UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[xx] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 33-26782-NY
U.S. Bridge Corp.
(Exact name of registrant as specified in its charter)
Delaware 11-2974406
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
53-09 97th Place, Corona, New York 11368
(Address of principal executive offices) (Zip Code)
(718) 699-0100
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (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 [xx] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Common stock, par value $.001 per share: 6,412,530 shares outstanding as of
September 30, 1996.
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U.S. BRIDGE CORP.
INDEX
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PART 1 - FINANCIAL INFORMATION:
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Balance Sheets September 30, 1996 (Unaudited)
and June 30, 1996 F-1
Consolidated Statements of Operations (Unaudited) for the
Three Months Ended September 30, 1996 and 1995 F-2
Consolidated Statement of Stockholders' Equity (Unaudited) for
the Three Months Ended September 30, 1996 F-3
Consolidated Statements of Cash Flows (Unaudited) for the
Three Months Ended September 30, 1996 and 1995 F-4
Notes to consolidated Financial Statements F-5 - F-14
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS F-15 - F-18
PART II - OTHER INFORMATION F-19
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U.S. BRIDGE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, June 30,
1996 1996
------------------ --------------
ASSETS
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Current assets:
Cash $282,436 $399,652
Contracts and retainage receivable, net 4,376,467 3,613,665
Costs and estimated earnings in excess of billings
on uncompleted contracts 2,924,633 2,433,524
Other current assets 131,828 55,116
------------------ ------------------
Total current assets 7,715,364 6,501,957
Property and equipment, net 2,997,090 3,042,090
Deferred Compensation 33,000 33,000
Deferred consulting costs, net 320,833 239,583
------------------ ------------------
Total assets $11,066,287 $9,816,630
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, including cash overdrafts of $45,679
as of September 30, 1996 $1,452,059 $936,445
Accrued expenses 452,729 397,729
Payroll taxes payable 446,564 382,135
Mortgage payable 2,735,531 2,735,531
Notes payable 145,837 145,837
Billings in excess of costs and estimated earnings
on uncompleted contracts - 16,567
Due to officer 578,279 358,779
------------------ ------------------
Total current liabilities 5,810,999 4,973,023
-1---------------- ------------------
Minority interest 2,612,048 2,409,028
Commitments and contingencies (Note 7) - -
Stockholders' equity:
Preferred stock, authorized 10,000,000, issued and outstanding
-0- shares - -
Common stock, $.001 par value, authorized 50,000,000 shares,
issued and outstanding 6,412,530 6,016 5,766
Additional paid-in capital 2,790,752 2,641,002
Accumulated deficit (153,528) (212,189)
------------------ ------------------
Total stockholders' equity 2,643,240 2,434,579
------------------ ------------------
Total liabilities and stockholders' equity $11,066,287 $9,816,630
================== ==================
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See notes to consolidated financial statements (unaudited).
F-1
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U.S. BRIDGE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
1996 1995
------------ -----------
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Revenue:
Contract revenues $3,176,051 $1,626,893
Rental income - 82,000
----------------- ---------------
Total revenue 3,176,051 1,708,893
----------------- --------------
Costs and expenses:
Cost of contract revenues 2,169,713 998,504
General and administrative expenses 668,411 686,847
----------------- ---------------
Total costs and expenses 2,838,124 1,685,351
----------------- ---------------
Income from operations before interest expense/financing
costs, minority interest and provision for income taxes 337,927 23,542
Interest expense/financing costs 76,246 602,693
----------------- ---------------
Income (loss) before minority interest and
provision for income taxes 261,681 (579,151)
Minority interest in net (income) loss (203,020) 263,317
----------------- ---------------
Net income (loss) before provision for income taxes 58,661 (315,834)
Provision for income taxes - -
----------------- -------------
Net income (loss) $58,661 $(315,834)
================= ===============
Net income (loss) per common equivalent share
Income (loss) from operations before minority interest
and provision for income taxes $.04 $(.09)
----------------- ---------------
Minority interest in net (income) loss $(.03) $ .04
----------------- ---------------
Provision for income taxes $- $ -
----------------- -------------
Net income (loss) $.01 $ (.05)
================= ===============
Weighted average number of common shares outstanding 6,237,530 6,112,530
================= ===============
</TABLE>
See notes to consolidated financial statements (unaudited).
