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: September 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 (I.R.S. Employer Identification
OF incorporation or organization) No.)
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: 8,272,779 shares of its $0.001 par value common stock
as of November 18, 1997.
Transitional Small Business Disclosure Format (check one) Yes
[ ] No [X]
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CGI HOLDING CORPORATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
September 30,
1997
-----------
Current Assets
Cash $ 28,391
Accounts receivable 2,396,101
Inventory 182,231
Other current assets 93,037
-----------
Total Current Assets 2,699,760
-----------
Property and Equipment
Leasehold improvements 28,262
Fixtures and equipment 441,336
Vehicles 155,404
Contracting equipment 426,826
-----------
1,051,828
Less: accumulated depreciation (639,643)
-----------
Net Property and Equipment 412,185
-----------
Deposits and other assets 3,552
-----------
Total Assets $ 3,115,497
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 656,196
Commissions payable 50,327
Short-term borrowings 110,341
Accrued liabilities 74,092
Income taxes payable 283,110
Billings over cost and
estimated earnings 111,399
Current portion of
long-term debt 505,608
-----------
Total Current Liabilities 1,791,073
-----------
Long-term debt, net of
current portion 185,526
Deferred Income Tax 9,822
----------
Total Long-Term Liabilities 195,348
----------
Stockholders' Equity
Preferred stock, $0.001 par value,
5,000,000 shares authorized; no
shares issued or outstanding -
Common stock - $0.001 par value;
100,000,000 shares authorized,
8,272,779 issued and outstanding 8,273
Additional paid-in capital 407,241
Retained earnings 713,562
-----------
Total Stockholders' Equity 1,129,076
-----------
Total Liabilities and
Stockholders' Equity $ 3,115,497
===========
See the accompanying notes to condensed consolidated
financial statements.
<PAGE>
CGI HOLDING CORPORATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Sales $2,163,171 $4,309,685 $6,438,423 $7,000,075
Cost of goods sold 1,446,380 2,794,011 4,136,584 4,424,001
---------- ---------- ---------- ----------
Gross profit 716,791 1,515,674 2,301,839 2,576,074
General and admin-
istrative expense 486,093 809,170 1,472,698 1,702,032
---------- ---------- ----------- ----------
Income from Operations 230,698 706,504 829,141 874,042
---------- ---------- ----------- ----------
Other Income(Expense)
Other (23) 4 92,901 80,647
Interest income - - 1,236 -
Interest expense (16,978) (29,471) (41,867) (62,086)
---------- ---------- ----------- ----------
Total Other
Income (17,001) (29,467) 52,270 18,561
---------- ---------- ----------- ----------
Income before income
taxes 213,697 677,037 881,411 892,603
Income tax provision 76,777 196,958 284,310 258,386
---------- ----------- ----------- ----------
Net Income $ 136,920 $ 480,079 $ 597,101 $ 634,217
========== =========== =========== ==========
Net Income Per
Common Share $ 0.02 $ 0.10 $ 0.10 $ 0.13
========== =========== =========== ==========
Weighted average
number of common
shares outstanding 7,264,863 4,961,056 5,737,431 4,961,056
========== =========== =========== ===========
See the accompanying notes to condensed consolidated financial statements.
<PAGE> CGI HOLDING CORPORATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash
----------------------------
For the Nine Months
Ended September 30,
---------------------
1997 1996
--------- -----------
Cash Flows From Operating Activities
Net profit $ 597,101 $ 634,217
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 79,046 70,344
Change in accounts receivable (721,206) (2,861,508)
Change in employee loan 400 -
Change in inventory 12,905 29,643
Change in prepaid insurance 27,755 27,917
Change in cost and estimated
earnings over billings 32,007 (21,041)
Change in deposits 941 997
Change in accounts payable (37,644) 878,716
Change in accrued expenses 204,665 414,473
Change in accrued income taxes (18,376) 217,437
Change in billing in excess of
cost and estimated earnings 10,217 -
Change in investment in all
weather roofing - 5,000
--------- ----------
Net Cash Provided by (Used
in) Operating Activities 187,811 (603,805)
--------- ----------
Cash Flows From Investing Activities
Purchase of property and equipment (126,610) (147,616)
--------- ----------
Net Cash Used in Investing
Activities (126,610) (147,616)
--------- ----------
Cash Flows From Financing Activities
Proceeds from sale of common stock 48,510 -
Change in loan payable 11,500 880,248
Change in notes payable (50,558) (165,025)
Distribution to shareholder (33,640) -
Redemption of common stock (81,500) (90,000)
--------- ----------
Net Cash Provided by (Used
by) Financing Activities (105,688) 625,223
--------- ----------
Net Decrease in Cash (44,487) (126,198)
Cash at Beginning of Period 72,878 164,075
--------- ----------
Cash at End of Period $ 28,391 $ 37,877
========= ==========
See the accompanying notes to condensed consolidated financial statements.
