UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[xx] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
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
USABG Corp.
(Exact Name of Registrant as Specified in its Charter)
Delaware 11-2974406
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation
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)
N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) has filed all reports required to be filed
by section 13 or 15 (d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [xx] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Common stock, par value $.001 per share: 7,844,148 shares outstanding as of May
12, 1998.
1
<PAGE>
USABG CORP.
INDEX
PART 1. FINANCIAL INFORMATION:
Item 1. FINANCIAL STATEMENTS
Balance Sheets March 31, 1998 (Unaudited) and June 30, 1997 3
Statements of Operations (Unaudited)
for the three months ended March 31, 1998 and 1997 4
Statements of Operations (Unaudited)
for the nine months ended March 31, 1998 and 1997 5
Statement of Stockholders' Equity (Unaudited)
for the nine months ended March 31, 1998 6
Statements of Cash Flows (Unaudited)
for the nine months ended March 31, 1998 and 1997 7
Notes to Financial Statements 8-13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 14-20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes In Securities And Use Of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission Of Matters To A Vote Of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits And Reports On Form 8-K 22
2
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<TABLE>
<CAPTION>
USABG CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, June 30,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 511,389 $ 555,435
Cash restricted 222,280 214,001
Contracts and retainage receivable, net 10,831,768 8,962,297
Costs and estimated earnings in excess of billings
on uncompleted contracts 1,545,272 2,225,723
Deferred tax asset 336,200 304,225
Due from officer and related parties 492,411 -
Other current assets 58,377 139,393
----------- -----------
Total current assets 13,997,697 12,401,074
Assets of discontinued operations - 2,889,999
Deferred tax assets - non-current 30,200 74,575
Other assets 100,437 30,606
----------- -----------
Total assets $14,128,334 $15,396,254
=========== ===========
<PAGE>
<CAPTION>
USABG CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, June 30,
1998 1997
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, including cash overdrafts of $45,372
and $149,290, respectively $ 1,786,531 $ 3,495,492
Accrued expenses 1,238,611 771,211
Payroll taxes payable 2,186,484 1,634,614
Income taxes payable 710,964 522,379
Convertible debentures 450,000 -
Liabilities of discontinued operations 150,000 3,039,999
Notes payable, including current portion of long-term obligations 445,358 145,358
Due to officer and related parties 152,376 166,540
Billings in excess of costs and estimated earnings
on uncompleted contracts - 126,455
----------- -----------
Sub-total current liabilities 7,120,324 9,902,048
----------- -----------
Long-term obligations 1,350,000 -
----------- ---------
Minority interest 3,324,648 2,828,301
----------- -----------
Commitments and contingencies (Note 7) - -
Stockholders' equity:
Preferred stock, authorized 10,000,000, issued and outstanding -0- shares
Common stock, $.001 par value, authorized 50,000,000 shares,
issued and outstanding 7,844,148 and 7,402,148, respectively 7,448 7,006
Additional paid-in capital 3,972,907 3,756,589
Accumulated deficit (1,028,276) (753,065)
----------- -----------
Subtotal 2,952,079 3,010,530
----------- -----------
Less: Stock subscription receivable (240,625) (240,625)
Deferred compensation and consulting (293,292) (104,000)
Prepaid rent (84,800) -
----------- ---------
Total subtractions (618,717) (344,625)
----------- -----------
Total stockholders' equity 2,333,362 2,665,905
----------- -----------
Total liabilities and stockholders' equity $14,128,334 $15,396,254
=========== ===========
</TABLE>
See notes to consolidated financial statements (unaudited)
3
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<TABLE>
<CAPTION>
USABG CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1998 1997
----------- -----------
<S> <C> <C>
Revenues $ 2,018,534 $ 1,915,553
----------- -----------
Costs and expenses:
Cost of contract revenues 1,350,392 1,156,070
General and administrative expenses 1,137,245 743,692
----------- -----------
Total costs and expenses 2,487,637 1,899,762
----------- -----------
Loss from operations before other income (expense),
minority interest and provision for income taxes (469,103) 15,791
----------- -----------
Other income (expense):
Interest expense (116,624) (77,368)
Gain on acquisition of subsidiary stock 11,307 --
----------- -----------
Total other income (expenses) (105,317) (77,368)
----------- -----------
Loss from operations before minority interest
and provision for income taxes (574,420) (61,577)
Minority interest in net loss (income) 51,741 (57,219)
----------- -----------
Loss before provision for income tax (benefit) expense (522,679) (118,796)
Provision for income tax (benefit) expense (7,468) 76,445
----------- -----------
Net loss $ (515,211) $ (195,241)
=========== ===========
Net loss per common equivalent share:
Basic:
Net loss $ (.07) $ (.03)
=========== ===========
Diluted:
Net loss $ (.07) $ (.03)
=========== ===========
Weighted average number of common shares outstanding 7,613,480 6,527,147
=========== ===========
Weighted average number of common shares outstanding
- assuming dilution 7,613,480 6,527,147
=========== ===========
</TABLE>
See notes to consolidated financial statements (unaudited)
4
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<TABLE>
<CAPTION>
USABG CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31,
(UNAUDITED)
1998 1997
------------ ------------
<S> <C> <C>
Revenues $ 14,293,019 $ 7,722,994
Costs and expenses:
Cost of contract revenues 11,422,861 5,170,187
General and administrative expenses 2,585,647 2,310,929
------------ ------------
Total costs and expenses 14,008,508 7,481,116
------------ ------------
Income from operations before other income (expense),
minority interest and provision for income taxes 284,511 241,878
Other income (expense):
Interest expense (124,382) (232,366)
Gain on sale/acquisition of subsidiary stock 11,307 --
------------ ------------
Total other income (expense) (113,075) (232,366)
------------ ------------
Income from operations before minority interest
and provision for income taxes 171,436 9,512
Minority interest in net loss (income) (241,347) (224,931)
------------ ------------
Loss before provision for income tax expense (69,911) (215,419)
Provision for income tax expense 205,300 301,000
