SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K/A AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): September 19, 1996
SYNERGISTIC HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 33-75162 42-1358036
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
50 Laser Court, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 436-5000
405 Sixth Avenue, Suite 200, Des Moines, Iowa 50309
Former name or former address, if changed since last report
Item 4. Changes in Registrant's Certifying Accountant
On February 5, 1997, Synergistic Holdings Corp. (the "Company") dismissed
Deloitte & Touche LLP ("D&T") as its principal independent accountants and
engaged BDO Seidman, LLP ("BDO") as its independent accountants. D&T were the
accountants for the Company prior to the September 19, 1996 merger transaction
pursuant to which Salex Holding Corporation ("Salex") was merged with and into
the Company (the "Merger Transaction"). BDO were the accountants for Salex prior
to the Merger Transaction. In the Merger Transaction, Salex was the acquirer for
accounting purposes, and the Company will continue its relationship with BDO.
The decision to change accountants was approved by the Company's Board of
Directors.
Neither of D&T's reports on the financial statements of the Company for the
fiscal years ended December 31, 1995 or December 31, 1994 contained an adverse
opinion or a disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. During the fiscal years ended
December 31, 1996 and December 31, 1995, there were no disagreements with D&T on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure or any reportable event (See attached Exhibit
16).
Subsequent to the Merger Transaction between the Company and Salex
described above, Salex consulted BDO (its accountants) regarding the issue of
whether the Company or Salex should, for accounting purposes, be treated as the
acquirer in the Merger Transaction. BDO stated in a letter to Salex dated
December 3, 1996 (a copy of which is included as an exhibit to this filing) its
belief that Salex should be treated as the acquirer for accounting purposes. On
January 3, 1997, in a letter to the SEC staff, the Company stated its belief
that Salex should be treated as the acquirer for accounting purposes, provided
the SEC staff with a copy of the letter from BDO, and asked the SEC staff to
indicate that it would not object to the Company accounting for the merger in
that manner. On January 15, 1997, the SEC staff indicated that it would not
object to such accounting. The Company had limited consultations with D&T
regarding this issue, which included D&T's reading of the BDO letter referred to
above. Although D&T orally informed the Company that based on a reading of the
BDO letter they had no reason to disagree with the conclusion expressed in it,
the consultations with D&T did not progress to the point of D&T reaching or
expressing a definitive conclusion regarding the issue.
Item 5. Other Events
On January 17, 1997 the Company received oral notification from the Boston
Stock Exchange that, because the Company had not filed its Form 10-Q as of such
date for its latest fiscal quarter, the Boston Stock Exchange had filed for the
delisting of the Company's securities.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Salex Holding Corporation
and Subsidiaries
and Affiliate
Combined Consolidated Financial Statements
Form 8-K - Item 7
Years Ended April 30, 1994, 1995 and 1996
and Three Months Ended July 31, 1995 and 1996
Salex Holding Corporation
and Subsidiaries
and Affiliate
- --------------------------------------------------------------------------------
Combined Consolidated Financial Statements
Form 8-K - Item 7
Years Ended April 30, 1994, 1995 and 1996
and Three Months Ended July 31, 1995 and 1996
F-1
Salex Holding Corporation
and Subsidiaries
and Affiliate
Contents
- --------------------------------------------------------------------------------
Report of independent certified public accountants F-3
Combined consolidated balance sheets:
April 30, 1995 and 1996 and July 31, 1996 (unaudited) F-4
Combined consolidated financial statements for the three years
ended April 30, 1996 and the three months ended
July 31, 1995 (unaudited) and 1996 (unaudited):
Statements of operations F-5
Statements of stockholders' equity and
proprietor's capital deficiency F-6
Statements of cash flows F-7
Notes to combined consolidated financial statements F-8 - F-22
F-2
Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders of
Salex Holding Corporation
We have audited the accompanying combined consolidated balance sheets of Salex
Holding Corporation and Subsidiaries and Affiliate as of April 30, 1995 and
1996, and the related combined consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended April 30, 1996. 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 combined consolidated 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 combined consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Salex
Holding Corporation and Subsidiaries and Affiliate as of April 30, 1995 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended April 30, 1996, in conformity with generally
accepted accounting principles.
/s/ BDO Seidman, LLP
- -----------------------
Mitchel Field, New York
January 18, 1997, except
for Note 1(a) which is
as of February 4, 1997
F-3
Salex Holding Corporation
and Subsidiaries
and Affiliate
Combined Consolidated Balance Sheets
================================================================================
April 30, July 31,
----------------------------- 1996
1995 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Assets (Note 4)
Current:
Cash $ 54,915 $ 74,354 $ 88,539
Accounts receivable, less allowance of $157,000, $188,000 and
$188,000 for possible losses (Note 7) 3,287,819 3,217,809 3,146,609
Refundable taxes 297,261 58,238 27,732
Prepaid expenses and other 198,265 122,360 119,135
Deferred income taxes (Notes 1 and 8) 16,000 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 3,854,260 3,472,761 3,382,015
- ------------------------------------------------------------------------------------------------------------------------------------
Property and equipment, less accumulated depreciation and
amortization (Notes 1, 3, 5, 6 and 11) 1,941,502 1,867,656 1,842,533
- ------------------------------------------------------------------------------------------------------------------------------------
Other:
Loan receivable, officer (Notes 6 and 11) 778,352 1,004,212 1,076,393
Goodwill, net of accumulated amortization of $544,375, $641,875
and $666,250 (Notes 1 and 2) 1,405,625 1,308,125 1,283,750
Noncompetition and consulting agreement, net of accumulated
amortization (Notes 1 and 10) 210,000 150,000 135,000
Other 19,035 18,635 41,135
- ------------------------------------------------------------------------------------------------------------------------------------
Total other assets 2,413,012 2,480,972 2,536,278
- ------------------------------------------------------------------------------------------------------------------------------------
$ 8,208,774 $ 7,821,389 $ 7,760,826
====================================================================================================================================
Liabilities and Stockholders' Equity and Proprietor's
Capital Deficiency
Current:
Bank overdrafts $ 1,032,733 $ 445,440 $ 918,528
Note payable - finance company (Note 4) 1,688,505 1,456,443 1,475,125
Accounts payable 2,401,659 3,323,193 3,278,303
Accrued expenses and other 358,885 487,484 269,119
Current maturities of long-term debt and capital lease obligations
(Notes 5 and 11) 220,795 227,820 230,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 5,702,577 5,940,380 6,171,075
Long-term debt and capital lease obligations, net of current
maturities (Notes 5 and 11) 1,277,789 1,049,969 987,235
Deferred income taxes (Notes 1 and 8) 27,000 10,000 10,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 7,007,366 7,000,349 7,168,310
- ------------------------------------------------------------------------------------------------------------------------------------
Commitments (Notes 9 and 11)
Stockholders' equity and proprietor's capital deficiency (Notes 1,
2 and 11):
Preferred stock, $.01 par value - shares authorized 5,000,000;
issued and outstanding, none -- -- --
Common stock, $.01 par value - shares authorized 15,000,000;
issued and outstanding, 5,356,200 at April 30, 1995, 7,900,000
at April 30, 1996 and July 31, 1996 53,562 79,000 79,000
Additional paid-in capital 1,958,438 3,951,546 3,951,546
Deficit and proprietor's capital deficiency (810,592) (3,209,506) (3,438,030)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity and proprietor's capital deficiency 1,201,408 821,040 592,516
- ------------------------------------------------------------------------------------------------------------------------------------
$ 8,208,774 $ 7,821,389 $ 7,760,826
====================================================================================================================================
See accompanying notes to combined consolidated financial statements.
