SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A-1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997
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 0-28140
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 Identification No.)
Incorporation or organization)
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)
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class Name of each exchange on which registered
NONE
Securities registered pursuant to Section 12(g) of
the Act:
Common Stock, $.001 par value
(Title of Class)
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that 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 no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ].
The Registrant's revenues for its fiscal year ended June 30, 1997 were
15,494,447.
The aggregate market value of the voting stock on September 30, 1997
(consisting of Common Stock, $.001 par value per share) held by non-affiliates
was approximately $3,726,239 based upon the average closing bid price for such
Common Stock on said date ($1.375), as reported by a market maker. On such date,
there were 7,402,148 shares of Registrant's Common Stock outstanding.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
History
U.S. Bridge Corp. ("the Company") was incorporated on September 12, 1988,
in the State of Delaware, as Colonial Capital Corp. In January 1991, the Company
amended its Certificate of Incorporation to effect a change in its name to The
Mercado Marketing Corporation. In June 1991, the Company amended its Certificate
of Incorporation to effect a change in its name to COFIS International Corp.
Effective in May 1994, in connection with the reverse acquisition of its
subsidiaries, the Company amended its Certificate of Incorporation to effect
another change in its name to its current name, U.S. Bridge Corp.
Until its acquisitions ("the Acquisitions") of both U.S. Bridge of N.Y.,
Inc. ("NY") and One Carnegie Court Associates, Inc. ("One Carnegie"),
consummated on April 25, 1994, the Company was a development stage company. Its
only operations involved searching for possible business acquisitions. Pursuant
to the Acquisitions, the Company issued an aggregate of 3,540,000 shares of its
Common Stock, par value $.001 per share ("the Common Stock"), to the
stockholders of NY and One Carnegie - 2,820,000 to the stockholders of NY and
720,000 to the stockholders of One Carnegie - in exchange for all of said
stockholders' issued and outstanding shares. Joseph Polito, the principal
stockholder of NY and the sole stockholder of One Carnegie, received, in
exchange for his shares of NY and One Carnegie common stock, 2,380,000 and
720,000 shares, respectively, of the Company's Common Stock. The Acquisitions
were accounted for as "recapitalizations." Accordingly, both NY and One Carnegie
became subsidiaries of the Company.
In connection with the Acquisitions, the Company amended its Certificate of
Incorporation to (i) increase its authorized shares of Common Stock from
10,000,000 to 50,000,000 shares; (ii) increase the par value of the Common Stock
from $.0001 to $.001; and (iii) authorize 10,000,000 shares of Preferred Stock,
which shares may be issued in classes and series, pursuant to the rights,
designations, and preferences as determined by the Board of Directors. To date,
the Company has not issued any Preferred Stock.
Recent Developments
In December 1996, the Company issued bonuses aggregating 114,617 shares of
Common Stock to the consultants and employees of its subsidiary, NY; it also
issued an option to purchase 400,000 shares of Common Stock to Joseph Polito; an
option to purchase 100,000 shares of Common Stock to Ronald Polito; and an
option to purchase 75,000 shares of Common Stock to Steven Polito pursuant to
the Company's 1994 Senior Management Incentive Plan. In connection with the
114,617 shares issued, the Company recorded compensation expense amounting to
<PAGE>
$107,453 which is based upon 50% of the average closing bid price for the month
of December 1996.
In February 1997, pursuant to a Form S-8 Registration Statement filed with
the Securities and Exchange Commission, the Company registered the resale of a
total of 686,617 shares of Common Stock, 575,000 shares of which are underlying
options pursuant to the Company's 1994 Senior Management Incentive Plan. The
options are exercisable at various prices ranging from $1.750 each to $1.925
each. See "Item 12. Certain Relationships and Related Transactions."
By agreement executed March 10, 1997 (mistakenly dated December 31, 1996),
One Carnegie entered into an Agreement for Deed in Lieu of Foreclosure ("the
Agreement") with Trinity Industries, Inc. ("Trinity"). The transaction, which
was not closed and completed until August 1, 1997, was necessitated by One
Carnegie's having defaulted on (i) the $3,000,000 Note (of which Trinity was the
holder), and (ii) the Deed of Trust and Security Agreement which secured said
Note for certain property located in Waldorf, Maryland. Pursuant to the
Agreement, in lieu of foreclosing upon the property owned by One Carnegie,
Trinity, through its affiliate, Waldorf Properties, Inc. ("WPI"), accepted the
deed to such property. See Item 2 Description of Property.
As of May 1997, NY was in arrears in the amount of $480,000 in payments due
under its lease with R.S.J.J. Realty Corp. ("RSJJ"). This arrearage was
converted into equity as follows: on June 19, 1997, NY issued 270,000 shares of
common stock to the Company, for the cancellation of the debt owed to RSJJ. The
Company, in turn, issued 200,000 shares of its Common Stock to Joseph Polito and
150,000 shares of its Common Stock to RSJJ. RSJJ then transferred all of such
shares to RSJJ's mortgagor, which agreed to accept said shares as payment of
RSJJ's outstanding mortgage. See "Item 12. Certain Relationships and Related
Transactions."
Business of U.S. Bridge of N.Y., Inc.
General
NY was incorporated in the State of New York on September 4, 1990, as Metro
Steel Structures, Ltd. NY amended its Certificate of Incorporation to effect a
change in its name to its current name on January 31, 1995. Additionally, NY
amended its authorized capital (i) to increase the number of authorized shares
of common stock from 200 to 10,000,000; (ii) to increase the par value from no
par value to $.001 par value per share; (iii) to authorize 500,000 shares of
preferred stock, par value $.01 per share; and (iv) to designate 400,000 shares
of NY's preferred stock as "Series A Preferred Stock." Also as of such date, NY
effected a 29,687.50 for one forward split of its common stock, pursuant to
which there became 950,000 shares of common stock outstanding.
NY commenced operations in or about June 1993 to serve primarily as a
general contractor for construction projects sponsored by federal, state, and
local government
<PAGE>
authorities in New York State and in the New York City metropolitan area.
Previously, through other entities, Joseph Polito furnished and provided steel
erection as a subcontractor for private and governmental construction projects.
Since its commencement of operations in June 1993, NY has provided steel
erection for building, roadway, and bridge repair projects for general
contractors who have been engaged by private and municipal/governmental
customers. As of September 30, 1997, NY has completed in excess of eighteen (18)
projects, with an aggregate project value of $22,768,614, and is currently
engaged in four (4) projects with an aggregate value of approximately
$19,998,040. The Company plans to maintain its subcontractor presence in the
steel industry; however, now that it has obtained general contractor bonding, it
intends to focus on obtaining projects as a general contractor.
Though formed to operate as a general contractor, NY operated initially
only as a subcontractor. NY's goals were to become a general contractor for
municipal projects; however, it needed financing to enable it to obtain bonding,
which is required for all municipal projects.
On June 15, 1993, NY purchased, from Atlas Gem, six then existing
contracts to perform steel erection services for the following projects:
Stillwell Avenue, 39th Street Bridge Rehabilitation, Honeywell Street Bridge,
New England Thruway, Lemon Creek, and Kosciuszko Bridge. Upon its sale of these
contracts to NY and its completion of its final project in September 1994, Atlas
Gem ceased operations. NY purchased Atlas Gem's contracts to add to its then
backlog in order to avoid a conflict of interest, as the two entities - which
were controlled by Joseph Polito as officer, director, and principal stockholder
- - were engaging in similar, but different work.
Construction Projects
In March 1995, NY entered into a subcontracting agreement with McKay
Enterprises, Inc. (general contractor) for the reconstruction of the 4th Avenue
Bridge, located in Brooklyn, New York, owned by the New York City Department of
Transportation. Work on the project has been completed.
In April 1996, NY entered a subcontracting agreement with Trataros
Construction, Inc. ("Trataros," general contractor) for the performance of
structural and water intrusion repairs of the Williamsburg Houses owned by the
New York City Housing Authority ("NYCHA"). This contract has been placed on hold
for a considerable period of time due to contract scope changes and/or other
issues between parties not involving NY. NY does not expect to return to this
project and thus deems same to be completed.
In May 1996, NY entered a subcontracting agreement with Lehrer McGovern
Bovis, Inc. (general contractor) for the terminal restoration of the Grand
Central Terminal owned by Metro-North Commuter Railroad. The contract is valued
at $3,706,653 and as of September 30, 1997 is approximately 69% complete.
<PAGE>
In June 1996, NY entered a prime contracting agreement with EklecCo,
the owner of the Palisades Power Mall located in West Nyack, New York, to
perform structural steel erection services. The estimated aggregate value of the
contract is $10,373,552. The mall is estimated to be approximately 3,900,000
square feet upon completion. The project is to be performed in two phases. NY
commenced work on Phase I in June 1996. As of September 30, 1997, the project is
79% complete.
In July 1996, NY entered into a prime contracting agreement with
Tishman Construction Corporation of New York (construction manager) to perform
steel erection services on the Louis Vuitton Office Tower owned by Starre Realty
and located on East 57th Street in New York, New York. Commencement of the
project was delayed due to conflict not involving NY, which conflict since has
been resolved. NY expects to recommence work on this project by the end of
calendar 1997. In or about December 1996, NY obtained confirmation of United
Casualty and Surety Insurance Company's willingness to issue a performance bond
for NY as general contractor of this project; however, the construction manager
subsequently waived its bond requirement. As of September 30, 1997, the project
is 67% complete.
In October 1996, NY entered into a subcontracting agreement with
Hannibal Construction Co., Inc. (general contractor) to provide certain
structural steel work for rehabilitation of the Hellgate Viaduct Structures,
located in Philadelphia, Pennsylvania, owned by the National Railroad Passenger
Corporation (AMTRAK). Work on the project has been completed.
In November 1996, NY entered into a subcontracting agreement with N.Y.
Iron (general contractor) to provide structural steel work for the Indonesian
Mission owned by the United Nations. Work on the contract has been completed.
In January 1997, NY entered into a subcontracting agreement with
Humphreys & Harding, Inc. to perform certain structural steel erection work for
the Permanent Mission to the Republic of Korea, located in New York, New York.
The contract price is $1,500,000. As of September 30, 1997, work on the project
is 16% complete.
The following table lists, as of June 30, 1997, (i) all companies in
which Joseph Polito is either an Officer, Director, or principal shareholder;
and (ii) the activities engaged in by such companies with the Company or any of
its subsidiaries:
<PAGE>
<TABLE>
<CAPTION>
Year J. Polito's Activities with the Place of
Company Name(1) of Inc. Title Ownership(%) Company and NY Business
<S> <C> <C> <C> <C> <C>
U.S. Bridge Corp.(2) 1988 Pres./Director 61% Parent Company Queens, NY
One Carnegie Court 1990 Pres./Director 0% Subsidiary of Corp. Waldorf, MD
Associates, Inc. (3)(5)(6)
R.S.J.J. Realty Corp.(4) 1983 Pres./Director 100% Leases the offices and Queens, NY
storage space to the
Company
Crown Crane, Inc.(4) 1988 -- 50% Supplies cranes to the Brooklyn, NY
Company for use in the
erection of steel
Atlas Gem Leasing, 1986 Pres./Director 100% Supplies welding Queens, NY
Inc. (4) machines and compressors
to the Company
Atlas Gem Erectors 1986 Pres./Director 100% Sold certain construction No office
Co., Inc. (4)(7) contracts to the Company;
ceased operations 9/94
Gem Steel Erectors 1966 Pres./Director 100% No business relationship; No office
Inc.(4)(8) ceased operations 3/91
Waldorf Steel 1990 Pres./Director 100% Provided steel to the No office
Fabricators, Inc.(3)(5) Company; ceased
operations in 8/95
U.S. Bridge Corp. 1994 Pres./Director 0% Subsidiary of Corp.; No office
(Maryland) (2)(9) ceased operations in 11/96
U.S. Bridge of N.Y., 1990 Pres./Director 56.3% Provides steel erection Queens, NY
Inc.(4)(10) buildings, roadway, and
bridge repair projects
</TABLE>
(1) Except as disclosed hereunder, no company listed is beneficially owned
by another entity; nor does any company have any subsidiaries. No company listed
has conducted any business operations under any name except for its corporate
name, except for the Company. See "-History."
(2) Incorporated in the State of Delaware.
(3) Incorporated in the State of Maryland.
(4) Incorporated in the State of New York.
(5) One Carnegie owned the property, building, and equipment which it
leased to Waldorf Steel Fabricators, Inc. ("Waldorf") prior to August 1, 1995,
as of which date it began leasing to U.S. Bridge Corp. (Maryland) ("MD") until
MD ceased operations in November 1996.
(6) Formed in December 1990, One Carnegie is a wholly-owned subsidiary of
the Company. Joseph Polito, through his ownership of approximately 61% of the
outstanding shares of the Company may be deemed the beneficial owner of the
shares of One Carnegie owned by the Company.
(7) Ceased operations in September 1994.
(8) Ceased operations in March 1991.
(9) MD was incorporated in the state of Delaware on September 21, 1994 and
is a wholly-owned subsidiary of the Company. It was formed to provide labor for
the fabrication of steel by Waldorf, which it provided until August 1, 1995,
when Waldorf ceased operations.
<PAGE>
(footnotes continued from previous page)
(10) Joseph Polito, through his ownership of approximately 61% of the
outstanding shares of the Company may be deemed the beneficial owner of the
shares of NY owned by the Company.
Schedule of Completed Contracts
<TABLE>
<CAPTION>
Project Name Contract Amount Contract Date Type of Contract
- ------------ --------------- ------------- ----------------
<S> <C> <C> <C>
Van Wyck $ 195,500 April 1992 Lump-Sum
39th Street Bridge 2,538,252 June 1993 Lump-Sum
39th Street (Demolition) 679,046 February 1993 Lump-Sum
New England Thruway 2,409,058 June 1993 Lump-Sum
Honeywell 1,100,000 June 1993 Joint Venture (1)
Kosciuszko Bridge 3,034,281 June 1993 Lump-Sum
Stillwell Avenue Bridge 8,084,655 June 1993 Lump-Sum
Cross Bronx Expressway 60,176 March 1994 Lump-Sum
Robert Moses Causeway 540,118 December 1994 Lump-Sum
4th Avenue Bridge 387,965 March 1995 Lump-Sum
201 East 80th Street 1,692,797 May 1995 Lump-Sum
Centereach 186,500 June 1995 Lump-Sum
Pro-Camera 50,275 August 1995 Lump-Sum
UDC 82,400 August 1995 Lump-Sum
Williamsburg Houses (2) 708,450 April 1996 Lump-Sum
South Avenue Plaza 274,045 May 1996 Lump-Sum
Hellgate Viaduct Structures 208,750 Oct. 1996 Lump-Sum
Indonesian Mission 348,000 Nov. 1996 Lump-Sum
Others(3) 188,346 N/A N/A
Total 22,768,614
</TABLE>
(1) Joint venture with John P. Picone, Inc. ("Picone"), whereby NY entered
into a consulting agreement with Picone, who was awarded the project. The
agreement provided that for 50% of the profits of the project, NY would provide
Picone with its expertise in steel erection, supply qualified workers, and
oversee the rehabilitation of the bridge. Picone put NY's employees on its
payroll and incurred all the expenses of the project.
(2) This project, which bore an original contract price of $2,517,651, was
on hold for a considerable period of time pending a dispute not involving NY. NY
believes that it will not return to this project and thus deems the project
complete.
(3) Total estimated project value of a collection of smaller projects
completed.
Inasmuch as NY purchased steel from Waldorf and NY leases equipment
from Crown Crane, Ltd. and/or Atlas Gem Leasing, Inc., NY checks prices in the
industry prior to engaging in any such transactions and will transact business
with such companies only on terms which may be considered similar to industry
standards. The Board of Directors intends to exercise reasonable judgment and
take such steps as it deems necessary under all of the circumstances to resolve
any specific conflict of interest which may occur and will determine what, if
any, specific measures - such as retention of an independent advisor,
independent counsel, or special committee - may be necessary or appropriate. The
fact that Joseph Polito is an officer, director, and principal shareholder in
other companies, including those that transact business with the Company and NY,
opens the potential that there may be conflicts of interest in decisions made by
Mr. Polito, which may compromise his fiduciary duty to the Company and NY. Any
remedy under state law, in the event such circumstances arise, most likely would
be prohibitively expensive and time consuming. See "-Suppliers; Subcontractors;
Unions."
<PAGE>
Industry Overview
1997 has brought about a resurrection in the construction industry in
the New York City metropolitan area. Major transportation arteries in New York
are under extensive construction programs to increase their ability to handle
the ever increasing volumes of traffic they carry. Work is in progress on the
major thruways, expressways, and parkways across New York State. NY currently is
preparing subcontracting bids for some of the roadway projects in the
metropolitan area.
