UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1998 or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ________ to _______
Commission file number 1-14088
---------------------------
Gibbs Construction, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-2095676
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1855 Wall Street, Garland, TX 75041
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (972) 278-3433
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on
which registered
Common Stock Boston Stock Exchange
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Warrants to purchase Common Stock Boston Stock Exchange
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Securities registered under Section 12(g) of the Exchange Act;
(Title of class)
- --------------------------------------------------------------------------------
Common Stock
Warrants to purchase Common Stock
<PAGE>
Indicate by check and mark whether registrant (1) has 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. Yes [X] No [ ]
Indicate by check mark if there is no disclosure of delinquent filers in
pursuant to Item 405 of Regulation S-K is not contained in this form, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of Form 10-K or any
amendment to this Form 10-K.
Yes [ ] No [X]
State issuer's revenues for its most recent fiscal year. $54,496,848
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked price, as of a
specified date within 60 days prior to the date of filing $2,968,750 As of March
26, 1999.
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 4,000,000
<PAGE>
Item 1. Business
General
Danny and Tony Gibbs, the Company's two executives, acquired Gibbs Construction,
Inc. (Gibbs Construction, Inc. is referred to herein as the "Company" unless the
context indicates otherwise) in 1985 and began to conduct their construction
business from that entity. The Company headquarters are located in Garland,
Texas, a suburb of Dallas. The Company is a full service, national, commercial
construction company. The Company's clients are principally national retail
chains that are engaged in aggressive expansion programs although the Company
has begun to construct small hotels. These programs usually call for the
erection of stand-alone facilities or "power centers," which typically have
stores that range in size from 10,000 to 75,000 square feet. Some of the
Company's clients include Best Buy, Oshmans Super Sports, Barnes & Noble, Office
Max, Petstuff, Just for Feet, Copy Max and Petsmart.
In July of 1996, the Company sold the assets of its wholly owned subsidiary,
Bronco Bowl Holding, Inc. which operated a 136,000 square foot complex, the
Bronco Bowl, on approximately twenty acres near downtown Dallas. The Company
acquired the property in 1994 and performed extensive renovations on the
complex, opening it in January of 1996. Because of operating losses, the Company
sold the facility later in 1996. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operation."
Construction Operations
The Company acts as a general contractor for both "ground up" and interior
"finish out" construction. "Ground up" construction involves the construction of
a building's shell, that is, construction of the building's floor, wall, and
ceiling. "Finish out" comprises electrical work, erection of walls, painting,
demolition, air conditioning and heating systems and plumbing, among other
activities. The Company focuses on the higher margin activities involved in
"finish out" work, subcontracting lower margin work to other contractors. In
1998, approximately 35% of the Company's revenues were derived from "ground up"
work and 65% from "finish out" work. The Company plans to allocate its resources
to increase significantly its "finish-out" business due to its high gross
margins.
The Company utilizes its own personnel throughout a project while trying to
minimize any subcontract labor. Personnel are sometimes flown to the city where
the construction occurs, but normally personnel and equipment are transported by
trucks and trailers to the construction site. The Company rents corporate
apartment housing when necessary, housing three or four persons per apartment.
The Company transports Company owned small tools and equipment to the
construction site via Company owned trucks. The Company leases or rents
particularly heavy equipment such as hoists, cranes and personnel lifts from
local equipment suppliers when necessary for use on particular projects. Most
jobs, including out of state jobs, can be organized within seven to ten days
after award of the contract.
Management believes that using its own personnel offers several advantages: a
consistent labor force that is familiar with the operational needs of the
customer as well as familiarity with the customer's type of construction; close
control over the work and construction schedule; increased focus on higher
margin activities such as demolition, drywall, painting, electrical, and air
conditioning and heating systems by having a skilled work force in those areas;
and more efficient use of personnel.
Marketing of the Construction Business
The Company's construction business focuses on a clientele of publicly held
companies or companies anticipating to become publicly held which have the
necessary funds appropriated for construction programs on a nation-wide basis.
The specifically targeted companies are national retail chains that conduct
operations in stand-alone facilities or "power-centers". These national retail
companies are frequently engaged in aggressive expansion programs, which often
require the construction of ten to fifty units of 10,000 to 100,000 square feet
per year on a nation-wide basis. In addition, these retail chains often remodel
a large number of existing outlets, providing a greater opportunity to generate
revenues for the Company.
The Company believes that concentrating on this targeted market provides for
longer term growth and financial stability. Concentration on this type of client
base also allows the Company to mitigate the cyclical and seasonal revenues
which are often typical of the construction industry. Although economic
contraction often reduces retail
<PAGE>
store's expansion, management's experience has been that most such retail chains
continue to expand during recessions, particularly in areas of the country that
are not affected by a recession or in which an economic slowdown is not as
severe as in other parts of the country.
The Company usually experiences some work slowdown in the first quarter of each
calendar year due, in the opinion of management, to a slowing of the bidding
process during the holiday season.
The Company does not engage in a formal marketing or selling program for the
construction business. Most work comes by referral or reputation with a large
amount of repeat business from existing customers. Management believes its
service and product will promote itself after the completion of a single project
for a national chain, providing additional construction and remodeling
opportunities after completion of the first contract. During 1998, approximately
79% of the Company business was repeat business from existing clients.
Most clients which have stores under construction have revenues which are
directly affected by the opening date of the store. It is critical for the
Company to further establish and maintain a dependable reputation within the
industry to meet completion schedules. To date, the Company has never had to
delay the expected completion date of a project. After completion of the first
project for a new client, the Company is able to develop a continuing
relationship with its clients by demonstrating the Company's other advantages
such as: the ability to work throughout the United States regardless of the
client's targeted area of expansion; more consistent service and product due to
familiarity with the client construction and operational needs; more centralized
communication since numerous projects could be discussed at one time; and
greater control over the construction schedule due to the use of the Company's
own crews.
The Company does not engage in heavy construction and provides neither
engineering nor architectural services. Only a small portion of its business
comes from construction in shopping malls or finish out of commercial office
buildings. None of its business is derived from work provided to governmental
agencies.
In 1998, the Company was engaged in over 120 projects for approximately 40
different clients. Two clients, Office Max (12%) and Just for Feet (22%),
accounted for approximately 34% of the Company's revenues during 1998. There can
be no assurances that these clients will continue at the present level or at all
and the loss if any one of them would have a material adverse effect on the
Company.
Contracting Process
Almost all of the Company's projects are competitively bid on a fixed price
basis. The Company presently obtains approximately 85% of all of its work on a
competitive bid basis. The Company utilizes an estimating process whereby the
project manager reviews every division and line item of the project. Unit costs
are then applied to each line item. This approach not only allows the project
manager to become extremely familiar with the details of the project but also
gives a good indication as to whether subcontractor prices are consistent with
market conditions.
On site inspections are always made by the project manager/estimator prior to
bid date. This allows the project manager to observe any peculiarities with the
project and to make note of any discrepancies in the architectural documents.
Competition
The Company believes that its construction business competes on price,
reputation for quality, timeliness, familiarity with retail construction, the
availability of aggregate materials and financial strength. Management believes
the Company competes favorably on the basis of the foregoing factors.
The market for construction services, particularly services to national retail
chains, is highly competitive. While the vast majority of the Company's
competitors are smaller and may not be as well capitalized, several of the
Company's competitors are larger, better known and have substantially greater
marketing, financial, personnel and other resources, including established
reputations and working relationships, than the Company. There can be no
assurance that the Company's services will continue to be competitive in the
market place.
<PAGE>
Government Regulation
The Company's business is subject to a variety of state and local governmental
regulations and licensing requirements relating to construction activities.
Prior to commencing work on a construction project, the Company is required to
obtain building permits and, in some jurisdictions, state and local authorities
require the Company to obtain demonstrating knowledge of construction, building,
fire and safety codes. In order to complete a project and obtain a certificate
of occupancy, the Company is required to obtain the approval of local
authorities confirming compliance with these requirements.
The Company has general contractor licenses in numerous large states and major
metropolitan areas.
Insurance and Bonding
The Company maintains general liability and excess liability insurance covering
its construction equipment in amounts consistent with industry practices.
Management believes its insurance programs are adequate. Worker's compensation
insurance covering the leased employees is provided through the employee leasing
company from which the Company leases employees.