F-2
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U.S. BRIDGE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
Common
stock
Additional Total
paid-in Accumulated Stockholders'
Shares Amount capital deficit equity
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Balances at July 1, 1996 6,162,530 $5,766 $2,641,002 $(212,189) $2,434,579
Issuance of common stock as
consideration 250,000 250 149,750 - 150,000
Net income for the three months ended
September 30, 1996 - - - 58,661 58,661
------------ --------- ----------- ------------ -------------
Balances at September 30, 1996 6,412,530 $6,016 $2,790,752 $(153,528) $2,643,240
============ ========= =========== ============ =============
</TABLE>
See notes to consolidated financial statements (unaudited)
F-3
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U.S. BRIDGE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
1996 1995
--------------------- ---------------
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Operating activities:
Net income (loss) $58,661 $(315,834)
Adjustments to reconcile net income to net cash (used) for operating activities:
Depreciation and amortization 45,000 45,000
Amortization of consulting costs 68,750 62,500
Issuance of common stock as consideration for services - 16,500
Amortization of financing costs - 441,863
Minority interest in net income (loss) 203,020 (263,317)
Changes in operating assets and liabilities:
Accounts receivable (762,802) (460,513)
Prepaid expenses - (114,162)
Costs and estimated earnings in excess of
billing on uncompleted contracts (491,109) (278,355)
Other current assets (76,712) 16,593
Accounts payable 515,614 197,815
Accrued expenses 55,000 (238,934)
Payroll taxes payable 64,429 12,611
Billings in excess of costs and estimated earnings
on uncompleted contracts (16,567) 69,614
Income taxes payable - 628
------------------ ------------------
Net cash (used) for operating activities (336,716) (807,991)
------------------ ------------------
Financing activities:
Deferred offering costs charged to additional paid in capital - 103,554
Proceeds from initial public offering - 4,008,072
Costs associated with initial public offering - (903,820)
Proceeds from officer 219,500 -
Principal payments on mortgage payable - (28,785)
Repayment of notes payable - (1,071,999)
Repayment of officers' loans - (1,525)
------------------ ------------------
Net cash provided by financing activities 219,500 2,105,497
------------------ ------------------
Net (decrease) increase in cash (117,216) 1,297,506
Cash, beginning 399,652 206,246
------------------ ------------------
Cash, ending $282,436 $1,503,752
================== ==================
Supplemental disclosure of cash flow information: Cash paid during the three
months for:
Interest $- $54,976
================== ==================
Supplemental disclosure of non-cash investing and financing activities:
Issuance of common stock in connection
with services provided to the Company $150,000 $49,500
================== ==================
</TABLE>
See notes to consolidated financial statements (unaudited).
F-4
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U.S. BRIDGE CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 1 - GENERAL
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-QSB. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management the consolidated interim financial statements include all adjustments
necessary in order to make the consolidated financial statements not misleading.
The results of operations for the three months ended is not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the Company's audited consolidated financial statements
and footnotes thereto at June 30, 1996, included in the Company's Annual Report
Form 10K- SB, filed with the Securities and Exchange Commission.
U.S. Bridge Corp. "the Company" was incorporated in the State of Delaware
on September 11, 1988 under the name of Colonial Capital Corp. The Company
subsequently changed its name to Cofis International Corp. ("Cofis") during May
1991. Effective April 1994, in connection with its recapitalization, (See Note
6a) Cofis changed its name to U.S. Bridge Corp.
U.S. Bridge of N.Y. Inc. ("US Bridge NY") is a New York Corporation and as
of September 30, 1996 is a 50.1% owned subsidiary of the Company which provides
steel erection to contractors pursuant to governmental construction projects.
The Company's ownership in US Bridge NY was diluted to a 50.1% as a result of
the public offering completed on August 14, 1995. US Bridge NY was incorporated
on September 4, 1990.
One Carnegie Court Associates, Ltd. "One Carnegie", was incorporated in the
State of Maryland and is a wholly owned subsidiary of the Company. One Carnegie
was incorporated on December 14, 1990 for the purposes of acquiring on January
14, 1991, land, building, machinery and equipment. One Carnegie rented said
facilities to an affiliate under terms pursuant to a signed lease agreement.
(See Note 8d).
On September 21, 1994, the Company formed a wholly owned subsidiary named
U.S. Bridge of Maryland Corp. ("US Bridge MD"). US Bridge MD was incorporated in
the State of Delaware for the purpose of providing material and labor to perform
fabrication work for US Bridge of NY.
Effective April 1994, the Company has adopted a new fiscal year that ends
on June 30 which is the same year end date as its subsidiaries. In connection
therewith, the Company has and will report its operations at September 30, 1996
and 1995 for the three months then ended, respectively, in order to correspond
with its operating subsidiaries.
The consolidated financial statements at September 30, 1996 and 1995
include the accounts of the Company and its majority owned subsidiaries, US
Bridge NY, One Carnegie and US Bridge MD, after elimination of all significant
intercompany transactions and accounts.
F-5
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U.S. BRIDGE CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 2 - PAYROLL TAXES
During September 1994, US Bridge NY entered into an installment agreement
with the Internal Revenue Service in order to liquidate delinquent payroll taxes
of approximately $231,535 and remove a tax lien filed by such authority. The
agreement requires US Bridge NY to pay $25,000 per month until such amount is
fully paid. As per the terms of the agreement, US Bridge NY must also pay timely
all current payroll taxes. As of September 30, 1996, US Bridge NY has not made
all the required $25,000 monthly payments and has not paid timely all current
payroll taxes. Consolidated payroll taxes payable amounted to $446,564 at
September 30, 1996.
