U.S. Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-16423
CITADEL ENVIRONMENTAL GROUP, INC.
(Exact name of small business issuer as specified in its charter)
California 84-0907969
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3617 East Thousand Oaks Blvd
Thousand Oaks, CA 91362
(Address of Principal Executive Offices) (Zip Code)
(805) 777-3450
(Registrant's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required o file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
Class Outstanding at November 30, 1997
Common Stock,
no par value 6,279,709
Transitional Small Business Disclosure Format: Yes No X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CITADEL ENVIRONMENTAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION> Sept 30, Dec 31,
1997 1996
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 178,601 $ 43,256
Accounts receivable 571,874 0
Notes receivable 59,500 50,000
Other current assets 21,117 69
Total current assets 831,092 93,325
Property and equipment 667,687 0
Goodwill 2,053,446 0
Other assets 92,155 0
$ 3,644,380 $ 93,325
Liabilities
Current Liabilities:
Accounts payable $ 523,767 $ 75,473
Accrued expenses 652,022 0
Notes payable 786,388 1,225,836
Stock subscriptions 0 280,000
Minority interest 168,705 0
Other liabilities 45,420 50,279
Total current liabilities 2,176,302 1,631,588
Long-term Debt 143,368 0
Stockholders' Equity (Deficiency)
Preferred stock, Series A, $0.01
par value, 1,500,000 shares
authorized and issued, no
shares outstanding 0 15,000
Preferred stock, Series B, $0.01
par value, 1,500,000 shares
authorized and issued, no
shares outstanding 0 15,000
Preferred stock, Series C, $0.01
par value, 2,000,000 shares
authorized and issued, no
shares outstanding 0 20,000
Preferred stock, Convertible, no
par value, 1,280,000 shares
authorized, 1,199,000 issued
and outstanding 997,500 0
Common stock, no par value,
25,000,000 shares authorized,
6,279,709 issued and outstanding 5,246,532 2,112,637
Accumulated deficit (4,919,322) (3,700,900)
Total stockholders' equity
(deficiency) 1,324,710 (1,538,263)
$ 3,644,380 $ 93,325
</TABLE>
See notes to condensed consolidated financial statements
1
<PAGE>
CITADEL ENVIRONMENTAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues $ 490,201 $ 0 $ 781,055 $ 0
Selling, general
and administrative 1,089,011 86,804 2,004,477 68,653
Net income (loss) $(598,810) $(86,804) (1,223,422) $(68,653)
Net income (loss)
per share $(0.10) $(0.12) $(0.26) $ (0.09)
Weighted Average
Number of Common
Shares Outstanding 6,279,709 732,744 4,726,901 732,744
</TABLE>
See notes to condensed consolidated financial statements
2
<PAGE>
CITADEL ENVIRONMENTAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION> Nine Months Ended
September 30,
1997 1996
Cash flows from operating activities:
Current Assets:
<S> <C> <C>
Net income (loss) $(1,223,422) $ (68,653)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation 45,198 0
Amortization 11,682 0
Decrease in accounts receivable 110,123 0
Increase in current assets (10,372) (203,701)
Increase in accounts payable 279,739 53,313
Increase in accrued expenses 435,449 0
Increase in minority interest 1,000 0
(350,603) (219,037)
Cash flows from investing activities:
Purchase of property and equipment (97,288) 0
Cash effect of consolidation of subsidiary (92,680) 0
(189,968) 0
Cash flows from financing activities:
Proceeds from the sale of preferred stock 673,250 0
Sale of treasury stock 0 266,135
Increase in short-term debt 292,000 0
Increase in long-term debt 30,000 0
Repayment of notes payable (319,334) 0
675,916 266,135
Net increase in cash and cash equivalents 135,345 47,098
Cash and cash equivalents:
Beginning of year 43,256 1,565
End of year $ 178,601 $ 48,663
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
CITADEL ENVIRONMENTAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The financial statements included in this Form 10-QSB have been
prepared by Citadel Environmental Group, Inc. (the "Company"), without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures,
normally included in financial statements prepared in accordance with
generally accepted accounting principles, have been condensed, or
omitted, pursuant to such rules and regulations. These financial
statements should be read in conjunction with the financial statements
and related notes included in the Company's December 31, 1996 Form
10-KSB.