Although not required by most clients, occasionally the Company is required to
provide various types of surety bonds guaranteeing its performance under certain
contracts. The Company's ability to obtain surety bonds depends upon its
capitalization, working capital, past performance, management expertise and
other factors. Surety companies consider such factors in light of the amount of
surety bonds then outstanding for the Company and their current underwriting
standards, which may change from time to time. The Company has never been
refused a surety bond.
Construction Employees
The Company leases all of its field employees through an employee leasing
company. The Company has utilized the same employee leasing company for more
than five years. By doing so, the Company is able to relieve itself from
administration surrounding employment practices. In particular, the Company
believes that the employee leasing company is able to find more favorable
workers compensation insurance than it would otherwise be able to find as well
as develop and administer Company safety programs.
At March 15, 1999, the field operations of the Company were conducted by 25
superintendents and 102 tradesmen. A field superintendent is assigned to each
project with the responsibility to oversee the day to day progress on the
project. The field superintendent reports directly to the project manager.
In addition to Danny and Tony Gibbs, the Company employs in the construction
business 21 persons, including 8 project managers, 8 project assistants, one
project accountant, 3 accounting clerks and a receptionist. The project managers
typically run three to four projects at a time and are responsible for the
overall coordination and scheduling of each project as well as communications
with the client.
Item 2. Properties.
The Company owns a 10,000 square foot office and warehouse facility in Garland,
Texas. Offices presently occupy approximately 6,000 square feet. Of that space,
the Company completed in March of 1996 and an additional 2,500 square feet that
enabled the Company to have space for additional project managers and four staff
members capable of supporting operations.
As of March 15, 1999, the Company owned 15 trucks and 5 trailers. The Company
also owned two tractors, two fork lifts and six scissor lifts. This type of
equipment is used on almost all jobs, and any additional equipment or machinery
required for a job is rented on an as needed basis. The Company has very little
inventory. That which does exist primarily consists of left over or unused
material which can be used on the next project.
Item 3. Legal Proceedings
The Company is involved in a number of legal proceedings, none of which, in the
opinion of management, is material.
Item 4. Submission of Matters to a Vote of Security Holders
None
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Maters.
The Company's common stock is listed on the NASDAQ Small Cap Market and is
traded under the symbol GBSE. The stock is also listed for trading on the Boston
Stock Exchange.
The Company completed its initial public offering in January of 1996 and trading
commenced on January 12, 1996. The following table set forth the high and low
bid and cash prices of the Company's Common Stock for each calendar quarter in
1997 and 1996 commencing January 12, 1996. as reported by NASDAQ:
1998 Ask Bid
High Low High Low
First Quarter 2.125 1.125 1.9375 1.00
Second Quarter 2.625 1.125 2.0625 1.9375
Third Quarter 2.25 2.0625 1.9375 1.5625
Fourth Quarter 2.00 1.50 2.0625 1.4375
1997 Ask Bid
High Low High Low
First Quarter 1.875 1.1875 1.25 0.875
Second Quarter 1.15625 0.59375 1.00 0.3125
Third Quarter 1.5625 1.0625 1.34375 0.90625
Fourth Quarter 1.6875 1.5 1.5 1.25
As of March 15, 1999, there were approximately 800 holders of record of the
Company's common stock, according to the records provided by the transfer agent.
Item 6. Selected Financial Data.
The following table summarizes certain selected financial of the Company for
each of the years in the five year period ended December 31, 1998. The selected
financial data should be read in conjunction with (i) The Company's Consolidated
Financial Statements and Notes thereto as set forth in Item 14 below, and (ii)
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 7 below.
<TABLE>
<CAPTION>
1998 1997 1996 1995(1) 1994
<S> <C> <C> <C> <C> <C>
Net sales $54,496,848 $47,993,287 $47,438,930 $33,336,120 $21,010,296
Income (loss)
from continuing operation 465,707 584,900 546,383 1,592,835 74,101
Income (loss) per share
from continuing operation $0.12 $0.14 $0.14 $ 0.53 $0.02
Total Assets $13,132,346 $12,617,916 $12,733,026 $11,291,394 $4,516,816
Long-term obligations 408,402 210,232 563,254 945,057 100,492
Cash Dividends - - - - -
</TABLE>
(1) Prior to October 1, 1995, the Company was taxed as a subchapter S
corporation under the Internal Revenue Code of 1986. Income, Income, per share
and Total Assets reflect amounts that would have been accrued had the Company
taxed other than as a subchapter S corporation.
Item 7. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations.
Overview
<PAGE>
In 1997 the Company returned to its core business, commercial building
construction for national retail chains. In 1996 the Company had incurred
substantial losses in connection with its operation of the Bronco Bowl, a large
entertainment complex which the Company sold in 1996. See "Item 7. Business -
General." In 1998 the Company's net profit from operations was $465,707.
Results of Operations - 1998 Compared with 1997
Revenues from continuing operations between 1998 and 1997 increased
approximately 13.6% to $54,496,848 in 1998 compared to $47,993,287 in 1997. The
increase is principally attributable to expanding the Company's operations
beyond retail construction to small hotels.
Gross profits for 1998 increased to $3,282,871 in 1998 or approximately 6.0% of
revenues compared to $2,439,086 or 5.1% of revenue in 1997. The Company enjoyed
particularly strong gross margins in the fourth quarter from its construction on
several retail construction projects.
Operating income from continuing operations, however, decreased to $752,966 in
1998 from $1,070,089 in 1997. The decrease resulted from an increase in 1998 in
General and Administrative expenses principally because the Company wrote off
$842,758 of accounts receivable, of which $637,632 was written off in the fourth
quarter of 1998. In addition, the Company recognized $166,670 in 1998 in
litigation expense compared to $62,213 in 1997 related to collection of
aforesaid receivables.
The effect of these increases in General and Administrative Expense was to
reduce 1998 income before taxes to approximately $731,772 in 1998 compared to
$891,100 in 1997, and net income in 1998 to $465,707 compared to $584,900 in
1997.
Results of Operations - 1997 Compared with 1996
Revenues from continuing operations between 1997 and 1996 were essentially flat,
$47,993,287 in 1997 compared to $47,438,930 in 1996. In 1996 the Company added a
substantial number of new clients of which one did not have projects that
provided the Company with an adequate margin. Early in 1997, the Company stopped
bidding on this client's projects. Throughout 1997, new business development
replaced the revenues derived from this client but revenues did not grow in
1997.
Similarly, gross profits for 1997 and 1996 were essentially the same, $2,439,086
or 5.1% of revenue in 1997 compared to $2,490,249 or 5.2% of revenue in 1996.
While gross profits were unchanged compared to the previous year, gross profit
margins improved in the latter half of 1997 as the Company ceased work on the
projects undertaken for the client described above.
Operating income from continuing operations increased by approximately 17% to
$1,070,089 in 1997 compared to $915,833 in 1996. The increase resulted from the
reduction in General and Administrative expenses to $1,368,957 in 1997 from
$1,574,416 in 1996. General and Administrative Expenses were more in 1996 as the
Company dealt with its first year being public and administrative expenses
associated with the sale of the Bronco Bowl.
The increase in operating profits were partially offset by increased interest
expense in 1997 and approximately $52,000 in losses in temporary investments.
Interest expense increased due to interest on a sales tax obligation the Company
owes to the State of Texas.
The effect of these increases in other expenses was to reduce 1997 income before
taxes to approximately that of 1996, $891,100 in 1997 compared to $839,383 in
1996, and net income in 1997 to $584,900 compared to $546,383 in 1996.
Liquidity and Capital Resources
The Company finances its operations largely without debt. The debt it does incur
principally relates to the financing of vehicles and equipment. In 1998 the
Company did encumber its headquarters facility, borrowing approximately $300,000
there on but liquidating a sales tax obligation to the State of Texas. The note
requires monthly payments of $5,834 and matures April 30, 2003.
The Company moved to continue to increase its working capital in 1998,
increasing at December 31, 1998, its current ratio to 1.07 from 0.94 at December
31, 1996. The Company plans to continue to improve its operating capital
position through operations during 1998.
