Share of Common Stock
Income per share of Common Stock is computed based on the weighted
average number of shares of Common Stock outstanding (9,595,061 and 9,441,944
shares for the years ended December 31, 1998 and 1997, respectively).
- 9 -
<PAGE>
SYNERGISTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE F - CONCENTRATION OF RISK
From time to time, the Company maintains deposits with major
financial institutions in excess of insurable limits.
NOTE G - RENT AND OPERATING LEASE COMMITMENT
The Company's rent expense during the years ended December 31, 1998
and 1997 approximated $60,062 and $59,400, respectively, principally under the
terms of a lease for its operating facility.
During April 1994, the Company leased new premises for a period of
five years. The lease provides that the Company is responsible for fifty
percent of the real estate taxes and operating costs of the premises. Future
rental payments required under the lease, exclusive of real estate taxes and
operating costs, are as follows:
Year Ending December 31,
1999 $ 19,390
NOTE H - INCOME TAXES
At December 31, 1998, operating loss carryforwards aggregating
approximately $5,300,000 are available to reduce future federal taxable income,
if any. If not utilized, these carryforwards will expire at various dates
between 1999 and 2008. The carryforwards are subject to examination by the
Internal Revenue Service.
The net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes are reflected in deferred income taxes.
As of December 31, 1998 and 1997, the Company's deferred tax asset consists of:
1998 1997
Net operating loss carryforwards $1,920,709 $1,978,811
Other 66,000 66,000
Valuation allowance (1,227,035) (1,227,035)
---------- ---------
$ 759,674 $ 817,776
========== ==========
- 10 -
<PAGE>
SYNERGISTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
NOTE I - BUSINESS SEGMENT INFORMATION
The Company's business, which consists principally of a single
segment, is the designing, manufacturing and selling of single and
multifunctional electronic systems which control access to secure areas. The
Company sells to domestic and foreign customers from its domestic location.
Sales by Major Customer Category 1998 1997
Government sales $ 71,744 $ 62,808
Other domestic sales 2,345,173 1,834,233
Export sales 500,875 482,926
--------- ---------
$2,917,792 $2,379,967
========== ==========
Export sales are made directly and through United States brokers
to users in Canada, South and Central America to include Mexico, the Middle East
including Turkey, and the South Pacific and Far East. No single foreign area
accounts for more than ten percent of total sales in 1998. One major domestic
contract accounted for approximately 17% of sales.
NOTE J - CONTINGENT SALE OF ASSETS
The Company has negotiated a settlement of the contingent sale of
assets related to the imaging product, calling for payments of $50,000 in 1998,
which have been received, and $14,000 per year in 1999, 2000, and 2001. Income
is being recognized as received.
NOTE K - NOTE RECEIVABLE - DIRECTOR
The Company repurchased 25,000 shares of Common Stock from a
director in exchange for the director's note to the Company.
NOTE L - ADVERTISING COSTS
Advertising expense was $84,947 and $60,773, respectively, for the
years ended December 31, 1998 and 1997.
NOTE M -
The Company has a deferred compensation plan under Section 401(k)
covering substantially all employees. The Company provided a $6,000 match
during 1998 and no match during 1997.
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 84,376
<SECURITIES> 0
<RECEIVABLES> 639,347
<ALLOWANCES> 20,000
<INVENTORY> 333,382
<CURRENT-ASSETS> 1,051,520
<PP&E> 152,227
<DEPRECIATION> 103,167
<TOTAL-ASSETS> 1,860,254
<CURRENT-LIABILITIES> 357,999
<BONDS> 0
0
0
<COMMON> 96,326
<OTHER-SE> 1,413,064
<TOTAL-LIABILITY-AND-EQUITY> 1,860,254
<SALES> 2,917,792
<TOTAL-REVENUES> 2,917,792
<CGS> 1,696,990
<TOTAL-COSTS> 1,696,990
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 36,400
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 158,287
<INCOME-TAX> 58,102
<INCOME-CONTINUING> 100,185
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,185
<EPS-PRIMARY> 0.010
<EPS-DILUTED> 0.010
</TABLE>
