ANNUAL
REPORT
2003
January 30, 2004
To the Stockholders of Synergx Systems Inc.
Enclosed you will find the Annual Report to Stockholders of Synergx Systems Inc.
for the fiscal year ended September 30, 2003 and the proxy materials related to
our upcoming Annual Meeting of Stockholders scheduled for March 10, 2004. We
invite all of you to attend the meeting where we will consider proposals to
elect our Board of Directors, re-appoint our independent auditors and approve a
new Employee Incentive Stock Option Plan.
By any measure 2003 was a successful year during which (notwithstanding a
continuing difficult market for construction) we:
* Increased revenues 17% to approximately $20 million
* Increased operating earnings by $1.0 million to $512,000.
* Increased our order position by 36% to $16.5 million.
In other important business developments
* As part of future business opportunities and diversification, we
completed our 25% investment in Secure 724 LP. This joint venture
company has developed wireless technology that we anticipate
integrating into our products and marketing.
*Hired additional sales persons and engineers to maximize our unique
position as a systems integrator for life safety, security, public
address and audio-visual systems.
*Finalized the terms of our investment in RePort Business Solutions a
provider of software to the investment management industry
*Negotiated a new $3.0 million Credit Facility with Hudson United Bank
{closed in October}
*Shortly after our year end, we completed the launch of our new website at
www.synergxsystems.com to introduce stockholders, customers and others
to our products and people.
While we face strong competition in both New York City and Dallas for sale of
life safety products and service, we believe our broad and expanding product
line, growth in our Comco on-board transit communication product line (with its
geographic diversification) and fast development of our security business will
allow us to continue on a successful track.
On behalf of all of our employees, officers and the Board, we wish to thank you
for your support in the past and your continued investment in Synergx. Our
Annual Meeting will be held at the offices of our attorneys at 96 Spring Street,
8th Floor, New York, NY at 11:00 a.m. on March 10, 2004.
Very truly yours,
Daniel S. Tamkin Joseph Vitale
Chairman and CEO President and COO
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a $3 million credit facility with Citizens Business Credit
of Boston (the "Credit Facility") that was due to expire in December, 2004. The
Credit Facility had an interest rate of prime plus 1/4% on outstanding balances.
Advances under the Credit Facility are measured against a borrowing base
calculated on eligible receivables and inventory. The Credit Facility is secured
by all assets of the Company and all of its operating subsidiaries.
The Credit Facility included various covenants and the Company was also
required to maintain certain financial ratios. At September 30, 2003, the
Company was not in default with any of its financial covenants or financial
ratios and at such time owed approximately $1,256,000 under the Credit Facility.
In October 2003, the Company entered into a new $3 million revolving credit
facility with Hudson United Bank. This credit facility has an interest rate of
prime plus 1/4% and expires in October 2005. Initial proceeds from the new
credit facility were used to pay off the Credit Facility with Citizens Business
Credit. (See footnote 4 - Long Term Debt and footnote 14 - Subsequent Event)
Net cash provided by operations for the twelve months ended September 30,
2003 amounted to $57,000 as compared to $312,000 for the comparable prior year
period. The primary reason for a lower amount of cash being provided by
operations was due to an increase in working capital requirements from funding
$2.9 million of higher sales in 2003. The net cash inflow of $57,000 from
operations during 2003 less the outflow for equipment purchases of ($164,000)
and advances to Secure 724 LP of ($143,000) where funded by an increase in bank
borrowing. The Company anticipates continuation of the negotiation of certain
terms with its customers prior to the beginning of a project, the monitoring of
its terms during a project and completing projects in timely fashion, resulting
in faster final payments. It is the intention of the Company to closely monitor
this program throughout fiscal 2004.
The ratio of the Company's current assets to current liabilities improved
to approximately 2.65 to 1 at September 30, 2003 compared to 2.60 at September
30, 2002.
Synergx's terms of sale are net 30 days. However, the normal receivable
collection period is 60-120 days, exclusive of retainage, because certain
governmental regulations and the Company's frequent status as a subcontractor
(entitled to pro rata payments as the general project is completed) extends the
normal collection period. Synergx believes this is a standard industry practice.
Synergx's receivable experience is consistent with the industry as a whole and
will likely continue. This could be considered an area of risk and concern.
However, due to the proprietary nature of Synergx's systems, many projects
require Synergx's cooperation to secure a certificate of occupancy and/or to
activate/operate a life safety system, thus assisting Synergx's collection of a
significant portion or even total payment, even when Synergx's immediate account
debtor's (contractor) creditors have seized a project. Many large public work
projects are performed under bonding arrangements between the project contractor
(customer) and an insurance company, which can also aid in the ultimate
collectability of the Company's receivable.
RESULTS OF OPERATIONS
Revenues and Gross Profit
For the years ended September 30,
2003 2002
(In thousands)
----------------------
Product Sales $14,720 $10,672
Subcontract Sales 643 1,763
Service Revenue 4,451 4,508
------- -------
Total Revenue $19,814 $16,943
Product Gross Margin $ 5,081 $ 3,484
Subcontract Gross Margin 116 307
Service Gross Margin 1,298 1,328
------- -------
Total Gross Margin $ 6,495 $ 5,119
Gross Profit Product % 35% 33%
Gross Profit Subcontractor % 18% 17%
Gross Profit Service % 29% 29%
-------- -------
Total Gross Profit % 33% 30%
Revenues
The increase in product revenues resulted from a gradual improvement in
economic activity in the Company's principal New York City market during 2003.
The 2002 year was impacted by the events of September 11th which delayed work on
several projects involving New York City Transit Authority and reduced tenant
revenue as tenants relocated out of New York City or consolidated into existing
space uptown. The product revenue improvement in 2003 in the New York City
market area relates to the following: 1) release of projects that have been
delayed by the events of September 11th, 2) a gradual improvement in tenant
activity, 3) higher sales of railcar communication products as we began to see
the release of new orders for shipment. Product revenues in our Dallas, Texas
market area were below 2002 levels but improved in the second half of the 2003
fiscal year.
