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, 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
USABG Corp.
(Exact Name of Registrant as Specified in its Charter)
Delaware 11-2974406
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
53-09 97th Place, Corona, New York 11368
(Address of Principal Executive Offices) (Zip Code)
(718) 699-0100
(Registrant's Telephone Number, Including Area Code)
U.S. Bridge Corp.
(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
February 18, 1998.
<PAGE>
USABG CORP.
(FORMERLY U.S. BRIDGE CORP.)
INDEX
<TABLE>
<CAPTION>
PART 1 - Financial Information:
ITEM 1 - Financial Statements
<S> <C>
Consolidated Balance Sheets at December 31, 1997
(unaudited) and June 30, 1997 1
Consolidated Statements of Operations (unaudited)
for the Three Months ended December 31, 1997 and 1996 2
Consolidated Statements of Operations (unaudited)
for the Six Months ended December 31, 1997 and 1996 3
Consolidated Statement of Stockholders' Equity (unaudited)
for the Six Months ended December 31, 1997 4
Consolidated Statements of Cash Flows (unaudited)
for the Six Months ended December 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6 - 10
ITEM 2 - Management's Discussion And Analysis Of
Financial Condition And Results Of Operations 11- 15
PART II
ITEM 1. Legal Proceedings 15
ITEM 4. Submission Of Matters To A Vote Of Security Holders 16
ITEM 5. Other Information 16
Signatures 18
</TABLE>
<PAGE>
USABG CORP. AND SUBSIDIARIES
(FORMERLY U.S. BRIDGE CORP. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
ASSETS (Unaudited)
<TABLE>
<CAPTION>
December 31, 1997 June 30, 1997
-------------------------------
Current assets:
<S> <C> <C>
Cash ...................................................................... $ 943,216 $ 555,435
Cash - restricted ......................................................... 219,199 214,001
Contracts and retainage receivable, net ................................... 10,145,153 8,962,297
Costs and estimated earnings in excess
of billings on uncompleted contracts ...................................... 1,437,547 2,225,723
Due from related parties .................................................. 255,526 --
Deferred tax asset ........................................................ 336,200 304,225
Other current assets ...................................................... 235,462 186,499
------------ ------------
Total current assets ................................................ 13,572,303 12,448,180
Assets of discontinued operations ............................................ -- 2,889,999
Deferred tax asset - non current ............................................. 30,200 74,575
Other assets ................................................................. 80,426 87,500
------------ ------------
Total assets ................................................................. $ 13,682,929 $ 15,500,254
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, including cash overdrafts of
$121,934 and $149,290, respectively$ ................................ 1,291,340 $ 3,495,492
Accrued expenses .......................................................... 1,325,105 964,236
Current portion of long-term payables ..................................... 325,000 --
Payroll taxes payable ..................................................... 1,786,677 1,441,589
Note payable .............................................................. 145,358 145,358
Billings in excess of costs and estimated earnings
on uncompleted contracts ................................................. 380,408 126,455
Due to related parties .................................................... -- 166,540
Income taxes payable ...................................................... 722,744 522,379
Liabilities of discontinued operations .................................... 150,000 3,039,999
------------ ------------
Total current liabilities ........................................... 6,126,632 9,902,048
------------ ------------
Long-term payable ............................................................ 1,425,000 --
------------ ------------
Minority interest ............................................................ 3,121,389 2,828,301
------------ ------------
Commitments and contingencies (Note 5) ....................................... -- --
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 7,006
Additional paid-in capital ................................................ 3,756,589 3,756,589
Retained earnings (Accumulated deficit) ................................... (513,062) (753,065)
Sub-total stockholders= equity ...................................... 3,250,533 3,010,530
Less: Stock subscription receivable ................................. (240,625) (240,625)
------------ ------------
Total stockholders' equity .......................................... 3,009,908 2,769,905
------------ ------------
Total liabilities and stockholders' equity ................................... $ 13,682,929 $ 15,500,254
============ ============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
<PAGE>
USABG CORP. AND SUBSIDIARIES
(FORMERLY U.S. BRIDGE CORP. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
(UNAUDITED)
1997 1996
Revenue:
<S> <C> <C>
Contract revenue ......................................... $ 3,350,901 $ 2,631,165
----------- -----------
Costs and expenses:
Cost of contract revenues ................................ 2,536,377 1,956,050
