As filed with the Securities and Exchange Commission on January 30, 1998
Registration No. 33-89230-NY
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST EFFECTIVE AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
USA BRIDGE CONSTRUCTION OF N.Y., INC.
(Exact Name of Registrant as Specified in Charter)
New York 1700 11-3032277
(State of Incorporation) Primary Standard Industrial (I.R.S. Employer
Classification Code Number Identification No.)
53-09 97th Place Corona, New York 11368 (718) 699-0100 (Address and
Telephone Number of Principal Executive Offices and Principal Place of Business)
Joseph M. Polito, President
53-09 97th Place
Corona, New York 11368
(718) 699-0100
(Name, Address, and Telephone Number of Agent for Service)
Copies to: David S. Klarman Klarman & Associates 10 East 60th Street, Suite
402 New York, New York 10022 (212) 688-9236 Approximate date of commencement of
proposed sale to the public: As soon as practicable after this Registration
Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. [X]
If delivery of a prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Cross Reference Sheet Pursuant to Rule 404 (a)
Showing the Location In Prospectus of
Information Required by Items of Form SB-2
<TABLE>
<CAPTION>
<S> <C>
Item in Form SB-2 Prospectus Caption
1. Front of Registration
Statement and Outside Front
Cover Page of Prospectus Cover Page and Cover Page of Registration Statement
2. Inside Front and Outside
Back Cover Pages of
Prospectus Continued Cover Page, Table of Contents
3. Summary Information and Prospectus Summary, Risk Factors, Summary
Risk Factors Financial Information
4. Use of Proceeds Use of Proceeds
5. Determination of Offering
Price Not Applicable
6. Dilution Risk Factors
7. Selling Securityholders Principal Securityholders
8. Plan of Distribution Cover Page, Plan of Distribution
9. Legal Proceedings Business
10. Directors, Executive Officers,
Promoters and Certain Control
Persons Management
11. Security Ownership of
Certain Beneficial Owners Principal Securityholders
and Management
12. Description of Securities Description of Securities
-ii-
<PAGE>
13. Interest of Named Experts
and Counsel Legal Opinions, Experts
14. Disclosure of Commission Position Management and Item 24. Indemnification
on Securities Act Liabilities Officers and Directors
15. Organization Within Five Years Prospectus Summary, Business, Principal
Securityholders, Certain Relationships and Related
Transactions, Risk Factors
16. Description of Business Business
17. Management's Discussion Management's Discussion and Analysis of Financial
and Analysis or Plan of Operation Condition and Results of Operations
18. Description of Property Business
19. Certain Relationships and Related
Transactions Certain Relationships and Related Transactions
20. Market for Common Equity Not Applicable
and Related Stockholder
Matters
21. Executive Compensation Management
22. Financial Statements Financial Statements
23. Changes in and Disagreements Not Applicable
with Accountants and Financial
Disclosure
</TABLE>
-iii-
<PAGE>
Preliminary prospectus subject to completion, dated January 30, 1998
Prospectus
U.S. Bridge of N.Y., Inc.
3,494,500 shares of Common Stock
The Company consummated a public offering of 860,000 shares (the
"Shares") of common stock, par value $.001 per share (the "Common Stock"), of
U.S. Bridge of N.Y., Inc. (the "Company") of which 764,500 shares and 494,500
Warrants (includes 64,500 shares and 64,500 Warrants issued upon the exercise of
the over-allotment option) were sold by the Company and 160,000 shares and
3,000,000 Warrants were sold by certain selling securityholder in August 1995.
The shares of Common Stock offered hereby are deliverable by the Company from
time to time upon the exercise of the Warrants.
Each Warrant entitles the holder thereof to purchase one share of
Common Stock at a price of $3.00 until August 8, 2000. On October 22, 1997, the
board of directors of the Company voted to decrease the exercise price of the
Warrants from $6.00 to $3.00. See "Description of Securities - Warrants." The
Warrants are redeemable by the Company at any time upon 30 days' prior notice at
a redemption price of $.05 each, provided that the closing bid quotation of the
Common Stock for at least 20 consecutive trading days ending on the third day
prior to the date on which the Company gives notice has been at least 150% of
the exercise price of the Warrants being redeemed. The Warrants will remain
exercisable during the 30 day notice period.