Subcontract revenue decreased during 2003 as the Company was responsible
for a smaller amount of electrical installation as one large fire alarm project
was completed and another was at a reduced level of activity in 2003.
Service revenues decreased 2% during 2003 primarily due to lower call-in
service on fire alarm systems (replacement parts and service required by
buildings). The previous year was favorably impacted by revenues from buildings
that were required to correct systems that were contaminated from the events of
September 11th.
Gross Profit
Gross profit margin from product revenues increased 46% to $5,081,000 due
to higher product sales (noted above) and related gross margin. Gross profit
margin as a percentage of product revenues was 35% in 2003 compared to 33% in
2002. This improvement in gross profit percentage was due to the effect of
higher sales in which to absorb certain fixed overhead costs. In addition, 2003
benefited from certain purchase discounts received from a supplier.
Gross profit margin related to subcontract revenues for 2003 decreased in
absolute terms as the Company was responsible for a smaller amount of electrical
installation as one fire alarm project was completed in 2003 and another was at
a reduced level. Gross profit margin from service revenues decreased during 2003
due to lower call-in service revenue. The gross profit was higher during the
prior year period because of significantly higher call in maintenance service on
fire alarm systems as replacement parts and service were needed in certain
buildings affected by contamination from the events of September 11th.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses ("S G &A") increased by 7% in
2003 over 2002 primarily as a result of the Company's continued expansion of its
marketing programs for new products and from higher insurance costs. During 2002
additional staffing was made to address the markets for audio/visual and
security products. During 2001 the Company increased staffing in the railcar
transit communication group as it addressed a marketing opportunity for future
business over the next several years. These marketing initiatives helped to
improve total sales in 2003. Consequently, S G & A expenses as a percentage of
sales decreased 3% to 29% in 2003 due to higher sales volume compared to the
relative fixed nature of these costs. The Company will continue to invest in
staff to secure and support sales of new products in future years.
Income Before Tax
The improvement in income before income taxes during 2003 is primarily due
to the increase in gross profit caused by higher product revenues and from
improved margins due to the relative fixed nature of certain overhead costs
(noted above). This improvement in product gross profit was mitigated by lower
gross profit from subcontract revenues. Partially offsetting the improvement in
overall gross profit was an increase in selling, general and administrative
expenses of 7% during 2003 in order to support higher product sales and from
higher insurance costs. Favorably affecting income before income taxes were
declines in interest expense of 27% in 2003 due to lower interest rates and from
lower borrowing levels during 2003. For 2003, the Company also recorded a loss
of $35,000 on its equity in the operating loss of Secure 724 LP.
Tax Provision
The Company's current income tax provision represents federal, state and
local income taxes. Deferred taxes represent the net change in deferred tax
assets and non current deferred tax liability as it related to certain timing
differences of book and tax deductions.
Order Position
Synergx's order position, excluding service, increased to $16.5 million at
September 30, 2003 compared to the $12.1 million level at September 30, 2002.
The Company expects to fulfill a significant portion of its backlog over the
next twelve months. This high level of backlog reflects recent large new orders
for several subway complexes, which will be deliverable over several years as
the projects are released, and reflects recent new orders in the Dallas, Texas
market area. The backlog includes $2.6 million of orders for communication and
announcement systems from several transit car manufacturers, that will be
shippable over the next 24 month period. While quotation activity is brisk,
there is no assurance when orders will be received and whether the order
position will increase. Due to the fact that some of the Company's products are
sold and installed as part of larger construction or mass transit projects,
there is typically a delay between the booking of the contract and its revenue
realization. The order position from time to time includes, and the Company
continues to bid on, projects that include significant subcontractor labor,
(electrical installation performed by others). The Company expects to be active
in seeking orders where the Company would act as a prime contractor and
responsible for management of the project as well as electrical installation.
Plan of Operations
During fiscal 2004, management intends to continue to focus on its
intensified marketing programs that were begun in 1998 and to continue to
contain or monitor fixed overhead as well as to reduce variable costs through
improved efficiency and productivity. Management anticipates improved demand for
products in 2004 and some improved performance. Specifically management is
pursuing a strategy of aggressive costs marketing of products and systems to
drive more revenue through established channels of distribution. Management is
analyzing how to integrate the Secure 724 technology into its marketing efforts
by offering a wireless feature to augment existing new products and systems.
However, competition remains severe in many of the Company's product categories
and demand remains quite low in the Dallas market area due to contraction of
computer, communication and internet related companies. Longer term, management
expects increased demand for the Company's audio-visual, public address,
security and other communication products. Enhancements in recent years to
Synergx's management information systems and methods of approving and monitoring
project costs have improved management's ability to pinpoint waste and/or third
party (supplier or customer) cost responsibility.
Inflation
The impact of inflation on the Company's business operations has not been
material in the past. Casey's labor costs are normally controlled by union
contracts covering a period of three years and its material costs have remained
relatively stable. However in July of 2002, the Company and its union agreed to
a new three year contract that provides for wage/benefits increases of
approximately 5% in each year. During 2001, under terms of the previous union
contract, certain union members, upon passing certain test requirements, began
moving up to higher paying categories that have multiple salary steps per year
in excess of the 5% contractual level. In addition, the demand for highly
skilled professionals has resulted in the need to assess salary levels in order
to remain competitive. It is expected that required salary adjustments will
exceed normal increases given in the past. The Company will try to mitigate the
effect of these increases in labor costs by price increases, if possible, and
expense reductions.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None
Independent Auditors' Report
To the Audit Committee of the Board of Directors of
Synergx Systems Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Synergx Systems
Inc. and its subsidiaries as of September 30, 2003 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
ended September 30, 2003 and 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated statements referred to above present fairly, in
all material respects, the consolidated financial position of Synergx Systems
Inc. and its subsidiaries as of September 30, 2003 and the consolidated results
of their operations and their cash flows for the years ended September 30, 2003
and 2002, in conformity with accounting principles generally accepted in the
United States of America.
