-----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, K2+CPnKYsmwYCsNB+iN9I2R2KFGyHz0EiNAu7/H8nh5ITT8wt0eApR6iDA4S9kRg McrcSpiz+1GbhRHkYWKzMg== 0001012895-97-000122.txt : 19970912 0001012895-97-000122.hdr.sgml : 19970912 ACCESSION NUMBER: 0001012895-97-000122 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970908 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEMSTAR ENTERPRISES INC 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: 10QSB/A SEC ACT: SEC FILE NUMBER: 033-19980-D FILM NUMBER: 97676383 BUSINESS ADDRESS: STREET 1: 8400 BROOKFIELD AVENUE CITY: BROOKFIELD STATE: IL ZIP: 60513 BUSINESS PHONE: 708-485-3434 MAIL ADDRESS: STREET 1: 73-251 AMBER ST CITY: PALM DESERT STATE: CA ZIP: 92260 FORMER COMPANY: FORMER CONFORMED NAME: NORTH STAR PETROLEUM INC DATE OF NAME CHANGE: 19900530 10QSB/A 1 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB/A [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT OF 1934 Commission File Number: 33-19980-D CGI HOLDING CORPORATION - -------------------------------- (Exact name of small business issuer as specified in its charter) Nevada 87-0450450 - ----------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 8400 Brookfield Avenue, Brookfield, Illinois 60513 - -------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (708) 485-3434 - ------------------------------- (Issuer telephone number) Gemstar Enterprises, Inc., 73-251 Amber Street, Palm Desert, California 92260 - ----------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Yes [ ] No [X] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 8,272,778 shares of its $0.001 par value common stock as of September 5, 1997. Transitional Small Business Disclosure Format (check one) Yes [ ] No [X] PAGE 2 ITEM 5. OTHER INFORMATION Set forth below is historical and pro forma financial information with respect to the Company and the Acquired Corporation as required pursuant to Regulation S-B. CGI HOLDING CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA On July 28, 1997, the shareholders of Safe Environment Corporation (SECO) and Roli Ink Corporation (RIC) entered into reorganization agreements with Gemstar Enterprises, Inc. (which has since changed its name to CGI Holding Corporation, referred to herein as the Company). The reorganization agreements provided for the shareholders of SECO to receive 2,200,056 shares of the Company's restricted common stock in exchange for all of the issued and outstanding common stock of SECO, and for the shareholders of RIC to receive 2,761,000 shares of the Company's restricted common stock in exchange for all of the issued and outstanding common stock of RIC. Prior to the reorganization Gemstar reverse split its common stock on a 1-for-5 basis, resulting in a total of 2,151,723 shares of common stock outstanding prior to the issuances of the new shares to SECO and RIC. All shares presented above are presented on a post-split basis. The transaction has been accounted for as a reorganization of SECO and RIC in a manner similar to a pooling-of-interests, and an acquisition of the Company. The stock issued pursuant to the reorganization has been treated as a restatement of the outstanding RIC and SECO common stock with no change in the historical carrying value of their assets and liabilities. The acquisition of the Company has been accounted for as a purchase business combination. Its assets and liabilities were recorded at their fair value which also equaled their historical carrying value. The accompanying pro forma condensed consolidated balance sheet as of June 30, 1997 has been prepared assuming the reorganization and the acquisition occurred on that date. The pro-forma condensed consolidated statements of operations have been prepared assuming the reorganization and the acquisition occurred at the beginning of 1996. Such information is derived from, and should be read in conjunction with, the separate historical financial statements of SECO and RIC, included elsewhere herein, and the historical financial statements of the Company included in the annual report on Form 10-KSB at September 30, 1996 and quarterly report on Form 10-QSB at June 30, 1997. The pro forma condensed consolidated statements of operations do not purport to be indicative of the results of operations which actually would have been obtained if the reorganization and the acquisition had occurred January 1, 1996 or the results of operations which may be obtained in the future. In addition, future results may vary significantly from the results reflected in these pro forma condensed consolidated statements of operations. PAGE 3 CGI HOLDING CORPORATION (A Development Stage Company) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of June 30, 1997
Safe Gemstar Environment Roli Ink Enterprises ProForma Corporation Corporation Inc. Adjustments Pro Forma ----------- ---------- ---------- - ---------- ---------- ASSETS Cash and cash equivalents $ 79,267 $ 49,265 $ 332 $ - - $ 128,864 Accounts receivable 1,406,012 282,347 - - - 1,688,359 Inventory 19,368 184,702 - - - 204,070 Other current assets 123,714 5,427 - - - 129,141 ----------- ---------- ---------- - --------- ----------- Total current assets 1,628,361 521,741 332 - - 2,150,434 Property, plant and equipment 624,944 349,924 - - - 974,868 Accumulated depreciation (413,765) (225,536) - (B) 60,903 (578,398) ----------- ---------- ---------- - --------- ----------- Net property, plant and equipment 211,179 124,388 - 60,903 396,470 Other assets 2,977 20,302 500 - - 23,779 ----------- ---------- ---------- - --------- ----------- Total assets $1,842,517 $ 666,431 $ 832 $ 60,903 $ 2,570,683 ========== ========== ========== ========= =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $1,111,751 $ 155,785 $ 5,432 $ - - $ 1,272,969 Long-term liabilities 179,214 59,303 - - - 238,517 ---------- ---------- ---------- - --------- ----------- Total liabilities 1,290,965 215,088 5,432 - - 1,511,486 Stockholders' equity Common stock 93,902 1,682 10,759 A (99,230) 7,113 Additional paid-in-capital - 359,308 914,285 A (869,486) 211,150 C (192,957) Retained earnings 516,038 230,353 (929,644) A 770,328 840,934 B 60,903 C 192,957 Treasury stock (58,388) (140,000) - A 198,388 - ---------- ---------- ---------- - --------- ------------ Total stockholders' equity 551,552 451,343 (4,600) 60,903 1,059,197 Total Liabilities and Stockholders' Equity $1,842,517 $ 666,431 $ 832 $ 60,903 $ 2,570,683 ========== ========== ========== ========= =========== See the accompanying notes to pro forma condensed consolidated financial data.
PAGE 4 CGI HOLDING CORPORATION (A Development Stage Company) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS As of June 30, 1997
Safe Gemstar Environment Roli Ink Enterprises Pro Forma Pro Forma Corporation Corporation Inc. Adjustments Results ----------- ----------- ----------- - ---------- ---------- FOR THE YEAR ENDED DECEMBER 31, 1996 Sales $ 6,862,261 $ 2,845,543 $ - $ - - $ 9,707,804 Cost of sales 5,373,781 1,399,775 - - - 6,773,556 ----------- ----------- ----------- - ---------- ----------- Gross profit 1,488,480 1,445,768 - - - 2,934,248 ----------- ----------- ----------- - ---------- ----------- General and administrative expense 989,690 1,091,995 3,568 - - 2,085,253 Interest expense 80,525 7,969 - - - 88,494 ----------- ----------- ----------- - ---------- ----------- Total expense 1,070,215 1,099,964 3,568 - - 2,173,747 ----------- ----------- ----------- - ---------- ----------- Income (loss) from operations 418,265 345,804 (3,568) - - 760,501 Other income 82,161 (45,415) - - - 36,746 Provision for income taxes 90,940 83,272 - - - 174,212 ----------- ----------- ------------ - --------- ----------- Net income (loss) $ 409,486 $ 217,117 $ (3,568) $ - - $ 623,035 =========== =========== ============ ========= =========== Net income per common share $ 1.63 $ 129.08 $ - $ - - $ 0.09 =========== =========== ============ ========= =========== Weighted average number of common stock used in per share calculation 251,000 16,820 7,112,779 