-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ExZf3ywaNKexcO3lfdPJd69pWxkUdvjzVFKUnKpBRWniqjQHvL/VLanw04EQUGN5 bg0E3lMptncoH7Q8l2tdUA== 0000829323-01-500007.txt : 20010416 0000829323-01-500007.hdr.sgml : 20010416 ACCESSION NUMBER: 0000829323-01-500007 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010412 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CGI HOLDING CORP CENTRAL INDEX KEY: 0000829323 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 870450450 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 033-19980-D FILM NUMBER: 1601181 BUSINESS ADDRESS: STREET 1: 8400 BROOKFIELD AVENUE CITY: BROOKFIELD STATE: IL ZIP: 60513 BUSINESS PHONE: 7083570900 MAIL ADDRESS: STREET 1: 8400 BROOKFIELD AVE CITY: BROOKFIELD STATE: IL ZIP: 60513 FORMER COMPANY: FORMER CONFORMED NAME: GEMSTAR ENTERPRISES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: NORTH STAR PETROLEUM INC DATE OF NAME CHANGE: 19900530 10KSB 1 file001.txt ANNUAL REPORT FOR PERIOD ENDED 12/31/00 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 ---------------- [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to __________ -------------------- Commission File Number 33-19980-D ---------------------- CGI Holding Corporation ----------------------------------- (Exact name of registrant as specified in 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 offices) (Zip Code) Issuer's telephone number, including area code (708) 387-0900 --------------- Securities registered pursuant to section 12(b) of the Act: Title of each class Name of each exchange on which registered None N/A - ------------------ ----------------------------------------- Securities registered pursuant to section 12(g) of the Act: None --------------- (Title of class) Check whether the Issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes [X] No [ ] (2) Yes [ ] No [X] Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] State issuer's revenues for its most recent fiscal year: $9,929,197 State the aggregate market value of the voting and nonvoting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within the past 60 days: Based on the average bid and asked price of $0.39 per share for the issuer's common stock at March 26, 2001, the market value of the issuer's common stock held by non-affiliates would be $1,197,368. A list and description of affiliates can be found in Item 11. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of March 26, 2001, there were 10,229,779 shares of the issuer's common stock issued and outstanding. PART I ITEM 1. DESCRIPTION OF BUSINESS HISTORY AND ORGANIZATION CGI Holding Corporation (formerly known as North Star Petroleum, Inc.) (the "Company") was incorporated under the laws of the State of Nevada in October of 1987. From 1993 until July 1997, the Company had essentially no operations. On June 30, 1997, the Company entered into a preliminary letter of intent with Safe Environment Corporation, an Illinois corporation ("SECO-Illinois"), and Roli Ink Corporation, a Wisconsin corporation ("RIC"). On July 28, 1997, the Company entered into a reorganization agreement (the "Reorganization Agreement") with SECO-Illinois and RIC, all of the shareholders of SECO-Illinois and RIC approved the transaction and the shareholders of SECO-Illinois and RIC tendered their stock certificates in SECO-Illinois and RIC. Pursuant to the terms of the Reorganization Agreement, the Company agreed to purchase all of the issued and outstanding equity interests in SECO-Illinois and RIC in exchange for shares of the Company's common stock (the "Common Stock"). Immediately prior to the reorganization, the Company completed a 1-for-5 reverse stock split of its outstanding Common Stock, resulting in 3,311,723 shares of Common Stock issued and outstanding. The reorganization became effective on August 4, 1997. Upon the effective date of the reorganization, the Company issued an additional 4,961,056 (post-split) shares of Common Stock to the shareholders of SECO-Illinois and RIC in exchange for all of the issued and outstanding equity interests in SECO-Illinois and RIC. Therefore, upon the effective date of the reorganization, the shareholders of SECO-Illinois and RIC held approximately 59.9% of the issued and outstanding Common Stock. The shareholders of SECO-Illinois received 2,761,000 shares of Common Stock (approximately 33.3% of the issued and outstanding Common Stock) and the shareholders of RIC received 2,200,056 shares of Common Stock (approximately 26.6% of the issued and outstanding Common Stock). On March 5, 1999, the Company's wholly owned subsidiary, Personal Care Products, Inc., acquired substantially all of the assets of Salle International, L.L.C. (a private company) under an asset purchase agreement dated March 2, 1999. The acquisition price for Trifinity's assets was $1,319,171. The acquisition price consisted of (i) assumed debt of $951,171 and (ii) 1,600,000 shares of Common Stock (with a market value of $368,000). Subsequent to the acquisition, Personal Care Products, Inc. changed its name to Trifinity, Inc. ("Trifinity"). On November 15, 2000, with an effective date of November 13, 2000, the Company sold its wholly owned subsidiary, Roli Ink, Corporation. This was accomplished through an asset sale to Braden Sutphin Ink Corporation of Cleveland, Ohio. You are referred to the Form 8-K filed on November 30, 2000. The pre-tax gain on the sale of the assets was $1,561,943. The management of the Company made this decision as a way to reduce the Company's debt and to pursue other opportunities that may arise in the future. On March 27, 2001, World Mall, Inc. was merged into World Mall Acquisition Corp., a wholly owned subsidiary of CGI Holding Corporation ("CGI") and in exchange the shareholders, optionholders and warrantholders of World Mall Inc. received forty percent (40%) of the outstanding common stock of CGI on a fully diluted basis. If World Mall Acquisition Corp. meets certain performance criteria, those former shareholders, optionholders and warrantholders of World Mall, Inc. will receive an additional four percent (4%) of the outstanding common stock of CGI on a fully diluted basis. SAFE ENVIRORNMENT CORPORATION The Company currently has two subsidiaries involved in the asbestos/lead abatement industry. SECO-Illinois was incorporated in the State of Illinois in 1987 and has been involved in the asbestos abatement industry since its formation. Safe Environment Corporation of Indiana ("SECO-Indiana") was incorporated in the State of Indiana in 1999. SECO-Illinois and SECO-Indiana are collectively referred to as SECO. The management of SECO deemed it would best serve its operations to concentrate on the Illinois and Indiana markets thereby ceasing its activities in Missouri on October 1, 2000. The Company sold its Missouri based assets for $350,000 plus the assumption of its Missouri based liabilities. This transaction resulted in a one time charge of $243,082. SECO recently expanded its services to include lead mitigation in order to better serve its clients overall environmental needs. SECO provides asbestos and lead abatement services to industrial, government and private concerns desiring to remove or abate asbestos and/or lead in the workplace or residence in order to alleviate the health risks associated with asbestos and/or lead. The asbestos and lead environmental remediation industry developed out of concern for the health of workers, students and residents who may be exposed to these hazards. Environmental remediations are performed in accordance with SECO's standard operating procedures, which meet or exceed applicable federal, state and local regulations and guidelines. Because of the health hazards posed by asbestos and lead, the need to comply with requirements of the Occupations