<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
General Form for Registration of Securities
of Small Business Issuers Under Section 12(b) or (g)
of the Securities Exchange Act of 1934
LUDLUM CONSTRUCTION CO., INC.
(Name of Small Business Issuer in its charter)
FLORIDA 59-1413673
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10 Central Parkway 34994
Suite 440 (Zip Code)
Stuart, FL
(Address of principal executive offices)
Issuer's telephone number: (561) 287-2378
--------------------------------
Securities to be registered under Section 12(b) of the Act: NONE
Securities to be registered under Section 12 (g) of the Act:
CLASS B COMMON STOCK ($.0l PAR VALUE)
(Title of Class)
(Currently registered - Symbol LDLMB)
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 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form and no disclosure will be contained
to the best of the registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-SB or any
amendment to this Form 10-SB. [X]
State the issuer's revenue for most recent fiscal year. $3,801,988
12/31/99 (unaudited)
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked price of such, as of a specified date within the last 60 days.
$3,760,767 based on the average of the closing bid and asked obtained from the
OTC Bulletin Board on December 31, 1999.
State the number of shares outstanding of each of the Issuer's classes of common
equity as of the latest practicable date. As of December 31,1999.
Class B Common Stock - 3,703,000 shares
Class A Common Stock - 0 shares
Transitional Small Business Disclosure Format [ ] YES [X] No
<PAGE> 2
TABLE OF CONTENTS
Item 1. Description of Business
Item 2. Management's Discussion and Analysis or Plan of operation
Item 3. Description of Property
Item 4. Security Ownership of Certain Beneficial Owners and
Management
Item 5. Directors, Executive Officers, Promoters and
Control Persons
Item 6. Executive Compensation
Item 7. Certain Relationships and Related Transactions
Item 8. Description of Securities
Item 9. Market Price of and Dividends on the Registrant's Common
Equity and Related Shareholder Matters
Item 10. Legal Proceedings
Item 11. Changes in and Disagreements With Accountants
Item 12. Recent Sales of Unregistered Securities
Item 13. Indemnification of Directors and Officers
Item 14. Financial Statements
Item 15. Exhibits
A) Articles of Incorporation
B) Amendment to Articles of Incorporation
C) Bylaws
2
<PAGE> 3
Ludlum Construction Co., Inc. (LDLMB) is filing this Form 10-SB in
Compliance with disclosure requirements of Rule 12b-23 of the Securities
Exchange Act of 1934.
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
Ludlum Construction Co., Inc., a Florida corporation ("Ludlum
Construction" or the "Company"), was founded and incorporated in 1976 by Noah
Ludlum. Ludlum Construction is a dredging and land excavating contractor which
provides dredging services for navigable waterways, lake construction and
marinas. It also provides excavation and development relating to construction of
golf courses and subdivisions. The Company is based in Martin County, Florida.
In April 1998, the Company implemented its expansion plan which
Included restructuring of management. Noah Ludlum resigned as president, turning
management over to his protege, James Schwarz, who has been employed by the
Company since its inception. In March of 1998, the Company conducted a private
offering under Rule 504 Of Regulation D of the Securities Exchange Act of 1934.
On September 18, 1998 the Company was approved by the National Association of
Securities Dealers for listing on the Over the Counter Bulletin Board (symbol
LDLMB).
CONTRACT SERVICES
The dredging and excavation market consists of government, commercial
and private segments. Ludlum relies primarily on a national on-line subscription
service for information on new projects and bidding instructions. Because of its
longstanding reputations, the Company received some of its private contracts
through referrals. The Company bids an average of six potential projects a
month. The Company regularly pursues government jobs on a competitive bid basis
and is currently focusing on the most profitable jobs in the least competitive
$.3 to $1.5 million range.
The Company's 25 plus employees uses the Company's equipment base of
five dredges, three barge-mounted excavators, tug boats, and work boats, along
with 20 pieces of earth-moving equipment to provide dredging and earthwork
services for federal and local government jobs, real estate developers and
marinas.
NEW SERVICES
The Company has recently implemented a "lease-out" equipment program
that enables the Company to profit from leasing its dormant equipment to outside
contractors for short periods. Within twelve months the Company plans to
establish a concrete crushing recycling facility. The Company will purchase or
lease a concrete crusher to process debris concrete obtained from rubble and
demolition debris or from construction companies. Although concrete crushing
facilities are available throughout the United States, none currently exist on
Florida's Treasure Coast. Such a facility would provide contractors a more
cost-effective alternative to dispose of waste concrete. Implementation of the
concrete recycling facility is dependent upon permitting and approval by the
Martin County Commission.
COMPETITIVE DESCRIPTION
The land excavating industry is very competitive; however, there is
less competition for dredging projects. There are currently a limited number of
major Florida-based companies competing with Ludlum Construction in the dredging
field. The Company estimates its present share of the South Florida market as
20%, a number which is projected to increase as the Company expands. The Company
estimates it is awarded 25% of all jobs it bids. Ludlum Construction can bid
competitively because most of the equipment is owned and operated by Ludlum
Construction. Only minor aspects of the jobs awarded are subcontracted. In
addition, over the last 27 years the Company has established a reputation for
reliable and efficient completion of all jobs undertaken.
3
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EMPLOYEES
At December 31, 1999, the Company had 27 full-time employees and 2
officers. None of the Company's employees are covered by collective bargaining
agreements. The Company considers its employee relations to be satisfactory.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION OVERVIEW
Ludlum Construction Co., Inc. is a dredging and land excavation
contractor based in Palm City, Florida, that has been in business for over 20
years. The projects of the Company range from government contracts for dredging
navigable waters, lake construction, maintenance dredging of small marinas to
construction of golf courses and subdivision excavation.
RECENTLY COMPLETED PROJECTS (CUSTOMERS)
The Company completed the following dredging projects within the Past
12 months:
<TABLE>
<CAPTION>
Job Site Contractor/Customer Contract $ Amount
-------- ------------------- -----------------
<S> <C> <C> <C>
1. Jupiter Inlet, Florida Jupiter Inlet District 234,820
2. Clam Bay, Florida Collier County B.O.C.C. 324,030
3. C-12 Canal, Florida South Florida Water
Management 794,867
4. Castaway Cay, Bahamas American Bridge Co. 113,125
5. Sailfish Point POA, Florida Sailfish Point, P.O.A. 150,647
6. Lauderdale Marine Center, FL Lauderdale Marine Center 262,500
7. Evans Crary Bridge, Florida PCL Civil Constructors Inc. 65,938
8. Trump Golf Course, Florida Ranger Construction
Industries, Inc. 324,326
9. St. Lucie County
Landfill, Florida St. Lucie County 1,075,533
</TABLE>
CURRENT PROJECTS IN PROCESS
The following is a list of the Company's current pending projects/work
in progress:
<TABLE>
<CAPTION>
Contract Total Est.
Project Total $ Direct Cost $
------- -------- -------------
<S> <C> <C>
COE Puerto Rico 701,000 374,619
Felix-Eagle Marsh 114,500 45,045
Felix - BJS 102,750 45,000
Kissimmee 265,750 105,553
C-51 Canal 118,167 41,704
Crossroads 286,481 147,882
Time & Materials Projects
-------------------------
Misc Small Projects 72,482 35,283
Floridian 177,658 118,862
Hendry 175,768 91,199
Lowes Boatyard 28,953 10,390
Mancils 108,304 73,534
Millenium 126,176 65,373
</TABLE>
4
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RESULTS OF OPERATIONS
A review of the audited 1998 financials indicates a net loss of
$904,354, of which $619,987 is attributed to depreciation. A portion of the loss
in 1998 can also be attributed to cost overrun on two jobs, the St. Lucie County
Landfill and Andros Isle.
The current management began operating the Company in April 1998, Noah
Ludlum the founder of the Company, who remained with the Company as a consultant
until he retired in July 1999. In 1998 and 1999, the Company experienced cost
overruns on two jobs that had been negotiated and bid upon by the former
management. Excessive costs, difficulty in dredging at the St. Lucie County
Landfill, and significantly underbidding the job ($1 per cubic yard of fill
material), caused a loss of approximately $240,000 to be recorded on the St.
