<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT OF 1934
Commission File Number: 33-19980-D
CGI HOLDING CORPORATION
- --------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 87-0450450
- ----------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8400 Brookfield Avenue, Brookfield, Illinois 60513
- --------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(708) 485-3434
- -------------------------------
(Issuer telephone number)
Gemstar Enterprises, Inc., 73-251 Amber Street, Palm Desert, California 92260
- -----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 Company was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes
[X] No [ ] Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 8,272,778 shares of its
$0.001 par value common stock as of September 5, 1997.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
PAGE
<PAGE> 2
ITEM 5. OTHER INFORMATION
Set forth below is historical and pro forma financial information with
respect to the Company and the Acquired Corporation as required pursuant to
Regulation S-B.
CGI HOLDING CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
On July 28, 1997, the shareholders of Safe Environment Corporation (SECO)
and Roli Ink Corporation (RIC) entered into reorganization agreements with
Gemstar Enterprises, Inc. (which has since changed its name to CGI Holding
Corporation, referred to herein as the Company). The reorganization
agreements provided for the shareholders of SECO to receive 2,200,056 shares
of the Company's restricted common stock in exchange for all of the issued
and outstanding common stock of SECO, and for the shareholders of RIC to
receive 2,761,000 shares of the Company's restricted common stock in exchange
for all of the issued and outstanding common stock of RIC. Prior to the
reorganization Gemstar reverse split its common stock on a 1-for-5 basis,
resulting in a total of 2,151,723 shares of common stock outstanding prior to
the issuances of the new shares to SECO and RIC. All shares presented above
are presented on a post-split basis.
The transaction has been accounted for as a reorganization of SECO and
RIC in a manner similar to a pooling-of-interests, and an acquisition of the
Company. The stock issued pursuant to the reorganization has been treated as a
restatement of the outstanding RIC and SECO common stock with no change in the
historical carrying value of their assets and liabilities. The acquisition of
the Company has been accounted for as a purchase business combination.
Its assets and liabilities were recorded at their fair value which also
equaled their historical carrying value.
The accompanying pro forma condensed consolidated balance sheet as of
June 30, 1997 has been prepared assuming the reorganization and the
acquisition occurred on that date. The pro-forma condensed consolidated
statements of operations have been prepared assuming the reorganization and
the acquisition occurred at the beginning of 1996. Such information is derived
from, and should be read in conjunction with, the separate historical
financial statements of SECO and RIC, included elsewhere herein, and the
historical financial statements of the Company included in the annual report
on Form 10-KSB at September 30, 1996 and quarterly report on Form 10-QSB at
June 30, 1997. The pro forma condensed consolidated statements of operations
do not purport to be indicative of the results of operations which actually
would have been obtained if the reorganization and the acquisition had
occurred January 1, 1996 or the results of operations which may be obtained in
the future. In addition, future results may vary significantly from the
results reflected in these pro forma condensed consolidated statements of
operations.
PAGE
<PAGE> 3
CGI HOLDING CORPORATION
(A Development Stage Company)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 1997
<TABLE>
<CAPTION>
Safe Gemstar
Environment Roli Ink Enterprises ProForma
Corporation Corporation Inc.
Adjustments Pro Forma
----------- ---------- ----------
- ---------- ----------
<S> <C> <C> <C>
<C> <C>
ASSETS
Cash and cash equivalents $ 79,267 $ 49,265 $ 332 $
- - $ 128,864
Accounts receivable 1,406,012 282,347 -
- - 1,688,359
Inventory 19,368 184,702 -
- - 204,070
Other current assets 123,714 5,427 -
- - 129,141
----------- ---------- ----------
- --------- -----------
Total current assets 1,628,361 521,741 332
- - 2,150,434
Property, plant and
equipment 624,944 349,924 -
- - 974,868
Accumulated depreciation (413,765) (225,536) - (B)
60,903 (578,398)
----------- ---------- ----------
- --------- -----------
Net property, plant
and equipment 211,179 124,388 -
60,903 396,470
Other assets 2,977 20,302 500
- - 23,779
----------- ---------- ----------
- --------- -----------
Total assets $1,842,517 $ 666,431 $ 832 $
60,903 $ 2,570,683
========== ========== ==========
========= ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities $1,111,751 $ 155,785 $ 5,432 $
- - $ 1,272,969
Long-term liabilities 179,214 59,303 -
- - 238,517
---------- ---------- ----------
- --------- -----------
Total liabilities 1,290,965 215,088 5,432
- - 1,511,486
Stockholders' equity
Common stock 93,902 1,682 10,759 A
(99,230) 7,113
Additional paid-in-capital - 359,308 914,285 A
(869,486) 211,150
C
(192,957)
Retained earnings 516,038 230,353 (929,644) A
770,328 840,934
B
60,903
C
192,957
Treasury stock (58,388) (140,000) - A
198,388 -
---------- ---------- ----------
- --------- ------------
Total stockholders'
equity 551,552 451,343 (4,600)
60,903 1,059,197
Total Liabilities and
Stockholders' Equity $1,842,517 $ 666,431 $ 832 $
60,903 $ 2,570,683
========== ========== ==========
========= ===========
<FN>
See the accompanying notes to pro forma condensed consolidated financial data.
</FN>
</TABLE>
PAGE
<PAGE> 4
CGI HOLDING CORPORATION
(A Development Stage Company)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
As of June 30, 1997
<TABLE>
<CAPTION>
Safe Gemstar
Environment Roli Ink Enterprises Pro
Forma Pro Forma
Corporation Corporation Inc.
Adjustments Results
----------- ----------- -----------
- ---------- ----------
<S> <C> <C> <C>
<C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1996
Sales $ 6,862,261 $ 2,845,543 $ - $
- - $ 9,707,804
Cost of sales 5,373,781 1,399,775 -
- - 6,773,556
----------- ----------- -----------
- ---------- -----------
Gross profit 1,488,480 1,445,768 -
- - 2,934,248
----------- ----------- -----------
- ---------- -----------
General and administrative
expense 989,690 1,091,995 3,568
- - 2,085,253
Interest expense 80,525 7,969 -
- - 88,494
----------- ----------- -----------
- ---------- -----------
Total expense 1,070,215 1,099,964 3,568
- - 2,173,747
----------- ----------- -----------
- ---------- -----------
Income (loss) from
operations 418,265 345,804 (3,568)
- - 760,501
Other income 82,161 (45,415) -
- - 36,746
Provision for income taxes 90,940 83,272 -
- - 174,212
----------- ----------- ------------
- --------- -----------
Net income (loss) $ 409,486 $ 217,117 $ (3,568) $
- - $ 623,035
=========== =========== ============
========= ===========
Net income per common share $ 1.63 $ 129.08 $ - $
- - $ 0.09
=========== =========== ============
========= ===========
Weighted average number
of common stock used in
per share calculation 251,000 16,820 7,112,779
7,112,779 7,112,779
========== =========== ============
========= ===========
FOR THE SIX MONTHS ENDED JUNE 30, 1997
Sales $ 2,900,635 $ 1,374,618 $ - $
- - $ 4,275,253
Cost of sales 2,060,688 725,545 -
- - 2,786,233
------------ ----------- ------------
- --------- -----------
Gross profit 839,947 649,073 -
- - 1,489,020
------------ ----------- ------------
- --------- -----------
General and administrative
expense 471,730 418,846 11,000 B
(60,903) 840,673
Interest expense 21,259 3,630 -
- - 24,889
------------ ----------- ------------
- --------- -----------
Total expense 492,989 422,476 11,000
(60,903) 865,562
------------ ----------- ------------
- --------- -----------
Income (loss) from
operations 346,958 226,597 (11,000)
60,903 623,458
Other income 94,160 - -
- - 94,160
Povision for income taxes 176,447 - -
- - 176,447
------------ ----------- ------------
- --------- -----------
Net income (loss) $ 264,671 $ 226,597 $ (11,000) $
60,903 $ 541,171
============ =========== ============
========= ===========
Net income per common share $ 1.05 $ 134.72 $ - $
0.01 $ 0.08
============ =========== ============
========= ===========
Weighted average number
of common stock used in
per share calculation 251,000 16,820 7,112,779
7,112,779 7,112,779
============ ========== =============
========= ===========
</TABLE>
<PAGE> 5
CGI HOLDING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL DATA
NOTE A -- REORGANIZATION AND ISSUANCE OF COMMON STOCK
In connection with the reorganization agreements the Company issued a total of
4,961,056 (post-split) shares of common stock in exchange for all of the issued
and outstanding common stock of both SECO and RIC resulting in a total
8,272,778 (post-split) shares of common stock issued and outstanding
immediately following the reorganization and the acquisition and following the
issuance of 1,160,000 shares after June 30, 1996, and prior to the
reogranization. Accordingly, equity has been adjusted to reflect the
restatement of common stock outstanding, the retirement of treasury stock and
the adjustment of retained
earnings and additional paid-in capital resulting from the transaction.
NOTE B --ACCUMULATED DEPRECIATION ADJUSTMENT
The interim financial statements of RIC for the six months ending June 30,
1997 reflect accelerated depreciation that will not be used in the future. Pro
forma adjustments have been made to reflect the depreciation expense that
would have been recognized using the straight-line method of depreciation.
NOTE C-- S CORPORATION EARNINGS AND PROFITS
RIC elected to be treated as an "S" corporation for purposes of income tax
reporting effective January 1, 1997. Pro forma adjustments have been made to
reflect the distribution and subsequent capital contribution of $192,957 in S
corporation earnings, net of cash distributions, for the six months ended June
30, 1997.