General and administrative expenses ...................... 769,915 742,180
----------- -----------
Total costs and expenses .............................. 3,306,292 2,698,230
---------- -----------
Income (loss) from operations before other income (expense),
minority interest and provision for income taxes .......... 44,609 (67,065)
Other income (expenses):
Interest expense and financing costs ..................... (3,858) (7,899)
Interest income .......................................... 2,251 225
----------- -----------
Total other income (expense) .......................... (1,607) (7,674)
----------- -----------
Loss before minority interest and provision
for income taxes .......................................... 43,002 (74,739)
Minority interest in net income ............................ (28,708) (76,745)
----------- -----------
Income (loss) before provision for income taxes ............ 14,294 (151,484)
Provision for income taxes (Note 2) ........................ 85,610 --
----------- -----------
Net loss before loss from discontinued operations .......... (71,316) (151,484)
Loss from discontinued operations .......................... -- 115,853
----------- -----------
Net loss ................................................... $ (71,316) $ (267,337)
=========== ===========
Net loss per common equivalent share:
Income (loss) .............................................. $ (.01) $ (.04)
=========== ===========
Weighted average number of common shares outstanding ....... 7,402,148 6,389,966
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
<PAGE>
USABG CORP. AND SUBSIDIARIES
(FORMERLY U.S. BRIDGE CORP. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---------------- -------------
Revenue:
<S> <C> <C>
Contract revenues ................................... $ 12,269,286 $ 5,806,441
------------ ------------
Costs and expenses:
Cost of contract revenues ........................... 10,072,469 4,125,763
General and administrative expenses ................. 1,448,402 1,365,591
------------ ------------
Total costs and expenses .......................... 11,520,871 5,491,354
------------ ------------
Income from operations before
interest expense, unusual item,
minority interest and
provision for income taxes ........................... 748,418 315,087
Other income (expense):
Interest expense .................................... (7,758) (9,145)
Interest income ..................................... 5,199 1,000
------------ ------------
Total other income (expense) ...................... (2,559) (8,145)
------------ ------------
Income (loss) from operations before minority interest
and provision for income taxes ...................... 745,859 306,942
Minority interest in net (income) loss ............... (293,088) (279,765)
------------ ------------
Net income before provision for income taxes ......... 452,771 27,177
Provision for income taxes ........................... 212,768 --
------------ ------------
Net income before loss from discontinued operations .. 240,003 27,177
Loss from discontinued operations .................... -- 235,853
------------ ------------
Net income (loss) .................................... $ 240,003 $ (208,676)
============ ============
Net (loss) income per common equivalent share:
Net income (loss) ................................... $ .03 $ (.03)
============ ============
Weighted average number of common shares outstanding . 7,402,148 6,450,736
============ ============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
<PAGE>
USABG CORP. AND SUBSIDIARIES
(FORMERLY U.S. BRIDGE CORP. AND SUBSIDIARIES)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
(UNAUDITED)
Common Additional Total
Stock Paid-in Accumulated Stockholders'
Shares Amount capital Deficit
equity
<S> <C> <C> <C> <C> <C> <C>
Balances at July 1, 1997 ............... 7,402,148 $ 7,006 $ 3,756,589 $ (753,065) $ 3,010,530
Net income for the six months
ended December 31, 1997 ............... -- -- -- 240,003 240,003
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1997 $7,402,148 $ 7,006 $ 3,756,589 $ (513,062) $ 3,250,533
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
<PAGE>
USABG CORP. AND SUBSIDIARIES
(FORMERLY U.S. BRIDGE CORP. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
(UNAUDITED)
1997 1996
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) ............................................................. $ 240,003 $ (101,223)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation and amortization ............................................... 11,298 242,327
Amortization of consulting costs ............................................ 37,500 22,000
Minority interest in net income (loss) ...................................... 293,088 279,765
Changes in operating assets and liabilities:
Accounts receivable ......................................................... (1,182,856) (3,266,998)
Prepaid expenses ............................................................ -- (10,996)
Costs and estimated earnings in excess of
billing on uncompleted contracts ........................................... 788,176 1,361,524
Other current assets ........................................................ (48,963) 47,934
Deferred tax assets ......................................................... (31,975) --
Other assets ................................................................ 51,449 --
Accounts payable ............................................................ (454,152) 971,631