F-4
Salex Holding Corporation
and Subsidiaries
and Affiliate
Combined Consolidated Statements of Operations
================================================================================
Year Ended Three Months Ended
April 30, July 31,
------------------------------------------- ---------------------------
1994 1995 1996 1995 1996
(Unaudited) (Unaudited)
- ---------------------------------------------------------------------------------------------------------------
Net sales (Note 7) $ 29,235,395 $ 33,883,908 $ 25,481,628 $ 6,314,607 $ 5,720,520
Cost of sales 24,298,278 28,392,318 21,174,290 5,185,888 4,628,929
- --------------------------------------------------------------------------------------------------------------
Gross profit 4,937,117 5,491,590 4,307,338 1,128,719 1,091,591
Selling, general and
administrative expenses
(Note 2) 4,454,030 5,122,575 6,187,466 1,237,038 1,247,716
- --------------------------------------------------------------------------------------------------------------
Operating income
(loss) 483,087 369,015 (1,880,128) (108,319) (156,125)
- --------------------------------------------------------------------------------------------------------------
Other expense:
Interest expense, net (281,534) (431,844) (460,100) (108,946) (72,399)
Loss on disposal of
property and equipment -- (34,908) -- -- --
- --------------------------------------------------------------------------------------------------------------
Total other expense (281,534) (466,752) (460,100) (108,946) (72,399)
- --------------------------------------------------------------------------------------------------------------
Income (loss) before taxes
on income (recoveries) 201,553 (97,737) (2,340,228) (217,265) (228,524)
Taxes on income
(recoveries) (Note 8) 81,535 (4,000) 58,686 -- --
- --------------------------------------------------------------------------------------------------------------
Net income (loss) $ 120,018 $ (93,737) $ (2,398,914) $ (217,265) $ (228,524)
==============================================================================================================
Net income (loss) per
share (Note 1) $ .02 $ (.01) $ (.25) $ (.03) $ (.02)
==============================================================================================================
Weighted average number
of shares outstanding 7,210,912 7,210,912 9,772,363 7,210,912 10,635,563
==============================================================================================================
See accompanying notes to combined consolidated financial statements.
F-5
Salex Holding Corporation
and Subsidiaries
and Affiliate
Combined Consolidated Statements of Stockholders' Equity
and Proprietor's Capital Deficiency
================================================================================
Common stock Deficit and
------------------------ Additional Proprietor's
Paid-In Capital
Shares Amount Capital Deficiency Total
- -----------------------------------------------------------------------------------------------------------
Balance, April 30, 1993 5,356,200 $ 53,562 $ 1,933,438 $ (547,693) $ 1,439,307
Net income -- -- -- 120,018 120,018
Distribution to stockholders -- -- -- (200,000) (200,000)
- -----------------------------------------------------------------------------------------------------------
Balance, April 30, 1994 5,356,200 53,562 1,933,438 (627,675) 1,359,325
Capital contribution (Note 2) -- -- 25,000 -- 25,000
Net loss -- -- -- (93,737) (93,737)
Distribution to stockholders -- -- -- (89,180) (89,180)
- -----------------------------------------------------------------------------------------------------------
Balance, April 30, 1995 5,356,200 53,562 1,958,438 (810,592) 1,201,408
Sale of common stock
(Note 2) 2,543,800 25,438 1,206,562 -- 1,232,000
Compensation related to sale of
shares (Note 2) -- -- 786,546 -- 786,546
Net loss -- -- -- (2,398,914) (2,398,914)
- -----------------------------------------------------------------------------------------------------------
Balance, April 30, 1996 7,900,000 79,000 3,951,546 (3,209,506) 821,040
Net loss (unaudited) -- -- -- (228,524) (228,524)
- -----------------------------------------------------------------------------------------------------------
Balance, July 31, 1996
(unaudited) 7,900,000 $ 79,000 $ 3,951,546 $(3,438,030) $ 592,516
===========================================================================================================
See accompanying notes to combined consolidated financial statements.