These projects positively affect the availability of work in diverse
disciplines in the construction industry: landscaping, concrete, paving, steel,
etc. NY has qualified as a bidder (and expects to place a bid by the end of
November 1997) for a project for the JFK Airport, international arrivals
building, Korean Air and Lufthansa terminals.
Apart from the infrastructure construction programs, there has been an
impressive increase in the restoration, alteration, and expansion of office
space, residential properties, and public facilities. This increase has resulted
in the Korean Mission subcontracting project. There also appears to be an
infusion of foreign investment capital into the depressed real estate market in
New York, prompting major renovations and alterations. This capital infusion
enhances the value of property and therefore increases the incentive for new
development.
Marketing
NY obtains its projects primarily through the process of competitive
bidding. Accordingly, NY's marketing efforts include the following: (i)
subscribing to bid reporting services; (ii) monitoring trade journals including
Engineering Record News, Dodge Report, and Brown's Letter, Inc.; (iii)
monitoring daily newspapers and real estate publications; (iv) membership and
networking in affiliated organizations including Allied Building Trades; (v)
maintaining contracts with developers and other general contractors; and (vi)
requesting notification from various government agencies as to bid solicitations
being requested.
The Contract Process; Bidding
In response to bid requests, NY submits to the soliciting entity a proposal
detailing its qualifications, the services to be provided, and the cost of its
services. Based on its evaluation of the proposals submitted, the soliciting
entity awards the contract to the bidder it deems appropriate. Generally, the
contract for a project is awarded to the lowest bidder, although other factors
may be taken into consideration.
NY submits its bids after management performs a detailed review of the
project specifications, an internal review of NY's capabilities and equipment
availability, and an assessment of whether the project is likely to attain
targeted profit margins. In bidding on
<PAGE>
contracts, there are two types of bid requests made by the soliciting entity: a
unit cost bid and a lump-sum bid. The unit cost bid is based upon a cost per
unit basis; a lump-sum bid obligates NY to complete the project at a fixed
price. With a lump-sum bid, the risk of estimating the quantity of units
required for a particular project is on NY, while with a unit cost bid, NY must
estimate the per unit cost, not the number of units needed. Any increase in NY's
unit cost over its unit bid price or cost over its lump-sum bid, whether due to
inefficiency, faulty estimates, weather, inflation, or other factors, must be
borne by NY and may adversely affect its results of operations.
Upon receipt by a New York City agency of notification that a bid
submitted for a project has been declared the low bid, the city's procurement
policy requires that the New York Finance Committee then approve all funds to be
allocated to such project. During this time, if NY is the low bidder, it must
provide the New York City agency with such documents as are required - including
a Payment and Performance Bond and a Labor and Material Bond in order to be
approved to undertake the project. Once the New York City Finance Committee has
cleared the allocation of funds for a project and the agency has cleared all the
documentation required to be submitted by the contractor, a starting date and
time table is set up for the project.
Most government contracts provide for termination of the contract at
the election of the customer, although in such event, NY is generally entitled
to receive a small cancellation fee. Many of NY's contracts are also subject to
completion requirements with liquidated damages assessed against it if schedules
are not met.
While Joseph Polito has been in the construction business for many
years, NY has only recently started bidding on projects as a general contractor,
and NY may incur unanticipated expenses, problems, or difficulties which may
affect its bid prices and project profitability. Though NY has been the low
bidder on several public sector and private sector bids, it has not commenced
any public or private sector projects as a general contractor. It has, however,
commenced two projects as prime contractor.
NY expects to act as a general contractor on some of the projects it
will undertake in the near future and will need to hire subcontractors to
perform certain jobs such as electrical and mechanical work, though it shall
continue also to bid as a subcontractor at the request of other general
contractors. As a general contractor, NY will be responsible for the performance
of the entire contract, including work assigned to subcontractors. Accordingly,
NY is subject to liability associated with the failure of subcontractors to
perform as required under the contract; thus, NY may require its subcontractors
to furnish Performance Bonds. Affirmative action regulations, however, require
NY to use its best efforts to hire minority subcontractors for a portion of the
project and some of these minority subcontractors may not be able to obtain such
surety bonds.
<PAGE>
Insurance and Bonding
NY maintains general liability and excess liability insurance,
insurance covering its construction equipment, and workers' compensation
insurance in amounts it believes are consistent with industry practices. NY
carries liability insurance of $1,000,000 per occurrence which management
believes is adequate for its current operations.
Although NY generally has not been required to provide Performance
Bonds to general contractors when acting as a subcontractor, it may be required
to furnish bonds guaranteeing its performance as a subcontractor in the future.
Currently, NY is serving as a subcontractor on two projects. For the EklecCo
prime contracting project and the Grand Central Terminal and Korean Mission
subcontracting projects, NY has been required to provide, and has provided,
Performance Bonds and Labor and Material Bonds.
NY expects to bid on both private and public sector projects as a
general contractor. Most of these projects, both public and private sector,
shall require Bid Bonds and Payment and Performance Bonds. A Bid Bond is a bond
issued by a bonding company which is usually in an amount equal to 10% of the
bid price and which guarantees that the contractor will be able to produce such
other additional documents and information required in order to commence the
project including the issuance of a Performance Bond. A Performance Bond is a
guarantee by a surety, customarily 100% of the value of the contract amount,
that the contractor will complete the project pursuant to the terms and
conditions of the contract. Most government contracts allow for termination of
the contract at the election of the customer, although in such event, NY is
generally entitled to receive a small cancellation fee. Many of NY's contracts
are also subject to completion requirements with liquidated damages assessed
against NY if schedules are not met. In the past, NY has not been materially
adversely affected by these provisions as a subcontractor.
NY's ability to obtain bonding and its bonding capacity are primarily
determined by its net worth, liquid working capital (consisting of cash and
accounts receivable), past performance, management expertise, the number and
size of projects under construction, and various other factors. The larger the
project and/or the more projects in which NY is engaged, the greater the
bonding, net worth, and liquid working capital requirements. Surety companies
consider such factors in light of the amount of NY's surety bonds then
outstanding and the surety companies' current underwriting standards, which
standards may change periodically. Therefore, NY may be required to maintain
certain levels of tangible net worth in connection with establishing and
maintaining bonding limits. As a practical matter, such levels may limit
dividends, if any, which might have been declared and which would limit
corporate funds available for other purposes.
In determining whether to issue a bond, surety companies perform credit
checks and other due diligence disclosure requirements and investigate NY's
capitalization, working
<PAGE>
capital, past performance, management's expertise, and such other factors as are
discussed above. The surety companies require companies receiving bonding to
maintain certain amounts of capital and liquid assets and base the amount of
bonding they will issue on a formula, which is usually based on certain industry
standards which take into account such factors. The surety companies also
require that the bonds be personally guaranteed by Joseph Polito.
Bonding requirements vary depending upon the nature of the project to
be performed. NY anticipates paying premiums of between 1 1/4% to 3 1/2% of the
total amount of the contracts to be performed. Since these premiums are
generally payable at the beginning of a project, NY must maintain sufficient
working capital to satisfy the premium prior to receiving revenue from the
project. Bonding premiums are a line item in the submitted bid and are included
as part of NY's billing to its clients.
In December 1996, NY obtained a commitment for a Surety Bond Line of
Credit ($10,000,000 single project limit) from United American Guarantee
Company, Ltd. ("UAGC") for its general contracting projects. This commitment
will allow NY to pursue those general contracting projects in the public and
private sectors which require performance bonds. To date, it has also allowed NY
to obtain Performance Bonds and Labor and Material Bonds for the one prime
contracting and two subcontracting projects which have required same: the
EklecCo, Grand Central Terminal, and Korean Mission projects.
Work in Progress; Backlog and Seasonality
Contracts as a subcontractor and general contractor often involve work
periods in excess of one year. Revenue on uncompleted fixed price contracts is
recorded under the percentage of completion method of accounting. NY begins to
recognize profit on its contracts when it first accrues direct costs. As is
standard construction industry practice, a portion of billings may be retained
by the customer until certain contractual obligations are fulfilled.
The following is a list, as of September 30, 1997, of those projects in
which NY is currently engaged:
<TABLE>
<CAPTION>
Backlog
Contract Party/ Contract Amount at Type of % of job
Project Name Amount Contract Date 9/30/97 Contract Completed
<S> <C> <C> <C> <C> <C>
EklecCo/
Palisades Power Mall(1) ... $10,373,552(2) June 1996 2,178,446 Lump-sum 79%(2)
Lehrer McGovern, Bovis, Inc./
Grand Central Terminal .... 3,706,653 May 1996 1,169,449 Lump-sum 69%(2)
Tishman Construction Corp./
Louis Vuitton N.A.(1) ..... 4,417,835 July 1996 1,457,886 Lump-sum 67%(2)
Humphreys & Harding, Inc./
Korean Mission ............ 1,500,000 Jan. 1997 1,260,000 Lump-sum 16%(2)
Total Signed Contracts ...... $19,998,040 $ 6,065,781
</TABLE>
<PAGE>
(footnotes from previous page)
(1) NY is prime contractor (similar to general contractor) on this project.
(2) Completion percentage is as of September 30, 1997 and is based on the
percentage of costs incurred through that date to the estimated cost of the
project.
Though NY does not believe its business is seasonal, its operations
slow during the winter months due to decreased productivity of the laborers
caused by their inability to work in severe weather conditions. As a result of
the foregoing, NY's costs are increased.
Suppliers; Subcontractors; Unions
For the year ended June 30, 1997, NY received approximately 43% of the
fabricated steel it required from MD, a subsidiary of the Company. Queens County
Ironworks and New York Iron, Inc. - neither of which companies is affiliated
with the Company, NY, or any Officer, Director, or principal stockholder of
either company - provided the remainder of the steel. MD provided NY with
fabricated steel until November 1996, at which time MD ceased operating. The
prices paid and the terms for the steel purchased from MD were comparable to
competitive prices and terms; therefore, NY believes it now will be able to
acquire same through other suppliers at similar prices and on similar terms.
NY currently depends upon various vendors to supply spare parts,
cranes, and other heavy equipment, and its ability to hire skilled workers
depends upon its ability to comply with certain union agreements and contracts.
NY rents cranes from Crown Crane, Ltd., a company of which Joseph Polito is a
50% shareholder, and rents generators and other equipment from Atlas Gem
Leasing, Inc., a company which is wholly owned by Mr. Polito. NY believes that
there are a sufficient number of vendors, so that in the event any individual or
group of vendors can no longer service NY's needs, NY will be able to find other
vendors at competitive prices.
As is standard practice in the construction industry, NY's employees,
other than its office employees, are not salaried individuals. They are union
employees who are hired on an as-needed, or per project, basis and are paid an
hourly wage which is set by the unions with which they are associated. NY hires
skilled steel workers represented by the International Union of Structural
Ironworkers local 40, 361, & 417 and International Operating Engineers locals
14, 14B, 15, 15A, 15C, 15D, and 825 and Cement Masons local 472. NY must comply
with its agreements with the unions, which agreements regulate all employment
issues including pay, overtime, working conditions, vacations, benefits, etc. -
between NY and the union employees. These agreements expire on June 30, 1999.
NY believes that it has a good relationship with the Unions and is in
compliance with all union agreements. No assurance can be given that NY will
continue to be in compliance with the Unions or successfully negotiate
extensions to NY's agreements with such Unions. In the event problems or
conflicts with the Unions arise or there is a loss of skilled steel and
<PAGE>
operating engineers, this would have a detrimental effect on NY's operations.
NY's success as a general contractor, in part, will be dependent upon
its ability to hire workers and comply with union contracts and agreements and
its ability to oversee and retain qualified subcontractors to perform certain
work. Although NY believes that it will be able to attract subcontractors to bid
on projects it bids as general contractor, there can be no assurance that it
will be able to do so. NY will be responsible for performance of the entire
contract, including the work done by subcontractors. Accordingly, NY may be
subject to substantial liability if a subcontractor fails to perform as
required. In addition, in hiring and overseeing subcontractors, there may be
difficulties of which NY is not aware.
Competition
All aspects of NY's business are, and will continue to be, highly
competitive. NY is one of many subcontractors which erects and furnishes steel
for projects. Many of these subcontractors have substantially greater financial
resources and sales than those of NY. When contractors seek construction
contracts, they request bids from numerous subcontractors based on the various
requirements of the project. These subcontractors compete primarily as to price,
name recognition, and prior performance.
As a general contractor, NY will be competing with many larger and more
experienced (and thus more established) contractors whose names are more readily
recognized and whose relationships with federal and state municipalities and
agencies, and those private companies who are bidding against NY, have been
established. NY is a subcontractor and a general contractor specializing, but
not exclusively, in bridge and roadway repair and replacement as well as in
furnishing and erecting steel structures for buildings. NY's competitors are
numerous, and many have substantially greater marketing, financial, bonding, and
human resources.
Government Regulation
NY must comply with the rules and regulations of the Occupational
Safety and Health Administration ("OSHA"), a federal agency which regulates and
enforces the safety rules and standards for the construction industry. In
addition, NY must comply with a wide range of other state and local rules and
regulations applicable to its business, including regulations covering labor
relations, safety standards, affirmative action, and the protection of the
environment including those pertaining to water discharge, air emissions, and
hazardous and toxic substance discharge. Continued compliance with OSHA and the
broad federal, state, and local regulatory network is essential and costly. The
failure to comply with such regulations or amendments to current laws or
regulations imposing more stringent requirements may have an adverse effect on
NY's operations. NY believes that it is in substantial compliance with all
applicable laws and regulations.
<PAGE>
Employees
As of June 30, 1997, the Company had three executive officers and no
employees. As of June 30, 1997, NY had three executive officers, two
administrative assistants, one comptroller, one project estimator, one project
manager, and two employees in the accounting department. The number of union
employees NY utilizes depends on the number and size of projects in which NY is
engaged and can range from 10-200 employees, some of whom are employed full-time
and others of whom are employed part-time. These union employees are represented
by the International Union of Structural Ironworkers locals 40, 361 and 417;
International Operating Engineers locals 14, 14B, 15, 15A, 15C, 15D, 825; and
Cement Masons local 472. NY's contracts with these Unions, which contracts
regulate all employment issues between NY and the union employees - including
pay, overtime, working conditions, vacations, benefits, etc. - expire on June
30, 1999. NY considers its relationships with the unions and its employees to be
good.
ITEM 2. DESCRIPTION OF PROPERTY
The Company shares office space with NY (at 53-09 97th Place, Corona,
New York 11368) which leases approximately 25,000 square feet of space
(approximately 24,000 square feet of which is utilized for storage space) from
an affiliate company, RSJJ. RSJJ is owned by the Company's majority stockholder
and President, Joseph Polito. The lease, pursuant to which NY pays rent of
$20,000 per month to RSJJ, expires in March 1998. NY also leases a yard for
storage material pursuant to an oral agreement with RSJJ, which agreement
requires monthly payments of $3,500. The Company believes that the terms of
these leases are comparable and competitive to those terms which might have been
negotiated with an unaffiliated landlord.
As of May 1997, NY was in arrears in the amount of $480,000 in payments
due under its lease with RSJJ. This arrearage was converted into equity as
follows: NY issued 270,000 shares of common stock to the Company, for the
cancellation of the debt owed to RSJJ. The Company, in turn, issued 200,000
shares of its Common Stock to Joseph Polito and 150,000 shares of its Common
Stock to RSJJ. RSJJ then transferred all of such shares to RSJJ's mortgagor,
which agreed to accept said shares as payment of RSJJ's outstanding mortgage.
The Company also, through One Carnegie, formerly owned 13 acres of
property in St. Charles Business Park, Waldorf, Maryland, inclusive of a 4 1/2
acre (170,000 square foot) building. In connection with the acquisition of the
property and equipment, One Carnegie entered into a $3,000,000 installment loan
agreement with Trinity, which loan was collateralized by all of the property and
equipment owned by One Carnegie and personally guaranteed by Joseph Polito and
Atlas Gem.
By agreement executed March 10, 1997 (mistakenly dated December 31,
1996), One Carnegie entered into an Agreement for Deed in Lieu of Foreclosure
("the Agreement") with
<PAGE>
Trinity. The transaction, which was not deemed complete and closed until August
1, 1997, was necessitated by One Carnegie's having defaulted on (i) the
$3,000,000 Note (of which Trinity was the holder); and (ii) the Deed of Trust
and Security Agreement which secured said Note.
Pursuant to the Agreement, in lieu of foreclosing upon the Charles
County, Maryland property owned by One Carnegie, Trinity, through its affiliate,
WPI, accepted the deed to such property. As additional consideration for
Trinity's entering the Agreement, One Carnegie executed a promissory note in the
amount of $150,000 naming Trinity as payee. The promissory note is guaranteed by
Joseph Polito and Atlas Gem. A Bill of Sale and Assignment, providing for the
conveyance of certain One Carnegie personal property in exchange for $25,000
from WPI, comprised an additional component of the Agreement. A final component
of the Agreement is a Mutual Release which releases One Carnegie, Mr. Polito,
Atlas Gem, and Trinity (and all their successors and assigns) from any claims
which arose prior to execution of the Agreement.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material litigation and is not aware
of any threatened litigation that would have a material adverse effect on its
business, except for the litigation matters discussed below. The Company and its
subsidiaries believe that the nature and number of these proceedings are typical
for a construction firm of its size and scope.