December 4, 2003 MARCUM & KLIEGMAN LLP
New York, NY
SYNERGX SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30,
2003
-------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 293,000
Accounts receivable, principally trade, less allowance
for doubtful accounts of $411,000 5,794,000
Inventories 2,449,000
Deferred taxes 295,000
Prepaid expenses and other current assets 309,000
---------
TOTAL CURRENT ASSETS 9,140,000
---------
PROPERTY AND EQUIPMENT -at cost, less
accumulated depreciation and amortization of $1,359,000 418,000
OTHER ASSETS 700,000
----------
TOTAL ASSETS $10,258,000
==========
See accompanying Notes to the Consolidated Financial Statements
SYNERGX SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30,
2003
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and capital leases payable - current portion $ 88,000
Accounts payable and accrued expenses 2,926,000
Deferred revenue 435,000
----------
TOTAL CURRENT LIABILITIES 3,449,000
Note payable to bank 1,256,000
Notes and capital leases payable - less current portion 69,000
Deferred taxes 18,000
----------
TOTAL LIABILITIES 4,792,000
----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, 2,000,000 shares authorized-
none issued and outstanding -
Common stock, 10,000,000 shares authorized, $.001
par value; issued and outstanding 4,061,144 shares 4,000
Capital in excess of par 5,971,000
Accumulated deficit (509,000)
----------
TOTAL STOCKHOLDERS' EQUITY 5,466,000
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,258,000
==========
See accompanying Notes to the Consolidated Financial Statements
SYNERGX SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended September 30,
2003 2002
---------- ----------
Product sales $14,720,000 $10,672,000
Subcontract sales 643,000 1,763,000
Service revenue 4,451,000 4,508,000
----------- -----------
Total revenues 19,814,000 16,943,000
----------- -----------
Cost of product sales 9,639,000 7,188,000
Cost of subcontract sales 527,000 1,456,000
Cost of service 3,154,000 3,180,000
Selling, general and administrative 5,729,000 5,374,000
Interest expense 64,000 89,000
Depreciation and amortization 154,000 149,000
Loss on equity investment 35,000
----------- -----------
19,302,000 17,436,000
----------- -----------
Income (loss) before provision for
(benefit from) income taxes 512,000 (493,000)
----------- -----------
Provision for (benefit from) income taxes:
Current 180,000 (184,000)
Deferred 50,000 (16,000)
----------- -----------
230,000 (200,000)
----------- -----------
Net Income (Loss) $ 282,000 $ (293,000)
=========== ===========
Earnings Per Common Share
Basic Earnings (Loss) Per Share $ 0.07 $ (0.09)
=========== ===========
Diluted Earnings (Loss) Per Share $ 0.06 $ (0.09)
=========== ===========
Weighted average number of common shares outstanding 3,850,811 3,409,794
Weighted average number of common and dilutive
common shares outstanding 4,433,735 3,409,794
See accompanying Notes to the Consolidated Financial Statements
SYNERGX SYSTEMS INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2003 and 2002
TOTAL CAPITAL
STOCKHOLDERS' COMMON STOCK IN EXCESS ACCUMULATED
EQUITY SHARES AMOUNT OF PAR (DEFICIT)
----------- ---------- ------- ---------- ----------
Balance at October 1,2001 $4,783,000 3,408,860 $4,000 $5,277,000 $(498,000)
Issuance of shares from
private placement 238,000 340,000 - 238,000
Stock option compensation 6,000 6,000
Net Loss (293,000) (293,000)
---------- ---------- ---------- ---------- ----------
Balance at September 30, 2002 4,734,000 3,748,860 4,000 5,521,000 (791,000)
Issuance of shares for
investment in Secure 724 LP 405,000 300,000 - 405,000
Issuance of warrants for
investment in Secure 724 LP 28,000 28,000
Exercise of employee stock options 6,000 12,284 - 6,000
Tax benefit of stock option exercsie 11,000 11,000
Net earnings 282,000 282,000
---------- ---------- ---------- ---------- ----------
Balance at September 30, 2003 $5,466,000 4,061,144 $4,000 $5,971,000 $(509,000)
========== ========== ========== ========== ==========
See accompanying Notes to the Consolidated Financial Statements
SYNERGX SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended
September 30,
2003 2002
--------- -----------
OPERATING ACTIVITIES
Net income (loss) $ 282,000 $(293,000)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 154,000 149,000
Deferred tax (benefit) 49,000 (16,000)
Provision for doubtful accounts (17,000) 101,000
Loss on equity investment 35,000
Stock option compensation 6,000
Changes in operating assets and liabilities:
Accounts receivable (747,000) 1,326,000
Inventories (11,000) (146,000)
Prepaid expenses and other current assets 85,000 (156,000)
Other assets (41,000) (4,000)
Accounts payable and accrued expenses 279,000 (647,000)
Deferred revenue (11,000) (8,000)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 57,000 312,000
---------- ----------
INVESTING ACTIVITIES
Notes receivable from Secure 724 LP (143,000)
Purchases of property and equipment (164,000) (118,000)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (307,000) (118,604)
---------- ----------
FINANCING ACTIVITIES
Principal payments on notes payable and capital lease obligations (149,000) (166,000)
Proceeds from notes payable 79,000 98,000
Proceeds from (repayment of) revolving line of credit - net 407,000 (461,000)
Proceeds from private placement 238,000
Proceeds from exercise of stock options 6,000
---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 343,000 (291,000)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 93,000 (98,000)
Cash and cash equivalents at beginning of period 200,000 298,000
---------- ----------
Cash and cash equivalents at end of period $ 293,000 $ 200,000
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 94,000 $ 151,000
Interest $ 67,000 $ 96,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the years ended September 30, 2003 and 2002, the Company incurred no
capital lease obilgations for the acquisition of equipment.
During the year ended September 30, 2003, Synergx purchased from Nafund Inc. a
25% investment in Secure 724 LP in exchange for 300,000 shares of Common Stock
and warrants to purchase 50,000 shares of Common Stock, with an aggregate market
value of $432,500, which is included in OTHER ASSETS (See Note 7)
See accompanying Notes to the Consolidated Financial Statements
Synergx Systems Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Business
The Company operates in one industry segment: the design, manufacture,
distribution, marketing and service of a variety of data communications product
and systems with applications in the fire alarm, life safety, transit, security
and communications industry. The Company conducts its business principally in
the New York Metropolitan area and in Dallas, Texas.