PAGE
<PAGE> 6
POULOS & BAYER LTD
Certified Public Accountants
To the Board of Directors of
Safe Environment Corporation
8400 Brookfield Avenue
Brookfield, IL 60513
Gentlemen:
Pursuant to your instructions, we have prepared and submit herewith
the financial statements of:
SAFE ENVIRONMENT CORPORATION
(AN ILLINOIS CORPORATION)
BROOKFIELD, ILLINOIS
consisting of the following Exhibits and Schedule:
EXHIBIT "A" - Balance Sheet, June 30, 1997
EXHIBIT "B" - Statement of Retained Earnings,
June 30, 1997
EXHIBIT "C" - Statement of Profit and Loss, Six
Months and Three Months Ended June 30, 1997
EXHIBIT "C-1" - Schedule of Operating Expenses, Six
Months and Three Months Ended June 30, 1997
EXHIBIT "D" - Comparative Balance Sheet,
June 30, 1997 and 1996
EXHIBIT "E" - Comparative Statement of Profit and Loss,
Six Months Ended June 30, 1997 and 1996
EXHIBIT "F" - Comparative Statement of Cash Flows,
Six Months Ended June 30, 1997 and 1996
EXHIBIT "G" - Footnotes to Financial Statements,
June 30, 1997
We have compiled the accompanying balance sheet of Safe Environment
Corporation as of June 30, 1997 and the related statements of income,
and cash flows for the period then ended in accordance with standards
established by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting, in the form of financial
statements, information that is the representation of management. We
have not audited or reviewed the accompanying financial statements
and, accordingly, do not express an opinion or any other form of
assurance on them.
Respectfully Submitted,
Poulos & Bayer
July 28, 1997
<PAGE> 7
SAFE ENVIRONMENT CORPORATION EXHIBIT "A"
BALANCE SHEET
JUNE 30, 1997
<TABLE>
ASSETS
<S> <C> <C> <C>
<C>
CURRENT ASSETS
Cash $ 79,266.54
Accounts Receivable 1,406,012.46
Inventory 19,368.00
Prepaid Insurance 81,010.39
Costs and Estimated
Earnings Over Billings 40,494.00
Employee Loans 2,210.00
-------------
TOTAL CURRENT ASSETS
$1,628,361.39
<CAPTION>
Accumulated
Cost Depri- Carrying
Basis ciation Value
----------- ----------- -------------
FIXED ASSETS
Leasehold Improvements $ 7,728.08 $ 7,255.82 $ 472.26
Office Equipment 50,787.42 39,755.35 11,032.07
Contracting Equipment 426,826.56 285,832.44 140,994.12
Vehicles 139,601.93 80,921.51 58,680.42
----------- ----------- -------------
Total $624,943.99 $413,765.12
=========== ===========
NET FIXED ASSETS 211,178.87
OTHER ASSETS
Bid Deposits $ 477.00
Security Deposits 2,500.00
-------------
TOTAL OTHER ASSETS 2,977.00
-------------
TOTAL ASSETS $1,842,517.26
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 370,420.93
Payroll Taxes Payable 1,781.24
Accrued Payroll 71,108.78
Notes Payable - Insurance 142,312.51
Accrued Corporate Income Taxes 176,447.00
Notes Payable - Current Portion 349,681.18
-------------
TOTAL CURRENT LIABILITIES $1,111,751.64
LONG-TERM LIABILITIES
Notes Payable - See
Footnote 4 $ 504,538.96
Less: Current Portion 349,681.18
-------------
TOTAL LONG-TERM LIABILITIES 154,857.78
<PAGE> 8
OTHER LIABILITIES
Loans Payable - Shareholder 24,355.59
STOCKHOLDERS' EQUITY
Capital Stock $ 93,902.00
Retained Earnings 516,038.25
Treasury Stock (58,388.00)
-------------
TOTAL STOCKHOLDERS' EQUITY 551,552.25
-------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1 ,842,517.26
=============
</TABLE>
SCHEDULE "B"
SAFE ENVIRONMENT CORPORATION
STATEMENT OF RETAINED EARNINGS
JUNE 30, 1997
BALANCE: JANUARY 1, 1997 $251,367.18
ADD: NET PROFIT 264,671.07
-----------
BALANCE: JUNE 30, 1997 $516,038.25
===========
PAGE
<PAGE> 9
EXHIBIT "C"
SAFE ENVIRONMENT CORPORATION
STATEMENT OF PROFIT AND LOSS
SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, 1997
Amount Percent Amount Percent
------------- -------- ------------- --------
<S> <C> <C> <C> <C>
SALES $2,900,634.71 100.00% $1,175,255.79 100.00%
------------- -------- ------------- --------
LESS: DIRECT COST OF
OPERATIONS
Beginning Inventory $ 26,882.94 0.93% $ 19,368.00 1.65%
Materials 275,163.05 9.49% 120,390.25 10.24%
Direct Labor 66,017.22 2.28% 36,936.92 3.14%
Warehouse Labor 17,864.62 0.62% 10,956.37 0.93%
Finders Fees 8,100.00 0.28% 0.00 0.00%
Dumping Fees 50,514.30 1.74% 48,553.50 4.13%
Equipment Rental 65,993.46 2.28% 40,152.20 3.42%
Equipment Repairs 5,038.70 0.17% 2,728.70 0.23%
Insurance
Asbestos Liability 21,250.35 0.73% 20,438.61 1.74%
Bonding Costs 3,672.00 0.13% 5,071.00 0.43%
Workmans' Compensation (15,913.82) (0.55%) 6,963.00 0.59%
Payroll Taxes - 90% 55,596.49 1.92% 20,203.33 1.72%
Sub - Contract Costs 1,306,049.57 45.03% 530,250.66 45.12%
Testing Fees 88,199.75 3.04% 51,623.25 4.39%
Travel Expense 19,934.30 0.69% 8,203.23 0.70%
Truck Expense 1,269.86 0.04% 0.00 0.00%
Room Charges 450.00 0.02% 0.00 0.00%
Union Dues 34,500.69 1.19% 32,372.69 2.75%
Radios 5,115.87 0.18% 5,115.87 0.44%
Depreciation
Equipment 17,732.97 0.61% 9,452.41 0.80%
Trucks 11,390.76 0.39% 5,695.38 0.48%
Freight 2,186.20 0.08% 86.20 0.01%
Set-up Costs 1,650.00 0.06% (50.00) 0.00%
Removal 11,397.00 0.39% 11,397.00 0.97%
------------- -------- ------------- --------
TOTAL DIRECT COSTS
AVAILABLE $2,080,056.28 71.71% $ 985,908.57 83.89%
LESS: ENDING INVENTORY 19,368.00 0.67% 19,368.00 1.65%
------------- -------- ------------- --------
TOTAL DIRECT COSTS OF
OPERATIONS $2,060,688.28 71.04% $ 966,540.57 82.24%
------------- -------- ------------- --------
GROSS PROFIT $ 839,946.43 28.96% $ 208,715.22 17.76%
LESS: OPERATING EXPENSES 471,729.82 16.26% 205,217.85 17.46%
------------- -------- ------------- --------
NET PROFIT BEFORE
INTEREST EXPENSE $ 368,216.61 12.69% $ 3,497.37 0.30%
<PAGE> 10
LESS: INTEREST EXPENSE 21,258.99 0.73% 12,553.65 1.07%
------------ --------- ------------- --------
NET PROFIT (LOSS) BEFORE
OTHER INCOME $ 346,957.62 11.96% $ (9,056.28) (0.77%)
ADD: OTHER INCOME
Miscellaneous $ 93,470.04 3.22% $ 72,080.17 6.13%
Interest 690.41 0.02% 161.21 0.01%
------------ --------- ------------- --------
TOTAL OTHER INCOME $ 94,160.45 3.25% $ 72,241.38 6.15%
------------ --------- ------------- --------
NET PROFIT BEFORE CORPORATE
INCOME TAXES $ 441,118.07 15.21% $ 63,185.10 5.38%
============= ========
LESS: CORPORATE INCOME
TAXES 176,447.00 6.08%
------------ ---------
NET PROFIT $ 264,671.07 9.12%
============ =========
</TABLE>
PAGE
<PAGE> 11
SCHEDULE "C-1"
SAFE ENVIRONMENT CORPORATION
SCHEDULE OF OPERATING EXPENSES
SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, 1997
Amount Percent Amount Percent
----------- ------- ----------- --------
<S> <C> <C> <C> <C>
OPERATING EXPENSES
Advertising and Promotion $ 1,200.97 0.04% $ 196.00 0.02%
Auto Allowances 43,539.57 1.50% 11,254.08 0.96%
Bank Charges 1,273.07 0.04% 19.00 0.00%
Business Meals 540.98 0.02% 440.02 0.04%
Cleaning 950.00 0.03% 650.00 0.06%
Depreciation
Office Equipment 1,663.39 0.06% 849.32 0.07%
Leasehold Improvements 59.04 0.00% 29.52 0.00%
Donations 9,265.45 0.32% 7,715.45 0.66%
Dues and Subscriptions 486.00 0.02% 400.00 0.03%
Employee Education 855.00 0.03% 160.00 0.01%
Entertainment 5,496.90 0.19% 5,085.60 0.43%
Filing and Inspections 8,130.00 0.28% 4,140.00 0.35%
Fines/Penalties 799.36 0.03% 266.33 0.02%
General Insurance 11,426.80 0.39% 7,153.35 0.61%
Group Insurance 20,897.66 0.72% 8,343.62 0.71%
Licenses 5,355.87 0.18% 3,137.00 0.27%
Life Insurance 6,988.68 0.24% 2,484.07 0.21%
Medical Expenses 3,909.30 0.13% 2,483.30 0.21%
Miscellaneous 12,295.55 0.42% 1,645.71 0.14%
Office Expenses 3,478.78 0.12% 2,110.44 0.18%
Office Rent 23,336.00 0.80% 13,824.00 1.18%
Payroll Taxes - 10% 6,127.39 0.21% 2,194.82 0.19%
Postage and Messenger 4,853.72 0.17% 2,981.93 0.25%
Professional Fees 57,020.34 1.97% 12,277.58 1.04%
Salaries