F-6
Salex Holding Corporation
and Subsidiaries
and Affiliate
Combined Consolidated Statements of Cash Flows
(Note 10)
================================================================================
Year ended Three months ended
April 30, July 31,
----------------------------------------------------------------------------
1994 1995 1996 1995 1996
- --------------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income (loss) $ 120,018 $ (93,737) $(2,398,914) $ (217,265) $ (228,524)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization 206,699 256,638 294,973 74,183 74,047
Provision for doubtful accounts 4,369 75,000 31,000 -- --
Loss on disposal of property and
equipment -- 34,908 -- -- --
Deferred income taxes 6,000 21,000 (1,000) -- --
Compensation related to sale of
shares -- -- 786,546 -- --
Increase (decrease) in cash flows from
changes in operating assets and
liabilities:
Accounts receivable (1,612,248) 1,518,028 39,010 142,804 71,200
Refundable taxes -- (297,261) 239,023 22,310 30,506
Prepaid expenses and other
current assets (42,599) (7,293) 75,905 (16,033) 3,225
Other assets 6,804 (1,814) 400 (11,000) (22,500)
Accounts payable 857,671 (869,368) 921,534 (369,635) (44,890)
Accrued expenses and other
current liabilities 102,890 81,194 128,599 274,983 (218,365)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities (350,396) 717,295 117,076 (99,653) (335,301)
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures, net (79,608) (88,765) (63,627) -- (9,549)
Loan to officer (net of repayments of
$104,000, $100,000, $325,000, $0
and $0) (115,607) 7,349 (225,860) -- (72,181)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing
activities (195,215) (81,416) (289,487) -- (81,730)
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Change in bank overdrafts 220,905 (244,858) (587,293) 264,657 473,088
Net proceeds from (repayments of)
note payable-finance company 685,142 (235,709) (232,062) (68,409) 18,682
Principal payments on long-term debt
and capital lease obligations (158,234) (180,555) (220,795) (56,399) (60,554)
Distribution to stockholders (200,000) (89,180) -- -- --
Proceeds from promissory note - bank -- 100,000 -- -- --
Net proceeds from issuance of
common stock -- 25,000 1,232,000 -- --
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 547,813 (625,302) 191,850 139,849 431,216
- --------------------------------------------------------------------------------------------------------------------------
Net increase in cash 2,202 10,577 19,439 40,196 14,185
Cash, at beginning of period 42,136 44,338 54,915 54,915 74,354
- --------------------------------------------------------------------------------------------------------------------------
Cash, at end of period $ 44,338 $ 54,915 $ 74,354 $ 95,111 $ 88,539
==========================================================================================================================
See accompanying notes to combined consolidated financial statements.
F-7
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
1. Summary of
Accounting Policies
(a) Basis of Presentation and Principles of Combination and
Consolidation
Salex Holding Corporation ("SHC") was incorporated on July
31, 1995 under the laws of Delaware. SHC's principal
business is managing the maintenance and repair of fleet
vehicles operated by corporate customers on a nationwide
basis. SHC has begun to expand its operations to provide
services to individual car owners nationwide.
On August 4, 1995, SHC acquired the stock of its four
commonly controlled companies in exchange for 5,356,200
shares of common stock of SHC (the "Reorganization"). These
financial statements have given effect to this transaction
as if it had occurred at the beginning of the earliest year
presented.
These combined consolidated financial statements include the
accounts of SHC and its wholly-owned subsidiaries, Salex
Fleet Specialist Corp., Salex Fleet Management Corp., Salex
National Account Corp., and Salex Salvage Disposal Corp. and
the real estate in which the Company operates, which is
individually owned by SHC's principal stockholder
(collectively, the "Company"). The real estate was
transferred to the Company effective with the merger of SHC
and Synergistic in September 1996 (Note 11).
All significant intercompany accounts and transactions have
been eliminated in the combination.
F-8
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
The Company has sustained operating losses which have
continued into fiscal 1997. Such losses have related
primarily to the loss of several major customers and
increases in operating expenses. The losses have been funded
by the proceeds from the sale of common stock (Note 2(b)(I))
and the private placement (Note 11(f)), additional
borrowings under the revolving credit agreement (Note 4),
and increased trade payables. Management's plans to return
the Company to profitability include a cost cutting program
which was commenced in November 1996 and an aggressive sales
program to replace lost customers, which has recently
resulted in increased sales. However, the Company requires
and management is seeking additional sales and/or debt or
equity capital to complete its plans to return to
profitability. On February 4, 1997 the Company received a
firm offer which would, among other things, infuse
$1,500,000 in cash into the Company immediately in exchange
for shares of convertible preferred stock. It is
management's intent to accept this offer if another
comparable offer is not finalized within a short time.
In preparing financial statements in conformity with
generally accepted accounting principles, management is
required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
F-9
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
(b) Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation and
amortization are provided on either the straight-line basis
or accelerated methods over the estimated useful lives of
the assets.
In March 1995, the Financial Accounting Standards Board
issued Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which is effective for fiscal years beginning after
December 31, 1995, with earlier application encouraged. The
Company has adopted Statement No. 121 for the year ended
April 30, 1996. The adoption of Statement No. 121 did not
have a material effect on the combined consolidated
financial statements.
(c) Taxes on Income
Each of the entities comprising the Company files separate
federal and state income tax returns.
The stockholders of Salex Fleet Management Corp. have
consented to be taxed as an "S" corporation for federal and
state income tax purposes. Therefore, there is no provision
for, or recovery of, income taxes for that company as its
income or losses are reportable in the returns of its
stockholders. The election as an "S" corporation terminated
upon the effective date of the reorganization of the Company
(see Note 1(a)) and Salex Fleet Management Corp. became
subject to federal and state income taxes. The additional
provision for income taxes that would have been required if
Salex Fleet Management Corp. had not been taxed as an "S"
corporation is not material.
Deferred taxes are recorded to reflect the temporary
differences in the tax bases of assets and liabilities and
their reported amounts in the financial statements.
(d) Revenue Recognition
The Company's principal revenues are derived from billings
for repairs and maintenance for vehicles covered in its
fleet management program. Revenues are recorded when the
services have been rendered.
F-10
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
(e) Goodwill
The excess of cost over fair value of net assets acquired is
being amortized on the straight-line method over a twenty
year period. Amortization expense for each of the years
ended April 30, 1994, 1995 and 1996 amounted to $97,500.