NOTE 3 - NOTE PAYABLE
During August 1994, the Company secured a $250,000 credit line with a bank
at an interest rate of one and one half percent (11/2%) above the prime rate.
Interest is payable on the first day of each month which commenced October 1,
1994. Said credit line is payable on demand. At September 30, 1996 the balance
was $145,837.
NOTE 4 - MORTGAGE PAYABLE
On October 12, 1995, in connection with the original acquisition of the
property and equipment, One Carnegie signed with the lender a letter agreement
revising the modification agreement discussed below. Pursuant to such letter
agreement, One Carnegie was in default as of September 30, 1996. Accordingly,
the mortgage has been classified as current at September 30 and June 30, 1996,
since One Carnegie has not paid the required monthly installments timely as
stipulated in the letter agreement thereby allowing the lender to call the loan
at anytime.
On December 13, 1994, One Carnegie signed a modification to the first
forbearance agreement with the lender. Pursuant to such modification agreement,
the lender agreed not to accelerate and demand full payment of the note and
allowed One Carnegie to reduce the monthly payments to $40,000 pursuant to a new
two (2) year amortization schedule provided by the lender. Such modification
agreement required One Carnegie to make timely payments after December 31, 1994,
which One Carnegie did not make timely.
The above terms had been previously modified as follows. On February 1,
1991, One Carnegie originally entered into a $3,000,000 installment loan with
interest at 11% per annum through November 1994, with interest increasing to 13%
per annum in December 1994; monthly payments including interest of $50,000
through November 1993, increasing to $60,000 in December 1993 and increasing to
$177,430 on December 14, 1994 until January 15, 1996, the due date of the loan.
The mortgage is collateralized by all property and equipment of One Carnegie and
is personally guaranteed by the majority stockholder of the Company and an
entity owned by such stockholder.
F-6
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U.S. BRIDGE CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 4 - MORTGAGE PAYABLE (Cont'd)
On October 21, 1993, One Carnegie signed the first Forbearance Agreement
staying foreclosure and restructuring the terms under the above original
mortgage agreement. The respective terms under said agreement required One
Carnegie to make monthly payments of $50,000 to October 14, 1994, a $60,000
payment on November 14, 1994, and monthly payments of $177,430 thereafter until
maturity on January 15, 1996. Interest is payable at 11% per annum. Upon the
earlier to occur of October 14, 1994 or a public or private issuance by One
Carnegie of either equity or debt with a term of three (3) years or more
(including sale/leaseback or other off balance sheet financing), or any
combination thereof, One Carnegie was required to pay to the mortgagor the
amount sufficient to pay in full all interest then accrued and unpaid on the
Indebtedness and to reduce the outstanding principal amount of the indebtedness
to $2,331,965 which is the amount that would have been outstanding on such date
had One Carnegie timely made all of the payments based on the original mortgage
agreement. Pursuant to such forbearance agreement, the Mortgagor may terminate
immediately, irrevocably and without notice such forbearance agreement if One
Carnegie defaults on such terms.
One Carnegie did not make the required payment on October 14, 1994 to
reduce the outstanding principal amount of the indebtedness to $2,331,965
pursuant to such forbearance agreement. The lender did not but could have
accelerated and demanded the total balance due under the note and could
terminate the forbearance agreement immediately, irrevocably and without notice.
NOTE 5 - MINORITY INTEREST
In connection with the initial public offering of US Bridge NY, the
Company's ownership percentage in US Bridge NY was reduced to 49.95% before the
exercise of the special warrant as discussed in Note 6g. Accordingly, at
September 30, 1996 the Company's minority interest amounting to $2,612,048
represents the effect of US Bridge NY's private offering and the initial public
offering and the cumulative effect of US Bridge NY's operations since the
private offering and initial public offering.
NOTE 6 - STOCKHOLDERS' EQUITY
a) Recapitalization
On April 25, 1994, after giving effect to a 1-for-4 reverse stock split,
the Company issued 2,820,000 and 720,000 shares, respectively, of its common
stock to the stockholders of US Bridge NY and One Carnegie in exchange for all
of their issued and outstanding shares.
The acquisition by the Company has been treated as a recapitalization for
accounting purposes. Accordingly, after such transaction and before US Bridge
NY's private offering and initial public offering, US Bridge NY was a wholly
owned subsidiary of the Company. As of September 30, 1996 US Bridge NY is a
50.01% owned subsidiary and One Carnegie is a wholly owned subsidiary of the
Company.