<PAGE>
Year 2000 Computer Issues
The Company has determined, after formal review, that it will not be required to
modify or replace significant portions of its software to avoid any disruptions
that arise because a number of computer programs use two digits rather than four
when computing dates. The Company has initiated formal communications with all
of its significant suppliers and large customers to determine the extent to
which the Company's systems are vulnerable to those third parties' failure to
remediate their own Year 2000 issues. However, the can be no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted and would not have and adverse effect on the Company's systems. The
total cost of the Year 2000 project is not expected to be significant.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
Item 8. Financial Statements and Supplementary Data.
The response to this item is submitted as a separate section of this Form 10-K.
See "Item 14. Exhibits, Financial Statements and Reports on Form 8-K."
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons;
Compliance With section 16(a) of the Exchange Act.
Executive Officers and Directors
The directors and executive officers of the Company, and their respective ages
and positions held with the Company, are as follows:
Name Age Position
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Danny Gibbs 42 President/Secretary Director
Tony Gibbs 38 Vice-President/Treasurer,
Director
Dennis T. Mitchell 49 Director
L.W. Reynolds 63 Director
Danny Gibbs has served as president, general manager and a director of the
Company since the Company's inception in 1984. Mr. Gibbs has acted as the
Company's Chief Financial Officer throughout the Company's existence. Mr. Gibbs
received a Bachelor of Arts degree in History with a minor in Architecture from
Texas Tech University.
Tony Gibbs has served as vice president and a director of the Company since the
Company's inception in 1984. From 1983 to 1984, Mr. Gibbs formed a construction
company which provided construction services to the residential industry and the
commercial industry. Mr. Gibbs received a Bachelor of Science degree in
Accounting with a minor in Architecture from Texas Tech University
Dennis T. Mitchell, a licensed professional architect, is president of AIG,
Inc., an architectural firm Mr. Mitchell formed in 1969 which is primarily
engaged in the design, documentation and execution of commercial construction.
AIG, Inc. provides architectural service to a variety of retail, industrial and
governmental entities, including Barnes & Noble, Lil Things, and Eckerds. Mr.
Mitchell is a member of several national and local architectural professional
organizations and a graduate of the University of Texas at Arlington.
L. W. Reynolds is president of Reynolds Financial and Management Services, Inc.,
a financial and management consulting firm that provides services to the real
estate, wholesale distribution, retail, environmental services, assisted living
and construction industries. Mr. Reynolds formed the firm in 1990. He is also
chairman of Elder Living Centers, Inc., a Company Mr. Reynolds formed in 1996
that develops and finances assisted living facilities in New Mexico and Texas.
Also in 1996, Mr. Reynolds formed Davis Covenant Corporation, a general
<PAGE>
contractor engaged in the development of apartments and assisted living
facilities and asbestos statement. Mr. Reynolds, a certified public accountant,
worked for Peat Marwick Mitchell and Company from 1959 to 1966 and the Maloof
Companies from 1966 through 1984, becoming an Executive Vice President and Chief
Financial Officer in 1980. From 1984 to 1986, he was President and Chief
Executive Officer of American Federal Savings and Loan Association and from 1986
through 1989 was Vice President of Market Development for Public Service Company
of New Mexico. Mr. Reynolds is a graduate of McMurry University and holds a
Masters of Business Administration from the University of Texas at Austin .
Danny Gibbs and Tony Gibbs are brothers.
Each director will hold office until the next Annual Meeting of Shareholders and
until such time as his successor is elected and qualified, subject to prior
removal by the shareholders of the Company in accordance with the Bylaws of the
Company. The officers of the Company serve at the discretion of the Board of
Directors of the Company.
Danny Gibbs and Tony Gibbs have committed to supporting for reelection the
existing outside directors at the Company's next annual meeting.
Committees of the Board of Directors
The Company's Board of Directors will establish an Audit Committee and a
Compensation Committee, each consisting of at least two directors, none of whom
will be an officer or employee of the Company. The duties of the Audit Committee
will be to recommend to the entire Board of Directors the selection of
independent certified public accountants to perform an audit of the financial
statements of the Company, to review the activities and report of the
independent certified public accountants, and to report the results of such
review to the entire Board of Directors. The Audit Committee will also monitor
the internal controls of the Company. The duties of the Compensation Committee
will be to provide a general review of the Company's compensation and benefit
plans to ensure that they meet corporate objectives and to administer or oversee
the Company's 1995 Incentive Stock Option Plan and other benefit plans. In
addition, the Compensation Committee will review the compensation of officers of
the Company and the recommendations of the Chief Executive Officer on (i)
compensation of all employees of the Company and (ii) adopting and changing
major Company compensation policies and practices. Except with respect to the
administration of the 1995 Incentive stock option plan, the Compensation
Committee will report its recommendations to the entire Board of Directors for
approval.
Item 11. Executive Compensation.
The following table sets forth certain information concerning the compensation
of the chief executive officer of the Company and the other executive officers
of the Company whose total annual salary and bonus exceeded $100,000, for the
fiscal years ended December 31, 1998, 1997, and 1996.
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Annual Compensation (1) All Other
Principal Position Fiscal Year Salary Bonus (2) Compensation
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Danny Gibbs 1998 $119,000
Chief Executive Officer 1997 133,000 -
1996 150,000 -
Tony Gibbs 1998 $104,000 - -
Vice President 1997 $123,000 - -
1996 150,000 -
- ------------------
</TABLE>
(1) The Company provides certain perquisites and personal benefits to its
executive officers, the aggregate amount of which does not exceed $50,000
or 10% of such officer's total annual salary and bonus.
(2) These amounts represent distributions to Messrs. Danny and Tony Gibbs in
connection with the Company's status as a subchapter S corporation pursuant
to the United States tax codes. They exclude amounts accrued in 1995 but
paid in 1996 as part of the Company's termination of it subchapter S
status. As of December 31, 1998, $397,740 remained to be paid.
<PAGE>
Executive Director Compensation
Upon the completion of this Offering the Company plans to pay $150,000 per year
to each of Messrs. Danny Gibbs and Tony Gibbs. Directors of the Company are
entitled to receive from the Company fees and reimbursement of expenses for
their services as directors. Under the Company's standard arrangement for
compensation of directors, outside are entitled to receive a fee for each Board
meeting attended of $500. In addition, directors will be reimbursed for their
ordinary and necessary expenses incurred in attending meetings of the Board of
Directors or a committee thereof. Directors of the Company, whether or not
employees of the Company, will also be entitled to receive options to acquire
shares of Common Stock under the Company's Stock Option Plans.
In connection with certain actions taken by the Company, Messrs. Danny R. Gibbs
and Tony G. Gibbs relinquished a total of 1,000,000 shares of Common Stock to
the Company and acquired the right to acquire for $0.10 per share 2,000,000
shares of stock if either Danny R. Gibbs or Tony G. Gibbs are terminated without
their consent or if 20% of the Company is acquired by those other than Danny R.
Gibbs or Tony G. Gibbs.
Benefit Plans
1995 Incentive Stock Option Plan
The Company's 1995 Incentive Stock Option Plan was approved by the Board of
Directors and shareholders of the Company on August 15, 1995 to provide for the
grant of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986 as amended to officers and employees of the
Company and subsidiaries of the Company. A total of 200,000 shares of Common
Stock has been authorized and reserved for issuance under the 1995 Incentive
Stock Option Plan, subject to adjustment to reflect changes in the Company's
capitalization in the case of a stock split, stock dividend or similar event.
The 1995 Incentive Stock Option Plan is administered by the Compensation
Committee, which consists of the Company's two "Outside Directors." Outside
Directors shall mean only those directors of the Company or a subsidiary of the
Company who are not regular salaried employees of either the Company or a
subsidiary as of the date the option is granted. The Compensation Committee has
the sole authority to interpret the 1995 Incentive Stock Option Plan, to
determine the persons to whom options will be granted, to determine the basis
upon which the options will be granted, and to determine the exercise price,
duration and other terms of options to be granted under the 1995 Incentive Stock
Option Plan; provided that, (i) the exercise price of each option granted under
the 1995 Incentive Stock Option Plan may not be less than the fair market value
of the Common Stock on the day of the grant of the option, (ii) the exercise
price must be paid in cash and or stock upon exercise of the option, (iii) no
option may be exercisable for more than 10 years after the date of grant, and
(iv) no option is transferable other than by will or the laws of descent and
distribution. No option is exercisable after an optionee ceases to be employed
by the Company or a subsidiary of the Company, subject to the right of the
Compensation Committee to extend the exercise period for not more than 90 days
following the date of termination of an optionee's employment. An optionee who
was a director or advisor may exercise his option at any time within 90 days
after such optionee's status as a director or advisor terminates to the extent
he was entitled to exercise such option at the date of termination of his
status. If an optionee's employment is terminated by reason of disability, the
Compensation Committee has the authority to extend the exercise period for not
more than one year following the date of termination of the optionee's
employment or service as an advisor or director. If an optionee dies and shall
hold options not fully exercised, such options may be exercised in whole or in
part within one year of the optionee's death by the executors or administrators
of the optionee's estate or by the optionee's heirs. The vesting period, if any,
specified for each option will be accelerated upon the occurrence of a change of
control or threatened change of control of the Company.