Three actions to foreclose upon mechanics liens were commenced by NY in
the last fiscal year. The first action was commenced in New York State Supreme
Court, Kings County on February 25, 1997. The action names NY and Metro Steel
Structures, Ltd. as plaintiffs and the Perini Corporation, Metropolitan
Transportation Authority, New York City Transportation Authority, and Fidelity
and Deposit Company of Maryland as defendants. NY's claim for relief in this
action is $2,199,560. The claim is based upon filed mechanic's liens and general
contract law. The claim is for labor performed and materials supplied including
money owed under the contract and money due for "extra" work with regard to the
Rehabilitation of the Viaduct at the Stillwell Avenue Station of the Coney
Island Line in Brooklyn, New York. This action is still in the discovery phase.
The second action was filed on February 26, 1997 in New York State
Supreme Court, Queens County. It names NY, Metro Steel Structures, Ltd., and
McKay Enterprises, Inc. as plaintiffs and Perini Corporation, Department of
Transportation of the City of New York, and Fidelity and Deposit Company of
Maryland as defendants. NY's claim for relief in this action is $844,932. This
claim is based upon filed mechanic's liens and general contract law. The claim
is for labor performed and materials supplied including money owed under the
contract regarding the rehabilitation of the 39th Street Bridge over the Long
Island Rail Road and Amtrak in Queens, New York. This action is still in the
discovery phase.
<PAGE>
On February 7, 1997, Perini Corporation filed a related action against NY and
Metro Steel Structures, Ltd. in New York State Supreme Court, Kings County.
Perini's claims against NY total $1,140,560 and allege defective work on the
Stillwell Avenue project and upon a loss/profit agreement for both the Stillwell
Avenue project and the 39th Street Bridge project. NY has counterclaimed for the
amounts set forth in the above discussion of the two actions involving Perini
Corporation, and its claims are based upon the same theories as those set forth
above.
NY filed its third action in the New York Supreme Court, Suffolk County
on or about May 13, 1997. The action names Kiska Construction, the State of New
York, acting through the New York State Comptroller, the New York State
Department of Transportation, and the Seaboard Surety Company as defendants.
NY's claim for relief in this action is $279,346. This claim is based upon filed
mechanic's liens and general contract law. The claim is for labor performed and
materials supplied including money owed under the contract and money due for
"extra" work regarding the rehabilitation of the Robert Moses Causeway
Northbound Bridge over the State Boat Channel, in Suffolk County, New York. This
action is still in the discovery phase.
In August 1997, the Company, NY, and MD entered into an agreement
settling the January 1997 trademark infringement claim made by The Ohio Bridge
Corporation. The Company has agreed to effect a name change to USA Bridge
Construction Corp.; NY has agreed to effect a name change to USA Bridge
Construction of N.Y., Inc.; and MD has agreed to effect a name change to USA
Bridge Construction Corp. (Maryland) before the end of the 1997 calendar year.
In April 1995, NY (then Metro Steel Structures, Ltd.) commenced an
Article 78 proceeding in the Supreme Court of the State of New York, County of
New York, against the Commissioners of the State Insurance Fund and the State
Insurance Fund to annul the cancellation of NY's workers' compensation policy
and to annul the rates, classifications, and premiums assigned to NY. This
action claims that defendants audited NY's books for purposes of assigning the
workers' compensation rates and premiums to be assessed against NY and
thereafter (i) "arbitrarily and capriciously and without any foundation in law
or in fact" assigned to NY's employees improper job classifications which were
then used unlawfully as the basis for improperly assessing the highest premium
rates which could be assessed against NY; (ii) improperly applied said premiums
retroactively; (iii) billed NY for premiums which were improper and excessive;
and (iv) canceled NY's workers' compensation policy upon NY's failure to tender
payment in the improper and excessive amount demanded by defendants.
NY is prosecuting this action to the fullest extent possible. On
September 30, 1997, NY and defendants were scheduled to appear before the court
for a conference in this matter. This matter was adjourned, however, to October
28, 1997, pending settlement discussions.
<PAGE>
In December 1995, the Commissioners of the State Insurance Fund for and on
behalf of the State Insurance Fund commenced suit against Joseph Polito, Ronald
Polito, Steven Polito, NY, Metro Steel Structures, Ltd. (now known as NY), One
Carnegie, and others alleging that certain workers' compensation insurance
policies obtained for various insured defendants were obtained fraudulently and
that the defendant corporations failed to pay the appropriate premiums. The
claims against NY, amounting to approximately $3 million, are limited to a
policy covering the period April 29, 1993 through December 1994. NY, Messrs.
Polito, and all other defendants are defending against this action. The action
is in the discovery phase, and settlement negotiations are currently underway.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Neither the Company nor NY submitted any matters to a vote of its
security holders during the last quarter of the fiscal year ended June 30, 1997.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock began trading on the Nasdaq SmallCap Stock
Market on July 25, 1996. Prior to that, from August 25, 1994 to July 24, 1996,
the Company's Common Stock, $.001 par value per share, traded sporadically and
on a limited basis in the over-the-counter market on the OTC Bulletin Board. The
following table sets forth representative high and low closing bid prices for
the period the stock traded on the OTC Bulletin Board and the high and low sales
prices for the period the stock traded on the Nasdaq SmallCap Stock Market, by
calendar quarters, as reported by a market maker during the periods provided for
herein. The bid quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission, and may not represent actual transactions. Sales
quotations represent prices between dealers, do not include resale mark-ups,
mark-downs, or other fees or commissions, and do not necessarily represent
actual transactions. Prior to August 25, 1994, there was no trading market for
the Company's Common Stock.
<TABLE>
<CAPTION>
Calendar Quarter Prices
Ended Low High
1995
<S> <C> <C>
07/01/95 - 09/30/95 1/4 1 1/4
10/01/95 - 12/31/95 1/4 1
1996
01/01/96 - 03/31/96 1 1/4 2
04/01/96 - 06/30/96 2 1/4 3
07/01/96 - 07/24/96(1) 1 3/4 3 1/4
07/25/96 - 09/30/96(1) 1 1/2 3 3/8
10/01/96 - 12/31/96 1 3
1997
01/01/97 - 03/31/97 1 2 3/8
04/01/97 - 06/30/97 1 2 1/8
07/01/97 - 09/30/97 15/16 1 7/16
</TABLE>
(1) As indicated above, the Company's Common Stock traded on the
over-the-counter market of the OTC Bulletin Board from August
25, 1994 to July 24, 1996. Since July 25, 1996, the Common
Stock has traded on the Nasdaq SmallCap Stock Market.
Therefore, the amounts provided from July 1, 1995 to July 24,
1996 represent bid quotations, and the amounts thereafter
represent sales price.
As of September 30, 1997, there were 129 registered holders of record
of the Company's Common Stock, $.001 par value, which number, determined by the
Company's
<PAGE>
stockholder records, does not include beneficial owners of the Common Stock
whose shares are held in names of various security holders, dealers, and
clearing agencies. The Company believes there are in excess of 500 such
beneficial holders of the Common Stock.
The Company has paid no dividends for the last two fiscal years or in
the 1st quarter of fiscal 1998; nor does it have any present plan to pay such
dividends. Payment of future dividends will be determined from time to time by
the Company's Board of Directors based upon its future earnings, if any,
financial condition, capital requirements, and other factors. The Company is not
presently subject to any contractual or similar restriction on its present or
future ability to pay such dividends.
ITEM 6 . MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The following management's discussion and analysis for the years ended
June 30, 1997 and 1996 is a discussion of the Company's subsidiaries since the
Company did not have any material operations of its own except for primarily
stock-related transactions.
NY, the primary operating entity, recognizes revenue and costs for all
contracts under the percentage of completion method. Cost of contract revenues
includes all direct material and labor costs and those indirect costs related to
contract performance. General and administrative expenses are accounted for as
period costs and are, therefore, not included in the calculation of the
estimates to complete construction contracts in progress. Material project
losses are provided for in their entirety without reference to the percentage of
completion. As contracts can extend over one or more accounting periods,
revisions in costs and earnings estimated during the course of the work are
reflected during the accounting period in which the facts become known. An
amount equal to the costs attributable to unapproved change orders and claims is
included in the total estimated revenue when realization is probable.
The current asset, "costs and estimated earnings in excess of billings
on uncompleted contracts," represents costs and estimated earnings in excess of
amounts billed on respective uncompleted contracts at the end of each period.
The current liability, "billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings which exceed costs and
estimated earnings on respective uncompleted contracts at the end of each
period.
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 in the New York City metropolitan area.
Previously, Mr. Polito, through other entities, furnished
<PAGE>
and provided steel erection as a subcontractor for private and governmental
construction projects. Since its commencement of operations in June 1993, NY has
provided steel erection services for building, roadway, and bridge repair
projects for general contractors who have been engaged by private, municipal,
and/or government clients.
NY's operations are substantially controlled by Joseph Polito since he
owns approximately 61% of the outstanding shares of the Company, which owns
53.23% of the common stock of NY; hence, Mr. Polito may be considered the
beneficial owner of NY. Mr. Polito is also a 100% shareholder of RSJJ. Pursuant
to a signed lease agreement which expires on March 31, 1998, RSJJ leases office
space to NY at a cost of $20,000 per month. Mr. Polito has ownership interests
in Waldorf (which ceased operations on August 1, 1995), Crown Crane, Inc., and
Atlas Gem Leasing, Inc., all of which provided services to NY for the years
ended June 30, 1997 and 1996. Lastly, NY purchased from MD, a wholly-owned
subsidiary of the Company, certain materials and labor to perform steel erection
service. For the years ended June 30, 1997 and 1996, purchases by NY from MD
amounted to $371,321 and $622,050, respectively. MD ceased operations in
November 1996; since then, NY has purchased its steel from unrelated parties.
NY plans to continue to undertake projects as a subcontractor but will
focus on obtaining projects as a general contractor in both the public and
private sectors. In the New York City metropolitan area, there are an abundance
of subcontractors who have significant experience and are competitive with
respect to pricing and level of service. For those general contracting projects
it undertakes, NY will be responsible for performance of the entire contract,
including the work to be performed by subcontractors. Accordingly, 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. NY requires bonding from a New York licensed bonding company in
order to bid on projects as a general contractor.
Though NY does not believe its business is seasonal, its operations are
generally slow in the winter months due to the decrease in worker productivity
because of weather conditions. Accordingly, NY may experience a seasonal pattern
in its operating results with lower revenue in the third quarter of each fiscal
year. Interim results also may be affected by the timing of bid solicitation,
the stage of completion of major projects, and revenue recognition policies.
In determining whether to issue a bond, surety companies perform credit
checks and other due diligence disclosure requirements and require NY to
maintain certain amounts of capital and liquid assets. Each company bases the
amount of bonding it will issue on a formula (devised individually) which takes
into account, inter alia, NY's capital and liquid assets. In order for NY to
obtain and maintain bonding, it must adhere to the requirements stipulated in
the bonding agreements, which agreements 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 are paid by the
customer. Any monies taken from the
<PAGE>
working capital for this purpose will be replaced as monthly requisition
payments are received from the customer. Bonding requirements vary depending
upon the nature of the projects to be performed. NY anticipates paying a fee to
bonding companies of between 1 1/4% to 3 1/2% of the amount of the contracts to
be performed. Since these fees generally are payable at the beginning of a
project, NY must maintain sufficient working capital to satisfy the fee prior to
receiving revenue from the project.
In December 1996, NY obtained a bonding commitment for a surety line of
credit ($10,000,000 single project limit) from UAGC for its general contracting
projects. The commitment will allow NY to pursue those general contracting
projects in the public and private sectors which require performance bonds. To
date, it has also allowed NY to obtain Performance Bonds and Labor and Material
Bonds for the one prime contracting and two subcontracting projects which have
required same: the EklecCo, Grand Central Terminal, and Korean Mission projects.
Year ended June 30, 1997 as compared to the year ended June 30, 1996
Contract revenues for the years ended June 30, 1997 and 1996 amounted
to $15,494,447 and $7,401,433, respectively. This net increase of $8,093,014, or
approximately 109%, is a direct result of NY's $17,943,400 backlog as of June
30, 1996. This backlog amount represents the contracts NY entered into during
the latter part of its June 30, 1996 fiscal year. During the year ended June 30,
1997, NY obtained new contracts and change orders to previous contracts,
aggregating approximately $3,600,347. Included in contract revenues are revenues
from joint venture profit sharing agreements on certain projects. Joint venture
revenues for the year ended June 30, 1997 totaled $0 as compared to the year
ended June 30, 1996 in which they totaled $200,000. Accordingly, revenues for
the year ended June 30, 1997 from NY's core business, construction contracts,
increased by approximately $8,393,000 as compared to the year ended June 30,
1996. As of June 30, 1997, NY's backlog amounted to approximately $6,100,000.
Backlog represents the amount of revenue NY expects to realize from work to be
performed on uncompleted contracts in progress and from contractual agreements
for which work has not yet begun.
The Company's gross profit for the year ended June 30, 1997 amounted to
28%, whereas for the year ended June 30, 1996, gross profit amounted to 32%.
Gross profit decreased by 4% as a result of NY's revision of its contract costs
estimates for jobs coming to an end in the current year.
For the years ended June 30, 1997 and 1996, NY purchased from Waldorf
approximately $0 and $180,333, respectively, of the materials and labor
necessary to perform
fabrication services. Effective August 1, 1995, Waldorf ceased operations.
Waldorf is under the common control of NY's majority stockholder and president.
Lastly, for the years ended June 30, 1997 and 1996, NY paid $371,321 and
$622,050, respectively, to MD for materials and labor necessary to perform steel
erection services. MD is a wholly-owned subsidiary of
<PAGE>
the Company. In November 1996, MD ceased operations, and NY began purchasing
material and labor from unrelated third party steel fabricators. At June 30,
1997, NY owed MD $62,606, principally for advances in connection with the above
services: such amounts are non-interest bearing and are due on demand.
General and administrative expenses have increased by $441,517 (from
$2,493,399 for the year ended June 30, 1996), or 18%, to $2,934,916 for the year
ended June 30, 1997. The increase in general administration costs is mainly
attributable to an overall increase in NY's administrative salaries associated
with the material amount of increase in contract revenue and stock-based
compensation expense.
As of June 30, 1997, NY increased its allowance for doubtful accounts
to $2,287,000 against its contract receivables. The bad debt expense associated
with the increase in allowance amounted to $1,287,000. NY increased its
allowance for doubtful accounts based on a review of the factors surrounding
certain mechanic's liens filed against a certain customer for certain projects
and an estimate of the future collection of other receivables for which no
mechanic's liens have been filed. In management's opinion, the allowance for
doubtful accounts at June 30, 1997 will be sufficient to absorb any losses that
may be sustained from a settlement with this and other customers. For the years
ended June 30, 1997 and 1996, NY had three unrelated customers which accounted
for approximately 86% and 62%, respectively, of total revenues. As of June 30,
1997 and 1996, approximately 83% and 89% of contracts and retainage receivables
are due from four and three customers respectively.
Liquidity and Capital Resources
Year ended June 30, 1997 as compared to the year ended June 30, 1996
At June 30, 1997, the Company's working capital amounted to $2,546,132.
The working capital increase is principally attributable to NY's contracts
receivable. As of June 30, 1997, NY's net contract receivable amounted to
$8,962,297, approximately $2,424,219 (or 27%) of which has been collected
through September 9, 1997.
Net cash provided by operating activities amounted to $578,792 for the
year ended June 30, 1997. For the year ended June 30, 1996, the net cash used
for operating activities amounted to $2,055,771 and was principally attributable
to increases in accounts receivable and costs and estimated earnings in excess
of billings on uncompleted contracts.
With regards to financing activities, the Company used $200,852 of cash
for the year ended June 30, 1997. Such cash was used primarily for repayments to
affiliates and related parties.
<PAGE>
As of June 30, 1997, the Company owes approximately $1,441,589 in
payroll taxes and related penalties and interest. Although, as of June 30, 1997,
the Company has not entered into any written repayment agreements with the
respective tax authorities, it has been making monthly payments to same pursuant
to duly negotiated oral agreements.
In August 1996, the Company issued 400,000 shares of Common Stock in
repayment of a loan of $300,000. The stock has been valued at $1.00 per share,
representing the average market value at the time of the loan. Accordingly,
interest expense in the amount of $100,000 has been recorded.
In October 1996, the Company issued 250,000 shares of Common Stock as
an advisory fee pursuant to a previous agreement. These shares have been valued
at $1.20 per share with a 50% discount due to the restricted nature of the
stock, for a total value of $150,000. The value of these services is being
amortized over the advisory period of two years.