Amortization expense for the three month periods ended July
31, 1995 and 1996 amounted to $24,375.
The Company's operational policy for the assessment and
measurement of any impairment in the value of excess of cost
over fair value of net assets acquired which is other than
temporary is to evaluate the recoverability and remaining
life of its goodwill and determine whether the goodwill
should be completely or partially written-off or the
amortization period accelerated. The Company will recognize
an impairment of goodwill if undiscounted estimated future
operating cash flows of the Company are determined to be
less than the carrying amount of goodwill. If the Company
determines that goodwill has been impaired, the measurement
of the impairment will be equal to the excess of the
carrying amount of the goodwill over the amount of the
undiscounted estimated operating cash flows. If an
impairment of goodwill were to occur, the Company would
reflect the impairment through a reduction in the carrying
value of goodwill.
(f) Noncompetition and Consulting Agreement
Amortization is provided over the five year contractual life
of the agreement.
(g) Fair Value of Financial Instruments
The carrying amounts of certain financial instruments,
including cash, accounts receivable and payable, and
short-term debt, approximated fair value as of April 30,
1995 and 1996. The carrying value of long-term debt,
including the current portion, approximated fair value as of
April 30, 1995 and 1996, based on the borrowing rates
currently available to the Company for bank loans with
similar terms and maturities.
F-11
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
(h) Earnings Per Share
Earnings per share information is computed by dividing the
net income (loss) for the applicable period by the weighted
average number of common shares outstanding, as adjusted for
the effect of the exchange of stock in the Reorganization
(Note 1(a)) and the stock split that was effected in
connection with the merger with Synergistic discussed in
Note 11. The terms of the convertible preferred stock issued
in the split are such that the preferred stock is in
substance common stock. Accordingly, the common stock
issuable upon conversion of the preferred stock has been
included in the weighted average number of common shares
outstanding for all periods presented.
(i) New Accounting Pronouncement
In October 1995, the Financial Accounting Standards Board
issued Statement No. 123, "Accounting for Stock-Based
Compensation," which is effective for transactions entered
into after December 31, 1995. Statement No. 123 establishes
a fair value method of accounting for stock-based
compensation, through either recognition or disclosure. The
Company intends to adopt the employee stock-based
compensation provisions of Statement No. 123 in fiscal 1997
by disclosing the pro forma net income and earnings per
share amounts assuming the fair value method was adopted May
1, 1996. The adoption of Statement No. 123 will not impact
the Company's results of operations, financial position or
cash flows.
(j) Interim Financial Statements
The financial statements and related notes thereto as of
July 31, 1996 and for the three months ended July 31, 1995
and 1996 are unaudited and have been prepared on the same
basis as the audited financial statements included herein.
In the opinion of management, such unaudited financial
statements include all adjustments necessary to present
fairly the information set forth therein. These adjustments
consist solely of normal recurring accruals. The interim
results are not necessarily indicative of the results for
any future period.
F-12
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
2. Equity Transactions
(a) In October 1989, a 49% stockholder of the Company purchased
an additional 49% resulting in the Company becoming
substantially wholly-owned and controlled by one
stockholder. The purchase price of $1,950,000 was "pushed
down" to establish a new accounting basis in the Company's
financial statements. The entire amount was charged to
goodwill since the carrying amounts of the other assets and
liabilities approximated their estimated fair values.
Concurrently, an additional $250,000 was paid by the same
stockholder, who was a 50% partner in land and building in
which the Company operates, to purchase the other 50% and
thus become a 100% owner of the property.
(b) (1) In August 1995, Synergistic Holdings Corp.
("Synergistic"), purchased 1,580,000 shares of common stock
directly from SHC for $1,500,000. After related expenses,
net proceeds amounted to $1,129,000, of which $25,000 had
been received in fiscal 1995.
(2) In January 1996, Synergistic purchased an additional
363,400 shares of SHC from SHC's principal stockholder.
(3) A merger of Synergistic and SHC was completed in
September 1996 (Note 11).
(c) In August 1995, 963,800 shares of common stock were sold to
relatives of an officer of SHC for $128,000. A charge for
compensation of approximately $787,000 resulted from this
transaction due to the relative market value of the stock
derived from the Synergistic transaction described in Note
2(b).
(d) The Company's deficit and proprietor's capital deficiency
includes ($100,738), ($49,008) and ($43,760) of proprietor's
capital deficiency as of April 30, 1995 and 1996, and July
31, 1996, respectively, resulting from the operations of the
real estate individually owned by the Company's principal
stockholder.
F-13
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
3. Property and
Equipment
Property and equipment consists of the following:
April 30, July 31,
--------------------------------------
1995 1996 1996
--------------------------------------------------------------------
Land $ 490,000 $ 490,000 $ 490,000
Building 1,227,261 1,227,261 1,227,261
Furniture and fixtures 1,321,238 1,383,754 1,393,303
Vehicles 60,799 60,799 60,799
Leasehold improvements 19,596 21,920 21,920
--------------------------------------------------------------------
3,118,894 3,183,734 3,193,283
Less accumulated depreciation
and amortization 1,177,392 1,316,078 1,350,750
--------------------------------------------------------------------
$1,941,502 $1,867,656 $1,842,533
====================================================================
4. Note Payable -
Finance Company
The Company has a $2,250,000 revolving credit agreement with
a finance company, which expires January 1, 1998. Interest
on borrowings are at prime plus 4.5%, or 13.5%, 12.75% and
12.75% at April 30, 1995, 1996 and July 31, 1996,
respectively. The interest rate was reduced to prime plus 2%
in November 1996. Borrowings are collateralized by
substantially all of the Company's assets not otherwise
encumbered and are personally guaranteed by the Company's
principal stockholder.