F-7
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U.S. BRIDGE CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 6 - STOCKHOLDERS' EQUITY (Cont'd)
b) Amendment to Certificate of Incorporation of US Bridge NY
On January 11, 1995, US Bridge NY amended its Certificate of Incorporation
to (i) change its name from Metro Steel Structures, Ltd., to U.S. Bridge of
N.Y., Inc., (ii) increase the number of authorized common shares from 200 at no
par value to 10,000,000 shares at $.001 par value and (iii) to authorize the
issuance of 500,000 preferred shares at $.01 par value of which 400,000 of such
shares have been designated as Series A. The Series A Preferred Shares shall
have the right to vote at all meetings of the stockholders of US Bridge NY, or
consent in writing in lieu of voting, or otherwise, in respect to any matter
upon which the vote, or consent in lieu of voting of the shareholders is
required, including, without limitation, the election of directors. Each share
of Series A Preferred Stock shall be entitled to ten (10) votes. No preferred
shares have been issued to date. In connection with the amendment of its
Certificate of Incorporation, US Bridge NY effected 29,687.50 for one forward
split of its old no par value common shares.
c) Bridge Loan of US Bridge NY
On January 10, 1995, pursuant to a private transaction, US Bridge NY sold
to one (1) individual 10 units comprising one (1) promissory note totaling
$252,000 and 3,000,000 warrants purchased for $30,000 which provide for the
right to acquire 3,000,000 common shares. The warrants are exercisable under the
same term as the IPO warrants. Each unit is comprised of a $25,200 12%
promissory note and 300,000 warrants for $3,000 for a total price of $28,200 per
unit. The promissory note was due and payable on the earlier of (i) the
consummation of a public offering or private financing through the sale of
equity securities from which US Bridge NY receives net proceeds equal to or
greater than $1,000,000 or (ii) 12 months from issuance. Accordingly, upon the
completion of its initial public offering on August 14, 1995, such note was
repaid in full in addition to $17,813 of accrued interest.
d) Private offering of US Bridge NY
On January 16, 1995 the Underwriter commenced and privately offered on a
best-efforts basis, sixteen (16) units of US Bridge NY's securities at a price
of $55,000 per unit. Each unit consisted of a promissory note in the principal
amount of $45,000 bearing interest at 12% per annum, and 10,000 shares of common
stock at $1.00 per share. The 160,000 shares sold in this offering were assigned
a value of 100% of the initial public offering price of $5.00 per share. In
relation to the common stock sold in the offering, US Bridge NY recorded
deferred financing costs of $640,000 (160,000 shares at $5.00 per share less
original cost of $1.00 per share). Deferred financing costs were amortized over
the due date or the term of the notes of twelve (12) months. The holders of such
shares have registered their shares in US Bridge NY's initial public offering.
F-8
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U.S. BRIDGE CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 6 - STOCKHOLDERS' EQUITY (Cont'd)
e) Initial public offering of US Bridge NY
On August 14, 1995 US Bridge NY successfully completed its public offering.
As a result, US Bridge NY sold 791,850 shares which included 91,850 shares in
connection with the exercise of the underwriter's over-allotment options and
494,500 warrants which included 64,500 warrants pursuant to the underwriter's
over-allotment option. US Bridge NY yielded a total net proceeds of $2,077,903
after deducting underwriter selling expenses and expense allowance, repayment of
bridge loans and promissory notes and related accrued interest to the bridge
lenders and private investors, and the pre-payment of the first two year's
financial consulting agreement with the underwriter. Simultaneously with the
offering, US Bridge NY charged all deferred offering costs incurred to
additional paid-in capital which totalled $903,820.
Upon the closing of the sale of the Shares and Warrants offered, US Bridge
NY sold to the underwriter individually and not as a representative of the
Underwriters, warrants to purchase 70,000 common shares and 43,000 Warrants
exercisable for a period of four years commencing one year after the IPO
effective date (August 9, 1995) at 120% of the initial offering price.
f) Issuance of shares
i) On August 15, 1995, the Company issued 150,000 shares of common stock to
its President pursuant to the terms of the Company's Senior Management Incentive
Plan. Such shares were issued as compensation for the President's efforts with
the Company and US Bridge NY in the consummation of US Bridge NY's initial
public offering on August 14, 1995. Of the total 150,000 shares issued to the
President, 50,000 shares are immediately vested without restrictions and the
remaining 100,000 shares vest pursuant to the restricted periods, whereby 50,000
shares vest on each August 15, 1996 and 1997.
F-9
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U.S. BRIDGE CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 6 - STOCKHOLDERS' EQUITY (Cont'd)
f) Issuance of shares (Cont'd)
(ii) On June 16, 1995 pursuant to Form S-8 Registration Statement filed
with Securities and Exchange Commission the Company registered and issued
500,000 shares to a broker dealer as consideration for a two year consulting
agreement. Pursuant to the consulting agreement, the consultant will serve as a
financial consultant and advisor to the Company on a non-exclusive basis for a
period of twenty-four (24) months commencing on June 1, 1995. Of the total
500,000 shares issued to the consultant, 250,000 of such shares were to be held
in escrow and released to the consultant upon the approval of the Company's
common stock on NASDAQ. The Company had also agreed that upon NASDAQ approval,
an additional 100,000 shares of restricted stock were to be issued to the
consultant. Pursuant to a consent of the Board of Directors, the company amended
such consulting agreement whereby such shares in escrow were released to such
consultant during February 1996 even though the Company was not listed on NASDAQ
until July 25, 1996. Lastly, the Board of Directors further amended the
consulting agreement to increase the additional number of shares from 100,000 to
250,000. Accordingly during August 1996, the Company issued 250,000 restricted
shares to such consultant.
g) Special Warrant
On September 9, 1995, the Company purchased at $2.50 per share 5,665 common
shares of US Bridge NY be exercising its right pursuant to the terms of a
special warrant issued only to such stockholder. As a result, the Company
increased its ownership of US Bridge NY to 50.01% from 49.95%.