Consultant 14,131.20 0.49% 3,800.00 0.32%
Office and
Administration 61,913.27 2.13% 27,956.63 2.38%
Officer 60,000.00 2.07% 0.00 0.00%
Sales 69,083.01 2.38% 57,687.17 4.91%
Telephone 18,418.00 0.63% 10,389.89 0.88%
401K Expense 2,042.50 0.07% 444.22 0.04%
Tax Penalties 1,940.85 0.07% 847.63 0.07%
Utilities 402.23 0.01% 402.23 0.03%
Repairs and Maintenance 5,248.94 0.18% 5,248.94 0.45%
Construction Administration
Fees 8,600.00 0.30% 8,600.00 0.73%
----------- ------- ----------- --------
TOTAL OPERATING EXPENSES $471,729.82 16.26% $205,217.85 17.46%
</TABLE>
PAGE
<PAGE> 12 EXHIBIT "D"
SAFE ENVIRONMENT CORPORATION
COMPARATIVE BALANCE SHEET
JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
--------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 79,266.54 $ 32,878.69
Accounts Receivable 1,406,012.46 725,744.11
Inventory 19,368.00 27,680.02
Prepaid Insurance 81,010.39 69,103.70
Costs and Estimated Earnings
Over Billings 40,494.00 21,041.00
Employee Loan 2,210.00 0.00
------------- -------------
TOTAL CURRENT ASSETS $1,628,361.39 $ 876,447.52
FIXED ASSETS
Cost Basis $ 624,943.99 $ 459,434.12
Less: Accumulated
Depreciation 413,765.12 330,523.65
------------- -------------
NET FIXED ASSETS 211,178.87 128,910.47
OTHER ASSETS
Bid Deposits $ 477.00 $ 756.00
Security Deposits 2,500.00 2,757.00
Due from SECO Abatement 0.00 14,476.78
------------- -------------
TOTAL OTHER ASSETS 2,977.00 17,989.78
------------- -------------
TOTAL ASSETS $1,842,517.26 $1,023,347.77
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 370,420.93 $ 265,142.03
Payroll Taxes Payable 1,781.24 7,578.53
Accrued Payroll 71,108.78 6,279.17
Deferred Compensation 0.00 15,000.00
Accrued Corporate Income Taxes 176,447.00 0.00
Notes Payable - Insurance 142,312.51 27,398.76
Notes payable - Current 349,681.18 592,294.00
------------- -------------
TOTAL CURRENT LIABILITIES $1,111,751.64 $ 913,692.49
LONG-TERM LIABILITIES
Notes payable - Long Term 154,857.78 0.00
OTHER LIABILITIES
Loans Payable 24,355.59 113,500.00
STOCKHOLDERS' EQUITY
Capital Stock $ 93,902.00 $ 246,000.00
<PAGE> 13
Retained Earnings 516,038.25 (72,348.72)
Treasury Stock (58,388.00) (177,496.00)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 551,552.25 (3,844.72)
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,842,517.26 $1,023,347.77
============= =============
</TABLE>
EXHIBIT "E"
SAFE ENVIRONMENT CORPORATION
COMPARATIVE STATEMENT OF PROFIT AND LOSS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 June 30, 1996
Amount Percent Amount Percent
------------- -------- ------------- --------
<S> <C> <C> <C> <C>
SALES $2,900,634.71 100.00% $1,310,245.03 100.00%
LESS: COST OF OPERATIONS 2,060,688.28 71.04% 987,825.90 75.39%
------------- -------- ------------- --------
GROSS PROFIT $ 839,946.43 28.96% $ 322,419.13 24.61%
LESS: OPERATING EXPENSES 471,729.82 16.26% 276,080.44 21.07%
------------- -------- ------------- --------
NET PROFIT ON OPERATIONS $ 368,216.61 12.69% $ 46,338.69 3.54%
LESS: INTEREST EXPENSE 21,258.99 0.73% 26,210.58 2.00%
------------- -------- ------------- --------
NET PROFIT BEFORE
OTHER INCOME $ 346,957.62 11.96% $ 20,128.11 1.54%
ADD: OTHER INCOME 94,160.45 3.25% 80,642.65 6.15%
------------- -------- ------------- --------
NET PROFIT BEFORE
CORPORATE INCOME TAXES $ 441,118.07 15.21% $ 100,770.76 7.69%
============= ======== ============= =========
</TABLE>
PAGE
<PAGE> 14
EXHIBIT "F"
SAFE ENVIRONMENT CORPORATION
COMPARATIVE STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit $ 264,671.07 $ 100,770.76
Non-Cash Items Included
In Net Loss:
Depreciation 30,846.16 21,013.08
Change in Accounts Receivable (18,476.41) (327,494.36)
Change in Employee Loan (1,210.00) (0.00)
Change in Inventory 7,514.94 (6,674.56)
Change in Prepaid Insurance (1,356.56) (10,451.70)
Change in Costs and Estimated
Earnings Over Billings 31,801.00 (21,041.00)
Change in Deposits 1,516.00 1,522.00
Change in Accounts Payable (215,409.46) 151,923.05
Change in Accrued Expenses 201,133.48 3,485.86
Change in Inter-Company Payable (2,624.00) 99,130.70
Change in Investment In All
Weather Roofing 0.00 5,000.00
Change in Billings in Excess of
Costs and Estimated Earnings (101,182.00) 0.00
-------------
- -------------
NET CASH CHANGE PROVIDED BY
OPERATING ACTIVITIES $ 197,224.22 $ 17,183.83
------------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Fixed Assets Acquired $ (40,897.00) $ (19,347.16)
Proceeds from Sale of
Fixed Assets 1,143.42 0.00
------------- -------------
NET CASH USED BY INVESTING
ACTIVITIES $ (39,753.58) $ (19,347.16)
------------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Change in Loan payable $ (89,144.41) $ 0.00
Change in Notes Payable 32,488.57 (59,749.08)
Proceeds from Sale of
Stock 48,510.00 0.00
Change in Treasury Stock (81,500.00) 0.00
------------- -------------
NET CASH USED BY FINANCING
ACTIVITIES $ (89,645.84) $ (59,749.08)
------------- -------------
NET CASH CHANGE $ 67,824.80 $ (61,912.41)
CASH BALANCE: JANUARY 1, 1997
AND 1996 11,441.74 94,791.10
------------- -------------
CASH BALANCE: JUNE 30, 1997
AND 1996 $ 79,266.54 $ 32,878.69
============= =============
</TABLE>
<PAGE> 15
EXHIBIT "G"
SAFE ENVIRONMENT CORPORATION
FOOTNOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
1 Revenues from fixed-price construction contracts and time-and-material
contracts are recognized upon pre-agreed stages of completion. This method
is used because management considers expended costs to be the best
available measure of progress on these contracts.
Contract costs include all direct material, labor, sub-contractors and
equipment costs and those indirect costs related to contract performance.
General and Administrative Costs are charged to expense as incurred.
Changes in job performance, job conditions and estimated profitability are
recognized in the period in which the revenues are determined.
B. Accounts Receivable
Management anticipates all receivables are collectible.
C. Fixed Assets
Fixed assets are depreciated over their estimated useful life using the
150% declining-balance method.
2-ACCOUNTS RECEIVABLE
Accounts Receivable at June 30, 1997 consist of the following:
Currently Due $1,406,012.46
Retainages 441,419.66
-------------
$ 964,592.80
=============
Retainages are due in less than one (1) year.
3-COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs Incurred on
Uncompleted Contract $ 19,774.00
Estimated Earnings 20,720.00
-----------
$ 40,494.00
Less: Billings to Date 0.00
-----------
$ 40,494.00
===========
Included on Balance Sheet
Costs and Estimated Earnings
in Excess of Billings $ 40,494.00
Billings in Excess of Costs
and Estimated Earnings 0.00
-----------
$ 40,494.00
===========
PAGE
<PAGE> 16
4-NOTES PAYABLE
Description Current Long-Term
----------- ----------- ------------
a) CIB Bank Line of Credit
Interest rate is 8.75% and
maturity date is February
1, 1998. $250,000.00 $ 0.00
b) CIB Bank
Note payable dated February
3, 1997 for $250,000 note
payable monthly at $6,945.00
principal plus interest with
a maturity date of February
1, 2000 83,340.00 138,880.00
c) Vehicle 1 - payment is
$400.00 principal plus
interest 4,364.99 2,722.31
d) Vehicle 2 - payment is
$487.50 principal plus
interest 5,304.11 2,845.82
e) Vehicle 3 - payment is
$285.09 principal plus
interest 2,743.48 6,466.44
f) Vehicle 4 - payment is
$375.69 principal plus
interest 3,928.60 3,943.21
----------- -----------
Totals $349,681.18 $154,857.78
=========== ===========
5-LEASING COMMITMENTS
The company leases office and warehouse facilities at a monthly rate of
$2,500.00, without a formal agreement.