Safety and Health Administration ("OSHA"), the Environmental Protection Agency ("EPA"), and similar state and local agencies, environmental remediation must be performed by trained and licensed personnel using approved techniques and equipment. SECO-Illinois markets its services primarily in the State of Illinois, SECO-Indiana markets its services primarily in the State of Indiana The asbestos abatement and lead mitigation industry is currently driven by three markets: industrial, public and commercial. The industrial market consists of chemical, petroleum and manufacturing facilities that were constructed prior to discontinuation of the use of asbestos for the insulation of pipes and tanks. These types of facilities are continually performing operations and maintenance procedures that require the removal and/or repair of these insulation materials. The public market consists of federally and state owned facilities, schools and military facilities that contain asbestos materials such as pipe insulation and floor tile and lead paint on interior building components. The commercial real estate market consists of corporate offices containing asbestos materials such as sprayed on insulation and floor tile. These materials must be removed prior to any renovations. As the asbestos abatement industry matures and the market shrinks, SECO intends to look for other opportunities. SECO's services also include interior demolition, which now constitutes approximately 30% of SECO's business. In addition, SECO has begun developing asbestos and lead operations and maintenance programs to assist building owners in managing their in place asbestos and lead, with large scale removal occurring only to facilitate renovation or prior to building demolitions. SECO is also investigating potential expansion into re-insulation, painting and duct cleaning. SECO currently employs approximately 18 full time employees who average 40 hours per week. Included in total employees are 10 administrative staff and 8 supervisors. In addition, SECO has a pool of approximately 85 hourly field personnel who are available on an as needed basis. TRIFINITY, INC. Trifinity, Inc. was incorporated in the State of Illinois in 1999. Trifinity markets and distributes licensed and house brand personal care products and performs contract liquid filling. The personal care product market is dominated by large, international companies. Trifinity's major competitors in this market include Unilever, Johnson & Johnson and Shering Plough. Contract liquid filling is generally performed by regional companies like Trifinity. Trifinity's operations are regulated by the Bureau of Alcohol, Tobacco and Firearms (due to its mouth wash products). Trifinity is also FDA registered and regulated by the EPA. Trifinity currently employs 24 full-time employees. Included in total employees are 4 administrative staff. ITEM 2. DESCRIPTION OF PROPERTIES SECO-Illinois leases, on a month to month basis, approximately 8,000 square feet of office, warehouse and storage facilities in Brookfield, Illinois. Approximately 2,000 square feet is used as office space, with the remaining facility principally used as a warehouse. Most of SECO-Illinois's projects are performed on site, so its facilities are primarily used for storing and working on its equipment when not in use. Under the terms of the SECO-Illinois lease, SECO-Illinois pays monthly rent of $3,000. The building is leased from 8400 Brookfield Partners, which is owned and controlled by John Giura, the president of the Company, and James Spachman, a major shareholder of the Company. Presently, the property is encumbered by a 20 year adjustable rate mortgage from the Community Bank of Ravenswood. The lease is on a month to month term. (See: Item 12: "Certain Relationships and Related Transactions.") The Company also uses this facility as its corporate offices. The Company and SECO-Illinois believe this facility will be adequate for their future needs. SECO-Indiana leases a small office and warehouse space in Indiana under a lease effective from February 1, 1999 through January 31, 2000. Under the terms of its lease, SECO-Indiana pays monthly rent of $465. SECO-Indiana believes this space will be adequate for its future needs. Commencing Januray 1, 2001, CGI Holding Corporation will pay rent at $700.00 per month for its space requirements. Trifinity leases approximately 40,000 square feet of manufacturing and office space in Waukegan, Illinois under a lease effective from July 1, 1999 through June 30, 2003. Under the terms of its lease, Trifinity pays monthly rent of $13,600. Trifinity believes this space will be adequate for its future needs. ITEM 3. LEGAL PROCEEDINGS People of the State of Illinois, Plaintiff, v. Robert Larsen, Et. Al., Defendants, No. 96 CH 1033. This action is pending in the Circuit Court of the Nineteen Judicial Circuit, Lake County, Illinois. The Company is not a party to this action. However, SECO-Illinois is a defendant. This action, filed in 1996, was brought by the State of Illinois to compel defendant Larsen to conduct an environmental clean-up of his property. SECO-Illinois was thereafter named an additional defendant, from whom the State sought the imposition of unspecified penalties as the result of certain asbestos removal work which it had conducted on the subject property. In the summer of 1999, Larsen filed a counterclaim against SECO-Illinois, seeking unspecified damages against it for sums Larsen was allegedly caused to expend by reason of improper remediation work performed by SECO-Illinois. The matter remains pending and undetermined, and currently is in the process of discovery. Discovery to date has indicated that Larsen is seeking damages in excess of $200,000. Trifinity, Inc., successor - in - interest of Salle International, L.L.C. v. General Nutrition Corporation et al. Trifinity is engaged in litigation in the U.S. District Court of Western Pennsylvania against General Nutrition Corporation whereby Trifinity is seeking damages against the defendant in the amount of $315,000. The case is currently on an arbitration trail list. Counsel for Trifinity has no opinion as to the outcome. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS None. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock is quoted on the National Association of Securities Dealers Electronic Bulletin Board under the symbol "CGIH" (the Common Stock formerly traded under the symbol "CGIC"). Set forth below are the high and low bid prices for the Common Stock for each quarter during the last two years. Although the Common Stock is quoted on the Electronic Bulletin Board, it has traded sporadically. Consequently, the information provided below may not be indicative of the Common Stock price under different conditions. Quarter Ended High Bid Low Bid - ------------- -------- ------- March 1999 0.46 0.23 June 1999 0.28 0.23 September 1999 0.25 0.24 December 1999 0.43 0.25 March 2000 0.44 0.25 June 2000 0.28 0.23 September 2000 0.41 0.20 December 2000 0.40 0.22 At March 27, 2001, the bid and asked price for the Common Stock was $0.33 and $0.44, respectively. All prices listed herein reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. Since its inception, the Company has not paid any dividends on the Common Stock, and the Company does not anticipate that it will pay dividends in the foreseeable future. At March 27, 2001, the Company had approximately 181 shareholders. RECENT SALES OF UNREGISTERED SECURITIES On March 31, 2000, the Company sold 1,000,000 shares of its common stock, 500,000 to Richard Levy and 500,000 to Michael Balkin. The shares were sold with an option agreement that these shares could be repurchased by the Company within nine months of issuance. The above-described transactions were private placements pursuant to Section 4(2) of the Securities Act of 1933, as amended. The Company did not use underwriters for any of the above-described transactions and, therefore, the transactions did not involve underwriter discounts or commissions. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION LIQUIDITY AND CAPITAL RESOURCES The Company's total assets at December 31, 2000 were $5,211,333, a decrease of $1,611,592 over the prior year. The decrease was mainly attributable to the sale of the assets of its wholly owned subsidiary Roli Ink Corporation. The proceeds resulting from this sale were mainly directed to the reduction of the Company's debt. Correspondingly, total liabilities decreased by $2,216,554. Working capital at December 31, 2000 was $663,515, as compared to $165,288 last year. The Company's cash flow for the year 2000 was $465,782, an increase from 1999 in the amount of $496,277. At December 31, 2000, short-term debt totaled $2,037,191, representing a decrease from 1999 of $1,190,019. Long-term debt also decreased in the same period by $586,652. During the year the Company purchased 1,000,000 of its common stock at a cost of $350,000 or $0.35 per share. The purchase of these shares are reflected as treasury stock on the Company's financial statements. During the year, management began negotiations with an internet company, WorldMall.Com, located in Rochester, New York. The purpose of these negotiations were directed toward the merger of CGI Holding Corporation and WorldMall.Com. WorldMall.Com commenced operations in October of 1999 and the management of CGI is of the opinion that this combination will benefit the future of CGI. As a result of these negotiations, CGI advanced WorldMall.Com $470,000, which was necessary to fund their start-up and development costs. These funds are reflected as a 'Good Faith Deposit' on the Company's balance sheet. As a result of the sale of Roli Ink, the Company's ability to generate profits and cash flows cannot be deemed to be assured. This disclosure is being made on the fact that Roli Ink Corporation was consistently the Company's most reliable source of cash flows from its purchase in 1997. The Company's future liquidity will be dependent on the future operating results of its two operating subsidiaries, Safe Environment Corporation and Trifinity, Inc. The Company must be able to renegotiate its current line of credit which matures May 31, 2001 and September 1, 2001 to be able to meet its cash needs through the year 2001. RESULTS OF OPERATIONS Sales increased during 2000 in the amount of $1,985,417 for a total of $9,929,197. This increase resulted from each operating subsidiary experiencing a growth in volume. SECO's sales increased $911,390 and Trifinity's increased $1,074,013. Cost of Sales decreased during 2000 in the amount of $433,411. This decrease resulted in a gross profit percentage increase of 36.78%. This increase in performance is directly attributable to SECO's contract performance. SECO's gross profit percentage in 2000 was 27.10% as compared to 4.20% in 1999. Selling, general and administrative expenses were $2,987,481 in 2000, representing an increase of $338,970 over the previous year. Included in this increase was the write down of purchased goodwill attributable to the 1997 purchase of Roli Ink Corporation of $174,392. Interest expense increased in 2000 by $109,543. The reduction in the Company's debt did not occur until after the sale of Roli in November of 2000. Included in the other expenses was a one time charge of $243,082 resulting from the sale of certain assets of SECO located in its Missouri division. Total income tax expense for the Company in 2000 was $566,536 which was comprised of $161,782 current and $404,754 deferred. The tax expense for 2000 attributable to continuing operations was ($195,151). Income taxes from discontinued operations were $761,687. The total gain from discontinued operations, net of taxes was $1,074,780, which consisted of $168,818 from operations and $906,162 from the sale. Net income for the year 200 was $729,962 or $0.03 per share as compared to lost year's loss of ($1,288,714) or $0.16 per share. SEGMENT ANALYSIS The Company's operations are divided into operating segments using individual products or services or groups of related products and services. Each segment has separate management that reports to a person that makes decisions about performance assessment and resource allocation for all segments. The Company has two operating segments at the end of 2000: asbestos abatement and liquid filling. The Company disposed of its Ink production division in November of 2000 and it is included as discontinued operations. The Company evaluates the performance of each segment using before-tax income or loss from continuing operations. There are no sales transactions between segments. Listed below is a presentation os sales, operating profit and total assets for all reportable segments. The other segment category consists of the management company CGI Holding Corporation. NET SALES BY INDUSTRY SEGMENT INDUSTRY SEGMENT 2000 1999 AMOUNT PERCENT AMOUNT PERCENT SECO $8,341,515 84.01 7,430,125 93.53 TRIFINITY 1,587,668 15.99 513,655 6.47 OTHER 0 0 0 0 ---------- ------ ---------- ------ TOTAL SALES $9,929,197 100.00 $7,943,780 100.00 ========== ====== ========== ====== OPERATING PROFIT BY INDUSTRY SEGMENT INDUSTRY SEGMENT AMOUNT AMOUNT SECO $401,076 ($1,548,572) TRIFINITY 88,824 (357,389) OTHER (510,482) (194,480) ---------- ---------- TOTAL OPERATING PROFIT ($20,582) ($2,100,441) ========== ========== TOTAL ASSETS BY INDUSTRY SEGMENT INDUSTRY SEGMENT AMOUNT PERCENT AMOUNT PERCENT SECO $2,066,611 39.66 $3,892,533 57.05 TRIFINITY 1,505,747 28.89 1,492,477 21.87 OTHER 1,638,975 31.45 568,577 8.34 DISCONTINUED 0 0.00 869,338 12.74 ---------- ------ ---------- ------ TOTAL ASSETS $5,211,333 100.00 $6,822,925 100.00 ========== ====== ========== ====== SECO SECO generated gross revenues in 2000 of $8,341,151 as compared to $7,430,125, representing an increase of $911,390. Also, cost of operations for the year 2000 were $6,080,644 compared to $7,117,752 in 1999 resulting in a gross profit increase of 22.90 percent. General and administrative expenses for the year were $1,859,795(22.30% of sales) as compared to $1,860,945(25.05% of sales) in 1999. Interest expense increased to $183,561 in 2000 from $175,974 in 1999, an increase of $7,587. The net profit before taxes for 2000 was $68,283, as compared to a net loss in 1999 of ($1,712,030). During the year ended December 31, 2000, SECO was able to improve its operating results as compared to last year due to several factors. First, in early 2000, two new estimators were hired to aid in the bidding of jobs. SECO also decided to concentrate it's efforts in the private market as apposed to the public market that they were more concentrated in before. Finally, the management of SECO decided to pursue larger jobs with more profitable returns. All of these factors have lead to SECO's turnaround from 1999. TRIFINITY Trifinity sales increased to $1,587,683 in 2000 from $513,655 in 1999, an increase of $1,074,028. Similarly, their cost of sales increased to $881,655 from $277,958 in 1999 or $603,697. The gross profit remained relatively constant at 44.47% for 2000 and 45.88% for 1999. Selling, general and adminsitrative expenses increased $24,118 in 2000 to $617,204. Interest expense increased $54,476 in from the prior year to $94,786. This was attributable to the Company's being in business for a full year in 2000 as opposed to 1999. Trifinity, Inc. was able to reach the sales volume that had been expected by its management and was therefore able to achieve a small profit of $1,632 as apposed to the loss it incurred in 1999 of $393,797. The sales volume was achieved due to an increase in the number of liquid filling contracts the Company was able to secure during 2000. OTHER Included in the operating expenses of the parent Corporation, CGI, which totalled $510,482, was the write down of Goodwill associated with the sale of Roli Ink Corporation that was originally recorded at the time of the purchase of Roli on August 4, 1997. This amounted to around $174,392 for 2000. The balance of the operating expenses were administration items incurred with the operations of the Company. 