Lucie County Landfill job in 1998. (The St. Lucie County Landfill job was
finished in September 1999 with an additional loss of approximately $340,000 in
1999). Ambiguities and disputes in the Andros Isle contract as to the amount of
fill removed caused the Company to write off $150,000.00 from that project in
1998. Working with their accountants, the new management has refined the bidding
process and spreadsheets to get a true cost-of-job estimate. In sharp contrast
to the $1.00 per cubic yard received from the St. Lucie County Project, the new
management has successfully bid on and completed the following projects:
<TABLE>
<CAPTION>
Contractor Site Yards Dredged Price per Yard
---------- ---- ------------- ---------------
<S> <C> <C> <C>
South Florida Water
Management District C-12 Canal, FL 80,000 $5.63
Pelican Bay Services Clam Bay, FL 32,000 $5.32
City of Melbourne Crane Creek, FL 46,552 $5.25
PCL Civil
Constructors, Inc. St. Lucie River, FL 5,950 $7.57
</TABLE>
As can be noted, the Company has significantly increased its cost per
cubic yards of material dredged. This was accomplished by focusing on bonded
jobs which are awarded by federal, state and local governments. The bonded jobs
are less competitive because of the financial and regulatory requirements.
Another positive aspect of government jobs is that payment is guaranteed, unlike
projects with private contractors where collectability is often an issue. By
focusing on the government contracts, the Company is expected to continually
increase its profitability over the next 5 years.
In 1999 the Company sold two dredges which were not being utilized. The
Company plans to begin leasing more equipment on an "as needed" basis to
decrease costs of operation. The Company also plans to lease out its equipment
then it is not being used on a project. The Company's dredge, the "Florida
Chief" was recently leased to Hendry Corporation for $32,000 per month, while
its fixed costs to the Company is approximately $12,000 per month. The Company's
most recent project in Aguadilla, Puerto Rico will be completed in the next 60
days. The Army Corps of Engineers is paying the Company $701,000 to dredge
57,000 yards of sand out of this harbor in Puerto Rico. Because this project is
scheduled to be completed within a 4 month time frame, the Company expects it
will be one of its most profitable projects to date. The management is confident
that this is just the beginning of many more profitable jobs in the future.
EXPANSION PROGRAM
The Company is looking to the year 2000 to begin a major expansion in
its dredging and excavation operations. As its first step, the Company will
begin bidding jobs in the southeastern United States. This will enable the
Company to focus on government awarded contracts. These contracts are more
profitable because there is less competition due to the strict bonding
requirements. Further, many of these dredging projects are done on an emergency
basis which gives the Company an advantage over its competitors because of the
large number of portable dredges it owns. Beginning next year the Company plans
to further expand by considering the acquisition of smaller dredging and
excavation companies.
5
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IMPLEMENTATION SUMMARY
Through the use of on-line services announcing government jobs, the
Company will begin expanding its dredging projects throughout the southeastern
United States and the Caribbean. The Company has already completed projects in
North Carolina for the U.S. Army Corps of Engineers and in Gorda Cay, Bahamas
(Disney's Island) for American Bridge Company. Before bidding a job the
management meets with employees to discuss the potential project. At these
meetings, equipment needs, number of workers and potential problems of the jobs
are discussed. The implementation of these strategy meetings have proved
invaluable to the current management in accurately preparing cost analysis for
its projects.
MARKETING STRATEGY
The vast majority of contracts the Company is awarded are on a closed
bid basis usually to the lowest bidder. Therefore, cost effectiveness is a
number one priority for the Company to market itself and obtain government and
private contracts.
SALES FORECAST
Revenues for 1999 are estimated to be approximately $4 million. Through
its expansion efforts, the Company is seeking to increase revenues to $6.5
million the following year. In 1998 the Company had a net loss. Through cost
cutting efforts of the new management, the Company has reduced the amount of
loss in 1999.
ITEM 3. DESCRIPTION OF PROPERTY
FACILITIES
The Company leases an office and yard on five acres of industrial real
estate in Palm City, Florida. The office and yard shop combined provide a total
of approximately 2,000 square feet. Because of the large size of the dredges,
barges, dump trucks, and transport rigs, the equipment is kept in the yard. The
Company leases an 1100 square foot business office in Stuart, Florida. Expansion
plans call for relocating the Company to a waterfront property on the Okeechobee
Waterway in Palm City, Florida, where the office, repair shop and equipment yard
can be situated at one location. This will give the Company direct water access
to the west coast of Florida and the Gulf states via Lake Okeechobee. Lease
negotiations are currently under way. Also, negotiations for the lease of an
industrial site for the concrete crushing operation, a sand plant, and mulching
operation will be concluded once county permits are approved.
EQUIPMENT
Ludlum Construction's dredging and excavating equipment base consists
of five dredges, three barge-mounted excavators, tug boats, and work boats along
with 20 pieces of earth-moving equipment. The Company has leased with an option
to purchase a new Elliott 370 Mud-Cat to meet increasing demand for dredging.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
number of shares of Common Stock owned beneficially as of December 31, 1999 by:
(i) each person known to the Company to own more than five percent (5%) of any
class of the Company's voting securities; (ii) each director of the Company; and
(iii) all directors and officers as a group.
6
<PAGE> 7
<TABLE>
<CAPTION>
TITLE NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNER OF CLASS
-------- ------------------- ------------------- --------
<S> <C> <C> <C>
Class B James K. & Donna M. Schwarz 2,031,250 54%
Common Stock 4437 SW Cherokee Street Restricted
Palm City, FL 34990
Class B James A. Conway 1,218.750 32%
Common Stock 963 SE MacArthur Boulevard Restricted
Stuart, FL 34996
Class B All Directors & Officers 3,250,000 86%
Common Stock as a Group Restricted
</TABLE>
All shares of Common Stock are held directly with sole voting and
investment powers.
The Company is not aware of any arrangement which might result in a
change of control in the future.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The following table sets forth certain information about the directors
and executive officers of the Company:
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION TERM
---- --- -------- ----
<S> <C> <C> <C>
James K. Schwarz 45 Director/President April 9,1998 - Present
Chairman of the Board
James A. Conway 39 Chief Executive Officer April 9,1998 - Present
</TABLE>
James K. Schwarz, President and Director. Mr. Schwarz has served as the
Company's President since April 1998 and has been employed by the company since
its inception. Mr. Schwarz proficient in managing the Company operations,
projects, marketing and finances for over 10 years. He is the primary reason for
the Company's long-standing reputation for excellence throughout the industry.
James A. Conway, Chief Executive Officer. Mr. Conway has served as the
Company's Chief Executive office, Vice President, Secretary and treasurer since
April 1998. Mr. Conway holds degrees in finance and law from the University of
Florida. He has thirteen years of experience in the corporate legal area
including negotiations, drafting contracts, and litigation. Mr. Conway currently
practices law in Palm Beach and Martin County, Florida. He has served as the
company's legal counsel for eight years.
Item 6. Executive Compensation
The following summary compensation table sets forth certain information
regarding compensation paid during the fiscal year ending December 31, 1998 to
the executives of the Company.
7
<PAGE> 8
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Annual
Principal Salary Bonus
Position Year ($) ($)
-------- ---- ------ -----
<S> <C> <C> <C>
Noah Ludlum, Jr. 1998 100,000 0
President
James K. Schwarz 1998 100,000 0
President 1999 100,000 0
James A. Conway 1998 25,000 0
Vice President, 1999 25,000 0
Treasurer/Secretary
Chief Executive Officer
Chief Financial Officer
</TABLE>
COMPENSATION OF DIRECTORS.
No director of the Company received any form of compensation from the
Company for any services provided as a director, for committee participation, or
for special assignments.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company intends that any transactions between the Company and its
officers, directors, principal shareholders, affiliates or advisors will be on
terms no less favorable to the Company than those reasonably obtainable from
third parties.