------------ ------------
Net loss $ (275,211) $ (516,419)
============ ============
Net (loss) income per common equivalent share:
Basic:
Net loss $ (.04) $ (.08)
============ ============
Diluted:
Net loss $ (.04) $ (.08)
============ ============
Weighted average number of common shares outstanding 7,472,591 6,499,369
============ ============
Weighted average number of common shares outstanding
- assuming dilution 7,472,591 6,499,369
============ ============
</TABLE>
See notes to consolidated financial statements (unaudited)
5
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<TABLE>
<CAPTION>
USABG CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
Common
stock Stock
Additional subscription Total
paid-in Accumulated and other Stockholders'
Shares Amount capital deficit deductions equity
------ ------ ------- ------- ---------- ------
<S> <S> <C> <C> <C> <C> <C>
Balances at July 1, 1997 7,402,148 $ 7,006 $ 3,756,589 $ (753,065) $ (344,625) $ 2,665,905
Issuance of common stock pursuant
to the Senior Management Incentive
Plan as consideration for services
provided to the Company 250,000 250 114,750 - (92,000) 23,000
Issuance of common stock in
connection with prepayment
of subsidiary's rent 192,000 192 101,568 - (113,067) (11,307)
Deferred compensation in connection
with issuance of subsidiary's common
stock - - - - (217,500) (217,500)
Amortization of deferred expenses - - - - 120,208 120,208
Amortization of prepaid rent - - - - 28,267 28,267
Net loss for the nine months ended
March 31, 1998 - - - (275,211) - (275,211)
------------ --------- ----------- ------------ ------------ -------------
Balances at March 31, 1998 7,844,148 $ 7,448 $ 3,972,907 $ (1,028,276) $ (618,717) $ 2,333,362
============ ========= =========== ============ ============ =============
</TABLE>
See notes to consolidated financial statements (unaudited)
6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
USABG CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
(UNAUDITED)
1998 1997
----------- -----------
<S> <C> <C>
Operating activities:
Net loss $ (275,211) $ (516,419)
Adjustments to reconcile net loss to net
cash (used) for operating activities:
Depreciation and amortization 8,787 369,740
Amortization of deferred compensation & consulting 120,208 26,125
Bad debt recovery (128,000) --
Issuance of common stock for services 23,000 107,453
Amortization of prepaid rent 28,267 --
Deferred tax 12,400
Gain on subsidiary stock (11,307) --
Minority interest increases (decreases) 278,847 224,931
Decrease (increase) in:
Accounts receivable (1,741,471) (3,641,588)
Prepaid expenses -- (3,150)
Costs and estimated earnings in excess of
billing on uncompleted contracts 680,451 1,044,828
Other current assets (6,716) 22,697
Increase (decrease) in:
Accounts payable 41,039 1,439,023
Accrued expenses 467,400 188,622
Payroll taxes payable 551,870 283,105
Billings in excess of costs and estimated earnings
on uncompleted contracts (126,455) 12,892
Income taxes payable 188,585 301,000
----------- -----------
Net cash used for operating activities 111,694 (140,741)
----------- -----------
Investing activities:
Fixed asset acquisitions (87,779) (5,677)
Increase in restricted cash (8,279) --
----------- -----------
Net cash used for investing activities (96,058) (5,677)
----------- -----------
<PAGE>
<CAPTION>
USABG CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
(UNAUDITED)
1998 1997
----------- -----------
<S> <C> <C>
Financing activities:
Proceeds from convertible debentures 450,000 --
Proceeds from related parties 118,456 --
Due to officer (132,620) --
Loans from related parties (395,518) 94,532
Principal payments on mortgage payable -- --
Repayment of notes payable (100,000) (479)
----------- -----------
Net cash provided by financing activities (59,682) 94,053
----------- -----------
Net (decrease) in cash (44,046) (52,365)
Cash, beginning 555,435 399,652
----------- -----------
Cash, ending $ 511,389 $ 347,287
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the nine months for:
Interest $ 11,564 $ 7,599
=========== ===========
Taxes $ -- $ --
=========== ===========
Supplemental disclosure of non-cash investing and financing activities:
Issuance of common stock in connection with services provided
to the Company $ -- $ 257,453
=========== ===========
Surrender of property, plant and equipment in lieu of foreclosure
on mortgage $ 2,889,999 $ --
=========== ===========
Conversion of accounts payable to note payable $ 1,750,000 $ --
=========== ===========
</TABLE>
See notes to consolidated financial statements (unaudited)
7
<PAGE>
USABG CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
NOTE 1 - GENERAL
The consolidated financial statements of USABG Corp. (the "Company") at
March 31, 1998 and 1997 include the accounts of its subsidiary USA
Bridge Construction of N.Y. Inc ("NY") (56.8%) and its wholly-owned
subsidiaries Royal Steel Services, Inc. ("Royal"), Worldwide
Construction Limited ("Worldwide"), One Carnegie Court Associates, Ltd.
("One Carnegie") and USA Bridge Construction Corp. (Maryland) ("MD"),
after elimination of all significant intercompany transactions and
accounts.
Royal Steel was formed in November 1997, in order for the Company to
conduct work on its smaller base contracts. To date, Royal Steel has
commenced work on two projects, aggregating approximately $215,000.
Worldwide was formed by the Company in December 1997 and is a British
Virgin Islands corporation. It was formed to own 80% of each of Falcon
TChad S.A. ("Falcon") and Portshop S.A. ("Portshop"), both of which
companies were formed in N'Djamena, Chad. Falcon was formed in February
1998 to operate as a full service transportation, forwarding, and
warehousing company. Portshop was formed in February 1998 to stock and
operate a duty free store in Chad's sole international airport.
Worldwide shall operate as the liaison between Portshop and Falcon and
the governmental or private entities with which both companies intend
to contract in Chad. As of March 31, 1998, no activity has commenced in
Worldwide.
The accompanying unaudited consolidated financial statements of the
Company have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
instructions to Form 10-QSB. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, the consolidated interim financial statements include all
adjustments necessary in order to make the consolidated financial
statements not misleading. The results of operations for the three and
nine months ended are not necessarily indicative of the results to be
expected for the full year. For further information, refer to the
Company's audited consolidated financial statements and footnotes
thereto at June 30, 1997, included in the Company's Annual Report Form
10-KSB, filed with the Securities and Exchange Commission.