F-14
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
5. Long-term Debt and
Capital Lease
Obligations
Long-term debt and capital lease obligations consist of the
following:
April 30, July 31,
--------------------------------
1995 1996 1996
------------------------------------------------------------------
Mortgage payable to bank,
payable in monthly
installments of $6,000
through December 1997,
plus interest at 2% above
the bank's "peg rate"
(10.75% at April 30, 1996)
The balance of $792,203 is
due January 20, 1998. The
mortgage is collateralized
by land and building with a
book value of $1,485,836 at
April 30, 1996 $984,203 $912,203 $894,203
Consulting and
noncompetition agreement
payable in monthly
installments of $5,000
through June 1998 210,000 150,000 130,000
Capital lease obligations with
varying monthly payments
and interest rates ranging
from 15% to 17%
per annum maturing 1998
through 2000; secured by
interests in computer
equipment with a book
value of $106,000 at April
30, 1996 207,084 153,424 138,978
F-15
- --------------------------------------------------------------------------------
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
Promissory note payable to
bank in monthly
installments of $2,703, plus
interest, through April
1998; interest at prime plus
2% (10.25% at April 30,
1996); secured by an
interest in computer
equipment with a book
value of $52,000 at April
30, 1996 97,297 62,162 54,054
-----------------------------------------------------------------------
1,498,584 1,277,789 1,217,235
Less: Current maturities of
long-term debt and capital
lease obligations 220,795 227,820 230,000
-----------------------------------------------------------------------
$1,277,789 $1,049,969 $ 987,235
=======================================================================
F-16
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
The following is a schedule by years of future minimum lease
payments under capital leases, together with the present
value of the net minimum lease payments as of April 30,
1996:
Year ending April 30,
------------------------------------------------------------
1997 $ 83,894
1998 66,331
1999 31,201
2000 5,200
--------
Total minimum lease payments 186,626
Less: amount representing interest 33,202
--------
Present value of net minimum lease payments $153,424
========
The following is a schedule of long-term debt maturities
(including capital lease obligations) as of April 30, 1996:
Year ending April 30,
-----------------------------------------------------------
1997 $ 227,820
1998 986,870
1999 57,997
2000 5,102
-----------------------------------------------------------
$1,277,789
============================================================
6. Related Party Transactions
The Company has a loan receivable of $778,352, $1,004,212
and $1,076,393 from its principal stockholder as of April
30, 1995 and 1996 and July 31, 1996, respectively. For the
years ended April 30, 1994, 1995 and 1996 interest was
computed at 6% per annum. The borrower has agreed to offset
approximately $1,000,000 of the loan against the Company's
note payable to him which arose in September 1996 (see Note
11).
F-17
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
7. Major Customers
For the year ended April 30, 1995, sales to two customers
accounted for approximately 12% of net sales. For the year
ended April 30, 1996, sales to one customer accounted for
approximately 13% of net sales. No receivables from any one
customer represented more than 10% of the April 30, 1995 and
1996 accounts receivable balance. No single customer or
group of customers affiliated through common control
accounted for more than 10% of the Company's sales or
accounts receivable in fiscal 1995 or 1996.
8. Taxes on Income
(Recoveries)
The provisions for (recoveries of) taxes on income in the
consolidated statements of operations consist of the
following:
Year Ended April 30, 1994 1995 1996
- --------------------------------------------------------------------------------
Current:
Federal $ 54,452 $(21,250) $ 50,733
State 21,083 (3,750) 8,953
- --------------------------------------------------------------------------------
Total current 75,535 (25,000) 59,686
- --------------------------------------------------------------------------------
Deferred:
Federal 5,100 17,850 (850)
State 900 3,150 (150)
- --------------------------------------------------------------------------------
Total deferred 6,000 21,000 (1,000)
- --------------------------------------------------------------------------------
Total taxes on income
(recoveries) $ 81,535 $ (4,000) $ 58,686
================================================================================
Significant components of the Company's deferred tax assets
and liabilities are as follows:
April 30, 1995 1996
- --------------------------------------------------------------------------------
Deferred tax assets:
Receivable reserves $ 16,000 $ 75,000
Net operating loss carryforwards -- 515,000
- --------------------------------------------------------------------------------
Total deferred tax asset 16,000 590,000
Valuation allowance for deferred
tax assets -- (590,000)
- --------------------------------------------------------------------------------
Net deferred tax asset $ 16,000 $ --
================================================================================
Deferred tax liability:
Depreciation $ 27,000 $ 10,000
- --------------------------------------------------------------------------------
Noncurrent deferred income
tax liability $ 27,000 $ 10,000
================================================================================
F-18
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
The provision for taxes on income (loss) before taxes
differs from the amounts computed applying Federal statutory
rates due to the following:
Year Ended April 30, 1994 1995 1996
- ------------------------------------------------------------------------
Provision for Federal
income taxes at the
statutory rate 34% (34%) (34%)
Increase (decrease):
Loss (income) earned by
S Corporation taxable
to individual
stockholders (15) 4 --
Adjustment for under
(over) accrual from
prior year (6) (16) 3
State taxes, net of
Federal tax benefit 6 (6) (6)
Non-deductible expenses 21 48 16
Valuation allowance for
deferred tax assets -- -- 24
- ------------------------------------------------------------------------
Provision for taxes on
income 40% (4%) 3%
========================================================================
As of April 30, 1996, the Company has net operating loss
carryforwards for federal income tax purposes of
approximately $1,200,000, expiring in the year 2011.
The Company has provided valuation allowances equal to its
deferred tax assets, consisting principally of the net
operating loss carryforwards, because of the uncertainty as
to their future utilization.
F-19
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
9. Commitments
Retirement Plans
The Company has a 401(K) plan for eligible salaried
employees. The contribution for any participant may not
exceed statutory limits. After six months of employment, the
Company will match 662/3% of each employee participant's
contributions up to the first 6% of compensation. The total
matching contributions charged against operations amounted
to $68,000, $70,000 and $60,000 for the years ended April
30, 1994, 1995 and 1996.
Employment Agreements
The Company has employment agreements with seven officers
covering a three-year period ending in August 1998. These
agreements originally provided for minimum aggregate annual
salaries of $678,000 for fiscal 1997 and 1998, and $170,000
for fiscal 1999. Certain of these commitments have recently
been reduced in connection with the Company's plans
described in Note 1.