CGI HOLDING CORPORATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
NOTE 1--CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements
have been prepared by the Company, and are not audited. All
adjustments necessary for fair presentation have been included, and
consist only of normal recurring adjustments, except as disclosed
herein. These financial statements are condensed and, therefore, do
not include all disclosures normally required by generally accepted
accounting principles. These statements should be read in conjunction
with the annual financial statements of Safe Environment Corporation
and Roli Ink Corporation included in the Company's Form 10-QSB dated
June 30, 1997. The financial position and results of operations
presented in the accompanying financial statements are not
necessarily indicative of the results to be generated for the
remainder of 1997.
The consolidated financial statements include the accounts of
Safe Environment Corporation and Roli Ink Corporation for all periods
presented and the accounts of CGI Holding Corporation from July 28,
1997. All intercompany accounts and transactions have been eliminated
upon consolidation.
NOTE 2--REORGANIZATION WITH SAFE ENVIRONMENT CORPORATION
AND ROLI INK CORPORATION
On July 28, 1997, the Company entered a reorganization with two
privately held corporations, Safe Environment Corporation (Safe), an
Illinois Corporation, and Roli Ink Corporation (Roli), a Wisconsin
Corporation. As part of the reorganization, the Company changed its
name to CGI Holding Corporation, and completed a 1-for-5 reverse
stock split of the outstanding common shares resulting in 3,311,723
common shares being outstanding immediately before the
reorganization. The Company then issued a controlling interest of
4,961,056 shares (post-split) to the shareholders of Safe and Roli.
The reorganization was accounted for as the purchase of Gemstar
Enterprises, Inc. under the purchase method of accounting. The
3,311,723 shares deemed issued in the acquisition were valued
at$(384), which was Gemstar's net capital deficiency on the date of
the reorganization. The operations of Gemstar have been included in
the consolidated results of operations from July 28, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
- -------
CGI Holding Corporation, (the "Company"), was incorporated
under the laws of the State of Nevada in October of 1987, under the
name of North Star Petroleum, Inc. and completed a public offering of
its common stock and warrants in August of 1988. Subsequent to the
public offering, the Company engaged in the exploration, development
and production of oil and gas on a joint venture basis with other
industry partners and real estate development.
The Company's prior operations proved unsuccessful and from
1993 until July 1997, the Company had essentially no operations.
Since the sale of its prior business, the Company was seeking to
acquire assets or to acquire or merge with an existing operating
entity in order to establish business operations. On June 30, 1997,
the Company signed two separate Agreements and Plan of
Reorganization, (the "Reorganization Agreements") to acquire Roli Ink
Corporation, a Wisconsin corporation ("RIC"), and Safe Environment
Corp., an Illinois corporation ("SECO"), in a so called "reverse
acquisition" transaction with a closing date of July 28, 1997. On the
closing date, all shareholders of RIC and SECO approved the
transaction and tendered their stock certificates in RIC and SECO in
exchange for shares of the Company's Common Stock. The businesses of
the two acquired corporations became the business of the Company as
well as the management of the acquired corporation becoming the
management of the Company. The Company changed its fiscal year end
from September 30, to December 31, which is the fiscal year end of
RIC and SECO.
Under the terms of the Reorganization Agreements, the Company
acquired all of the issued and outstanding shares of RIC and SECO for
an aggregate of 4,961,056 shares of Common Stock. As a result of the
purchase of RIC and SECO, shareholders of the Acquired Corporations
own approximately 59.9% of the Company. The RIC shareholders
represent 26.6% and the SECO shareholders represent 33.3% of the
Company. After the acquisition, individuals associated with the
Acquired Corporations purchased, from existing shareholders of the
Company, an additional 1,160,000 shares of Common Stock.
Pursuant to the Reorganization Agreement, RIC's and SECO's
business became the business of the Company and John Giura and Ann K.
Knaack, who were appointed directors of the Company on the Closing
Date, will manage the operations of the Company as well as the
operations of RIC and SECO.