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. ITEM 7. FINANCIAL STATEMENTS The financial statements of the Company are set forth immediately following the signature page to this form 10-KSB. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The following table sets forth the executive officers, directors and significant employees of the Company: Name Age Position - -------------------- --- ----------------------- John Giura 68 President, Secretary and Director, Chairman Jaime Bendersky 72 Director Chander Jadhwani 50 Director John Giura has served as a Director, President, Chief Executive Officer and Chief Financial Officer of the Company since August of 1997. Mr. Giura has been the Secretary of the Company since 1999. In 1987, Mr. Giura co-founded SECO-Illinois and in 1994 he acquired control of SECO-Illinois. Mr. Giura has been a director of SECO-Illinois since 1997, and served as its President and Chief Executive Officer from 1994 though 1998. Mr. Giura, along with other individuals, acquired control of RIC in 1993. Mr. Giura has been a director of RIC since 1993, and has served as its President since 1996. In addition, Mr. Giura has been a director of Trifinity since March 1999. Mr. Giura received his BA degree from the University of Naples (Italy) in 1956 and an MA in economics from the University of Chicago in 1961. Dr. Bendersky has served as a Director of the Company since 1998. Dr. Bendersky is a licensed physician specializing in internal medicine and as of April of 1998, an emeritus member on the medical staff of Westlake Community Hospital in Melrose Park, Illinois. From 1966 until his retirement in April of 1998, Dr. Bendersky had been an active member on the medical staff of Westlake Community Hospital. Dr. Bendersky is currently involved in the establishment of a clinic in Oak Brook, Illinois that will provide diagnostic evaluation and treatment of patients with obesity. Mr. Jadhwani has served as a Director of the Company since 1997. Chander Jadhwani has been Manager of New Business Development for the Company since August of 1997. His duties include the development and execution of the Company's strategic business plans and acquisitions. Mr. Jadhwani has been employed by Waste Solutions Corporation, a privately owned company involved in the manufacture of products used in the clean up of hazardous waste since 1994. He serves as a Managing Director responsible for the development and execution of Waste Solution Corporation's strategic business plans. Mr. Jadhwani received an MS in structural engineering from the Illinois Institute of Technology in 1976 and an MBA from the Illinois Institute of Technology in 1984. Except as set forth below, to the knowledge of management, during the past five years, no present or former director or executive officer of the Company: (1) filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which such person was an executive officer at or within two years before the time of such filing; (2) was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining such person from or otherwise limiting, the following activities: (i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliate person, director or employee of any investment company, or engaging in or continuing any conduct or practice in connection with such activity; (ii) engaging in any type of business practice; or (iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws; (4) was the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any federal or state authority barring, suspending, or otherwise limiting for more than 60 days the right of such person to engage in any activity described above, or to be associated with persons engaged in any such activity; (5) was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any federal or state securities law, and the judgment in such civil action or finding by the Securities and Exchange Commission has not been subsequently reversed, suspended, or vacated. (6) was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated. Mr. Giura, president of the Company, has been permanently disqualified from acting as a Registered Investment Advisor as a result of two federal convictions in 1986 and 1989 relating to allegations occurring prior to June 1985. To the best of the Company's knowledge, there are no other injunctions or permanent bars limiting Mr. Giura's involvement in any type of business, security or banking activities. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT The Company is not subject to the requirements of Section 16(a) of the Exchange Act. ITEM 10. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth certain summary information concerning the compensation paid or accrued for each of the Company's last three completed fiscal years for the Company's or its subsidiary's chief executive officer, and each of its other executive officers who received compensation in excess of $100,000 during such periods (as determined at December 31, 1999):
Long Term Compensation ---------------------- Annual Compensation Awards Payouts Other Restricted Name and Annual Stock Options All Principal Year Salary Bonus($) Compensation Awards /SARs Other Position Compensation - -------------- ----- ------ -------- ------------ ------ ------- ------------ John Giura 2000 177,058 -0- 7,200 -0- -0- 2,000 John Giura 1999 72,000 -0- 7,200 -0- -0- 2,000 John Giura 1998 60,000 -0- 7,200 -0- -0- 2,000 President and CEO Ann K. Knaack 2000 79,337 -0- 6,000 -0- -0- 2,000 Ann K. Knaack 1999 110,600 -0- 7,200 -0- -0- 2,000 Vice President
Cash Compensation John Giura was paid $177,058 by RIC for the year ended December 31, 2000. In 1999 and 1998 Mr. Giura was paid by RIC. Mr. Giura does not have an employment contract with the Company and no set compensation arrangement has been set for Mr. Giura for the fiscal year ended December 31, 2001. Ann K. Knaack was paid $79,337 by RIC for the year ended December 31, 2000. Ms. Knaack is currently employed by the purchaser of Roli Ink Corporation. Bonuses and Deferred Compensation The Company maintains a 401K profit sharing plan. The Company matches employee contributions to fifty percent with a maximum limit of $2,000. Total Company contributions for 2000 were $42,014. Compensation Pursuant to Plans. None. Pension Table None. Other Compensation None. Compensation of Directors. None. Employment Contracts and Termination of Employment, and Change-in-Control Arrangements There are no compensatory plans or arrangements, including payments to be received from the Company, with respect to any person named in the Cash Compensation section set out above which would in any way result in payments to any such person because of his resignation, retirement, or other termination of such person's employment with the Company or its subsidiaries, or any change in control of the Company, or a change in the person's responsibilities following a changing in control of the Company. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding beneficial ownership of the Common Stock as of December 31, 2000 by (i) each person who is known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock, (ii) each director of the Company, (iii) each of the named executives and (iv) all directors and executive officers of the Company as a group. At December 31, 2000, there were approximately 10,229,779 shares of Common Stock issued and outstanding. Title of Name and Address of mount and Nature of Percent Class Beneficial Owner Beneficial Ownership(1) of Class - ----- ---------------- -------------------- ---------- Common John Giura President and Director C/O CGI Holding Corporation 8400 Brookfield Ave Brookfield, IL 60513 2,536,494 (2) 24.80% Common PCP Partners 1,600,000 15.64% c/o William Blair & Co. 222 West Adams Chicago, IL 60606 Common James Spachman 735 Selbourn Road Riverside, IL 60546 814,000 7.96% Common Jaime Bendersky 283,680 2.77% Director 324 Hambleton Drive Oakbrook, IL 60523 Common Chander Jadhwani 250,000 (3) 2.44% Director c/o CGI Holding Corporation 8400 Brookfield Ave Brookfield, IL 60513 Common Directors and Officers as a 3,070,174 30.01% Group (6 persons) (1) Except as set forth in the footnotes to this table, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them. (2) Includes 135,300 shares which are held jointly by Mr. Giura and Mr. Spachman and 1,021,900 held by CIB Bank Hillside as custodian for Mr. Giura. Mr. Giura also controls 260,000 shares owned by Mentor Investments, Inc., a company of which he is the sole shareholder. (3) Includes 20,000 held by Mr. Jadhwani as custodian for his children. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS TRANSACTIONS WITH MANAGEMENT AND OTHERS SECO-Illinois leases its office facilities from 8400 Brookfield Partners. 8400 Brookfield Partners is owned by John Giura, the president of the Company, and James Spachman, a principal shareholder of the Company. Pursuant to a month-to-month lease, the Company pays 8400 Brookfield Partners $3,000 per month for the lease of the facilities. (See: Item 2: "Description of Properties.") The Company and SECO-Illinois borrowed funds from shareholders throughout the year to cover operating expenses. The total outstanding principal balance due as of December 31, 2000 was $180,000. The detail of this principal balance as of December 31, 2000 is as follows: John Giura $5,000 - No repayment terms. Interest paid quarterly at 1/2% over the prime rate (loan to the Company). Jim Spachman $175,000 - No repayment terms. No interest paid or accrued ($25,000 loan to the Company and $150,000 loan to SECO-Illinois). TRANSACTIONS WITH PROMOTERS Not applicable. ITEM 13. EXHIBITS AND REPORTS (a)(1)FINANCIAL STATEMENTS. The following financial statements are filed as part of this report: Title of Document - ----------------- Report of Poulos & Bayer, Certified Public Accountants Balance Sheets December 31, 2000, and 1999 Statements of Stockholders' Equity For the years ended December 31, 2000, and 1999 Statements of Operations For the years ended December 31, 2000, and 1999 Statements of Cash Flows For the years ended December 31, 2000, and 1999 Notes to Financial Statements (a)(2)FINANCIAL STATEMENT SCHEDULES. The following financial statement schedules are included as part of this report: None. (a)(3)EXHIBITS. The following exhibits are filed as part of this report: EXHIBIT NO. DOCUMENT DESCRIPTION 2.1 Plan and Agreements of Reorganization, incorporated by reference to the Registrant's Form 10-QSB for quarter ended June 30, 1997. 2.2 Asset Purchase Agreement, incorporated by reference to the Registrant's Form 8-K filed March 19, 1999 and Form 8 K/A filed June 19, 1999. 3.1 Articles of Incorporation, incorporated by reference to the Registrant's registration statement on Form S-18, SEC File No. 33-19980-D. 3.2 Amended Articles of Incorporation, incorporated by reference to the Registrant's Form 10-KSB for the year ended September 30, 1989. 3.3 Amended Articles of Incorporation, incorporated by reference to the Registrant's Form 10-QSB for the quarter ended December 31, 1995. 3.4 Amended Articles of Incorporation, incorporated by reference to the Registrant's Form 10-QSB for the quarter ended September 30, 1995. 3.5 By-laws, incorporated by reference to the Registrant's registration statement on Form S-18, SEC File No. 33-19980-D. 4.1 Warrant Agent Agreement, incorporated by reference to the Registrant's registration statement on Form S-18, SEC File No. 33-19980-D. 4.2 First Amendment to Warrant Agent Agreement, incorporated by reference to the Registrant's Form 10-QSB for the quarter ended December 31, 1995. 4.3 Second Amendment to Warrant Agent Agreement, incorporated by reference to the Registrant's Form 10-QSB for the quarter ended September 30, 1995. 11 A computation of income per share is contained in this Form 10-KSB. 21 The Registrant has three subsidiaries: Safe Environment Corporation, an Illinois corporation; Safe Environment Corporation of Indiana, an Indiana corporation; and Trifinity, Inc., an Illinois corporation. 27 A Financial Data Schedule is included in this Form 10-KSB as Exhibit 27. (b) REPORTS ON FORM 8-K. The Company filed Form 8-K during the fourth quarter of 2000 in reference to the sale of the assets of Roli Ink Corporation. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March, 2001. CGI Holding Corporation By: /s/ John Giura ---------------------------------- John Giura Director, President and Chief Financial Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated on this 26th day of March, 2001. Signature Title /s/ John Giura President, Chief Financial Officer and Director - ------------------------ John Giura /s/ Jaime Bendersky Director - ------------------------ Jaime Bendersky /s/ Chander R. Jadhwani Director - ------------------------ Chander R. Jadhwani Independent Auditor's Report To the Board of Directors CGI Holding Corporation 8400 Brookfield Avenue Brookfield, Illinois 60513 We have audited the accompanying balance sheets of CGI Holding Corporation (a Nevada Corporation) as of December 31, 2000 and 1999, and the related statements of income, stockholder's equity, 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 audit 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 audit 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 CGI Holding Corporation as of December 31, 2000 and 1999 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. By: /s/ Poulos & Bayer Poulos & Bayer Chicago, Illinois March 25, 2001 CGI HOLDING CORPORATION, INC. COMPARATIVE CONSOLIDATED BALANCE SHEET DECEMBER 31, 2000 AND 1999 (AUDITED) DECEMBER 31, DECEMBER 31, 2000 1999 ---------- ---------- CURRENT ASSETS Cash 582,972 117,190 Accounts Receivable 2,100,057 2,609,637 Allowance for Bad Debts (62,854) (167,489) Inventory 616,062 588,856 Other Current Assets 22,304 174,173 Note Receivable 350,000 - Costs and Estimated Earnings in Excess of Billings - 74,154 Refundable Income Taxes - 211,029 Deferred Tax Asset - 377,767 Current Assets of Discontinued Operations - 670,809 ---------- ---------- Total Current Assets 3,608,541 4,656,126 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT Property, Plant and Equipmet 915,214 1,587,841 Less:Accumulated Depreciation (188,631) (213,294) ---------- ---------- Subtotal 726,583 1,374,547 Fixed Assets of Discontinued Operations(Net) - 171,969 ---------- ---------- NET PROPERTY, PLANT AND EQUIPMENT 726,583 1,546,516 ---------- ---------- OTHER ASSETS Goodwill 316,716 522,032 Other Assets 89,493 98,251 Good Faith Deposit 470,000 0 ---------- ---------- TOTAL OTHER ASSETS 876,209 620,283 ---------- ---------- TOTAL ASSETS 5,211,333 6,822,925 ========== ========== CURRENT LIABILITIES Current Portion of Long Term Debt 474,955 592,160 Notes Payable-Line of Credit 1,412,236 2,168,000 Accounts Payable 579,493 649,075 Short-Term Borrowings 150,000 152,050 Accrued Corporate Taxes 131,808 Accrued Liabilities 196,534 160,245 Billings in Excess of Costs and Estimated Earnings Loan Payable- Shareholder - 315,000 Current Liabilities of Discontinued Operations - 454,308 ---------- ---------- TOTAL CURRENT LIABILITIES 2,945,026 4,490,838 ---------- ---------- LONG TERM LIABILITIES Long-Term Debt, Net of Current Portion 390,005 856,657 Deferred Income Tax 49,652 22,665 Loan Payable-Shareholder 180,000 300,000 Long Term Liabilities of Discontinued Operations - 111,077 ---------- ---------- TOTAL LONG TERM LIABILITIES 619,657 1,290,399 ---------- ---------- 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, 10,229,779 shares issued and outstanding 11,230 10,230 Additional Paid In Capital 3,119,381 2,895,381 Retained Earnings (1,133,962)(1,863,923) Treasury Stock (350,000) - ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 1,646,650 1,041,688 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 5,211,333 6,822,925 ========== ========== CGI HOLDING CORPORATION, INC. STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 (AUDITED) COMMON COMMON PAID-IN RETAINED TREASURY SHARES STOCK CAPITAL EARNINGS STOCK ---------- ---------- ---------------------- --------- COMMON SHARES $0.001 PAR VALUE BALANCE: JANUARY 1, 1999 8,329,779 8,330 2,448,281 (575,209) 0 ISSUED 1,600,000 SHARES OF COMMON STOCK FOR THE PURCHASE OF SALLE INTERNATIONAL ON MARCH 5, 1999 1,600,000 1,600 366,400 ADDITIONAL ISSUANCE OF 200,000 SHARES ON JUNE 15, 1999 AT $0.30/SHARE 200,000 200 59,800 ADDITIONAL ISSUANCE OF 100,000 SHARES ON JULY 1, 1999 AT $0.21/SHARE 100,000 100 20,900 1999 NET LOSS (1,288,714) ---------- ---------- ---------- ----------- --------- BALANCE: JANUARY 1, 2000 10,229,779 10,230 2,895,381 (1,863,923) - SOLD 1,000,000 SHARES ON 3/31/00 FOR $0.225/SHARE 1,000,000 1,000 224,000 PURCHASE 1,000,000 SHARES INTO TREASURY ON 11/16/00 AT $0.35/SHARE 1,000,000 (350,000) 2000 NET PROFIT 729,962 ---------- ---------- ---------- ---------- ---------- BALANCE:DECEMBER 31, 2000 10,229,779 11,230 3,119,381 (1,133,961)(350,000) ========== ========== ========== ========== ========== CGI HOLDING CORPORATION, INC. CONSOLIDATED STATEMENTS OF OPERATIONS TWELVE MONTHS ENDED DECEMBER 31, 2000 AND 1999 (AUDITED) TWELVE MONTHS ENDED DECEMBER 31, 2000 ------------------------------- ---------- ----------- 2000 1999 ---------- ----------- SALES 9,929,197 7,943,780 COST OF GOODS SOLD 6,962,299 7,395,710 ---------- ----------- GROSS PROFIT 2,966,899 548,070 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,987,481 2,648,511 ---------- ----------- INCOME FROM OPERATIONS (20,582) (2,100,441) ----------- ----------- OTHER INCOME (EXPENSES) Other Income/(Expense) (142,268) 14,738 Interest Income 5,070 1,680 Interest Expense (382,190) (272,647) ---------- ----------- TOTAL OTHER INCOME (EXPENSE) (519,388) (256,229) ---------- ----------- INCOME BEFORE CORPORATE INCOME TAXES (539,970) (2,356,670) INCOME TAX PROVISION (195,151) (757,538) ---------- ----------- NET INCOME FROM CONTINUING OPERATIONS (344,819) (1,599,132) ---------- ----------- DISCONTINUED OPERATIONS: Income from operations of discontinued operations (less applicable tax of $119,497) 168,618 310,418 Gain on disposal of discontinued operations(less applicable tax of $642,190) 906,162 0 ----------- ----------- TOTAL DISCONTINUED OPERATIONS 1,074,780 310,418 ----------- ----------- NET INCOME 729,962 (1,288,714) =========== =========== NET INCOME PER COMMON SHARE FROM CONTINUING OPERATIONS (0.03) (0.16) =========== =========== NET INCOME PER COMMON SHARE FROM DISCONTINUED OPERATIONS 0.10 0.03 =========== =========== NET INCOME PER COMMON SHARE 0.07 (0.13) =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 10,859,916 9,808,683 =========== =========== The accompanying notes are an integral part of these statements. CGI HOLDING CORPORATION, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS TWELVE MONTHS ENDED DECEMBER 31, 2000 AND 1999 (AUDITED) TWELVE MONTHS ENDED 12/31/2000 12/31/1999 ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net profit 729,962 (1,288,714) Non-Cash Items Included in Net Profit Loss on Disposition of Assets 243,082 - Gain on Disposition of Assets (251,318) - Depreciation 208,354 197,430 Amortization 205,316 42,636 Allowance for Bad Debts (104,635) 167,489 OTHER CHANGES: Change in Accounts Receivable (280,302) (230,511) Change in Inventory (27,206) (98,600) Change in Other Current Assets 151,500 (73,628) Change in Costs and Estimated Earnings Over Billings 74,154 189,621 Change in Prepaid Corporate Taxes 211,029 (211,029) Change in other Assets 8,758 (63,251) Change in Accounts Payable (25,239) 16,369 Change in Accrued Expenses 45,045 126,598 Change in Accrued Income Taxes 131,808 (13,449) Change in Deferred Taxes 377,767 (377,767) Change in Good Faith Deposit (470,000) - Change in Assets and Liabilities of Discontinued Operations 186,585 (175,587) Change in Deferred Tax Liabilities 26,987 - ------------ ------------- NET CASH CHANGE FROM OPERATING ACTIVITIES 1,441,647 (1,792,393) ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES Fixed Assets Acquired-Discontinued Operations (6,668) (82,352) Proceeds from Sale of Assets 365,000 - Fixed Assets Acquired (7,636) (302,702) ------------ ------------- NET CASH CHANGE FROM INVESTING ACTIVITIES 350,696 (385,054) ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES Change in Debt (743,687) 1,536,050 Change in Shareholders Loans (435,000) 345,120 Proceeds from Sale of Stock 225,000 81,000 Purchase of treasury Stock (350,000) - Change in Debt-Discontinued Operations (22,874) 184,782 ------------ ------------- NET CASH CHANGE FROM FINANCING ACTIVITIES (1,326,561) 2,146,952 ------------ ------------- NET CASH CHANGE 465,782 (30,495) CASH BALANCE:JANUARY 1 117,190 147,685 ------------ ------------- CASH BALANCE: DECEMBER 31 582,972 117,190 ============ ============= Supplemental Information Interest Paid 382,190 297,815 Income Taxes Paid (156,672) 64,102 Supplemental Schedule Of Noncash Investing and Financing Activities On March 5, 1999, the Company issued 1,600,000 shares of common stock with a par value of $0.001 and market value of $368,000 plus assumed debt of $951,171 in connection with the purchase of the assets of Personal Care Products, Inc. In January of 1999, the Company assumed certain debt in the amount of $400,000 to purchase contracting equipment. On October 1, 2000, the Company sold assets amounting to $1,244,165 for a $350,000 note receivable and the assumption of $651,083 of the Company's liabilities. CGI HOLDING CORPORATION FOOTNOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 NOTE 1 - PURCHASE OF ROLI INK CORPORATION AND SAFE ENVIRONMENT CORPORATION On July 28, 1997, CGI Holding Corporation (the "Company") entered into a reorganization with two privately held corporations, Safe Environment Corporation ("SECO-Illinois"), an Illinois corporation, and Roli Ink Corporation ("Roli"), a Wisconsin corporation. Immediately prior to the reorganization, the Company completed a 1-for-5 revenue stock split of its outstanding common shares, resulting in 3,311,723 common shares outstanding. The Company then issued a controlling interest of 4,961,056 additional shares (post-split) to the shareholders of SECO-Illinois and Roli. In connection with the reorganization, the Company changed its name from Gemstar Enterprises to CGI Holding Corporation. The reorganization was accounted for as the purchase of SECO-Illinois and RIC by the Company. The purchase method was utilized in accordance with Accounting Principles Board opinion number 16. The net assets of SECO-Illinois and RIC were purchased by the issuance of common shares of the Company as follows: the shareholders of SECO-Illinois received 2,761,000 shares and the shareholders of RIC received 2,200,056 shares, leaving the shareholders of the Company immediately prior to the reorganization with 3,311,723 or 40.03% of the outstanding shares. The market value of shares of the Company at the