7,112,779 7,112,779 ========== =========== ============ ========= =========== FOR THE SIX MONTHS ENDED JUNE 30, 1997 Sales $ 2,900,635 $ 1,374,618 $ - $ - - $ 4,275,253 Cost of sales 2,060,688 725,545 - - - 2,786,233 ------------ ----------- ------------ - --------- ----------- Gross profit 839,947 649,073 - - - 1,489,020 ------------ ----------- ------------ - --------- ----------- General and administrative expense 471,730 418,846 11,000 B (60,903) 840,673 Interest expense 21,259 3,630 - - - 24,889 ------------ ----------- ------------ - --------- ----------- Total expense 492,989 422,476 11,000 (60,903) 865,562 ------------ ----------- ------------ - --------- ----------- Income (loss) from operations 346,958 226,597 (11,000) 60,903 623,458 Other income 94,160 - - - - 94,160 Povision for income taxes 176,447 - - - - 176,447 ------------ ----------- ------------ - --------- ----------- Net income (loss) $ 264,671 $ 226,597 $ (11,000) $ 60,903 $ 541,171 ============ =========== ============ ========= =========== Net income per common share $ 1.05 $ 134.72 $ - $ 0.01 $ 0.08 ============ =========== ============ ========= =========== Weighted average number of common stock used in per share calculation 251,000 16,820 7,112,779 7,112,779 7,112,779 ============ ========== ============= ========= ===========
5 CGI HOLDING CORPORATION NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA NOTE A -- REORGANIZATION AND ISSUANCE OF COMMON STOCK In connection with the reorganization agreements the Company issued a total of 4,961,056 (post-split) shares of common stock in exchange for all of the issued and outstanding common stock of both SECO and RIC resulting in a total 8,272,778 (post-split) shares of common stock issued and outstanding immediately following the reorganization and the acquisition and following the issuance of 1,160,000 shares after June 30, 1996, and prior to the reogranization. Accordingly, equity has been adjusted to reflect the restatement of common stock outstanding, the retirement of treasury stock and the adjustment of retained earnings and additional paid-in capital resulting from the transaction. NOTE B --ACCUMULATED DEPRECIATION ADJUSTMENT The interim financial statements of RIC for the six months ending June 30, 1997 reflect accelerated depreciation that will not be used in the future. Pro forma adjustments have been made to reflect the depreciation expense that would have been recognized using the straight-line method of depreciation. NOTE C-- S CORPORATION EARNINGS AND PROFITS RIC elected to be treated as an "S" corporation for purposes of income tax reporting effective January 1, 1997. Pro forma adjustments have been made to reflect the distribution and subsequent capital contribution of $192,957 in S corporation earnings, net of cash distributions, for the six months ended June 30, 1997. PAGE 6 POULOS & BAYER LTD Certified Public Accountants To the Board of Directors of Safe Environment Corporation 8400 Brookfield Avenue Brookfield, IL 60513 Gentlemen: Pursuant to your instructions, we have prepared and submit herewith the financial statements of: SAFE ENVIRONMENT CORPORATION (AN ILLINOIS CORPORATION) BROOKFIELD, ILLINOIS consisting of the following Exhibits and Schedule: EXHIBIT "A" - Balance Sheet, June 30, 1997 EXHIBIT "B" - Statement of Retained Earnings, June 30, 1997 EXHIBIT "C" - Statement of Profit and Loss, Six Months and Three Months Ended June 30, 1997 EXHIBIT "C-1" - Schedule of Operating Expenses, Six Months and Three Months Ended June 30, 1997 EXHIBIT "D" - Comparative Balance Sheet, June 30, 1997 and 1996 EXHIBIT "E" - Comparative Statement of Profit and Loss, Six Months Ended June 30, 1997 and 1996 EXHIBIT "F" - Comparative Statement of Cash Flows, Six Months Ended June 30, 1997 and 1996 EXHIBIT "G" - Footnotes to Financial Statements, June 30, 1997 We have compiled the accompanying balance sheet of Safe Environment Corporation as of June 30, 1997 and the related statements of income, and cash flows for the period then ended in accordance with standards established by the American Institute of Certified Public Accountants. A compilation is limited to presenting, in the form of financial statements, information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them. Respectfully Submitted, Poulos & Bayer July 28, 1997 7 SAFE ENVIRONMENT CORPORATION EXHIBIT "A" BALANCE SHEET JUNE 30, 1997 ASSETS CURRENT ASSETS Cash $ 79,266.54 Accounts Receivable 1,406,012.46 Inventory 19,368.00 Prepaid Insurance 81,010.39 Costs and Estimated Earnings Over Billings 40,494.00 Employee Loans 2,210.00 ------------- TOTAL CURRENT ASSETS $1,628,361.39
Accumulated Cost Depri- Carrying Basis ciation Value ----------- ----------- ------------- FIXED ASSETS Leasehold Improvements $ 7,728.08 $ 7,255.82 $ 472.26 Office Equipment 50,787.42 39,755.35 11,032.07 Contracting Equipment 426,826.56 285,832.44 140,994.12 Vehicles 139,601.93 80,921.51 58,680.42 ----------- ----------- ------------- Total $624,943.99 $413,765.12 =========== =========== NET FIXED ASSETS 211,178.87 OTHER ASSETS Bid Deposits $ 477.00 Security Deposits 2,500.00 ------------- TOTAL OTHER ASSETS 2,977.00 ------------- TOTAL ASSETS $1,842,517.26 ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 370,420.93 Payroll Taxes Payable 1,781.24 Accrued Payroll 71,108.78 Notes Payable - Insurance 142,312.51 Accrued Corporate Income Taxes 176,447.00 Notes Payable - Current Portion 349,681.18 ------------- TOTAL CURRENT LIABILITIES $1,111,751.64 LONG-TERM LIABILITIES Notes Payable - See Footnote 4 $ 504,538.96 Less: Current Portion 349,681.18 ------------- TOTAL LONG-TERM LIABILITIES 154,857.78 8 OTHER LIABILITIES Loans Payable - Shareholder 24,355.59 STOCKHOLDERS' EQUITY Capital Stock $ 93,902.00 Retained Earnings 516,038.25 Treasury Stock (58,388.00) ------------- TOTAL STOCKHOLDERS' EQUITY 551,552.25 ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1 ,842,517.26 =============
SCHEDULE "B" SAFE ENVIRONMENT CORPORATION STATEMENT OF RETAINED EARNINGS JUNE 30, 1997 BALANCE: JANUARY 1, 1997 $251,367.18 ADD: NET PROFIT 264,671.07 ----------- BALANCE: JUNE 30, 1997 $516,038.25 =========== PAGE 9 EXHIBIT "C" SAFE ENVIRONMENT CORPORATION STATEMENT OF PROFIT AND LOSS SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1997
Six Months Ended Three Months Ended June 30, 1997 Amount Percent Amount Percent ------------- -------- ------------- -------- SALES $2,900,634.71 100.00% $1,175,255.79 100.00% ------------- -------- ------------- -------- LESS: DIRECT COST OF OPERATIONS Beginning Inventory $ 26,882.94 0.93% $ 19,368.00 1.65% Materials 275,163.05 9.49% 120,390.25 10.24% Direct Labor 66,017.22 2.28% 36,936.92 3.14% Warehouse Labor 17,864.62 0.62% 10,956.37 0.93% Finders Fees 8,100.00 0.28% 0.00 0.00% Dumping Fees 50,514.30 1.74% 48,553.50 4.13% Equipment Rental 65,993.46 2.28% 40,152.20 3.42% Equipment Repairs 5,038.70 0.17% 2,728.70 0.23% Insurance Asbestos Liability 21,250.35 0.73% 20,438.61 1.74% Bonding Costs 3,672.00 0.13% 5,071.00 0.43% Workmans' Compensation (15,913.82) (0.55%) 6,963.00 0.59% Payroll Taxes - 90% 55,596.49 1.92% 20,203.33 1.72% Sub - Contract Costs 1,306,049.57 45.03% 530,250.66 45.12% Testing Fees 88,199.75 3.04% 51,623.25 4.39% Travel Expense 19,934.30 0.69% 8,203.23 0.70% Truck Expense 1,269.86 0.04% 0.00 0.00% Room Charges 450.00 0.02% 0.00 0.00% Union Dues 34,500.69 1.19% 32,372.69 2.75% Radios 5,115.87 0.18% 5,115.87 0.44% Depreciation Equipment 17,732.97 0.61% 9,452.41 0.80% Trucks 11,390.76 0.39% 5,695.38 0.48% Freight 2,186.20 0.08% 86.20 0.01% Set-up Costs 1,650.00 0.06% (50.00) 0.00% Removal 11,397.00 0.39% 11,397.00 0.97% ------------- -------- ------------- -------- TOTAL DIRECT COSTS AVAILABLE $2,080,056.28 71.71% $ 985,908.57 83.89% LESS: ENDING INVENTORY 19,368.00 0.67% 19,368.00 1.65% ------------- -------- ------------- -------- TOTAL DIRECT COSTS OF OPERATIONS $2,060,688.28 71.04% $ 966,540.57 82.24% ------------- -------- ------------- -------- GROSS PROFIT $ 839,946.43 28.96% $ 208,715.22 17.76% LESS: OPERATING EXPENSES 471,729.82 16.26% 205,217.85 17.46% ------------- -------- ------------- -------- NET PROFIT BEFORE INTEREST EXPENSE $ 368,216.61 12.69% $ 3,497.37 0.30% 10 LESS: INTEREST EXPENSE 21,258.99 0.73% 12,553.65 1.07% ------------ --------- ------------- -------- NET PROFIT (LOSS) BEFORE OTHER INCOME $ 346,957.62 11.96% $ (9,056.28) (0.77%) ADD: OTHER INCOME Miscellaneous $ 93,470.04 3.22% $ 72,080.17 6.13% Interest 690.41 0.02% 161.21 0.01% ------------ --------- ------------- -------- TOTAL OTHER INCOME $ 94,160.45 3.25% $ 72,241.38 6.15% ------------ --------- ------------- -------- NET PROFIT BEFORE CORPORATE INCOME TAXES $ 441,118.07 15.21% $ 63,185.10 5.38% ============= ======== LESS: CORPORATE INCOME TAXES 176,447.00 6.08% ------------ --------- NET PROFIT $ 264,671.07 9.12% ============ =========