Outside Directors Stock Option Plan
The Outside Directors Stock Option Plan was approved by the Board of Directors
and shareholders of the Company on August 15, 1995. A total of 50,000 shares of
Common Stock has been authorized and reserved for issuance under the Outside
Directors Stock Option Plan, subject to adjustment to reflect changes in the
Company's capitalization in the case of a stock split, stock dividend or similar
event. The Outside Directors Stock Option Plan is administered by the Stock
Option Committee which consists of Danny Gibbs and Tony Gibbs. The Stock Option
Committee has the sole authority to interpret the Outside Directors Stock Option
Plan, to determine the persons to whom options will be granted, to determine the
basis upon which the options will be granted, and to determine the exercise
price, duration and other terms of options to be granted under the Outside
Directors Stock Option Plan; provided that, (i) the exercise price of each
option granted under the Plan may not be less than the fair market value of the
Common Stock on the day of the grant of the option, (ii) the exercise price must
be paid in cash and or stock
<PAGE>
upon exercise of the option, (iii) no option may be exercisable for more than 10
years after the date of grant, and (iv) no option is transferable other than by
will or the laws of descent and distribution. If an optionee's status as an
Outside Director is terminated for any reason other than death, the optionee may
exercise his option at any time within 90 days after such termination to the
extent it was then exercisable. If an optionee dies while an Outside Director
and shall not have fully exercised options granted under the Outside Directors
Stock Option Plan, such options may be exercised in whole or in part within six
months of the optionee's death by the executors or administrators of the
optionee's estate or by the optionee's heirs. The vesting period, if any,
specified for each option will be accelerated upon the occurrence of a change of
control or threatened change of control of the Company.
Options under the Outside Directors Stock Option Plan are granted only to
Outside Directors selected by the Committee. Outside Directors shall mean only
those directors of the Company or a subsidiary of the Company who are not
regular salaried employees of either the Company or a subsidiary as of the date
the option is granted. As of the date of this Prospectus, none of the Common
Stock reserved for issuance in either the Outside Directors Stock Plan or the
1995 Incentive Stock Option Plan had been issued.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of March 15, 1999 by (i) each
person known by the Company to be a beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, and (iii)
all directors and executive officers of the Company as a group. Unless otherwise
noted, each beneficial owner named below has sole investment and voting power
with respect to the Common Stock shown below as beneficially owned by him.
Shares Owned
Name and Address of Number of Percent
Beneficial Owner Shares Owned Owned
- -----------------------------------------------------------------------------
Danny Gibbs 1,000,000 25.0%
Tony Gibbs 1,000,000 25.0%
All directors and officers
as a group (6 persons) 2,000,000 50.0%
-----------------
(1) The address for Danny Gibbs and Tony Gibbs is 1855 Wall Street, Garland, TX
75041.
(2) In connection with certain actions taken by the Company, Messrs. Danny R.
Gibbs and Tony G. Gibbs relinquished a total of 1,000,000 shares of Common
Stock to the Company and acquired the right to acquire for $0.10 per share
2,000,000 shares of stock if either Danny R. Gibbs or Tony G. Gibbs are
terminated without their consent if 20% of the Company is acquired by those
other than Danny R. Gibbs or Tony G. Gibbs.
Item 13. Certain Relationships And Related Transactions
As part of the termination of the Company's election to be taxed as a Subchapter
S Corporation, the Company has accrued $749,255 to be distributed to Danny Gibbs
and Tony Gibbs for payment of income taxes owed for the Company's operations. At
December 31, 1998, $397,740 remained to be paid.
In 1996 Messrs. Danny and Tony Gibbs formed a corporation that engages in
electrical contracting services. The Company paid this entity $2,068,365 and
$75,772 during the years ended December 31, 1998 and 1997, respectively. At
December 31, 1998, and 1997, the Company owed this related party $164,342 and
$53,415, respectively.
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(a) Financial Statements
The following financial statements are included herewith:
Page
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-8
(b) Reports on Form 8-K
None
(c) Exhibits
3.1 Restated Articles of Incorporation, as amended (incorporated
by reference from a similarly numbered exhibit filed with the
Company's Registration Statement No. 33-97308-D)
3.2 Bylaws (incorporated by reference from a similarly numbered
exhibit filed with the Company's Registration Statement No.
33- 97308-D)
4.1 Form of Warrant Agreement Covering Redeemable Common Stock
Purchase Warrants (incorporated by reference from a similarly
numbered exhibit filed with the Company's Registration
Statement No. 33-97308-D)
10.1 Revised form of Representative's Warrant and Registration
Rights Agreement (incorporated by reference from a similarly
numbered exhibit filed with the Company's Registration
Statement No. 33-97308-D)
10.2 Copy of 1995 Incentive Stock Option Plan (incorporated by
reference from a similarly numbered exhibit filed with the
Company's Registration Statement No. 33-97308-D)
10.3 Copy of Outside Director Stock Option Plan (incorporated by
reference from a similarly numbered exhibit filed with the
Company's Registration Statement No. 33-97308-D)
10.4 Copy of Warrant Agreement between the Company and Can Am
Capital (incorporated by reference from a similarly numbered
exhibit filed with the Company's Registration Statement No.
33-97308-D)
10.5 Copy of Note and Security Agreement between the Company and
Bronco Bowl Holding, Inc. (incorporated by reference from a
similarly numbered exhibit filed with the Company's
Registration Statement No. 33-97308-D)
10.6 diversified Employee Leasing, Inc. Client Service Agreement
(incorporated by reference from a similarly numbered exhibit
filed with the Company's Registration Statement No.
33-97308-D)
23.1 Consent of Killman, Murrell & Company, P.C. (filed herewith)
24.1 Power of Attorney
27.1 Financial Data Schedule
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
TABLE OF CONTENTS
Page
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-3
Consolidated Statements of Operations for Each of the Years
in the Three Year Period Ended December 31, 1998 F-5
Consolidated Statements of Stockholders' Equity for Each of the
Years in the Three Year Period Ended December 31, 1998 F-7
Consolidated Statements of Cash Flows for Each of the Years in
the Three Year Period Ended December 31, 1998 F-8
Notes to Consolidated Financial Statements F-9
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Gibbs Construction, Inc. and Subsidiary
Garland, Texas
We have audited the accompanying consolidated balance sheets of Gibbs
Construction, Inc. and Subsidiary as of December 31, 1998 and 1997, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three year period ended December 31, 1998.
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 audits 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 provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Gibbs Construction,
Inc. and Subsidiary as of December 31, 1998 and 1997, and the results of their
operations and cash flows for each of the years in the three year period ended
December 31, 1998, in conformity with generally accepted accounting principles.
KILLMAN, MURRELL & COMPANY, P.C.
Dallas, Texas
February 26, 1999
F-2
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,066,665 $ 438,445
Temporary Investments - Note 9 99,768 142,533
Accounts Receivable
Trade - net of allowance for doubtful
accounts of $725,000 in 1998 7,313,519 7,662,445
Costs and Estimated Earnings in Excess of
Billings on Uncompleted Contracts - Note 2 2,134,170 1,834,063
Prepaid Expenses 107,549 82,309
Deferred Tax Asset - Note 12 350,000 350,000
------------ ------------
TOTAL CURRENT ASSETS 11,071,671 10,509,795
----------- -----------
LAND, BUILDINGS AND EQUIPMENT - Note 3 1,341,939 1,105,556
Less Accumulated Depreciation (657,394) (542,015)
------------ ------------
NET LAND, BUILDINGS AND EQUIPMENT 684,545 563,541
------------ ------------
OTHER ASSETS
Receivables From Affiliates and Employees 202,290 118,040
Deferred Tax Asset - Note 12 1,173,840 1,426,540
------------ ------------
TOTAL OTHER ASSETS 1,376,130 1,544,580
------------ ------------
TOTAL ASSETS $13,132,346 $12,617,916
=========== ===========
</TABLE>
The accompanying notes are an
integral part of these consolidated financial statements.