The Company's securities are quoted on the Nasdaq National Stock Market
("Nasdaq") under the symbols "USBR" and "USBRW", for the Shares and Warrants,
respectively. Quotation on Nasdaq does not imply that a meaningful sustained
market for the Company's Securities has or will develop or if developed, that it
will be sustained for any period of time. In the absence of a listing on Nasdaq,
the Company's Securities will be available for trading in the over-the-counter
market on the OTC Bulletin Board. See "Risk Factors."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK
TO INVESTORS. SEE "RISK FACTORS on Page No. 7."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is January 30, 1998
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 under the Securities Act,
with respect to the shares of Common Stock and Warrants to which this Prospectus
relates. As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the Registration
Statement. For further information with respect to the Company and the
Securities offered hereby, reference is made to the Registration Statement,
including the exhibits thereto, which may be copied and inspected at the Public
Reference Section of the Commission at its principal office at 450 Fifth Street,
N.W., Washington, D.C., 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information which is filed
electronically through the Commission's Edgar system, all of which may be viewed
through accessing the Commission's Web site located at http://www.sec.gov.
The Company's fiscal year end is June 30. The Company is subject to the
informational reporting requirements of the Exchange Act, and in accordance
therewith, files periodic reports, proxy statements and other information with
the Commission. In the event the Company's obligation to file such periodic
reports, proxy statements and other information is suspended, the Company will
voluntarily continue to file such information with the Commission. The Company
will distribute to its stockholders annual reports containing audited financial
statements, together with an opinion by its auditing accountants. In addition,
the Company may, in its discretion, furnish quarterly reports to stockholders
containing unaudited financial information for the first three quarters of each
year.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is intended to set forth certain pertinent facts and
highlights from material contained in the body of this Prospectus. The summary
is qualified in its entirety by the detailed information and financial
statements appearing elsewhere in this Prospectus.
USA Bridge Construction of N.Y., Inc. (the "Company") was incorporated in
the State of New York on September 4, 1990, as Metro Steel Structures, Ltd. The
Company amended its Certificate of Incorporation to effect a change to in its
name to U.S. Bridge of N.Y., Inc. on January 10, 1995. The Company amended its
Certificate of Incorporation to effect a change to in its name to its current
name on January 12, 1998. See "Recent Developments."
The Company 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 New York State and Metropolitan areas.
Though formed to operate as a general contractor, the Company operated initially
only as a subcontractor. The Company=s goals were to become a general contractor
for municipal projects; however, it needed financing to enable it to obtain
bonding, which is required for all municipal projects. To date the Company has
provided steel erection for building, roadway, and bridge repair projects for
general contractors who have been engaged by private and municipal/governmental
customers. As of September 30, 1997, the Company has completed in excess of
eighteen (18) projects with an aggregate project value of $22,768,614 and is
currently engaged in four (4) projects with an aggregate value of approximately
$19,998,040. The Company plans to maintain its subcontractor presence in the
steel industry; however, now that it has obtained general contractor bonding, it
intends to focus on obtaining projects as a general contractor.
In recent years there has been a resurrection in the construction industry
in the New York Metropolitan Area. Major transportation arteries in New York are
under extensive construction programs to increase their ability to handle the
ever increasing volumes of traffic they carry. Work is in progress on the major
thruways, expressways, and parkways across New York State. The Company currently
is preparing subcontracting bids for some of the roadway projects in the
Metropolitan area.
The Company obtains its projects primarily through the process of
competitive bidding. In response to bid requests, the Company submits to the
soliciting entity a proposal detailing its qualifications, the services to be
provided, and the cost of its services. Based on its evaluation of the proposals
submitted, the soliciting entity awards the contract to the bidder it deems
appropriate.
The Company expects to bid on both private and public sector projects
as a general contractor. Most of these projects, both public and private sector,
shall require Bid Bonds and Payment and Performance Bonds. The Company=s ability
to obtain bonding and its bonding capacity are primarily determined by its net
worth, liquid working capital (consisting of cash and accounts receivable), past
performance, management expertise, the number and size of projects under
construction, and various other factors.
3
<PAGE>
In December 1996, the Company obtained a commitment for a Surety Bond Line
of Credit ($10,000,000 single project limit) from United American Guarantee
Company, Ltd. ("UAGC") for its general contracting projects. This commitment
will allow the Company to pursue those general contracting projects in the
public and private sectors which require performance bonds. To date, it has also
allowed the Company to obtain Performance Bonds and Labor and Material Bonds for
the three subcontracting projects which have required same: the Ecklec Co.,
Grand Central Terminal, and Korean Mission projects.
The Company's executive offices are located at 53-09 97th Place, Corona,
New York 11368. The Company's telephone number at its principal office is (718)
699-0100.
4
<PAGE>
The Offering (1)
<TABLE>
<CAPTION>
<S> <C>
Securities Offered: 3,494,500 shares of Common Stock issuable
upon the exercise of the Warrants.