NOTE 7 - COMMITMENT AND CONTINGENCIES
a) Lease agreement
US Bridge NY leases its administrative offices and storage space pursuant
to a signed lease agreement with an affiliate owned by the Company's President.
Such lease requires monthly payments of $20,000 and expires on March 31, 1998.
Under such lease agreement, US Bridge NY is required to make future minimum
lease payments as follows:
Year Ending
June 30,
1997 180,000
1998 180,000
- ---------------
Total $360,000
===============
U.S. Bridge NY also leases a yard for storage of material pursuant to an
oral agreement with an unrelated party which requires monthly payments of
$3,500. Accordingly, included in general and administrative expenses is rent
expense which amounted to $70,500 for the three months ended September 30, 1996
and 1995.
F-10
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U.S. BRIDGE CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 7 - COMMITMENT AND CONTINGENCIES (Cont'd)
b) Significant vendors
For the three months ended September 30, 1996 and 1995, US Bridge NY
and $14,000, respectively, of the materials and labor necessary to perform steel
erection services. Effective August 1, 1995, Waldorf ceased operations. Lastly,
for the three months ended September 30, 1996 and 1995, U.S. Bridge N.Y. paid
$166,000 and $200,000 respectively to U.S. Bridge of Maryland, Inc. ("US Bridge
MD") for certain materials and labor necessary to perform steel erection
services. US Bridge MD is a wholly owned subsidiary of the Company. Amounts
payable related to all of such transactions and included in accounts payable
total $102,000 at September 30, 1996. Such amounts are non-interest bearing
obligations. Said vendors are under the common control of the Company's majority
stockholder.
c) Seasonality
US Bridge NY operates in an industry which may be seasonal, generally due
to inclement weather occurring during the winter months. Accordingly, the
Company may experience a seasonal pattern in its operating results with lower
revenue in the third quarter of each fiscal year. Quarterly results may also be
affected by the timing of bid solicitations by governmental authorities, the
stage of completion of major projects and revenue recognition policies.
d) Bonding requirements
US Bridge NY is required to provide bid and/or performance bonds in
connection with governmental construction projects. To date, US Bridge NY has
been able to sufficiently obtain bonding up to $10,000,000 per job for its
private projects. US Bridge NY is continuously pursuing obtaining bonding for
its governmental construction projects. In addition, new or proposed legislation
in various jurisdictions may require the posting of substantial additional bonds
or require other financial assurances for particular projects.
e) Payroll Taxes
During September 1994, US Bridge NY entered into an installment agreement
with the Internal Revenue Service in order to liquidate delinquent payroll taxes
of approximately $231,535 and remove a tax lien filed by such authority. The
agreement requires US Bridge NY to pay $25,000 per month until such amount is
fully paid. As per the terms of the agreement, US Bridge NY must also pay timely
all current payroll taxes. As of September 30, 1996, US Bridge NY has not made
all the required $25,000 monthly payments and has not paid timely all current
payroll taxes. Consolidated payroll taxes payable amounted to $446,564 at
September 30, 1996.
F-11
<PAGE>
U.S. BRIDGE CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 8 - RELATED PARTY TRANSACTIONS
a) Purchase of material and labor
For the three months ended September 30, 1996 and 1995, US Bridge NY
purchased from Waldorf Steel Fabrications, Inc. ("Waldorf") approximately $ -0-
and $14,000, respectively, of the materials and labor necessary to perform steel
erection services. Effective August 1, 1995, Waldorf ceased operations. Lastly,
for the three months ended September 30, 1996 and 1995, U.S. Bridge N.Y. paid
$166,000 and $200,000 respectively to U.S. Bridge of Maryland, Inc. ("US Bridge
MD") for certain materials and labor necessary to perform steel erection
services. US Bridge MD is a wholly owned subsidiary of the Company. Amounts
payable related to all of such transactions and included in accounts payable
total $102,000 at September 30, 1996. Such amounts are non-interest bearing
obligations. Said vendors are under the common control of the Company's majority
stockholder.
b) Rent expense
Included in general and administrative expenses is rent expense paid
pursuant to a signed lease agreement with a Company owned by the Company's
majority stockholder. Such rent amounted to $60,000 for the three months ended
September 30, 1996 and 1995, respectively.
c) Employment agreement
On April 4, 1995, US Bridge NY entered into an employment agreement with
its President and Director for a term of approximately three (3) years expiring
on June 30, 1998. The employment agreement provides for an annual salary of
$300,000 with a 10% annual escalation. Pursuant to the agreement, the President
and Director is also entitled to receive a $50,000 per year non-accountable
expense allowance payable in equal weekly installments. The President and
Director is also entitled to receive an annual bonus of $50,000 if US Bridge NY
nets $1,000,000 before taxes in any year and an additional $25,000 for each
$500,000 of additional pre-tax profits. Advances against such bonus are equal to
$10,000 payable monthly until the end of the employment agreement, at such time
any excess advances will be re-paid to US Bridge NY. No advances have been made
as of September 30, 1996.