In December 1996, the Company issued 114,617 shares of Common Stock to
the consultants, officers, and employees of its subsidiary, NY, under its 1994
Senior Management Incentive Plan ("the Management Plan"). These shares have been
valued at $1.875 per share with a 50% discount, due to the restricted nature of
the stock, for a total of $107,452.
Also in December 1996, the Company issued 575,000 options to officers
of the Company under the Management Plan. The shares were exercisable at the
then fair market value, and no additional compensation was recorded. Under the
terms of the issue, the officer could execute a note for payment of the shares.
In March 1997, 125,000 shares of Common Stock were issued pursuant to these
options. The officer elected to execute a note, resulting in a reduction of
stockholders' equity for the balance of the note, $240,625.
On August 14, 1995, NY successfully completed its public offering. As a
result, 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. NY yielded 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 years' financial consulting agreement with
the underwriter. Simultaneously with the offering, NY charged all deferred
offering costs incurred to additional paid-in capital which totaled $903,820.
Accordingly, the increase in financing activities, amounting to $2,249,177 for
the year end June 30, 1996, was primarily from NY's initial public offering.
In June 1997, NY and the Company completed a transaction whereby stock
NY issued 270,000 shares of common stock to the Company, for the cancellation of
$480,000 in rent debt owed to RSJJ. The Company, in turn, issued 200,000 shares
of its Common Stock to Joseph Polito (RSJJ's president) and 150,000 shares of
its Common Stock to RSJJ. RSJJ then transferred
<PAGE>
all of such shares to RSJJ's mortgagor, which agreed to accept said shares as
payment of RSJJ's outstanding mortgage. As a result of this transaction, the
Company increased its ownership in NY to 53.23%. The Company recorded an
additional investment in NY of $218,750, or the fair market value of the stock
of $1.25 per share with a 50% discount due to the restricted nature of the
stock. NY recorded a gain on the forgiveness of debt in the amount of $243,750,
the difference between the debt forgiven ($480,000) and the fair market value of
the stock ($1.75 per share) with a 50% discount, or $236,250. The difference
between the Company's stock value and the stock issued by NY, $17,500, has been
recorded as a gain on issuance of stock.
In December 1994, NY's Board of Directors adopted the 1994 Senior
Management Incentive Plan ("the NY Plan") which was adopted also by shareholder
consent. The NY Plan provided for the issuance of up to 150,000 shares of NY's
common stock in connection with the issuance of stock options and other stock
purchase rights to executive officers and other key employees. In December 1996,
the Board of Directors authorized an amendment to the NY Plan to increase the
amount of stock options available to 1,000,000.
In February 1997, pursuant to a Form S-8 Registration Statement filed
with the Securities and Exchange Commission, NY registered for resale 125,000
shares of common stock underlying options granted to NY's president pursuant to
the NY Plan. The options were exercisable at $1.10 per share (110% of the bid
price on November 27, 1996). They were exercised on March 25, 1997 and resulted
in the issuance of 125,000 shares of common stock, 60,000 of which shares have
been resold to date.
ITEM 7. FINANCIAL STATEMENTS
See attached Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Officers and Directors.
The names, ages, and positions of the Company's Executive Officers and
Directors are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
<S> <C> <C>
Joseph M. Polito 63 President and Director
Ronald J. Polito 38 Secretary and Director
Steven J. Polito 35 Treasurer and Director
</TABLE>
All Directors hold office until the next annual meeting of stockholders
or until their successors are elected and duly qualified. Vacancies on the Board
of Directors may be filled by the remaining Directors. Officers are elected
annually by, and serve at the discretion of, the Board of Directors. There are
no family relationships between or among any Officers or Directors of the
Company, except that Joseph Polito is the father of both Steven and Ronald
Polito.
Joseph M. Polito has been the President and Director of the Company
since April 1994. He has been the president and a director of NY since its
inception in 1990, and prior to the Acquisitions in April 1994, he was the sole
shareholder of NY. Mr. Polito oversees all of the Company's operations. Since
its inception in 1994, Mr. Polito has been the president and a director of MD, a
wholly owned subsidiary of the Company. Since December 1990, Mr. Polito has been
the president and sole director and shareholder of One Carnegie, also a wholly
owned subsidiary of the Company. Since 1988, Mr. Polito has been a 50%
shareholder of Crown Crane, Ltd., a company which leases cranes for construction
projects. Since 1986, Mr. Polito has been the president and 100% shareholder of
Atlas Gem Leasing, Inc., a company which leases generators and other
construction equipment. Mr. Polito has also been the president and sole director
and shareholder of Waldorf since 1990. Before it ceased operating in August
1995, Waldorf fabricated steel and sold same to NY. Since 1983, Mr. Polito has
been the president and 100% shareholder of RSJJ, a company which owns and leases
real property.
Since 1976, Mr. Polito has been a member of the Allied Building Metal
Industries, Inc. ("ABMII"), a trade association which has the authority to
negotiate with the unions in order to better the construction industry. He was
the president of same from 1992 until 1993. Since approximately 1987, Mr. Polito
has been the Chairman of the Steel Institute of New York, a trade association
similar to the ABMII. From the mid-1980's to the mid-1990's, Mr. Polito was a
member of the Building Trades Association Joint Safety Committee. Since the mid-
<PAGE>
1980's, he has served on the Council of Presidents of New York Building
Congress, Inc. Since the mid-1970's, Mr. Polito has been a member of the of the
International Union of Structural Ironworkers, locals 40, 361, and 417. He has
been co-chairman of this organization since the early 1990's.
Ronald J. Polito has been the Secretary and a Director of the Company since
April 1994. Mr. Polito has been the secretary and a director of NY since its
inception in 1990. Mr. Polito oversees the daily progress on all projects and
analysis of the final costs and profits of jobs completed and the preparation
and bidding on new projects. Since its inception in 1994, Mr. Polito has been
the secretary and a director of MD. From its inception in 1990 until March 1995,
he was also the treasurer of NY. Since December 1990, Mr. Polito has been the
secretary of One Carnegie and Waldorf. Since 1983, Mr. Polito has been the
secretary of RSJJ. Mr. Polito received a Bachelor of Science Degree in Civil
Engineering from Brooklyn Polytechnical Institute in 1981. He is the son of Mr.
Joseph Polito.
Steven J. Polito has been Treasurer of the Company since March 1995 and a
Director of the Company since April 1994. Mr. Polito was elected treasurer of NY
in March 1995. Mr. Polito oversees the daily operations for projects in process
and projects completed, including purchasing and leasing of materials and
machinery and the distribution of labor. He had previously been a Project
Manager and has been a director of NY since its inception in 1990. Since its
inception in 1994, Mr. Polito also has been the treasurer and a director of MD.
Since 1988, Mr. Polito has been the treasurer of One Carnegie, Waldorf, and
RSJJ. He is the son of Mr. Joseph Polito.
Significant Employees of NY
John G. Bauer has been the chief administrative officer (a non-executive
position) of the Company since February 1995. Since its inception in March 1992,
Mr. Bauer has been the President and a Director of Dynamic Construction
Consulting, Inc. ("Dynamic"), a company of which Mr. Bauer was the founder.
Dynamic provides construction management and consulting services to NY and other
companies. From July 1988 to March 1992, Mr. Bauer was a Vice President of
Tishman Construction Corp. of N.Y., a construction company.
Michael Panayi has been a structural engineer for NY since its commencement
of operations in June 1993. From 1987 to 1993, Mr. Panayi was a structural
engineer for Atlas Gem.
William J. Kubilus, a professional estimator in the field of general
contracting and subcontracting since 1966, joined NY in 1996 to provide
estimating expertise for the Company's general contracting and subcontracting
bids. Prior to joining NY, from 1993 to 1996, Mr. Kubilus was an estimator for
Lazzinarro General Contracting. From 1989 to 1993, he was an estimator for NICO
Construction.
<PAGE>
As permitted under the Delaware General Corporation Law, the Company's
Certificate of Incorporation eliminates the personal liability of the Directors
to the Company or any of its shareholders for damages for breaches of their
fiduciary duty as Directors.
As a result of the inclusion of such provision, stockholders may be
unable to recover damages against Directors for actions taken by them which
constitute negligence or gross negligence or which are in violation of their
fiduciary duties. The inclusion of this provision in the Company's Certificate
of Incorporation may reduce the likelihood of derivative litigation against
Directors and other types of shareholder litigation.
Certain Reports
No person who during the fiscal year ended June 30, 1997 was a
Director, Officer, or beneficial owner of more than ten percent of the Common
Stock (which is the only class of securities of the Company registered under
Section 12 of the Securities Exchange Act of 1934 (the "Act") (a "Reporting
Person") failed to file on a timely basis reports required by Section 16 of the
Act during the most recent fiscal year or prior years, except Joseph Polito,
Ronald Polito, and Steven Polito each did not file Forms 4 with respect to the
receipt of shares of Common Stock as a bonus or with respect to the stock
options granted in December 1996. All Officers have confirmed that they shall
file the appropriate Forms 5 on or before November 26, 1997. The foregoing is
based solely upon a review by the Company of (i) Forms 3 and 4 as furnished to
the Company (during the most recent fiscal year) in accordance with Rule
16a-3(d) under the Act; (ii) Forms 5 and amendments thereto as furnished to the
Company with respect to its most recent fiscal year; and (iii) any
representations received by the Company from any reporting persons that no Form
5 is required, except as described herein.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, or paid by NY, the Company's subsidiary, during the years ended
June 30, 1997, 1996, and 1995.
Summary Compensation Table
Annual Compensation
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g)
Name Restricted
and Principal Other Annual Stock Options/
Position Year Salary ($) Bonus ($) Compensation ($) Awards ($) (1) SARS (#)
- ------------------ ---- --------------- --------- ---------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Joseph Polito 1997 $330,000 - $ 68,642 (2) - 125,000
President and 1996 300,000 - 111,911 (2) - -
Director 1995 378,000 - 68,200 (2) - 25,000
Ronald Polito 1997 $118,800 - $ 17,194 (3) - -
Secretary and 1996 125,000 - 15,144 (3) - -
Director 1995 121,000 - 21,200 (3) - -
Steven Polito 1997 $86,580 - $ 8,572 (4) - -
Treasurer and 1996 94,000 - 8,275 (4) - -
Director 1995 91,575 - 9,900 (4) - -
</TABLE>
(1) At the end of the fiscal year, Joseph Polito held 4,647,156 shares of
Restricted Stock valued at $5,228,050. Ronald Polito and Steven Polito
each held 2,500 shares of Restricted Stock valued at $2,812.50.
Valuations are based on the closing bid price of Common Stock ($1.125)
on June 30, 1997, as reported by a market maker.
(2) Includes (i) the payment of premiums on a life insurance policy of
$10,722, $54,362, and $46,000 for the years ended June 30, 1997, 1996,
and 1995, respectively; (ii) the payment of travel expenses of $50,000,
$50,000, and $22,200 for the years ended June 30, 1997, 1996, and 1995,
respectively; and (iii) the payment of an automobile lease of $7,920
and $7,549 for the years ended June 30, 1997 and 1996. See "-Employment
and Consulting Agreements."
(3) Represents (i) 100,000 shares of Common Stock issued as a bonus in
December 1996 under the Company's 1994 Senior Management Incentive
Plan. Valuation on the 100,000 restricted shares is based on the
closing bid price of Common Stock ($1.75) on December 2, 1996, as
reported by a market maker.
(4) Represents (i) an option to purchase 400,000 shares of Company's Common
stock granted under the Company's Stock Option Plan, exercisable at
$1.925 per share (which is 110% of the market price on the date of
grant), upon partial exercise of which 125,000 shares were purchased,
60,000 of which shares were resold; (ii) an option to purchase 125,000
shares of NY's common stock at $1.10 per share (110% of the market
price on the date of grant), which option has been exercised in full
(60,000 shares have been resold).
(5) Represents 150,000 shares of the Company's Common Stock which were
issued as a bonus in August 15, 1995, upon completion of NY's initial
public offering. The market price on the date of issuance was ($.625),
as reported by a market maker. The 150,000 shares of Common Stock were
subject to a vesting schedule whereby 50,000 shares vested upon
issuance; 50,000 vested on August 15, 1996; and 50,000 vested on August
15, 1997. All of these shares have vested and have been issued.
<PAGE>
(footnotes from previous page)
(6) Represents an option to purchase 25,000 shares of NY's common stock at
$5.50 per share issued in accordance with Mr. Polito's employment
agreement. The option vests over a three year period. See "-Employment
and Consulting Agreements".
(7) Includes (i) payments on an automobile lease of $5,416, $5,416, and
$8,000 for the years ended June 30, 1997, 1996, and 1995, respectively;
(ii) the payment of premiums on a term life insurance policy of $8,510,
$4,684, and $5,800 for the years ended June 30, 1997, 1996, and 1995,
respectively; and (iii) a travel allowance of $12,705, $2,971, and
$7,400 for the years ended June 30, 1997, 1996, and 1995, respectively.
(8) Reflects the value of the ownership of 2,500 shares of Common Stock
issued as a bonus in December 1996, at $1.125, the market price on June
30, 1997.
(9) Reflects an option to purchase shares issuable under the Company's
stock option plan, at an exercise price of $1.75 per share, which
shares are vested and exercisable.
(10) Includes (i) payments on an automobile lease of $5,304, $5,304, and
$6,700 for the years ended June 30, 1997, 1996, and 1995, respectively;
and (ii) a travel allowance of $3,268, $2,971, and $3,200 for the years
ended June 30, 1997, 1996, and 1995, respectively.
Stock Options
The following table sets forth certain information concerning the grant of stock
options during the year ended June 30, 1997.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
====================================================================================================================================
Individual Grants
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
% of Total
# of Securities Options/SAR's
underlying Granted to
Options/SARs Employees in Exercise or Base
Name Granted(1) Fiscal Year Price ($/share) Expiration Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joseph M. Polito 400,000 69.56% $1.925 December 1, 2001
Ronald J. Polito 100,000 17.39% $1.75 December 1, 2001
Steven J. Polito 75,000 13.04% $1.75 December 1, 2001
====================================================================================================================================
</TABLE>
(1) Represents incentive stock options granted under the Company's Stock
Option Plan. The options are fully vested and are exercisable at $1.925
per share for Joseph Polito and $1.75 per share for each of Ronald and
Steven Polito.
<PAGE>
The following table contains information with respect to employees of the
Company and options held as of June 30, 1997:
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
==================================================================================================================================
(a) (b) (c) (d) (e)
- ----------------------------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised In-
Securities The-Money
Underlying Options/SAR's at
Unexercised FY-End($)
Shares Acquired Value Options/SAR's at Exercisable/
Name on Exercise (#) Realized($) (1) FY-End (#) Unexercisable
---- --------------- --------------- -------------
Exercisable/
Unexercisable
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Polito 125,000 $ 0 275,000/0 0/0 (2)
Ronald J. Polito 0 0 100,000/0 0/0 (2)
Steven J. Polito 0 0 75,000/0 0/0 (2)
==================================================================================================================================
</TABLE>
(1) Based upon the average bid and asked prices for such Common Stock on
the date of exercise, March 13, 1997 ($1.125), as reported by a market maker.
(2) Since the options are exercisable at $1.925 and $1.75, respectively,
there is no value to such options as of June 30, 1997.
Employment and Consulting Agreements
On April 4, 1995, Joseph Polito entered into an employment agreement with
NY wherein he agreed to devote 80% of his business time to the affairs of NY.
The agreement is for a term of approximately three years and expires June 30,
1998. Pursuant to the terms of the agreement, Mr. Polito is to receive a salary
of $300,000 per annum until June 30, 1996, with 10% yearly escalations subject
to adjustment by the Board of Directors. Mr. Polito is also to receive a yearly
non-accountable expense allowance of $50,000. Under the NY Plan, Mr. Polito
received stock options to purchase 25,000 shares of common stock at $5.50 per
share, vesting at the rate of 7,500 in each of April 1996 and 1997 and 10,000 in
April 1998. Mr. Polito also has the right to receive a yearly bonus equal to
five percent (5%) of the first $1,000,000, upon reaching $1,000,000, and five
percent (5%) of the next $500,000, upon reaching $1,500,000, and five percent
(5%) after $1,500,000, of all the pre-tax profits of NY. NY shall pay to Mr.
Polito a monthly draw of $10,000 against the bonus. Pursuant to the agreement,
NY also shall pay the premiums on a $3,500,000 life insurance policy for the
benefit of individuals as directed by Mr. Polito. The estimated yearly premium
for same is
<PAGE>
$80,000. The agreement restricts Mr. Polito from competing with NY for a period
of one year after the termination of his employment. The agreement provides for
severance compensation to be paid to Mr. Polito if his employment with NY is
terminated or if there is a decrease in responsibilities or duties following a
change in control of NY. The severance compensation shall be made in one payment
equal to three times the aggregate annual compensation paid to Mr. Polito during
the preceding calendar year.