ITEM 8. DESCRIPTION OF SECURITIES
COMPANY STOCK
On October 24th, 1997 the Company's Articles of Incorporation were
amended to authorize the Company to issue ten million (10,000,000) shares of
Class B Common Stock, par value $.0l per share ("Common Stock"), designated as
one (1) share "Class A" and nine million nine hundred ninety-nine thousand
(9,999,999) "Class B". As of December 31, 1999, there were issued and
outstanding 3,703,000 shares of "Class B" Common Stock held of record by
approximately 27 shareholders and no Class A" Common Stock.
The holders of the "Class B" shares shall have exclusive voting rights
and powers, including the exclusive right to notice of shareholders meetings.
DIVIDENDS
The Company has paid no dividends on its "Class B" Common Stock and it
currently intends to retain earnings for use in its business to finance
operations and growth. Any future determination as to the distribution of cash
dividends will depend upon the earnings and financial position of the Company at
that time and such other factors as the Board of Directors may deem appropriate.
WARRANTS
The Company has no outstanding warrants.
8
<PAGE> 9
ITEM 9. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Effective December 31, 1999, the Company is listed on the NASDAQ
Over-the-Counter Bulletin Board (symbol LDLMB). The quarterly high and low sales
prices are listed below. As of December 31, 1999, there were approximately 27
holders of the Company's Common Stock.
Initially listed High Low
---------------- ---- ---
9/25/98 2.75 2.50
Qtr. End 12/31/98 4.25 2.625
Qtr. End 3/31/99 4.50 0.875
Qtr. End 6/30/99 1.0625 0.8125
Qtr. End 9/30/99 1.125 0.375
Qtr. End 12/31/99 1.375 0.6562
The Company distributed no dividends during fiscal year 1998.
ITEM 10. LEGAL PROCEEDINGS
(a) Pending Legal Proceedings
On November 3, 1999 a lawsuit was filed in the circuit court of the
15th Judicial Circuit, Palm Beach County, Florida, case # CL9910542G by Nelson
Bunker Hunt Trust estate - Trust A and Edward Stephenson against Ludlum
Construction Co., Inc. Noah W. Ludlum jr, Timothy Ludlum, James Conway, James K.
Schwarz, Merit First, Inc, and John O'Keefe. The plaintiffs each bought 100,000
shares of unregistered Ludlum Construction Co, Inc. stock at $2.50 per share.
Each plaintiff signed a subscription agreement stating "that there is no market
for the purchase and sale of the shares and that no such market may ever exist."
After the shares were registered the price per share rose to a high of $4.50.
When the price per share dropped the lawsuit was filed. The plaintiffs have
alleged fraud in the inducement, violation of Florida Securities Investment
Protection Act, and Breach of Promissory note. Each Plaintiff is seeking
$250,000.00 in damages. Ludlum Construction Co., Inc.'s attorney is of the
opinion that the lawsuit is without merit. A motion to dismiss the lawsuit along
with a claim for attorneys fees against the plaintiffs has been filed by Ludlum
Construction Co., Inc. and its Directors.
(b) Pending governmental agency proceedings
As the result of a sales tax audit for the years 1992 to 1997, the
Florida Department of Revenue filed a sales tax lien against Ludlum Construction
Co., Inc. in July 1999 in the amount of $75,071. A written agreement has been
reached to pay off the lien. The Company has paid $20,000 and will begin making
$5,000 monthly payments beginning February, 2000 until the taxes are paid in
full without any additional interest.
The Company has no knowledge of any other pending or contemplated
governmental proceedings against it.
ITEM 11. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The accounting firm of Sweeney, Gates and Co. of Ft. Lauderdale,
Florida, was engaged in July of 1998 to prepare reviewed financial statements up
to and including the quarter ending 6/30/98. All such reviewed financial reports
prepared by Sweeney, Gates and Co. contained a standard disclaimer of opinion.
There were no disagreements between the accountants at Sweeney, Gates and Co.
The Company precipitated the termination of their business relationship for
demographic reasons (Sweeney, Gates and Co. were located over 75 miles from the
Company). In of 1998 the Board of Directors approved the change of accountants
to Mehlich, Rogiers, Goldin & Co. of Stuart, Florida, a reputable firm with
offices located within a mile of the Company. The Board elected to make the
change in accountants to take advantage of both the close proximity of Mehlich,
Rogiers, Goldin & Co. to the Company and additional financial services the
larger firm (18 CPAS) could provide. At the recommendation of Mehlich, Rogiers,
Goldin & Co. the Company retained the CPA firm of Holyfield and Associates,
P.A., as a partner familiar with SEC regulations, to assist them in the 1998
audit. Holyfield is located in West Palm Beach, Florida and will be used by the
Company for year-end audits.
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<PAGE> 10
ITEM 12. RECENT SALES OF UNREGISTERED SECURITIES
The following information sets forth certain information for all
securities the Company sold during the past three years without registration
under the Securities Act of 1933 (the "Securities Act"):
In November 1997 the company sold 120 shares of Class B common stock
for $400 per shares to James Conway. In April 1998 the stock was split 10,155.25
to 1 resulting in a total of 1,218,750 shares of Class B common stock to James
Conway who is currently a principal in the company.
In March of 1998 the Company initiated a private placement offering
pursuant to SEC Rule 504 to raise $1 million for additional capitalization. At
December 31, 1998 the Company had raised $845,000 through the sale of 353,000
shares of class B common stock for $2.50 a share. These shares were sold to 27
investors.
In addition, a total of 100,000 shares of free-trading Class B Common
Stock were issued to two companies for financial consulting services and
registering the securities. There were no underwriters participating in the
transactions.
ITEM 13. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The By-Laws of the Company make no provision for indemnification of its
directors or officers.
ITEM 14. FINANCIAL STATEMENTS
Please refer to the Financial Statements and the index thereto which
appear on pages F-1 to F-12 hereof.
ITEM 15. EXHIBITS
DESCRIPTION OF EXHIBITS
15.1 Articles of Incorporation
15.2 Amendment to the Articles of Incorporation
15.3 Bylaws
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
LUDLUM CONSTRUCTION CO., INC.
a Florida corporation
By: /s/ James K. Schwarz
-----------------------------------
James K. Schwarz
President and Chairman of the Board
Dated: January 5, 2000
10
<PAGE> 11
LUDLUM CONSTRUCTION CO., INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 (unaudited)
<PAGE> 12
LUDLUM CONSTRUCTION COMPANY, INC.
INDEX TO FINANCIAL STATEMENTS
Reports of Independent Auditors F-1
Balance sheets as of December 31, 1998 and 1997 F-2
Statements of Operations for the years ended
December 31, 1998 and 1997 F-3
Statements of Stockholders, Equity for the years
ended December 31, 1998 and 1997 F-4
Statement of Cash Flows for the years ended
December 31, 1998 and 1997 F-5
Notes to Financial Statements F-6 to F-12
<PAGE> 13
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders of
Ludlum Construction Co., Inc.
Stuart, Florida
We have audited the accompanying balance sheet of Ludlum Construction Co., Inc.
as of December 31, 1998 and the related statements of operations, stockholders'
equity and cash flows for the year then ended. These financial statements are
the responsibility of Ludlum Construction Co., Inc. management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ludlum Construction Co., Inc.
as of December 31, 1998 and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
The 1997 financial statements were reviewed by other accountants and their
report thereon, dated May 13, 1998, stated they were not aware of any material
modifications that should be made to those statements for them to be in
conformity with generally accepted accounting principles. However, a review is
substantially less in scope than an audit and does not provide a basis for the
expression of an opinion on the financial statements taken as a whole.