Accrued expenses ............................................................ 360,869 160,989
Payroll taxes payable ....................................................... 345,088 155,429
Billings in excess of costs and estimated earnings
on uncompleted contracts ................................................... 253,953 (8,857)
Income taxes payable ........................................................ 200,365 --
----------- -----------
Net cash provided by (used for) operating activities ....................... 863,843 (146,475)
----------- -----------
Cash flows from investing activities:
Fixed asset acquisitions ...................................................... (3,779) (5,677)
----------- -----------
Net cash used by investing activities ....................................... (3,779) (5,677)
----------- -----------
Cash flows from financing activities:
Advances and repayments (to) proceeds from related parties .................... (467,085) 129,532
----------- -----------
Net cash (used for) provided by financing activities ....................... (467,085) 129,532
----------- -----------
Net increase (decrease) in cash ................................................ 392,979 (22,620)
Cash, beginning ................................................................ 769,436 399,652
----------- -----------
Cash, ending ................................................................... $ 1,162,415 $ 377,032
=========== ===========
Supplemental disclosure of cash flow information: Cash paid during the six
months for:
Interest .................................................................... $ 7,758 $ 8,651
=========== ===========
Supplemental disclosure of non-cash investing and financing activities:
Issuance of common stock in connection with services provided
to the Company ............................................................... $ -- $ 150,000
=========== ===========
Surrender of property plant and equipment in lieu foreclosure
on mortgage ................................................................... $ 2,889,999 $
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
<PAGE>
USABG CORP. AND SUBSIDIARIES
(FORMERLY U.S. BRIDGE CORP. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(UNAUDITED)
NOTE 1 GENERAL
USABG, Corp. (the ACompany@) amended its certificate of
incorporation on January 14, 1998 to change its name from U.S. Bridge Corp. to
USABG Corp. The Company currently owns 53.23% of the outstanding shares of USA
Bridge Construction of N.Y., Inc. (AUSA Bridge,@ formerly known as U.S. Bridge
of N.Y., Inc.), 100% of the outstanding shares of common stock of Worldwide
Construction Limited (AWorldwide@), and 80% of the outstanding shares of common
stock of Royal Steel Services, Inc. (ARoyal Steel@). These three subsidiaries
are the only ones through which the Company operates. Two additional
subsidiaries of the Company (each wholly owned subsidiaries), One Carnegie Court
Associates, Inc. and U.S. Bridge Corp. (Maryland), ceased operations in August
1997 and November 1996, respectively.
Royal Steel was formed in 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 to own 80% of Falcon TChad SA
(AFalcon@), a company formed in Ndjamena, Chad to operate as a full service
transportation, forwarding, warehousing, and development company. Falcon shall
offer transportation services including trucking, customs clearance, and
warehousing. As of December 31, 1997, neither Royal Steel nor Worldwide
commenced operations.
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-QSB. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management the interim financial statements include all adjustments necessary in
order to make the financial statements not misleading. The results of operations
for the three and six months ended is not necessarily indicative of the results
to be expected for the full year. For further information, refer to the
Company=s audited 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 PROVISION FOR INCOME TAXES
For the three and six months ended December 31, 1997, the
Company recorded an estimated income tax expense of $85,610 and $212,768,
respectively. For the six months ended December 31, 1996, no income tax expense
was recorded by the Company as a result of its then net operating tax
carryforward which was subsequently utilized. The income tax expense for the
three and six months ended December 31, 1997 is primarily from the net income
generated by USA Bridge.
NOTE 3 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 provided by USA Bridge. Interest is payable
on the first day of each month which commenced October 1, 1994. The credit line
is payable on demand. At December 31, 1997 the balance was $145,358.
<PAGE>
NOTE 4 MINORITY INTEREST
In connection with USA Bridge's private placement on March 9,
1995 and its Initial Public Offering (AIPO@), the Company's interest in USA
Bridge 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 USA Bridge 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 USA Bridge to 50.1% from 49.95%. During the year ended June 30,
1997 stock transactions of USA Bridge resulted in an increase in the Company=s
ownership to 53.23%. As of December 31, 1997, the minority interest balance
amounting to $3,121,389 is a result of all of the above transactions and the
proportionate share of income and losses attributable to the minority
stockholders.