In June 1995, the Company issued Marlowe & Company ("Marlowe") 500,000
shares of Common Stock pursuant to the terms of a consulting agreement. 250,000
of such shares were issued immediately, and 250,000 were held in escrow by Alan
Berkun, counsel for Marlowe, a National Association of Securities Dealers, Inc.
member broker-dealer of which Alan Berkun was the president and principal
stockholder, pending quotation of the Company's securities on the Nasdaq
SmallCap Stock Market. The sale of the 500,000 shares was registered pursuant to
a Registration Statement on Form S-8 filed by the Company on June 11, 1995. In
addition to the shares issued, the consulting agreement provided for the payment
of a consulting fee of $4,000 per month, for six months commencing June 1995, as
additional compensation. This monthly fee was not paid. Pursuant to the terms of
the consulting agreement, in addition to consulting services, Marlowe was
required to utilize its best efforts to raise a minimum of $750,000 for the
Company upon quotation of the Company's securities on Nasdaq. All 500,000 shares
were resold pursuant to the S-8 registration statement filed by Alan Berkun on
behalf of the Company. On August 1, 1996, the Company amended its June 1995
agreement with Marlowe and agreed to issue an additional 250,000 shares of
Common Stock to Marlowe in payment of overdue investment banking fees and
additional costs due Marlowe: the shares were issued on October 10, 1996 and
resold pursuant to Regulation S under the Act. Alan Berkun acted as special
counsel for the Company regarding these transactions.
Since March 1995 and April 1994, Steven and Ronald Polito have received
annual salaries of $94,000 and $125,000, respectively, from NY. Both individuals
also receive a car allowance equal to the monthly lease payments on their
automobiles and the payment of premiums on life insurance policies for which
they choose their beneficiaries. Neither individual has entered into an
employment agreement with NY or the Company.
In December 1996, the Company entered into a Consulting
Agreement with Bernard Tapie, a Paris based consultant. Mr. Tapie agreed to
offer his services in the development of business relations for the Company in
Asia, the Middle East, Europe, and Africa. The Company agreed to pay a monthly
retainer of $12,000. The Company subsequently assigned the Agreement, as
provided for therein, to Philip Hababav.
1994 Senior Management Incentive Plan
In December 1994, the Board of Directors adopted the 1994 Senior
Management Incentive Plan (the "Management Plan"). This plan was adopted by
shareholder consent also.
<PAGE>
The Management Plan provides for the issuance of up to 2,000,000 shares of the
Company's Common Stock in connection with the issuance of stock options and
other stock purchase rights to executive Officers and other key employees of the
Company. The Company issued 114,617 shares of Common Stock to the management,
employees and consultants of NY: Joseph Polito received 100,000 of the shares,
and Messrs. Ronald and Steven Polito each received 2,500.
The adoption of the Management Plan was prompted by the Company's desire
(i) to attract and retain qualified personnel, whose performance is expected to
have a substantial impact on the Company's long-term profit and growth
potential, by encouraging those persons to acquire equity in the Company; and
(ii) to provide the Board with sufficient flexibility regarding the forms of
incentive compensation which the Company will have at its disposal in rewarding
executive Officers, key employees, and consultants without unnecessarily
depleting the Company's cash reserves. The Management Plan is designed to
augment the Company's existing compensation programs and is intended to enable
the Company to offer executives, key employees, and consultants a personal
interest in the Company's growth and success through the grant of stock options
and/or other rights pursuant to the Management Plan. It is contemplated that
only those executive management employees (generally the Chairman of the Board,
Vice Chairman, Chief Executive Officer, Chief Operating Officer, President, and
Vice President of the Company), key employees, and consultants who perform
services of special importance to the Company will be eligible to receive
compensation under the Management Plan. As of the date hereof, the Company's
Officers and Directors number only three: Messrs. Joseph Polito, Ronald Polito,
and Steven Polito, though the Plan also includes Messrs. Bauer and Panayi. A
total of 2,000,000 shares of Common Stock are reserved for issuance under the
Management Plan.
Unless otherwise indicated, the Management Plan is to be administered
by the Board of Directors or a committee of the Board, if such a committee is
appointed for this purpose (the Board or such committee, as the case may be,
shall be referred to in the following description as "the Administrator").
Subject to the specific provisions of the Management Plan, the Administrator
will have the discretion to determine (i) the recipients of the awards; (ii) the
nature of the awards to be granted; (iii) the dates such awards will be granted;
(iv) the terms and conditions of the awards; and (v) the interpretation of the
Management Plan, except that any award granted to any employee of the Company
who is also a Director of the Company shall also be subject - in the event the
persons serving as members of the Administrator of the Management Plan at the
time such award is proposed to be granted do not satisfy the requirements
regarding the participation of "disinterested persons" set forth in Rule 16b-3
("Rule 16b-3") promulgated under the Exchange Act - to the approval of an
auxiliary committee consisting of not less than two individuals who are
considered "disinterested persons" as defined under Rule 16b-3. As of the date
hereof, the Company has not yet determined who will serve on such auxiliary
committee, if one is required.
The Management Plan generally provides that unless the Administrator
determines otherwise, each option or right granted shall become exercisable in
full upon certain "change of control" events as described in the Management
Plan, or subject to any right or option granted
<PAGE>
under the Management Plan (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure, or otherwise), the Administrator will make appropriate
adjustments to such plans and the classes, number of shares, and price per share
of stock subject to outstanding rights or options. Generally, the Management
Plan may be amended by action of the Board of Directors, except that any
amendment which (i) would increase the total number of shares subject to such
plan; (ii) extend the duration of such plan; (iii) materially increase the
benefits accruing to participants under such plan; or (iv) change the category
of persons who can be eligible for awards under such plan, must be approved by
the affirmative vote of a majority of the shareholders entitled to vote. The
Management Plan permits awards to be made thereunder until November 2004.
Directors who are not otherwise employed by the Company will not be
eligible for participation in the Management Plan. The Management Plan provides
for four types of awards: stock options, incentive stock rights, stock
appreciation rights (including limited stock appreciation rights), and
restricted stock purchase agreements (as described below).
Stock Options. Options granted under the Management Plan may be either
incentive stock options ("ISOs") or options which do not qualify as ISOs
("non-ISOs"). ISOs may be granted at an option price of not less than 100% of
the fair market value of the Common Stock on the date of grant, except that an
ISO granted to any person who owns capital stock representing more than 10% of
the total combined voting power of all classes of Common Stock of the Company
("10% stockholder") must be granted at an exercise price of at least 110% for
the fair market value of the Common Stock on the date of the grant. The exercise
price of the non-ISOs may not be less than 85% of the fair market value of the
Common Stock on the date of grant. Unless the Administrator determines
otherwise, no ISO or non-ISO may be exercisable earlier than one year from the
date of grant. ISOs may not be granted to persons who are not employees of the
Company. ISOs granted to persons other than 10% stockholders may be exercisable
for a period of up to ten (10) years from the date of grant; ISOs granted to 10%
stockholders may be exercisable for a period of up to five years from the date
of grant. No individual may be granted ISOs that become exercisable in any
calendar year for Common Stock having a fair market value at the time of grant
in excess of $100,000. Non-ISOs may be exercisable for a period of up to
thirteen (13) years from the date of grant.
Payment for shares of Common Stock purchases pursuant to exercise of stock
options shall be paid in full in (i) cash, (ii) by certified check, or, (iii) at
the discretion of the Administrator by shares of Common Stock having a fair
market value equal to the total exercise price, or (iv) by a combination of the
above. The provision that permits the delivery of already owned shares of stocks
as payment for the exercise of an option may permit "pyramiding." In general,
pyramiding enables a holder to start with as little as one share of common stock
and, by using the shares of common stock acquired in successive, simultaneous
exercises of the option, to exercise the entire option, regardless of the number
of shares covered thereby, with no additional cash or investment other than the
original share of
<PAGE>
common stock used to exercise the option.
Upon termination of employment or consulting services, an optionee will be
entitled to exercise the vested portion of an option for a period of up to three
months after the date of termination, except that if the reason for termination
was a discharge for cause, the option shall expire immediately, and if the
reason for termination was for death or permanent disability of the optionee,
the vested portion of the option shall remain exercisable for a period of twelve
(12) months thereafter.
Incentive Stock Rights. Incentive stock rights consist of incentive stock
units equivalent to one share of Common Stock in consideration for services
performed for the Company. Each incentive stock unit shall entitle the holder
thereof to receive, without payment of cash or property to the Company, one
share of Common Stock in consideration for services performed for the Company or
any subsidiary by the employee, subject to the lapse of the incentive periods,
whereby the Company shall issue such number of shares upon the completion of
each specified period. If the employment or consulting services of the holder
with the Company terminate prior to the end of the incentive period relating to
the units awarded, the rights shall thereupon be null and void, except that if
termination is caused by death or permanent disability, the holder or his/her
heirs, as the case may be, shall be entitled to receive a pro rata portion of
the shares represented by the units, based upon that portion of the incentive
period which shall have elapsed prior to the holder's death or disability.
Stock Appreciation Rights (SARs). SARs may be granted to recipients of
options under the Management Plan. SARs may be granted simultaneously with, or
subsequent to, the grant of a related option and may be exercised to the extent
that the related option is exercisable, except that no general SAR (as
hereinafter defined) may be exercised within a period of six months of the date
of grant of such SAR, and no SAR granted with respect to an ISO may be exercised
unless the fair market value of the Common Stock on the date of exercise exceeds
the exercise price of the ISO. A holder may be granted general SARs ("General
SARs") or limited SARs ("Limited SARs"), or both. General SARs permit the holder
thereof to receive an amount (in cash, shares of Common Stock, or a combination
of both) equal to the number of SARs exercised multiplied by the excess of the
fair market value of the Common Stock on the exercise date over the exercise
price of the related option. Limited SARs are similar to General SARs, except
that, unless the Administrator determines otherwise, they may be exercised only
during a prescribed period following the occurrence of one or more of the
following "Change of Control" transactions: (i) the approval of the Board of
Directors of consolidation or merger in which the Company is not the surviving
corporation, the sale of all of substantially all the assets of the Company, or
the liquidation or dissolution of the Company; (ii) the commencement of a tender
or exchange offer for the Company's Common Stock (or securities convertible into
Common Stock) without the prior consent of the Board; (iii) the acquisition of
beneficial ownership by any person or other entity (other than the Company or
any employee benefit plan sponsored by the Company) of securities of the Company
representing 25% or more of the voting power of the Company's
<PAGE>
outstanding securities; or (iv) if during any period of two years or less,
individuals who at the beginning of such period constitute the entire Board
cease to constitute a majority of the Board, unless the election, or the
nomination for election, of each new director is approved by at least a majority
of the directors then still in office.
The exercise of any portion of either the related option or the tandem SARs
will cause a corresponding reduction in the number of shares remaining subject
to the option or the tandem SARs, thus maintaining a balance between outstanding
options and SARs.
Restricted Stock Purchase Agreements. Restricted Stock purchase agreements
provide for the sale by the Company of shares of Common Stock at prices to be
determined by the Board, which shares shall be subject to restrictions on
disposition for a stated period during which the purchaser must continue
employment with the Company in order to retain the shares. Payment must be made
in cash. If termination of employment occurs for any reason within six months
after the date of purchase, or for any reason other than death or by retirement
with the consent of the Company of the Company after the six-month period but
prior to the time that the restrictions on disposition lapse, the Company shall
have the option to reacquire the shares at the original purchase price.
Restricted shares awarded under the Management Plan will be subject to a
period of time designated by the Administrator (the "restricted period") during
which the recipient must continue to render services to the Company before the
restricted shares will become vested. The Administrator may also impose other
restrictions, terms, and conditions that must be fulfilled before the restricted
shares may vest.
Upon the grant of restricted shares, stock certificates
registered in the name of the recipient will be issued and such shares will
constitute issued and outstanding shares of Common Stock for all corporate
purposes. The holder will have the right to vote the restricted shares and to
receive all regular cash dividends (and such other distributions as the
Administrator may designate), if any, which are paid or distributed on the
restricted shares and, generally, to exercise all other rights as a holder of
Common Stock, except that, until the end of the restricted period, (i) the
holder will not be entitled to take possession of the stock certificates
representing the restricted shares; and (ii) the holder will not be entitled to
sell, transfer, or otherwise dispose of the restricted shares. A breach of any
restrictions, terms, or conditions established by the Administrator with respect
to any restricted shares will cause a forfeiture of such restricted shares.
Upon expiration of the applicable restriction period and the satisfaction
of any other applicable conditions, all or part of the restricted shares and any
dividends or other distributions not distributed to the holder (the "retained
distributions") thereon will become vested. Any restricted shares and any
retained distributions thereon which do not so vest will be forfeited to the
Company. If prior to the expiration of the restricted period a holder is
terminated without cause or because of a total disability (in each case as
defined in the
<PAGE>
Management Plan), or dies, then, unless otherwise determined by the
Administrator at the time of the grant, the restricted period applicable to each
award of restricted shares will thereupon be deemed to have expired. Unless the
Administrator determines otherwise, if a holder's employment terminates prior to
the expiration of the applicable restricted period for any reason other than as
set forth above, all restricted shares and any retained distributions thereon
will be forfeited.
Accelerating of the vesting of the restricted shares shall occur, under the
provisions of the Management Plan, on the first day following the occurrence of
any of the following: (a) the approval by the stockholders of the Company of an
"Approved Transaction"; (b) a "Control Purchase"; or (c) a "Board Change."
An "Approved Transaction" is defined as (A) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation
or pursuant to which shares of Common Stock will be converted into cash,
securities, or other property other than a merger of the Company in which the
holders of the Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock of the surviving corporation immediately
after the merger; or (B) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company; or (C) the adoption of any plan or proposal for
the liquidation or dissolution of the Company.
A "Control Purchase" is defined as circumstances in which any person (as
such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act),
corporation, or other entity (other than the Company or any employee benefit
plan sponsored by the Company) (A) shall purchase any Common Stock of the
Company (or securities convertible into the Company's Common Stock) for cash,
securities, or any other consideration pursuant to a tender offer or exchange
offer, without the prior consent of the Board of Directors, or (B) shall become
the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the then
outstanding securities of the Company ordinarily (and apart from rights accruing
under special circumstances) having the right to vote in the election of
directors (calculated as provided in paragraph (d) of such Rule 13d-3 in the
case of rights to acquire the Company's securities).
A "Board Change" is defined as circumstances in which, during any period of
two consecutive years or less, individuals who at the beginning of such period
constitute the entire Board shall cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by the company's
stockholders, of each new director was approved by a vote of at least a majority
of the directors then still in office.
<PAGE>
1994 Employee Stock Option Plan
In December 1994, the Board of Directors adopted the 1994 Senior
Employee Incentive Plan (the "Employee Plan"). This plan was adopted also by
shareholder consent. The Employee Plan provides for the issuance of up to
2,000,000 shares of the Company's Common Stock in connection with the issuance
of stock options to key employees of the Company.
The adoption of the Employee Plan was prompted by the Company's desire (i)
to attract and retain qualified personnel, whose performance is expected to have
a substantial impact on the Company's long-term profit and growth potential, by
encouraging those persons to acquire equity in the Company; and (ii) to provide
the Board with sufficient flexibility regarding the forms of incentive
compensation which the Company will have at its disposal in rewarding key
employees, advisors, and independent consultants without unnecessarily depleting
the Company's cash reserves. The Employee Plan is designed to augment the
Company's existing compensation programs and is intended to enable the Company
to offer employees a personal interest in the Company's growth and success
through the grant of stock options. A total of 2,000,000 shares of Common Stock
are reserved for issuance under the Employee Plan.
Under the Employee Plan, options to purchase an aggregate of not more than
2,000,000 shares of Common Stock may be granted from time to time to key
employees, advisors and independent consultants to the Company and its
subsidiaries. It is anticipated that awards made under the Employee Plan will be
subject to vesting periods, although the vesting periods are subject to the
discretion of the Board of Directors or Administrator of the plan. If approved,
awards under the Employee Plan may be made until January 1, 2004 when the
Employee Plan terminates.
The Employee Plan is to be administered by the Board of Directors.
Subject to the specific provisions of the Employee Plan, the Administrator is
generally empowered to (i) interpret the plan; (ii) prescribe rules and
regulations pertaining thereto; (iii) determine the terms of the option
agreements; (iv) amend them with the consent of the optionee; (v) determine the
employees to whom options are to be granted; and (vi) determine the number of
shares subject to each option and the exercise price thereof.
The per share exercise price for incentive stock options ("ISOs") will not
be less than 100% of the fair market value of a share of the Common Stock on the
date the option is granted (110% of fair market value on the date of grant of an
ISO if the optionee owns more than 10% of the Common Stock of the Company).