F-12
<PAGE>
U.S. BRIDGE CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 8 - RELATED PARTY TRANSACTIONS (Cont'd)
c) Employment agreement (Cont'd)
In addition, the President and Director will be granted options to purchase
25,000 shares of US Bridge NY's common stock, all of which options shall be
vested as of the dates outlined as follows. The options shall be exercisable
commencing April 4, 1996 and continuing until April 4, 2004; providing, however,
options to purchase 7,500 shares shall become vested and exercisable on April 4,
1996 and April 4, 1997, respectively, 10,000 vesting on April 4, 1998. The
option shall contain such other terms and conditions as set forth in the stock
option agreement. The exercise price of the options shall be equal to the 110%
of the stock price in the initial public offering. The foregoing options are
intended to qualify as incentive stock options. Lastly, US Bridge NY, pursuant
to such agreement will pay premiums on a $3,500,000 life insurance policy for
the benefit of individuals as directed by such President and Director. Any cash
surrender value is US Bridge NY's property until the employment agreements ends.
The estimated premium on such policy is $80,000 per year.
d) Rental income
On July 1, 1991, One Carnegie leased to Waldorf Steel Fabricators Inc.,
"Waldorf", an affiliate owned by the Company's majority stockholder, the
facilities it purchased in January 1991. Such lease is for five (5) years and
provides for monthly rental payments of $50,000. Pursuant to such lease
agreement, any funds collected in excess of the total annual rent of $600,000 is
to be credited to the next respective subsequent year. The lease also provides
for all real estate taxes and operating costs to be paid directly by the lessee.
All of the rental income for the three months ended September 30, 1995 was
derived and the entire rent receivable balance of $943,399 as of September 30,
1996 and June 30, 1996 is due from Waldorf. The Company has made a $943,399
provision related to such receivables as of June 30, 1995. Pursuant to an
assignment agreement entered during 1994, Waldorf has assigned all of its
rights, title and interests in certain accounts receivable amounting to $571,172
to One Carnegie as collateral to secure the amounts owed to One Carnegie.
On August 1, 1995 Waldorf canceled its facilities operating lease with One
Carnegie and entered into a lease surrender agreement. Pursuant to such
agreement, Waldorf surrendered the premises and waived any and all rights to the
possession of such premises. Simultaneously, One Carnegie entered into a lease
agreement with US Bridge MD. Such lease expires on December 31, 2001 and
provides for monthly rental payments of $50,000. The lease also provides for all
real estate taxes and operating costs to be paid directly by US Bridge MD. For
the three months ended September 30, 1995, the Company recorded $82,000 of
rental income from Waldorf representing $50,000 of rent for the month of July
1995 and $32,000 as a recovery of previously reserved uncollectible rent
receivable. All rental activities subsequent to August 1, 1995 have been
eliminated in consolidations since US Bridge of MD is a wholly owned subsidiary
of the Company.
F-13
<PAGE>
U.S. BRIDGE CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 8 - RELATED PARTY TRANSACTIONS (Cont'd)
e) Due to Officer
On May 13, 1996, an unrelated party loaned the Company's President $300,000
pursuant to a memorandum of understanding. The loan bears interest at 1% above
prime, and its due 90 days from receipt of funds. Simultaneously therewith, the
Company's President loaned the Company the $300,000. As collateral for the loan,
550,000 shares of the Company's common stock owned by the President were put in
an escrow account. Upon the Company being listed on NASDAQ, the Company will
liquidate such loan by releasing 400,000 shares from the escrow account to such
unrelated party pursuant to Regulation "S" under the Securities Act of 1933, as
amended. Accordingly, during September 1996, the Company released 400,000 to
such unrelated party for satisfaction of the loan.
Additionally, the Company's President issued to such unrelated party an
option to purchase 600,000 share at $1.50 per share from the day the funds are
received until 6 months after the Company attains NASDAQ listing. The option may
be exercised at any time within the exercise period subject to a minimum bid
prize of $3 per share. Lastly, the Company's President may borrow an additional
$100,000 under the same terms as discussed above for a period of 30 days.
As of September 30, 1996, of the total due to officer amounting to
$578,279, $267,500 represents the remaining amount owed for the original
$300,000 loan and the remaining balance amounting to $310,779 represents
advances made by the President to the Company's subsidiaries which bear no
interest and are due on demand.