PAGE 11 SCHEDULE "C-1" SAFE ENVIRONMENT CORPORATION SCHEDULE OF OPERATING EXPENSES SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1997
Six Months Ended Three Months Ended June 30, 1997 Amount Percent Amount Percent ----------- ------- ----------- -------- OPERATING EXPENSES Advertising and Promotion $ 1,200.97 0.04% $ 196.00 0.02% Auto Allowances 43,539.57 1.50% 11,254.08 0.96% Bank Charges 1,273.07 0.04% 19.00 0.00% Business Meals 540.98 0.02% 440.02 0.04% Cleaning 950.00 0.03% 650.00 0.06% Depreciation Office Equipment 1,663.39 0.06% 849.32 0.07% Leasehold Improvements 59.04 0.00% 29.52 0.00% Donations 9,265.45 0.32% 7,715.45 0.66% Dues and Subscriptions 486.00 0.02% 400.00 0.03% Employee Education 855.00 0.03% 160.00 0.01% Entertainment 5,496.90 0.19% 5,085.60 0.43% Filing and Inspections 8,130.00 0.28% 4,140.00 0.35% Fines/Penalties 799.36 0.03% 266.33 0.02% General Insurance 11,426.80 0.39% 7,153.35 0.61% Group Insurance 20,897.66 0.72% 8,343.62 0.71% Licenses 5,355.87 0.18% 3,137.00 0.27% Life Insurance 6,988.68 0.24% 2,484.07 0.21% Medical Expenses 3,909.30 0.13% 2,483.30 0.21% Miscellaneous 12,295.55 0.42% 1,645.71 0.14% Office Expenses 3,478.78 0.12% 2,110.44 0.18% Office Rent 23,336.00 0.80% 13,824.00 1.18% Payroll Taxes - 10% 6,127.39 0.21% 2,194.82 0.19% Postage and Messenger 4,853.72 0.17% 2,981.93 0.25% Professional Fees 57,020.34 1.97% 12,277.58 1.04% Salaries Consultant 14,131.20 0.49% 3,800.00 0.32% Office and Administration 61,913.27 2.13% 27,956.63 2.38% Officer 60,000.00 2.07% 0.00 0.00% Sales 69,083.01 2.38% 57,687.17 4.91% Telephone 18,418.00 0.63% 10,389.89 0.88% 401K Expense 2,042.50 0.07% 444.22 0.04% Tax Penalties 1,940.85 0.07% 847.63 0.07% Utilities 402.23 0.01% 402.23 0.03% Repairs and Maintenance 5,248.94 0.18% 5,248.94 0.45% Construction Administration Fees 8,600.00 0.30% 8,600.00 0.73% ----------- ------- ----------- -------- TOTAL OPERATING EXPENSES $471,729.82 16.26% $205,217.85 17.46%
PAGE 12 EXHIBIT "D" SAFE ENVIRONMENT CORPORATION COMPARATIVE BALANCE SHEET JUNE 30, 1997 AND 1996
June 30, 1997 June 30, 1996 --------------- ------------- ASSETS CURRENT ASSETS Cash $ 79,266.54 $ 32,878.69 Accounts Receivable 1,406,012.46 725,744.11 Inventory 19,368.00 27,680.02 Prepaid Insurance 81,010.39 69,103.70 Costs and Estimated Earnings Over Billings 40,494.00 21,041.00 Employee Loan 2,210.00 0.00 ------------- ------------- TOTAL CURRENT ASSETS $1,628,361.39 $ 876,447.52 FIXED ASSETS Cost Basis $ 624,943.99 $ 459,434.12 Less: Accumulated Depreciation 413,765.12 330,523.65 ------------- ------------- NET FIXED ASSETS 211,178.87 128,910.47 OTHER ASSETS Bid Deposits $ 477.00 $ 756.00 Security Deposits 2,500.00 2,757.00 Due from SECO Abatement 0.00 14,476.78 ------------- ------------- TOTAL OTHER ASSETS 2,977.00 17,989.78 ------------- ------------- TOTAL ASSETS $1,842,517.26 $1,023,347.77 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 370,420.93 $ 265,142.03 Payroll Taxes Payable 1,781.24 7,578.53 Accrued Payroll 71,108.78 6,279.17 Deferred Compensation 0.00 15,000.00 Accrued Corporate Income Taxes 176,447.00 0.00 Notes Payable - Insurance 142,312.51 27,398.76 Notes payable - Current 349,681.18 592,294.00 ------------- ------------- TOTAL CURRENT LIABILITIES $1,111,751.64 $ 913,692.49 LONG-TERM LIABILITIES Notes payable - Long Term 154,857.78 0.00 OTHER LIABILITIES Loans Payable 24,355.59 113,500.00 STOCKHOLDERS' EQUITY Capital Stock $ 93,902.00 $ 246,000.00 13 Retained Earnings 516,038.25 (72,348.72) Treasury Stock (58,388.00) (177,496.00) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY 551,552.25 (3,844.72) ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,842,517.26 $1,023,347.77 ============= =============
EXHIBIT "E" SAFE ENVIRONMENT CORPORATION COMPARATIVE STATEMENT OF PROFIT AND LOSS SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Six Months Ended June 30, 1997 June 30, 1996 Amount Percent Amount Percent ------------- -------- ------------- -------- SALES $2,900,634.71 100.00% $1,310,245.03 100.00% LESS: COST OF OPERATIONS 2,060,688.28 71.04% 987,825.90 75.39% ------------- -------- ------------- -------- GROSS PROFIT $ 839,946.43 28.96% $ 322,419.13 24.61% LESS: OPERATING EXPENSES 471,729.82 16.26% 276,080.44 21.07% ------------- -------- ------------- -------- NET PROFIT ON OPERATIONS $ 368,216.61 12.69% $ 46,338.69 3.54% LESS: INTEREST EXPENSE 21,258.99 0.73% 26,210.58 2.00% ------------- -------- ------------- -------- NET PROFIT BEFORE OTHER INCOME $ 346,957.62 11.96% $ 20,128.11 1.54% ADD: OTHER INCOME 94,160.45 3.25% 80,642.65 6.15% ------------- -------- ------------- -------- NET PROFIT BEFORE CORPORATE INCOME TAXES $ 441,118.07 15.21% $ 100,770.76 7.69% ============= ======== ============= =========
PAGE 14 EXHIBIT "F" SAFE ENVIRONMENT CORPORATION COMPARATIVE STATEMENT OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Six Months Ended June 30, 1997 June 30, 1996 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Profit $ 264,671.07 $ 100,770.76 Non-Cash Items Included In Net Loss: Depreciation 30,846.16 21,013.08 Change in Accounts Receivable (18,476.41) (327,494.36) Change in Employee Loan (1,210.00) (0.00) Change in Inventory 7,514.94 (6,674.56) Change in Prepaid Insurance (1,356.56) (10,451.70) Change in Costs and Estimated Earnings Over Billings 31,801.00 (21,041.00) Change in Deposits 1,516.00 1,522.00 Change in Accounts Payable (215,409.46) 151,923.05 Change in Accrued Expenses 201,133.48 3,485.86 Change in Inter-Company Payable (2,624.00) 99,130.70 Change in Investment In All Weather Roofing 0.00 5,000.00 Change in Billings in Excess of Costs and Estimated Earnings (101,182.00) 0.00 ------------- - ------------- NET CASH CHANGE PROVIDED BY OPERATING ACTIVITIES $ 197,224.22 $ 17,183.83 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Fixed Assets Acquired $ (40,897.00) $ (19,347.16) Proceeds from Sale of Fixed Assets 1,143.42 0.00 ------------- ------------- NET CASH USED BY INVESTING ACTIVITIES $ (39,753.58) $ (19,347.16) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Change in Loan payable $ (89,144.41) $ 0.00 Change in Notes Payable 32,488.57 (59,749.08) Proceeds from Sale of Stock 48,510.00 0.00 Change in Treasury Stock (81,500.00) 0.00 ------------- ------------- NET CASH USED BY FINANCING ACTIVITIES $ (89,645.84) $ (59,749.08) ------------- ------------- NET CASH CHANGE $ 67,824.80 $ (61,912.41) CASH BALANCE: JANUARY 1, 1997 AND 1996 11,441.74 94,791.10 ------------- ------------- CASH BALANCE: JUNE 30, 1997 AND 1996 $ 79,266.54 $ 32,878.69 ============= =============