10. Supplemental Cash
Flow Information
Supplemental information on interest and income taxes paid
is as follows:
Three Months
Year Ended Ended
April 30, July 31,
-------------------------------------------------------------
1994 1995 1996 1995 1996
- --------------------------------------------------------------------------------
Interest $264,000 $419,000 $460,000 $116,000 $100,000
================================================================================
Income taxes $ 43,000 $164,000 $ 33,000 $ -- $ --
================================================================================
F-20
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
Supplemental schedule of non-cash investing and financing
activities:
The Company entered into a non-competition and consulting
agreement for $300,000 in fiscal 1994, payable over a five
year period, in connection with its third party claims
processing division.
Equipment acquired under capital leases amounted to $111,000
in fiscal 1995.
In fiscal 1996, additional paid-in capital of $787,000 arose
from compensation related to sale of shares of common stock
to relatives of an officer of the Company (Note 2(c)).
11. Subsequent Events
On September 19, 1996, SHC and Synergistic completed a plan
of merger, the principal terms of which are as follows:
(a) Synergistic, concurrent with the merger with SHC, sold all
of its assets and liabilities except its investment in SHC
in exchange for 750,000 shares of Synergistic common stock
and a non-recourse note in the initial principal amount of
$500,000 secured by 250,000 shares of Synergistic common
stock.
(b) Synergistic acquired from SHC's major stockholder 1,453,600
shares of SHC common stock for $2,000,000 in notes payable.
The stockholder has agreed to offset approximately
$1,000,000 of these notes payable against the Company's loan
receivable from the stockholder (see Note 6).
(c) Synergistic acquired the remaining SHC common stock from all
of SHC's stockholders for 4,003,165 shares of Synergistic
common stock and 1,000 shares of Synergistic voting
convertible preferred stock. This Synergistic preferred
stock votes on an if converted basis and automatically
converts into 2,059,106 shares of Synergistic common stock
as soon as the number of Synergistic common shares
authorized is increased to a level sufficient to permit the
conversion.
F-21
Salex Holding Corporation
and Subsidiaries
and Affiliate
Notes to Combined Consolidated Financial Statements
(Information with respect to the three months ended
July 31, 1995 and 1996 is unaudited)
================================================================================
(d) Synergistic granted 179,333 stock options to the SHC
stockholders to purchase Synergistic common stock at $2.13
per share, which approximated fair value at the date of
grant.
(e) The merger agreements provided a grant to SHC's major
stockholder of an option to purchase 500,000 shares of
Synergistic common stock at $1.50 per share if SHC's net
income before taxes for the year ending April 30, 1997
equals or exceeds $2.7 million.
(f) The merger agreements provided for a sale of securities by
SHC in a private placement ("PPM"). Under the terms of the
PPM, each unit sold consists of 250 shares of SHC 8.5%
cumulative convertible preferred stock and 25,000 warrants
to purchase SHC common stock at $3.50 per share. The PPM
provides for the exchange of the preferred stock and
warrants of Synergistic upon closing of the merger. Just
prior to the closing, SHC received $478,000 in proceeds
(after transaction costs of $172,000) from the sale of
units. In November and December 1996, the Company received
another $425,000 in net proceeds from the sale of units.
(g) In connection with the merger, the Company acquired from its
principal stockholder the real estate of its principal place
of business, subject to the related mortgage obligation, in
exchange for a reduction of certain loans receivable from
the stockholder.
Upon completing the merger, the former stockholders of SHC owned
a majority of the voting interests of Synergistic. Accordingly,
the merger will be accounted for as an acquisition of Synergistic
by SHC. The transaction will be reflected in SHC's financial
statements as a recapitalization (a stock split in which common
shares outstanding were reduced and the voting, automatically
converting preferred stock was issued) and a treasury stock
purchase (for $2 million in notes payable), followed by an
issuance of common stock by SHC in exchange for treasury stock
and Synergistic's note receivable. Because the note receivable is
nonrecourse and is collateralized by common stock, it will be
classified as a reduction of stockholders' equity.
F-22
SYNERGISTIC HOLDINGS CORP. AND SUBSIDIARIES AND AFFILIATE
PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In August 1995, Synergistic Holdings Corp. (Synergistic or the "Company")
purchased 1,580,000 shares (representing a 20% common equity interest) of Salex
Holding Corporation ("SHC"), an unrelated privately owned company, directly from
SHC for $1,500,000.
In January 1996, Synergistic purchased an additional 363,400 shares
(representing a 4.6% common equity interest) of SHC directly from SHC's
principal stockholder for $500,000.
On September 19, 1996, a merger of Synergistic and SHC was completed. In the
merger, Synergistic was the legal acquirer. However, as hereinafter described,
SHC was the acquirer for accounting purposes, as this transaction was in
substance a "reverse acquisition" of Synergistic by SHC.
Synergistic, concurrent with the merger with SHC, sold all of its assets except
its investment in SHC in exchange for 750,000 shares of Synergistic common stock
and a nonrecourse note in the initial principal amount of $500,000 secured by
250,000 shares of Synergistic stock.
At the merger closing, Synergistic acquired from SHC's principal stockholder
1,453,600 shares of SHC's common stock for $2 million in notes payable to the
stockholder, and the remainder of his and the other SHC stockholders' stock for
4,003,165 shares of Synergistic common stock and 1,000 shares of Synergistic
Series B voting convertible preferred stock. This Synergistic preferred stock
votes on an if-converted basis and automatically converts into 2,059,106 shares
of Synergistic common stock as soon as the number of Synergistic common shares
authorized is increased to a level sufficient to permit the conversion.
Since the merger resulted in voting control by the stockholders of SHC, the
merger transaction has been accounted for as a recapitalization of SHC (stock
split, distribution of (voting, automatically converting) preferred stock, and
treasury stock purchase (for debt)) followed by an issuance of common stock by
SHC in exchange for treasury stock and Synergistic's nonrecourse note
receivable. The note receivable, because it is nonrecourse and is collateralized
by common stock, has been recorded as a reduction of stockholders' equity.