F-14
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
On April 25, 1994, after giving effect to a 1-for-4 reverse stock split,
the Company issued 2,820,000 and 720,000 shares, respectively, of its common
stock to the stockholders of US Bridge NY and One Carnegie in exchange for all
of their issued and outstanding shares.
The acquisition by the Company has been treated as a recapitalization for
accounting purposes. Accordingly, after such transaction and before US Bridge
NY's private offering and initial public offering, US Bridge NY was a wholly
owned subsidiary of the Company. As of September 30, 1996 US Bridge NY is a
50.01% owned subsidiary and One Carnegie is a wholly owned subsidiary of the
Company.
On September 21, 1994, the Company formed a wholly owned subsidiary named
U.S. Bridge of Maryland Corp. ("US Bridge MD"). US Bridge MD was incorporated in
the State of Delaware for the purpose of providing material and labor to perform
fabrication work for US Bridge of NY.
One Carnegie Court Associates, Ltd. "One Carnegie", was incorporated in the
State of Maryland and is a wholly owned subsidiary of the Company. One Carnegie
was incorporated on December 14, 1990 for the purposes of acquiring on January
14, 1991, land, building, machinery and equipment. One Carnegie rented said
facilities to an affiliate under terms pursuant to a signed lease agreement.
The following Management's discussion and analysis for the three months
ended September 30, 1996 and 1995 are that of the Company's subsidiaries since
the Company itself did not have any material operations of its own.
RESULTS OF OPERATIONS
Three months ended September 30, 1996 as compared to three months ended
September 30, 1995.
US Bridge NY was formed by Joseph Polito, its President, to serve primarily
as a general contractor for public and private sector construction projects. The
public sector projects are sponsored by Federal, State and local Government
authorities in New York State and the Metropolitan areas. Previously, Mr.
Polito, through other entities, furnished and provided steel erection as a
subcontractor for private and governmental construction projects. From its
commencement of operations in June 1993, US Bridge NY provided steel erection
services for building, roadway and bridge repair projects for general contracts
who have been engaged by private and municipal/government clients.
In order for US Bridge NY to obtain and maintain bonding, it must adhere to
the requirements stipulated in the bonding agreements which vary with each
bonding company. The bonding costs for each bond are incorporated in the
contract price of each job. These costs are carried as a line item in the
requisition and paid by the customer. Any monies taken from the working capital
for this purpose will be replaced as the monthly requisition payments are
received from the customer. Bonding requirements vary depending upon the nature
of the projects to be performed.
F-15
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Cont'd)
RESULTS OF OPERATIONS (Cont'd)
Three months ended September 30, 1996 as compared to three months ended
September 30, 1995. (Cont')
US Bridge NY is required to provide bid and/or performance bonds in
connection with governmental construction projects. To date, US Bridge NY has
been able to sufficiently obtain bonding up to $10,000,000 per job for its
private projects. US Bridge NY is continuously pursuing obtaining bonding for
its governmental construction projects. In addition, new or proposed legislation
in various jurisdictions may require the posting of substantial additional bonds
or require other financial assurances for particular projects.
In the New York Metropolitan area, there are an abundance of subcontractors
known to the US Bridge NY who have significant experience and are competitive
with respect to pricing and level of service. US Bridge NY will be responsible
for performance of the entire contract, including the work done by
subcontractors. Accordingly, US Bridge NY may be subject to substantial
liability if a subcontractor fails to perform as required. Also there may be
unanticipated difficulties in hiring and overseeing subcontractors that US
Bridge NY is currently not aware of. In the event the bonding company pays a
claim related to a subcontractor's non-performance or similar event, the bonding
company has recourse against US Bridge NY. US Bridge NY requires bonding from a
New York licensed bonding company in order to bid on projects as a general
contractor.
Though US Bridge NY does not believe its business is seasonal, its
operations are generally slow in the winter months due to the decrease in worker
productivity due to weather conditions. Accordingly, US Bridge NY may experience
a seasonal pattern in its operating results with lower revenue in the third
quarter of each fiscal year. Interim results may also be affected by the timing
of bid solicitation, the stage of completion of major projects and revenue
recognition policies.
The Company's operations are substantially controlled by Mr. Polito since
he owns approximately 69.5% of the outstanding shares and may be considered the
beneficial owner of the shares of US Bridge NY. Mr. Polito is also a 100%
shareholder of R.S.J.J. Realty Corp. ("RSJJ"). RSJJ leases the administrative
offices and storage space to US Bridge NY at a cost of $20,000 per month
pursuant to a signed lease agreement expiring on March 31, 1998. Lastly, Mr.
Polito has ownership interests in Waldorf Steel Fabricators, Inc. (which ceased
operations on August 1, 1995), Crown Crane, Inc., Atlas Gem Leasing, Inc., Atlas
Gem Erectors Co., Inc. and Gem Steel Erectors.
F-16
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Cont'd)
RESULTS OF OPERATIONS (Cont'd)
Three months ended September 30, 1996 as compared to three months ended
September 30, 1995. (Cont')
US Bridge NY recognizes revenue under the percentage of completion method.