Principles of Consolidation
The consolidated financial statements include the accounts of Synergx Systems
Inc. (formerly Firetector Inc.) and its subsidiaries, all of which are wholly
owned (the "Company"). The principal operating subsidiaries are: Casey Systems
Inc. ("Casey"), General Sound (Texas) Company ("GenSound"), and Systems Service
Technology Corp. ("SST"). Significant intercompany items and transactions have
been eliminated in consolidation. The Company is a subsidiary of Mirtronics,
Inc. ("Mirtronics"), an Ontario publicly-held corporation.
Revenue Recognition
Product sales include sale of systems, which are similar in nature, that involve
fire alarm, life safety and security (CCTV and card access), transit (on board
systems) and communication (paging, announcement and audio/visual). Product
sales represent sales of product along with the integration of technical
services at a fixed price under a contract with an electrical contractor or end
user customer (building owner or tenant), or customer agent. Product sales are
allocated using a constant gross profit percentage over the entire contract, and
is recognized, using the percentage-of-completion method of accounting. The
Company utilizes a units-of-work performed method to measure progress towards
completion of the contract. The effects of changes in contract terms are
reflected in the accounting period in which they become known. Contract terms
provide for billing schedules that differ from revenue recognition and give rise
to costs and estimated profits in excess billings, and billings in excess of
costs and estimated profits. Costs and estimated profits in excess of billing
were not material at September 30, 2003 and 2002 and have been included in
accounts receivable. There was no billing in excess of costs and estimated
profits at September 30, 2003 and 2002.
Subcontract sales principally represent revenues related to electrical
installation of wiring and piping performed by others for the Company when the
Company acts as the prime contractor and sells its products along with
electrical installation. Subcontract sales are also recognized during the entire
project using the percentage-of-completion method of accounting as electrical
installation is performed at the job site.
Service revenue from separate maintenance contracts is recognized on a
straight-line basis over the terms of the respective contract, which is
generally one year. The unearned service revenue from these contracts is
included in current liabilities as deferred revenue. Non-contract service
revenue is recognized when services are performed.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at September 30,
2003, and reported amounts of revenues and expenses during the fiscal year.
Actual results could differ from those estimates.
Inventories
Inventories are priced at the lower of cost (first-in, first-out) or market and
consist primarily of raw materials.
Property and Equipment
Property and equipment are stated at historical cost. Leases meeting the
criteria for capitalization are recorded at the present value of future lease
payments.
Depreciation and amortization of machinery and equipment and furniture and
fixtures are provided primarily by the straight-line method over their estimated
useful lives. The Company depreciates machinery and equipment over periods of 3
to 10 years and amortizes leasehold improvements and assets acquired under
capitalized leases utilizing the straight line method over the life of the lease
or their economic useful life, whichever is shorter.
Other Assets
Other assets consists principally of the 2003 investment in Secure 724 LP which
is comprised of notes receivable of $143,000 and 25% ownership in Secure 724 LP
of $397,500 (net of loss on equity investment of $35,000). This investment
includes the excess of cost over the fair value of the assets acquired on the
date of acquisition of $359,500. (see Note 3 - Investment in Secure 724 LP) Also
included in other assets is the excess of cost over the fair value of the assets
acquired in the 1990 acquisition of General Sound of approximately $103,000.
The Company does not amortize goodwill but evaluates whether the carrying value
of goodwill has become impaired. The pro forma effects of not amortizing
goodwill as it relates to FAS 142 is immaterial.
Advertising Costs
Advertising Costs are expensed as incurred during the year. Advertising Costs
for the years ended September 30, 2003 and 2002 amounted to $27,000 and $23,000,
respectively.
Research and Development Cost
Research and development costs are expensed as incurred during the year.
Research and development costs for the years ended September 30, 2003 and 2002
amounted to $155,000 and $149,000, respectively.
Income Taxes
The Company accounts for income taxes under Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". Under SFAS No. 109, the
asset and liability method is used to determine deferred tax assets and
liabilities based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.
Earnings Per Share
SFAS No. 128 "Earnings Per Share" requires companies to report basic and diluted
earnings per share ("EPS") computations. Basic EPS excludes dilution and is
based on the weighted-average common shares outstanding and diluted EPS gives
effect to potential dilution of securities that could share in the earnings of
the Company. Diluted EPS reflects the assumed issuance of shares with respect to
the Company's employee stock options, non-employee stock options, and warrants.
Potentially dilutive options and warrants of - 0 - and 1,163,582 exist as of
September 30, 2003 and 2002, respectively, which were not included in the
calculation of diluted earnings per share because they were antidilutive.
Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
Concentration of Credit Risk
The Company's operations are located in two large U.S. cities (New York City,
New York and Dallas, Texas), each of which is an independent market. The Company
grants credit to its customers, principally all of which are general or
specialized construction contractors, none of which individually constitutes a
significant portion of outstanding receivables. Approximately 85% of such
outstanding receivables at September 30, 2003 are due from customers in New
York.
At September 30, 2003, the Company had approximately $124,000, that is subject
to insured amount limitations. The Company does not require collateral to
support financial instruments subject to credit risk.
Stock Options and Similar Equity Instruments
The Company adopted the disclosure requirements of SFAS No. 123, "Accounting for
Stock Based Compensation," for stock options and similar equity instruments
(collectively, "Options") issued to employees; however, the Company will
continue to apply the intrinsic value based method of accounting for options
issued to employees prescribed by Accounting Principles Board ("APB") Opinion
25, "Accounting for Stock Issues to Employees," rather than the fair value based
method of accounting prescribed by SFAS No. 123. SFAS No. 123 also applies to
transactions in which an entity issues its equity instruments to acquire goods
or services from non-employees. Those transactions must be accounted for based
on the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measured.
On December 31, 2002, the FASB issued SFAS No. 148 ("SFAS 148"), Accounting for
Stock Based Compensation-Transition and disclosure. SFAS 148 amends SFAS No.