15 EXHIBIT "G" SAFE ENVIRONMENT CORPORATION FOOTNOTES TO FINANCIAL STATEMENTS JUNE 30, 1997 1 Revenues from fixed-price construction contracts and time-and-material contracts are recognized upon pre-agreed stages of completion. This method is used because management considers expended costs to be the best available measure of progress on these contracts. Contract costs include all direct material, labor, sub-contractors and equipment costs and those indirect costs related to contract performance. General and Administrative Costs are charged to expense as incurred. Changes in job performance, job conditions and estimated profitability are recognized in the period in which the revenues are determined. B. Accounts Receivable Management anticipates all receivables are collectible. C. Fixed Assets Fixed assets are depreciated over their estimated useful life using the 150% declining-balance method. 2-ACCOUNTS RECEIVABLE Accounts Receivable at June 30, 1997 consist of the following: Currently Due $1,406,012.46 Retainages 441,419.66 ------------- $ 964,592.80 ============= Retainages are due in less than one (1) year. 3-COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Costs Incurred on Uncompleted Contract $ 19,774.00 Estimated Earnings 20,720.00 ----------- $ 40,494.00 Less: Billings to Date 0.00 ----------- $ 40,494.00 =========== Included on Balance Sheet Costs and Estimated Earnings in Excess of Billings $ 40,494.00 Billings in Excess of Costs and Estimated Earnings 0.00 ----------- $ 40,494.00 =========== PAGE 16 4-NOTES PAYABLE Description Current Long-Term ----------- ----------- ------------ a) CIB Bank Line of Credit Interest rate is 8.75% and maturity date is February 1, 1998. $250,000.00 $ 0.00 b) CIB Bank Note payable dated February 3, 1997 for $250,000 note payable monthly at $6,945.00 principal plus interest with a maturity date of February 1, 2000 83,340.00 138,880.00 c) Vehicle 1 - payment is $400.00 principal plus interest 4,364.99 2,722.31 d) Vehicle 2 - payment is $487.50 principal plus interest 5,304.11 2,845.82 e) Vehicle 3 - payment is $285.09 principal plus interest 2,743.48 6,466.44 f) Vehicle 4 - payment is $375.69 principal plus interest 3,928.60 3,943.21 ----------- ----------- Totals $349,681.18 $154,857.78 =========== =========== 5-LEASING COMMITMENTS The company leases office and warehouse facilities at a monthly rate of $2,500.00, without a formal agreement. 6-CONTRACTUAL AGREEMENTS The company contracts with Mentor Investments, Inc. to provide direct labor for certain jobs. -CAPITAL STOCK The company has authorized 500,000 shares of common stock at no par value. As of June 30, 1997, 251,000 shares were issued with a stated value of $93,902.00 Shareholders John Guira 92,900 Jim Spachman 74,000 Ron Riba 10,000 Fred Schmidt 35,000 David Ryan 10,000 Others 29,100 -------- Total 251,000 ======== 8-TREASURY STOCK As of June 30, 1997, the company had 54,400 shares of treasury stock with a book value of $58,388.00. 17 SAFE ENVIRONMENT CORPORATION SCHEDULE OF CONTRACTS IN PROCESS JUNE 30, 1997
Costs and Billings Estimated in Earnings Excess Costs Billing in Excess Costs & Job Contract Est. Gross % Revenue to Gross to of Est. Number Amount Costs % Profit Compl. Earned Date Profit Dte Billings Earnings - ------ ------- ------- ------- ------- ------ ------- ------- ------ ------- - ------- ------- 96005 $50,618 $24,718 51.16 $25,900 80.00 $40,794 $19,774 $20,720 $ 0.00 $40,494 $ 0.00
PAGE 18 POULOS & BAYER LTD. Certified Public Accountants Safe Environment Corporation 8400 Brookfield Avenue Brookfield, Illinois 60513 Gentlemen: Pursuant to your instructions, we have prepared and submit herewith the financial statements of: SAFE ENVIRONMENT CORPORATION (ILLINOIS CORPORATION) BROOKFIELD, ILLINOIS consisting of the following Exhibits and Schedules: - Independent Auditor's Report EXHIBIT "A" - Balance Sheet, December 31, 1996 SCHEDULE "B" - Statement of Retained Earnings, December 31, 1996 EXHIBIT "C" - Statement of Profit and Loss, Twelve Months Ended December 31, 1996 SCHEDULE "C-1"- Schedule of Operating Expenses, Twelve Months Ended December 31, 1996 EXHIBIT "D" - Comparative Balance Sheet, December 31, 1996 and 1995 EXHIBIT "E" - Comparative Statement of Profit and Loss, Twelve Months Ended December 31, 1996 and 1995 EXHIBIT "F" - Comparative Statement of Cash Flows, Twelve Months Ended December 31, 1996 and 1995 EXHIBIT "G" - Footnotes to Financial Statements, December 31, 1996 PAGE 19 POULOS & BAYER LTD Certified Public Accountants INDEPENDENT AUDITOR'S REPORT To The Board of Directors Safe Environment Corporation 8400 Brookfield Avenue Brookfield, Illinois 60513 We have audited the accompanying balance sheet of Safe Environment Corporation as of December 31, 1996 and 1995 and the related statements of income, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above, present fairly, in all material respects, the financial position of Safe Environment Corporation as of December 31, 1996 and 1995 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Respectfully Submitted, Poulos & Bayer, Ltd. July 28, 1997 PAGE 20 SAFE ENVIRONMENT CORPORATION EXHIBIT "A" BALANCE SHEET December 31, 1996
ASSETS CURRENT ASSETS Cash $ 11,441.74 Accounts Receivable 1,387,536.05 Inventory 26,882.94 Prepaid Insurance 79,653.83 Costs and Estimated Earnings Over Billings 72,295.00 Employee Loans 1,000.00 ------------ TOTAL CURRENT ASSETS $1,578,809.56 Accumulated Cost Depri- Carrying Basis ciation Value ----------- ------------- ------------- FIXED ASSETS Leasehold Improvements $ 7,728.08 $ 7,196.78 $ 531.30 Office Equipment 48,485.42 38,091.96 10,393.46 Contracting Equipment 389,374.98 268,099.47 121,275.51 Vehicles 139,601.93 69,530.75 70,071.18 ----------- ------------- ------------- Total $585,190.41 $ 382,918.96 =========== ============= NET FIXED ASSETS 202,271.45 OTHER ASSETS Bid Deposits $ 1,736.00 Security Deposits 2,757.00 TOTAL OTHER ASSETS 4,493.00 ------------- TOTAL ASSETS $1,785,574.01 ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 585,830.39 Payroll Taxes Payable 7,834.07 Accrued Payroll 9,429.47 Due to Seco Abatement 2,624.00 Notes Payable - Insurance 62,115.92 Billings in Excess of Costs and Estimated Earnings 101,182.00 Accrued Corporate Income Taxes 30,940.00 Notes Payable - Current Portion 527,914.32 ------------- TOTAL CURRENT LIABILITIES $1,327,870.17 PAGE 21 LONG-TERM LIABILITIES Notes Payable - See Footnote 4 $ 552,246.98 Less: Current Portion 527,914.32 ------------- TOTAL LONG-TERM LIABILITIES 24,332.66 OTHER LIABILITIES Loans Payable - See Footnote 5 113,500.00 STOCKHOLDERS' EQUITY Capital Stock $ 167,504.00 Retained Earnings 251,367.18 Treasury Stock (99,000.00) ------------- TOTAL STOCKHOLDERS' EQUITY 319,871.18 TOTAL LIABILITIES AND ------------- STOCKHOLDERS' EQUITY $1,785,574.01 =============
SCHEDULE "B" SAFE ENVIRONMENT CORPORATION STATEMENT OF RETAINED EARNINGS DECEMBER 31, 1996 BALANCE: JANUARY 1, 1996 $(158,119.48) ADD: NET PROFIT 409,486.66 ------------ BALANCE: DECEMBER 31, 1996 $ 251,367.18 ============ PAGE 22 EXHIBIT "C" SAFE ENVIRONMENT CORPORATION STATEMENT OF PROFIT AND LOSS TWELVE MONTHS ENDED DECEMBER 31, 1996
Amount Percent ---------------------------- -------- SALES $6,862,261.55 100.00% LESS: DIRECT COST OF OPERATIONS Beginning Inventory $ 21,005.46 0.31% Materials 573,520.82 8.36% Direct Labor 265,329.62 3.87% Warehouse Labor 37,539.03 0.55% Finders Fees 1,100.00 0.02% Dumping Fees 128,969.35 1.88% Equipment rental 67,864.83 0.99% Equipment Repairs 660.21 0.01% Insurance Asbestos Liability 226,204.33 3.30% Bonding Costs 208,231.14 3.03% Workmans' Compensation 146,085.76 2.13% Payroll Taxes - 90% 69,969.56 1.02% Sub - Contract Costs 3,353,094.04 48.86% Testing Fees 102,301.50 1.49% Travel Expense 41,904.59 0.61% Truck Expense 19,798.62 0.29% Room Charges 3,608.79 0.05% Union Dues 74,431.27 1.08% Depreciation Equipment 37,395.03 0.54% Trucks 21,176.02 0.31% Freight 474.10 0.01% ------------- -------- TOTAL DIRECT COSTS AVAILABLE $5,400,664.07 78.70% ------------- -------- LESS: ENDING INVENTORY 26,882.94 0.39% ------------- -------- TOTAL DIRECT COSTS OF OPERATIONS 5,373,781.13 78.31% ------------- -------- GROSS PROFIT $1,488,480.42 21.69% LESS: OPERATING EXPENSES 989,689.95 14.42% ------------- ------- NET PROFIT BEFORE INTEREST EXPENSE $ 498,790.47 7.27% LESS: INTEREST EXPENSE 80,524.75 1.17% ------------- ------- NET PROFIT BEFORE OTHER INCOME $ 418,265.72 6.10% PAGE 23 ADD: OTHER INCOME Management Fee $ 59,798.20 0.87% Insurance Claim 20,314.00 0.30% Miscellaneous 523.29 0.01% Interest 1,525.45 0.02% ------------- ------- TOTAL OTHER INCOME 82,160.94 1.20% ------------- ------- NET PROFIT BEFORE CORPORATE INCOME TAXES $ 500,426.66 7.29% LESS: CORPORATE INCOME TAXES 90,940.00 1.33% ------------- ------- NET PROFIT $ 409,486.66 5.97% ============= =======