6-CONTRACTUAL AGREEMENTS
The company contracts with Mentor Investments, Inc. to provide direct labor
for certain jobs. -CAPITAL STOCK
The company has authorized 500,000 shares of common stock at no par value.
As of June 30, 1997, 251,000 shares were issued with a stated value of
$93,902.00
Shareholders
John Guira 92,900
Jim Spachman 74,000
Ron Riba 10,000
Fred Schmidt 35,000
David Ryan 10,000
Others 29,100
--------
Total 251,000
========
8-TREASURY STOCK
As of June 30, 1997, the company had 54,400 shares of treasury stock with a
book value of $58,388.00.
<PAGE> 17
SAFE ENVIRONMENT CORPORATION
SCHEDULE OF CONTRACTS IN PROCESS
JUNE 30, 1997
<TABLE>
<CAPTION>
Costs and Billings
Estimated in
Earnings Excess
Costs Billing
in Excess Costs &
Job Contract Est. Gross % Revenue to Gross to
of Est.
Number Amount Costs % Profit Compl. Earned Date Profit Dte
Billings Earnings
- ------ ------- ------- ------- ------- ------ ------- ------- ------ -------
- ------- -------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
96005 $50,618 $24,718 51.16 $25,900 80.00 $40,794 $19,774 $20,720 $ 0.00
$40,494 $ 0.00
</TABLE>
PAGE
<PAGE> 18
POULOS & BAYER LTD.
Certified Public Accountants
Safe Environment Corporation
8400 Brookfield Avenue
Brookfield, Illinois 60513
Gentlemen:
Pursuant to your instructions, we have prepared and submit
herewith the financial statements of:
SAFE ENVIRONMENT CORPORATION
(ILLINOIS CORPORATION)
BROOKFIELD, ILLINOIS
consisting of the following Exhibits and Schedules:
- Independent Auditor's Report
EXHIBIT "A" - Balance Sheet, December 31, 1996
SCHEDULE "B" - Statement of Retained Earnings,
December 31, 1996
EXHIBIT "C" - Statement of Profit and Loss,
Twelve Months Ended December 31, 1996
SCHEDULE "C-1"- Schedule of Operating Expenses,
Twelve Months Ended December 31, 1996
EXHIBIT "D" - Comparative Balance Sheet,
December 31, 1996 and 1995
EXHIBIT "E" - Comparative Statement of Profit and Loss,
Twelve Months Ended December 31, 1996 and
1995
EXHIBIT "F" - Comparative Statement of Cash Flows,
Twelve Months Ended December 31, 1996 and
1995
EXHIBIT "G" - Footnotes to Financial Statements,
December 31, 1996
PAGE
<PAGE> 19
POULOS & BAYER LTD
Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors
Safe Environment Corporation
8400 Brookfield Avenue
Brookfield, Illinois 60513
We have audited the accompanying balance sheet of Safe Environment
Corporation as of December 31, 1996 and 1995 and the related
statements of income, retained earnings and cash flows for the
years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audit.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above,
present fairly, in all material respects, the financial position
of Safe Environment Corporation as of December 31, 1996 and 1995
and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting
principles.
Respectfully Submitted,
Poulos & Bayer, Ltd.
July 28, 1997
PAGE
<PAGE> 20
SAFE ENVIRONMENT CORPORATION EXHIBIT "A"
BALANCE SHEET
December 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 11,441.74
Accounts Receivable 1,387,536.05
Inventory 26,882.94
Prepaid Insurance 79,653.83
Costs and Estimated
Earnings Over Billings 72,295.00
Employee Loans 1,000.00
------------
TOTAL CURRENT ASSETS $1,578,809.56
Accumulated
Cost Depri- Carrying
Basis ciation Value
----------- ------------- -------------
FIXED ASSETS
Leasehold Improvements $ 7,728.08 $ 7,196.78 $ 531.30
Office Equipment 48,485.42 38,091.96 10,393.46
Contracting Equipment 389,374.98 268,099.47 121,275.51
Vehicles 139,601.93 69,530.75 70,071.18
----------- ------------- -------------
Total $585,190.41 $ 382,918.96
=========== =============
NET FIXED ASSETS 202,271.45
OTHER ASSETS
Bid Deposits $ 1,736.00
Security Deposits 2,757.00
TOTAL OTHER ASSETS 4,493.00
-------------
TOTAL ASSETS $1,785,574.01
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 585,830.39
Payroll Taxes Payable 7,834.07
Accrued Payroll 9,429.47
Due to Seco Abatement 2,624.00
Notes Payable -
Insurance 62,115.92
Billings in Excess of Costs
and Estimated Earnings 101,182.00
Accrued Corporate
Income Taxes 30,940.00
Notes Payable -
Current Portion 527,914.32
-------------
TOTAL CURRENT LIABILITIES $1,327,870.17
PAGE
<PAGE> 21
LONG-TERM LIABILITIES
Notes Payable - See
Footnote 4 $ 552,246.98
Less: Current Portion 527,914.32
-------------
TOTAL LONG-TERM LIABILITIES 24,332.66
OTHER LIABILITIES
Loans Payable -
See Footnote 5 113,500.00
STOCKHOLDERS' EQUITY
Capital Stock $ 167,504.00
Retained Earnings 251,367.18
Treasury Stock (99,000.00)
-------------
TOTAL STOCKHOLDERS' EQUITY 319,871.18
TOTAL LIABILITIES AND -------------
STOCKHOLDERS' EQUITY $1,785,574.01
=============
</TABLE>
SCHEDULE "B"
SAFE ENVIRONMENT CORPORATION
STATEMENT OF RETAINED EARNINGS
DECEMBER 31, 1996
BALANCE: JANUARY 1, 1996 $(158,119.48)
ADD: NET PROFIT 409,486.66
------------
BALANCE: DECEMBER 31, 1996 $ 251,367.18
============
PAGE
<PAGE> 22
EXHIBIT "C"
SAFE ENVIRONMENT CORPORATION
STATEMENT OF PROFIT AND LOSS
TWELVE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Amount Percent
---------------------------- --------
<S> <C> <C> <C>
SALES $6,862,261.55 100.00%
LESS: DIRECT COST OF
OPERATIONS
Beginning Inventory $ 21,005.46 0.31%
Materials 573,520.82 8.36%
Direct Labor 265,329.62 3.87%
Warehouse Labor 37,539.03 0.55%
Finders Fees 1,100.00 0.02%
Dumping Fees 128,969.35 1.88%
Equipment rental 67,864.83 0.99%
Equipment Repairs 660.21 0.01%
Insurance
Asbestos Liability 226,204.33 3.30%
Bonding Costs 208,231.14 3.03%
Workmans' Compensation 146,085.76 2.13%
Payroll Taxes - 90% 69,969.56 1.02%
Sub - Contract Costs 3,353,094.04 48.86%
Testing Fees 102,301.50 1.49%
Travel Expense 41,904.59 0.61%
Truck Expense 19,798.62 0.29%
Room Charges 3,608.79 0.05%
Union Dues 74,431.27 1.08%
Depreciation
Equipment 37,395.03 0.54%
Trucks 21,176.02 0.31%
Freight 474.10 0.01%
------------- --------
TOTAL DIRECT COSTS
AVAILABLE $5,400,664.07 78.70%
------------- --------
LESS: ENDING INVENTORY 26,882.94 0.39%
------------- --------
TOTAL DIRECT COSTS OF
OPERATIONS 5,373,781.13 78.31%
------------- --------
GROSS PROFIT $1,488,480.42 21.69%
LESS: OPERATING EXPENSES 989,689.95 14.42%
------------- -------
NET PROFIT BEFORE
INTEREST EXPENSE $ 498,790.47 7.27%
LESS: INTEREST EXPENSE 80,524.75 1.17%
------------- -------
NET PROFIT BEFORE
OTHER INCOME $ 418,265.72 6.10%
PAGE
<PAGE> 23
ADD: OTHER INCOME
Management Fee $ 59,798.20 0.87%
Insurance Claim 20,314.00 0.30%
Miscellaneous 523.29 0.01%
Interest 1,525.45 0.02%
------------- -------
TOTAL OTHER INCOME 82,160.94 1.20%
------------- -------
NET PROFIT BEFORE CORPORATE
INCOME TAXES $ 500,426.66 7.29%
LESS: CORPORATE INCOME
TAXES 90,940.00 1.33%
------------- -------
NET PROFIT $ 409,486.66 5.97%
============= =======
</TABLE>
PAGE
<PAGE> 24
SCHEDULE "C-1"
SAFE ENVIRONMENT CORPORATION
SCHEDULE OF OPERATING EXPENSES
TWELVE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Amount Percent
-------------- -------
<S> <C> <C>
OPERATING EXPENSES
Advertising and
Promotion $ 6,027.84 0.09%
Auto Allowances 17,557.45 0.26%
Bad Debts 95,005.56 1.38%
Bank Charges 590.82 0.01%
Business Meals 1,926.05 0.03%
Commissions 35,000.00 0.51%
Depreciation
Office Equipment 2,332.93 0.03%
Leasehold Improvements 118.08 0.00%
Donations 3,760.00 0.05%
Dues and Subscriptions 5,678.73 0.08%
Employee Education 16,650.00 0.24%
Entertainment 7,865.40 0.11%
Filing and Inspections 18,269.00 0.27%
Fines and Penalties 1,849.72 0.03%
General Insurance 28,486.75 0.42%
Group Insurance 30,522.68 0.44%
Licenses 9,280.23 0.14%
Life Insurance 4,186.50 0.06%
Medical Expenses 5,091.00 0.07%
Office Expenses 12,829.69 0.19%
Office Rent 24,912.00 0.36%
Payroll Taxes - 10% 7,774.39 0.11%
Postage and Messenger 5,669.34 0.08%
Professional Fees 40,599.79 0.59%
Salaries
Consultant Salaries 45,183.53 0.66%
Office and
Administration 69,456.19 1.01%
Officer 150,000.00 2.19%
Sales 284,909.12 4.15%
Scavenger 307.95 0.00%