NOTE 5 COMMITMENTS AND CONTINGENCIES
a) Disclosure of significant estimates - revenue recognition
USA Bridge 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 USA Bridge=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 estimated may be subject to revision in the normal course of
business.
b) Leases
USA Bridge leases its administrative offices pursuant to a
signed lease agreement with RSJJ Realty Corp. (ARSJJ@) an entity wholly-owned by
the Company=s President which requires monthly payments of $20,000. Such lease
expires on March 31, 1998. (See Note 7a(i) for additional information). Under
such lease agreement, USA Bridge is required to make future minimum lease
payments as follows:
Year Ending
June 30,
1998 $ 60,000
===============
Total $ 60,000
===============
Accordingly, included in selling, general and administrative
expenses is rent expense which amounted to $60,000 for each of the three months
ended December 31, 1997 and 1996 and $120,000 for each of the six months ended
December 31, 1997 and 1996. USA Bridge also leases a yard for storage material
pursuant to a oral agreement which requires monthly payments of $3,500. As of
December 31, 1997, $87,500 of yard rent remains unpaid and is included in
accounts payable.
c) Significant customers and vendors
For the six months ended December 31, 1997 and 1996, USA
Bridge had one and three unrelated customers respectively,
which accounted for approximately 45 % and 85% of total
revenues. As of December 31, 1997 approximately 75% of
contracts and retainage receivables are due from two
customers.
d) Seasonality
USA Bridge operates in an industry which may be seasonal,
generally due to inclement weather occurring during the winter
months. Accordingly, USA Bridge may experience a seasonal
pattern in its operating results and generate lower revenue in
the third quarter of each fiscal year. Quarterly results may
also be affected by the timing of bid solicitations by
governmental authorities, the stage of completion of major
projects, and revenue recognition policies.
<PAGE>
e) Bonding requirements
USA Bridge is required to provide bid and/or performance bonds
in connection with governmental construction projects. To
date, USA Bridge has been able to sufficiently obtain bonding
for its private projects. USA Bridge 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) Mechanic=s liens
As of December 31, 1997, USA Bridge filed various mechanic=s
liens on certain projects totaling $16,919,542.
g) 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, or change orders either in
dispute or unapproved.
h) Payroll taxes
As of December 31, 1997, the Company owes approximately
$1,786,677 in payroll taxes. Although as of December 31, 1997,
the Company had not entered into any formal repayment
agreements with the respective tax authorities, it has been
making payments based on oral agreements.
i) Legal proceedings
The Company is 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.
j) Accounts payable
In November 1997, USA Bridge entered into an agreement with
the Iron Workers Local 40,361, and 417 Joint Security Funds
(the AUnion@) in order to liquidate $1,750,000 owed for unpaid
union dues. USA Bridge 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, USA Bridge assigned
its retainage receivable from a certain project as well as
$1,750,000 of its related mechanics lien. Upon any funds being
released or paid under such mechanics lien, The Union will be
repaid any balance owed in full before USA Bridge may receive
any funds. USA Bridge will receive credit for any payments
received by The Union related to the assigned portion of the
mechanics lien.
<PAGE>
NOTE 6 RELATED PARTY TRANSACTIONS
a) Due from related parties
As of December 31, 1997, the Company has advanced funds to its
President and certain affiliates. These advances are
non-interest bearing and are due on demand. As of December 31,
1997 such advances amounted to $255,526.
b) Rental expense
Included in general and administrative expenses is rent
expense paid by USA Bridge pursuant to a signed lease
agreement with RSJJ a company owned by the Company's
President. The lease expires March 31, 1998. Rent expense for
the three months ended December 31, 1997 and 1996 amounted to
$60,000 and for the six months ended December 31, 1997 and
1996 amounted to $120,000.