PAGE 24 SCHEDULE "C-1" SAFE ENVIRONMENT CORPORATION SCHEDULE OF OPERATING EXPENSES TWELVE MONTHS ENDED DECEMBER 31, 1996
Amount Percent -------------- ------- OPERATING EXPENSES Advertising and Promotion $ 6,027.84 0.09% Auto Allowances 17,557.45 0.26% Bad Debts 95,005.56 1.38% Bank Charges 590.82 0.01% Business Meals 1,926.05 0.03% Commissions 35,000.00 0.51% Depreciation Office Equipment 2,332.93 0.03% Leasehold Improvements 118.08 0.00% Donations 3,760.00 0.05% Dues and Subscriptions 5,678.73 0.08% Employee Education 16,650.00 0.24% Entertainment 7,865.40 0.11% Filing and Inspections 18,269.00 0.27% Fines and Penalties 1,849.72 0.03% General Insurance 28,486.75 0.42% Group Insurance 30,522.68 0.44% Licenses 9,280.23 0.14% Life Insurance 4,186.50 0.06% Medical Expenses 5,091.00 0.07% Office Expenses 12,829.69 0.19% Office Rent 24,912.00 0.36% Payroll Taxes - 10% 7,774.39 0.11% Postage and Messenger 5,669.34 0.08% Professional Fees 40,599.79 0.59% Salaries Consultant Salaries 45,183.53 0.66% Office and Administration 69,456.19 1.01% Officer 150,000.00 2.19% Sales 284,909.12 4.15% Scavenger 307.95 0.00% Telephone 31,817.90 0.46% Temporary Help 9,013.50 0.13% 401K Expense 15,978.19 0.23% Loss of Sale of Equipment 1,039.62 0.02% ------------- ------- TOTAL OPERATING EXPENSES $ 989,689.95 14.42% ============= =======
PAGE 25 EXHIBIT "D" SAFE ENVIRONMENT CORPORATION COMPARATIVE BALANCE SHEET DECEMBER 31, 1996 AND 1995
December 31, December 31, 1996 1995 ------------- ------------- ASSETS CURRENT ASSETS Cash $ 11,441.74 $ 94,791.10 Accounts Receivable 1,387,536.05 398,249.75 Inventory 26,882.94 21,005.46 Prepaid Insurance 79,653.83 58,652.00 Costs and Estimated Earnings Over Billings 72,295.00 0.00 Employee Loan 1,000.00 0.00 ------------- ------------- TOTAL CURRENT ASSETS $1,578,809.56 $ 572,698.31 FIXED ASSETS Cost Basis $ 585,190.41 $ 440,086.96 Less: Accumulated Depreciation 382,918.96 309,510.57 ------------- ------------- NET FIXED ASSETS 202,271.45 130,576.39 OTHER ASSETS Bid Deposits $ 1,736.00 $ 2,278.00 Security Deposits 2,757.00 2,757.00 Due from SECO Abatement 0.00 113,607.48 Investment in All Weather Roofing 0.00 5,000.00 ------------- ------------- TOTAL OTHER ASSETS 4,493.00 123,642.48 ------------- ------------- TOTAL ASSETS $1,785,574.01 $ 826,917.18 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 585,830.39 $ 113,218.98 Payroll Taxes Payable 7,834.07 6,077.84 Accrued Payroll 9,429.47 0.00 Due to Seco Abatement 2,624.00 0.00 Billings in Excess of Costs and Estimated Earnings 101,182.00 0.00 Accrued Corporate Income Taxes 30,940.00 4,294.00 Notes Payable - Insurance 62,115.92 47,147.84 Notes Payable - Current 527,914.32 632,294.00 ------------- ------------- TOTAL CURRENT LIABILITIES $1,327,870.17 $ 803,032.66 26 LONG-TERM LIABILITIES Notes Payable - Long Term 24,332.66 0.00 OTHER LIABILITIES Loans Payable 113,500.00 113,500.00 STOCKHOLDERS' EQUITY Capital Stock $ 167,504.00 $ 191,504.00 Retained Earnings 251,367.18 (158,119.48) Treasury Stock (99,000.00) (123,000.00) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY 319,871.18 (89,615.48) ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,785,574.01 $ 826,917.18 ============= =============
EXHIBIT "E" SAFE ENVIRONMENT CORPORATION COMPARATIVE STATEMENT OF PROFIT AND LOSS TWELVE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Twelve Months Ended December 31, 1996 December 31, 1995 Amount Percent Amount Percent ------------- ------- ------------- ------- SALES $6,862,261.55 100.00% $3,048,697.11 100.00% LESS: COST OF OPERATIONS 5,373,781.13 78.31% 2,065,746.84 67.76% ------------- ------- ------------- ------- GROSS PROFIT $1,488,480.42 21.69% $ 982,950.27 32.24% LESS: OPERATING EXPENSES 989,689.95 14.42% 452,739.70 14.85% ------------- ------- ------------- ------- NET PROFIT ON OPERATIONS $ 498,790.47 7.27% $ 530,210.57 17.39% LESS: INTEREST EXPENSE 80,524.75 1.17% 87,241.27 2.86% ------------- ------- ------------- ------- NET PROFIT BEFORE OTHER INCOME $ 418,265.72 6.10% $ 442,969.30 14.53% ADD: OTHER INCOME 82,160.94 1.20% 163,866.00 5.37% ------------- ------- ------------- ------- NET PROFIT BEFORE CORPORATE INCOME TAXES $ 500,426.66 7.29% $ 606,835.30 19.90% ============= ======= ============= =======
PAGE 27 EXHIBIT "F" SAFE ENVIRONMENT CORPORATION COMPARATIVE STATEMENT OF CASH FLOWS TWELVE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Twelve Months Ended December 31, December 31, 1996 1995 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Profit $ 409,486.66 $ 602,541.30 Non-Cash items Included In Net Loss Loss on Sale of Equipment 1,039.62 0.00 Depreciation 61,022.06 43,915.84 Change in Accounts Receivable (989,286.30) 345,446.96 Change in Employee Loan (1,000.00) 0.00 Change in Inventory (5,877.48) (21,005.46) Change in Consulting and Insurance Refunds 0.00 8,185.00 Change in Loans Receivable 0.00 15,000.00 Change in Prepaid Insurance (21,001.83) 7,266.53 Change in Costs and Estimated Earnings Over Billings (72,295.00) 0.00 Change in Deposits 542.00 (1,331.50) Change in Accounts Payable 472,611.41 (218,952.89) Change in Accrued Expenses 37,831.70 (7,324.48) Change in Inter-Company Receivable 115,918.23 (113,607.48) Change in Investment In All Weather Roofing 5,000.00 (5,000.00) Change in Billings in Excess of Costs and Estimated Earnings 101,182.00 0.00 ------------- ------------- NET CASH CHANGE PROVIDED BY OPERATING ACTIVITIES $ 115,173.07 $ 655,133.82 ------------- ------------- CASH FLOWS FROM INVESTING Fixed Assets Acquired $ (113,575.88) $ (24,173.23) Proceeds from Sale of Fixed Assets 3,500.00 0.00 ------------- ------------- NET CASH USED BY INVESTING ACTIVITIES $ (110,075.88) $ (24,173.23) ------------- ------------- PAGE 28 CASH FLOWS FROM FINANCING ACTIVITIES Change in Loan Payable $ 0.00 $ (290,000.00) Change in Notes Payable (88,446.55) (285,542.39) Proceeds from Sale of Stock 0.00 12,504.00 ------------- ------------- NET CASH USED BY FINANCING ACTIVITIES $ (88,446.55) $ (563,038.39) ------------- ------------- NET CASH (DECREASE) INCREASE $ (83,349.36) $ 67,922.20 CASH BALANCE: JANUARY 1, 1996 AND 1995 94,791.10 26,868.90 ------------- ------------- CASH BALANCE: DECEMBER 31, 1996 AND 1995 $ 11,441.74 $ 94,791.10 ============= =============
EXHIBIT "G" SAFE ENVIRONMENT CORPORATION FOOTNOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 1--SIGNIFICANT ACCOUNTING POLICIES A. Revenue and Cost Recognition -------------------------------- Revenues from fixed-price construction contracts and time-and- material contracts are recognized upon pre-agreed stages of completion. This method is used because management considers expended costs to be the best available measure of progress on these contracts. Contract costs include all direct material, labor, sub- contractors and equipment cost and those indirect costs related to contract performance. General and Administrative Costs are charged to expense as incurred. Changes in job performance, job conditions and estimated profitability are recognized in the period in which the revenues are determined. B. Accounts Receivable ---------------------- Management anticipates all receivables are collectible. C. Fixed Assets --------------- Fixed assets are depreciated over their estimated useful life using the 150% declining - balance method. PAGE 29 2--ACCOUNTS RECEIVABLE Accounts Receivable at December 31, 1996 consist of the following: Currently Due $1,387,536.05 Retainages 538,785.90 ------------- $ 848,750.15 ============= Retainages are due in less than one(1) year. 3--COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Costs Incurred on Uncompleted Contracts $2,860,224.00 Estimated Earnings 1,200,639.00 ------------- $4,060,863.00 Less: Billings to Date 4,089,750.00 ------------- $ (28,887.00) ============= Included on Balance Sheet Costs and Estimated Earnings in Excess of Billings $ 72,925.00 Billings in Excess of Costs and Estimated Earnings 101,812.00 ------------ $ (28,887.00) ============ 4--NOTES PAYABLE Description Current Long-Term - ------------ ----------- ----------- Suburban Bank line of credit secured by the general assets of the company and personally guaranteed by various share- holders. Interest rate is prime plus 1.5% and maturity date is March 31, 1997 $512,294.00 $ 0.00 Vehicle 1 - payment is $400.00 principal plus interest 4,183.96 4,951.02 Vehicle 2 - payment is $487.50 principal plus interest 5,059.59 5,560.45 Vehicle 3 - payment is $285.09 principal plus interest 2,629.72 7,867.22 Vehicle 4 - payment is $375.69 principal plus interest 3,747.05 5,953.97 ----------- ----------- Totals $527,914.32 $ 24,332.66 =========== =========== PAGE 30 5--LOANS PAYABLE This loan was to Suzanne Erkskine and was repaid in full on February 7, 1997 with no dispute. 