123, to provide an alternative method of transition to SFAS 123's fair value
method of accounting for stock based employee compensation. SFAS 148 also amends
the disclosure provisions of SFAS 123 and Accounting Principles Board ("APB")
Opinion No. 28, "Interim Financial Reporting", to require disclosure in the
summary of significant accounting policies of the effects of an entity's
accounting policy with respect to stock based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
While the statement does not amend SFAS 123 to require companies to account for
employee stock options using the fair value method, the disclosure provisions of
SFAS 123 are applicable to all companies with stock based employee compensation,
regardless of whether they account for that compensation using the fair value
method of SFAS 123, or the intrinsic value method of APB Opinion No. 25. The
adoption of SFAS 148 did not have an impact on net income or pro forma net
income applying fair value method as the Company did not have stock based
compensation for the year ended September 30, 2003. Pro forma net income and pro
forma net income per share applying the fair value method for the year ended
September 30, 2002 is summarized in the following table.
If the Company had elected to recognize compensation expense based upon the fair
value at the grant date for awards under these stock option plans consistent
with the methodology prescribed by SFAS 123, the Company's net income (loss) and
net income (loss) per share for 2003 and 2002 would be reduced to the pro forma
amounts.:
2003 2002
Net Income (Loss):
As reported $282,000 $(293,000)
Deduct: Total stock based employee compensation
expense determined under the fair value-based method
for all awards 7,000
Pro forma 282,000 ( 300,000)
Earnings (Loss) per common share:
As reported
Basic $.07 ($0.09)
Diluted $.06 ($0.09)
====== ======
Pro forma
Basic $.07 ($0.09)
Diluted $.06 ($0.09)
====== =======
These pro forma amounts may not be representative of future disclosures since
the estimated fair value of stock options is amortized to expense over the
vesting period for purposes of future pro forma disclosures, and additional
options may be granted in future years. The fair value of these options was
estimated at the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions for 2002: dividend yield of zero;
expected volatility 45% and expected life of 3.25 year. The weighted average
risk fee interest rates for 2002 was 3.22%. The weighted average fair value of
options granted (extended) in 2002, was $.56.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected price volatility. Because the
Company's employees' stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's'
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of employee stock options.
2. Property and Equipment
Property and equipment (including those arising from capital leases) are
summarized as follows:
September 30,
2003
-------------
Machinery and equipment $1,566,000
Furniture and fixtures 166,000
Leasehold improvements 45,000
----------
1,777,000
Less accumulated depreciation and amortization
1,359,000
----------
$ 418,000
==========
Annual amortization of equipment under capital leases is included with
depreciation and amortization expense.
Depreciation and amortization expense related to these assets were $138,000 and
$133,000 for the years ended September 30, 2003 and 2002, respectively.
3. Investment in Secure 724 L.P.
On May 29, 2003, the Company (through a special purpose Nova Scotia subsidiary)
acquired 25% of the equity of Secure 724 LP ("Secure 724 LP"), an Ontario
limited partnership, from Nafund Inc. ("Nafund") in consideration of (a) 300,000
shares of Common Stock; (b) warrants to purchase 50,000 shares of Common Stock
at $1.15 per share for 24 months; (c) agreeing to provide secured loans of up to
Cdn$300,000 (which was approximately $220,000 U.S. at September 30, 2003) to
Secure 724 LP pro rata with equity/loans to be provided by Nafund and tied to
certain development milestones and (d) 150,000 shares of Common Stock to be
issued in the future upon Secure 724 LP satisfying the milestones and Nafund
providing the funding. Either the Company and/or Nafund can elect not to provide
all or any part of the above funding (regardless of whether the milestones are
attained). If milestones are attained and either the Company and/or Nafund
elects not to provide all or part of the above funding it would have its equity
reduced based on a formula.
The 25% investment in Secure 724 L.P. for 300,000 shares of Common Stock and
warrants to purchase 50,000 shares of Common Stock was valued at $432,500. This
investment is accounted for utilizing the equity method and is included in OTHER
ASSETS. The underlying equity of this investment on the date of the transaction
was approximately $73,000; resulting in goodwill of approximately $359,500;
which will not be amortized but will be tested for impairment. For the year
ended September 30, 2003, a $35,000 adjustment to the equity investment was
recorded to reflect the Company's 25% portion of the operating loss of Secure
724 LP.
In connection with initial capital contribution per the partnership agreement,
the Company advanced $18,158 (Cdn$25,000) to Secure 724 LP in May 2003 and upon
reaching milestones advanced $125,089 (Cdn$175,000) in August 2003. These notes
receivable bear interest at a rate of 4% and mature in May 2006 and August 2006,
respectively.
This transaction was submitted to the stockholders of Synergx (as two directors
of Synergx are directors of Secure 724 LP) and approved at its Annual Meeting on
March 26, 2003.
There can be no assurance that the investment in Secure 724 LP will be
profitable.
4. Long-Term Debt
In 1998, the Company entered into a revolving credit facility with Citizens
Business Credit Company of Boston, Massachusetts (the "Credit Facility"). The
Credit Facility was revised in September 2000 and provides for a $3,000,000
revolving line of credit through December 2004 and carries an interest rate of
prime plus 1/4% on outstanding balances (4.5% at September 30, 2003). The Credit
Facility limits capital expenditures to $250,000 in each year. Advances under
the Credit Facility are measured against a borrowing base calculated on eligible
receivables and inventory. At September 30, 2003 the amount available under the
borrowing base was $2,700,000 and $1,256,000 was outstanding under this
facility. The Credit Facility is secured by all of the assets of the Company and
all of its operating subsidiaries.
The Credit Facility includes certain restrictive covenants, which among other
things, impose limitations on declaring or paying dividends, acquisitions and
capital expenditures. At September 30, 2003, the Company was not in default of
any of its financial covenants and in October 2003 this Credit Facility was
replaced with a new credit facility with Hudson United Bank (see Note 14 -
Subsequent events).