NOTE 7 SUBSEQUENT EVENTS
a) Issuance of common stock
i) On February 5, 1998, USA Bridge agreed to issue 106,667
shares of its common stock to the Company as consideration
to the Company for issuing shares of its own common stock
to RSJJ in consideration for payment in full of the rent
due by USA Bridge to RSJJ for the period from January 1,
1998 to December 31, 1998. The value of the shares issued
will be 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) During February 1998, 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 will be issued to the Company=s
Treasurer. The remaining 50,000 shares will be issued to
consultants to the Company. The Company also authorized
the filing of an amended Form S-8 Registration Statement
filed in 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.
iii) During February 1998, USA Bridge authorized the issuance
of 250,000 shares of its common stock pursuant to its
Senior Management Incentive Plan. Of the 250,000 shares,
100,000 will be issued to the Company=s President,
50,000 to USA Bridge=s Secretary, and 50,000 to USA
Bridge=s Treasurer. The remaining 50,000 shares will be
issued to employees and consultants of USA Bridge. USA
Bridge also authorized the filing of an amended Form S-8
Registration Statement to increase to 1,000,000 shares
the shares which may be issued under the plan and the
registration of the above shares.
<PAGE>
b) Private placement
The Company raised $450,000 for the Worldwide and Falcon Chad
SA operations, through the sale of Debentures through VenGua
Capital Corp., a London, England firm, as placement agent. The
Debentures accrue interest at the rate of 8% per annum, which
interest is payable in shares of Common Stock upon conversion
of the Debentures into shares of Common Stock. Holders of the
Debentures are entitled to convert the entire face amount of
the Debentures, plus accrued interest, at the lesser of (a)
100% of the 5-day average closing bid price, as reported by
Bloomberg, LP 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, as reported by Bloomberg,
LP 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 the 100% referred to in (a) of this paragraph
shall be decreased to 97.5% and the 75% referred to in (b) of
this paragraph shall be increased to 72.5%, per 30 day period
or portion thereof pro rata, until the Registration Statement
has been declared effective. In addition, the purchasers
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 and Falcon Chad SA to purchase the
trucks and to set up offices and operations in Chad.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
USABG, Corp. (the ACompany@) amended its certificate of
incorporation on January 14, 1998 to change in its name from
U.S. Bridge Corp., to USABG Corp. The Company currently owns
53.23% of the outstanding shares of USA Bridge Construction of
N.Y., Inc. (AUSA Bridge@) and 100% of the outstanding shares
of common stock of Worldwide Construction Limited
(AWorldwide@), and 80% of the outstanding shares of common
stock of Royal Steel Services, Inc. (ARoyal Steel@). These
three subsidiaries are the only ones through which the Company
operates. Two additional subsidiaries of the Company (each
wholly owned subsidiary), One Carnegie court Associates, Inc.,
and U.S. Bridge Corp. (Maryland) ceased operations in August
1997 and November 1996, respectively.
Worldwide was formed by the Company in December 1997 and is a
British Virgin Islands corporation. It was formed to own 80%
of Falcon TChad SA (AFalcon@), a company formed in Ndjamena,
Chad to operate as a full service transportation, forwarding,
warehousing, and development company. Falcon shall offer
transportation services including trucking, customs clearance
and warehousing. As of December 31, 1997, no activity
commenced in either Royal Steel or Worldwide.
The following management=s discussion and analysis for the
three and six months ended December 31, 1997 and 1996 are
primarily that of the Company=s subsidiary, USA Bridge, since
the Company itself did not have any material operations of its
own.
<PAGE>
USA Bridge, the primary operating entity, 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.
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.
<PAGE>
USA Bridge's operations are substantially controlled by Mr.
Polito since he owns approximately 61% of the outstanding shares
of the Company which owns 53.23% of the common stock of USA
Bridge and may be considered the beneficial owner of USA Bridge.
Mr. Polito is also a 100% shareholder of R.S.J.J. Realty Corp.
("RSJJ"). RSJJ leases the administrative office space to USA
Bridge at a cost of $20,000 per month pursuant to a signed lease
agreement expiring on March 31, 1998.
USA Bridge 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. USA
Bridge will be responsible for performance of the entire
contract, including the work done by subcontractors.
Accordingly, USA Bridge may be subject to substantial
liability if a subcontractor fails to perform as required.
Also there may be unanticipated difficulties in hiring and
overseeing subcontractors that USA Bridge is currently not
aware of. USA Bridge requires bonding from a New York licensed
bonding Company in order to bid on projects as a general
contractor.