6--LEASING COMMITMENTS The company leases office and warehouse facilities at a monthly rate of $2,500.00, without a formal agreement. 7--CONTRACTUAL AGREEMENTS a. The company contracts with Mentor Investments, Inc. to provide direct labor for certain jobs. 'Mentor' is responsible for the cost of the payroll taxes and workmens compensation insurance. 'Mentor' receives, for these services, the cost of the gross payroll plus 20%. b. The company contracted on February 15, 1995 to provide all sales and management services for SECO Abatement, Inc. The terms of this agreement allow the company to participate in 82% of the profits of SECO Abatement, Inc. These earnings are reflected as management fees in the financial statement. 8--CAPITAL STOCK The company has authorized 500,000 shares of common stock at no par value. As of December 31, 1996, 231,900 shares were issued with a stated value of $167,504.00. Shareholders John Guira 54,500 Jim Spachman 44,000 Ron Riba 76,000 Fred Schmidt 34,000 Others 23,400 --------- Total $ 231,900 ========= 9--TREASURY STOCK As of December 31, 1996, the company had 49,500 shares of treasury stock with a book value of $99,000.00. Treasury Stock Transaction Shares Amount -------------------------- ------- ----------- Acquired January 1, 1995 90,500 $181,000.00 Issued in 1995 29,000 58,000.00 Issued in 1996 12,000 24,000.00 ------- ----------- 49,500 $ 99,000.00 ====== =========== PAGE 31 SAFE ENVIRONMENT CORPORATION SCHEDULE OF CONTRACTS IN PROCESS JUNE 30, 1997
Costs and Billings Estimated in Earnings Excess Costs Billing in Excess Costs & Job Contract Est. Gross % Revenue to Gross to of Est. Number Amount Costs % Profit Compl. Earned Date Profit Dte Billings Earnings - ------ ------- ------- ------- ------- ------ ------- ------- ------ ------- - ------- ------- 96074 $4,422,027 $3,095,419 30.00% $1,326,608 86.52% $3,825,930 $2,678,157 $1,147,781 $3,927,750 $ 0 $101,812 96098 285,000 220,875 22.50% 64,125 82.43% 234,925 182,067 52,858 162,000 72,925 0 - ------ ---------- ---------- ------- ---------- ------- ---------- - ---------- ---------- ---------- -------- -------- $4,707,027 $3,316,294 $1,390,733 $4,060,863 $2,860,639 $1,200,639 $4,089,750 $ 72,925 $101,812 ========== ========== ========== ========== ========== ========== ========== ======== ========
PAGE 32 RADKE & SCHLESNER, S.C. Certified Public Accountants 10750 West Howard Avenue Milwaukee, Wisconsin 53228 (414) 328-1000 Roli Ink Corporation 4010 West Douglas Avenue Milwaukee, Wi 53209 We have compiled the accompanying balance sheet of Roli Ink Corporation as of June 30, 1997 and the related statements of income, and cash flows for the 1 month and 6 months then ended, and the accompanying supplementary information, which is presented only for supplementary analysis purposes, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting, in the form of financial statements and supplementary schedules information that is the representation of management. We have not audited or reviewed the accompanying financial statements and supplementary schedules and, accordingly, do not express an opinion or any other form of assurance on them. Management has elected to omit substantially all of the disclosures required by generally accepted accounting principals. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the company's financial position, results of operation, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters. Milwaukee, Wisconsin July 11,1997 PAGE 33 ROLI INK CORPORATION BALANCE SHEET AS OF JUNE 30, 1997 ASSETS CURRENT ASSETS Cash - M & I Northern Bank $ 49,264.62 Accounts receivable 282,346.79 Inventory 184,701.90 Prepaid insurance 4,627.30 Prepaid Wisconsin corporate income tax 800.00 ----------- Total current assets $521,740.61 Property and Equipment: Accumulated Depri- Book Cost ciation Value ---------- ----------- ----------- Leasehold Improvements $20,533.81 $ 3,455.02 $ 17,078.79 Fixtures & Equipment 319,911.28 217,482.42 102,428.86 Transportation equipment 9,478.84 4,598.86 4,879.98 ----------- ----------- ----------- Total $349,923.93 $225,536.30 124,387.63 =========== =========== OTHER ASSETS Deposit 20,302.20 ----------- Total other assets 20,302.20 ----------- Total assets $666,430.44 =========== PAGE 34 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion long-term debt $ 30,700.00 Accounts payable 81,458.72 Commissions payable 43,415.99 401K loan payable 210.08 ----------- Total current liabilities $155,784.79 Long-term debt: Notes payable - treasury stock 75,003.91 Note payable - Gordon Page 15,000.00 Less: Current maturities (30,700.00) ----------- Total long-term debt 59,303.91 ----------- Total liabilities 215,088.70 Stockholder's equity: Capital stock 1,682.00 Additional paid-in capital 359,308.00 Retained earnings 37,394.63 Treasury stock (140,000.00) AAA Shareholder distributions (33,640.00) Net income (loss) - year to date 226,597.11 ----------- Total stockholders' equity 451,341.74 ----------- Total liabilities & stockholders' equity $666,430.44 =========== See Accountants' Compilation Report PAGE 35 ROLI INK CORPORATION Statements of Income For the 1 Month and 6 Months Ended June 30, 1997
Current Year to Month % Date % ------------ ------- ------------- ------- Sales: Ink sales $ 227,690.90 100.63 $1,399,809.82 101.83 Ink sales discount (1,428.46) (0.63) (25,192.21) 1.83 ------------ ------- ------------- ------- Total sales 226,262.44 100.00 1,374,617.61 100.00 ------------ ------- ------------- ------- Cost of sales: Cost of raw materials 68,170.47 30.13 492,604.03 35.84 Packaging (455.25) (0.20) 26,941.80 1.96 Freight 4,675.02 2.06 38,343.58 2.79 Manufacturing supplies 1,376.39 0.61 9,111.31 0.66 Wages - Q.C. 4,504.22 1.99 29,277.43 2.13 Shop wages 4,734.89 2.10 33,237.90 2.42 Employment services shop 1,506.82 0.66 6,261.77 0.45 Production supervisory wages 2,307.70 1.02 15,000.05 1.09 Rent 2,962.26 1.31 16,399.26 1.20 Wages - delivery 500.41 0.22 2,661.92 0.19 Leased delivery vehicle 451.82 0.20 3,354.53 0.24 Utilities 714.55 0.31 6,073.44 0.44 Repairs & maintenance 1,648.33 0.73 7,368.22 0.54 Insurance - shop 321.55 0.14 1,562.63 0.11 Health insurance 382.30 0.17 2,630.95 0.20 Workman's comp. insurance 542.96 0.24 2,290.67 0.16 Property taxes 539.42 0.24 3,547.13 0.26 Insurance - delivery vehicle 579.20 0.26 558.30 0.04 FICA 745.60 0.33 6,796.64 0.50 Unemployment tax 93.51 0.04 3,364.84 0.24 401K match 184.01 0.08 1,776.73 0.13 Disability insurance 124.23 0.05 124.23 0.01 Life insurance 16.80 0.01 16.80 0.00 Vehicle delivery expense 109.27 0.05 2,095.53 0.15 Depreciation 2,322.77 1.03 14,145.57 1.03 ------------ ------- ------------- ------- Total cost of sales 99,049.25 43.78 725,545.26 52.78 ------------ ------- ------------- ------- Gross profit 127,213.19 56.22 649,072.35 47.22 ------------ ------- ------------- ------- Expenses: Outside services 0.00 0.00 40.00 0.00 36 Operating supplies 301.60 0.13 2,382.06 0.18 Lab supplies 0.00 0.00 2,856.14 0.20 Freight & postage 423.92 0.19 2,023.90 0.15 Wages - lab 2,923.08 1.29 19,000.00 1.38 Officers salaries 11,615,38 5.14 75,499.97 5.50 Bonuses 0.00 0.00 150.00 0.01 Wages - administrative 2,307.68 1.02 