NOTE 2 - NOTE PAYABLE
a) In August 1994, the Company secured a $250,000 credit line with a
bank at an interest rate of one and one half percent (11/2%) above
the prime rate. Interest is payable on the first day of each month
which commenced October 1, 1994. Said credit line is payable on
demand. The line of credit is secured by a certificate of deposit.
At March 31, 1998 the balance was $145,358.
b) In November 1997, NY entered into an agreement with the Iron Workers
Local 40, 361, and 417 Joint Security Funds (the "Union") in order
to liquidate $1,750,000 owed for unpaid union dues previously
recorded as accounts payable. NY agreed to pay $75,000 by January
1998 and at least $25,000 monthly commencing March 1, 1998 with
interest at 9.5% per annum. As collateral, NY assigned its retainage
receivable from a certain project as well as $1,750,000 of its
related mechanic's lien (which was discharged upon the lien-debtor's
posting of a bond with the court). Upon any funds being released or
paid under such bond, the Union will be repaid any balance it is
owed, in full, before NY may receive any funds. NY will receive
credit for any payments received by the Union related to the
assigned portion of the mechanics lien.
8
<PAGE>
NOTE 3 - CONVERTIBLE DEBENTURES
In January 1998, the Company raised a net of $393,000 after a 10%
commission (and expenses), in connection with a private placement to
fund the Worldwide operations, from the sale of $450,000 of convertible
debentures. Such debentures are due January 30, 2000 with interest
accruing at 8% per annum. Holders of the debentures are entitled to
convert the entire face of the debentures plus accrued interest, at the
lesser of (a) 100% of the 5-day average closing bid price, for the 5
trading days immediately preceding the closing date of the offering
(February 3, 1998) or b) 75% of the 5-day average closing bid price for
the 5 trading days immediately preceding the date of conversion. The
Company agreed to file a Registration Statement covering the shares of
common stock to be issued upon conversion of the debentures, and if not
declared effective within 90 days following the closing of the
offering, then there shall be a decrease of the conversion ratios by
2.5% per 30 day period or portion thereof pro rata, until the
Registration Statement has been declared effective. In addition, the
purchasers of the debentures received warrants to purchase an aggregate
of 100,000 shares of common stock, 50,000 shares at an exercise price
of $1.125 per share and 50,000 shares at $1.41 per share. The funds are
being loaned to Worldwide to commence operations in Chad.
As a result of the beneficial conversion feature, the Company will
record additional interest of $166,667 which will be amortized over the
period between date of issuance and the estimated date of conversion,
or six months. The recording of additional interest results in an
effective interest rate of 74.7%.
NOTE 4 - MINORITY INTEREST
As noted in Note 1, the Company has ownership of 56.8% of NY (inclusive
of the President's ownership thereof). During February 1998, the
Company's ownership increased from 53% to 55% (not inclusive of the
President's shares) and during March 1998, the Company's ownership
decreased to 48% (not inclusive of the President's shares). The
Company, along with its President, owns more than 50% of the
outstanding shares of NY. Accordingly, as of March 31, 1998 and
December 31, 1997, the Company's minority interest amounting to
$3,324,648 and $2,828,301, respectively, is a result of the stock
transactions of NY and the proportionate share of income and losses
attributable to minority stockholders.
NOTE 5 - STOCKHOLDERS' EQUITY
a) Issuance of common stock
i) In December 1997, NY agreed to issue 106,667 shares of its common
stock to the Company as consideration to the Company for issuing
192,000 shares of its own common stock to R.S.J.J. Realty Corp.
("RSJJ") in consideration for payment in full of the rent due by
NY to RSJJ for the period from January 1, 1998 to December 31,
1998. The value of the shares issued by NY are recorded at their
estimated market value at the date of issuance of $2.12 per
share, with a 50% discount due to the restricted nature of the
stock. The value of the shares issued by the Company are recorded
at their estimated market value at date of issuance ($1.06 per
share) with a 50% discount due to the restricted nature of the
stock. The difference in market values of stock will be reported
as a gain on conversion of approximately $11,307.
9
<PAGE>
ii)In December 1997, the Company authorized the issuance of 250,000
shares of its common stock pursuant to its Senior Management
Incentive Plan. Of the 250,000 shares, 150,000 were issued to the
Company's President, and 25,000 were issued to each of the
Company's Secretary and Treasurer. These shares vest 50% on June
1, 1998 and 50% on January 1, 1999. The remaining 50,000 shares
were issued to consultants to the Company and vest immediately.
The Company also authorized the filing of a Post-Effective
Amendment to the Form S-8 Registration Statement initially filed
in February 1997 register the resale of management's shares. In
connection with such issuance, the Company recorded compensation
and consulting expense amounting to $115,000 which is based on
the average closing bid price of $0.92 share for the third
quarter of the Company's fiscal year, with a 50% discount due to
the restricted nature of the stock. The above shares which do not
vest immediately have been recorded as deferred compensation and
are being amortized over the vesting period.
NOTE 6 - ISSUANCE OF SUBSIDIARY STOCK
a) Issuance of common stock
i) In December 1997, NY agreed to issue 106,667 shares of its common
stock to the Company as consideration to the Company for issuing
192,000 shares of its own common stock to RSJJ in consideration
for payment in full of the rent due by NY to RSJJ for the period
from January 1, 1998 to December 31, 1998. The value of the
shares issued by NY are recorded at their estimated market value
at the date of issuance of $2.12 per share, with a 50% discount
due to the restricted nature of the stock.
ii)In December 1997, NY authorized the issuance of 290,000 shares
of its common stock during the third quarter of its fiscal year
pursuant to its Senior Management Incentive Plan. Of the 290,000
shares, 150,000 were issued to NY's President, 70,000 were issued
to NY's Secretary, and 70,000 were issued to NY's Treasurer.
These shares vest 50% on June 1, 1998 and 50% on January 1, 1999.