Though USA Bridge 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, USA Bridge 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.
In order to obtain bonding, in addition to credit checks and
other due diligence disclosure requirements bonding companies
require USA Bridge receiving bonding to have certain amounts
of capital and liquid assets, which will base the amount of
bonding it will issue based on a formula, devised by each
individual bonding Company, which primarily takes into account
USA Bridge's capital and liquid assets. In order for USA
Bridge to obtain and maintain bonding, it must adhere to the
requirements stipulated in the bonding agreements which vary
with each bonding Company. The bonding costs for each bond are
incorporated in the contract price of each job. These costs
are carried as a line item in the requisition and paid by the
customer. Any monies taken from the working capital for this
purpose will be replaced as the monthly requisition payments
are received from the customer. Bonding requirements vary
depending upon the nature of the projects to be performed. USA
Bridge 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 are generally payable at the
beginning of a project, USA Bridge must maintain sufficient
working capital to satisfy the fee prior to receiving from the
project.
Three months ended December 31, 1997 as compared to the three
months ended December 31, 1996
Contract revenues for the three months ended December 31, 1997
and 1996 amounted to $3,350,901 and $2,631,165, respectively.
This increase amounted to $719,736 or approximately 27%.
During the three months ended December 31, 1997 USA Bridge has
obtained no new contracts but has obtained additional change
orders to previous contracts. As of December 31, 1997, USA
Bridge=s backlog amounted to approximately $3,227,000. Backlog
represents the amount of revenue USA Bridge expects to realize
from work to be performed on uncompleted contracts in progress
and from contractual agreements which work has not yet begun.
<PAGE>
The Company=s gross profit for the three months ended December
31, 1997 and 1996 amounted to 24% and 26%, respectively. The
decrease in gross profit of 2% is a result of the Company
revising its contract costs estimates for jobs coming to an
end in the current period and shutdown costs on jobs which
have been halted or completed.
For the three months ended December 31, 1997 and 1996, USA
Bridge paid $0 and $172,141, respectively, to US Bridge MD for
materials and labor necessary to perform steel erection
services. During September 1996, US Bridge MD ceased
substantially all of its operations and USA Bridge began
purchasing material and labor from unrelated third party steel
fabricators. At December 31, 1997 USA Bridge owed US Bridge MD
$47,220, principally for advances in connection with above
services and such amounts are non-interest bearing and due on
demand.
General and administrative expenses have increased by $27,735
or 4% to $769,915 for the three months ended December 31, 1997
from $742,180 for the three months ended December 31, 1996.
The increase in general administration costs are mainly
attributable to general corporate overhead. As of December 31,
1997, USA Bridge has an allowance for doubtful accounts to
$2,159,000 against its contract receivable. In management=s
opinion, the allowance for doubtful accounts at December 31,
1997, will be sufficient to absorb any losses that may be
sustained from a settlement with this and other customers. As
of December 31, 1997 approximately 75% of contracts and
retainage receivables are due from two customers.
Six months ended December 31, 1997 as compared to the six
months ended December 31, 1996
Contract revenues for the six months ended December 31, 1997
and 1996 amounted to $12,269,286 and $5,806,441, respectively.
This net increase amounting to $6,462,845 or approximately
111% is a direct result of the Company=s backlog as of June
30, 1997 which amounted to approximately $6,088,000. This
backlog amount represents the contracts the Company had
entered into during the latter part of its June 30, 1997
fiscal year. During the six months ended December 31, 1997,
the Company has obtained no new contracts but has obtained
additional change orders to previous contracts amounting to
approximately $10,744,852. As of December 31, 1997, the
Company=s backlog amounted to approximately $3,227,000.
Backlog represents the amount of revenue the company expects
to realize from work to be performed on uncompleted contracts
in progress and from contractual agreements which work has not
yet begun.
The Company=s gross profit for the six months ended December
31, 1997 and 1996 amounted to 18% to 29%. The decrease in
gross profit represents estimated cost adjustments on certain
contracts and shut down costs on jobs which have been halted
or completed.
General and administrative expenses have increased by $82,811
or 6% to $1,448,402 for the six months ended December 31, 1997
from $1,365,591 for the six months ended December 31, 1996.