14,999.92 1.09 Rent 474.60 0.21 2,847.60 0.21 Telephone lease 83.03 0.03 498.18 0.03 Equipment lease 58.37 0.03 408.59 0.03 Leased vehicle sales 1,968.25 0.87 7,703.81 0.56 Wages office 2,805.16 1.24 18,116.69 1.32 Utilities 89.59 0.04 917.61 0.07 Telephone 323.56 0.14 2,004.57 0.14 Repairs & maintenance 422.36 0.19 2,875.70 0.21 Independent sales rep 33,033.32 14.60 195,865.09 14.25 Advertising & promotion 0.00 0.00 1,794.94 0.13 Business insurance 119.29 0.05 490.72 0.04 Health insurance 875.83 0.39 5,406.24 0.39 Workman's comp insurance 407.64 0.18 1,127.72 0.08 Meals & entertainment 0.00 0.00 2,080.45 0.15 Travel 0.00 0.00 1,808.70 0.13 Property taxes 95.18 0.04 589.10 0.05 Auto insurance 129.60 0.06 119.07 0.01 F.I.C.A. tax 1,822.43 0.80 9,865.82 0.71 Unemployment tax 16.49 0.01 468.74 0.04 401K match 833.12 0.37 4,051.61 0.29 Life insurance 22.40 0.01 22.40 0.00 Permits & licenses 0.00 0.00 36.60 0.01 Vehicle expense 146.27 0.06 348.97 0.02 Legal & accounting 1,799.25 0.80 7,419.25 0.54 Professional services 239.28 0.10 3.080.45 0.23 Depreciation 654.59 0.29 3,927.54 0.28 Dues & subscriptions 394.00 0.18 3,547.64 0.26 Administrative expense 1,087.19 0.48 6,963.82 0.51 Donations 0.00 0.00 257.72 0.02 Miscellaneous 27.38 0.01 156.93 0.01 Bank charges 0.00 0.00 105.00 0.00 Consulting expense 2,105.75 0.93 16,332.57 1.19 Consulting services 0.00 0.00 653.69 0.05 ------------ ------- ------------- ------- Total expenses 67,605.59 29.88 418,845.52 30.47 ------------ ------- ------------- ------- Operating income (loss) 59,607.60 26.34 230,226.83 16.75 ------------ ------- ------------- ------- Other income (expense): Interest (520.24) (0.23) (3,629.72) (0.26) ------------ ------- ------------- ------- Total other income (expense) (520.24) (0.23) (3,629.72) (0.27) ------------ ------- ------------- ------- Net income (loss) $ 59,087.36 26.11 $ 226,597.11 16.48 ============ ======= ============= ======= See Accountants' Compilation Report
37 ROLI INK CORPORATION Statements of Cash Flows For the 1 Month and 6 Months Ended June 30, 1997
Current Year to Month Date ------------ ------------- Cash flows from operating activities: Net income (loss) $ 59,087.36 $ 226,597.11 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation & amortization 654.59 3,927.54 Changes in assets and liabilities: Decrease (increase)in accounts receivable 39,869.50 5,012.19 Decrease (increase) in inventory (10,691.04) (16,448.33) Decrease (increase) in other current assets 2,594.31 (24,929.50) Increase (decrease) in accounts payable (40,406.92) (35,790.39) Increase (decrease) other current liabilities (42,258.96) (118,483.81) ------------ ------------- Total adjustments (50,238.52) (186,712.30) ------------ ------------- Net cash provided by (used in) operating activities 8,848.84 39,884.81 ------------ ------------- Cash flows from investing activities: Purchases of property and equipment (1,828.31) 4,249.87 ------------ ------------- Net cash provided by (used in) investing activities (1,828.31) 4,249.87 ------------ ------------- Cash flows from financing activities: Payments on long-term debt (16,301.67) (22,666.09) Shareholder distributions (16,820.00) (33,640.00) ------------ ------------- Net cash provided by (used in) financing activities (33,121.67) (56,306.09) ------------ ------------- Net increase (decrease) in cash (26,101.14) (12,171.41) Cash at beginning of period 75,365.76 61,436.03 ------------ ------------- Cash at end of period $ 49,264.62 $ 49,264.62 ============ ============= See Accountants' Compilation Report
38 ROLI INK CORPORATION Statements of Cash Flows For the 1 Month and 6 Months Ended June 30, 1997
Current Year to Month Date ------------ ------------- Analysis of cash accounts: Cash - M & I Northern Bank $ 49,264.62 $ 49,264.62 ------------ ------------- Total cash 49,264.62 49,264.62 Cash at beginning of period 75,365.76 61,436.03 ------------ ------------- Increase (decrease) in cash $ (26,101.14) $ (12,171.41) ============ ============= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest 520.24 3,629.72 Income taxes 400.00 62,942.00
See Accountants' Compilation Report PAGE 39 SUPPLEMENTARY INFORMATION ROLI INK CORPORATION Comparative Statements of Income For the 6 Months Ended June 30, 1997
1997 1996 Amount % Amount % ------------- ------ ------------- ------ Sales: Ink sales $1,399,809.82 101.83 $1,405,766.47 101.86 Ink sales discount (25,192.21) (1.83) (25,621.80) (1.86) ------------- ------ ------------- ------ Total sales 1,374,617.61 100.00 1,380,144.67 100.00 ------------- ------ ------------- ------ Cost of sales: Cost of raw materials 492,604.03 35.84 547,111.24 39.64 Packaging 26,941.80 1.96 31,717.19 2.30 Freight 38,343.58 2.79 34,420.77 2.49 Manufacturing supplies 9,111.31 0.66 9,164.79 0.67 Wages - Q.C. 29,277.43 2.13 19,749.99 1.43 Shop wages 33,237.90 2.42 37,638.60 2.73 Employment services shop 6,261.77 0.45 7,956.93 0.57 Production supervisory wages 15,000.05 1.09 18,036.58 1.31 Rent 16,399.26 1.20 12,398.10 0.90 Wages - delivery 2,661.92 0.19 2,734.58 0.20 Leased delivery vehicle 3,354.53 0.24 1,844.40 0.13 Utilities 6,073.44 0.44 6,375.17 0.46 Repairs & maintenance 7,368.22 0.54 6,539.23 0.48 Insurance - shop 1,562.63 0.11 4,998.82 0.36 Health insurance 2,630.95 0.20 2,343.99 0.17 Workman's comp. insurance 2,290.67 0.16 3,581.89 0.26 Property taxes 3,547.13 0.26 2,865.96 0.20 Insurance - delivery vehicle 558.30 0.04 1,049.68 0.08 FICA 6,796.64 0.50 4,092.04 0.30 Unemployment tax 3,364.84 0.24 3,270.28 0.23 401K match 1,776.73 0.13 514.02 0.04 Disability insurance 124.23 0.01 Life insurance 16.80 Vehicle delivery expense 2,095.53 0.15 2,850.24 0.21 Depreciation 14,145.57 1.03 ------------- ------ ------------- ------ Total cost of sales 725,545.26 52.78 761,254.49 55.16 ------------- ------ ------------- ------- Gross profit 649,072.35 47.22 618,890.18 44.84 ------------- ------ ------------- ------- PAGE 40 Expenses: Outside services 40.00 Operating supplies 2,382.06 0.18 4,524.37 0.33 Lab supplies 2,856.14 0.20 4,225.53 0.30 Freight & postage 2,023.90 0.15 2,620.25 0.19 Wages - lab 19,000.00 1.38 24,076.88 1.75 Employment serv office 3,978.00 0.29 Officers salaries 75,499.97 5.50 79,646.14 5.77 Bonuses 150.00 0.01 Wages - administrative 14,999.92 1.09 14,125.02 1.02 Rent 2,847.60 0.21 2,187.90 0.16 Telephone lease 498.18 0.03 562.24 0.04 Equipment lease 408.59 0.03 384.37 0.03 Leased vehicle sales 7,703.81 0.56 11,618.38 0.84 Wages office 18,116.69 1.32 14,428.84 1.05 Utilities 917.61 0.07 1,029.74 0.07 Telephone 2,004.57 0.14 2,754.04 0.20 Repairs & maintenance 2,875.70 0.21 5,816.26 0.42 Independent sales rep 195,865.09 14.25 208,327.53 15.10 Advertising & promotion 1,794.94 0.13 939.71 0.06 Business insurance 490.72 0.04 1,245.11 0.09 Health insurance 5,406.24 0.39 7,043.16 0.51 Workman's comp insurance 1,127.72 0.08 705.02 0.06 Meals & entertainment 2,080.45 0.15 2,138.07 0.15 Travel 1,808.70 0.13 356.78 0.03 Property taxes 589.10 0.05 1,794.36 0.13 Auto insurance 119.07 0.01 2,329.14 0.16 F.I.C.A. tax 9,865.82 0.71 12,484.52 0.91 Unemployment tax 468.74 0.04 577.03 0.04 401K match 4,051.61 0.29 3,297.57 0.24 Life insurance 22.40 Permits & licenses 36.60 0.01 200.00 0.01 Vehicle expense 348.97 0.02 1,649.12 0.12 Bad debts 231.47 0.02 Legal & accounting 7,419.25 0.54 4,752.50 0.35 Professional services 3,080.45 0.23 3,685.31 0.26 Office expense (3.27) Depreciation 3,927.54 0.28 22,854.45 1.66 Dues & subscriptions 3,547.64 0.26 1,944.20 0.14 Administrative expense 6,963.82 0.51 Donations 257.72 0.02 Miscellaneous 156.93 0.01 497.89 0.03 Bank charges 105.00 59.97 0.01 Consulting expense 16,332.57 1.19 18,842.77 1.36 Consulting services 653.69 0.05 11,696.68 0.85 ------------- ------ ------------- ------- Total expenses 418,845.52 30.47 479,627.05 34.75 ------------- ------ ------------- ------- Operating income (loss) 230,226.83 16.75 139,263.13 10.09 ------------- ------ ------------- ------- Other income & (expense): Interest (3,629.72) (0.26) (6,404.71) (0.46) Management fee expense (15,000.00) (1.09) ------------- ------ ------------- ------- Total other income & (expense) (3,629.72) (0.27) (21,404.71) (1.55) ------------- ------ ------------- ------- 41 Income (loss) before taxes 226,597.11 16.48 117,858.42 8.54 Wisconsin income tax 9,657.00 0.70 Federal income tax 24,900.60 1.80 ------------- ------ ------------- ------- Net income (loss) $ 226,597.11 16.48 $ 83,300.82 6.04 See Accountants' Compilation Report