NY also authorized the issuance of 50,000 shares to employees and
consultants of NY which vest immediately. NY authorized the
filing of a Post-Effective Amendment to the Form S-8 Registration
Statement initially filed in February 1997 to register
management's shares. In connection with such issuance, NY
recorded compensation and consulting expense amounting to
approximately $255,000 which is based on the average closing bid
price of $1.50 per share for the month of March 1998, with a 50%
discount due to the restricted nature of the stock. The above
shares which do not vest immediately have been recorded as
deferred compensation and are being amortized over the vesting
period.
10
<PAGE>
NOTE 7 - COMMITMENTS AND CONTINGENCIES
a) Disclosure of significant estimates - revenue recognition
NY'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 NY'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) Lease agreement
NY leases its administrative offices and storage space pursuant to a
signed lease agreement with an affiliate owned by the Company's
President. Such lease requires monthly payments of $20,000 and
expires on December 31, 1998. Under such lease agreement, NY is
required to make future minimum lease payments as follows:
Year Ending
June 30,
-----------
1998 $240,000
1999 120,000
--------
Total $360,000
========
NY also leases a yard for storage of material pursuant to an oral
agreement with an unrelated party which requires monthly payments of
$3,500. NY settled the rent for the period January 1 through
December 31, 1998 by issuance of stock valued at $113,067 as
compared to the $240,000 it would have been required to pay under
the lease agreement. Accordingly, included in general and
administrative expenses is rent expense which amounted to $38,767
and $70,500, respectively, for the three months ended March 31, 1998
and 1997 and $179,767 and $211,500, respectively for the nine months
ended March 31, 1998 and 1997. As of March 31, 1998, $98,000 and
$66,500, respectively, of rent remains unpaid and is included in
accounts payable.
c) Significant customers
For the nine months ended March 31, 1998 and 1997, NY had three and
three unrelated customers, respectively, which accounted for
approximately 60%, 12% and 12%, and 34%, 31% and 17% of total
revenues. As of March 31, 1998, approximately 17% and 55% of
contracts and retainage receivables are due from two customers
For the three months ended March 31, 1998 and 1997, NY had two and
four unrelated customers, respectively, which accounted for
approximately 76% and 24% and 48%, 19%, 12%, and 10%, respectively,
of total revenues. As of June 30, 1997, approximately 22%, 21%, 15%,
and 24% of contracts and retainage receivables net of allowances for
doubtful accounts are due from four customers.
11
<PAGE>
d) Seasonality
NY operates in an industry which may be seasonal, generally due to
inclement weather occurring during the winter months. Accordingly,
the Company may experience a seasonal pattern in its operating
results with lower revenue in the third quarter of each fiscal year.
Quarterly results may also be affected by the timing of bid
solicitations by governmental authorities and the stage of
completion of major projects.
e) Bonding requirements
NY is required to provide bid and/or performance bonds in connection
with governmental construction projects. To date, NY has been able
to obtain sufficient bonding for its private projects. 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. NY has been unable to bid as a general
contractor on New York State and New York City projects as a result
of its inability to obtain bonding from a New York licensed bonding
company.
f) Payroll Taxes
As of December 31, 1997 and June 30, 1997, NY and MD owe
approximately $2,186,484 and $1,634,614, respectively, of payroll
taxes and related estimated interest and penalties. Although as of
December 31, 1997 NY and MD have not entered into any formal
repayment agreements with the respective tax authorities, they have
been making payments based on oral agreements.
h) Mechanic's liens
As of June 30, 1997, three actions to foreclose upon mechanics liens
filed during the fiscal year were commenced. Such actions seek
relief in the amount of $3,278,775. As of December 31, 1997,
additional mechanic's liens were filed, bringing the total relief
sought to $16,919,542.
The mechanic's liens have been filed in relation to work completed
and billed. As such, these amounts are included in contracts and
retainage receivable. Based upon the assessment of management and
legal counsel, the Company has recorded on allowance for doubtful
account to adjust the receivables to their estimated realizable
amount.
i) Legal proceedings
The Company's subsidiaries are parties 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.
12
<PAGE>
j) Claims
The Company elected not to recognize any portion of the revenue
associated with any contract claims until the amounts recoverable
can be accurately estimated. Claims are amounts in excess of the
agreed contract price which the Company seeks to collect for
customer caused delays, errors in specifications and designs,
contract terminations, change orders in dispute or unapproved.
NOTE 8 - RELATED PARTY TRANSACTIONS
a) Due to related parties
As of March 31, 1998 and June 30, 1997, the total due to officer and
related parties, amounting to $152,376 and $166,540, respectively
represents advances made by the President of the Company and
affiliated entities which bear no interest and are due on demand.
b) Due from related parties
As of March 31, 1998, the Company has advanced funds to its
President and certain affiliates. These advances are non-interest
bearing and are due on demand. As of March 31, 1998, such advances
amounted to $492,411.
c) Purchase of material and labor
For the nine months ended March 31, 1998 and 1997, NY paid $0 and
$33,500, respectively, to MD for certain materials and labor
necessary to perform steel erection services.
d) Rent expense
Included in general and administrative expenses is rent expense paid
pursuant to a signed lease agreement with a Company owned by the
Company's majority stockholder. Such rent amounted to $28,267 and
$60,000 for the three months ended March 31, 1998 and 1997,
respectively. As of March 31, 1998, $88,400 of rent is prepaid (see
Note 5(f)(i)) and is included as a reduction of equity.
NOTE 9 - SUBSEQUENT EVENTS
a) During April 1998, NY redeemed its certificate of deposit of
approximately $222,000, repaying a loan of approximately $147,000 on
behalf of the Company. The balance of the funds were deposited into
NY's operating account.
b) On May 12, 1998, the Company executed a letter of intent to sell all
of its holdings in NY to Amalgamated Resources Management S.A.