/s/ Holyfield Associates
- ------------------------------
Holyfield Associates
West Palm Beach, Florida
May 14, 1999
F-1
<PAGE> 14
LUDLUM CONSTRUCTION CO., INC. BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
as of December 31, 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,251 $ 67,825
Contract receivables 408,933 754,328
Costs and estimated earnings in excess of
billings on uncompleted contracts 128,894 284,047
Tax refunds receivable -- 24,769
------------ ------------
541,078 1,130,969
PROPERTY AND EQUIPMENT
Construction and office equipment 4,312,476 3,269,931
Accumulated depreciation (1,386,799) (1,043,855)
------------ ------------
2,925,677 2,226,076
OTHER ASSETS
Notes receivable 66,332 24,400
Deposits and prepaid expenses 3,738 216,273
------------ ------------
Total assets $ 3,536,825 $ 3,597,718
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of notes payable $ 844,433 $ 465,548
Short term debt 381,195 235,000
Due to stockholders 173,093 185,696
Accounts payable and accrued expenses 569,067 627,277
Billings in excess of costs and estimated
earnings on uncompleted contracts 10,025 107,581
------------ ------------
1,977,813 1,621,102
------------ ------------
NON-CURRENT LIABILITIES
Long term portion of notes payable 1,185,907 981,365
------------ ------------
Deferred income taxes -- 181,700
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, Class A, $.01 par value,
1 share authorized, none issued and
outstanding in 1998, 1 share issued and outstanding in 1997 -- 1
Common stock, Class B, $.01 par value,
9,999,999 shares authorized,
3,703,000 shares issued and outstanding in 1998,
5,078,125 shares issued and outstanding in 1997 37,030 50,781
Additional paid in capital 952,910 475,250
Retained earnings (deficit) (616,835) 287,519
------------ ------------
373,105 813,551
------------ ------------
Total liabilities and stockholders' equity $ 3,536,825 $ 3,597,718
============ ============
</TABLE>
The accompanying notes and accountant's report should be
read with these financial statements
F-2
<PAGE> 15
LUDLUM CONSTRUCTION CO., INC. STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
for the years ended December 31, 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Contract revenues earned $ 4,390,049 $ 5,623,967
Cost of revenues earned 4,226,536 4,719,118
------------ ------------
Gross profit 163,513 904,849
------------ ------------
General and administrative expenses 1,037,180 721,490
------------ ------------
Income (loss) from operations (873,667) 183,359
Other income (expenses)
Investment income 21,290 4,891
Gain (loss) on dispostion of assets 21,798 (94,989)
Interest expense (286,031) (34,328)
------------ ------------
Income (loss) before income taxes (1,116,610) 58,933
Provision for income taxes (credit) (212,256) 30,010
------------ ------------
Net income (loss) $ (904,354) $ 28,923
============ ============
Basic and diluted earnings (loss) per share:
Net income (loss) per share $ (.23) $ .006
============ ============
</TABLE>
The accompanying notes and accountant's report should be
read with these financial statements
F-3
<PAGE> 16
LUDLUM CONSTRUCTION CO., INC. STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
for the years ended December 31, 1998 and 1997 (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock Shares Additional
--------------------- Paid-in Retained
Class A Class B Amount Capital Earnings Total
------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1997 (unaudited) 1 500 $ 5 $ 526,026 $ 258,596 $ 784,628
Retroactive adjustment for stock split
in 1998 (10,156.25 to 1) 5,077,625 50,776 (50,776)
Net income, 1997 (unaudited) 28,923 28,923
---- ---------- --------- --------- ---------- ---------
Balances, December 31, 1997 (unaudited) 1 5,078,125 50,781 475,250 287,519 813,551
Sale of 1,218,750 shares of Class B common 1,218,750 12,187 35,813 48,000
Redemption of stock (1) (3,046,875) (30,468) (405,896) (436,365)
Issuance of 100,000 shares of Class B
common for consulting services 100,000 1,000 6,273 7,273
Sale of 353,000 shares of Class B common 353,000 3,530 841,470 845,000
Net loss, 1998 (904,354) (904,354)
---- ---------- --------- --------- ---------- ---------
Balances, December 31, 1998 -- 3,703,000 $ 37,030 $ 952,910 $(616,835) $ 373,105
==== ========== ========= ========= ========== =========
</TABLE>
The accompanying notes and accountant's report should be
read with these financial statements
F-4
<PAGE> 17
<TABLE>
<CAPTION>
(Unaudited)
for the years ended December 31, 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (904,354) $ 28,923
Adjustments to reconcile net income (loss) to
cash flows from operating activities:
Non-cash issuance of stock for consulting services 7,273 --
Depreciation and amortization 623,408 518,585
Disposition of property and equipment (21,798) 94,989
Change in:
Contract receivables 345,395 92,391
Costs and estimated earnings in excess of billings 155,153 (11,070)
Decrease in provision for losses on uncompleted contracts -- (45,096)
Income taxes receivable 24,769 (24,769)
Other assets 170,603 --
Accounts payable and accrued expenses (58,210) 285,567
Deferred income taxes payable (181,700) 75,280
Billings in excess of costs and estimated earnings (97,556) (122,680)
----------- ---------
Net cash provided by operating activities 62,983 892,120
----------- ---------
Cash flows from investing activities
Purchase of property and equipment (1,713,006) (636,836)
Proceeds from sales of property and equipment 415,217 50,376
Employee advances 2,724
----------- ---------
Net cash used in investing activities (1,297,789) (583,736)
----------- ---------
Cash flows from financing activities
Net borrowings from shareholders (12,603) (38,880)
Sales of stock 893,000 --
Stock redemption (36,364) --
New financing 1,518,666 410,144
Payments on notes payable (1,192,467) (610,378)
----------- ---------
Net cash provided by (used in) financing activities 1,170,232 (239,114)
----------- ---------
Increase (decrease) in cash and cash equivalents (64,574) 69,270
Cash and cash equivalents, beginning of year 67,825 (1,445)
----------- ---------
Cash and cash equivalents, end of year $ 3,251 $ 67,825
=========== =========
Supplemental disclosures of cash flow information:
Cash payments for interest $ 276,105 $ 136,311
=========== =========
Non cash financing activities:
Note payable issued in stock redemption $ 400,000 $ --
=========== =========
Decrease in and reclassification of long-term debt $ -- $ 449,134
=========== =========
</TABLE>
The accompanying notes and accountant's report should be
read with these financial statements
F-5
<PAGE> 18
LUDLUM CONSTRUCTION CO., INC. NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS
1998 AND 1997 (unaudited)
- --------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies
Organization
Ludlum Construction Co., Inc. (the "Company") was incorporated on December 13,
1976 and operates as a construction site and dredge contractor with projects
throughout South Florida. The work is performed under cost-plus fee contracts,
fixed-price contracts and fixed price contracts modified by incentive and
penalty provisions and on a time and material basis. The Company grants credit,
in accordance with available lien laws, to its customers. Management believes
that its contract acceptance, billing and collection policies are adequate to
minimize potential credit risk.
Accounting for Construction Contracts
Construction contracts are accounted for using the percentage of completion
method of accounting measured by the percentage of costs incurred to date to
estimated total costs. Under the terms of the various contracts, progress
billings are made either at the completion of specific portions of the contract
or at fixed amounts at stated dates. Contract costs include all direct material
and labor costs and those indirect costs related to contract performance, such
as indirect labor, supplies, tools, repairs and depreciation costs. General and
administrative costs are charged to expense as incurred. At such time as a
contract is estimated to be unprofitable, the anticipated loss is charged to
income.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. The lives
range from five to ten years.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements. The corporation is on the percentage of completion method
for financial statement presentation and on the completed contract method of
accounting for income tax filing purposes. On the percentage of completion
method, income is recognized as the work is performed on all contracts, both
completed and in process. On the completed contract method, revenue is only
recognized when a project is completed.
Deferred taxes are recognized for differences in income recognition between the
two methods of accounting as well as the differences between the basis of assets
and liabilities for financial statement and income tax purposes. The deferred
tax assets and liabilities represent the future tax consequences of those
differences which will either be deductible or taxable when income is realized
or the assets and liabilities are recovered or settled. Deferred taxes are also
recognized for operating losses and tax credits that are available to offset
future taxable income.
Accounting Estimates
The management of the Company uses accounting estimates in determining revenues
from contracts as accounted for by the percentage of completion method.
Estimates are based on subjective as well as objective factors and, as a result,
judgement is required to estimate certain amounts at the date of the financial
statements.