Outstanding prior to Warrant Exercise:
Common Stock ........... 2,302,515
Warrants Y...YYYY.. 3,494,500
After the Exercise of the Warrants:
Common Stock .......... 5,797,015
Use Of Proceeds ......... The net proceeds from the exercise of any Warrants will be used by the
Company for working capital. See "Use of Proceeds."
Terms of the WarrantsYY. Each Warrant entitles the holder thereof to purchase one share of
Common Stock at $3.00 until August 8, 2000. The Warrants are
redeemable by the Company at any time upon 30 days prior notice at a
price of $.05 per Warrant, provided the closing bid quotation of the
Common Stock for at least 20 consecutive trading days ending on the
third day prior to the day on which the Company gives notice has been
at least 150% of the then effective exercise price of the Warrants.
The Warrants will remain exercisable during the 30 day notice period.
Any holder who does not exercise his Warrants prior to their
expiration or redemption, as the case may be, will forfeit his right
to exercise his Warrants.
Risk Factors An investment in the Securities offered hereby is highly speculative.
The statements contained in this Prospectus which are not historical
facts contain forward looking information with respect to plans,
projections or future performances of the Company, the occurrences of
which involve certain risks and uncertainties as detailed herein. See
"Risk Factors."
NASDAQ Symbol(2) Common Stock.............USBR
Warrants.....................USBRW
- ----------------------------------
</TABLE>
(1) Unless otherwise indicated, no effect is given in this Prospectus to
the issuance of (i) 3,494,500 shares of Common Stock reserved for issuance upon
the exercise of the Warrants and (ii) 1,000,000 shares of Common Stock reserved
for issuance under the Company's 1996 Senior Management Incentive Plan, except
for 125,000 shares which have been issued. See "Management - Senior Management
Incentive Plan."
(2) The Company securities are listed on the Nasdaq National Stock Market
("Nasdaq"). Quotation on Nasdaq does not imply that a meaningful, sustained
market for the shares of Common Stock or Warrants has or will develop. In
addition, continued inclusion in Nasdaq is subject to certain maintenance
criteria. The failure to meet these maintenance criteria in the future may
result in the discontinuance of the listing of the Company's shares and Warrants
on Nasdaq, which may have an adverse effect on the market for the Company's
Securities. See "Risk Factors."
5
<PAGE>
Summary Financial Data:
Set forth below is the historical summary financial information with
respect to the Company for the years ended June 30, 1997 and 1996 and for the
three months ended September 30, 1997 and 1996. The annual financial data for
the Company has been derived from audited financial statements by Scarano &
Tomaro, P.C., Certified Public Accountants. The selected historical financial
data presented below at September 30, 1997 and 1996 are unaudited. In the
opinion of management, the unaudited financial statements include all
adjustments, consisting of normal recurring adjustments and accruals, necessary
for a fair presentation of the financial position and results of operations of
the Company for these periods. The summary historical financial data presented
below should be read in conjunction with the audited financial statements of the
Company and related notes thereto included elsewhere in this Prospectus.
Summary of Operations Data:
<TABLE>
<CAPTION>
=========================================================================================================================
=========================================================================================================================
Three Months Three Months
Ended Year Ended Ended Year Ended
<S> <C> <C> <C> <C> <C> <C> <C> <C>
09/30/97 06/30/97 09/30/96 06/30/96
- -------------------------------------------------------------------------------------------------------------------------
Revenues $8,918,385 $15,455,699 $3,147,941 $7,091,396
- -------------------------------------------------------------------------------------------------------------------------
Net Income (loss) $562,511 $602,465 $406,122 ($824,373)
- -------------------------------------------------------------------------------------------------------------------------
Net Income (loss) per share (1)
$.24 $.30 $.21 ($.46)
=========================================================================================================================
Summary Balance Sheets Data:
=============================================================================================================
June 30 September 30 September 30
- -------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
Working Capital $5,645,087 $4,671,526 $6,205,300 $5,021,855
- -------------------------------------------------------------------------------------------------------------
Total Assets $12,278,818 $6,223,115 $14,507,409 $7,365,943
- -------------------------------------------------------------------------------------------------------------
Total Liabilities $6,612,286 $1,532,798 $8,278,366 $2,269,504
- -------------------------------------------------------------------------------------------------------------
Stockholders' Equity $5,666,532 $4,690,317 $6,229,043 $5,096,439
=============================================================================================================
</TABLE>
(1) Weighted average number of shares outstanding at September 30, 1997;
September 30, 1996; June 30, 1997; and June 30, 1996 are 2,302,515; 1,907,515;
1,961,265; and 1,807,354; respectively.