("ARM") for an aggregate of $10,220,000. This sale shall occur
simultaneously with the closing of NY's acquisition of 51% of the
common stock of First Anglo-Swiss Holdings, Inc. ("FAS") in exchange
for 510,000 shares of NY's common stock. The acquisition is
contingent upon approval by the Boards of Directors and Stockholders
of both companies as well as consummation of the ninety day due
diligence, contract drafting, and auditing processes. The
acquisition is also contingent upon FAS' consummation of
acquisitions of certain other companies and assets and the
completion of an audit of FAS' (and its subsidiaries') financial
statements within ninety days.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 ("Act") provides a
safe harbor for forward-looking information made on behalf of NY. All
statements, other than statements of historical facts, which address NY's
expectation of sources of capital or which express NY's expectation for the
future with respect to financial performance or operating strategies can be
identified as forward-looking statements. Forward-looking statements made by NY
are based on knowledge of the environment in which it operates; however, because
of the factors previously listed, as well as other factors beyond the control of
NY, actual results may differ materially from the expectations expressed in the
forward-looking statements.
General
USABG Corp. (the "Company") was incorporated on September 12, 1988, in
the State of Delaware, as Colonial Capital Corp. The Company's current name was
established via the filing, in January 1998, of an amendment to its Certificate
of Incorporation. The Company currently owns 48.46% of the outstanding shares of
USA Bridge Construction of N.Y., Inc. ("NY"), 100% of the outstanding shares of
common stock of Worldwide Construction Limited ("Worldwide"), and Royal Steel
Services, Inc. ("Royal Steel"). These three subsidiaries are the only ones
through which the Company currently operates. Two additional subsidiaries of the
Company (each a wholly-owned subsidiary), One Carnegie Court Associates, Inc.
and USA Bridge Construction Corp. (Maryland) ("MD") ceased operations in August
1997 and November 1996, respectively.
Royal Steel was formed during November 1997, in order for the Company
to conduct work on its smaller base contracts. Worldwide was formed by the
Company in December 1997 and is a British Virgin Islands corporation. It was
formed as a holding company intended to own 80% of each of Falcon TChad SA
("Falcon") and Portshop S.A. ("Portshop"), both of which companies are
registered in Chad, a country located in Central North Africa. The remaining 20%
of each of Falcon and Portshop is owned by Diversified Investments Africa S.A.
("DIA"), a Luxembourg company unaffiliated with the Company. Falcon will operate
as a full service transportation, forwarding, and warehousing company in the
city of N'Djamena. Portshop shall stock and operate a duty free store in Chad's
sole international airport. Worldwide shall operate as the liaison between
Portshop and Falcon and the governmental or private entities with which Falcon
and Portshop intend to contract in Chad.
The following management's discussion and analysis for the three and
nine months ended March 31, 1998 and 1997 are that of the Company's subsidiaries
since the Company itself did not have any material operations of its own except
for primarily stock related transactions.
NY's operations are substantially controlled by Joseph M. Polito since
he owns approximately 66% of the outstanding shares of the Company and may be
considered the beneficial owner of NY. Mr. Polito is also a 100% shareholder of
R.S.J.J. Realty Corp. ("RSJJ"). RSJJ leases the administrative office space to
NY at a cost of $20,000 per month pursuant to a signed lease agreement which
extends through December 31, 1998. Mr. Polito also has ownership interests in
Waldorf Steel Fabricators, Inc. ("Waldorf") (which ceased operations on August
1, 1995), Crown Crane, Inc., and Atlas Gem Leasing, Inc. which provided services
to NY for the three and nine months ended March 31, 1998 and 1997. Lastly, NY
purchased from MD, certain materials and labor to perform steel erection
service. For the three months ended March 31, 1998 and 1997, no such services
were utilized. For the nine months ended March 31, 1998 and 1997, purchases by
NY from MD amounted to $0 and $33,500, respectively. MD ceased operations during
September 1996 and, accordingly, NY has since purchased its steel from unrelated
parties.
14
<PAGE>
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 authorities in the New York State and Metropolitan areas.
Though formed to operate as a general contractor, NY has operated primarily as a
subcontractor and as a prime contractor on two projects. As of March 31, 1998,
NY has completed in excess of twenty-one (21) projects with an aggregate project
value of approximately $40,000,000 and is currently engaged in two (2) projects
with an aggregate value of approximately $10,790,150. NY plans to maintain its
subcontractor presence in the steel industry; however, it intends also to focus
on obtaining projects as a general contractor.
In December 1996, NY obtained a commitment for a Surety Bond Line of
Credit ($10,000,000 single project limit) from UAGC for its general contracting
projects. This commitment allows 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 three subcontracting projects which have required same; the EkleCo., Grand
Central Terminal, and Korean Mission projects. However, since New York State and
City agencies require bonds from bonding companies licensed by the State of New
York and UAGC is not a New York licensed bonding company, NY has been unable to
bid as a general contractor on projects for New York State and City agencies. NY
has approached several New York licensed bonding companies, but as of the date
hereof, has not been approved by any company to receive bonding.
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 may also be affected by the timing of bid solicitation,
the stage of completion of major projects and revenue recognition policies. For
the year ended June 30, 1997 and for the nine months ended March 31, 1998, NY
obtained new contracts valued at approximately $1,889,000 and $20,000,
respectively. NY did not obtain any material new contracts for the nine months
ended March 31, 1998 because it did not provide the lowest bids for the projects
for which it submitted same.
NY 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, revision in costs and earnings
estimated during the course of the work are reflected during the accounting
period in which the facts become known.
The current asset "costs and estimated earnings in excess of billings
on uncompleted contracts" represents revenues recognized 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 revenues recognized on
respective uncompleted contracts at the end of each period.
15
<PAGE>
An amount equal to the costs attributable to unapproved change orders
and claims is included in the total estimated revenue when realization is
probable and the amount can be estimated. NY has elected not to recognize any
portion of the revenue associated with such unapproved change orders and claims
until the amounts have been received or awarded. Claims are amounts in excess of
the agreed contract price which NY seeks to collect for customer-caused delays,
errors in specifications and designs, contract terminations, or change orders
which are either in dispute or unapproved.