(Continued)
F-3
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Continued)
DECEMBER 31, 1998 AND 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES
Note Payable - Note 4 $ 150,000 $ 150,000
Current Installments of Long-Term Debt - Note 5 193,260 380,769
Accounts Payable 7,975,704 7,482,475
Accrued Expenses - Note 11 794,765 685,722
Billings in Excess of Costs and Estimated Earnings on
Uncompleted Contracts - Note 2 832,447 1,372,152
Payable to Stockholders 397,740 422,245
------------ ------------
TOTAL CURRENT LIABILITIES 10,343,916 10,493,363
LONG-TERM DEBT - Excluding
Current Installments - Note 5 408,402 210,232
------------ ------------
TOTAL LIABILITIES 10,752,318 10,703,595
----------- -----------
CONTINGENCIES - Notes 6, 7, 8 and 10 - -
STOCKHOLDERS' EQUITY - Note 15
Common Stock of $.01 Par Value. Authorized
15,000,000 Shares; Issued and Outstanding
4,000,000 Shares 40,000 40,000
Additional Paid-In-Capital 4,907,272 4,907,272
Retained Deficit (2,567,244) (3,032,951)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,380,028 1,914,321
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $13,132,346 $12,617,916
=========== ===========
</TABLE>
The accompanying notes are an
integral part of these consolidated financial statements.
F-4
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------------- ---------------- ----------------
<S> <C> <C> <C>
CONSTRUCTION REVENUE $54,496,848 $47,993,287 $47,438,930
COST OF CONSTRUCTION 51,213,977 45,554,241 44,948,681
----------- ----------- -----------
GROSS PROFIT 3,282,871 2,439,046 2,490,249
------------ ------------ ------------
GENERAL AND ADMINISTRATIVE
EXPENSES 1,687,147 1,288,997 1,338,194
------------ ------------ ------------
BAD DEBT EXPENSE 842,758 79.960 236,222
------------ ------------- ------------
INCOME BEFORE OTHER
INCOME (EXPENSE) 752,966 1,070,089 915,833
OTHER INCOME (EXPENSE)
Gain (Loss) on Disposal of
Equipment 5,000 9,140 (1,623)
(Loss) on Temporary
Investments Transactions (39,782) (62,157) (22,906)
Interest Income 157,795 23,566 22,215
Interest Expense (144,207) (155,347) (86,628)
Other - 5,809 12,492
--------------- ------------- -------------
INCOME BEFORE INCOME
TAXES 731,772 891,100 839,383
INCOME TAX (EXPENSE) - Note 12
Current (13,365) - -
Deferred (252,700) (306,200) (293,000)
------------ ------------ -------------
TOTAL INCOME TAX (EXPENSE) (266,065) (306,200) (293,000)
------------ ------------ -------------
INCOME FROM CONTINUING
OPERATIONS 465,707 584,900 546,383
DISCONTINUED OPERATIONS
(Loss) From Discontinued Operations - - (1,186,114)
(Loss) on Disposal of Subsidiary - - (3,483,103)
--------------- --------------- ------------
NET INCOME (LOSS) $ 465,707 $ 584,900 $ (4,122,834)
=========== ============ ============
</TABLE>
(Continued)
F-5
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- ---------------- ---------------
<S> <C> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE
Continuing Operations $ 0.12 $ 0.14 $ 0.14
Discontinued Operations - - (1.21)
------------ ------------ -----------
$ 0.12 $ 0.14 $ (1.07)
========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 4,000,000 4,000,000 3,846,154
========= ========= =========
</TABLE>
The accompanying notes are an
integral part of these consolidated financial statements.
F-6
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Common Stock
-----------------------
Number Paid-In Retained
of Shares Amount Capital Deficit Total
--------- ------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 3,000,000 $30,000 $ - $2,724,319 $2,754,319
Sale of Common Shares
January 1996 1,000,000 10,000 3,712,500 - 3,722,500
Registration Costs, net of
applicable tax effect - - (358,948) - (358,948)
"S" Corporation Status Termination - - 1,553,720 (2,219,336) (665,616)
1996 Net Loss - - - (4,122,834) (4,122,834)
------------- ---------- -------------- ------------ -----------
BALANCE, DECEMBER 31, 1996 4,000,000 40,000 4,907,272 (3,617,851) 1,329,421
1997 Net Income - - - 584,900 584,900
------------- ---------- -------------- ------------ -----------
BALANCE, DECEMBER 31, 1997 4,000,000 40,000 4,907,272 (3,032,951) 1,914,321
1997 Net Income - - - 465,707 465,707
------------- ---------- -------------- ------------ -----------
BALANCE, DECEMBER 31, 1998 4,000,000 $40,000 $4,907,272 $(2,567,244) $2,380,028
========= ======= ========== =========== ==========
</TABLE>
The accompanying notes are an
integral part of these consolidated financial statements.
F-7
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- ---------------- ---------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING
ACTIVITIES
Net Income (Loss) $ 465,707 $584,900 $(4,122,834)
Adjustments to Reconcile Net Income
(Loss) to Net Cash From Operating
Activities
Loss on Sale of Discontinued
Operations - - 3,483,103
Depreciation 163,420 159,400 520,756
Loss (Gain) on Disposal
of Equipment (5,000) (9,140) 1,623
Loss on Temporary
Investments Transactions 39,782 62,157 22,906
Deferred Taxes 252,700 306,200 (323,000)
Increase in Allowance for Doubtful
Accounts 725,000 - -
Changes in Current Assets and Liabilities
(Increase) Decrease in Accounts
Receivable (376,074) 933,837 (5,156,893)
(Increase) in Inventories - - (8,259)
(Increase) Decrease in Billings Related to
Cost and Earnings on Uncompleted
Contracts (839,812) (627,394) 45,334
(Increase) in Prepaid Expenses (25,240) (62,933) (72,909)
Increase (Decrease) in Accounts Payable 493,229 (565,465) 2,787,248
Increase (Decrease) in Accrued Expenses 109,043 (34,027) (246,900)
Purchase of Temporary Investments (2,514,475) (302,327) (20,177)
Proceeds From Sale of Temporary Investments 2,517,458 99,140 19,951
---------- --------- -----------
NET CASH FLOW PROVIDED
(USED) BY OPERATING
ACTIVITIES 1,005,738 544,348 (3,070,051)
---------- -------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Equipment (288,348) (48,101) (219,425)
Bronco Bowl Renovations - - (1,983,864)
Proceeds from Sale of Equipment 8,924 30,936 3,500
(Increase) Decrease in Other Assets (84,250) 117,203 (43,461)
Cash Proceeds from Sale of Discontinued
Operations - - 712,456
-------------- ----------- -----------
NET CASH FLOW (USED) PROVIDED
BY INVESTING ACTIVITIES (363,674) 100,038 (1,530,794)
----------- -------- ----------
</TABLE>
(Continued)
The accompanying notes are an
integral part of these consolidated financial statements.