The financial statements presented herein reflect in the opinion of
management, all adjustments necessary for a fair presentation of
financial position and the results of operations for the periods
presented. The results of operations for any interim period are not
necessarily indicative of the results for the full year.
The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries in which the Company has
a controlling interest. All significant inter-company transactions
and balances have been eliminated.
2. INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed by dividing net income
(loss) applicable to common stock by the weighted average number of
shares of common stock and common share equivalents outstanding during
each period.
3. INCOME TAXES
Income taxes are calculated using the liability method specified by
Statement of Financial Accounting Standards No.109 (SFAS 109),
"Accounting for Income Taxes". Management provides a valuation
allowance against its deferred tax assets to the extent that
management concludes that it is more likely than not that the
Company will not benefit from the utilization of such deferred tax
assets.
4. ACQUISITION OF APPLIED MEDICAL RECOVERY, INC.
On March 26, 1997, the Company acquired a 64.45% interest in Applied
Medical Recovery, Inc. ("AMR"), an Arizona corporation, engaged in
reprocessing and recycling of non-critical medical instruments and
devices in exchange for 1,633,608 shares of common stock valued at
$2,042,010. The acquisition was accounted for using the purchase
method of accounting and resulted in goodwill of $1,737,971. Goodwill
will be amortized over a 20 year period.
AMR and its subsidiaries have developed a proprietary service which
allows for the recovery and re-use of previously used and
contaminated, (disposable) non-critical surgical instruments and
related medical devices. The FDA has not yet developed regulations for
the new niche reprocessing industry. However,
4
<PAGE>
the regulations are expected to be issued by late 1997 or early 1998.
Until there are published standards, AMR is following FDA Regulation
#1722513 which relates to good manufacturing practices. Prior to
the creation of the independent re-processor of surgical instruments
and/or medical devices, only hospitals
reprocessed instruments. Hospitals do not fall under the regulation
of the FDA and therefore no known regulations are currently in place.
Instruments and/or devices are segregated and collected at the point
of use in specially designated containers, reprocessed at AMR's plants
and are "sold back" to the healthcare facility (point of origin) for
reuse. AMR believes that its reprocessing system may save the
healthcare facility up to 50% in instrument replacement costs.
5. OFFICER'S SEVERANCE AGREEMENT
On January 14, 1997 the Company entered into an agreement with Richard
Landi, accepting his retirement as President of the Company effective
February 1, 1997. Pursuant to the agreement Landi is entitled to full
compensation from February 1, 1997 through January 1, 1998 at $8,333
per month, payable bi-monthly. The Company made payments through March
31, 1997 and has not made any further payment to date. The Company is
seeking arbitration to reach a mutually satisfactory settlement
regarding the unpaid balance of $83,333.
6. STOCK SUBSCRIPTIONS
On August 5, 1996 the Company issued a Private Placement Memorandum
offering up to 666,667 shares of its common stock at a price of $1.50
per share. The common stock certificates for the 186,666 shares
subscribed and paid for were not issued as of December 31, 1996. The
certificates for the 186,666 shares were issued during the quarter
ended March 31, 1997 resulting in a $280,000 increase in the common
stock account.
In conjunction with the private placement of Preferred Stock discussed
in Note 7 below, the 186,666 shares of common stock were converted to
280,000 shares preferred stock in accordance with the terms of the
Preferred Stock private placement.
7. PREFERRED STOCK PRIVATE PLACEMENT
On December 15, 1996 the Company offered through a Private Placement
Memorandum 1,000,000 shares of its Preferred, no par, stock at $1.00
per share, plus one A Warrant and one B Warrant. Two A Warrants allow
the holder to purchase one share of Common Stock at $1.25 per share
and expire one year from date of issuance (October 1997) or 90 days
following the registration of the underlying common shares, whichever
is greater. Two B Warrants allow the holder to purchase one share of
Common Stock at $1.50 per share and expire two years from date of
issuance (October 1998) or 90 days following the registration of the
underlying common shares, whichever is greater. Concurrent with this
offering the Company issued an additional 280,000 shares of Preferred
Stock during the quarter ended March 31, 1997 in exchange for the
186,666 shares of Common Stock sold in the August 5, 1996 Private
Placement, as discussed in Note 6 above.