Three months ended March 31, 1998 as compared to three months ended
March 31, 1997
Contract revenues for the three months ended March 31, 1998 and 1997
amounted to $1,969,865 and $1,915,553, respectively. This net increase,
amounting to $54,312 (or approximately 3%) is partially a result of NY's backlog
as of June 30, 1997, which amounted to approximately $7,900,000, and the change
orders and termination of the EklecCo and Korean projects. The change orders for
the three months ended March 31, 1998 amounted to approximately $175,000 for
ongoing projects. During the three months ended March 31, 1998, approximately
$290,000 (or 17%) of the revenue recognized during the period was collected. The
remaining amounts uncollected represent retainage expected to be collected
within the next one to two years or amounts which NY is attempting to collect
under mechanic's liens for which actions to foreclose same have been commenced.
Approximately $213,000 (or 11%) of the revenue recognized was not billed at
March 31, 1998.
During the three months ended March 31, 1998, NY did not provide the
lowest bids for the projects for which it submitted bids, and thus, obtained no
new contracts during that period. As of March 31, 1998, NY's backlog amounted to
approximately $600,000. 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.
On October 14, 1997, NY filed a mechanic's lien in the amount of
$13,640,767 against EklecCo (f/k/a Pyramid Company of Rockland). On October 16,
1997, in New York State Supreme Court, Rockland County, EklecCo commenced suit
against NY seeking to vacate the mechanic's lien filed against same and seeking
specific enforcement of the contract, declaratory relief, damages for slander of
title, and approximately $500,000,000 in damages from NY for breach of contract
and intentional interference with contractual relations. The lien was not
vacated, however, and on February 9, 1998, EklecCo posted a bond in the amount
of $14,254,730 to secure payment of NY's $13,640,747 mechanic's lien, interest,
and court costs; accordingly, the court granted EklecCo's motion to discharge
said lien.
The Company's gross profit for the three months ended March 31, 1998
and 1997 amounted to 31% and 41%, respectively. The decrease in gross profit for
the three months ended March 31, 1998 as compared to the three months ended
March 31, 1997 is primarily a result of an overall different mix of contracts
with a lower gross profit percentage and a decrease in estimated gross profit on
the Louis Vuitton and Grand Central jobs resulting from high than expected
remobilization costs and change orders with lower gross profits.. The overall
estimated gross profit for the three months ended March 31,1998 was
approximately 21% as compared to the three months ended March 31, 1997 whereby
the overall estimated average gross profit was 28%. Additionally, the effect of
change orders and adjustments to estimated costs, as well as the interruption
and termination of certain jobs, has resulted in reductions of overall gross
profit.
16
<PAGE>
Below is a summary of NY's billings and collections for the three
months ended March 31, 1998:
<TABLE>
<CAPTION>
Gross contract and Allowances for Net contracts
Retainage receivables uncollectible receivables
--------------------- ------------- -----------
<S> <C> <C> <C>
Balances at December 31, 1997 $ 12,304,153 $ 2,159,000 $ 10,145,153
------------ ----------- ------------
Billings 1,481,683 - 1,481,683
Collections 795,068 - 795,068
------------ ----------- ------------
Balances at March 31, 1998 12,990,768 $2,159,000 10,831,768
============ =========== ============
</TABLE>
Through May 15, 1998, NY collected approximately $815,000 (or 8%) of
its net contract receivables. As of March 31, 1998, $5,917,454 (or approximately
55%) of its net receivables is due from the EklecCo project. The project was to
be performed in two phases. NY commenced work on Phase I during June 1996. The
project was terminated in October 1997, when it was approximately 98% complete.
On October 14, 1997, NY filed a mechanic's lien in the amount of $13,640,767
against EklecCo (f/k/a Pyramid Company of Rockland), for the EklecCo project.
In addition to the EklecCo lien, NY has filed various other liens on
certain other projects with net receivables amounting to approximately
$1,877,214. With regards to the remaining receivables, amounting to
approximately $3,018,000 (approximately $795,000 of which represents retainage
that is not expected to be collected within one year), NY expects to collect
approximately the remaining $2,223,000 by the end of the fiscal year ended June
30, 1999.
As of March 31, 1998, NY was engaged in two (2) major projects (Grand
Central Terminal and Louis Vuitton), with a total contract value amounting to
$10,732,750 whereby the backlog associated therewith amounted to $600,000. The
contract receivables associated with these ongoing projects is approximately
$1,244,000. In January 1998, due to certain disputes on the Korean Mission
project, NY received a contract termination letter from the general contractor
thereof.
General and administrative expenses have increased by $393,553 (or 53%)
to $1,137,245 for the three months ended March 31, 1998 from $743,692 for the
three months ended March 31, 1997.
The increase in general administration costs is mainly attributable to
an overall increase of NY's administrative salaries associated with the material
increase in contract revenue and certain general corporate overhead.
For the three months ended March 31, 1998, the Company recorded an
estimated income tax benefit of $7,468 whereby for the three months ended March
31, 1997 the Company recorded an estimated income tax expense of $76,445.
17
<PAGE>
Nine months ended March 31, 1998 as compared to the nine months ended
March 31, 1997
Contract revenues for the nine months ended March 31, 1998 and 1997
amounted to $14,239,151 and $7,691,412, respectively. This net increase of
$6,547,739 (or approximately 85%) is a direct result of NY's $7,900,000 backlog
as of June 30, 1997. This backlog amount represents the contracts NY entered
into during the latter part of its June 30, 1997 fiscal year. During the nine
months ended March 31, 1998, NY obtained new contracts and change orders to
previous contracts aggregated approximately $2,608,000. Revenues for the nine
months ended March 31, 1998 increased 85% as compared to the nine months ended
March 31, 1997.
As of March 31, 1998, NY's backlog amounted to approximately $600,000.
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 commenced. NY's gross profit for the nine months
ended March 31, 1998 and 1997 amounted to 21% and 31%, respectively, a decrease
of 10%.
Below is a summary of NY's billings and collections for the nine months
ended March 31, 1998:
<TABLE>
<CAPTION>
Gross contract and Allowances for Net contracts
Retainage receivables uncollectible receivables
--------------------- ------------- -----------
<S> <C> <C> <C>
Balances at June 30, 1997 $ 11,249,297 $ 2,287,000 $ 8,962,297
------------ ----------- -----------
Billings 14,489,359 - 14,489,359
Collections 12,747,888 128,000 12,619,888
------------ ----------- -----------
Balances at March 31, 1998 12,990,768 $2,159,000 10,831,768
============ =========== ===========
</TABLE>
As of March 31, 1998, NY collected $128,000 of its allowance to reserve
for the uncollectibility of certain receivables for which mechanic's liens were
filed.