Options will be exercisable for a term determined by the Board which will
not be less than one year. Options may be exercised only while the original
grantee has a relationship with the Company or a subsidiary of the Company which
confers eligibility to be granted options or up to ninety (90) days after
termination at the sole discretion of the Board. In the event of termination due
to retirement, the Optionee, with the consent of the Board, shall have
<PAGE>
the right to exercise his option at any time during the twelve (12) month period
after such retirement. Options may be exercised up to twelve (12) months after
death or total and permanent disability. In the event of certain basic changes
in the Company, including a change in control of the Company (as defined in the
Employee Plan) in the discretion of the Board, each option may become fully and
immediately exercisable. ISOs are not transferable other than by will or the
laws of descent and distribution. Options may be exercised during the holder's
lifetime only by the holder or his or her guardian or legal representative.
Options granted pursuant to the Employee Plan may be designated as ISOs,
with the attendant tax benefits provided under Section 421 and 422A of the
Internal Revenue Code of 1986. Accordingly, the Employee Plan provides that the
aggregate fair market value (determined at the time an ISO is granted) of the
Common Stock subject to ISOs exercisable for the first time by an employee
during any calendar year (under all plans of the Company and its subsidiaries)
may not exceed $100,000. The Board may modify, suspend, or terminate the
Employee Plan, provided, however, that certain material modifications affecting
the Plan must be approved by the shareholders, and any change in the Employee
Plan that may adversely affect an optionee's rights under an option previously
granted under the Employee Plan requires the consent of the optionee.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information as of September 29,
1997, based upon information obtained by the persons named below, with respect
to the beneficial ownership of shares of Common Stock by (i) each person known
by the Company to be the owner of 5% or more of the outstanding shares of Common
Stock; (ii) by each Officer and Director; and (iii) by all Officers and
Directors as a group.
<TABLE>
<CAPTION>
Percent of
Common
Number of Stock
Name Shares Owned
<S> <C> <C>
Joseph Polito (1) 4,862,156 61.1%
c/o U.S. Bridge Corp.
53-09 97th Place
Corona, New York 11368
Steven Polito (2) 127,500 1.7%
c/o U.S. Bridge Corp.
53-09 97th Place
Corona, New York 11368
Ronald Polito (3) 152,500 2.0%
c/o U.S. Bridge Corp.
53-09 97th Place
Corona, New York 11368
All Officers and Directors
as a group (3 persons)(1)-(3) 5,142,156 65.3%
</TABLE>
(1) Includes 275,000 shares issuable upon the exercise of an option which
is presently vested and exercisable. Does not include (i) 10,000 shares issuable
to Joseph Polito upon the exercise of options not presently vested; and (ii) an
aggregate of 251,000 shares gifted by Joseph Polito, of which 81,000 shares were
gifted to members of Joseph Polito's family (including 50,000 each to Ronald and
Steven Polito) and 70,000 shares were gifted to employees of the Company, as of
January 23, 1995. Joseph Polito disclaims beneficial ownership of all shares
transferred to his family members.
(2) Includes 75,000 shares issuable to Steven Polito pursuant to options
which have vested. (3) Includes 100,000 shares issuable to Ronald Polito
pursuant to options which have vested.
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 1, 1995, in conjunction with NY's public offering
underwriter's exercise of its over-allotment option to purchase 91,850
additional shares of NY's common stock, the Company exercised its Special
Warrant and purchased 5,665 shares of NY's common stock at $2.50 per share.
On October 11, 1995, NY paid One Carnegie $50,000 on behalf of MD for
fabrication services performed by MD. Such payment was treated as a payment on
account by NY to MD. From July 1995 to October 1995, NY paid MD approximately
$183,000 for the labor associated with the fabrication of steel.
On May 13, 1996, Joseph Polito, the Company's President, entered into a
memorandum of understanding with an individual, Lubov Ulianova, whereby Mr.
Polito borrowed $300,000 from Mr. Ulianova. The loan was secured by 550,000
shares of the Company's Common Stock owned by Mr. Polito, which shares were put
into an escrow account, with Alan Berkun as the escrow agent. The funds were
then loaned by Mr. Polito to the Company. The loan provided that upon the
Company's listing of its Common Stock on the Nasdaq SmallCap Stock market
(Nasdaq), 400,000 shares of Common Stock would be issued to Mr. Ulianova as
repayment of the loan. This transaction was an exempt transaction, in accordance
with Regulation S under the Securities Act of 1933, as amended. In addition, Mr.
Polito granted Mr. Ulianova an option to purchase 600,000 shares of Company
Common Stock at a price of $1.50 and could only be exercised if the bid price
for the Company's Common Stock was at least $3.00. The Company's Common Stock
was approved for listing on Nasdaq on July 25, 1996, at which time the loan was
repaid. The option expired unexercised. These matters were reviewed for the
Company by its special counsel Alan Berkun, Esq.
In December 1996, the Company issued bonuses of 100,000 shares of
Common Stock to Joseph Polito and 2,500 shares to each of Ronald Polito and
Steven Polito as part of the
aggregate of 114,617 shares issued to NY's employees and consultants pursuant to
the Management Plan. The Company also issued 313 shares of Common Stock to Ilene
Althaus, Joseph Polito's wife. In connection with the 114,617 shares issued to
NY's employees and consultants, the Company recorded compensation expense
amounting to $107,453, which is based on upon 50% of the average closing bid
price for the month of December 1996.
In February 1997, pursuant to a Form S-8 Registration Statement filed
with the Securities and Exchange Commission, the Company registered for sale a
total of 686,617 shares of Common Stock, 575,000 of which are shares underlying
options granted pursuant to the Company's Senior Management Incentive Plan. The
options are exercisable at $1.75 and $1.925 per share.
On March 13, 1997, the Company issued 125,000 shares of Common Stock to
Joseph Polito upon exercise of options granted pursuant to the above mentioned
Management Plan. In
<PAGE>
February 1997, these shares were registered for resale pursuant to a Form
S-8 Registration Statement. Mr. Polito executed a promissory note for the
exercise price.
NY leases its administrative office space and certain storage space from
RSJJ, an affiliate owned by the Company's majority stockholder, Joseph Polito.
In accordance with a signed lease agreement which expires on March 31, 1998, NY
pays rent in the amount of $20,000 per month. As of May 1997, NY was in arrears
in the amount of $480,000 in payments due under its lease with RSJJ. This
arrearage was converted into equity as follows: NY issued 270,000 shares of
common stock to the Company, for the cancellation of the debt owed to RSJJ. The
Company, in turn, issued 200,000 shares of its Common Stock to Mr. Polito and
150,000 shares of its Common Stock to RSJJ. RSJJ then transferred all of such
shares to RSJJ's mortgagor, which agreed to accept said shares as payment of
RSJJ's outstanding mortgage.
During the year ended June 30, 1996, NY purchased approximately $180,333 of
fabricated steel from Waldorf. Such amount paid to Waldorf represented
approximately 18% of the steel purchased by NY for the year ended June 30, 1996.
Waldorf is wholly owned by Joseph Polito.
During the years ended June 1997 and 1996, NY paid $371,321 and $802,383,
respectively, to MD for certain materials and labor necessary to perform steel
erection services. MD is a wholly owned subsidiary of the Company.
During the years ended June 30, 1997 and 1996, NY paid $214,000 and
$163,000, respectively, to Crown Crane, Inc. for leasing cranes necessary to
perform steel erection services. Joseph Polito owns 50% of Crown Crane, Inc.
During the year ended June 30, 1997, NY paid $35,000 to Atlas Gem Leasing,
Inc. for certain machinery necessary to perform steel erection services. Atlas
Gem Leasing, Inc. is wholly owned by Joseph Polito.
See "Item 10. Executive Compensation-Employment and Consulting Agreements"
for information regarding management's compensation.
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following financial statements of the Company are included as Part II,
Item 8:
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors Report F-1
Consolidated Balance Sheet F-2
Consolidated Statements of Operations F-3
Consolidated Statement of Stockholders' Equity F-4
Consolidated Statements of Cash Flows F-5 - F-6
Consolidated Notes to Financial Statements F-7 - F-19
</TABLE>
(b) During the last quarter, the Company filed no reports on Form 8-K.
(c) All exhibits, except those designated with an asterisk (*) which are filed
herewith, previously have been filed with the Commission in connection with such
documents as are incorporated by reference herein.
<TABLE>
<CAPTION>
<S> <C> <C>
2.1 - Agreement and Plan of Reorganization dated effective as of April 25,
1994 (incorporated by reference herein to exhibit 2.1 of Form 10-K filed
with the Commission for the fiscal year ended June 30, 1994).
3.1 - Certificate of Incorporation of the Company filed June 15, 1994.
3.2 - By-Laws of the Company (incorporated herein by reference to Form S-
18, dated May 4, 1989).
4.1 - Form of Special Warrant (incorporated herein by reference to exhibit 4.1
of Form 10-KSB for the fiscal year ended June 30, 1995).
4.2 - Form of Restricted Stock agreement issued to Joseph Polito
(incorporated herein by reference to exhibit 4.2 of Form 10-KSB for the
fiscal year ended June 30, 1995).
10.1 - Lease Agreement between One Carnegie Court Associates and Waldorf
Steel Fabrications, Inc., dated March 27, 1990 (incorporated herein by
reference to exhibit 10.1 of Form 10-KSB for the fiscal year ended June
30, 1994).
10.2 - Promissory note from the Company to Trinity Industries, Inc.
(incorporated herein by reference to exhibit 10.2 of Form 10-KSB for the
fiscal year ended June 30, 1994).
10.3 - Forbearance Agreement between the Company and Trinity Industries,
Inc., dated October 14, 1993 (incorporated herein by reference to exhibit
10.3 of Form 10-KSB for the fiscal year ended June 30, 1994).
<PAGE>
10.4 - Lease Agreement between R.S.J.J. Realty Corp. and NY, dated June 30,
1993 (incorporated herein by reference to exhibit 10.4 of Form 10-KSB
for the fiscal year ended June 30, 1994).
10.5 - Employment Agreement of Joseph Polito (incorporated herein by
reference to exhibit 10.5 of Form 10-KSB for the fiscal year ended June
30, 1995).
10.6 - The Company's Senior Management Incentive Plan
(incorporated herein by reference to the proxy
statement dated February 1995).
10.7 - The Company's Employee Stock Option Plan
(incorporated herein by reference to the proxy
statement dated February 1995).
10.8 - Agreement between Iron Workers Local Union 40 and NY (incorporated
herein by reference to exhibit 10.8 of Form 10-KSB for the fiscal year
ended June 30, 1995).
10.9 - Agreement between Local Union 14, 14B, 15, 15A, 15C, 15D,
International Union of Operating Engineers, AFL-CIO and NY
(incorporated herein by reference to exhibit 10.9 of Form 10-KSB for the
fiscal year ended June 30, 1995).
10.10 - Agreement between Local 780 and NY (incorporated herein by reference
to exhibit 10.10 of Form 10-KSB for the fiscal year ended June 30,
1995).
10.11 - Agreement to capitalize the $400,000 of debt (incorporated herein by
reference to exhibit 10.11 of Form 10-KSB for the fiscal year ended June
30, 1995).
10.12 - Consulting Agreement with Marlowe and Company (incorporated by
reference herein to exhibit 10.12 of Form 10-KSB for the fiscal year
ended June 30, 1995).
10.13 - Lease surrender agreement between One Carnegie and Waldorf dated
August 1, 1995 (incorporated herein by reference to Form 10-KSB/A for
the fiscal year ended June 30, 1995).
10.14 - Lease Agreement between One Carnegie and U.S. Bridge Corp.
(Maryland), dated August 1, 1995 (incorporated herein by reference to
Form 10-KSB/A for the fiscal year ended June 30, 1995).
10.15* - Consulting Agreement dated December 9, 1996 with Bernard Tapie.
10.16* - Memorandum of Understanding, dated May 13, 1996, between the
Company and Lubov Ulianova.
21.1* - List of Subsidiaries.
27.1 - Financial Data Schedule.
</TABLE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 7th day of November, 1997.
U.S. BRIDGE CORP.
By: /s/ Joseph M. Polito
Joseph M. Polito, President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Joseph M. Polito President and Director
Joseph M. Polito (Principal Executive 11/07/97
Officer) Date
/s/ Ronald J. Polito Secretary and Director
Ronald J. Polito 11/07/97
Date
/s/ Steven J. Polito Treasurer 11/07/97
Steven J. Polito and Director Date
</TABLE>
<PAGE>
U.S. BRIDGE CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Page
Number
<S> <C>
Independent auditors' report F-1
Consolidated balance sheet as of June 30, 1997 F-2
Consolidated statements of operations for the years
ended June 30, 1997 and 1996 F-3
Consolidated statement of stockholders' equity for the years
ended June 30, 1997 and 1996 F-4
Consolidated statements of cash flows for the years
ended June 30, 1997 and 1996 F-5 F-6
Notes to consolidated financial statements F-7 - F-19
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
U.S. Bridge Corp. and Subsidiaries
We have audited the accompanying consolidated balance sheet of U.S. Bridge Corp.
and its subsidiaries (the "Company") as of June 30, 1997 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended June 30, 1997 and 1996. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of the Company as of June 30, 1997, and the consolidated
results of its operations and cash flows for the years ended June 30, 1997 and
1996, in conformity with generally accepted accounting principles.
Scarano & Tomaro, P.C.