Annual maturities of Loans and Notes and Capital Leases Payable are as follows:
Bank Other Notes and Total
Loan Capital Leases Payable
------------------------------------------------------------------
2004 $ $ 88,000 $ 88,000
2005 1,256,000 50,000 1,306,000
2006 19,000 19,000
------------------------ ------------------------ ----------------
Total $1,256,000 $157,000 $1,413,000
======================== ===================== ===================
5. Leases
The Company leases certain office and warehouse space under noncancelable
operating leases expiring at various times through 2010. In February 2000, the
Company signed a lease for office, manufacturing and warehouse space in Syosset,
New York. The rental schedule provides for monthly rent of $13,966 during the
first and second years of the initial term and with 3.3% yearly increases for
the third thru seventh years. This lease expires in June 2007.
The Company has a lease for its service center in New York City that became
effective August 2002 and runs thru December 31, 2009. The lease is for office
and warehouse space and provides for yearly rental of $84,000 during the first
year plus expenses with yearly escalation of 2% each year thereafter. Total cost
of space over the life of the lease will approximate $631,000.
The Company leases an office and warehouse facility in Richardson, Texas, a
suburb of Dallas, pursuant to a lease that was extended in August, 2002 to
expire on June 30, 2010 providing for annual rent on a net basis of $50,152
escalating annually to $64,016 in the final year of the lease.
The following is a schedule of future minimum payments, by year and in the
aggregate, under operating leases with initial or remaining terms of one year or
more at September 30, 2003:
Total Operating
Leases
2004 323,000
2005 333,000
2006 343,000
2007 300,000
2008 155,000
2009 159,000
2010 24,000
---------
Total minimum lease payments $1,637,000
=========
Rental expense amounted to $314,000 and $366,000 for 2003 and 2002,
respectively.
6. Significant Customers and Suppliers
During fiscal 2003 and 2002, no customer accounted for more than 10% of sales.
One supplier accounted for 11% of Synergx's cost of sales during fiscal 2003.
7. Income Taxes
During the year ended September 30, 2003, the Company recorded a tax provision
of $230,000 compared to a tax benefit of $(200,000) for the year ended September
30, 2002. A reconciliation of such with the amounts computed by applying the
statutory federal income tax rate is as follows:
Year ended September 30,
2003 2002
------------------------------
Statutory federal income tax rate 34% 34%
Computed expected tax from income $174,000 ($168,000)
(Decrease)Increase in taxes resulting from:
State and local income taxes, net of Federal tax benefit 47,000 (22,000)
Nondeductible expenses 11,000 8,000
(Decrease) in taxes resulting from
benefit of future tax deductible items (2,000) (18,000)
------------------------------
Provision (Benefit) $230,000 ($200,000)
==============================
The Company provided $13,000 and $13,000 for state and local franchise and
capital taxes for the years ended September 30, 2003 and 2002, respectively.
These expenses have been included in selling, general and administrative
expenses for each of the years presented.
The Company has recorded a current deferred tax asset and a non current deferred
tax liability at September 30, 2003 and 2002 related to certain accelerated tax
deductions or book provisions to be deducted in future tax returns. Management
anticipates profitable operations to continue at a level that will result in the
utilization of the entire deferred tax asset.
The components of deferred tax assets and liabilities at September 30, 2003 and
2002 consist of the following:
Deferred Tax Assets 2003 2002
------------------- ------- ---------
Allowance for doubtful accounts $165,000 $172,000
Inventory reserve 112,000 120,000
Net operating loss carryforward 18,000 47,000
------ --------
Total deferred tax asset $295,000 $339,000
======== ========
Deferred Tax Liabilities
-------------------------
Depreciation and amortization $18,000 $11,000
------- -------
Total deferred tax liability $18,000 $11,000
======= =======
8. Earnings Per Share
Shown below is a table that presents for 2003 and 2002 the computation of basic
earnings per share, diluted earnings per share, weighted shares outstanding, and
weighted average shares after potential dilution.
Year Ended
2003 2002
---------- -----------
Basic EPS Computation
Net income (loss) available to common
stockholders $ 282,000 $(293,000)
Weighted average outstanding shares 3,850,811 3,409,794
Basic earnings (loss) per share $.07 $(.09)
===== ======
Diluted EPS Computation
Income (loss) available to common
stockholders $ 282,000 $(293,000)
Weighted-average shares 3,850,811 3,409,794
Plus: Incremental shares from
assumed conversions
Employee Stock Options* 106,453
Warrants* 476,471
--------- ---------
Dilutive common shares 582,924 N/A
--------- ---------
Adjusted weighted-average shares 4,433,735 3,409,794
--------- ---------
Diluted earnings (loss) per share $.06 $(.09)
==== ======
*All warrants and options were antidilutive in 2002.
9. Stockholders' Equity
On July 7, 2003, the Company's Board of Directors declared a 2-for-1 stock split
of its outstanding stock. The stock split took the form of a dividend whereby
the Company issued on July 25th to each stockholder of record at the close of
business on July 18, 2003 one additional share for every share held on that
date. The financial statements and footnotes for the year ended September 30,
2002, have been adjusted retroactively to reflect this stock split.
On September 30, 2002, the Company sold 340,000 units ("Units") in a private
placement to an unaffiliated investor for $.70 per Unit. Each Unit consists of
one share of Common Stock and one warrant (the "Warrant") to purchase an
additional share of Common Stock at $.70 for a period of 24 months from
September 30, 2002.
The Units, Common Stock, Warrants and Common Stock issueable upon exercise of
the warrants were restricted and were not to be sold or transferred without
registration under or exemption from applicable securities laws. The purchaser
was granted one-time piggyback registration rights (see below).
The Company filed a Form S-3 registration statement, which became effective June
27, 2003. The registration statement provided for the registration of the
340,000 shares in the private placement noted above and for 100,000 shares in
connection the investment in Secure 724 LP (see footnote 4).
The Company filed a Form S-8 registration statement, which became effective July
22, 2003. The registration statement provided for the registration of 404,885
shares issueable under the 1997 Non-Qualified Stock Option Plan.