F-6
<PAGE> 19
1. Summary of Significant Accounting Policies, continued
Cash and Cash Equivalents
Cash and cash equivalents include overnight investments in repurchase
agreements. The Company considers all investments with maturities of three
months or less to be cash equivalents.
Fair Value of Financial Instruments
The fair value of the Corporation's financial instruments, such as accounts
receivable, accounts payable, and notes payable approximate their carrying
value.
Year 2000 Reporting
On August 4, 1998, the SEC issued expanded requirements for disclosure regarding
the international computer programming problems whereby certain computer
programs will not be able to properly recognize the date in the year 2000.
Management believes the Company has no material exposure from the year 2000
problem. The Company's management information systems advisor reports that
because the Company's system was originally designed to be unaffected by the
year 2000 problem, the Company has no exposure to the problem within its own
system. The Company has consulted major vendors and suppliers whose
non-compliance with correction of the problem could cause material damage to the
Company and has determined that such vendors and suppliers have plans in place
that will circumvent year 2000 problems that could affect the Company.
Recent Accounting Pronouncements
In 1997, the FASB issued Statements No. 130, "Reporting Comprehensive Income,"
and No. 131, "Disclosures about segments of an Enterprise and Related
Information," which are effective for fiscal years beginning after December 15,
1997. These Statements will have no effect on the Company's financial position
or results of operations
Net Income (Loss) Per Share
Basic and diluted earnings (loss) per share is computed by dividing income
(loss) available to common shareholders by the weighted average number of common
shares outstanding for the year (retroactively adjusted for the stock split in
1998).
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Net income (loss) to common shareholders $ (904,354) $ 28,923
Weighted average number of common
shares outstanding 3,912,264 5,078,125
Basic and diluted income (loss) per share
from continuing operations $ (.23) $ .006
</TABLE>
2. Contract Receivables
Contract receivables consist of the following as of December 31, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Completed contracts $ 230,777 $ 161,601
Uncompleted contracts 70,334 260,959
Retainages 107,822 331,768
--------- ---------
$ 408,933 $ 754,328
========= =========
</TABLE>
F-7
<PAGE> 20
\
2. Costs and Estimated Earnings on Uncompleted Contracts
Costs and estimated earnings on uncompleted contracts as of December 31, 1998
and 1997, consist of the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 1,501,930 $ 2,594,563
Estimated earnings to date 835,465 547,655
----------- -----------
2,337,395 3,142,218
Less billings 2,218,526 2,965,752
----------- -----------
$ 118,869 $ 176,466
=========== ===========
Included in accompanying balance sheet
under the following captions:
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 128,894 $ 284,047
Billings in excess of costs and estimated
earnings on uncompleted contracts (10,025) (107,581)
----------- -----------
$ 118,869 $ 176,466
=========== ===========
</TABLE>
The following schedule reflects a reconciliation of the Company's backlog
representing signed contracts in existence at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Backlog, beginning of year $ 2,389,000 $ 2,897,000
New contracts and contract adjustments 4,019,000 5,116,000
----------- -----------
Total 6,408,000 8,013,000
Less contract revenues earned in the current period 4,390,000 5,624,000
----------- -----------
Backlog, end of year $ 2,018,000 $ 2,389,000
=========== ===========
</TABLE>
4. Property and Equipment
Major classes of property and equipment as of December 31, 1998 and 1997 are:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Dredges, barges and equipment $ 2,329,760 $ 1,755,474
Heavy equipment 1,542,956 1,064,368
Vehicles and transports 367,380 377,709
Shop equipment 43,564 43,564
Office equipment 28,816 28,816
----------- -----------
4,312,476 3,269,931
Less accumulated depreciation 1,386,799 1,043,855
----------- -----------
$ 2,925,677 $ 2,226,076
=========== ===========
</TABLE>
Depreciation expense was $619,987 in 1998 and $515,164 in 1997.
F-8
<PAGE> 21
5. Debt
Notes payable
Short-term debt consists of the following as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Line of credit payable to a bank,
interest at 2.5% over prime,
secured by all assets $ 200,000 $ 200,000
Other short- term notes payable, interest
at 8-8 1/4% 181,195 35,000
--------- ---------
$ 381,195 $ 235,000
========= =========
</TABLE>
Long-term debt
Long term debt consists of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Notes payable to banks, bearing interest
from 6.45% to 14.7%, payable monthly
from $318 to $11,310, secured by
vehicles and equipment, final payments
due from March 1997 to June 2001 $ 816,186 $ 902,983
Note payable, interest at 6.4%, secured by
stock of the Company, accrued interest and
payments of $100,000 due April 9, and July 9,
1998, 1999, 2000, 2001 respectively 305,842 --
Notes payable to finance companies, bearing
interest from 5.38% to 22.19%, payable monthly
from $186 to $12,468, secured by vehicles and
equipment, final payments due from April 1998 to
January 2003. 908,312 543,930
---------- ---------
2,030,340 1,446,913
Less current maturities 844,433 465,548
---------- ----------
$1,185,907 $ 981,365
========== ==========
</TABLE>
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Payments on long term debt due in 1998 $ -- $ 465,548
1999 844,433 871,836
2000 416,653 75,764
2001 603,192 21,569
2002 155,530 12,196
2003 10,532 --
---------- ----------
$2,030,340 $1,446,913
========== ==========
</TABLE>
F-9
<PAGE> 22
6. Income Taxes
A provision for state and federal income taxes has been computed based on
amounts currently payable to (refundable from) taxing authorities and increased
or decreased by changes in deferred taxes. The current provision for income tax
consists of the following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Amount currently refundable $ (30,566) $ (14,190)
Changes in deferred taxes Current -- (800)
Long-term (181,700) 45,000
--------- ---------
$(212,256) $ 30,010
========= =========
</TABLE>
Deferred tax liabilities, giving rise to deferred taxes, are recognized for
temporary differences that will result in taxable amounts in future years. At
December 31, 1998 and 1997, the Company had deferred tax liabilities in the
following amounts
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Current $ -- $ --
Long-term -- 181,700
-------- ---------
$ -- $ 181,700
======== =========
</TABLE>
Offsetting future liabilities are net operating loss carry forwards amounting to
approximately $1,740,000. This operating loss will expire on December 31, 2012.
7. Stockholders' Equity
Pursuant to a stock subscription agreement dated November 7, 1997, the Company
sold 120 shares of class B stock to an unrelated third party for $48,000.
Pursuant to a contract signed on December 31, 1997 and consummated on April 9,
1998, the board of directors of the Company agreed to redeem the shares of two
directors comprising 100% of the class A and 60% of the class B shares issued by
the Company.
The redemption price set on December 31, 1997 was $0 per share of class A stock
and $1,455 per share for the class B stock. The total purchase price for the
shares was $436,364. On April 9, 1998, the Company signed a note payable to a
selling director for $400,000 bearing an interest rate of 6.4%. The note
requires principal payments of $100,000 payable on July 9, 1998, 1999, 200,
2001. The note is secured by the stock certificates issued to officers of the
Company. Also, the Company must maintain a term life insurance policy on the
life of the note holder to pay the unpaid balance of the note payable until such
time as the note is fully paid.
On April 9, 1998, the Company authorized a stock split of 10,156.25 to one share
for each class B stock.
From April 9, 1998 through December 31, 1998, the Company has issued 353,000
shares of post split class B stock for $845,000.
In 1998, the Company also issued 100,000 shares of post split class B stock for
consulting services. The Company provided a charge to expense for $7,273.
F-10
<PAGE> 23
7. Stockholders' Equity, continued
The Company entered into an employment agreement with a selling director. The
agreement obligates the Company to pay the individual $75,000 per year and
provides him with health and term life insurance, as well as use of a Ford F350
truck with all expenses paid for a period of three years. At the end of the
agreement, the truck is to be given to the individual. This person retired in
May, 1999 and the employment agreement was terminated.
8. Concentration of Credit Risk
During the year, the Company has maintained cash balances in excess of the
Federally insured limits. The funds are with major money center banks.