RIC was incorporated in the State of Wisconsin in 1985 for the
purpose of manufacturing and selling water based printing inks to
industrial printers. After some initial problems finding acceptance
for water based inks versus solvent inks, RIC developed, in-house, a
new ink product line. With its new product line, RIC began focusing
on the corrugated box manufactures who were producing display grade
boxes. This area represented potentially good volume and the box
manufactures could pay the prices required by RIC's ink products.
RIC primarily concentrates its efforts on the Wisconsin and Northern
Illinois ink market due to limited capital for expansion.
In addition to specialty corrugated ink, RIC sells ink to
envelope and label manufacturers and medical packaging plants. It
also sells a conductive and static dissipative coating used in
electronics packaging.
SECO was formed in November 1987 to provide asbestos abatement
services. SECO has been involved in the asbestos abatement industry
since its formation. SECO provides asbestos abatement services to
industrial and government concerns desiring to remove asbestos in the
workplace or other environments in order to remedy the health risks
associated with asbestos and to return the plants and or office
facilities to operation on a timely basis.
The asbestos abatement industry developed out of concern for
the health of workers who may be exposed to asbestos. SECO's
services involve the removal of the asbestos and the transportation
of asbestos to a site where it can be disposed. Asbestos abatement
is performed in accordance with SECO's operating procedures and
applicable federal, state, and local guidelines. Because of the
health hazards posed by asbestos, the need to comply with applicable
requirements of the Occupational Safety and Health Administration
("OSHA") and similar state agencies and local regulations relating to
workplace safety, asbestos abatement has to be performed by trained
personnel using approved techniques. SECO employees engaged in
asbestos abatement obtain required certification that they meet or
exceed minimal competence requirements of applicable authorities.
Liquidity and Capital Resources
- -------------------------------
For the quarter ended September 30, 1997, the Company had
assets of $3,115,497 and liabilities of $1,986,421. As of September
30, 1997, the Company had working capital of $908,687 consisting
primarily of accounts receivable from its subsidiary SECO. The
Company feels these receivables are collectible and that all
liabilities will be able to be paid in a timely manner. Through the
acquisition of SECO and RIC the Company increased its property, plant
and equipment by $412,185.
The Company's operations with the addition of the new
subsidiaries, Roli and SECO, are profitable and able to cover ongoing
expenses. Currently, the Company has the plants and equipment needed
to carry on its existing operations and to expand sales in its
current geographical coverage areas. The Company does want to expand
its operations in both subsidiaries and may seek outside sources of
financing including potentially equity and/or debt financing as
warranted.
Results of Operations
- ---------------------
Through the reorganization of RIC and SECO into the Company,
combined operations produced net income of $136,920 (($0.03 per
share) for the quarter ended September 30, 1997 and $597,101 ($0.10
per share) for the nine months then ended. Net income from combined
operations was $480,079 ($0.10 per share) for the three months ended
September 30, 1996 and $634,217 ($0.13 per share) for the nine months
then ended. For the quarter ended September 30, 1997, SECO produced
income of $82,907, on sales of $1,505,879 and RIC produced income of
$54,013 on sales of $657,292. Without the acquisition of RIC and
SECO, the Company would have had no revenue.
Although the Company produced income for the quarter ended
September 30,1997, as opposed to the same time frame in 1996, its
operating subsidiary SECO experienced decreased net income over the
same period in 1996. For the quarter ended September 30, 1996, SECO
had income of $428,127 as opposed to the $82,907 produced in 1997.
This decrease was the result of one major annual project which took place in
August - September 1996 but in 1997, the same project was delayed to
the fourth quarter. Accordingly, the fourth quarter of 1997 should be
more profitable than the fourth quarter of 1996. The company is
confident that its earnings for all of 1997 will show an improvement
over 1996.
RIC experienced only slight gains over its income in 1996
having produced income of $51,952 for the quarter ended September
30, 1996, as opposed to the $54,013 for the 1997 quarter. For the
nine months ended September 30, 1997, Roli experienced substantial
gains over 1996, having produced $249,524 in income as opposed to
$132,188 for the same time frame in 1996. SECO on the other hand
decreased to $347,577 for the nine months ended September 30, 1997,
from the $502,029 in 1996, for the reasons explained above.
The Company is hopeful to reduce some of the administrative
expenses by combining certain functions which can be handled at the
parent company level. As the acquisition has only recently been
completed, it is difficult to determine how the combined entities will
perform.
