UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[Mark One]
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: September 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES 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 I.D. No.)
incorporation or organization
8400 Brookfield Avenue, Brookfield, Illinois 60513
- --------------------------------------------- --------
(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code (708) 387-9200
--------------
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 periods),
and (2) has been subject to such filing requirements for the past 90 days,
Yes [x] No [ ] Yes [x] No [ ]
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 October, 31, 1998.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [x]
<PAGE> 2
CGI HOLDING CORPORATION
FORM 10-QSB
For the Quarter Ended September 30, 1998
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
a) Balance Sheets
as of September 30, 1998, December 31, 1997
and September 30, 1997 3
b) Statement of Stockholders' Equity
for the Nine Months Ended September 30, 1998 4
c) Statement of Operations
for the Three and Nine Months Ended
September 30, 1998 and 1997 5
d) Statement of Cash Flows
for the Nine Months Ended September 30, 1998 and 1997 6
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 7,8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Signature 9
<PAGE> 3
CGI HOLDING CORPORATION, INC.
CONDENSED COMPARATIVE CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1998 1997 1997
------------ ----------- -------------
CURRENT ASSETS
Cash $271,709 $174,267 $28,391
Accounts Receivable 2,502,630 1,513,279 2,396,101
Inventory 189,642 238,257 182,231
Unexpired Insurance 43,035 82,262 47,599
Negotiation Deposit 10,000 0 0
Other Assets 13,372 0 5,150
Costs and Estimated Earnings in
Excess of Billings 125,826 45,000 40,288
------------ ----------- -------------
TOTAL CURRENT ASSETS $3,156,214 $2,053,065 $2,699,760
------------ ----------- -------------
PROPERTY, PLANT AND EQUIPMENT
Leasehold Improvements $28,262 $28,262 $28,262
Fixtures and Equipment 457,995 447,025 441,336
Vehicles 162,302 147,804 155,404
Contracting Equipment 466,183 426,827 426,826
------------ ----------- -------------
Total $1,114,743 $1,049,918 $1,051,828
Less: Accumulated Depreciation 740,989 659,864 639,643
------------ ----------- -------------
NET PROPERTY, PLANT AND EQUIPMENT 373,754 390,054 412,185
------------ ----------- -------------
OTHER ASSETS 3,752 3,552 3,552
------------ ----------- -------------
TOTAL ASSETS $3,533,720 $2,446,671 $3,115,497
============ =========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Portion of Long-Term Debt $911,372 $131,906 $505,608
Accounts Payable 696,051 440,741 656,196
Short-Term Borrowings 56,374 134,832 110,341
Accrued Corporate Income Taxes 109,723 331,654 283,110
Accrued Liabilities 71,402 120,066 124,419
Loan Payable-Shareholder 115,000 0 0
Billings in Excess of Costs
and Estimated Earnings 0 0 111,399
------------- ----------- -------------
TOTAL CURRENT LIABILITIES $1,959,922 $1,159,199 $1,791,073
------------- ----------- -------------
LONG TERM LIABILITIES
Long-Term Debt, Net of
Current Portion $62,271 $155,336 $185,526
Deferred Income Tax 9,822 9,822 9,822
------------- ----------- -------------
TOTAL LONG-TERM LIABILITIES $72,093 $165,158 $195,348
------------- ----------- -------------
STOCKHOLDERS' EQUITY
Preferred Stock, $0.001 par value,
5,000,000 shares authorized; no
shares issued or outstanding $0 $0 $0
Common Stock, $0.001 par value,
100,000,000 shares authorized;
8,272,779 shares issued and
outstanding 8,273 8,273 8,273
Additional Paid-In Capital 363,674 363,674 363,674
Retained Earnings 1,129,758 750,367 757,129
------------- ----------- -------------
TOTAL STOCKHOLDERS' EQUITY $1,501,705 $1,122,314 $1,129,076
------------- ----------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,533,720 $2,446,671 $3,115,497
============= =========== =============
The accompanying notes are an integral part of these statements.
<PAGE> 4
CGI HOLDING CORPORATION, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
COMMON COMMON PAID-IN RETAINED
SHARES STOCK CAPITAL EARNINGS
---------- --------- ----------- ----------
COMMON SHARES $0.001 PAR VALUE
STOCK ACCOUNTS REFLECTED AT
POST REORGANIZATION UNIT SHARES
BALANCE: JANUARY 1, 1998 8,272,779 $8,273 $363,674 $750,367
NET PROFIT FROM EXHIBIT 379,391
--------- --------- ---------- ----------
BALANCE: SEPTEMBER 30, 1998 8,272,779 $8,273 $363,674 $1,129,758
========= ========= =========== ==========
The accompanying notes are an integral part of these statements.