Consequently, the Company does not believe that there is a significant risk in
having these balances in the financial institutions. The cash balances at
December 31, 1998 were not over the limit.
9. Related Party Transactions
Lease payments are being made to Noah Ludlum, the former president of the
Company, for land used for equipment storage. The yearly rental of this land is
$12,720.
10. Commitments and Contingencies
The Company leases its office, equipment and land used for equipment storage.
The minimum payments due under these leases are:
<TABLE>
<CAPTION>
Monthly Expiration Current Remaining
Obligation Date Portion Balance
---------- -------------- -------- ----------
<S> <C> <C> <C> <C>
Office $ 1,112 Month to month $ 10,008 $ 10,008
Dredge $ 2,000 Jan. 18, 2002 $ 24,000 $ 80,000
Land used for storage $ 1,060 Month to month $ 9,540 $ 9,540
Equipment $ 3,287 July 7, 2002 $ 39,444 $ 138,063
</TABLE>
F-11
<PAGE> 24
11. General and Administrative Expenses
General and administrative expenses consist of the following for the years 1998
and 1997:
<TABLE>
<CAPTION>
1998 1997
--------- ----------
<S> <C> <C>
Salaries $ 343,212 $ 302,046
Bad debts 217,239 93,956
Taxes and licenses 82,245 74,565
Telephone and utilities 55,074 59,684
Rent 36,089 39,873
Professional fees 137,555 30,771
Office expenses 41,566 29,769
Automotive 37,103 24,749
Insurance 21,103 21,721
Travel expenses 19,142 11,984
Depreciation and amortization (after allocations to job cost) 10,199 10,055
Other 36,653 22,317
----------- ---------
$ 1,037,180 $ 721,490
=========== =========
</TABLE>
F-12
<PAGE> 1
ARTICLES OF INCORPORATION
OF
LUDLUM CONSTRUCTION CO., INC.
The undersigned subscribers to these Articles of Incorporation, two
natural persons competent to contract, hereby undertake to form a corporation
for profit under the laws of the State of Florida.
ARTICLE I. NAME
The name of the corporation is Ludlum Construction Co., Inc.
ARTICLE II. NATURE OF BUSINESS
The corporation may engage in any activity or business permitted under
the laws of the United States and this State.
ARTICLE III. CAPITAL STOCK
The maximum number of shares of stock that this corporation is
authorized to have outstanding at any time is one hundred (100) shares of
common stock, each having no par value.
ARTICLE IV. INITIAL CAPITAL
The amount of the capital with which this corporation shall begin
business is in excess of five hundred dollars ($500.00).
ARTICLE V. TERM OF EXISTENCE
This corporation shall have perpetual existence.
ARTICLE VI. ADDRESS
The initial street address of the principal office of this corporation
is to be 320 Denver Avenue, Stuart, Florida.
The Stockholders may from time to time designate such other address and
place of the principal office of this corporation as it may see fit.
ARTICLE VII. STOCKHOLDERS
The affairs of this corporation shall be managed by its stockholders,
and the corporation shall have no directors.
-1-
<PAGE> 2
ARTICLES VIII. SUBSCRIBERS
The names and street addresses of subscribers to these Articles of
Incorporation are as follows:
NAME ADDRESS
---- -------
NOAH LUDLUM Grove Road
Palm City, Florida
BONNIE LUDLUM Grove Road
Palm City, Florida
ARTICLES IX. EFFECTIVE DATE
These Articles of Incorporation shall become effective on April 30,
1972.
IN WITNESS WHEREOF, we have hereunto set our hands and seals,
acknowledged and filed the foregoing Articles of Incorporation under the laws of
the State of Florida, this 14th day of April, 1972.
/s/ Noah Ludlum (SEAL)
----------------------------
NOAH LUDLUM
/s/ Bonnie Ludlum (SEAL)
----------------------------
BONNIE LUDLUM
STATE OF FLORIDA )
COUNTY OF MARTIN )
BEFORE ME, personally appeared NOAH LUDLUM and BONNIE LUDLUM, to me
well known to be the individuals described in and who executed the foregoing
Articles of Incorporation, and they acknowledged before me that they executed
the same for the purposes therein expressed.
WITNESS my hand and official seal in the County and State named above,
this 14th day of April, 1972.
-------------------------------------
NOTARY PUBLIC
My commission expires August 27, 1974
-2-
<PAGE> 3
CERTIFICATE DESIGNATING PLACE OF BUSINESS OR DOMICILE FOR THE
SERVICE OF PROCESS WITHIN THIS STATE, NAMING AGENT UPON WHICH
PROCESS MAY SERVED
In pursuance of Chapter 48.091, Florida Statutes, the following is
submitted, in compliance with said Act:
1. That LUDLUM CONSTRUCTION CO., INC., beginning to organize under the
laws of the State of Florida with its principal office, as indicated in the
Articles of Incorporation at Stuart, County of Martin, State of Florida, has
named ELTON H. SCHWARZ, located at 320 Denver Avenue, City of Stuart, County of
Martin, State of Florida, as its Agent to accept service of process within this
State.
ACKNOWLEDGEMENT
Having been named to accept service of process for the above stated
Corporation, at place designated in this certificate, I hereby accept to act in
this capacity, and agree to comply with the provision of said Act relative to
keeping open said office.
/S/ Elton H. Schwarz
---------------------------------
ELTON H. SCHWARZ
Resident Agent
-3-
<PAGE> 4
STATE OF FLORIDA
(SEAL)
DEPARTMENT OF STATE
I certify from the records of this office that LUDLUM CONSTRUCTION CO., INC. is
a corporation organizaed under the laws of the State of Florida, filed on
July 5, 1972.
The document number of this corporation is 404448.
I further cetify that said corporation has paid all fees and penalties due this
office through December 31, 1998, and its most recent annual report was filed on
June 2, 1998, and its status is active.
I further certify that said corporation has not filed Articles of Dissolution.
Given under my hand and the
Great Seal of the State of Florida
at Tallahassee, the Capitol, this the
Twelfth day of June, 1998
/s/ Sandra B. Mortham
(SEAL) -------------------------------------
Sandra B. Mortham
Secretary of State
-4-
<PAGE> 1
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
LUDLUM CONSTRUCTION CO., INC.
Pursuant to the provisions of the Florida Statues, on October 24, 1997 all of
the directors and shareholders of Ludlum Construction Co., Inc., a Florida
corporation (the "Corporation"), adopted the following resolutions by written
consent:
RESOLVED: That the number of authorized shares of common stock of
the Corporation should be increased to ten million
(10,000,000), $0.01 par value per share, one (1) of
which is designated "Class A" and nine million, nine
hundred ninety nine thousand nine hundred ninety nine
(9,999,999) of which are designated "Class B".
RESOLVED: That the Articles of Incorporation as filed with the
Florida State Department should be amended to reflect
the foregoing resolution.
RESOLVED: That the President of the Corporation is authorized to
take any and all action necessary in order to reflect
the change in authorized capital of the Corporation.
NOW THEREFORE, in accordance with the foregoing resolutions, the first sentence
of Article III of the Corporation's Articles of Incorporation is deleted and the
following inserted in its place:
ARTICLE III. CAPTIAL STOCK
The total number of shares of all classes of stock which the
corporation has the authority to issue is ten million (10,000,000)
shares of common stock, $0.01 par value per share, one (1) of which is
designated "Class A" and nine million nine hundred ninety nine thousand
nine hundred ninety nine (9,999,999) of which are designated "Class B".
IN WITNESS WHEREOF, the President of the Corporation has executed and submitted
this instrument this 24th day of October, 1997.
/s/ Noah W. Ludlum, Jr.
------------------------------------
Noah W. Ludlum, Jr., President
<PAGE> 2
STATE OF FLORIDA
(SEAL)
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on November 7, 1997, to Articles of Incorporation for LUDLUM CONSTRUCTION
CO., INC., a Florida corporation, as shown by the records of this office.
The document number of this corporation is 404448.