5
<PAGE>
On April 30, 1997 the December 15, 1996 Private Placement Offering
closed. The results of the offering are as follows:
Subscriptions Shares Funds
Convertible Preferred, no par 717,500 $ 717,500
Series A Warrants 717,500 0
Series B Warrants 717,500 0
In summary, the Company had issued and outstanding the following:
Convertible Preferred Stock, no par 997,500 shares
Series A Warrants 997,500 warrants
Series B Warrants 997,500 warrants
On November 8, 1997 the Board of Directors voted to extend the
expiration dates for the Series A and B warrants to October 30, 1998
and October 30, 1999, respectively.
8. LOAN AGREEMENT WITH APPLIED MEDICAL RECOVERY, INC.
On July 1, 1997, Citadel entered into a loan agreement with AMR. The
loans are covered by a Multiple Advance Promissory Note in the amount
of $3,500,000, bearing interest at Wells Fargo prime rate plus two
percent (2%) per annum with principal and interest due and payable
on or before July 1,1998. The note is secured by a Security Agreement
on all of the assets of AMR and its subsidiaries. The $525,390 loan
to AMR as of June 30, 1997 was consolidated into this loan agreement.
During the quarter and nine months ended September 30,1997 the Company
loaned AMR an additional $169,610 and $645,000, respectively ,
increasing the loan to $695,000. The loan is eliminated in
consolidation. As of November 1, 1997, Citadel has advanced $745,000
to AMR pursuant to this Multiple Advance Promissory Note.
9. RETIREMENT OF SERIES A, B, AND C PREFERRED STOCK
The Company issued 2,840,000 shares of Citadel Common Stock during
the quarter ended June 30, 1997 in exchange for all of the
Series A, B and C Preferred Stock outstanding and the cancellation
of $1,100,000 in indebtedness.
10. NOTES PAYABLE
On August 1, 1997 the Company issued a $52,000 note payable to its
President at the time in consideration of accrued and unpaid
compensation. The note bears interest at 10% per annum and is due on
demand.
On September 25, 1997 the Company received $40,000 pursuant to a
short-term note bearing interest at 10% and due on demand.
On September 26, 1997 the Company received $200,000 pursuant to a
convertible note due March 26, 1998. The note is unsecured and bears
interest at 10% per annum, payable quarterly commencing November 30,
1997. The note and any accrued and unpaid interest is convertible
into common stock of
the Company at an amount equal to 50% of the average closing bid
price of the Company as reported by the NASD Electronic Bulletin Board
for the ten days prior to the notice of conversion.
6
<PAGE>
CITADEL ENVIRONMENTAL GROUP, INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
Citadel's focus is to acquire controlling interest in operating
companies in growth industries and increase the value of the
investment by providing or locating the managerial, administrative and
financial assistance necessary to facilitate growth. The Company is
dependent upon additional debt or equity financing in order to provide
these services for the benefit of its controlled subsidiaries. There
is no assurance that the Company will be able to raise such capital.
On March 26, 1997, the Company acquired a 64.45% interest in Applied
Medical Recovery, Inc. ("AMR"), an Arizona corporation, engaged in
reprocessing and recycling of non-critical medical instruments and
devices in exchange for 1,633,608 shares of common stock valued at
$2,042,010. The acquisition was accounted for using the purchase
method of accounting.
Plan of Operations
The Company intends to assist AMR's expansion of its medical
reprocessing and recovery activities on a national and international
basis. The medical reprocessing and recovery business has four
distinct operating segments.
1) Through 47 independent sales representatives, AMR
contacts individual hospitals and surgical centers and
offers, on a fee for service basis, to reprocess their
non-critical medical instruments and devices. To date,
AMR's primary business has come from the southeast and
northeast sections of the United States and since
inception in 1995, AMR has serviced over 200 accounts.
AMR has developed several innovative approaches to
obtaining instruments from its customers which have
increased the quantity of the instruments recovered
and therefore reprocessed. AMR established a "mail
away" program in 1996 which substantially increased
the amount of instruments recovered from those
facilities which entered AMR's program. All
instruments received from a hospital are reprocessed
and then returned to that facility. Ownership of these
instruments is generally retained by the hospital. AMR
is paid a fee for reprocessing which averages
approximately 50% of the price the hospital originally
paid for the instrument.
2) AMR is targeting hospital groups whereby it can
contract for reprocessing on behalf of a number of
hospitals and surgical centers with common ownership.