time of purchase was $0.30 per share. The excess of the purchase price over the fair value of the assets received was recorded by the Company as goodwill and is being amortized over a fifteen year life. The purchase price of SECO-Illinois was $828,300(2,761,000 shares at $0.30/share). The fair value of SECO-Illinois' net assets at the time of acquisition was $523,373, resulting in goodwill of $304,927. The purchase price of RIC was $660,017(2,200,056 shares at $0.30/share). The fair value of RIC's assets at the time of acquisition was $452,132, resulting in goodwill of $207,885. NOTE 2 - PURCHASE OF ASSETS OF SALLE INTERNATIONAL, L.L.C. On March 5, 1999, the Company's wholly owned subsidiary, Personal Care Products, Inc., acquired substantially all of the assets of Salle International, L.L.C. (a private company) under an asset purchase agreement dated March 2, 1999. The acquisition price for Trifinity's assets was $1,319,171. The acquisition price consisted of (i) assumed debt of $951,171 and (ii) 1,600,000 shares of Common Stock (with a market value of $368,000). Subsequent to the acquisition, Personal Care Products, Inc. changed its name to Trifinity, Inc. ("Trifinity"). Goodwill in the amount of $100,188 was recorded at the date of purchase and is being amortized over a ten year life. NOTE 3 - SALE OF ROLI INK CORPORATION On November 15, 2000, with an effective date of November 13, 2000, the Company sold its wholly owned subsidiary, Roli Ink, Corporation. This was accomplished through an asset sale to Braden Sutphin Ink Corporation of Cleveland, Ohio. You are referred to the Form 8-K filed on November 30, 2000. The pre-tax gain on the sale of the assets was $1,548,352. The management of the Company made this decision as a way to reduce the Company's debt and to pursue other opportunities that may arise in the future. NOTE 4 - DISCONTINUED OPERATIONS In accordance with APB 30, the financial statement activities of Roli Ink Corporation are reported as discontinued operations. The following summarizes the results and tax consequences of the sale of the Division in 2000. GAIN ON DISPOSITION OF ASSETS $1,548,352 TAX RELATED TO DISPOSITION OF ASSETS 642,190 --------- NET GAIN ON DISPOSITION OF ASSETS $906,162 INCOME FROM OPERATIONS OF DISCONTINUED OPERATIONS $288,115 TAX RELATED TO INCOME FROM OPERATIONS 119,497 --------- NET INCOME FROM OPERATIONS OF DISCONTINUED OPERATIONS 168,618 ---------- $1,074,780 ========== NOTE 5 - NATURE OF BUSINESS CGI Holding Corporation is a holding company which owns 100% of three subsidiaries, Safe Environment Corporation ("SECO-Illinois"), Safe Environment Corporation of Indiana ("SECO-Indiana"), and Trifinity, Inc.("Trifinity"). SAFE ENVIRORNMENT CORPORATION The Company currently has two subsidiaries involved in the asbestos/lead abatement industry. SECO-Illinois was incorporated in the State of Illinois in 1987 and has been involved in the asbestos abatement industry since its formation. Safe Environment Corporation of Indiana ("SECO-Indiana") was incorporated in the State of Indiana in 1999. SECO-Illinois and SECO-Indiana are collectively referred to as SECO. The management of SECO deemed it would best serve its operations to concentrate on the Illinois and Indiana markets thereby ceasing its activities in Missouri on October 1, 2000. The Company sold its Missouri based assets for $350,000 plus the assumption of its Missouri based liabilities. This transaction resulted in a one time charge of $243,082. SECO recently expanded its services to include lead mitigation in order to better serve its clients overall environmental needs. SECO provides asbestos and lead abatement services to industrial, government and private concerns desiring to remove or abate asbestos and/or lead in the workplace or residence in order to alleviate the health risks associated with asbestos and/or lead. The asbestos and lead environmental remediation industry developed out of concern for the health of workers, students and residents who may be exposed to these hazards. Environmental remediations are performed in accordance with SECO's standard operating procedures, which meet or exceed applicable federal, state and local regulations and guidelines. Because of the health hazards posed by asbestos and lead, the need to comply with requirements of the Occupations Safety and Health Administration ("OSHA"), the Environmental Protection Agency ("EPA"), and similar state and local agencies, environmental remediation must be performed by trained and licensed personnel using approved techniques and equipment. SECO-Illinois markets its services primarily in the State of Illinois, SECO-Indiana markets its services primarily in the State of Indiana The asbestos abatement and lead mitigation industry is currently driven by three markets: industrial, public and commercial. The industrial market consists of chemical, petroleum and manufacturing facilities that were constructed prior to discontinuation of the use of asbestos for the insulation of pipes and tanks. These types of facilities are continually performing operations and maintenance procedures that require the removal and/or repair of these insulation materials. The public market consists of federally and state owned facilities, schools and military facilities that contain asbestos materials such as pipe insulation and floor tile and lead paint on interior building components. The commercial real estate market consists of corporate offices containing asbestos materials such as sprayed on insulation and floor tile. These materials must be removed prior to any renovations. As the asbestos abatement industry matures and the market shrinks, SECO intends to look for other opportunities. SECO's services also include interior demolition, which now constitutes approximately 30% of SECO's business. In addition, SECO has begun developing asbestos and lead operations and maintenance programs to assist building owners in managing their in place asbestos and lead, with large scale removal occurring only to facilitate renovation or prior to building demolitions. SECO is also investigating potential expansion into re-insulation, painting and duct cleaning. SECO currently employs approximately 18 full time employees who average 40 hours per week. Included in total employees are 10 administrative staff and 8 supervisors. In addition, SECO has a pool of approximately 85 hourly field personnel who are available on an as needed basis. TRIFINITY Trifinity, Inc. was incorporated in the State of Illinois in 1999. Trifinity markets and distributes licensed and house brand personal care products and performs contract liquid filling. The personal care product market is dominated by large, international companies. Trifinity's major competitors in this market include Unilever, Johnson & Johnson and Shering Plough. Contract liquid filling is generally performed by regional companies like Trifinity. Trifinity's operations are regulated by the Bureau of Alcohol, Tobacco and Firearms (due to its mouth wash products). Trifinity is also FDA registered and regulated by the EPA. Trifinity currently employs 24 full-time employees. Included in total employees are 4 administrative staff. Trifinity recognizes revenue at the time of shipment. SEGMENT ANALYSIS The Company's operations are divided into operating segments using individual products or services or groups of related products and services. Each segment has separate management that reports to a person that makes decisions about performance assessment and resource allocation for all segments. The Company has two operating segments at the end of 2000: asbestos abatement and liquid filling. The Company disposed of its Ink production division in November of 2000 and it is included as discontinued operations. The Company