The accompanying pro forma condensed combined consolidated financial statements
illustrate the effects of the disposition of the Company's assets and the merger
on the Company's financial position and results of operations. The pro forma
condensed combined consolidated balance sheet as of July 31, 1996 is based on
the historical balance sheet of the Company as of June 30, 1996 and of SHC as of
July 31, 1996, and assumes the disposition and merger took place on that date.
The pro forma condensed combined consolidated statements of operations for the
year ended April 30, 1996 and the three months ended July 31, 1996 are based on
the historical statements of operations for SHC for those periods and for
Synergistic for the year ended March 31, 1996 and the three months ended June
30, 1996. The pro forma condensed combined consolidated statements of operations
assume the disposition and merger took place on May 1, 1995.
As a result of the merger, SHC is the continuing entity for financial reporting
purposes, and the pro forma financial statements represent its combined
consolidated financial position and results of operations. After the disposition
of its discontinued broker/dealer operations, the accounts of Synergistic
included in the pro forma condensed combined consolidated financial statements
reflect only corporate level expenses.
The accompanying pro forma condensed combined consolidated financial statements
should be read in connection with the historical financial statements of the
Company and SHC.
Synergistic Holdings Corp. and Subsidiaries and Affiliate
Pro Forma Condensed Combined Consolidated Balance Sheets
(Unaudited)
Proforma
Synergistic Disposition Synergistic Salex Acquisition as
June 30, 1996 Adjustment Pro forma July 31, 1996 Adjustments Adjusted
--------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 330,263 $ (330,263)(1) $ 88,539 $ 88,539
Accounts receivable -- -- 3,146,609 3,146,609
Receivables from brokers 863,360 (863,360)(1) -- --
Securities owned, at market value 678,082 (678,082)(1) -- --
Prepaid expenses and other
current assets -- -- 146,867 146,867
------------ ----------- ---------- -----------
Total current assets 1,871,705 -- 3,382,015 3,382,015
Property and equipment 395,080 (395,080)(1) -- 1,842,533 1,842,533
Investment in Electronic Designs,
Inc., at cost 1,000,000 (1,000,000)(1) -- --
Investment in Salex Holding
Corporation, at cost 2,000,000 2,000,000 (2,000,000)(4) --
Receivables from officers and employees 261,034 (261,034)(1) -- 1,076,393 1,076,393
Goodwill and other intangibles -- -- 1,418,750 1,418,750
Deferred income taxes 889,000 (889,000)(1) -- --
Other assets 164,857 (164,857)(1) -- 41,135 41,135
------------ ----------- ---------- -----------
$ 6,581,676 $ 2,000,000 $ 7,760,826 $ 7,760,826
============ =========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Checks issued against future deposits -- -- 918,528 918,528
Securities sold, but not yet purchased,
at market value 144,989 (144,989)(1) -- --
Note payable - finance company -- -- 1,475,125 1,475,125
Accounts payable and accrued expenses 1,480,549 (1,480,549)(1) -- 3,547,422 3,547,422
Current portion of long-term debt -- -- 230,000 230,000
------------ ----------- ---------- -----------
Total current liabilities 1,625,538 -- 6,171,075 6,171,075
Long-term debt, capital lease obligations
and other liabilities 1,000,000 (1,000,000)(1) -- 997,235 2,000,000(2) 2,997,235
Excess of fair value of assets acquired
over cost 717,341 (717,341)(1) --
------------ ------------- ----------- ---------- -----------
Total liabilities 3,342,879 -- 7,168,310 9,168,310
------------ ----------- ---------- -----------
Preferred stock, Series A -- -- -- --
Preferred stock, Series B -- -- -- 10(3) 10
Common stock 59,495 59,495 79,000 (14,536)(2) 91,873
(7,155)(3)
(59,495)(4)
34,564(4)
Additional paid-in capital 6,481,694 6,481,694 3,951,546 (1,985,464)(2) 2,438,663
7,145(3)
(6,481,694)(4)
465,436(4)
Less: Treasury stock (20,802) (1,593,750)(1) (1,614,552) -- 1,614,552(4) --
Note receivable -- (500,000)(1) (500,000) -- (500,000)
Deficit and proprietor's capital
deficiency (3,281,590) 854,953(1) (2,426,637) (3,438,030) 2,426,637(4) (3,438,030)
------------ ----------- ---------- -----------
Stockholders' equity (capital deficit) 3,238,797 2,000,000 592,516 (1,407,484)
------------ ----------- ---------- -----------
$ 6,581,676 $ 2,000,000 $ 7,760,826 $ 7,760,826
============ =========== ========== ===========
See Notes to Pro Forma Condensed Combined Consolidated Financial Statements
(Unaudited)
Synergistic Holdings Corp. and Subsidiaries and Affiliate
Pro Forma Condensed Combined Consolidated Statements of Operations
Year Ended April 30, 1996
(Unaudited)
Synergistic Salex Proforma
Year Ended Disposition Synergistic Year Ended Acquisition as
March 31, 1996 Adjustment Pro forma April 30, 1996 Adjustments Adjusted
------------------------------------------------------------------------------------------
Net sales or revenues $ 17,100,633 $(17,100,633)(5) $ - $ 25,481,628 $ 25,481,628
-
Cost of sales - - 21,174,290 21,174,290
-
----------------- ---------------------------- -------------
Gross profit 17,100,633 - 4,307,338 4,307,338
Selling, general and
administrative expenses 18,981,958 (18,904,689)(5) 77,269 6,187,466 6,264,735
----------------- ---------------------------- -------------
Operating loss (1,881,325) (77,269) (1,880,128) (1,957,397)
Interest expense (175,828) 175,628 (5) - (460,100) (164,379)(6) (624,479)
----------------- ---------------------------- -------------
Loss before income taxes
(recoveries) (2,057,153) (77,269) (2,340,228) (2,581,876)
Income taxes (recoveries) (36,000) 36,000 (5) - 58,686 58,686
----------------- ---------------------------- -------------
Loss from continuing operations $ (2,021,153) $ (77,269)$ (2,398,914) $ (2,640,562)
================= ============================ =============
Loss from continuing operations
per share $ (0.65) $ (0.04) $ (0.28)