Under this approach, AMR can reprocess instruments and
then act as a central supply for the entire group. In
this case, depending on the size of the group, and the
volume of instruments involved, AMR may joint venture
a facility with a major hospital or healthcare group
and process their instruments exclusively. This would
provide substantial savings to the group and improve
inventory controls for the individual hospitals
involved.
7
<PAGE>
3) The Company is negotiating with a major medical waste
transportation and disposal firm which would generate
for AMR a substantial supply of instruments to be
reprocessed. Although no assurance can be given that
AMR will be successful in these negotiations, under
the terms of the agreement, the waste company would
deliver the instruments, for a fee, to a
decontamination center owned and operated by AMR. The
instruments would then be decontaminated and sent to
the Phoenix plant for reprocessing and then returned
back to the hospital of origin. That hospital would
then be charged a fee, or the instruments could be
held in AMR's inventory for overseas sales (See Item
4 below).
4) Instruments and devices received by AMR which are not
under contract with a healthcare facility become the
property of AMR and will, if suitable for
reprocessing, be held in AMR's inventory. AMR believes
that there is a substantial overseas market for
disposable instruments which are currently thrown away
in the United States. AMR intends, either through
joint ventures or direct sales to international
distributors, to sell reprocessed instruments overseas
and then reprocess through offshore facilities the
instruments several more times, depending on the
instrument. Once the instrument is outside the United
States it can have a separate reprocessing operation.
AMR currently has no overseas contractual
relationships.
AMR currently has 34 employees of whom seven are employed at the
corporate office, five of which are executives and two of which are
clerical. The remaining employees are employed at the Phoenix
facility. When the Phoenix facility is fully operational, it will
have the capacity to accommodate up to three shifts per day, with a
single shift employing approximately 40 employees.
Citadel expects to assist in the national and international expansion
of AMR by providing capital (generally in the form of loans) and
certain management expertise. Citadel has committed to AMR that
Citadel would make available a $1,500,000 working capital line of
credit and assist in obtaining an additional $2,000,000 in debt
financing for expansion. As of September 30, 1997 the Company has
advanced AMR $695,000. As of November 30, 1997, Citadel has loaned AMR
$745,000 under the line of credit with future borrowing dependent upon
Citadel's ability to raise additional capital. To date, the
additional $2,000,000 in debt has not yet been secured. Absent the
additional financing, AMR will not have the capital necessary to
achieve its plan of operations.
Liquidity and Capital Resources
The Company's cash and cash equivalents at September 30, 1997 are
$178,601 compared to $43,256 at December 31, 1996. The increase in
cash and cash equivalents of $135,345 is principally due to cash used
by operating activities of $350,603, plus cash used by investing
activities of $189,968, offset by cash provided by financing
activities of $675,916.
For the nine months ended September 30, 1997 the corporate office of
Citadel incurred an operating loss of $446,852. AMR was included in
consolidated operations during the second and third quarters and
incurred an operating loss of $776,569 for a consolidated operating
loss for the period of $1,223,422.
8
<PAGE>
The cash used by operating activities for the nine months ended
September 30, 1997 was $872,819 less than the consolidated operating
loss, or $350,603 principally due to an increase in accounts payable
and accrued expenses of $279,739 and $435,449, respectively, which do
not use cash, plus $110,123 generated by a decrease in accounts
receivable.
The cash used by investing activities included $97,288 of equipment
purchases by AMR plus the cash effect of the consolidation of AMR of
$92,680.
The cash provided by financing activities consists principally of
$673,250 of proceeds from the sale of convertible preferred stock
discussed below and $322,000 in new indebtedness, offset by a net
repayment of notes payable of $319,334.
Acquisition of Applied Medical Recovery, Inc.
On March 26, 1997, the Company acquired a 64.45% interest in Applied
Medical Recovery, Inc. ("AMR"), an Arizona corporation, engaged in
reprocessing and recycling of non-critical medical instruments and
devices in exchange for 1,633,608 shares of common stock valued at
$2,042,010. The acquisition was accounted for using the purchase
method of accounting and resulted in goodwill of $1,737,971. Goodwill
will be amortized over a 20 year period.
AMR and its subsidiaries have developed a proprietary service which
allows for the recovery and re-use of previously used and
contaminated, (disposable) non-critical surgical instruments and
related medical devices. The FDA has not yet developed regulations for
the new niche reprocessing industry. However, the regulations are
expected to be issued by late 1997 or early 1998. Until there are
published standards, AMR is following FDA Regulation #1722513 which
relates to good manufacturing practices. Prior to the creation of the
independent re-processor of surgical instruments and/or medical
devices, only hospitals
reprocessed instruments. Hospitals do not fall under the regulation
of the FDA and therefore no known regulations are currently in place.