Telephone 31,817.90 0.46%
Temporary Help 9,013.50 0.13%
401K Expense 15,978.19 0.23%
Loss of Sale of
Equipment 1,039.62 0.02%
------------- -------
TOTAL OPERATING EXPENSES $ 989,689.95 14.42%
============= =======
</TABLE>
PAGE
<PAGE> 25
EXHIBIT "D"
SAFE ENVIRONMENT CORPORATION
COMPARATIVE BALANCE SHEET
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
------------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 11,441.74 $ 94,791.10
Accounts Receivable 1,387,536.05 398,249.75
Inventory 26,882.94 21,005.46
Prepaid Insurance 79,653.83 58,652.00
Costs and Estimated Earnings
Over Billings 72,295.00 0.00
Employee Loan 1,000.00 0.00
------------- -------------
TOTAL CURRENT ASSETS $1,578,809.56 $ 572,698.31
FIXED ASSETS
Cost Basis $ 585,190.41 $ 440,086.96
Less: Accumulated
Depreciation 382,918.96 309,510.57
------------- -------------
NET FIXED ASSETS 202,271.45 130,576.39
OTHER ASSETS
Bid Deposits $ 1,736.00 $ 2,278.00
Security Deposits 2,757.00 2,757.00
Due from SECO Abatement 0.00 113,607.48
Investment in All Weather
Roofing 0.00 5,000.00
------------- -------------
TOTAL OTHER ASSETS 4,493.00 123,642.48
------------- -------------
TOTAL ASSETS $1,785,574.01 $ 826,917.18
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 585,830.39 $ 113,218.98
Payroll Taxes Payable 7,834.07 6,077.84
Accrued Payroll 9,429.47 0.00
Due to Seco Abatement 2,624.00 0.00
Billings in Excess of Costs
and Estimated Earnings 101,182.00 0.00
Accrued Corporate Income
Taxes 30,940.00 4,294.00
Notes Payable - Insurance 62,115.92 47,147.84
Notes Payable - Current 527,914.32 632,294.00
------------- -------------
TOTAL CURRENT LIABILITIES $1,327,870.17 $ 803,032.66
<PAGE> 26
LONG-TERM LIABILITIES
Notes Payable - Long Term 24,332.66 0.00
OTHER LIABILITIES
Loans Payable 113,500.00 113,500.00
STOCKHOLDERS' EQUITY
Capital Stock $ 167,504.00 $ 191,504.00
Retained Earnings 251,367.18 (158,119.48)
Treasury Stock (99,000.00) (123,000.00)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 319,871.18 (89,615.48)
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,785,574.01 $ 826,917.18
============= =============
</TABLE>
EXHIBIT "E"
SAFE ENVIRONMENT CORPORATION
COMPARATIVE STATEMENT OF PROFIT AND LOSS
TWELVE MONTHS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Twelve Months Ended
December 31, 1996 December 31, 1995
Amount Percent Amount Percent
------------- ------- ------------- -------
<S> <C> <C> <C> <C>
SALES $6,862,261.55 100.00% $3,048,697.11 100.00%
LESS: COST OF OPERATIONS 5,373,781.13 78.31% 2,065,746.84 67.76%
------------- ------- ------------- -------
GROSS PROFIT $1,488,480.42 21.69% $ 982,950.27 32.24%
LESS: OPERATING EXPENSES 989,689.95 14.42% 452,739.70 14.85%
------------- ------- ------------- -------
NET PROFIT ON OPERATIONS $ 498,790.47 7.27% $ 530,210.57 17.39%
LESS: INTEREST EXPENSE 80,524.75 1.17% 87,241.27 2.86%
------------- ------- ------------- -------
NET PROFIT BEFORE
OTHER INCOME $ 418,265.72 6.10% $ 442,969.30 14.53%
ADD: OTHER INCOME 82,160.94 1.20% 163,866.00 5.37%
------------- ------- ------------- -------
NET PROFIT BEFORE
CORPORATE INCOME TAXES $ 500,426.66 7.29% $ 606,835.30 19.90%
============= ======= ============= =======
</TABLE>
PAGE
<PAGE> 27
EXHIBIT "F"
SAFE ENVIRONMENT CORPORATION
COMPARATIVE STATEMENT OF CASH FLOWS
TWELVE MONTHS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Twelve Months Ended
December 31, December 31,
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit $ 409,486.66 $ 602,541.30
Non-Cash items Included In
Net Loss
Loss on Sale of Equipment 1,039.62 0.00
Depreciation 61,022.06 43,915.84
Change in Accounts Receivable (989,286.30) 345,446.96
Change in Employee Loan (1,000.00) 0.00
Change in Inventory (5,877.48) (21,005.46)
Change in Consulting and
Insurance Refunds 0.00 8,185.00
Change in Loans Receivable 0.00 15,000.00
Change in Prepaid Insurance (21,001.83) 7,266.53
Change in Costs and Estimated
Earnings Over Billings (72,295.00) 0.00
Change in Deposits 542.00 (1,331.50)
Change in Accounts Payable 472,611.41 (218,952.89)
Change in Accrued Expenses 37,831.70 (7,324.48)
Change in Inter-Company
Receivable 115,918.23 (113,607.48)
Change in Investment In All
Weather Roofing 5,000.00 (5,000.00)
Change in Billings in Excess
of Costs and Estimated
Earnings 101,182.00 0.00
------------- -------------
NET CASH CHANGE PROVIDED BY
OPERATING ACTIVITIES $ 115,173.07 $ 655,133.82
------------- -------------
CASH FLOWS FROM INVESTING
Fixed Assets Acquired $ (113,575.88) $ (24,173.23)
Proceeds from Sale of
Fixed Assets 3,500.00 0.00
------------- -------------
NET CASH USED BY INVESTING
ACTIVITIES $ (110,075.88) $ (24,173.23)
------------- -------------
PAGE
<PAGE> 28
CASH FLOWS FROM FINANCING
ACTIVITIES
Change in Loan Payable $ 0.00 $ (290,000.00)
Change in Notes Payable (88,446.55) (285,542.39)
Proceeds from Sale of Stock 0.00 12,504.00
------------- -------------
NET CASH USED BY FINANCING
ACTIVITIES $ (88,446.55) $ (563,038.39)
------------- -------------
NET CASH (DECREASE) INCREASE $ (83,349.36) $ 67,922.20
CASH BALANCE: JANUARY 1, 1996
AND 1995 94,791.10 26,868.90
------------- -------------
CASH BALANCE: DECEMBER 31, 1996
AND 1995 $ 11,441.74 $ 94,791.10
============= =============
</TABLE>
EXHIBIT "G"
SAFE ENVIRONMENT CORPORATION
FOOTNOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1--SIGNIFICANT ACCOUNTING POLICIES
A. Revenue and Cost Recognition
--------------------------------
Revenues from fixed-price construction contracts and time-and-
material contracts are recognized upon pre-agreed stages of
completion. This method is used because management considers
expended costs to be the best available measure of progress on
these contracts.
Contract costs include all direct material, labor, sub-
contractors and equipment cost and those indirect costs related
to contract performance. General and Administrative Costs are
charged to expense as incurred. Changes in job performance, job
conditions and estimated profitability are recognized in the
period in which the revenues are determined.
B. Accounts Receivable
----------------------
Management anticipates all receivables are collectible.
C. Fixed Assets
---------------
Fixed assets are depreciated over their estimated useful life
using the 150% declining - balance method.
PAGE
<PAGE> 29
2--ACCOUNTS RECEIVABLE
Accounts Receivable at December 31, 1996 consist of the
following:
Currently Due $1,387,536.05
Retainages 538,785.90
-------------
$ 848,750.15
=============
Retainages are due in less than one(1) year.
3--COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs Incurred on
Uncompleted Contracts $2,860,224.00
Estimated Earnings 1,200,639.00
-------------
$4,060,863.00
Less: Billings to Date 4,089,750.00
-------------
$ (28,887.00)
=============
Included on Balance Sheet
Costs and Estimated Earnings
in Excess of Billings $ 72,925.00
Billings in Excess of Costs
and Estimated Earnings 101,812.00
------------
$ (28,887.00)
============
4--NOTES PAYABLE
Description Current Long-Term
- ------------ ----------- -----------
Suburban Bank line of credit
secured by the general assets
of the company and personally
guaranteed by various share-
holders. Interest rate is prime
plus 1.5% and maturity date is
March 31, 1997 $512,294.00 $ 0.00
Vehicle 1 - payment is $400.00
principal plus interest 4,183.96 4,951.02
Vehicle 2 - payment is $487.50
principal plus interest 5,059.59 5,560.45
Vehicle 3 - payment is $285.09
principal plus interest 2,629.72 7,867.22
Vehicle 4 - payment is $375.69
principal plus interest 3,747.05 5,953.97
----------- -----------
Totals $527,914.32 $ 24,332.66
=========== ===========
PAGE
<PAGE> 30
5--LOANS PAYABLE
This loan was to Suzanne Erkskine and was repaid in full on
February 7, 1997 with no dispute.
6--LEASING COMMITMENTS
The company leases office and warehouse facilities at a monthly
rate of $2,500.00, without a formal agreement.