================= ============ =============
Weighted average number of
shares outstanding 3,092,848 (1,000,000)(5) 2,092,848 9,534,684
================= ============== =============
See Notes to Pro Forma Condensed Combined Consolidated Financial Statements (Unaudited)
Synergistic Holdings Corp. and Subsidiaries and Affiliate
Pro Forma Condensed Combined Consolidated Statements of Operations
Three Months Ended July 31, 1996
(Unaudited)
Synergistic Salex Proforma
Three Months Ended Disposition Synergistic Three Months Ended Acquisition as
June 30, 1996 Adjustment Pro forma July 31, 1996 Adjustments Adjusted
-----------------------------------------------------------------------------------------------------
Net sales or revenues $ 3,771,147 $(3,771,147)(5) $ -- $ 5,720,520 $ 5,720,520
Cost of sales -- -- 4,628,929 4,628,929
----------- --------------------------- -----------
Gross profit 3,771,147 -- 1,091,591 1,091,591
Selling, general and
administrative expenses 3,808,940 (3,780,111)(5) 28,829 1,247,716 1,276,545
----------- --------------------------- -----------
Operating loss (37,793) (28,829) (156,125) (184,954)
Interest expense (18,409) 18,409(5) -- (72,399) (37,479)(6) (109,878)
----------- --------------------------- -----------
Loss before income taxes (56,202) (28,829) (228,524) (294,832)
Income taxes -- -- -- --
----------- --------------------------- -----------
Loss from continuing operations $ (56,202) $ (28,829) $ (228,524) $ (294,832)
=========== =========================== ===========
Loss from continuing operations
per share $ (0.01) $ (0.01) $ (0.03)
=========== ============ ===========
Weighted average number of shares
outstanding 5,949,535 (1,000,000)(5) 4,949,535 11,246,366
=========== ============ ===========
See Notes to Pro Forma Condensed Combined Consolidated Financial Statements (Unaudited)
Synergistic Holdings Corp. and Subsidiaries and Affiliate
Notes to Pro Forma Condensed Combined Consolidated Financial Statements
(Unaudited)
Note A - Basis of Presentation
Reference is made to the "Introduction" preceding the Pro Forma Condensed
Combined Consolidated Financial Statements.
Note B - Pro Forma Journal Entries
------------------------------
Debit Credit
------------------------------
Balance Sheets
1 Note receivable 500,000
Securities sold, but not yet purchased, at market value 144,989
Accounts payable and accrued expenses 1,480,549
Long-term debt and capital lease obligations 1,000,000
Excess of fair value of assets acquired over cost 717,341
Treasury stock 1,593,750
Cash and cash equivalents 330,263
Receivables from brokers 863,360
Securities owned, at market value 678,082
Property and equipment 395,080
Investment in Electronic Designs, Inc., at cost 1,000,000
Receivables from officers and employees 261,034
Deferred income taxes 889,000
Other assets 164,857
Shareholders' equity 854,953
To record disposition of all assets and liabilities of Synergistic,
exclusive of the investment in Salex Holding Corporation ("SHC"), in
exchange for 750,000 shares of Synergistic common stock (valued at
$2.125 per share, the quoted market price on the date of the
disposition) and a $500,000 nonrecourse note receivable. The note is
collateralized by 250,000 shares of Synergistic common stock and has
been recorded as a reduction of stockholders' equity.
2 Common stock 14,536
Additional paid-in capital 1,985,464
Notes payable 2,000,000
To record acquisition and constructive retirement of treasury stock
purchased from SHC's principal shareholder.
3 Common stock 7,155
Additional paid-in capital 7,145
Preferred stock, Series B 10
To record recapitalization of SHC equity to reflect the 5,730,850
shares of common stock and 1,000 shares of convertible preferred
stock, Series B outstanding
4 Common stock 59,495
Additional paid-in capital 6,481,694
Investment in SHC 2,000,000
Common stock 34,564
Additional paid-in capital 465,436
Treasury stock 1,614,552
Deficit 2,426,637
To record merger of SHC and Synergistic and the constructive
retirement of the treasury stock acquired in the merger. SHC is the
acquirer for accounting purposes.
Synergistic Holdings Corp. and Subsidiaries and Affiliate
Notes to Pro Forma Condensed Combined Consolidated Financial Statements
(Unaudited)
Note B - Pro Forma Journal Entries (Continued)
Statements of Operations
-------------------------------------------------------------
Debit Credit Debit Credit
-------------------------------------------------------------
Three Months Ended Year Ended
July 31, 1996 April 30, 1996
5 Revenues 3,771,147 17,100,633
Income taxes - 36,000
Selling, general and administrative expenses 3,780,111 18,904,689
Interest expense 18,409 175,828
Decrease in loss from continuing operations 27,373 1,943,884
To record disposition of revenues and expenses related to the
broker/dealer operations of Synergistic. Weighted average shares
outstanding was adjusted to reflect the 750,000 shares of
Synergistic common stock received in connection with this
transaction and the additional 250,000 shares received as
collateral for the $500,000 nonrecourse note receivable.
6 Interest expense 37,479 164,379
Increase in loss from continuing operations 37,479 164,379
To record interest expense on notes payable arising from
acquisition of treasury stock from SHC's principal stockholder.
Item 8. Change in Fiscal Year.
On September 19, 1996, the Company made a determination to change its
fiscal year end from December 31 to April 30, the fiscal year end of Salex.
Since Salex was the aquirer in the merger with Synergistic, the financial
statements of the Company for periods prior to the merger will be the financial
statements of Salex. Accordingly, the Company's future filings will be based on
Salex's April 30 fiscal year end.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYNERGISTIC HOLDINGS CORP
By: /s/ Salvatore Crimi
-----------------------
Salvatore Crimi, Chief
Executive Officer
Date: February 6, 1997