10. Employee Stock Options, Options, and Warrants
On April 30, 1997, the Company and its stockholders adopted a nonqualified stock
option plan ("1997 Plan"), which was to expire September 30, 2002, except as to
options outstanding under the 1997 Plan. Under the 1997 Plan, the Board of
Directors may grant options to eligible employees at exercise prices not less
than 100% of the fair market value of the common shares at the time the option
is granted. The number of shares of Common Stock that may be issued shall not
exceed an aggregate of up to 10% of its issued and outstanding shares from time
to time. Options vest at a rate of 20% per year commencing one year after date
of grant. Issuances under the 1997 Plan are to be reduced by options outstanding
under a 1990 nonqualified stock option plan (replaced by the 1997 Plan). In
September 2002, the stock option plan was extended to expire on December 31,
2005.
The Company applies the intrinsic value base method of accounting for options
issued to employees rather than the fair value based method of accounting. On
September 19, 2002, options on 48,166 shares of common stock were extended to
December 31, 2005 and the option price remained at $.50 per share. Stock option
compensation expense of $6,743 for year ended September 30, 2002, was recorded
to General and Administrative expense in connection with the extension of these
options.
Transactions involving stock options are summarized as follows:
Weighted Average
Stock Options Exercise Price of
Outstanding Options Outstanding
Balance September 30, 2001 215,916 .52
Options granted (extended) 48,166 .50
Option expired (60,500) .50
Balance September 30, 2002 203,582 .53
Options exercised (12,284) .52
Balance September 30, 2003 191,298 .52
There were 178,073 exercisable options at September 30, 2003 and 189,582
exercisable options at September 30, 2002.
The following table summarizes information concerning currently outstanding and
exercisable stock options.
Outstanding at Weighted Average Exercisable at
Exercise Price September 30, 2003 Contractual Life September 30, 2003
$.56 66,134 1.0 years 52,907
$.52 80,330 2.3 years 80,330
$.50 44,834 2.3 years 44,834
In 1998, the Company granted Mirtronics warrants to purchase 620,000 shares of
the Company's Common Stock which are exercisable at a price of $.51 per share at
any time until December 31, 2003. In December 2003, Mirtronics exercised these
warrants. (See Note 14 - Subsequent Event)
On September 30, 2002, the Company issued 340,000 warrants in connection with a
private placement that are exercisable at $.70 per share of Common Stock until
September 30, 2004. (See Note - 9 Stockholders Equity)
In May 2003, the Company issued 50,000 warrants in connection with its 25%
investment in Secure 724 LP. The warrants are exercisable at $1.15 per share of
Common Stock until May 29, 2005. (Also see Note 13 - Investment in Secure 724
LP)
Transactions involving non-employee stock options and warrants are summarized as
follows:
Weighted Average
Options and Warrants Exercise Price of
Outstanding Options Outstanding
Balance September 30, 2001 653,334 $ .60
Warrants expired 33,334 2.25
Warrants issued 340,000 .70
Balance September 30, 2002 960,000 .58
Warrants issued 50,000 1.15
Balance September 30, 2003 1,010,000 .61
All of these options and warrants were exercisable at the end of the periods
indicated in the above schedule.
The following table summarizes information concerning currently outstanding and
exercisable non-employee warrants.
Outstanding at Weighted Average Exercisable at
Exercise Price September 30, 2003 Contractual Life September 30, 2003
$ .51 620,000 .3 years 620,000
$ .70 340,000 1.0 years 340,000
$1.15 50,000 1.7 years 50,000
11. Contingencies
In the normal course of its operations, the Company has been or, from time to
time, may be named in legal actions seeking monetary damages. Management does
not expect, based upon consultation with legal counsel, that any material item
exists that will affect the Company's business or financial condition.
12. Other
Approximately 32% of the Company's employees are covered by collective
bargaining agreements. On July 20, 2002, the union representing hourly employees
and the Company ratified a Collective Bargaining Agreement expiring July 9,
2005, providing for an increase in salaries and benefits averaging approximately
4 1/2% per year over the life of the contract.
Effective January 1, 1996, the Board of Directors instituted a 401K plan for
nonunion employees. The plan includes a profit sharing provision at the
discretion of the Board of Directors. In 2003 a profit sharing contribution of
$29,000 was authorized and charged to expense. No profit sharing contribution
was authorized in 2002.
13. Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Values of Financial Instruments", requires
disclosing fair value to the extent practicable for financial instruments which
are recognized or unrecognized in the balance sheet. The fair value of the
financial instruments disclosed herein is not necessarily representative of the
amount that could be realized or settled, nor does the fair value amount
consider the tax consequences of realization or settlement.
For certain financial instruments, including cash and cash equivalents, trade
receivables and payables, and short-term debt, it was assumed that the carrying
amount approximated fair value because of the near term maturities of such
obligations. The fair value of long-term debt was determined based on current
rates at which the Company could borrow funds with similar remaining maturities,
which amount approximates its carrying value.
14. Subsequent Events
Long term debt
On October 9, 2003, the Company entered into a new $3 million revolving credit
facility with Hudson United Bank. This credit facility has an interest rate of
prime plus 1/4% and expires in October 2005. Advances under this credit facility
are measured against a borrowing based calculated on eligible receivables and
inventory. The new credit facility is secured by all assets of the Company and
all of its operating subsidiaries. Initial proceeds from the new credit facility
were used to pay off the Credit Facility with Citizens Business Credit. This new
credit facility has certain restrictive covenants which among other things
impose limitations on declaring or paying dividends, acquisitions, and capital
expenditures. The Company is also required to maintain certain financial ratios
and tangible net worth covenants.
Report Business Solutions
On November 20, 2003, the Company's Board of Directors approved entering into a
revised agreement to organize a new Ontario limited partnership to acquire and
operate the business of RePort Business Solutions ("RePort") in partnership with
NSC Holdings Inc. ("NSCH") and Nafund Inc. ("Nafund")
This transaction was originally submitted to the stockholders of Synergx for
approval at its Annual Meeting on March 26, 2003 because two directors of
Synergx are directors of Nafund and one is also a director and principal of
NSCH. Management believes that the revised structure and consideration are
within the scope of the stockholder approval.