7--CONTRACTUAL AGREEMENTS
a. The company contracts with Mentor Investments, Inc. to
provide direct labor for certain jobs. 'Mentor' is responsible
for the cost of the payroll taxes and workmens compensation
insurance. 'Mentor' receives, for these services, the cost of
the gross payroll plus 20%.
b. The company contracted on February 15, 1995 to provide all
sales and management services for SECO Abatement, Inc. The
terms of this agreement allow the company to participate in 82%
of the profits of SECO Abatement, Inc. These earnings are
reflected as management fees in the financial statement.
8--CAPITAL STOCK
The company has authorized 500,000 shares of common stock at no
par value. As of December 31, 1996, 231,900 shares were issued
with a stated value of $167,504.00.
Shareholders
John Guira 54,500
Jim Spachman 44,000
Ron Riba 76,000
Fred Schmidt 34,000
Others 23,400
---------
Total $ 231,900
=========
9--TREASURY STOCK
As of December 31, 1996, the company had 49,500 shares of
treasury stock with a book value of $99,000.00.
Treasury Stock Transaction Shares Amount
-------------------------- ------- -----------
Acquired January 1, 1995 90,500 $181,000.00
Issued in 1995 29,000 58,000.00
Issued in 1996 12,000 24,000.00
------- -----------
49,500 $ 99,000.00
====== ===========
PAGE
<PAGE> 31
SAFE ENVIRONMENT CORPORATION
SCHEDULE OF CONTRACTS IN PROCESS
JUNE 30, 1997
<TABLE>
<CAPTION>
Costs and Billings
Estimated in
Earnings Excess
Costs Billing
in Excess Costs &
Job Contract Est. Gross % Revenue to Gross to
of Est.
Number Amount Costs % Profit Compl. Earned Date Profit Dte
Billings Earnings
- ------ ------- ------- ------- ------- ------ ------- ------- ------ -------
- ------- -------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
96074 $4,422,027 $3,095,419 30.00% $1,326,608 86.52% $3,825,930
$2,678,157 $1,147,781 $3,927,750 $ 0 $101,812
96098 285,000 220,875 22.50% 64,125 82.43% 234,925
182,067 52,858 162,000 72,925 0
- ------ ---------- ---------- ------- ---------- ------- ----------
- ---------- ---------- ---------- -------- --------
$4,707,027 $3,316,294 $1,390,733 $4,060,863
$2,860,639 $1,200,639 $4,089,750 $ 72,925 $101,812
========== ========== ========== ==========
========== ========== ========== ======== ========
</TABLE>
PAGE
<PAGE> 32
RADKE & SCHLESNER, S.C.
Certified Public Accountants
10750 West Howard Avenue
Milwaukee, Wisconsin 53228
(414) 328-1000
Roli Ink Corporation
4010 West Douglas Avenue
Milwaukee, Wi 53209
We have compiled the accompanying balance sheet of Roli Ink
Corporation as of June 30, 1997 and the related statements of
income, and cash flows for the 1 month and 6 months then ended,
and the accompanying supplementary information, which is presented
only for supplementary analysis purposes, in accordance with
Statements on Standards for Accounting and Review Services issued
by the American Institute of Certified Public Accountants.
A compilation is limited to presenting, in the form of financial
statements and supplementary schedules information that is the
representation of management. We have not audited or reviewed the
accompanying financial statements and supplementary schedules and,
accordingly, do not express an opinion or any other form of
assurance on them.
Management has elected to omit substantially all of the
disclosures required by generally accepted accounting principals.
If the omitted disclosures were included in the financial
statements, they might influence the user's conclusions about the
company's financial position, results of operation, and cash
flows. Accordingly, these financial statements are not designed
for those who are not informed about such matters.
Milwaukee, Wisconsin
July 11,1997
PAGE
<PAGE> 33
ROLI INK CORPORATION
BALANCE SHEET
AS OF JUNE 30, 1997
ASSETS
CURRENT ASSETS
Cash - M & I Northern Bank $ 49,264.62
Accounts receivable 282,346.79
Inventory 184,701.90
Prepaid insurance 4,627.30
Prepaid Wisconsin
corporate income tax 800.00
-----------
Total current assets $521,740.61
Property and Equipment:
Accumulated
Depri- Book
Cost ciation Value
---------- ----------- -----------
Leasehold Improvements $20,533.81 $ 3,455.02 $ 17,078.79
Fixtures & Equipment 319,911.28 217,482.42 102,428.86
Transportation
equipment 9,478.84 4,598.86 4,879.98
----------- ----------- -----------
Total $349,923.93 $225,536.30 124,387.63
=========== ===========
OTHER ASSETS
Deposit 20,302.20
-----------
Total other assets 20,302.20
-----------
Total assets $666,430.44
===========
PAGE
<PAGE> 34
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion long-term debt $ 30,700.00
Accounts payable 81,458.72
Commissions payable 43,415.99
401K loan payable 210.08
-----------
Total current liabilities $155,784.79
Long-term debt:
Notes payable - treasury stock 75,003.91
Note payable - Gordon Page 15,000.00
Less: Current maturities (30,700.00)
-----------
Total long-term debt 59,303.91
-----------
Total liabilities 215,088.70
Stockholder's equity:
Capital stock 1,682.00
Additional paid-in capital 359,308.00
Retained earnings 37,394.63
Treasury stock (140,000.00)
AAA Shareholder distributions (33,640.00)
Net income (loss) - year to date 226,597.11
-----------
Total stockholders' equity 451,341.74
-----------
Total liabilities &
stockholders' equity $666,430.44
===========
See Accountants' Compilation Report
PAGE
<PAGE> 35
ROLI INK CORPORATION
Statements of Income
For the 1 Month and 6 Months Ended June 30, 1997
<TABLE>
<CAPTION>
Current Year to
Month % Date %
------------ ------- ------------- -------
<S> <C> <C> <C> <C>
Sales:
Ink sales $ 227,690.90 100.63 $1,399,809.82 101.83
Ink sales discount (1,428.46) (0.63) (25,192.21) 1.83
------------ ------- ------------- -------
Total sales 226,262.44 100.00 1,374,617.61 100.00
------------ ------- ------------- -------
Cost of sales:
Cost of raw
materials 68,170.47 30.13 492,604.03 35.84
Packaging (455.25) (0.20) 26,941.80 1.96
Freight 4,675.02 2.06 38,343.58 2.79
Manufacturing
supplies 1,376.39 0.61 9,111.31 0.66
Wages - Q.C. 4,504.22 1.99 29,277.43 2.13
Shop wages 4,734.89 2.10 33,237.90 2.42
Employment services
shop 1,506.82 0.66 6,261.77 0.45
Production supervisory
wages 2,307.70 1.02 15,000.05 1.09
Rent 2,962.26 1.31 16,399.26 1.20
Wages - delivery 500.41 0.22 2,661.92 0.19
Leased delivery
vehicle 451.82 0.20 3,354.53 0.24
Utilities 714.55 0.31 6,073.44 0.44
Repairs &
maintenance 1,648.33 0.73 7,368.22 0.54
Insurance - shop 321.55 0.14 1,562.63 0.11
Health insurance 382.30 0.17 2,630.95 0.20
Workman's comp.