Cost of contract revenues include all direct material and labor costs and those
indirect costs related to contract performance. The asset, costs and estimated
earnings in excess of billings on uncompleted contracts, represents costs and
estimated earnings in excess of amounts billed through September 30, 1996.
Billings in excess of costs and estimated earnings on uncompleted contracts,
represents billings which exceed costs and estimated earnings on individual
uncompleted contracts through September 30, 1996.
Contract revenues have increased by $1,549,158 or 95% to $3,176,051 from
$1,626,893 for the three months ended September 30, 1996 as compared to the
three months ended September 30, 1995. This material increase is due to new
contracts commencing toward the last quarter of the Company's fiscal year.
For the three months ended September 30, 1996 and 1995, US Bridge NY
purchased from Waldorf Steel Fabrications, Inc. ("Waldorf") approximately $0 and
$14,000, respectively, of the materials and labor necessary to perform steel
erection services. Effective August 1, 1995, Waldorf ceased operations. Lastly,
for the three months ended September 30, 1996 and 1995, U.S. Bridge N.Y. paid
$166,000 and $200,000 respectively to U.S. Bridge of Maryland, Inc. ("US Bridge
MD") for certain materials and labor necessary to perform steel erection
services. US Bridge MD is a wholly owned subsidiary of the Company. Amounts
payable related to all of such transactions and included in accounts payable
total $102,000 at September 30, 1996. Such amounts are non-interest bearing
obligations. Said vendors are under the common control of the Company's majority
stockholder.
General and administrative expenses include salaries, office overhead and
costs associated with estimating and bidding activities. General and
administrative expenses have decreased by $18,436 or 3% to $668,411 for the
three months September 30, 1996 from $686,847 for the three months ended
September 30, 1995. The total decrease amounting to $18,436 was attributable to
primarily decreases in office salaries.
Liquidity and Capital Resources
As of September 30, 1996, US Bridge NY has a backlog of approximately
$14,800,000. Backlog represents the amount of revenue US Bridge expects to
realized from work to be performed on uncompleted contracts in progress and from
contractual agreements which work has not yet begun. Subsequent to September
1996, US Bridge NY obtained an additional $1,900,000 of new projects.
At September 30, 1996, the Company has a consolidated working
capital of $1,904,365.
F-17
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Cont'd)
Liquidity and Capital Resources (Cont'd)
As of September 30, 1996, the Company's accounts receivable amounted to
$4,376,467, of which approximately $868,705 or 20% has been collected through
November 15, 1996.
Net cash used for operating activities amounted to $336,716 for the three
months ended September 30, 1996. The major components of such use of cash was
directly attributed to the increase of accounts receivable amounting to
$762,802, increase in costs in excess of billings on uncompleted contracts
amounting to $491,109, and the increase of accounts payable and net income
amounting to $574,275. For the three months ended September 30, 1995, the net
cash used for operating activities amounted to $807,991. With regards to
financing activities, the Company provided $219,500 of cash for the three months
ended September 30, 1996. Such cash was provided primarily by loans from an
officer of the Company.
During September 1994, US Bridge NY entered into an installment agreement
with the Internal Revenue Service in order to liquidate delinquent payroll taxes
of approximately $231,535 and remove a tax lien filed by such authority. The
agreement requires US Bridge NY to pay $25,000 per month until such amount is
fully paid. As per the terms of the agreement, US Bridge NY must also pay timely
all current payroll taxes. As of September 30, 1996, US Bridge NY has not made
all the required $25,000 monthly payments and has not paid timely all current
payroll taxes. Consolidated payroll taxes payable amounted to $446,564 at
September 30, 1996.
F-18
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings:
None
ITEM 2 - Changes in Securities:
None
ITEM 3 - Defaults Upon Senior Securities:
None
ITEM 4 - Submission of Matters to a Vote of Security Holders:
None
ITEM 5 - Other Information:
None
ITEM 6 - Exhibits and Reports on Form 8-K:
None
F-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securites and Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized as of the 18th day of November 1,
1996.
U.S. BRIDGE CORP.
By: /s/ Joseph Polito
President
By: /s/Steven Polito
Treasurer
<PAGE>
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<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> jun-30-1996
<PERIOD-END> sep-30-1996
<CASH> 282,436
<SECURITIES> 353,833
<RECEIVABLES> 4,376,467
<ALLOWANCES> 0
<INVENTORY> 2,924,633
<CURRENT-ASSETS> 131,828
<PP&E> 2,997,090
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,066,287
<CURRENT-LIABILITIES> 2,643,240
<BONDS> 0
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<COMMON> 0
<OTHER-SE> 2,637,224
<TOTAL-LIABILITY-AND-EQUITY> 2,643,240
<SALES> 3,176,051
<TOTAL-REVENUES> 3,176,051
<CGS> 2,169,713
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 871,431
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,246
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<INCOME-TAX> 0
<INCOME-CONTINUING> 58,661
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<NET-INCOME> 58,661
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