evaluates the performance of each segment using before-tax income or loss from continuing operations. There are no sales transactions between segments. Listed below is a presentation os sales, operating profit and total assets for all reportable segments. The other segment category consists of the management company CGI Holding Corporation. NET SALES BY INDUSTRY SEGMENT INDUSTRY SEGMENT 2000 1999 AMOUNT PERCENT AMOUNT PERCENT SECO $8,341,515 84.01 7,430,125 93.53 TRIFINITY 1,587,668 15.99 513,655 6.47 OTHER 0 0 0 0 ---------- ------ ---------- ------ TOTAL SALES $9,929,197 100.00 $7,943,780 100.00 ========== ====== ========== ====== OPERATING PROFIT BY INDUSTRY SEGMENT INDUSTRY SEGMENT AMOUNT AMOUNT SECO $401,076 ($1,548,572) TRIFINITY 88,824 (357,389) OTHER (510,482) (194,480) ---------- ---------- TOTAL OPERATING PROFIT ($20,582) ($2,100,441) ========== ========== TOTAL ASSETS BY INDUSTRY SEGMENT INDUSTRY SEGMENT AMOUNT PERCENT AMOUNT PERCENT SECO $2,066,611 39.66 $3,892,533 57.05 TRIFINITY 1,505,747 28.89 1,492,477 21.87 OTHER 1,638,975 31.45 568,577 8.34 DISCONTINUED 0 0.00 869,338 12.74 ---------- ------ ---------- ------ TOTAL ASSETS $5,211,333 100.00 $6,822,925 100.00 ========== ====== ========== ====== NOTE 6 - SIGNIFICANT ACCOUNTING POLICIES A. Revenue and Cost Recognition SECO SECO uses the percentage of completion method of accounting for all construction projects. The recognition of contract revenue and profit during construction is based on expected total profit and estimated progress toward completion in the current year. Estimated progress is measured by actual costs to date compared to projected total costs for each respective contract. All job related costs are recognized in the period in which they occur. TRIFINITY Income and costs are recognized at time of shipment to customer. B. Inventory Inventory is stated at cost using the first-in, first-out method. C. Fixed Assets All assets are depreciated over their useful life using the 150% declining method. Note 7 - Accounts Receivable Accounts receivable at December 31, 2000 consist of the following: Currently Due $1,850,057 Retainages 144,960 ---------- $1,705,097 ========== Retainages are due in less than one (1) year. Note 8 - Notes Payable Current Long-Term ----------- -------------- a.)CIB Bank - Line of Credit Interest rate of 8.75% and maturity date of May 31, 2001. This note is secured by general assets of SECO. $999,692 0 c.)Marine Bank - Line of Credit Note due on 9/1/2001 with an interest rate of 10.00%. The total amount available is $600,000 412,544 0 ----------- -------------- TOTAL LINE OF CREDIT $1,412,236 0 e.)Union Federal Savings - Equipment Loan Note dated 8/20/99 with a 6 year amortization and interest rate of 11.25% 79,989 377,553 f.)Clara Bendersky - Note payable due December 31, 2001 with interest rate of 10.00% 150,000 0 g.)Otto Barth - Note payable due June 30, 2001 with interest rate of 8.25% 50,000 0 h.)Audrey Love- Note payable due October 31, 1999 with interest rate of 8.25% 100,000 0 j.)John English - Note payable dated 7/1/01 with interest rate of 8.00% 50,000 0 i.)Paul Doll - Note Payable due June 30, 2001 35,000 0 with an interest rate of 10.00% l.)Computer Loan 36 month noted dated September 1999 with an interest rate of 15.99%. 945 0 p.)Vehicle 5 - payment is $303.05/month. Note is secured by the vehicle and has an interest rate of 7.65%. 4,322 0 s.)Vehicle Loan - 60 month note dated 4/3/99 with interest rate of 7.59% 4,699 12,452 ----------- ------------- Subtotal 474,955 390,005 ----------- ------------- Totals $1,887,191 390,005 =========== ============= Principal payments for the next five years are as follows: 2001 $1,887,191 2002 93,848 2003 104,816 2004 111,476 2005 79,865 ---------- $2,277,196 ========== NOTE 9 - LEASING COMMITMENTS The Company leases office and warehouse facilities at a monthly rate of $3,000.00 without a formal agreement. NOTE 10 - RELATED PARTY TRANSACTIONS SECO-Illinois, located in Brookfield, Illinois, leases on a month to month basis, approximately 8,000 square feet of office, warehouse and storage facilities. Approximately 2,000 square feet is used as office space with the remaining facility principally used as a warehouse. Most of SECO-Illinois' projects are performed on site so its facilities are primarily used for storing and working on its equipment when not in use. The terms of the lease require monthly payments of $2,500 during 1997 and $3,000 per month starting in January 1998. The building is leased from 8400 Brookfield Partners which is owned and controlled by John Giura, the president of the Company, and James Spachman, a major shareholder of the Company. The lease is on a month-to-month term. NOTE 11 - LOAN FROM SHAREHOLDERS The Company and SECO-Illinois borrowed funds from shareholders throughout the year to cover operating expenses. The total outstanding principal balance due as of December 31, 2000 was $180,000. The detail of this principal balance as of December 31, 2000 is as follows: John Giura $5,000 - No repayment terms. Interest paid quarterly at 1/2% over the prime rate (loan to the Company). Jim Spachman $175,000 - No repayment terms. No interest paid or accrued ($25,000 loan to the Company and $150,000 loan to SECO-Illinois). NOTE 12 - INSURANCE SECO is insured for General Liability by American Alternative Insurance Corporation for $1,000,000 with an aggregate limit of $5,000,000 available as needed on a per job basis. The deductible is $5,000. A.M. Best's Rating for American Alternative Insurance Corporation is A++15. NOTE 13 - INCOME TAXES The current tax expense for CGI Holding Corporation for the year ended December 31, 2000 was $161,782 and the deferred tax expense for the same period amounted to $404,754. The deferred taxes resulted in a Net Operating Loss Carryforward that the Company had from the year ended December 31, 1999. The Company was able to utilize this carryforward of $1,061,256 when the Company disposed of its wholly owned subsidiary, Roli Ink Corporation, on November 13, 2000. This carryover Net Operating Loss resulted in a deferred tax expense to the Company in the amount of $377,767. The remaining $26,987 of deferred tax expenses for 2000 was attributable to depreciation timing differnces in the amount of $125,022 from the Company's book to tax depreciation. The current tax expense was also the product of the sale of Roli Ink Corporation, which produced $141,735 of Wisconsin state income taxes and $20,047 of federal income taxes. On December 31, 2000, the Company had a deferred tax liability of $49,652. This is a result of depreciation timing differences. NOTE 14 - NOTE RECEIVABLE On October 1, 2000, the Company received a Note Receivable from Barry Ash, personally, and ACS Contractors for the purchase of certain assets of SECO's operating division located in Missouri. The terms of this note were as follows: 1) $50,000 to be paid in January 31, 2001 2) $50,000 to be paid by June 29, 2001 3) $50,000 to be paid by September 28, 2001 4) $200,000 to be paid on December 31, 2001. This note is to carry no interest unless the note goes into default at which time interest will accrue on any unpaid balances at a rate of 8.0% compounded monthly. NOTE 15 - GOOD FAITH DEPOSIT The Company has advanced $470,000 to WorldMall.Com in anticipation of purchasing 100% of the outstanding common stock. WorldMall.Com is a service organization to the internet market. NOTE 16 - TREASURY STOCK On March 31, 2000, the Company sold 1,000,000 shares of its common stock at $0.25 per share. The shares were sold with an option agreement that these shares could be repurchased by the Company within nine months at the current market value. These shares were repurchased November 16, 2000 for $0.35 per share. -----END PRIVACY-ENHANCED MESSAGE-----