SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended Commission File Number O-6421 June 30, 1998 SYNERGISTICS, INC. MASSACHUSETTS 04-2283157 (State of Incorporation) (IRS Employer ID 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(g) of the Act. Common Stock $0.01 Par Value 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 preceeding 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 		 There is no public market for, and thus no aggregate market value of, the registrants securities.		 Indicate the number of shares outstanding of each of the registrant's		 classes of common stock, as of the last practicable date. Class Outstanding at July 31, 1998 Common Stock, one cent par value 9,557,561 NO DOCUMENTS INCORPORATED BY REFERENCE		 SYNERGISTICS, INC. BALANCE SHEET			 ASSETS			 (UNAUDITED) (AUDITED)	 Jun 30 Dec 31	 1998 1997	 CURRENT ASSETS			 Cash 43,201 36,686 Accounts receivable 510,278 529,682 Allowance for doubtful accts (23,336) (20,000)	 Inventories 375,788 335,088 Prepaid expenses 25,846 15,026 ------- -------	 TOTAL CURRENT ASSETS 931,777 896,482	 			 EQUIPMENT, less allowances of $88,867			 and $79,267 for depreciation 57,214 62,921 			 DEFERRED TAXES 817,776 817,776 ------- -------	 TOTAL ASSETS 1,806,767 1,777,179 ========= ========= 			 " LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY"			 			 CURRENT LIABILITIES			 Trade accounts payable 251,597 307,033	 Accrued expenses and other current liabilities 67,154 56,779 Amount due stockholder 59,855 86,297 	 ------- -------	 TOTAL CURRENT LIABLITIES 378,606 450,109 			 STOCKHOLDERS' EQUITY 			 Common Stock (9,557,561 shares issued including shares held in Treasury)	 95,576 95,576 Additional paid-in capital 6,799,637 6,799,637 Retained earnings (deficit) (5,459,917) (5,561,008) --------- --------- 1,435,296 1,334,205	 Cost of Common Stock held in Treasury	 (7,135) (7,135) --------- ---------	 1,428,161 1,327,070 --------- --------- TOTAL LIABILITIES. PREFERRED STOCK			 AND SHAREHOLDERS' EQUITY 1,806,767 1,777,179 ========= ========= SYNERGISTICS, INC. STATEMENT OF OPERATIONS		 PERIOD OF SIX MONTHS ENDED 		 JUNE 30, 1998 AND 1997 (UNAUDITED) (UNAUDITED) 1998 1997 Sales 1,277,729 1,072,046 Other income 82,058 14,544 --------- -------- 1,359,787 1,086,590 		 Costs and expenses:		 Cost of sales	 777,930 815,087 Selling, general and administrative expenses 480,654 422,595 Interest expense 112 875 -------- -------- 1,258,696 1,238,557 --------- --------- Net gain (loss) 101,091 (151,967) 		 Gain (loss) per share of Common Stock		 Assuming no dilution $0.01 ($0.02) Assuming full dilution $0.01 ($0.02) 		 SYNERGISTICS, INC. STATEMENT OF CHANGES IN FINANCIAL POSITION		 PERIODS OF SIX MONTHS JUNE 30, 1998 AND 1997 (UNAUDITED) (UNAUDITED) 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES	 	 Net income (loss) 101,091 (151,967) 		 Adjustments to reconcile net income to net		 cash (used) provided by operating activities:		 Depreciation	 9,600 8,400 (Increase) decrease in accounts receivable 22,740 94,607 (Increase) decrease in inventories (40,700) (26,851) (Increase) decrease in prepaid expenses		 and other assets (10,820) (5,218) Increase (decrease) in accounts payable (55,436) (19,996) Increase (decrease) in accrued expenses		 and other current liabilities 10,375 (9,979) Increase (decrease) in amounts due 		 shareholder (26,442) 132,500 ------- ------- TOTAL ADJUSTMENTS (90,683) 173,463 ------ ------- NET CASH USED BY OPERATING ACTIVITIES 10,408 21,497 		 CASH FLOWS FROM INVESTING ACTIVITIES		 Capital expenditures (3,893) (6,283) ------ ------ NET CASH (USED) BY INVESTING ACTIVITIES (3,893) (6,283) 		 NET CHANGE IN CASH 6,515 15,214 		 CASH AT BEGINNING OF YEAR 36,686 101,550 ------ ------- CASH AT END OF PERIOD 43,201 116,764 ====== ======= SYNERGISTICS, INC. SELECTED INFORMATION		 Certain information and footnote disclosures normally included in		 financial statements prepared in accordance with generally accepted		 accounting principles have been condensed or omitted. It is suggested		 that these financial statements be read in conjunction with the		 financial statements and notes thereto included in the Company's Annual Report Form 10-K. The results of operations for the period ended June 30, 1998 are not necessarily indicative of the operating results for the full year. Basis of Presentation It is the opinion of management that all significant adjustments which are routine recurring adjustments reflected in the accompanying June 30 financial statements which are necessary to present fairly such interim financial statements. Accounting Policy for Revenues and Costs of Sales Revenues are recognized at the time of product shipment. Cost of sales is computed using the "gross profit" method based upon historical results of operations. Other cost, included in costs of sales, are based upon such costs as actually incurred. Inventories		 Inventories are comprised of the following:		 * 6/30/98 12/31/97 Raw Materials 86,430 80,746 Finished Goods & WIP 289,358 254,342 ------- ------- Total Inventories 375,788 335,088 *Allocation Based Upon Estimate		 (Loss) per Common Share		 The weighted average number of shares of common stock outstanding used		 in computing (loss) 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.		 The following schedule sets forth the number of shares used in computing		 earnings per share: Period of Six Months		 Ended June 30		 1998 1997 Assuming no dilution		 Common Stock Outstanding, July 31 9,557,561 	9,297,561 Shares held in Treasury 16,445 16,445 Total Shares Authorized 12,000,000 12,000,000 		 PART I FINANCIAL INFORMATION		 ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the six months ended June 30, 1998, the Company recorded sales of $1,277,729 compared to $1,072,046 for the six months ended June 30, 1997. At June 30, 1998 the Company had a backlog of $71,514 compared to $44,458 at June 30, 1997. Cost of sales as a percentage of sales decreased to 60.9% from 76% for the six months ended June 30, 1998 and 1997, respectively. This decrease is due to the reduction of new product development. For the period of six months ended June 30, 1998, selling, general and administrative expenses increased by $58,059 over the period of six months ended June 30, 1997. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are currently no pending legal proceedings to which the Company is a party or to which any of its property is subject. ITEM 2. CHANGE IN SECURITIES There have been no changes in the instruments defining the rights of holders of any class of securities of the Company during the first six months of calendar year 1998. ITEM 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS A Special meeting in lieu of an annual meeting was held on May 28, 1998. William Tetrick, Dave Longworth, Larry Bishop, Thomas Gehman and Robert Pogorelc were re-elected as directors. 	 A vote was taken to approve Livingston & Haynes, P.C. to continue as auditors for the coming year.	 ITEM 4. EXHIBITS AND FORM 8-K	 Exh 27 Financial Data Schedule	 Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf, the undersigned thereunto being duly authorized.	 DATE__August 13, 1998______ BY_/S/ WILLIAM M. TETRICK William M. Tetrick Chairman of the Board DATE__August 13, 1998_______ BY_/S/DAVID S. LONGWORTH		 David S. Longworth		 President and Clerk