Pursuant to the revised agreement (which is subject to approval by NSCH's bank
and completion of definitive documentation), the Company, through a subsidiary,
would acquire from Nafund, 25% of the Class B equity units of RePort in
consideration of the issuance to Nafund of 150,000 shares of Common Stock.
RePort which is currently a division of NSCH, provides software to the
independent international investment counseling, portfolio management and
brokerage community. Located in Toronto, Ontario, RePort's software links
external or outsourced trading, custodian, broker and bank systems in internal
diverse security and asset management systems and contact information systems
and electronic filing and documentation systems. RePort will provide these and
related back office services to NSCH (which is an investment counselor / money
manager) and to other third party investment counselors, money managers, funds
and similar entities.
There can be no assurance however that this transaction will take place.
Transactions with Related Parties
Mirtronics the largest stockholder of the Company had outstanding warrants to
purchase 620,000 shares of the Company's Common Stock, which were issued in
1998, and were exercisable at any time until December 31, 2003 at an exercise
price of $.51 per share. Mirtronics exercised these warrants in December 2003
for a total consideration of $316,200.
15. Authoritative Pronouncements
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", which was effective for the Company commencing October 1, 2002. SFAS
No. 142 requires, among other things, the discontinuance of goodwill
amortization. In addition, the standard includes provisions for the
reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairment of goodwill. The impact of the adoption of SFAS No. 142 resulted in
the Company discontinuing goodwill amortization.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 changes the accounting for
long-lived assets to be held and used by eliminating the requirement to allocate
goodwill to long-lived assets to be tested for impairment, by providing a
probability weighted cash flow estimation approach to deal ith situations in
which alternative courses of action to recover the carrying amount of possible
future cash flows and by establishing a primary-asset approach to determine the
cash flow estimation period for a group of assets and liabilities that
represents the unit of accounting for long-lived assets to be held and used.
SFAS No. 144 changes the accounting for long-lived assets to be disposed of
other than by sale by requiring that the depreciable life of a long-lived asset
to be abandoned be revised to reflect a shortened useful life and by requiring
the impairment loss to be recognized at the date a long-lived asset is exchanged
for a similar productive asset or distributed to owners in a spin-off if the
carrying amount of the asset exceeds its fair value. SFAS No. 144 changes the
accounting for long-lived assets to be disposed of by sale by requiring that
discontinued operations no longer be recognized on a net realizable value basis
(but at the lower of carrying amount or fair value less costs to sell), by
eliminating the recognition of future operating losses of discontinued
components before they occur and by broadening the presentation of discontinued
operations in the income statement to include a component of an entity rather
than a segment of a business. A component of an entity comprises operations and
cash flows that can be clearly distinguished, operationally, and for financial
reporting purposes, from the rest of the entity. The effective date for SFAS No.
144 is for fiscal years beginning after December 15, 2001. The adoption of SFAS
No 144 did not have a significant impact on the Company's financial statements.
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities", provides guidance on the recognition and measurement of liabilities
for cost associated with exit or disposal activities. The provisions of the
Statement are effective for exit or disposal activities that are initiated after
December 31, 2002. The adoption of SFAS No. 146 did not have a significant
impact on the Company's financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
addresses certain financial instruments that, under previous guidance, could be
accounted for as equity, but now must be classified as liabilities in statements
of financial position. These financial instruments include: 1) mandatorily
redeemable financial instruments, 2) obligations to repurchase the issuer's
equity shares by transferring assets, and 3) obligations to issue a variable
number of shares. SFAS No. 150 generally is effective for all financial
instruments entered into or modified after May 31, 2003, and otherwise effective
at the beginning of the first interim period beginning after June 15, 2003. The
adoption of SFAS 150 did not have a significant impact on the Company' financial
statements.
SYNERGX SYSTEMS INC.
CORPORATE DATA
SECURITIES TRADING
Common Stock Nasdaq symbol - SYNX
TRADING RANGES of COMMON STOCK
Quarter Ending High Low
December 31, 2001 1.000 .600
March 31, 2002 1.475 .735
June 30, 2002 .925 .625
September 30, 2002 .775 .580
December 31, 2002 .725 .500
March 31, 2003 1.225 .570
June 30, 2003 1.500 1.100
September 30, 2003 4.175 2.550
The above quotations represent inter-dealer prices, without adjustment for
retail mark-ups, mark-downs or commissions and do not necessarily represent
actual transactions.
RECORD HOLDERS
As of December 18, 2003, there were 472 record holders of Common Stock.
DIVIDENDS
Synergx Systems Inc. has never paid any cash dividends on its Common Stock and
the payment of cash dividends is not expected in the foreseeable future.
Synergx's loan agreements prevent the payment of dividends. The payment of
future dividends will depend on earnings, capital requirements, financial
conditions and other factors considered relevant by the Board of Directors.
TRANSFER AGENT OF ALL CLASSES
American Stock Transfer & Trust Company
GENERAL COUNSEL
Dolgenos Newman & Cronin LLP
Annual Report on Form 10-KSB
Synergx Systems Inc.'s Report on Form 10-KSB as filed with the Securities and
Exchange Commission on December 24, 2003 will provide additional information
about Synergx Systems Inc. A copy of the report is available without charge to
Stockholders upon request to:
Corporate Secretary
Synergx Systems Inc.
209 Lafayette Drive
Syosset, New York 11791
(516) 433-4700
INDEPENDENT AUDITORS
Marcum & Kliegman LLP
DIRECTORS AND EXECUTIVE OFFICERS
Daniel S. Tamkin, Chairman of the Board, Chief Executive Officer, General
Counsel, Audit Committee; Executive Vice President of Forum Financial
Corporation
Joseph Vitale, President, Director
John A. Poserina, Chief Financial Officer, Secretary, Treasurer and Director
Dennis P. McConnell, Director, Audit Committee; Dolgenos Newman & Cronin LLP
Henry Schnurbach, Director, Audit Committee, President of Cantar/ Polyair Inc.
J. Ian Dalrymple, Director
Mark Litwin, Director