F-8
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- ---------------- ---------------
<S> <C> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Deferred Registration Costs $ - $ - $ (107,358)
Proceeds from Note Borrowings 534,134 212,277 1,444,334
Repayments of Note Borrowings (523,473) (558,973) (284,827)
Repayments of Capital Lease Obligations - - (3,341)
Sale of Common Stock - - 3,722,500
Changes in Stockholder Receivables (24,505) 16,190 (110,081)
----------- --------- -----------
NET CASH FLOW PROVIDED (USED)
BY FINANCING ACTIVITIES (13,844) (330,506) 4,661,227
----------- -------- -----------
NET INCREASE CASH 628,220 313,880 60,382
CASH AT THE BEGINNING OF THE PERIOD 438,445 124,565 64,183
----------- -------- ------------
CASH AT THE END OF THE PERIOD $1,066,665 $438,445 $ 124,565
========== ======== ===========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash Paid During the Year For:
Interest Expense $ 144,207 $155,347 $ 63,425
=========== ======== ===========
Income Taxes $ 13,365 $ - $ 50,057
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Termination of "S" Corporation Status
Increase in Payable to Stockholders and
Affiliates $ - $ - $ 665,616
Transfer of Retained Earnings to
Paid-in-Capital - - 1,553,720
Reduction in Retained Earnings - - (2,219,336)
Reduction in Deferred Registration Costs - - 358,948
Registration Costs Offset against Paid-in-Capital - - (358,948)
Increase in Capital Lease Obligations - - 634,625
Assets Purchased through Capital Lease - - (634,625)
-------------- ----------- -----------
$ - $ - $ -
============== =========== ==============
</TABLE>
The accompanying notes are an
integral part of these consolidated financial statements.
F-9
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Gibbs Construction, Inc. (the "Company"), is a full service, national
commercial construction company located in Garland, Texas. The Company
operates throughout the United States and Puerto Rico, providing
construction services principally to national retail store chains.
Subsidiary and Principles of Consolidation
The consolidated financial statements include the accounts of Gibbs
Construction, Inc. and its wholly owned inactive subsidiary, Bronco Bowl
Holding, Inc. All significant intercompany balances and transactions have
been eliminated in consolidation.
Temporary Investments
The Company has entered into numerous account agreements with stockbrokers
and participates in an active trading program in equity securities listed on
nationally recognized stock exchanges. The fair value for temporary
investment securities are based on quoted market prices.
Revenue Recognition
Revenues from construction contracts are recognized on the
percentage-of-completion method, measured by the percentage of total direct
job costs incurred to date to estimated total direct job costs for each
contract. This method is used because management considers expended direct
job costs to be the best available measure of progress on contracts.
Contract costs include all direct material, labor and sub-contract costs and
those indirect costs related to contract performance, such as indirect
labor, supplies, tools and repair costs. General and administrative costs
are charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions and estimated
profitability, including those arising from contract penalty provisions and
final contract settlements, may result in revisions to costs and income and
are recognized in the period in which the revisions are determined.
The asset "costs and estimated earnings in excess of billings on uncompleted
contracts," represents revenues recognized in excess of amounts billed. The
liability "billings in excess of costs and estimated earnings on uncompleted
contracts," represents billings in excess of revenues recognized.
Receivables and payables related to construction contracts are generally
expected to be paid in less than one year.
F-10
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable
Accounts receivable consists of amounts due on open customer accounts,
contract balances billed, retainage, and sundry accounts receivable. Prior
to 1998, the Company had not established an allowance for doubtful accounts
and did not use the reserve method for recognizing bad debts. Bad debts were
treated as direct write-offs in the period management determined that
collection was not probable. Bad debts as determined under this method did
not vary significantly from the reserve method. In 1998, the Company
experienced collection problems resulting in the adoption of the reserve
method to account for uncollectible accounts receivable.
Buildings and Equipment
Depreciation of buildings and equipment is provided principally on the
straight-line method using estimated useful lives ranging from five to
twenty-five years.
Major renewals and betterments are added to the property accounts while the
cost of repairs and maintenance is charged to operating expenses in the
period incurred. Cost of assets retired or otherwise disposed of and the
applicable accumulated depreciation are removed from the accounts, and the
resultant gain or loss, if any, is reflected in operations.
Federal Income Taxes
From May 31, 1992 to December 31, 1995, the Company elected to be taxed as
an "S" corporation under the Internal Revenue Code; therefore, for that
period the Company's stockholders were required to include in their personal
tax returns the income and expenses of the Company and pay any applicable
federal income taxes. As of May 31, 1992, the Company reflected a retained
earnings balance of $212,975, which was subjected to federal income taxes
when earned. The Company returned to the "C" Corporation status on December
31, 1995.
The Company accounts for income taxes, pursuant to the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109), which requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Pension and Employee Benefit Plans
The Company has established a flexible benefits plan for its employees. The
purpose of this plan is to provide eligible employees a choice between cash
and specified welfare benefits.
The Company has established a deferred contribution profit sharing plan
(401(k) Plan), covering substantially all employees. This plan allows both
the Company and eligible employees to contribute to the plan.
(Continued)
F-11
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Pension and Employee Benefit Plans (Continued)
No significant contributions were made to the plans by the Company in 1998,
1997, or 1996.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash Flows
The Company considers cash to be cash equivalents for purposes of preparing
the statements of cash flows.
Basic Earnings Per Share
Basic earnings (loss) per share was computed using the weighted average
outstanding common shares for the applicable periods. The diluted earnings
(loss) per share is the same as basic since inclusion of the stock warrants
in the computation would have been anti-dilutive.
Accounting for Long-Lived Assets
The Company has adopted Statement of Financial Accounting Standards No. 121,
"Accounting For The Impairment Of Long-Lived Assets And For Long-Lived
Assets To Be Disposed Of". The Company reviews long-lived assets, certain
identifiable assets and any goodwill related to those assets for impairment
whenever circumstances and situations change such that there is an
indication that the carrying amounts may not be recoverable. At December 31,
1998, the Company believes that there has been no impairment of its
long-lived assets.
Impact of Year 2000 (Unaudited)
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business
activities.
Based on a recent assessment, the Company determined that it will not be
required to modify or replace significant portions of its software so that
its computer systems will function properly with respect to dates in the
year 2000 and thereafter. The Company believes that the Year 2000 Issue will
not pose significant operational problems for its computer systems.
(Continued)
F-12
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impact of Year 2000 (Unaudited)
The Company has initiated formal communications with all of its significant
suppliers and large customers to determine the extent to which the Company's
systems are vulnerable to those third parties' failure to remediate their
own Year 2000 Issues. However, there can be no guarantee that the systems of
other companies on which the Company's systems rely will be timely converted
and would not have an adverse effect on the Company's systems. The total
cost of the Year 2000 project is not expected to be significant.