As the Company is able to streamline its general and
administrative expenses, it is hopeful that it can expand the
geographical service area for SECO and RIC to increase revenue. The
Company is hopeful that with the cash flow generated by the two
operations, the Company will be able to expand its new subsidiaries
service areas and thereby expand their business.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
The board of directors adopted resolutions and a majority of
the Company's shareholders approved such resolutions providing for a
recapitalization (the "Recapitalization") pursuant to which the
issued and outstanding shares of Common Stock, were reversed split,
or consolidated, on a 1-for-5 basis, so that shareholders will own
one (1) share of common stock (hereinafter the "Consolidated Common
Stock") for each five (5) shares of Common Stock held by the
shareholder prior to the "effective date" of the Recapitalization.
No fractional shares were issued in connection with such
Recapitalization and any fractional shares were rounded down to the
nearest whole number.
For purposes of the Recapitalization of the Common Stock in the
OTC Electronic Bulletin Board, the Recapitalization was effective on
August 4, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In July 1997, pursuant to a shareholder consent of certain
shareholders of the Company, who collectively represent in excess of
fifty percent (50%) of the votes eligible to be cast as of the record
date of June 30, 1997, the following resolutions were approved and
through actions of the Company's officers the relevant transactions
were closed on July 28, 1997:
1. A recapitalization pursuant to which the issued and
outstanding shares of the Company's common stock were
reverse split, or consolidated, on a 1-for-5 basis so
that shareholders will own one share of Common Stock for
each 5 shares now held.
2. a) An Agreement and Plan of Reorganization dated June
30, 1997, between the Company and RIC, pursuant to which
the Company acquired RIC in a corporate reorganization
with RIC becoming a wholly owned subsidiary of the
Company, and the shareholders of RIC receiving an
aggregate of 2,200,056 post-split shares of the Common
Stock after giving effect to the Recapitalization
described above.
b) An Agreement and Plan of Reorganization dated
June 30, 1997, between the Company and SECO,
pursuant to which the Company acquired SECO in a
corporate reorganization with SECO becoming a
wholly owned subsidiary of the Company, and the
shareholders of SECO receiving an aggregate of
2,761,000 post-split shares of Common Stock after
giving effect to the Recapitalization described
above.
3. An amendment to the Company's Certificate of
Incorporation changing the name of the Company to CGI
Holding Corporation.
4. The election of John Giura and Ann K. Knaack as directors
of the Company, effective as of the date of the closing
of the above reorganization agreements, to serve in
accordance with the provisions of the Company's
Certificate of Incorporation and bylaws and until their
successors are elected and qualified.
Management solicited the Shareholder Consent from
holders of record of the Common Stock outstanding as of
June 30, 1997. Each shareholder had the right to one
vote for each share of Common Stock owned. There was no
cumulative voting. Holders of 6,634,750 shares
representing 61.67% of the 10,758,614 issued and
outstanding shares of Common Stock approved the above
actions.
As a result of the acquisition of the two companies, RIC
and SECO, the Company changed its fiscal year end from
September 30 to December 31 the fiscal year end of the
two new subsidiaries. The fiscal year end was changed to
better match the operations of the Company.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
----------
None
(b) Reports on From 8-K.
---------------------
None. Information required to be reported pursuant to
Item 1,2, and 6 of Form 8-K has been included or
reference in the Form 10-QSB for the Quarter ended June
30, 1997.
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: December 9, 1997 By: /S/ John Giura
----------------- ------------------
John Giura, Principal
Accounting, and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet as of September 30, 1997, and condensed
consolidated statements of operations fro the nine months ended September 30,
1997, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 28,391
<SECURITIES> 0
<RECEIVABLES> 2,396,101
<ALLOWANCES> 0
<INVENTORY> 182,231
<CURRENT-ASSETS> 2,699,760
<PP&E> 1,051,828
<DEPRECIATION> (639,643)
<TOTAL-ASSETS> 3,115,497
<CURRENT-LIABILITIES> 1,791,073
<BONDS> 195,348
0
0
<COMMON> 8,273
<OTHER-SE> 1,120,803
<TOTAL-LIABILITY-AND-EQUITY> 3,115,497
<SALES> 6,438,423
<TOTAL-REVENUES> 6,438,423
<CGS> 4,136,584
<TOTAL-COSTS> 4,136,584
<OTHER-EXPENSES> 1,472,698
<LOSS-PROVISION> 01,867
<INTEREST-EXPENSE> 41,8671
<INCOME-PRETAX> 881,411
<INCOME-TAX> 284,310
<INCOME-CONTINUING> 597,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 097,101
<NET-INCOME> 597,101
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