General and administrative expenses have increased by $274,718 (or 12%)
to $2,585,647 for the nine months ended March 31, 1998 from $2,310,929 for the
nine months ended March 31, 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 the
Company's stock-based compensation expenses.
Liquidity and Capital Resources
Of the $10,800,000 of net contract and retainage receivables as of
March 31, 1998 through May 15, 1998, NY has collected approximately $815,000 or
8%. The timing of the collectibility of $7,866,448, which represents the amount
of receivables (net of allowances) associated with mechanic's liens placed by NY
on certain jobs, cannot be determined by NY due to the surrounding circumstances
and the legal process associated in collecting funds whereby a lien has been
placed on a project. The remainder of the receivables is expected to be
collected by the end of the first quarter of fiscal 1998 - 99.
18
<PAGE>
As a result of the slow collection process associated with the above
circumstances, the Company was unable to pay its payroll tax obligations and
rent on a timely basis. Upon the collection or settlement of a major portion of
contracts receivable, the Company's first priority is to pay down its payroll
tax obligations as much as possible. The accrued and unpaid rent has been
settled by NY with NY issuing stock to its landlord, RSJJ. Although the lack of
no new contracts has an effect on revenues and net income the Company is
confident that based on its bidding process, it will obtain new contracts. Based
on the Company's backlog at December 31, 1997, amounting to approximately
$600,000 and its vigorous attempts to collect a portion of its contract
receivables, as well as the progress on the EklecCo lien, the Company expects to
generate sufficient cash flow to satisfy its cash requirements during the next
twelve months.
Net cash provided by operating activities amounted to $111,694 for the
nine months ended March 31, 1998. The major components of such provision of cash
was directly attributed to the Company's loss amounting to $275,211 and
increases in accounts receivables net of increases of its payroll taxes payable
and accrued expenses. For the nine months ended March 31, 1997, the net cash
used for operating activities amounted to $140,741 which were principally
attributable to increases in account receivables, decreases in costs and
estimated earnings in excess of billings on uncompleted contracts, and increases
in accounts payable.
With regards to investing activities, the Company used $96,058 of cash
for the nine months ended March 31, 1998 for the acquisition of fixed assets,
primarily in regard to Worldwide activity, and an increase in the value of
restricted cash.
The Company used $59,682 in cash from financing activities for the nine
months ended March 31, 1998. Such cash was used primarily by advances to
affiliates and officers, and payments on long-term obligations, net of new
borrowings.
As of March 31, 1998, the Company owes approximately $2,186,000 of
payroll taxes and related estimated penalties and interest. Although as of March
31, 1998, the Company has not entered into any formal repayment agreements with
the respective tax authorities, it has been making payments to same based on
oral arrangements negotiated therewith.
In November 1997, NY entered into an agreement with the Iron Workers
Locals 40, 361, and 417 Joint Security Funds (the "Union") in order to liquidate
$1,750,000 owed for unpaid union dues and benefits. NY agreed to pay $75,000 by
January 1998 and at least $25,000 monthly commencing March 1, 1998 with interest
at 9.5% per annum. As collateral, NY assigned its retainage receivable from the
EklecCo project as well as $1,750,000 of NY's related mechanic's lien (which was
discharged on the lien-debtor's payment of a bond with the court). Upon the
distribution of any funds under such bond, the Union will be repaid any balance
it is owed, in full, and NY shall receive the remainder thereof. NY will receive
credit for any payments received by the Union related to the assigned portion of
the bond.
During December 1997, the Company authorized the issuance of 250,000
shares of its common stock pursuant to its Senior Management Incentive Plan. Of
the 250,000 shares, 150,000 were issued to the Company's President, and 25,000
each to the Company's Secretary and Treasurer. These shares vest 50% on June 1,
1998 and 50% on January 1, 1999. The remaining 50,000 shares were issued to
consultants to the Company and vest immediately. The Company also authorized the
filing of an amended Form S-8 Registration Statement filed during February 1997
to reflect the increase to 2,000,000 shares which may be issued under the plan
and the registration of the above shares. In connection with such issuance, the
Company recorded compensation and consulting expense amounting to $115,000 which
is based on the average closing bid price of $0.92 share for the third quarter
of the Company's fiscal year, with a 50% discount due to the restricted nature
of the stock. The above shares which do not vest immediately have been recorded
as deferred compensation and are being amortized over the vesting period.
19
<PAGE>
During December 1997, NY authorized the issuance of 290,000 shares of
its common stock during the third quarter of its fiscal year pursuant to its
Senior Management Incentive Plan. Of the 290,000 shares, 150,000 were issued to
the NY's President, 70,000 to NY's Secretary, and 70,000 to NY's Treasurer.
These shares vest 50% on June 1, 1998 and 50% on January 1, 1999. NY also
authorized the issuance of 50,000 shares to employees and consultants of NY
which vest immediately. NY authorized the filing of an amended Form S-8
Registration Statement to reflect the increase to 1,000,000 shares the shares
which may be issued under the plan and the registration of the above shares. In
connection with such issuance, NY recorded compensation and consulting expense
amounting to approximately $255,000 which is based on the average closing bid
price of $1.50 per share for the month of March 1998, with a 50% discount due to
the restricted nature of the stock. The above shares which do not vest
immediately have been recorded as deferred compensation and are being amortized
over the vesting period.
During December 1997, NY agreed to issue 106,667 shares of its common stock to
the Company as consideration to the Company for issuing 192,000 shares of its
own common stock to RSJJ in consideration for payment in full of the rent due by
NY to RSJJ for the period from January 1, 1998 to December 31, 1998. The value
of the shares issued by NY are recorded at their estimated market value at the
date of issuance of $2.12 per share, with a 50% discount due to the restricted
nature of the stock. The value of the shares issued by the Company are recorded
at their estimated market value at date of issuance ($1.06 per share) with a 50%
discount due to the restricted nature of the stock.