insurance 542.96 0.24 2,290.67 0.16
Property taxes 539.42 0.24 3,547.13 0.26
Insurance - delivery
vehicle 579.20 0.26 558.30 0.04
FICA 745.60 0.33 6,796.64 0.50
Unemployment tax 93.51 0.04 3,364.84 0.24
401K match 184.01 0.08 1,776.73 0.13
Disability
insurance 124.23 0.05 124.23 0.01
Life insurance 16.80 0.01 16.80 0.00
Vehicle delivery
expense 109.27 0.05 2,095.53 0.15
Depreciation 2,322.77 1.03 14,145.57 1.03
------------ ------- ------------- -------
Total cost of sales 99,049.25 43.78 725,545.26 52.78
------------ ------- ------------- -------
Gross profit 127,213.19 56.22 649,072.35 47.22
------------ ------- ------------- -------
Expenses:
Outside services 0.00 0.00 40.00 0.00
<PAGE> 36
Operating supplies 301.60 0.13 2,382.06 0.18
Lab supplies 0.00 0.00 2,856.14 0.20
Freight & postage 423.92 0.19 2,023.90 0.15
Wages - lab 2,923.08 1.29 19,000.00 1.38
Officers salaries 11,615,38 5.14 75,499.97 5.50
Bonuses 0.00 0.00 150.00 0.01
Wages - administrative 2,307.68 1.02 14,999.92 1.09
Rent 474.60 0.21 2,847.60 0.21
Telephone lease 83.03 0.03 498.18 0.03
Equipment lease 58.37 0.03 408.59 0.03
Leased vehicle sales 1,968.25 0.87 7,703.81 0.56
Wages office 2,805.16 1.24 18,116.69 1.32
Utilities 89.59 0.04 917.61 0.07
Telephone 323.56 0.14 2,004.57 0.14
Repairs & maintenance 422.36 0.19 2,875.70 0.21
Independent sales rep 33,033.32 14.60 195,865.09 14.25
Advertising & promotion 0.00 0.00 1,794.94 0.13
Business insurance 119.29 0.05 490.72 0.04
Health insurance 875.83 0.39 5,406.24 0.39
Workman's comp insurance 407.64 0.18 1,127.72 0.08
Meals & entertainment 0.00 0.00 2,080.45 0.15
Travel 0.00 0.00 1,808.70 0.13
Property taxes 95.18 0.04 589.10 0.05
Auto insurance 129.60 0.06 119.07 0.01
F.I.C.A. tax 1,822.43 0.80 9,865.82 0.71
Unemployment tax 16.49 0.01 468.74 0.04
401K match 833.12 0.37 4,051.61 0.29
Life insurance 22.40 0.01 22.40 0.00
Permits & licenses 0.00 0.00 36.60 0.01
Vehicle expense 146.27 0.06 348.97 0.02
Legal & accounting 1,799.25 0.80 7,419.25 0.54
Professional services 239.28 0.10 3.080.45 0.23
Depreciation 654.59 0.29 3,927.54 0.28
Dues & subscriptions 394.00 0.18 3,547.64 0.26
Administrative expense 1,087.19 0.48 6,963.82 0.51
Donations 0.00 0.00 257.72 0.02
Miscellaneous 27.38 0.01 156.93 0.01
Bank charges 0.00 0.00 105.00 0.00
Consulting expense 2,105.75 0.93 16,332.57 1.19
Consulting services 0.00 0.00 653.69 0.05
------------ ------- ------------- -------
Total expenses 67,605.59 29.88 418,845.52 30.47
------------ ------- ------------- -------
Operating income
(loss) 59,607.60 26.34 230,226.83 16.75
------------ ------- ------------- -------
Other income (expense):
Interest (520.24) (0.23) (3,629.72) (0.26)
------------ ------- ------------- -------
Total other income
(expense) (520.24) (0.23) (3,629.72) (0.27)
------------ ------- ------------- -------
Net income (loss) $ 59,087.36 26.11 $ 226,597.11 16.48
============ ======= ============= =======
<FN>
See Accountants' Compilation Report
</FN>
</TABLE>
<PAGE> 37
ROLI INK CORPORATION
Statements of Cash Flows
For the 1 Month and 6 Months Ended June 30, 1997
<TABLE>
<CAPTION>
Current Year to
Month Date
------------ -------------
Cash flows from operating
activities:
<S> <C> <C>
Net income (loss) $ 59,087.36 $ 226,597.11
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation & amortization 654.59 3,927.54
Changes in assets and liabilities:
Decrease (increase)in accounts
receivable 39,869.50 5,012.19
Decrease (increase) in
inventory (10,691.04) (16,448.33)
Decrease (increase) in other
current assets 2,594.31 (24,929.50)
Increase (decrease) in
accounts payable (40,406.92) (35,790.39)
Increase (decrease) other
current liabilities (42,258.96) (118,483.81)
------------ -------------
Total adjustments (50,238.52) (186,712.30)
------------ -------------
Net cash provided by (used
in) operating activities 8,848.84 39,884.81
------------ -------------
Cash flows from investing
activities:
Purchases of property and
equipment (1,828.31) 4,249.87
------------ -------------
Net cash provided by (used
in) investing activities (1,828.31) 4,249.87
------------ -------------
Cash flows from financing
activities:
Payments on long-term debt (16,301.67) (22,666.09)
Shareholder distributions (16,820.00) (33,640.00)
------------ -------------
Net cash provided by (used
in) financing activities (33,121.67) (56,306.09)
------------ -------------
Net increase (decrease) in cash (26,101.14) (12,171.41)
Cash at beginning of period 75,365.76 61,436.03
------------ -------------
Cash at end of period $ 49,264.62 $ 49,264.62
============ =============
<FN>
See Accountants' Compilation Report
</FN>
</TABLE>
<PAGE> 38
ROLI INK CORPORATION
Statements of Cash Flows
For the 1 Month and 6 Months Ended June 30, 1997
<TABLE>
<CAPTION>
Current Year to
Month Date
------------ -------------
<S> <C> <C>
Analysis of cash accounts:
Cash - M & I Northern Bank $ 49,264.62 $ 49,264.62
------------ -------------
Total cash 49,264.62 49,264.62
Cash at beginning of period 75,365.76 61,436.03
------------ -------------
Increase (decrease) in cash $ (26,101.14) $ (12,171.41)
============ =============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest 520.24 3,629.72
Income taxes 400.00 62,942.00
</TABLE>
See Accountants' Compilation Report
PAGE
<PAGE> 39
SUPPLEMENTARY INFORMATION
ROLI INK CORPORATION
Comparative Statements of Income
For the 6 Months Ended June 30, 1997
<TABLE>
<CAPTION>
1997 1996
Amount % Amount %
------------- ------ ------------- ------
<S> <C> <C> <C> <C>
Sales:
Ink sales $1,399,809.82 101.83 $1,405,766.47 101.86
Ink sales discount (25,192.21) (1.83) (25,621.80) (1.86)
------------- ------ ------------- ------
Total sales 1,374,617.61 100.00 1,380,144.67 100.00
------------- ------ ------------- ------
Cost of sales:
Cost of raw materials 492,604.03 35.84 547,111.24 39.64
Packaging 26,941.80 1.96 31,717.19 2.30
Freight 38,343.58 2.79 34,420.77 2.49
Manufacturing supplies 9,111.31 0.66 9,164.79 0.67
Wages - Q.C. 29,277.43 2.13 19,749.99 1.43
Shop wages 33,237.90 2.42 37,638.60 2.73
Employment services shop 6,261.77 0.45 7,956.93 0.57
Production supervisory
wages 15,000.05 1.09 18,036.58 1.31
Rent 16,399.26 1.20 12,398.10 0.90
Wages - delivery 2,661.92 0.19 2,734.58 0.20
Leased delivery vehicle 3,354.53 0.24 1,844.40 0.13
Utilities 6,073.44 0.44 6,375.17 0.46
Repairs & maintenance 7,368.22 0.54 6,539.23 0.48
Insurance - shop 1,562.63 0.11 4,998.82 0.36
Health insurance 2,630.95 0.20 2,343.99 0.17
Workman's comp. insurance 2,290.67 0.16 3,581.89 0.26
Property taxes 3,547.13 0.26 2,865.96 0.20
Insurance - delivery
vehicle 558.30 0.04 1,049.68 0.08
FICA 6,796.64 0.50 4,092.04 0.30
Unemployment tax 3,364.84 0.24 3,270.28 0.23
401K match 1,776.73 0.13 514.02 0.04
Disability insurance 124.23 0.01
Life insurance 16.80
Vehicle delivery expense 2,095.53 0.15 2,850.24 0.21
Depreciation 14,145.57 1.03
------------- ------ ------------- ------
Total cost of sales 725,545.26 52.78 761,254.49 55.16
------------- ------ ------------- -------
Gross profit 649,072.35 47.22 618,890.18 44.84
------------- ------ ------------- -------
PAGE
<PAGE> 40
Expenses:
Outside services 40.00
Operating supplies 2,382.06 0.18 4,524.37 0.33
Lab supplies 2,856.14 0.20 4,225.53 0.30
Freight & postage 2,023.90 0.15 2,620.25 0.19
Wages - lab 19,000.00 1.38 24,076.88 1.75
Employment serv office 3,978.00 0.29
Officers salaries 75,499.97 5.50 79,646.14 5.77
Bonuses 150.00 0.01
Wages - administrative 14,999.92 1.09 14,125.02 1.02
Rent 2,847.60 0.21 2,187.90 0.16
Telephone lease 498.18 0.03 562.24 0.04
Equipment lease 408.59 0.03 384.37 0.03
Leased vehicle sales 7,703.81 0.56 11,618.38 0.84
Wages office 18,116.69 1.32 14,428.84 1.05
Utilities 917.61 0.07 1,029.74 0.07
Telephone 2,004.57 0.14 2,754.04 0.20
Repairs & maintenance 2,875.70 0.21 5,816.26 0.42
Independent sales rep 195,865.09 14.25 208,327.53 15.10
Advertising & promotion 1,794.94 0.13 939.71 0.06
Business insurance 490.72 0.04 1,245.11 0.09
Health insurance 5,406.24 0.39 7,043.16 0.51
Workman's comp insurance 1,127.72 0.08 705.02 0.06
Meals & entertainment 2,080.45 0.15 2,138.07 0.15
Travel 1,808.70 0.13 356.78 0.03
Property taxes 589.10 0.05 1,794.36 0.13
Auto insurance 119.07 0.01 2,329.14 0.16
F.I.C.A. tax 9,865.82 0.71 12,484.52 0.91
Unemployment tax 468.74 0.04 577.03 0.04
401K match 4,051.61 0.29 3,297.57 0.24
Life insurance 22.40
Permits & licenses 36.60 0.01 200.00 0.01
Vehicle expense 348.97 0.02 1,649.12 0.12
Bad debts 231.47 0.02
Legal & accounting 7,419.25 0.54 4,752.50 0.35
Professional services 3,080.45 0.23 3,685.31 0.26
Office expense (3.27)
Depreciation 3,927.54 0.28 22,854.45 1.66
Dues & subscriptions 3,547.64 0.26 1,944.20 0.14
Administrative expense 6,963.82 0.51
Donations 257.72 0.02
Miscellaneous 156.93 0.01 497.89 0.03
Bank charges 105.00 59.97 0.01
Consulting expense 16,332.57 1.19 18,842.77 1.36
Consulting services 653.69 0.05 11,696.68 0.85
------------- ------ ------------- -------
Total expenses 418,845.52 30.47 479,627.05 34.75
------------- ------ ------------- -------
Operating income
(loss) 230,226.83 16.75 139,263.13 10.09
------------- ------ ------------- -------
Other income & (expense):
Interest (3,629.72) (0.26) (6,404.71) (0.46)
Management fee expense (15,000.00) (1.09)
------------- ------ ------------- -------
Total other income
& (expense) (3,629.72) (0.27) (21,404.71) (1.55)
------------- ------ ------------- -------
<PAGE> 41
Income (loss)
before taxes 226,597.11 16.48 117,858.42 8.54
Wisconsin income tax 9,657.00 0.70
Federal income tax 24,900.60 1.80
------------- ------ ------------- -------
Net income (loss) $ 226,597.11 16.48 $ 83,300.82 6.04
<FN>
See Accountants' Compilation Report
</FN>
</TABLE>
<TABLE>
PAGE
<PAGE> 42
Roli Ink Corporation
4010 West Douglas Avenue
Milwaukee, WI 53209
Gentlemen:
Pursuant to your instructions, we have prepared and submit herewith the
financial statements of:
ROLI INK CORPORATION
(A WISCONSIN CORPORATION)
MILWAUKEE, WISCONSIN
consisting of the following Exhibits and Schedules:
-Independent Auditor's Report
EXHIBIT "A"-Comparative Balance Sheet
December 31, 1996 and 1995
SCHEDULE "B"-Comparative Statement of Retained Earnings,
December 31, 1996 and 1995
EXHIBIT "C"-Comparative Statement of Income
Twelve Months Ended December 31, 1996 and 1995
EXHIBIT "D"-Cash Flow Statement,
Twelve Months Ended December 31, 1996 and 1995
EXHIBIT "E"-Footnotes to Financial Statements
December 31, 1996
PAGE
<PAGE> 43
POULOS & BAYER LTD.