PAGE 42 Roli Ink Corporation 4010 West Douglas Avenue Milwaukee, WI 53209 Gentlemen: Pursuant to your instructions, we have prepared and submit herewith the financial statements of: ROLI INK CORPORATION (A WISCONSIN CORPORATION) MILWAUKEE, WISCONSIN consisting of the following Exhibits and Schedules: -Independent Auditor's Report EXHIBIT "A"-Comparative Balance Sheet December 31, 1996 and 1995 SCHEDULE "B"-Comparative Statement of Retained Earnings, December 31, 1996 and 1995 EXHIBIT "C"-Comparative Statement of Income Twelve Months Ended December 31, 1996 and 1995 EXHIBIT "D"-Cash Flow Statement, Twelve Months Ended December 31, 1996 and 1995 EXHIBIT "E"-Footnotes to Financial Statements December 31, 1996 PAGE 43 POULOS & BAYER LTD. CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR'S REPORT To The Board of Directors Roli Ink Corporation 4010 West Douglas Avenue Milwaukee, Wisconsin 53209 We have audited the accompanying balance sheet of Roli Ink Corporation(a Wisconsin Corporation) as of December 31, 1996 and 1995 and the related statements of income, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above, present fairly, in all material respects, the financial position of Roli Ink Corporation as of December 31, 1996 and 1995 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Respectfully submitted, Poulos and Bayer, Ltd. July 21,1997 PAGE 44 ROLI INK CORPORATION EXHIBIT "A" COMPARATIVE BALANCE SHEET DECEMBER 31, 1996 AND 1995 ASSETS 1996 1995 Current Assets Cash $61,436.03 $ 69,284.36 Accounts receivable 287,358.98 251,517.62 Inventory 168,253.57 190,946.41 Total Current Assets $517,048.58 $511,748.39 Fixed Assets Cost basis $340,028.23 $303,270.00 Less: Accumulated depreciation (177,678.13) (133,873.55) Net Fixed Assets 162,350.10 169,396.45 Other Assets Security deposits Total Assets $679,398.68 $687,109.55 LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts payable $117,249.11 $122,332.49 Commissions payable 38,821.57 64,602.40 Accrued management fee 50,000.00 15,000.00 Accrued consulting fees 10,346.31 18,006.12 Accrued corporate taxes 62,142.00 13,371.00 Notes payable - current portion 30,700.00 106,720.00 Deferred corporate taxes 9,822.00 2,492.00 Total Current Liabilities $319,080.99 $342,524.01 Long-Term Liabilities Notes Payable $112,670.00 $175,620.00 Less: Current portion (30,700.00) (106,720.00) Net Long-Term Liabilities 81,970.00 68,900.00 Stockholder's Equity Capital stock $1,577.00 $ 1,577.00 Additional paid in capital 298,510.00 298,510.00 Retained earnings 118,260.69 (24,401.46) Treasury stock (140,000.00) Total Stockholder's Equity 278,347.69 275,685.54 Total Liabilities and Stockholder's Equity $679,398.68 $687,109.55 PAGE 45 ROLI INK CORPORATION EXHIBIT "B" COMPARATIVE STATEMENT OF RETAINED EARNINGS DECEMBER 31, 1996 AND 1995 December 31, 1996 1995 Balance: January 1$ (24,401.46$ (73,496.25) Add: Net Profit - Exhibit "C" 142,662.15 49,094.79 Balance: December 31$ 118,260.69$ (24,401.46) PAGE 46 ROLI INK CORPORATION EXHIBIT "C" COMPARATIVE STATEMENT OF INCOME TWELVE MONTHS ENDED DECEMBER 31, 1996 AND 1995 Twelve Months Ended December 31, 1996 December 31, 1995 Amount Percent Amount Percent Sales Ink Sales$ 2,898,230.30 101.85%$ 2,668,937.87 101.50% Less: Sales discounts (52,687.21) (1.85) (39,370.83) (1.50%) Net Sales$ 2,845,543.09 100.00%$ 2,629,567.04 100.00% Cost of Sales Freight$ 72,194.85 2.54%$ 72,749.83 2.77% Manufacturing supplies 17,673.64 0.62% 15,223.70 0.58% Packaging 71,369.52 2.51% 70,142.29 2.67% Purchases 1,108,663.75 38.96% 1,077,651.68 40.98% Quality control wages 53,231.40 1.87% 40,354.55 1.53 Shop wages 76,642.28 2.69% 96,123.27 3.66% Total Cost of Sales$ 1.399,775.44 49.19%$ 1,372,245.32 52.19% Gross Profit$ 1,445,767.65 50.81%$ 1,257,321.72 47.81% Less: Operating Expenses 311,724.58 10.95% 321,059.37 12.21% Net Profit Before Selling and Administrative Expenses$ 1,134,043.07 39.85%$ 936,262.35 35.61% Less: Selling and Administrative Expenses 780,270.24 27.42% 817,670.33 31.10% Net Profit Before Other Expenses$ 353,772.83 12.43%$ 118,592.02 4.51% Other Expenses Interest expense$ 12,545.56 0.44%$ 7,969.34 0.30% Management fee 115,293.12 4.05% 45,414.89 1.73% Total Other Expenses$ 127,838.68 4.49%$ 53,384.23 2.03% Net Profit Before Corporate Income Taxes$ 225,934.15 7.94%$ 65,207.70 2.48% Corporate Income Taxes Current$ 75,942.00 2.67%$ 13,621.00 0.52% Deferred 7,330.00 0.26% 2,492.00 0.09% Total Corporate Income Taxes$ 83,272.00 2.93%$ 16,113.00 0.61% Net Profit (Loss)$ 142,662.15 5.01%$ 49,094.79 1.87%PAGE 47 ROLI INK CORPORATION EXHIBIT "D" CASH FLOW STATEMENT TWELVE MONTHS ENDED DECEMBER 31, 1996 AND 1995 Twelve Months Ended December 31, December 31, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES Net profit $ 142,662.15$ 49,094.79 Adjustments to reconcile net profit with cash Depreciation 43,804.58 28,905.01 Other changes: Change in accounts receivable (35,841.36) (30,869.04) Change in inventory 22,692.84 (57,411.59) Change in deposits 5,964.71 (936.11) Change in accounts payable (5,083.38) 18,618.18 Change in accrued expenses 1,559.36 22,833.60 Change in accrued income taxes 48,771.00 13.168.00 Change in deferred income taxes 7,330.00 2,492.00 CASH FLOWS FROM OPERATING ACTIVITIES$ 231.859.90$ 45,894.84 CASH FLOWS FROM INVESTING ACTIVITIES Fixed assets acquired (36,758.23) (146.396.28) CASH FLOWS FROM FINANCING ACTIVITIES Change in notes payable$ (62,950.00)$ 96,620.00 Treasury stock purchase (140,000.00) 0.00 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES$ (202,950.00)$ 96,620.00 NET CASH CHANGE$ (7,848.33)$ (3,881.44) CASH BALANCE JANUARY 1 69,284.36 73,165.80 CASH BALANCE DECEMBER 31$ 61,436.03$ 69,284.36 PAGE 48 ROLI INK CORPORATION EXHIBIT "E" FOOTNOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 1.COMPANY BACKGROUND The company is a Wisconsin Corporation formed March 1, 1986. Its main business activity is the production of ink products used primarily by the packaging industry. 2.SIGNIFICANT ACCOUNTING POLICIES A. Accounts Receivable Management deems all receivables are collectible and no provisions for bad debts are required. B. Inventory Inventory is stated at cost using the first-in, first-out method. C. Fixed Assets All assets are acquired in 1995 and 1996 are depreciated over their useful life using the 150% declining method. D. Notes Payable The following indebtedness is reflected on the balance sheet: December 31, December 31, 1996 1995 a.) M & I Northern Bank Payable monthly $2,206.15 principal and interest paid on 9/9/96$ 0.00$ 88,000.00 b.) M & I Northern Bank Paid in full on 2/1/96 0.00 37,000.00 c.) Automatan, Inc. Purchase of equipment paid in full 4/1/96 0.00 50,620.00 d.) M & I Northern Bank Dated 6/30/96 payable monthly $1,873.96 principal and interest. Balance of $40,659.54 due on 6/20/99.$ 82,670.00 0.00 e.) Gordon Page Payable $15,000 6/30/97 $15,000 6/30/98 No interest 30,000.00 0.00 Totals$ 112,670.00$ 175,620.00 49 3.COMMITMENTS EXHIBIT "E" a.) The company leases manufacturing and office facilities under a lease dated 9/1/96 through 9/30/99. Terms of the lease are; per month; Base month$ 3,164.00 Real estate tax 530.30 Additionally, company leased on 6/1/97 1,685 square feet at a cost of $262.86 per month. b.) The company is committed to pay a consulting agreement in the amount of $2,000 per month through 1999. This is payable to the original owner of the company. PAGE> 50 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CGI HOLDING CORPORATION Dated: August 29, 1997 By:/S/John Giura, Principal Accounting, and Chief Financial Officer
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