NOTE 2: COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Excess costs and billings are as follows:
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
Costs Incurred on Uncompleted Contracts $35,513,827 $26,167,883
Estimated Earnings 3,488,583 2,245,274
------------ ------------
39,002,410 28,413,157
Less Billings to Date 37,700,687 27,951,246
----------- -----------
$ 1,301,723 $ 461,911
=========== ============
</TABLE>
The above amounts are included in the accompanying balance sheets as
follows:
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
Costs and Estimated Earnings in Excess of
Billings on Uncompleted Contracts $ 2,134,170 $1,834,063
Billings in Excess of Costs and Estimated
Earnings on Uncompleted Contracts (832,447) (1,372,152)
------------ ----------
$ 1,301,723 $ 461,911
=========== ==========
</TABLE>
F-13
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 3: LAND, BUILDINGS AND EQUIPMENT
Land, buildings and equipment are as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Land $ 48,255 $ 48,255
Buildings and Improvements 227,214 227,214
Vehicles and Trailers 603,857 503,499
Construction Equipment 292,576 213,489
Office Equipment and Furniture 170,037 113,099
------------ ---------
1,341,939 1,105,556
Less Accumulated Depreciation (657,394) (542,015)
------------ ---------
NET LAND, BUILDINGS AND
EQUIPMENT $ 684,545 $ 563,541
============ =========
</TABLE>
NOTE 4: NOTES PAYABLE
A summary of notes payable follows:
<TABLE>
<CAPTION>
1998 1997
------------ --------------
<S> <C> <C>
10% note payable to an individual, unsecured,
renewed annually on January 17 $150,000 $150,000
======== ========
</TABLE>
NOTE 5: LONG-TERM DEBT
A summary of long-term debt follows:
<TABLE>
<CAPTION>
1998 1997
------------- --------------
<S> <C> <C>
4.9%note payable to a credit corporation, payable in
monthly installments of $546 including interest,
due June 1, 1999, secured by equipment $2,687 $8,942
9.5%note payable to a credit corporation, payable in
monthly installments of $653 including interest,
due August 4, 2001, secured by vehicle 17,896 23,265
9.65% note payable to a bank, payable in monthly
installments of $807 including interest, due
July 8, 1999, secured by vehicle 5,472 14,164
</TABLE>
(Continued)
F-14
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 5: LONG-TERM DEBT (Continued)
<TABLE>
<CAPTION>
1998 1997
------------- --------------
<S> <C> <C>
9.9% note payable to a credit corporation, payable
in installments of $469 including interest, due
January 2, 2001, secured by vehicle 10,796 14,712
10.0% note payable to a credit corporation, payable
in monthly installments of $533 including
interest, due August 30, 1999, secured by
equipment 5,140 10,817
9.5%note payable to a credit corporation, payable in
monthly installments of $628 including interest,
due August 4, 1999, secured by vehicle $21,696 $ 26,898
9.5%note payable to a credit corporation, payable in
monthly installments of $339 including interest,
due April 16, 2002, secured by vehicle 11,594 14,191
7.25% to 8.75% notes payable to a bank, payable in
installments of $2,618 including interest, due
April 23, 1998, secured by vehicles and
equipment - 5,195
Prime plus 1% (10%) note payable to a bank, payable
in monthly installments of $1,300 plus interest,
due June 25, 1998, secured by real estate - 102,696
9.5% note payable to a credit corporation, payable
in monthly installments of $339 including
interest, due April 16, 2002, secured by vehicle 11,570 14,162
9.5% note payable to a credit corporation, payable
in monthly installments of $633 including
interest, due June 26, 2000, secured by vehicle 10,857 16,485
9.5% note payable to a credit corporation, payable
in monthly installments of $648 including
interest, due October 20, 2000, secured by
vehicle 12,708 18,453
9.55% note payable to a bank, payable in monthly
installments of $428 including interest, due
August 25, 1999, secured by vehicle 3,301 8,236
</TABLE>
(Continued)
F-15
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 5: LONG-TERM DEBT (Continued)
<TABLE>
<CAPTION>
1998 1997
------------- ------------
<S> <C> <C>
9.5% note payable to a credit corporation, payable
in monthly installments of $655 including
interest, due January 15, 1999, secured by
vehicle $ 766 $ 9,318
9.95% note payable to a credit corporation, payable
in monthly installments of $643 including
interest, due December 1, 2000, secured by
vehicle 12,883 18,981
12% note payable to the Texas State Treasurer,
payable in monthly installments of $25,000
including interest, due December 24, 1998 - 276,996
10.0% note payable to a credit corporation, payable
in monthly installments of $1,010 including
interest, due July 15, 1998, secured by
equipment - 3,451
10.0% note payable to a credit corporation, payable
in monthly installments of $762 including
interest, due September 1, 1998, secured by
equipment - 4,039
9.5%note payable to a credit corporation, payable in
monthly installments of $1,676 including
interest, due September 17, 2002, secured by
equipment 63,241 -
9.5%note payable to a credit corporation, payable in
monthly installments of $1,212 including
interest, due June 25, 2002, secured by
equipment 34,809 -
9.75% note payable to a bank, payable in monthly
installments of $5,834 plus interest, due April
30, 2003, secured by deed of trust 303,328 -
10.75% note payable to a credit corporation, payable
in monthly installments of $1,022 including
interest, due July 8, 2001, secured by vehicle 27,556 -
</TABLE>
(Continued)
F-16
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 5: LONG-TERM DEBT (Continued)
<TABLE>
<CAPTION>
1998 1997
------------- ------------
<S> <C> <C>
11.9% note payable to a credit corporation, payable
in monthly installments of $642 including interest,
due October 1, 2001, secured by vehicle 17,983 -
12.75% note payable to a credit corporation, payable
in monthly installments of $964 including interest,
due November 20, 2001, secured by vehicle 27,379 -
--------- -----------
601,662 591,001
Less Current Installments 193,260 380,769
-------- --------
$408,402 $210,232
======== ========
</TABLE>
Aggregate maturities of long-term debt for the five years ending December
31, 2003, are as follows:
1999 $193,260
2000 157,267
2001 134,764
2002 93,075
2003 23,296
---------
$601,662
NOTE 6: LEASE OBLIGATIONS
The Company leases equipment under operating leases that expire over the
next three years. The following is a schedule by year of future minimum
rental payments required under these operating leases as of December 31,
1998:
1999 $15,871
2000 11,865
2001 574
--------
$28,310
For the years ended December 31, 1998, 1997, and 1996, the lease payments
aggregated $17,618, $14,984, and $13,326, respectively.
F-17
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7: MAJOR CUSTOMERS AND RISK CONCENTRATION
In 1998, the Company derived approximately 58% of its revenue from five (5)
customers, In 1997, the Company derived approximately 59% of its revenue
from six (6) customers, and in 1996, the Company derived approximately 63%
of its revenue from five (5) customers.
The following customers exceeded 10% of total revenues for their respective
years:
1998 1997 1996
---------- ---------- ----------
Just for Feet 21.9% 14.8% -
Office Max 12.1% 14.6% 22.5%
Oshman's - 12.1% 13.6%
Eckerds - - 11.4%
The Company grants credit, generally without collateral, to its customers,
which are located primarily within the forty-eight contiguous United States.
Management believes that it's contract acceptance, billing and collection
policies are adequate to minimize potential credit risks.
The Company's concentration of credit risk related to receivables from
significant customers is reduced by the Company's practice of filing
statutory liens on projects where collection problems are anticipated. The
liens serve as collateral for contract receivables.
At December 31, 1998, the Company had deposits aggregating $1,511,455 with a
bank. Such deposits exceed the Federal Deposit Insurance Corporation's
insurance coverage.
The carrying amounts of accounts receivable, accounts payable, notes
payable, and long term debt approximate their fair values.
NOTE 8: CONTINGENCIES
The Company has entered into guarantee arrangements on contracts in the
ordinary course of business. The guarantee period is generally one year.
Cost of repairs on guarantee arrangements cannot be reasonably estimated.
Warranty costs incurred for the years ended December 31, 1998, 1997, and
1996 were $5,317, $31,314, and $14,343, respectively.
The Company is a defendant in various legal proceedings arising in the
ordinary course of business. The Company intends to vigorously defend these
actions which it considers groundless. While it is not possible to forecast
the outcome of such litigation, it is the opinion of management that the
disposition of such lawsuits will not have a material adverse effect on the
Company's financial position or interfere with its operations.
F-18
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 9: TEMPORARY INVESTMENTS
The Company participates in trading publicly traded equity securities. The
temporary investment securities were as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Balance Sheet Date Cost Gains Losses Value
---------------------------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
December 31, 1996 $ 21,216 $ - $19,713 $ 1,503
December 31, 1997 $214,322 $1,415 $73,204 $142,533
December 31, 1998 $118,318 $ - $18,550 $ 99,768
</TABLE>
The gross unrealized gains and losses, set forth above, have been included
in the applicable statement of operations.
NOTE 10: DISCONTINUED OPERATIONS
In July 1996, Gibbs Construction, Inc. sold substantially all of the assets
of its subsidiary, Bronco Bowl Holding, Inc. to a third party resulting in a
loss on sale of discontinued operations of $5,277,103 before income tax
benefit of $1,794,000. The sale included assumptions by the buyer of
$1,350,000 of debt and $1,300,000 of liability relating to capital leases.
The major stockholders and the Company are the ultimate guarantors on the
liability related to the capital leases. Loss from discontinued operations
aggregated $1,802,114 before income tax benefit of $616,000. Revenues
related to discontinued operations were $1,873,916 for the year ended
December 31, 1996. There was no revenue related to discontinued operations
in 1995.
F-19
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 11: ACCRUED EXPENSES
Accrued Expenses were comprised of the following:
1998 1997
------------ ----------
Sales Tax $679,794 $609,675
Salaries 74,041 33,451
State Taxes 38,000 40,000
Other 2,930 2,596
--------- ---------
$794,765 $685,722
======== ========
NOTE 12: INCOME TAXES
Total income tax benefit (expense) is less than the amount computed by
multiplying earnings before income taxes by the statutory Federal income tax
rate. The reason for these differences and the related tax effects are:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- -------
<S> <C> <C> <C>
Tax (Expense) at Statutory Rates (34%) $(248,802) $(302,974) $(285,390)
Differences Resulting From Nondeductible
Expenses and Other (17,263) (3,226) (7,610)
---------- ---------- ----------
TOTAL INCOME TAX (EXPENSE) $(266,065) $(306,200) $(293,000)
========= ========= =========
</TABLE>
The Company's total deferred tax assets, deferred tax liabilities, and
deferred tax asset valuation allowances at December 31, 1998 and 1997, are
as follows:
1998 1997
------------- --------------
Total Deferred Tax Assets $1,561,084 $1,820,003
Less Valuation Allowance - -
------------- --------------
1,561,084 1,820,003
Total Deferred Tax Liabilities (37,244) (43,463)
------------ --------------
Net Deferred Tax Asset $1,523,840 $1,776,540
========== ===========
The deferred tax assets have been recorded based on a net operating loss
carryforward from sale of discontinued operations and loss from discontinued
operations. Management does not deem a valuation necessary due to expected
profits in future years.