The increase in general administration costs are mainly
attributable to an overall increase of the Company's
administrative salaries associated with the material amount
increase in contract revenue and general corporate overhead.
<PAGE>
As of December 31, 1997, the Company=s allowance for doubtful
accounts amounts to $2,159,000 against its contract
receivable. In management=s opinion, the allowance for
doubtful accounts at December 31, 1997, will be sufficient to
absorb any losses that may be sustained from settlements. For
the six months ended December 31, 1997 and 1996, the Company
had one and three unrelated customers respectively, which
accounted for approximately 45% and 85% of total revenues. As
of December 31, 1997 approximately 75% of contracts and
retainage receivables are due from two customers.
For the three and six months ended December 31, 1997, the
Company recorded an estimated income tax expense of $85,610
and $212,768, respectively. For the six months ended December
31, 1996, no income tax expense was recorded by the Company as
a result of its then net operating tax carryforward which was
subsequently utilized. The income tax expense for the three
and six months ended December 31, 1997 is primarily from the
net income generated by USA Bridge.
Liquidity and Capital Resources
At December 31, 1997, the Company's working capital amounted
to $7,445,671.
Net cash provided by operating activities amounted to $863,743
for the six months ended December 31, 1997. For the six months
ended December 31, 1996, the net cash used for operating
activities amounted to $146,475.
With regards to financing activities, the Company used
$467,085 of cash for the six months ended December 31, 1997.
Such cash was used primarily for repayments and advances to
affiliates and related parties.
As of December 31, 1997, the Company owes approximately
$1,786,677 of payroll taxes and related penalties and
interest. Although, as of December 31, 1997, the Company has
not entered into any formal repayment agreements with the
respective tax authorities, it has been making payments based
on oral agreements.
As of December 31, 1997, USA Bridge filed various mechanics
liens on certain projects totaling $16,919,542.
In November 1997, the USA Bridge entered into an agreement
with the Iron Workers Local 40,361 and 417 Joint Security
Funds AThe Union@ in order to liquidate $1,750,000 owed
relating to unpaid benefits. USA Bridge 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, USA
Bridge assigned its retainage receivable from a certain
project as well as $1,750,000 of its related mechanics lien.
Upon any funds being released or paid under such mechanics
lien, The Union will be repaid any balance owed in full before
USA Bridge may receive any funds. USA Bridge will receive
credit for any payments received by The Union related to the
assigned portion of the mechanics lien.
<PAGE>
On February 5, 1998, USA Bridge agreed to issue 106,667 shares
of its common stock to the Company as consideration to the
Company for issuing shares of its own stock to RSJJ in
consideration for payment in full of the rent due by USA
Bridge to RSJJ for the period from January 1, 1998 to December
31, 1998. The value of the shares issued will be 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.
During February 1998, 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 will
be issued to the Company=s President, 25,000 the Company=s
Secretary, and 25,000 to the Company=s Treasurer. The
remaining 50,000 shares will be issued to consultants to the
Company. 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.
During January 1998, the Company raised a net of $450,000
after a 10% commission, in connection with a private placement
to fund the Worldwide and Falcon Chad SA operations, from the
sale of $500,000 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 and Falcon Chad SA to commence operations
in Chad.
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
In April 1995, USA Bridge 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. This
action is scheduled for trial on March 17, 1998. See the Company=s Form 10-QSB
for the quarterly period ended September 30, 1997 for more information
concerning this matter.
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, USA Bridge (f/k/a Metro Steel Structures, Ltd.), One
Carnegie, and others. This action is in the discovery phase. See the Company=s
Form 10-QSB for the quarterly period ended September 30, 1997 for more
information concerning this matter.
On February 25, 1997, in New York State Supreme Court, Kings County,
USA Bridge 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 Form 10-QSB for the quarter ended September
30, 1997 for more information concerning this matter.
On February 26, 1997, in New York State Supreme Court, Queens County,
USA Bridge, 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 Form 10-QSB for the quarter ended 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 USA Bridge and Metro Steel
Structures, Ltd. This action is in the discovery phase. See the Company=s Form
10-QSB for the quarter ended September 30, 1997 for more information concerning
this matter.