<PAGE> 5
CGI HOLDING CORPORATION, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------- ------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
SALES $3,139,594 $2,163,171 $6,445,435 $6,438,423
COST OF GOODS SOLD 2,354,254 1,446,380 4,300,319 4,136,584
------------ ------------ ----------- -----------
GROSS PROFIT $785,340 $716,791 $2,145,116 $2,301,839
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 500,351 486,093 1,466,678 1,472,698
------------ ------------ ----------- -----------
INCOME FROM OPERATIONS $284,989 $230,698 $678,438 $829,141
------------ ------------ ----------- -----------
OTHER INCOME (EXPENSE)
Other ($93) ($23) $0 $92,901
Interest Income 0 0 0 1,236
Interest Expense (15,932) (16,978) (46,140) (41,867)
------------ ------------ ----------- ----------
TOTAL OTHER INCOME (EXPENSE) (16,025) (17,001) (46,140) 52,270
------------- ------------ ----------- ----------
INCOME BEFORE INCOME TAXES $268,964 $213,697 $632,298 $881,411
INCOME TAX PROVISION 113,508 76,777 252,907 284,310
------------- ----------- ----------- ----------
NET INCOME $155,456 $136,920 $379,391 $597,101
============ =========== =========== ==========
NET INCOME PER COMMON
SHARE $0.02 $0.02 $0.05 $0.10
============ =========== =========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
8,272,779 7,264,863 8,272,779 5,737,431
============ =========== =========== ==========
<PAGE> 6
CGI HOLDING CORPORATION, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit $379,391 $597,101
Non-Cash Items Included in Net Profit
Depreciation 81,125 79,046
Change in Accounts Receivable (989,351) (721,206)
Change in Inventory 48,615 12,906
Change in Loans Receivable (13,372) 400
Change in Prepaid Insurance 39,227 32,055
Change in Costs and Estimated Earnings
Over Billings (80,826) 27,843
Change in Deposits (10,200) 941
Change in Accounts Payable 255,310 (96,883)
Change in Accrued Expenses (48,664) 55,363
Change in Accrued Income Taxes (221,931) 190,028
Change in Billings in Excess of Costs and
Estimated Earnings 0 10,217
---------- ----------
NET CASH CHANGE FROM OPERATING
ACTIVITIES ($560,676) $187,811
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed Assets Acquired ($64,825) ($127,753)
Proceeds from Sale of Fixed Assets 0 1,143
---------- ----------
NET CASH CHANGE FROM INVESTING ACTIVITIES ($64,825) ($126,610)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in Loan Payable $115,000 $11,500
Change in Notes Payable 607,943 (50,558)
Change in Treasury Stock 0 (81,500)
Proceeds from Sale of Stock 0 48,510
Distribution to Shareholders 0 (33,640)
---------- ----------
NET CASH CHANGE FROM FINANCING
ACTIVITIES $722,943 ($105,688)
---------- ----------
NET CASH CHANGE $97,442 ($44,487)
CASH BALANCE: JANUARY 1 174,267 72,878
---------- ----------
CASH BALANCE: SEPTEMBER 30 $271,709 $28,391
========== ==========
Supplemental Information
Interest Paid $46,140 $41,867
Income Taxes Paid 474,838 94,282
The accompanying notes are an integral part of these statements.
<PAGE> 7
CGI HOLDING CORPORATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company had net income for the quarter ended September 30, 1998 of $155,456
compared to a net income of $136,920 for the three months ended September 30,
1997. Revenues increased during the three months ended September 30, 1998,
resulting in an increase in net income of $18,536, as compared to the three
months ended September 30, 1997.
Total revenues for the three months ended September 30, 1998 were $3,139,594 an
increase of $976,423 or approximately 45%, from the three months ended
September 30, 1997. The increase in revenues is primarily attributable to an
increase in the revenues of SECO resulting from the commencement of a large
contract that had been originally scheduled to begin in May but was rescheduled
by the customer to begin in July. Revenues from SECO operations increased
$1,056,335 from $1,505,879 for the three months ended September 30, 1997 to
$2,562,214 for the three months ended September 30, 1998. Revenues from ROLI
operations decreased $80,004 from $657,291 for the three months ended
September 30, 1997 to $577,287 for the three months ended September 30, 1998.
The sales of ROLI decreased due to a partial loss of business, from one large
customer. Management is striving to regain such sales from that customer and
is realizing new sales from its sales representative to be recognized early in
1999.