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors
Roli Ink Corporation
4010 West Douglas Avenue
Milwaukee, Wisconsin 53209
We have audited the accompanying balance sheet of Roli Ink Corporation(a
Wisconsin Corporation) as of December 31, 1996 and 1995 and the related
statements of income, retained earnings and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Roli Ink Corporation as of
December 31, 1996 and 1995 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
Respectfully submitted,
Poulos and Bayer, Ltd.
July 21,1997
PAGE
<PAGE> 44
ROLI INK CORPORATION EXHIBIT "A"
COMPARATIVE BALANCE SHEET
DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
<S> <S> <S>
Current Assets
Cash $61,436.03 $ 69,284.36
Accounts receivable 287,358.98 251,517.62
Inventory 168,253.57 190,946.41
Total Current Assets $517,048.58 $511,748.39
Fixed Assets
Cost basis $340,028.23 $303,270.00
Less: Accumulated depreciation (177,678.13) (133,873.55)
Net Fixed Assets 162,350.10 169,396.45
Other Assets
Security deposits
Total Assets $679,398.68 $687,109.55
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $117,249.11 $122,332.49
Commissions payable 38,821.57 64,602.40
Accrued management fee 50,000.00 15,000.00
Accrued consulting fees 10,346.31 18,006.12
Accrued corporate taxes 62,142.00 13,371.00
Notes payable - current
portion 30,700.00 106,720.00
Deferred corporate taxes 9,822.00 2,492.00
Total Current Liabilities $319,080.99 $342,524.01
Long-Term Liabilities
Notes Payable $112,670.00 $175,620.00
Less: Current portion (30,700.00) (106,720.00)
Net Long-Term Liabilities 81,970.00 68,900.00
Stockholder's Equity
Capital stock $1,577.00 $ 1,577.00
Additional paid in capital 298,510.00 298,510.00
Retained earnings 118,260.69 (24,401.46)
Treasury stock (140,000.00)
Total Stockholder's Equity 278,347.69 275,685.54
Total Liabilities and Stockholder's
Equity $679,398.68 $687,109.55
PAGE
<PAGE> 45
ROLI INK CORPORATION EXHIBIT "B"
COMPARATIVE STATEMENT OF RETAINED EARNINGS
DECEMBER 31, 1996 AND 1995
December 31,
1996 1995
Balance: January 1$ (24,401.46$ (73,496.25)
Add: Net Profit - Exhibit "C" 142,662.15 49,094.79
Balance: December 31$ 118,260.69$ (24,401.46)
PAGE
<PAGE> 46
ROLI INK CORPORATION EXHIBIT "C"
COMPARATIVE STATEMENT OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Twelve Months Ended
December 31, 1996 December 31, 1995
Amount Percent Amount Percent
Sales
Ink Sales$ 2,898,230.30 101.85%$ 2,668,937.87 101.50%
Less: Sales
discounts (52,687.21) (1.85) (39,370.83) (1.50%)
Net Sales$ 2,845,543.09 100.00%$ 2,629,567.04 100.00%
Cost of Sales
Freight$ 72,194.85 2.54%$ 72,749.83 2.77%
Manufacturing
supplies 17,673.64 0.62% 15,223.70 0.58%
Packaging 71,369.52 2.51% 70,142.29 2.67%
Purchases 1,108,663.75 38.96% 1,077,651.68 40.98%
Quality control
wages 53,231.40 1.87% 40,354.55 1.53
Shop wages 76,642.28 2.69% 96,123.27 3.66%
Total Cost of
Sales$ 1.399,775.44 49.19%$ 1,372,245.32 52.19%
Gross Profit$ 1,445,767.65 50.81%$ 1,257,321.72 47.81%
Less: Operating
Expenses 311,724.58 10.95% 321,059.37 12.21%
Net Profit Before
Selling and Administrative
Expenses$ 1,134,043.07 39.85%$ 936,262.35 35.61%
Less: Selling and Administrative
Expenses 780,270.24 27.42% 817,670.33 31.10%
Net Profit Before
Other Expenses$ 353,772.83 12.43%$ 118,592.02 4.51%
Other Expenses
Interest
expense$ 12,545.56 0.44%$ 7,969.34 0.30%
Management fee 115,293.12 4.05% 45,414.89 1.73%
Total Other
Expenses$ 127,838.68 4.49%$ 53,384.23 2.03%
Net Profit Before Corporate
Income Taxes$ 225,934.15 7.94%$ 65,207.70 2.48%
Corporate Income Taxes
Current$ 75,942.00 2.67%$ 13,621.00 0.52%
Deferred 7,330.00 0.26% 2,492.00 0.09%
Total Corporate Income
Taxes$ 83,272.00 2.93%$ 16,113.00 0.61%
Net Profit
(Loss)$ 142,662.15 5.01%$ 49,094.79 1.87%PAGE
<PAGE> 47
ROLI INK CORPORATION EXHIBIT "D"
CASH FLOW STATEMENT
TWELVE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Twelve Months Ended
December 31, December 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit $ 142,662.15$ 49,094.79
Adjustments to reconcile net profit
with cash
Depreciation 43,804.58 28,905.01
Other changes:
Change in accounts receivable (35,841.36) (30,869.04)
Change in inventory 22,692.84 (57,411.59)
Change in deposits 5,964.71 (936.11)
Change in accounts payable (5,083.38) 18,618.18
Change in accrued expenses 1,559.36 22,833.60
Change in accrued income taxes 48,771.00 13.168.00
Change in deferred income taxes 7,330.00 2,492.00
CASH FLOWS FROM OPERATING ACTIVITIES$ 231.859.90$ 45,894.84
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed assets acquired (36,758.23) (146.396.28)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in notes payable$ (62,950.00)$ 96,620.00
Treasury stock purchase (140,000.00) 0.00
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES$ (202,950.00)$ 96,620.00
NET CASH CHANGE$ (7,848.33)$ (3,881.44)
CASH BALANCE JANUARY 1 69,284.36 73,165.80
CASH BALANCE DECEMBER 31$ 61,436.03$ 69,284.36
PAGE
<PAGE> 48
ROLI INK CORPORATION EXHIBIT "E"
FOOTNOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1.COMPANY BACKGROUND
The company is a Wisconsin Corporation formed March 1, 1986. Its main business
activity is the production of ink products used primarily by the packaging
industry.
2.SIGNIFICANT ACCOUNTING POLICIES
A. Accounts Receivable
Management deems all receivables are collectible and no provisions for bad
debts are required.
B. Inventory
Inventory is stated at cost using the first-in, first-out method.
C. Fixed Assets
All assets are acquired in 1995 and 1996 are depreciated over their useful
life using the 150% declining method.
D. Notes Payable
The following indebtedness is reflected on the balance sheet:
December 31, December 31,
1996 1995
a.) M & I Northern Bank
Payable monthly $2,206.15 principal
and interest paid on 9/9/96$ 0.00$ 88,000.00
b.) M & I Northern Bank
Paid in full on 2/1/96 0.00 37,000.00
c.) Automatan, Inc.
Purchase of equipment paid in
full 4/1/96 0.00 50,620.00
d.) M & I Northern Bank
Dated 6/30/96 payable monthly
$1,873.96 principal and interest.
Balance of $40,659.54 due on
6/20/99.$ 82,670.00 0.00
e.) Gordon Page
Payable $15,000 6/30/97
$15,000 6/30/98
No interest 30,000.00 0.00
Totals$ 112,670.00$ 175,620.00
<PAGE> 49
3.COMMITMENTS EXHIBIT "E"
a.) The company leases manufacturing and office facilities under a lease dated
9/1/96 through 9/30/99.
Terms of the lease are; per month;
Base month$ 3,164.00
Real estate tax 530.30
Additionally, company leased on 6/1/97 1,685 square feet at a cost of $262.86
per month.
b.) The company is committed to pay a consulting agreement in the amount of
$2,000 per month through 1999. This is payable to the original owner of the
company.
PAGE><PAGE> 50<PAGE
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CGI HOLDING CORPORATION
Dated: August 29, 1997 By:/S/John Giura, Principal Accounting,
and Chief Financial Officer
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