Given under my hand and the
Great Seal of the State of Florida
at Tallahassee, the Capitol, this the
Thirteenth day of November, 1997
/s/ Sandra B. Mortham
(SEAL) -------------------------------------
Sandra B. Mortham
Secretary of State
<PAGE> 1
1
BYLAWS
OF
LUDLUM CONSTRUCTION CO., INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the corporation
shall be located at 4320 SW Grove Street, Palm City, Florida 34990.
Section 2. Registered Office. The registered office of the corporation
required by law to be maintained in the State of Florida may be, but need not
be, identical with the principal office.
Section 2. Other Offices. The corporation may have offices at such
other places, either within or without the State of Florida, as the Board of
Directors may from time to time determine or as the affairs of the corporation
may require.
ARTICLE II
Meetings of Shareholders
Section 1. Place of Meeting. All meetings of shareholders shall be held
at the principal office of the corporation or at such other place, either within
or without the State of Florida, as shall be designated in the notice of the
meeting or agreed upon by a majority of the shareholders entitled to vote
thereat.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
held at 10:00 o'clock A.M. on December 13th of each year, if not a legal
holiday, but if a legal holiday, then on the next day following not a legal
holiday, for the purpose of electing directors of the corporation and for the
transaction of such other business as may be properly brought before the
meeting.
Section 3. Substitute Annual Meeting. If the annual meeting shall not
be held on the day designated by these Bylaws, a substitute annual meeting may
be called in accordance with the provisions of Section 4 of this Article. A
meeting so called shall be designated and treated for all purposes as the annual
meeting.
Section 4. Special Meetings. Special meetings of the shareholders may
be called at any time by the president or Board of Directors of the corporation
or by any shareholder, pursuant to the written request of the holders of not
less than one-fourth of all the shares entitled to vote at the meeting.
1
<PAGE> 2
Section 5. Notice of Meetings. Written or printed notice stating the
time and place of the meeting shall be delivered not less than ten nor more than
fifty days before the date thereof, either personally or by mail, by or at the
direction of the president or other person calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, the notice
shall be deemed to delivered when deposited in the United States mail addressed
to the shareholder at his address as it appears on the records of the
corporation, postage prepaid.
In the case of an annual or substitute annual meeting, the
notice of meeting need not specifically state the business to be transacted
thereat, unless it is a matter, other than election of directors, on which the
vote of shareholders is expressly required by law. In the case of a special
meeting, the notice of meeting shall specifically state the purpose or purposes
for which the meeting is called.
When a meeting is adjourned for thirty days or more, notice of
the adjourned meeting shall be given as in the case of an original meeting. When
a meeting is adjourned for less than thirty days in any one adjournment, it is
not necessary to give any notice of the adjourned meeting, other than by
announcement at the meeting at which the adjournment is taken.
Section 6. Voting Lists. At least ten days before each meeting of
shareholders, the secretary of the corporation shall prepare an alphabetical
list of the shareholders entitled to vote at such meetings, with the address of
and number of shares held by each, which list shall be kept on file at the
registered office of the corporation for a period ten days prior to such meeting
and shall be subject to inspection by any shareholder at any time during the
usual business hours. This list shall also be produced and kept open at the time
and place of the meeting and shall be subject to inspection by any shareholder
during the whole time of the meeting. This Section shall not apply at any time
there are fewer than six (6) shareholders.
Section 7. Quorum. The holders of a majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a quorum at meetings
of shareholders. If there is no quorum at the opening of a meeting of
shareholders, such meeting may be adjourned from time to time by the vote of a
majority of the shares voting on the motion to adjourn; and at any adjourned
meeting at which a quorum is present, any business may be transacted which might
have been transacted at the original meeting.
The shareholders at a meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
Section 8. Voting Shares. Each outstanding share having voting rights
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders.
Except in the election of directors, the vote of a majority of
the shares voted on any matter at a meeting of shareholders at which a quorum is
present shall be the act of the shareholders on that matter, unless the vote of
a greater number is required by law or by the charter or bylaws of this
corporation.
Voting on all matters except the election of directors shall
be by voice or by a show of hands, unless the holders of one-tenth of the shares
represented at the meeting shall, prior to the voting on any matter, demand a
ballot vote on that particular matter.
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Section 9. Action by Shareholders Without a Meeting.
A. Any action required by law, these Bylaws, or the
Articles of Incorporation of this corporation, to be
taken at any annual or special meeting of
shareholders of the corporation, or any action which
may be taken at any annual or special meeting of such
shareholders, may be taken without a meeting, without
prior notice, and without a vote, if consent in
writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not
less than the minimum number of votes that would be
necessary to authorize or take such action at a
meeting at which all shares entitled to note thereon
were present and voted.
B. Within ten (10) days after obtaining such
authorization by written consent, notice shall be
given to those shareholders who have not consented in
writing. Such notice shall fairly summarize the
material features of the authorized action, and, if
the action be a merger, consolidation, or sale or
exchange of assets for which dissenters rights are
provided by statute, the notice shall contain a clear
statement of the right of shareholders dissenting
therefrom to be paid the fair value of their shares
upon compliance with further provisions of such
statute regarding the rights of dissenting
shareholders.
ARTICLE III
Directors
Section 1. General Powers. The business and affairs of the corporation
shall be managed by the Board of Directors or by such executive committees as
the Board may establish pursuant to these Bylaws.
Section 2. Number, Term and Qualifications. The number of directors of
the corporation shall be two (2). Each director shall hold office until his
death, resignation, retirement, removal, disqualification or his successor is
elected and qualifies. Directors need not be residents of the State of Florida
or shareholders of the corporation.
Section 3. Election of Directors. Except as provided in Section 5 of
this Article, the directors shall be elected at the annual meeting of
shareholders; and those persons who receive the highest number of votes shall be
deemed to have been elected. If any shareholder so demands, election of
directors shall be by ballot.
Section 4. Removal. Directors may be removed from office with or
without cause by a note of shareholders holding a majority of the shares
entitled to vote at an election of directors. However, unless the entire board
is removed, an individual director may not be removed, if the number of shares
voting against the removal would be sufficient to elect a director, if such
shares were voted cumulatively at an annual election. If any directors are so
removed, new directors may be elected at the same meeting.
Section 5. Vacancies. A vacancy occurring in the Board of Directors may
be filled by a majority of the remaining directors, though less than a quorum,
or by the sole remaining director; but a vacancy created by an increase in the
authorized number of directors shall be filled only by election at an annual
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meeting or at a special meeting of shareholders called for that purpose. The
shareholders may elect a director at any time to fill any vacancy not filled by
the directors.
Section 6. Chairman. There may be a chairman of the Board of Directors
elected by the directors from their number at any meeting of the Board. The
chairman shall preside at all meetings of the Board of directors and perform
such other duties as may be directed by the Board.
Section 7. Compensation. The Board of Directors may compensate
directors for their services as such and may provide for the payment of all
expenses incurred by directors in attending regular and special meetings of the
Board.
ARTICLE IV
Meetings of Directors
Section 1. Regular Meetings. A regular meeting of the Board of
Directors shall be held immediately after, and at the same place as, the annual
meetings of shareholders. In addition, the Board of Directors may provide, by
resolution or agreement in writing, the time and place, either within or without
the State of Florida, for the holding of additional regular meetings.
Section 2. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of ht president or by all or any two
directors. Such meetings may be held within or without the State of Florida.
Section 3. Notice of Meetings. Regular meetings of the Board of
Directors may be held without notice.
The person or persons calling a special meeting of the Board
of Directors shall, at least two days before the meeting, give notice thereof by
any usual means of communication. Such notice need not specify the purpose for
which the meeting is called.
Attendance by a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called.
Section 4. Quorum. A majority of the directors fixed b y these Bylaws
shall constitute a quorum for the transaction of business at any meeting of the
Board of Directors.
Section 5. Manner of Acting. Except as otherwise provided in this
section, the act of the majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors.