During January 1998, the Company raised a net of $393,000 after
expenses and a 10% commission, in connection with a private placement, to fund
the Worldwide operations, from the sale of $450,000 of convertible debentures.
Such debentures are due January 30, 2000 with interest accruing at 8% per annum.
Holders of the debentures are entitled to convert the entire face of the
debentures plus accrued interest, at the lesser of a) 100% of the 5-day average
closing bid price, for the 5 trading days immediately preceding the closing date
of the offering (February 3, 1998) or b) 75% of the 5-day average closing bid
price for the 5 trading days immediately preceding the date of conversion. The
Company agreed to file a Registration Statement covering the shares of common
stock to be issued upon conversion of the debentures, and if not declared
effective within 90 days following the closing of the offering, then there shall
be a decrease of the conversion ratios by 2.5% per 30 day period or portion
thereof pro rata, until the Registration Statement has been declared effective.
In addition, the purchasers of the debentures received warrants to purchase an
aggregate of 100,000 shares of common stock, 50,000 shares at an exercise price
of $1.125 per share and 50,000 shares at $1.41 per share.
On May 12, 1998, the Company, NY and the Company's President entered
into an agreement with First Anglo Swiss Holding, Inc. ("FAS") whereby NY would
issue 510,000 shares of common stock for 2,550,000 or 51% of FAS' outstanding
shares of common stock.
Simultaneously, with the closing, the Company agrees to sell 1,350,000 shares of
NY's common stock to Amalgamated Resources Management S.A. ("Amalgamated") for
$10,220,000. In addition, at the closing at the acquisition, the holders of FAS'
preferred stock shall exchange all of their shares of the preferred stock of FAS
for shares of a series of preferred stock of NY with the same rights and
preferences as the shares of FAS' preferred stock except for certain
limitations.
20
<PAGE>
PART II
Item 1. Legal Proceedings
In April 1995, NY 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. In December 1995, in the
United States District Court, Southern District of New York, 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 (f/k/a
Metro Steel Structures, Ltd.), One Carnegie, and others. See the Company's and
NY's Forms 10-QSB for the quarters ended December 31, 1997 and September 30,
1997 for more information concerning this matter. These actions settled in April
1998 for $750,000.
On February 25, 1997, in New York State Supreme Court, Kings County, NY
and Metro Steel Structures, Ltd. commenced suit against Perini Corporation,
Metropolitan Transportation Authority, New York City Transportation Authority,
and Fidelity and Deposit Company of Maryland. This action is in the discovery
phase. See the Company's and NY's Forms 10-QSB for the quarters ended December
31, 1997 and September 30, 1997 for more information concerning this matter.
On February 26, 1997, in New York State Supreme Court, Queens County,
NY, Metro Steel Structures, Ltd., and McKay Enterprises, Inc. commenced suit
against Perini Corporation, Department of Transportation of the City of New
York, and Fidelity and Deposit Company of Maryland. This action is in the
discovery phase. See the Company's and NY's Forms 10-QSB for the quarters ended
December 31, 1997 and September 30, 1997 for more information concerning this
matter.
On February 7, 1997, in New York State Supreme Court, Kings County,
Perini Corporation commenced an action against NY and Metro Steel Structures,
Ltd. This action is in the discovery phase. See the Company's and NY's Forms
10-QSB for the quarters ended December 31, 1997 and September 30, 1997 for more
information concerning this matter.
On or about May 13, 1997, in the New York Supreme Court, Suffolk
County, NY commenced suit against 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. This action is in the discovery
phase. See the Company's and NY's Forms 10-QSB for the quarters ended December
31, 1997 and September 30, 1997 for more information concerning this matter.
On October 14, 1997, NY filed a mechanic's lien in the amount of
$13,640,767 against EklecCo (f/k/a Pyramid Company of Rockland). On October 16,
1997, in New York State Supreme Court, Rockland County, EklecCo commenced suit
against NY. On February 9, 1998, the plaintiff posted a bond in the amount of
$14,254,730 to secure payment of NY's $13,640,747 mechanic's lien, interest, and
court costs; accordingly, the court granted the plaintiff's motion to discharge
said lien. The court further ordered that discovery be expedited in this matter.
This action is in the discovery phase. See the Company's and NY's Forms 10-QSB
for the quarters ended December 31, 1997 and September 30, 1997 for more
information concerning this matter.
ITEM 2. Changes In Securities And Use Of Proceeds: None
ITEM 3. Defaults Upon Senior Securities: None
ITEM 4. Submission Of Matters To A Vote Of Security Holders: None, except as
reported in the Company's Form 10-QSB for the quarter ended
December 31, 1997.
ITEM 5. Other Information: None
ITEM 6. Exhibits And Reports On Form 8-K:
In January 1998, the Company filed a Form 8-K, dated January 22, 1998,
wherein it reported the results of its annual meeting held on January 7, 1998.
In February 1998, the Company filed a Form 8-K, dated February 12, 1998, wherein
it reported the resignation of Philip Nielson as a Director and the election of
Ronald Murphy as a Director.
21
<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 21st day of May 1998.
USABG Corp.
By: /s/ Joseph M. Polito
-----------------------------
Joseph M. Polito, President
/s/ Steven J. Polito
-----------------------------
Steven J. Polito, Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statement of Cash Flows and Notes thereto
incorporated in Part I, Item 1 of this Form 10-QSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 773,669
<SECURITIES> 0
<RECEIVABLES> 10,831,768
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,997,697
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,128,334
<CURRENT-LIABILITIES> 7,120,324
<BONDS> 0
0
0
<COMMON> 7,448
<OTHER-SE> 2,325,914
<TOTAL-LIABILITY-AND-EQUITY> 14,128,334
<SALES> 2,018,534
<TOTAL-REVENUES> 2,018,534
<CGS> 1,350,392
<TOTAL-COSTS> 1,350,392
<OTHER-EXPENSES> 1,137,245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116,624
<INCOME-PRETAX> (522,679)
<INCOME-TAX> 25,300
<INCOME-CONTINUING> (515,211)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (515,211)
<EPS-PRIMARY> 1.98
<EPS-DILUTED> 1.98
</TABLE>