Syosset, New York
October 4, 1997
<PAGE>
U.S. BRIDGE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
ASSETS
Current assets:
<S> <C>
Cash ............................................................. $ 555,435
Cash - restricted ................................................ 214,001
Contracts and retainage receivable, net .......................... 8,962,297
Costs and estimated earnings in excess of billings
on uncompleted contracts ........................................ 2,225,723
Deferred tax asset ............................................... 304,225
Other current assets ............................................. 186,499
------------
Total current assets ........................................ 12,448,180
Assets of discontinued operations .................................... 2,889,999
Deferred tax asset - non current ..................................... 74,575
Other assets ......................................................... 87,500
------------
Total assets ......................................................... $ 15,500,254
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, including cash overdrafts of $149,290 .......... $ 3,495,492
Accrued expenses ................................................. 964,236
Payroll taxes payable ............................................ 1,441,589
Note payable ..................................................... 145,358
Billings in excess of costs and estimated earnings
on uncompleted contracts ........................................ 126,455
Due to officer and related parties ............................... 166,540
Income taxes payable ............................................. 522,379
Liabilities of discontinued operations ........................... 3,039,999
------------
Total current liabilities ................................... 9,902,048
Minority interest .................................................... 2,828,301
Commitments and contingencies (Note 13) .............................. --
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 7,402,148 ................................ 7,006
Additional paid-in capital ....................................... 3,756,589
Accumulated deficit .............................................. (753,065)
------------
Sub-total stockholders' equity .............................. 3,010,530
Less: Note receivable - stockholder ......................... (240,625)
Total stockholders' equity .................................. 2,769,905
Total liabilities and stockholders' equity ........................... $ 15,500,254
============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
U.S. BRIDGE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30,
<TABLE>
<CAPTION>
1997 1996
------------- ---------
Revenue:
<S> <C> <C>
Contract revenue ................................................. $ 15,494,447 $ 7,401,433
------------ ----------------
Costs and expenses:
Cost of contract revenues ........................................ 11,137,325 5,031,216
General and administrative expenses .............................. 2,934,916 2,493,399
Bad debt expense ................................................. 1,287,000 1,019,127
------------ ----------------
Total costs and expenses .................................... 15,359,241 8,543,742
------------ ----------------
Income (loss) from operations before other income (expense),
minority interest and (benefit) provision for income taxes .......... 135,206 (1,142,309)
Other income (expenses):
Interest expense and financing costs ............................. (158,577) (35,141)
Unusual item (Note 8(b)) ......................................... -- (441,863)
Gain on sale/acquisition of subsidiary's stock (Note 9) .......... 17,500 832,571
Gain on issuance of stock for accounts payable ................... 243,750 --
Interest income .................................................. 10,425 27,766
------------ ----------------
Total other (expenses) income ............................... 113,098 383,333
------------ ----------------
(Income) loss before minority interest and (benefit) provision
for income taxes .................................................... 248,304 (758,976)
Minority interest in net (income) loss ............................... (281,773) 342,802
------------ ----------------
Loss before provision (benefit) for income taxes ..................... (33,469) (416,174)
Provision (benefit) for income taxes ................................. 142,875 (860,960)
------------ ----------------
Net income before loss from discontinued operations .................. (176,344) 444,786
Loss from discontinued operations .................................... 280,911 404,217
Loss on disposal of assets of discontinued operations ................ 83,621 --
------------ ----------------
Net income (loss) .................................................... $ (540,876) $ 40,569
============ ================
Net income (loss) per common equivalent share:
Income (loss) from operations before other income (expense),
minority interest and (benefit) provision for income taxes ..... $ .02 $ (.20)
============ ================
Income (loss) before minority interest and (benefit) provision for
income taxes .................................................... $ .04 $ (.19)
============ ================
Provision (benefit) for income taxes ............................. $ .02 $ (.14)
============ ================
Net (loss) income ................................................ $ (.08) $ Nil
============ ================
Weighted average number of common shares outstanding ................. 6,854,390 6,137,530
================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
U.S. BRIDGE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Common
stock
Additional Total
paid-in Accumulated
Stockholders'
Shares Amount capital Deficit equity
<S> <C> <C> <C> <C> <C>
Balances at July 1, 1995 .................. 6,012,531 $ 5,616 $ 2,591,652 $ (252,758) $ 2,344,510
Issuance of common stock in consideration
for services pursuant to senior management
incentive plan ........................... 150,000 150 49,350 -- 49,500
Net income for the year ended
June 30, 1996 ............................ -- -- -- 40,569 40,569
----------- ----------- ----------- ----------- -----------
Balances at June 30, 1996 ................. 6,162,531 5,766 2,641,002 (212,189) 2,434,579
Issuance of common stock in lieu of
repayment of loan ........................ 400,000 400 399,600 -- 400,000
Issuance of common stock as
consideration for services
provided to the Company .................. 250,000 250 149,750 -- 150,000
Issuance of common stock pursuant
to the 1995 Senior Management
Incentive Plan as consideration for
services provided to the Company ......... 114,617 115 107,337 -- 107,452
Issuance of common stock in connection
with the exercise of options ............. 125,000 125 240,500 -- 240,625
Issuance of common stock in connection
with settlement of subsidiary's related
party debt ............................... 350,000 350 218,400 -- 218,750
Net loss for the year ended
June 30, 1997 ............................ -- -- -- (540,876) (540,876)
----------- ----------- ----------- ----------- -----------
Balances at June 30, 1997 ................. 7,402,148 $ 7,006 $ 3,756,589 $ (753,065) $ 3,010,530
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
U.S. BRIDGE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
Operating activities:
<S> <C> <C>
Net income (loss) ......................................... $ (540,876) $ 40,569
Adjustments to reconcile net (loss) income to net
cash (used for) provided by operating activities:
Depreciation and amortization ........................ 453,583 882,549
Minority interest in net income (loss) ............... 281,773 (342,802)
Bad debt expense ..................................... 1,287,000 1,019,127
Deferred income tax benefit .......................... (396,300) --
Issuance of common stock for services ................ 107,453 --
Gain on sale of subsidiary's stock ................... -- (832,571)
Gain on issuance of stock for debt ................... (143,750) --
Contingent loss on disposal of property .............. 92,121 --
Decrease (increase) in:
Contracts and retainage receivable ................... (6,752,882) (1,711,424)
Costs and estimated earnings in excess of
billings on uncompleted contracts ................... 207,801 (607,395)
Other current assets ............................... (7,382) (18,750)
Increase (decrease) in:
Accounts payable ..................................... 3,519,175 489,597
Accrued expenses ..................................... 778,853 (189,545)
Payroll taxes payable ................................ 1,060,660 62,570
Billings in excess of costs and estimated
earnings on uncompleted contracts ................... 109,888 16,567
Income taxes payable ................................. 521,675 (864,263)
----------- -----------
Net cash used for operating activities ............. 578,792 (2,055,771)
----------- -----------
Investing activities:
Other assets .............................................. (8,156) --
----------- -----------
Net cash (used for) provided by investing activities (8,156) --
----------- -----------
Financing activities:
Principal payments on mortgage ............................ -- (164,992)
Financing costs incurred .................................. (35,000) --
Principal payments of notes payable ....................... (479) (1,071,649)
Advances from officers .................................... 211,341 358,779
Advances from (payment to) related parties ................ (376,714) (80,767)
Proceeds from issuance of Subsidiary's
common stock and warrants, net of costs .................. -- 3,207,806
----------- -----------
Net cash provided by financing activities .......... (200,852) 2,249,177
----------- -----------
Net increase in cash .......................................... 369,784 193,406
Cash, beginning ............................................... 399,652 206,246
----------- -----------
Cash, ending .................................................. $ 769,436 $ 399,652
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
U.S. BRIDGE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,
<TABLE>
<CAPTION>
1997 1996
------------------ ------------
Supplemental disclosure of cash flow information: Cash paid during the year for:
<S> <C> <C>
Interest $ 36,848 $ 236,610
================== ==================
Taxes $ - $ -
================== ================
Supplemental disclosure of non-cash operating activities:
In connection with the issuance of common stock, 114,617 shares
were issued as consideration for employee compensation $ 107,452 $ -
============== ======
Supplemental disclosure of non-cash financing activities:
In connection with the conversion of subsidiary's account payable
of the Subsidiary's common stock, 350,000 shares of common
stock were issued as consideration for 270,000 shares of common
stock of the Subsidiary $ 218,750 $ -
================== ===============
In connection with issuance of common stock, 250,000 shares were
issued as deferred compensation $ 150,000 $ 49,500
================== ==================
In connection with the payment of due to shareholder, 400,000
shares of common stock were issued $ 300,000 $ -
================== ================
</TABLE>
<PAGE>
NOTE 1 - ORGANIZATION
U.S. Bridge Corp. ("the Company") was incorporated in the State of Delaware
on September 11, 1988 under the name of Colonial Capital Corp. Effective April
1994, in connection with the reverse acquisition of its subsidiaries, (See Note
12(a)) 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 June 30, 1997 is a 53.23% owned subsidiary of the Company which provides
steel erection to contractors. 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, building, machinery, and equipment, which it rented to US Bridge Corp.
(Maryland) ("US Bridge MD").
US Bridge MD was incorporated in the State of Delaware for the purpose of
providing laborers to perform fabrication work for US Bridge of NY and other
unrelated customers. US Bridge MD is a wholly-owned subsidiary of the Company.
The Company and its subsidiaries' year end is June 30, for financial
statement purposes.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Consolidated statements
The consolidated financial statements at June 30, 1997 and
1996 include the accounts of the Company and its
majority-owned subsidiary, US Bridge NY and its wholly-owned
subsidiaries, One Carnegie and US Bridge MD, after elimination
of all significant intercompany transactions and accounts.
b) Cash and cash equivalents
For purposes of the statements of cash flows, the
Company considers all highly liquid investments purchased with
an original maturity of six months or less to be cash
equivalents. US Bridge NY at June 30, 1997 maintains its cash
deposits in accounts which are in excess of federal deposit
insurance corporation limits by $244,625.
As of June 30, 1997, the Company maintains $214,001
of restricted cash securing a credit line from a financial
institution.
c) Use of estimates
The preparation of the financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue
<PAGE>
and expenses during the reporting period. The most significant
estimates with regard to these financial statements relate to
the estimating of final construction contract profits in
accordance with accounting for long-term contracts and
estimating potential liabilities in conjunction with certain
contingencies and commitments. Actual results could differ
from these estimates.
d) Balance sheet classifications
The Company includes in current assets and
liabilities amounts receivable and payable under construction
contracts which may extend beyond one year. A one-year time
period is used as the basis for classifying all other current
assets and liabilities.
e) Contracts and retainage receivables
Contracts and retainage receivables represent amounts billed
but uncollected on completed construction contracts and
construction contracts in progress and unbilled retainage on
construction contracts completed and in progress.
The Company utilizes the allowance method for recognizing the
collectibility of its contracts receivable. The allowance
method recognizes bad debt expense based on a review of the
individual accounts outstanding based on the surrounding facts
and estimates made by management.
f) Property and equipment
Property and equipment which has been classified as assets of
discontinued operations are recorded at cost. Depreciation was
provided using the straight-line method over the estimated
useful lives of the related assets which range from 10 to 40
years.
g) Deferred compensation
Deferred compensation which has been included as other assets
consists of stock issued to an officer relating to the initial
public offering of US Bridge NY. Deferred compensation has
been charged to general and administrative costs over the
vesting period of the stock issued. (See Note 10(b)(i)).
i) Deferred consulting costs
Deferred consulting costs which have been classified as other
assets consist of consulting fees in the form of additional
common stock issued to a broker-dealer. (See Note 10(b)(ii)).
The deferred consulting costs of $150,000 are being amortized
over the two year period.
j) Income taxes
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" which requires the use of the "liability
method" of accounting for income taxes. Accordingly, deferred tax
<PAGE>
liabilities and assets are determined based on the difference
between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in
which the differences are expected to reverse. Current income
taxes are based on the year's taxable income for Federal,
State and City income tax reporting purposes.
k) Revenue recognition
The Company recognizes revenue and costs for all contracts
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. General and
administrative expenses are accounted for as period costs and
are, therefore, not included in the calculation of the
estimates to complete construction contracts in progress.
Material project losses are provided for in their entirety
without reference to the percentage of completion. As
contracts can extend over one or more accounting periods,
revision in costs and earnings estimated during the course of
the work are reflected during the accounting period in which
the facts become known. An amount equal to the costs
attributable to unapproved change orders and claims is
included in the total estimated revenue when realization is
probable.
The current asset, "costs and estimated earnings in excess of
billings on uncompleted contracts", represents costs and
estimated earnings in excess of amounts billed on respective
uncompleted contracts at the end of each period.
The current liability, "billings in excess of costs and
estimated earnings on uncompleted contracts," represents
billings which exceed costs and estimated earnings on
respective uncompleted contracts at the end of each period.
l) Net income (loss) per share
Net income (loss) per share for the years ended June 30, 1997
and 1996 are based upon the weighted average number of common
shares outstanding during the respective years.
m) Impact of recently issued accounting standards
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", which requires
impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Statement
121 also addresses the accounting for long-lived assets that
are expected to be disposed of. The Company adopted Statement
121 during the year ended June 30, 1996.
n) Accounting for stock-based compensation
During 1995, SFAS No. 123, "Accounting for Stock-based
Compensation" was issued. The statement requires the fair
value of stock options and other stock-based compensation
issued to employees to be either included as compensation
expense in the
<PAGE>
income statement, or the pro-forma effect on net income and
earnings per share to be disclosed in the footnotes to the
financial statements commencing in 1996. The Company has
elected to adopt SFAS No. 123 effective July 1, 1995.
o) Fair value disclosure as of June 30, 1997
The carrying value of cash, accounts receivable, accounts
payable and accrued expenses and short-term debt are a
reasonable estimate of their fair value. The carrying value of
the long-term debt approximates fair value based upon the
interest factors for the debt being based upon the prime rate
which reflects market value.
p) Reclassifications
Certain reclassifications have been made to the June 30, 1996
consolidated financial statements in order to conform to the
June 30, 1997 presentation.
NOTE 3 - CONTRACT AND RETAINAGE RECEIVABLE
At June 30, 1997, contract and retainage receivable consist of
the following:
<TABLE>
<CAPTION>
<S> <C>
Contracts in progress $ 5,087,169
Completed contracts 4,939,284
Retainage 1,222,844
--------------
11,249,297
Less: allowance for doubtful accounts 2,287,000
$ 8,962,297
</TABLE>
NOTE 4 - CONTRACTS IN PROGRESS
<TABLE>
<CAPTION>
At June 30, 1997, costs and estimated earnings in excess of
billings and billings in excess of costs and estimated
earnings on uncompleted contracts consist of the following:
<S> <C>
Costs incurred on uncompleted contracts $ 14,025,808
Profits earned to date 4,190,473
--------------
18,216,281
Less: billings to date 16,117,013
$ 2,099,268
</TABLE>
<PAGE>
Included in the accompanying balance sheet under the following captions at June
30, 1997:
<TABLE>
<CAPTION>
<S> <C>
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 2,225,723
Billings in excess of costs and estimated
earnings on uncompleted contracts (126,455)
$ 2,099,268
</TABLE>
NOTE 5 - BACKLOG
The following schedule summarizes changes in backlog on
contracts during the year ended June 30, 1997. Backlog
represents the amount of revenue the Company expects to
realize from work to be performed on uncompleted contracts in
progress at year end and from contractual agreements on which
work has not yet begun.
<TABLE>
<CAPTION>
<S> <C>
Backlog balance at July 1, 1996 $ 17,943,400
Change orders to contracts in progress at July 1, 1996 2,486,885
New contracts during the year ended June 30, 1997 1,113,462
-----------------
21,543,747
Less: contract revenue earned during the year ended June 30, 1997 (15,494,447)
----------------
Backlog balance at June 30, 1997 $ 6,049,300
============
</TABLE>
NOTE 6 - ACCRUED EXPENSES
Accrued expenses consist of the following at June 30, 1997:
<TABLE>
<CAPTION>
<S> <C>
Wages and related union benefits $ 307,934
Professional fees 40,000
Insurance expense 421,885
State franchise taxes 1,392
Interest and penalties on payroll taxes 193,025
--------------
$ 964,236
</TABLE>
NOTE 7 - INCOME TAXES
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes".
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes related primarily to
differences between the financial and tax basis of assets and
liabilities. The deferred tax assets and liabilities represent
the future tax return consequences of these temporary
differences, which will either be taxable or deductible when
the assets and liabilities are recovered or settled. The
Company's only such significant items relate to its allowance
for doubtful accounts and Section 144 stock issuances.
<PAGE>
For income tax purposes, the Company reports using a
year end of December 31. The Company and its subsidiaries file
returns separately for federal and State purposes.
The reconciliation of income tax computed at the federal statutory tax rate
to income tax expense is as follows for the years ended June 30,
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Tax computed at the federal statutory
income tax rate (11,379) (141,500)
Increase (reductions) resulting from:
state and local taxes net of federal benefit (4,331) (18,395)
Tax expense on subsidiary income,
deferred income tax benefit and
other miscellaneous permanent differences 158,585 -
Reversal of prior year accruals - (701,065)
_______ ____________
------------------------------------
Income tax expense (benefit) 142,875 (860,960)
The tax effects of significant item comprising the Company's
net deferred tax assets as of June 30, 1997 is as follows:
Allowance for doubtful accounts $ 1,073,500
Section 144 stock (IRC Section 83) 441,700
Less: Valuation allowance (1,136,400)
Deferred tax asset $ 378,800
=============
Current portion of deferred tax asset $ 304,225
==================
Non-current portion of deferred tax asset 74,575
-------------
$ 378,800
</TABLE>
The Company has recorded a deferred tax asset with an
estimated valuation allowance of 75% as of June 30, 1997 based
on the estimated deductibility of the above items expense in
the future.
NOTE 8 - NOTES PAYABLE
a) Line of credit
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. The security for the line of
credit is in the form of a certificate of deposit in the
amount of $200,000
<PAGE>
provided by US Bridge NY. Interest is payable on the first day
of each month which commenced October 1, 1994. The credit line
is payable on demand. At June 30, 1997 the balance was
$145,358.
b) Promissory Notes
On January 16, 1995 an Underwriter commenced and privately
offered on a best-efforts basis, sixteen (16) units of US
Bridge NY 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 costs of $1.00 per share). Deferred
financing costs were amortized on a monthly basis until the
earlier of March 1996, the due date of the related promissory
notes or the initial public offering of US Bridge NY. As a
result, for the years ended June 30, 1997 and 1996 US Bridge
NY recorded amortization expense of $0 and $441,863,
respectively. The offering was completed on March 9, 1995
resulting in all sixteen (16) units being sold netting
proceeds to US Bridge NY of approximately $696,851.
NOTE 9 - MINORITY INTEREST
In connection with US Bridge NY's private placement on
March 9, 1995 (see Note 8(b)) and its Initial Public Offering
("IPO") (see Note 10(c)(i)), the Company's interest in US
Bridge NY was reduced to 49.95% before its exercise of the
special warrant. On September 9, 1995 the Company purchased at
$2.50 per share, 5,665 shares of common stock of US Bridge NY
by exercising its right pursuant to the terms of a special
warrant issued only to the Company. As a result, the Company
increased its ownership in US Bridge NY to 50.1% from 49.95%.
During the year ended June 30, 1997 stock transactions of US
Bridge NY resulted in an increase in the Company's ownership
of US Bridge NY to 53.23%. As of June 30, 1997, the minority
interest balance amounting to $2,828,301 is a result of all of
the above transactions and the proportionate share of income
and losses attributable to the minority stockholders.
Lastly, in connection with US Bridge NY's IPO, the Company
recorded a gain of $832,571 during the year ended June 30,
1996 as a result of the increase of the value of its ownership
of US Bridge NY's shares.
NOTE 10 - STOCKHOLDERS' EQUITY
a) Recapitalization
On April 24, 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
<PAGE>
US Bridge NY's private offering and initial public offering,
US Bridge NY was a wholly-owned subsidiary of the Company. As
of June 30, 1997 US Bridge NY is a 53.23% owned subsidiary and
One Carnegie is a wholly-owned subsidiary of the Company.
b) 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 immediately vested without
restrictions and the remaining 100,000 shares vested at the
rate of 50,000 shares on each August 15, 1996 and 1997. The
value of these shares were amortized over the vesting
periods.