On or about May 13, 1997, in the New York Supreme Court, Suffolk
County, USA Bridge 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 Form 10-QSB for the quarter ended
September 30, 1997 for more information concerning this matter.
In August 1997, the Company, USA Bridge, and MD entered into an
agreement settling the January 1997 trademark infringement claim made by The
Ohio Bridge Corporation. The Company agreed to change its name and on January
14, 1998 effected a name change to USABG Corp. USA Bridge agreed to change its
name to USA Bridge Construction of N.Y., Inc. This name change was effected on
January 12, 1998. MD agreed to change its name to USA Bridge Construction Corp.
(Maryland). This name change was effected on February 19, 1998.
On October 14, 1997, USA Bridge 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 USA Bridge. On February 9, 1998, the plaintiff posted a bond in the
amount of $14,254,730 to secure payment of USA Bridge=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 Form 10-QSB for the quarter ended September 30, 1997 for more
information concerning this matter.
<PAGE>
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
On January 7, 1998, the Company held its annual meeting at which time
the following five (5) Directors were elected to the Company's Board of
Directors to hold office for a period of one year or until their successors are
duly elected and qualified. The votes cast for each are as follows:
<TABLE>
<CAPTION>
Votes Cast Votes Cast
For Against Abstentions
<S> <C> <C> <C>
Joseph M. Polito 6,018,009 0 10,800
Ronald J. Polito 6,017,659 0 11,150
Steven J. Polito 6,018,009 0 10,800
Philip Neilson 6,018,009 0 10,800
Marvin Weinstein 6,018,009 0 10,800
</TABLE>
Also during the meeting, vote was taken on the proposal to amend the
Company's Certificate of Incorporation to change the name of the Company from
U.S. Bridge Corp. to USABG Corp. The votes cast for this proposal are as
follows:
<TABLE>
<CAPTION>
Votes Cast Votes Cast
For Against Abstentions
<S> <C> <C> <C>
6,027,209 1,600 0
</TABLE>
ITEM 5. OTHER INFORMATION
The Company raised $450,000 for the Worldwide and Falcon Chad SA
operations, through the sale of Debentures through VenGua Capital Corp., a
London, England firm, as placement agent. The Debentures accrue interest at the
rate of 8% per annum, which interest is payable in shares of Common Stock upon
conversion of the Debentures into shares of Common Stock. Holders of the
Debentures are entitled to convert the entire face amount of the Debentures,
plus accrued interest, at the lesser of (a) 100% of the 5-day average closing
bid price, as reported by Bloomberg, LP 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, as reported by Bloomberg, LP 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 the 100% referred to in (a) of this
paragraph shall be decreased to 97.5% and the 75% referred to in (b) of this
paragraph shall be increased to 72.5%, per 30 day period or portion thereof pro
rata, until the Registration Statement has been declared effective. In addition,
the purchasers 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 and Falcon
Chad SA to purchase the trucks and to set up offices and operations in Chad.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: None
<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 19th day of February 1998.
USABG 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 2/19/98
Joseph M. Polito (Chief Executive Officer) Date
/s/ Ronald J. Polito Secretary and Director 2/19/98
Ronald J. Polito Date
/s/ Steven J. Polito Treasurer and Director 2/19/98
Steven J. Polito Date
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
U.S. Bridge Corp.
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 7 of this Form 10-KSB and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> jun-30-1997
<PERIOD-END> dec-31-1997
<CASH> 1,162,415
<SECURITIES> 0
<RECEIVABLES> 12,304,153
<ALLOWANCES> 2,159,000
<INVENTORY> 1,437,547
<CURRENT-ASSETS> 13,572,303
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,682,929
<CURRENT-LIABILITIES> 9,902,048
<BONDS> 6,126,632
0
0
<COMMON> 7,006
<OTHER-SE> 3,002,902
<TOTAL-LIABILITY-AND-EQUITY> 13,682,929
<SALES> 3,350,901
<TOTAL-REVENUES> 3,350,901
<CGS> 2,536,377
<TOTAL-COSTS> 2,536,377
<OTHER-EXPENSES> 771,522
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,294
<INCOME-TAX> 85,610
<INCOME-CONTINUING> (71,316)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (71,316)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