Instruments and/or devices are segregated and collected at the point
of use in specially designated containers, reprocessed at AMR's plant
and are "sold back" to the healthcare facility (point of origin) for
reuse. AMR believes that its reprocessing system may save the
healthcare facility up to 50% in instrument replacement costs.
Results of operations for AMR are included in consolidated operations
commencing April 1, 1997.
Separate unaudited financial statements for AMR are attached as
follows:
Balance Sheets as of September 30, 1997 and December 31, 1996 F-1
Statements of Operations for the Quarter and Nine Months
Ended September 30, 1997 and 1996 F-2
Statements of Cash Flows for the Quarter and Nine Months
Ended September 30, 1997 and 1996 na
Notes to Financial Statements F-4
__________________
na - Not available
9
<PAGE>
Officer's Severance Agreement
On January 14, 1997 the Company entered into an agreement with Richard
Landi, accepting his retirement as President of the Company effective
February 1, 1997. Pursuant to the agreement Landi is entitled to full
compensation from February 1, 1997 through January 1, 1998 at $8,333
per month, payable bi-monthly. The Company made payments through March
31, 1997 and has not made any further payment to date. The Company is
seeking arbitration to reach a mutually satisfactory settlement
regarding the unpaid balance of $83,333.
Stock Subscriptions
On August 5, 1996 the Company issued a Private Placement Memorandum
offering up to 666,667 shares of its common stock at a price of $1.50
per share. The common stock certificates for the 186,666 shares
subscribed and paid for were not issued as of December 31, 1996. The
certificates for the 186,666 shares were issued during the quarter
ended March 31, 1997 resulting in a $280,000 increase in the common
stock account.
In conjunction with the private placement of Preferred Stock discussed
below, the 186,666 shares of common stock were converted to 280,000
shares preferred stock in accordance with the terms of the Preferred
Stock private placement.
Preferred Stock Private Placement
On December 15, 1996 the Company offered through a Private Placement
Memorandum 1,000,000 shares of its Preferred, no par, stock at $1.00
per share, plus one A Warrant and one B Warrant. Two A Warrants allow
the holder to purchase one share of Common Stock at $1.25 per share
and expire one year from date of issuance (October 1997) or 90 days
following the registration of the underlying common shares, whichever
is greater. Two B Warrants allow the holder to purchase one share of
Common Stock at $1.50 per share and expire two years from date of
issuance (October 1998) or 90 days following the registration of the
underlying common shares, whichever is greater. Concurrent with this
offering the Company issued an additional 280,000 shares of Preferred
Stock in exchange for the 186,666 shares of Common Stock sold in the
August 5, 1996 Private Placement, as discussed above.
On April 30, 1997 the December 15, 1996 Private Placement Offering
closed. The results of the offering are as follows:
Subscriptions Shares Funds
Convertible Preferred, no par 717,500 $ 717,500
Series A Warrants 717,500 0
Series B Warrants 717,500 0
In summary, the Company had issued and outstanding the following:
Convertible Preferred Stock, no par 997,500 shares
Series A Warrants 997,500 warrants
Series B Warrants 997,500 warrants
On November 8, 1997 the Board of Directors voted to extend the
expiration dates for the Series A and B warrants to October 30,1998
and October 30, 1999, respectively.
10
<PAGE>
Loan Agreement with Applied Medical Recovery, Inc.
On July 1, 1997, Citadel entered into a loan agreement with AMR. The
loans are covered by a Multiple Advance Promissory Note in the amount
of $3,500,000, bearing interest at Wells Fargo prime rate plus two
percent (2%) per annum with principal and interest due and payable
on or before July 1,1998. The note is secured by a Security Agreement
on all of the assets of AMR and its subsidiaries. The $525,390 loan
to AMR as of June 30, 1997 was consolidated into this loan agreement.
During the quarter and nine months ended September 30,1997 the Company
loaned AMR an additional $169,610 and $645,000, respectively ,
increasing the loan to $695,000. The loan is eliminated in
consolidation. As of November 1, 1997, Citadel has advanced $745,000
to AMR pursuant to this Multiple Advance Promissory Note.