(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 served
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 held
in escrow until February 1996. The Company had also agreed,
as amended, that upon NASDAQ approval, an additional 250,000
shares of restricted stock were to be issued to the
consultant, which shares were issued in August 1996.
(iii) Shares issued to employees
During December 1996, the Company issued an aggregate
of 114,617 shares to employees of the Company. In connection
with the 114,617 shares issued to employees, the Company
recorded compensation expense amounting to $107,453 which is
based on upon 50% of the average closing bid price for the
month of December 1996.
(iv) Additional acquisition of shares of US Bridge NY
During June 1997, in conjunction with US Bridge NY's
capitalization of accounts payable, the Company issued
350,000 shares of common stock to RSJJ in exchange for the
270,000 shares of common stock in US Bridge NY issued to
RSJJ in forgiveness of US Bridge NY's accounts payable to
RSJJ. The shares issued to RSJJ in exchange of US Bridge NY
shares have been valued at 50% of the average closing bid
market value 30 days prior to issuance as a result of their
restriction. Accordingly, the Company has recorded a gain on
the exchange of shares of approximately $17,500.
<PAGE>
(v) Senior Management Incentive Plan
During February 1997, pursuant to a Form S-8
Registration Statement filed with the Securities and
Exchange Commission, the Company registered a total of
686,617 common shares, of which, 575,000 shares are
underlying options pursuant to the Company's Senior
Management Incentive Plan. The options are exercisable at
various prices ranging from $1.750 each to $1.925 each. As
of June 30, 1997, the Company's president exercised the
option to purchase 125,000 shares at $1.925 each. The
Company received a promissory note in the amount of $240,625
as consideration for such shares.
(vi) 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 accrued interest at 1% above prime,
and was 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. In accordance with the Memorandum of
Understanding, upon the Company being listed on NASDAQ, the
Company liquidated such loan by issuing 400,000 shares to
such unrelated party pursuant to regulation "S" under the
securities act of 1933, as amended. The shares issued as
consideration for the repayment of such loan were valued at
the average closing bid price on the date the transaction
was commenced. Accordingly, the Company has recorded a
financing expense amounting to $100,000.
c) Equity transactions of US Bridge NY
i) Initial public offering
On August 14, 1995 US Bridge NY successfully completed
its public offering. As a result, US Bridge NY sold 791,850.
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 below.
(ii) Senior Management Incentive Plan
In December 1996, the Company granted its President an
option under its Management Plan to purchase 125,000 shares
of Common Stock. In February 1997, pursuant to a Form S-8
Registration Statement filed with the Securities and
Exchange Commission, the Company registered the sale of the
125,000 shares of Common Stock underlying the option. The
option was exercisable at $1.10 per share (110% of the bid
price on November 27, 1996) and was exercised March 25,
1997, resulting in the issuance of 125,000 shares of common
stock.
<PAGE>
NOTE 11 - COMMITMENT AND CONTINGENCIES
a) Disclosure of significant estimates - revenue recognition
As outlined in the Summary of Significant Accounting
Policies, the Company's construction revenue is recognized on
the percentage of completion basis. Consequently, construction
revenue and gross margin for each reporting period is
determined on a contract by contract basis by reference to
estimates by the Company's management and engineers of
expected costs to be incurred to complete each project. These
estimates include provisions for known and anticipated cost
overruns, if any exist or are expected to occur. These
estimates may be subject to revision in the normal course of
business.
b) Leases
US Bridge NY leases its administrative offices pursuant to a
signed lease agreement with RSJJ which requires monthly
payments of $20,000. Such lease 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,
1998 $ 180,000
===============
Total $ 180,000
===============
Accordingly, included in selling, general and administrative
expenses is rent expense which amounted to $240,000 for each
of the years ended June 30, 1997 and 1996. US Bridge NY also
leases a yard for storage material pursuant to a oral
agreement which requires monthly payments of $3,500. As of
June 30, 1997, $66,500 of yard rent remains unpaid and is
included in accounts payable.
c) Significant customers and vendors
For the years ended June 30, 1997 and 1996, the Company
had three unrelated customers respectively, which accounted
for approximately 86% and 62%, respectively, of total
revenues. As of June 30, 1997 and 1996 approximately 83% and
89% of contracts and retainage receivables are due from four
and three customers, respectively.
d) Seasonality
US Bridge NY operates in an industry which may be seasonal,
generally due to inclement weather occurring during the winter
months. Accordingly, US Bridge NY, 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 or the stage of completion of major projects.
<PAGE>
e) 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 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.
f) Mechanics liens
As of June 30, 1997, three actions to foreclose upon
mechanics liens filed during the fiscal year were commenced.
Such actions amounted to $3,278,775.
g) Payroll taxes
As of June 30, 1997, the Company owes approximately
$1,441,589 of payroll taxes and related penalties and
interest. Although as of June 30, 1997, the Company has not
entered into any formal repayment agreements with the
respective tax authorities, it has been making monthly
payments based on oral agreements.
h) Legal proceedings
i) During January 1997, an action was
commenced by The Ohio Bridge Corporation ("Ohio")
against US Bridge NY. Ohio claims that US Bridge NY has
infringed its trademark "U.S. Bridge". During August
1997 in settlement of the action, the Company and US
Bridge NY agreed to effect name changes.
ii) The Company is a party to various
claims and legal proceedings incidental to its business.
In management's opinion, the outcome of these claims and
proceedings will not have a material adverse effect on
the financial statements of the Company taken as a
whole.
NOTE 12 - RELATED PARTY TRANSACTIONS
a) As of June 30, 1997, the total due to officer and related
parties amounting to $166,540 represents advances made by the
President of the Company and affiliated entities which bear no
interest and are due on demand.
b) Rental expense
Included in general and administrative expenses is rent
expense paid by US Bridge NY pursuant to a signed lease
agreement with a Company (RSJJ) owned by the Company's
majority stockholder. The lease expires March 31, 1998. Rent
expensed for the years ended June 30, 1997 and 1996 amounted
to $240,000 and $240,000, respectively.
<PAGE>
c) Purchase of material and labor
For the years ended June 30, 1997 and 1996 US Bridge NY
purchased from Waldorf approximately $0 and $180,333,
respectively, of the materials and labor necessary to perform
steel erection services. Effective August 1, 1995, Waldorf
ceased operations. Said vendor is under the common control of
the President of the Company. Lastly, for the years ended June
30, 1997 and 1996, US Bridge NY paid $371,321 and $622,050,
respectively, to US Bridge MD for certain materials and labor
necessary to perform steel erection services. US Bridge MD is
a wholly-owned subsidiary of Bridge Corp. Effective September
1996, US Bridge MD ceased operations.
e) 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. In addition, the
President and Director were be granted options to purchase
25,000 shares of US Bridge NY's common stock, all of which
options shall vest through April 1998. 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.
NOTE 13 - DISCONTINUED OPERATIONS
a) Agreement for Deed in Lieu of Foreclosure
On March 10, 1997, One Carnegie executed an agreement
with its mortgage holder, whereby the property secured by the
mortgage and owned by One Carnegie and rented to US Bridge MD,
would be transferred to the mortgage holder. As additional
consideration, One Carnegie executed a promissory note in the
amount of $150,000 naming the mortgage holder as payee.
Accordingly, the property and related accumulated
depreciation, accrued interest and mortgage payable have been
recorded as assets and liabilities of discontinued operations.
The transaction was completed in August 1997, resulting in a
loss on disposal of $83,621.
<PAGE>
EXHIBIT 10.15
Consulting Agreement Dated December 9, 1996 With Bernard Tapie
<PAGE>
CONSULTING AGREEMENT
Agreement made as of the 9th day of December, 1996, by and
between Bernard Tapie, an individual, residing at 52 Rue des Saints Peres, Paris
75007 France (referred to herein as the "Consultant") and U.S. Bridge
Corporation, a Delaware corporation, with its principal executive offices
located at 53-09 97th Place, Corona, NY 11368 (the "Corporation").
W I T N E S S E T H :
WHEREAS, the Corporation desires to assure itself of the availability of
Consultant's services and technical expertise on a priority basis, and desires
to engage Consultant to render services in the development of business relations
for the Corporation in Asia, the Middle East, Europe and Africa (the
"Territory"); and
WHEREAS, as compensation for the services rendered the Consultant shall be
paid a monthly retainer of $12,000; and
WHEREAS, the Corporation agrees to retain the Consultant and Consultant
agrees to be retained by the Corporation under the terms and conditions set
forth below.
Based upon the foregoing, the parties agree as follows:
1. Appointment. For the term of this Agreement, the Corporation hereby
retains Consultant as an independent consultant and Consultant hereby accept
such retention. The consulting arrangement referred to herein is on a
non-exclusive basis subject to Paragraph 3.
2. Term of Agreement. The term of this Agreement shall commence as of
the date first written above and shall remain in force for a period of one (1)
year therefrom subject to sooner termination at the discretion of the
Corporation. The Corporation may terminate this agreement upon 10 days notice to
the Consultant. This agreement shall be automatically extended for an additional
one year term unless either party should notify the other that the term shall
not be extended.
3. Service. During the term hereof, Consultant shall render services in
providing assistance in the development of business relations and strategic
alliances for the Corporation in the Territory. Consultant's services shall
include:
1. Qualifying the Company in any governmental or private bids.
2. Research of new markets within the above defined Territory.
3. Research of new products to be offered within the above Territory.
4. Research potential mergers or acquisitions within the Company's field of
activities.
5. Participating in the introduction of the Company to financial
institutions.
4. Compensation. As compensation for the services described in
paragraph 3 above, the Corporation shall pay to the Consultant a monthly
retainer fee of $12,000 during the term of this agreement. The Corporation shall
not reimburse the Consultant for any expenses incurred by Consultant in the
performance of his duties hereunder.
5. Relationship. Consultant shall be an independent contractor and not
an employee of the Corporation. This Agreement shall not be construed to create
between the Corporation and Consultant the relationship of principal, employer
and employee, joint venturers, co-partners or any other similar relationship,
<PAGE>
the existence of which is hereby expressly denied by the Corporation and the
Consultant. Consultant is not an agent for the Corporation, except as described
herein and the Corporation is not an agent for the Consultant for any purpose
whatsoever; and each such party has no right or authority to assume or create
any obligations, express or implied, on behalf of or in the name of the other
party.
6. Non-disclosure; Disclosure of Potential Conflicts. The Consultant
shall not, at any time during or after the termination of this agreement except
when acting on behalf of and with the authorization of the Corporation, make use
of or disclose to any person, corporation, or other entity, for any purpose
whatsoever, any trade secret or other confidential information concerning the
Corporation's business, finances, proposed and current services and pricing, and
any information relating to the Corporation's business (collectively referred to
as the "Proprietary Information"). For the purposes of this Agreement, trade
secrets and confidential information shall mean information disclosed to the
Consultant or known by him as a consequence of his engagement by the Corporation
as a consultant, whether or not pursuant to this Agreement, and not generally
known in the industry, concerning the Corporation's Intellectual Property (as
hereinafter defined), business, finances, methods, operations, marketing
information, pricing and information relating to proposed expansion of the
Corporation or the Corporation's business plans. The Consultant acknowledges
that such Proprietary Information, as may exist from time to time, is valuable
and unique assets of the Corporation, and that disclosure of any such
information would cause substantial injury to the Corporation. The foregoing is
intended to be confirmatory of the common laws of the states of California, and
Delaware relating to trade secrets and confidential information. "Intellectual
Property" means (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all re-issuances,
continuations, continuations- in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and
corporate names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
7. Trading of the Corporation's Securities. Consultant represents that
he shall comply with all federal, state and local securities laws and have
prepared and filed with the appropriate agencies all required filings in a
timely and efficient manner. Due to the potential nature of the information the
Consultant may be privy to before such information is disseminated to the
public, the Consultant agrees not to engage in insider trading of the
Corporation securities and to abide by the rules and regulations of the
Corporation governing the trading of its securities by Consultants, as such
rules and regulations may be changed and enacted by the Corporation.
8. No Waiver. No delay or omission on the part of the Corporation in
exercising any right hereunder shall operate as a waiver of such right or of any
other right of the Corporation, nor shall any delay, omission or waiver on any
one occasion be deemed a bar to or waiver of the same or any other right on any
future occasion.
9. Assignability. This agreement is assignable by the Corporation at
its sole discretion without the prior written consent of the Consultant. Upon
assignment the Corporation shall be released from all obligations under this
Agreement. This Agreement is not assignable by the Consultant without the
express written consent of the Corporation. Notwithstanding the foregoing, this
Agreement shall bind any successor or assign of either party.
10. Entire Agreement. This Agreement sets forth the entire agreement
between the parties with respect to the subject matter hereof, superseding all
prior understandings and agreements whether written or oral.
<PAGE>
This Agreement may not be amended, revised or terminated except by a writing
signed by both parties.
11. Default. In the event that either party shall fail to conform to
the terms of this Agreement, the other party shall reimburse the damaged party
for any expenses, including reasonable attorney's fees, which may be incurred by
such party in attempting to collect any obligation, or to enforce obligations
under this Agreement.
12. Governing Law, etc. This Agreement and all rights and obligations
hereunder, including matters of construction, validity and performance, shall be
governed by the laws of the State of New York applicable to contracts made and
performed entirely within the State of New York without regard to conflicts of
laws rules applied in the State of California.
13. Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be personally
delivered or sent by certified or registered mail postage and fees prepaid or by
overnight courier, to the other party at the address mentioned in the preamble
of this Agreement. Any party may designate a different address for the purpose
of the service of notice hereunder by giving notice thereof in accordance with
the provisions of this Paragraph 13.
14. Captions. Captions herein have been inserted solely for convenience
of reference and in no way define, limit or describe the scope or substance of
any provision of this Agreement.
15. Severability. The provisions of this Agreement are severable, and
invalidity of any provision shall not affect the validity of any other provision
unless the invalidity impairs materially the benefits of the contract to either
party. In the even that any court of competent jurisdiction shall determine that
any provision of this Agreement or the application thereof is unenforceable in
whole or in part because of the duration and scope thereof, the parties hereto
agree that said court in making such determination shall have the power to
reduce the duration and scope of such provision to the extent necessary to make
it enforceable, and that the Agreement in its reduced form shall be valid and
enforceable to the full extent permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
affixed their hands and seals the day and year first above written.
U.S. Bridge Corporation
By: ____________________
Joseph M. Polito
Chief Executive Officer
Consultant
------------------
Bernard Tapie
EXHIBIT 10.16
Memorandum of Understanding, dated May 13, 1996, between the Company
and Lubov Ulianova
<PAGE>
5-13-96
MEMORANDUM OF UNDERSTANDING
Re: U.S. Bridge Corp
1. Lubov Ulianova ("UL") residing at: 12 impasse de Presles Paris 75015 France
will loan to Joseph M. Polito, ("JMP"), c/o U.S. BRIDGE, 53-09 97th Place Corona
NY 11368), the sum of 300,000.00 and JMP will simultaneously loan these funds to
USBG. UL will receive through their escrow agent: Alan Berkun, Esq. the sum of
550,000 shares of common stock from JMP as collateral for the loan. Upon NASDAQ
listing of USBG, JMP will call his loan to USBG who will pay off the debt to UL
with 400,000 shares of stock which will be issued pursuant to Regulation "S".
The loan to JMP will be for a 90 day period at prime plus 1% interest. Both
parties acknowledge that although the escrow attorney holds 550,000 shares in
escrow, the total shares due to UL, in event of a default on the loan to UL, is
400,000 common shares, issued pursuant to Regulation "S".
2. JMP will issue an option to UL to purchase 600,000 shares at the price of
$1.50. The option period shall begin from the date of the closing (defined as
the wire transfer of the $300,000 dollars to JMP as per item #1.), and expire 6
months after USBG attains a NASDAQ listing. This option may be exercised at any
time within the exercise period, subject to a minimum bid price ($3.00), but no
shares exercised can be sold under the Registration (whether S-8 Registration or
Regulation "S" Registration), for a minimum of 6 months from the date of the
issuance of the option. The option is issued pursuant to Regulation "S" or under
an S-8 registration for JMP. The common stock in USBG must trade at a bid price
of $3.00 for ten consecutive trading days, before the option can be exercised by
UL.
3. UL will have the right to loan an additional $100,000 to JMP on the same
terms and conditions as paragraph #1 for a period of 30 days.
Agreed this 13th day of May, 1996
USBG by: ___________________________ ________________________
JOSEPH M. POLITO-PRES. LUBOV ULIANOVA
EXHIBIT 21.1
List of Subsidiaries
<TABLE>
<CAPTION>
<S> <C>
1. U.S. Bridge of N.Y., Inc.
State of Incorporation: New York
Name(s) under which does business: U.S.B. Construction Co.
2. U.S. Bridge Corp. (Maryland)
State of Incorporation: Delaware
Name(s) under which does business: U.S. Bridge Corp. (Maryland)
3. One Carnegie Court Associates, Inc.
State of Incorporation: Maryland
No longer operational
</TABLE>