The vote of a majority of the number of directors fixed by
these Bylaws shall be required to adopt a resolution constituting an executive
committee. The vote of a majority of the directors then holding office shall be
required to adopt, amend or repeal a bylaw or to adopt a resolution dissolving
the corporation without action by the shareholders. Vacancies in the Board of
Directors may be filled as provided in Article III, Section 5, of these Bylaws.
Section 6. Informal Action by Directors. Action taken by a majority of
the directors without a meeting is nevertheless board action, if written consent
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to the action in question is signed by all the directors and filed with the
minutes of the proceedings of the Board, whether done before or after the action
so taken.
ARTICLE V
Officers
Section 1. Number. The officers of the corporation shall consist of a
president, a secretary, a treasurer and such vice presidents, assistant
secretaries, assistant treasurers and other officers as the Board of Directors
may from time to time elect.
Any two or more offices may be held by the same person.
Section 2. Election and Term. The officers of the corporation shall be
elected by the Board of Directors. Such elections may beheld at any regular or
special meeting of the Board. Each officer shall hold office until his death,
resignation, retirement, removal, disqualification or his successor is elected
and qualifies.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board with or without cause; but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
Section 4. Compensation. The compensation of all officers of the
corporation shall be fixed by the Board of Directors.
Section 5. President. The president shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall supervise and control the management of the corporation in
accordance with these Bylaws.
He shall , when present, preside at all meetings of
shareholders. He shall sign, with any other proper officer, certificates for
shares of the corporation and any deeds, mortgages, bonds, contracts or other
instruments which may be lawfully executed on behalf of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be delegated by the Board
of Directors to some other officer or agent; and, in general, he shall perform
all duties incident to the office of president and such other duties as may be
prescribed by the Board of Directors form time to time.
Section 6. Vice President. The vice presidents, in the order of their
election, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of that office. In addition, they shall perform such duties and have such
other powers as the Board of Directors shall prescribe.
Section 7. Secretary. The secretary shall keep accurate records of the
acts and proceedings of all meetings of shareholders and directors. He shall
give all notices required by law and by these Bylaws. He shall have general
charge of the corporate books and records and of the corporate seal and he shall
affix the corporate seal to any lawfully executed instrument requiring it. He
shall have general charge of the stock transfer books of the corporation and
shall keep, at the registered or principal office of the corporation, a record
of shareholders, showing the name and address of each shareholder and the number
and class of the shares held by each. He shall sign such instruments as may
require his signature and, in general, shall perform all duties incident to this
office of secretary and such other duties as may be assigned to him from time to
time by the president or by the Board of Directors.
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Section 8. Treasurer. The treasurer shall have custody of all funds and
securities belonging to the corporation and shall receive, deposit or disburse
the same under the direction of the Board of Directors. He shall keep full and
accurate accounts of the finances of the corporation in books especially
provided for that purpose; and he shall cause a true statement of its assets and
liabilities as of the close of each fiscal year and of the results of its
operations and of changes in surplus for such fiscal year, all in reasonable
detail, including particulars as to convertible securities then outstanding, to
be made and filed at the registered or principal office of the corporation
within four months after the end of such fiscal year. The statement so filed
shall be kept available for inspection by any shareholder for a period of ten
years, and the treasurer shall mail or otherwise deliver a copy of the latest
such statement to any shareholder upon his written request therefor. The
treasurer shall, in general, perform all duties incident to his office and such
other duties as may be assigned to him from time to time by the president or by
the Board of Directors.
Section 9. Assistant Secretaries and Treasurers. The assistant
secretaries and assistant treasurers shall, in the absence or disability of the
secretary or the treasurer, respectively, perform the duties and exercise the
powers of those offices and they shall, in general, perform such other duties as
shall be assigned to them by the secretary or the treasurer, respectively, or by
the president or the Board of Directors.
Section 10. Bonds. The Board of Directors may, by resolution, require
any and all officers, agents and employees of the corporation to give bond to
the corporation, with sufficient sureties, conditioned on the faithful
performance of the duties of their respective offices or positions, and to
comply with such other conditions as may from time to time be required by the
Board of Directors.
ARTICLE VI
Contracts, Checks, Loans, Deposits
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument on behalf of the corporation and such authority may be general or
confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebted ness shall be issued in its name,
unless authorized by a resolution of the Board of Directors. Such authority may
be general or confined to specific instances.
Section 3. Checks and Drafts. All checks, drafts or other orders for
the payment of money issued in the name of the corporation shall be signed by
such officer or officers, agent or agents of the corporation and in such manner
as shall from time to time be determined by resolution of the Board of
Directors.
Section 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such depositories as the Board of Directors shall direct.
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ARTICLE VII
Certificates for Shares and Their Transfer
Section 1. Certificate for Shares. Certificates representing shares of
the corporation shall be issued, in such form as the Board of Directors shall
determine, to every shareholder for the fully paid shares owned by him. These
certificates shall be signed by the president or any vice president and the
secretary, assistant secretary, treasurer or assistant treasurer. The shall be
consecutively numbered or otherwise identified; and the name and address of the
persons to whom they are issued, with the number of shares and date of issue
shall be entered on the stock transfer books of the corporation.
Section 2. Transfer of Shares. Transfer of shares shall be made on the
stock transfer books of the corporation only upon surrender of the certificates
for the shares sought to be transferred by the record holder thereof or by his
duly authorized agent, transferee or legal representative. All certificates
surrendered for transfer shall be cancelled before new certificates for the
transferred shares shall be issued.
Section 3. Closing Transfer Books and Fixing Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof or entitled to receive
payment of any dividend or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors may provide that the stock
transfer books shall be closed for a stated period, but not to exceed, in any
case, fifty days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten days immediately
preceding such meeting.
In lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date as the record date for any such
determination of shareholders, such record date in any case to be not more than
fifty days and, in case of a meeting of shareholders, not less than ten days
immediately preceding the date on which the particular action, requiring such
determination of shareholders, is to be taken.
If the stock transfer books are not closed and no record date
is fixed for the determination of shareholders entitled to notice of or to vote
at a meeting of shareholders or shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders.
Section 4. Lost Certificates. The Board of Directors may authorize the
issuance of anew share certificate in place of a certificate claimed to have
been lost or destroyed, upon receipt of an affidavit of such fact from the
person claiming the loss or destruction. When authorizing such issuance of a new
certificate, the Board may require the claimant to give the corporation a bond
in such sum as it may direct to indemnify the corporation against the loss from
any claim with respect to the certificate claimed to have been lost or destroyed
or the Board of Directors may, by resolution reciting that the circumstances
justify such action, authorize the issuance of the new certificate without
requiring such a bond.
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ARTICLE VIII
General Provisions
Section 1. Dividends. The Board of Directors may from time to time
declare and the corporation may pay dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and by its charter.
Section 2. Seal. The corporate seal of the corporation shall be the
following impression:
Section 3. Waiver of Notice. Whenever any notice is required to be
given by any shareholder or director by law or under the provisions of the
charter or Bylaws of this corporation, a waiver thereof in writing signed by the
person or persons entitled to such notice whether before or after the time
stated therein, shall be equivalent to the giving of such notice.
Section 4. Fiscal Year. The fiscal year of the corporation shall be as
determined by the Board of Directors.
Section 5. Amendments. Except as otherwise provided herein, these
Bylaws may be amended or repealed and new bylaws may be adopted by the
affirmative vote of a majority of the directors then holding office at any
regular or special meeting of the Board of Directors.
The Board of Directors shall have no power to adopt a bylaw:
(1) requiring move than a majority of the voting shares for a quorum at a
meeting of shareholders or more than a majority of the votes cast to constitute
actin by the shareholders, except where higher percentages are required by law;
(2) providing for the management of the corporation otherwise than by the Board
of Directors or its executive committees; (3) increasing or decreasing the
number of directors; (4) classifying and staggering the election of directors.
No bylaws adopted or amended by the shareholders shall be
altered or repealed by the Board of Directors.
The foregoing Bylaws were duly adopted by the Board of Directors of
LUDLUM CONSTRUCTION CO., INC., this 13th day of December, 1992.
------------------------------------
Bonnie Ludlum, Secretary
Original signature on file
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