(Continued)
F-20
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 12: INCOME TAXES (CONTINUED)
The types of temporary differences that give rise to significant portions of
deferred income taxes and the tax effects of those temporary differences
included in the deferred income taxes balances are presented below:
<TABLE>
<CAPTION>
1998 1997
----------------------------- -----------------------------
Current Noncurrent Current Noncurrent
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts $ - $ 246,500 $ - $ -
Loss on disposal of discontinued
operations and loss from
discontinued operations 350,000 899,612 350,000 1,427,290
Excess of tax basis over financial
basis of interest accrued but not
paid to stockholders - 53,118 - 35,412
Excess of tax basis over financial
basis of security loss reserve - 6,886 - 6,886
Excess of financial basis over tax
basis of property and equipment - (34,082) - (40,636)
Other - 1,806 - (2,412)
----------- ------------ ----------- -----------
Net deferred tax asset $350,000 $1,173,840 $350,000 $1,426,540
======== ========== ======== ==========
</TABLE>
For financial accounting and federal tax return purposes, the Company has
approximately $3,885,000 and $3,584,000, respectively, of net operating loss
carryforwards as of December 31, 1998, which expire beginning 2011.
NOTE 13: RELATED PARTY TRANSACTIONS
The Company does business with a subcontractor that is related through
common ownership of the stockholders of the Company and a key employee of
the Company.
Payments made to this related party for subcontractor services were
$2,068,365 and $75,772 during the years ended December 31, 1998 and 1997.
Amounts due the related party were $164,342 and $53,415 for December 31,
1998 and 1997, respectively.
F-21
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 14: STOCK OPTIONS PLANS
In September, 1995, the Company established the "1995 Incentive Stock Option
Plan" (the "Plan") to encourage ownership in the Company's common stock by
certain officers, directors, employees and advisors. The Company has
reserved two hundred thousand (200,000) authorized but unissued shares of
common stock, $.01 par value for issuance in connection with its plan. The
Plan will be administered by the Compensation Committee appointed by the
Board of Directors. In making any determination as to persons to whom
Options shall be granted and as to the number of shares to be covered by
such Options, the Compensation Committee shall take into account the duties
and responsibilities of the respective officers, directors, employees, or
advisors, their current and potential contributions to the success of the
Company and such other factors as the Compensation Committee shall deem
relevant in connection with accomplishing the purpose of the Plan. No
options have been granted under the Plan as of December 31, 1998.
In September 1995, the Company established the "Outside Directors Stock
Option Plan" (the "Directors Plan") which is to provide incentives for
Directors to promote the success of the Company and to remain as Outside
Directors. The Company has reserved fifty thousand (50,000) authorized but
unissued shares of common stock, $.01 par value for purposes of the
Directors Plan. The Directors Plan will be administrated by the Stock Option
Committee ("Options Committee") appointed by the Board of Directors. In
making any determination as to Outside Directors to whom Options shall be
granted, and as to the number of shares to be covered by such Options, the
Options Committee shall take into account the duties and responsibilities of
the respective Outside Directors, their current and potential contributions
to the success of the Company, the time devoted by such Outside Directors to
matters pertaining to the Company, and such other factors as the Options
Committee shall deem relevant in connection with accomplishing the purpose
of the Plan. No options have been granted under the Directors Plan as of
December 31, 1998.
In September 1995, the Company entered into a warrant agreement with its
financial consultant which allows the purchase of 150,000 authorized and
unissued shares of common stock, $.01 par value at a price equal to 120% of
the public offering price, exercisable for a four year (4) period commencing
one year from the effective date of the public offering.
The Company has previously issued warrants to purchase 30,000 shares of
common stock, exercisable prior to December 31, 2000 to Can Am Capital, LLC.
The purchase price of these shares is $5.00.
NOTE 15: PUBLIC OFFERING
On January 12, 1996, the Company completed its public offering and sold
1,000,000 shares of its common stock. Net proceeds to the Company were
$3,722,500.
F-22
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 16: BUSINESS SEGMENT REPORTING
The Company has three (3) primary business segments which are:
- Construction
- Securities Trading
- Discontinued Operations
The following summarizes the operation by business segment:
<TABLE>
<CAPTION>
1998 1997 1996
------------- -------------- ----------
<S> <C> <C> <C>
REVENUES
Construction $54,496,848 $47,993,287 $47,438,930
OPERATING PROFIT (LOSS)
Construction $3,282,871 $2,439,046 $2,490,249
Securities Trading $(39,782) $(62,157) $(22,906)
CAPITAL EXPENDITURES
Construction $288,348 $48,101 $219,425
Discontinued Operations - - $1,983,864
DEPRECIATION
Construction $163,420 $159,400 $147,534
Discontinued Operations - - $373,222
IDENTIFIABLE ASSETS
Construction $13,032,578 $12,475,383 $12,731,523
Securities Trading $99,768 $142,533 $1,503
Discontinued Operations - - -
LOSS FROM DISCONTINUED
OPERATIONS - - $1,186,114
</TABLE>
F-23
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 17: QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Income (Loss) Before Net Income Net Income
1998 Revenues Income Taxes (Loss) Per Share
---------- ------------- --------------------- ------------- ----------
<S> <C> <C> <C> <C>
December $17,691,628 $473,742 $308,792 $ .08
September 13,520,229 82,671 36,156 .01
June 11,821,015 128,914 90,089 .02
March 11,463,976 46,445 30,670 .01
1997
----------
December $17,572,158 $474,942 $308,742 $.08
September 12,353,343 458,764 304,264 .07
June 9,373,868 92,388 60,988 .01
March 8,693,918 (134,994) (89,094) (.02)
</TABLE>
NOTE 18: SUBSEQUENT EVENTS
On January 20, 1999, the Company issued 30,000 stock options at an exercise
price of $1.6875 per share pursuant to the Company's stock option plan to a
public relations firm in exchange for consulting work valued at approximately
$50,000. The shares related to the aforementioned stock options were registered
under the Securities Act of 1933 on March 16, 1999. As of the date of this
report, no shares of stock had been issued.
F-24
<PAGE>
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.
Gibbs Construction, Inc.
By: /s/ Danny R. Gibbs
------------------------------
Danny R. Gibbs, President and
Chief Financial Officer
Date: March 30, 1999
------------------------------
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.
Signature Title Date
/s/ Danny R. Gibbs
- --------------------------- Director March 30, 1999
Danny R. Gibbs
/s/ Tony G. Gibbs
- --------------------------- Director March 30, 1999
Tony G. Gibbs
/s/ Dennis T. Mitchell
- --------------------------- Director March 30, 1999
Dennis T. Mitchell
- --------------------------- Director March 30, 1999
L. W. Reynolds
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,066,665
<SECURITIES> 99,768
<RECEIVABLES> 7,313,519
<ALLOWANCES> 725,000
<INVENTORY> 0
<CURRENT-ASSETS> 11,071,671
<PP&E> 684,545
<DEPRECIATION> 163,420
<TOTAL-ASSETS> 13,132,346
<CURRENT-LIABILITIES> 10,343,916
<BONDS> 0
0
0
<COMMON> 40,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,132,346
<SALES> 54,496,848
<TOTAL-REVENUES> 84,496,848
<CGS> 51,213,977
<TOTAL-COSTS> 52,582,934
<OTHER-EXPENSES> 39,782
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 144,207
<INCOME-PRETAX> 731,772
<INCOME-TAX> 266,065
<INCOME-CONTINUING> 465,707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 465,907
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