Notes Payable
On August 1, 1997 the Company issued a $52,000 note payable to its
President at the time in consideration of accrued and unpaid
compensation. The note bears interest at 10% per annum and is due on
demand.
On September 25, 1997 the Company received $40,000 pursuant to a
short-term note bearing interest at 10% and due on demand.
On September 26, 1997 the Company received $200,000 pursuant to a
convertible note due March 26, 1998. The note is unsecured and bears
interest at 10% per annum, payable quarterly commencing November 30,
1997. The note and any accrued and unpaid interest is convertible
into common stock of the Company at an amount equal to 50% of the
average closing bid price of the Company as reported by the NASD
Electronic Bulletin Board for the ten days prior to the notice of
conversion.
Retirement of Series A, B, and C Preferred Stock
The Company issued 2,840,000 shares of Citadel Common Stock during the
quarter ended June 30, 1997 in exchange for all of the Series A,
B and C Preferred Stock outstanding and the cancellation of $1,100,000
in indebtedness.
Statement of Financial Accounting Standards No. 129
Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure" (SFAS No. 129) issued by the FASB
is effective for financial statements with fiscal years ending after
December 15, 1997. The new standard reinstates various securities
disclosure requirements previously in effect under Accounting
Principles Board Opinion No. 15, which has been superseded by SFAS No.
128. The Company does not expect the adoption of SFAS No. 129 to have
a material effect on its financial position or results of operations.
11
<PAGE>
Statement of Financial Accounting Standards No. 130
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS No. 130) issued by the FASB is effective
for financial statements with fiscal years beginning after December
15, 1997. Earlier application is permitted. SFAS 130 establishes
standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. The
Company has not determined the effect on its financial position or
results of operations from the adoption of this statement.
Statement of Financial Accounting Standards No. 131
Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" (SFAS No.
131) issued by the FASB is effective for financial statements
beginning after December 15, 1997. The new standard requires that
public business enterprises report certain information about operating
segments in complete sets of financial statements of the enterprise
and in condensed financial statements of interim periods issued to
shareholders. It also requires that public business enterprises
report certain information about their products and services, the
geographic areas in which they operate and their major customers. The
Company does not expect adoption of SFAS No. 131 to have a material
effect on its financial position or results of operations.
PART II. OTHER INFORMATION
Item 1.Legal Proceedings - Not Applicable
Item 2.Changes in Securities - Not Applicable
Item 3.Defaults Upon Senior Securities - Not Applicable
Item 4.Submission of Matters to a Vote of Security Holders - Not
Applicable
Item 5.Other Information - Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits:
None
b) Reports on Form 8-K were filed as follows:
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Citadel Environmental Group, Inc.
(Registrant)
Date: December 16, 1997 By: Louis F.Coppage
President
13
<PAGE>
APPLIED MEDICAL RECOVERY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION> Sept 30, Dec 31,
1997 1996
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 108,327 $ na
Accounts receivable 571,874 na
Notes receivable 59,500 na
Other current assets 20,337 na
Total current assets 760,038 na
Property and equipment 667,687 na
Goodwill 315,475 na
Other assets 92,155 na
$1,835,355 $ na
Liabilities
Current Liabilities:
Accounts payable $ 438,582 $ na
Accrued expenses 509,688 na
Notes payable 382,552 na
Note payable - Citadel 695,000 na
Total current liabilities 2,025,812 na
Long-term Debt 113,368 na
Stockholders' Equity
(Deficiency):
Common stock 1,274,291 na
Accumulated deficit (1,578,116) na
Total stockholders'
equity (deficiency) (303,825) na
$ 1,835,355 $ na
</TABLE>
na - not available
See notes to condensed consolidated financial statements
F-1
<PAGE>
APPLIED MEDICAL RECOVERY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION> Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues $ 490,201 $ na $ 781,055 $ na
Selling, general and
administrative 792,868 na 1,557,624 na
Net income (loss) $(302,667) $ na $ 776,569) $ na
</TABLE>
na - not available
See notes to condensed consolidated financial statements
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<PAGE>
APPLIED MEDICAL RECOVERY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The financial statements presented herein reflect in the opinion of
management, all adjustments necessary for a fair presentation of
financial position and the results of operations for the periods
presented. The results of operations for any interim period are not
necessarily indicative of the results for the full year.
The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries in which the Company has
a controlling interest. All significant inter-company transactions
and balances have been eliminated.
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