During the three months ended September 30, 1998 and 1997, direct costs of
(production and services) were $2,354,254 and $1,446,380 or 75% and 67% of
revenues, respectively. This represents an increase in costs of approximately
8% over the three months ended September 30, 1997. Due to competition
increasing in the industry a percentage of SECO's work had been done as joint
ventures with minorities, which was about 30-40% of SECO's work. For this work,
gross profit margins are in the range of 20-25%.
Total operating expenses for the three months ended September 30, 1998 were
$500,351, an increase of $14,258 over the three months ended September 30, 1997.
The 3% increase in operating expenses is primarily attributable to increases in
legal fees.
The Company recorded a net income from operations of $284,989 and $230,698 for
the three months ended September 30, 1998 and 1997, respectively. This increase
in income is attributable to commencement of the rescheduled SECO contract as
described above.
Financial Condition
At September 30, 1998, the Company's current assets exceeded its current
liabilities by $1,196,292 as compared with (i) current assets exceeding current
liabilities by $893,866 at December 31, 1997 and (ii) current assets exceeding
current liabilities by $908,687 at September 30, 1997. The current ratio of
assets to liabilities was 1.61 at September 30, 1998 as compared with 1.77 at
December 31, 1997 and 1.51 at September 30, 1997. Current assets increased by
$1,103,149 to $3,156,214 from December 31, 1997 to September 30, 1998. Current
liabilities increased by $800,723 during the same period to $1,959,922. The
increase in working capital over this period is primarily attributable to an
increase in Accounts Receivable and Cash and to decreases in short-term
borrowings of $78,458, accrued corporate income taxes of $221,931, and accrued
liabilities of $48,664.
Total assets were $3,533,720 at September 30, 1998 as compared to $2,446,671 at
December 31, 1997. The increase of $1,087,049 is attributable to an increase
in Accounts Receivable.
The Company endeavors to achieve a positive cash flow from operations, although
there can be no assurance that the Company will be successful in achieving that
objective. The Company has increased revenues during the nine months ended
September 30, 1998 as compared with the nine months ended September 30, 1997.
As of September 30, 1998, the Company had a business back log that stood at a
little over $1.5 million.
<PAGE> 8
Liquidity and Capital Resources
Cash flow increased from ($44,487) in the first nine months of 1997 to $97,442
in the first nine months of 1998. As of September 30, 1998, the Company had
$271,709 in cash. The Company uses its working capital to fund ongoing
operations.
The Company anticipates that existing cash will be sufficient to fund the
Company's operations and capital requirements for the foreseeable future.
However, no assurance can be given that changing business circumstances will not
require additional capital for reasons that are not currently anticipated or
that the necessary capital will then be available to the Company on favorable
terms, or at all.
Future Plans
As previously reported, the Company had advised its stockholders that it was
negotiating to acquire a manufacturing company. In August of 1998, a letter of
intent was signed to acquire all of the assets of the manufacturing company.
The letter of intent is subject to, among other things, delivery of all assets
free and clear of any and all encumberances. It is also subject to the
preparation of an acceptable, definitive agreement. There is no assurance that
such conditions will occur or that an acceptable agreement will be reached.
Forward-Looking Statements
This report included forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
statements contain information regarding growth and earnings expectations based
on the Company's current assumptions involving a number of risks and
uncertainties. There are certain important factors that can cause actual
results to differ materially from the forward-looking statements, including,
without limitation, adverse business or market conditions; the ability of the
Company to secure and satisfy customers; and adverse competitive developments.
Readers are cautioned not to place undue reliance on forward-looking statements.
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES INSECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
None
(b) Reports on Form 8-K
None
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: November 10, 1998 By: /S/ John Giura
----------------- ------------------
John Giura, President and Director
(Principal Executive Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 271,709
<SECURITIES> 0
<RECEIVABLES> 2,502,630
<ALLOWANCES> 0
<INVENTORY> 189,642
<CURRENT-ASSETS> 3,156,214
<PP&E> 1,114,743
<DEPRECIATION> 740,989
<TOTAL-ASSETS> 3,533,720
<CURRENT-LIABILITIES> 1,959,922
<BONDS> 62,271
0
0
<COMMON> 8,273
<OTHER-SE> 1,493,432
<TOTAL-LIABILITY-AND-EQUITY> 3,533,720
<SALES> 6,445,435
<TOTAL-REVENUES> 6,445,435
<CGS> 4,300,319
<TOTAL-COSTS> 4,300,319
<OTHER-EXPENSES> 1,466,678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,140
<INCOME-PRETAX> 632,298
<INCOME-TAX> 252,907
<INCOME-CONTINUING> 379,391
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 379,391
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