6
<PAGE>
RISK FACTORS
The Securities offered hereby are speculative and involve a high degree
of risk. The purchase of Securities should not be considered by anyone who
cannot afford the risk of loss of his entire investment. The statements
contained in this Prospectus which are not historical facts contain forward
looking information with respect to plans, projections or future performances of
the Company, the occurrences of which involve certain risks and uncertainties as
detailed herein.
1. Unanticipated Costs, Expenses and Difficulties in Commencing
Projects as a General Contractor. The Company has started to expand its business
operations to include operating as a general contractor. The Company has not
commenced construction on any public or private sector projects as a general
contractor. It has, however, commenced two projects as prime contractor.
Although the Company and Mr. Polito have experience as a subcontractor and in
the erection and fabrication of steel structures, neither has experience as a
general contractor. Further, as a general contractor, the Company will be
responsible for all aspects of a project and will be required to hire and
oversee the work of subcontractors. There can be no assurances that the Company
will be able to successfully implement its business plan or that unanticipated
expenses, problems or difficulties will not result in material delays in its
implementation or ability for the Company to implement such plan.
In addition to the unanticipated costs or problems that may be incurred
as a general contractor, many contracts are also subject to completion
requirements with liquidated damages assessed against the Company if schedules
are not met. The Company has not been materially adversely affected by these
provisions in the past as a subcontractor.
2. Dependence on Bonding. As a general contractor, and to some extent
as a subcontractor, the Company anticipates being required to provide bonding,
in the form of bid and/or performance bonds. Bids are submitted to the company
accepting the bids together with bid bonds. A Bid bond guarantees that the
company submitting the bid will be able to submit all proper documentation in
order to accept the project, in addition, it guarantees that a performance bond
shall be issued upon acceptance of the bid, if same is required. Most government
contracts require bonding.
3. Inability to Obtain New York State Projects as a General Contractor.
New York State agencies require bonds from bonding companies it has approved.
The Company has received bonding from a company which is not approved for state
and city projects. Therefore, the Company is unable to bid as a general
contractor on projects for New York state and city agencies. The Company has
approached several New York approved bonding companies, but as of the date
hereof has not been approved by any company to receive bonding.
In order to obtain bonding, in addition to credit checks and other due
diligence disclosure requirements bonding companies require the company
receiving bonding to have certain amounts of capital and liquid assets, and will
base the amount of bonding it will issue based on a formula, devised by each
individual bonding company, which primarily takes into account the Company's
capital and liquid assets.
There can be no assurance that it will be able to obtain bonding from a New
York licensed bonding company. 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. Therefore, there can
be no assurances that the Company will be able to implement its proposed
business plan to obtain projects as a general contractor. See "Business - The
Company," "-- The Contract Process" and "-- Insurance and Bonding."
7
<PAGE>
4. Unit Bid Verse Lump-Sum Bid. In bidding on contracts there are two types
of bid requests, at the option of the client requesting the bids, a unit cost
bid and a lump-sum bid. The unit cost bid is based upon a cost per unit basis,
where a lump sum bid obligates the Company to provide materials or services at
fixed prices. In a lump-sum bid the risk of estimating the quantity of units
required for a particular project is on the Company while in a unit cost bid the
Company must estimate the per unit cost, not the number of units needed. Any
increase in the Company's unit cost over its unit bid price or actual cost over
its lump-sum bid, whether due to inefficiency, faulty estimates, weather,
inflation or other factors, must be borne by the Company and may adversely
affect its results of operations. See "Business - The Contract Process."
5. Amount and Concentration of Construction Projects. For the year ended
June 30, 1997 the Company had 3 unrelated customers, which accounted for
approximately 86% of total revenues. For the three months ended September 30,
1997 the Company had 2 unrelated customers, which accounted for approximately
99% of total revenues. At June 30, 1997 and September 30, 1997, approximately
83% and 79% of contracts receivables are due from four and three customers,
respectively, of total accounts receivable. The discontinuance of any of these
projects, or a general economic downturn in the State of New York, in which the
projects are located, could have a material adverse affect on the Company's
results of operations.
6. Competition. All aspects of the Company's business are and will continue
to be highly competitive. The Company is one of many subcontractors which erect
and furnish steel for projects, many of whom have substantially greater sales,
personnel and financial resources than the Company. General contractors seeking
construction contracts, request bids from several subcontractors as to the
different areas of work to be performed on the project. These subcontractors
compete primarily as to price, name recognition and prior performance record.
As a general contractor, the Company will be competing with many larger,
established and more experienced general contractors, who have name recognition
and relationships with the federal and state municipalities and agencies as well
as private companies which request bids on the projects the Company intends to
bid on, including bridge and roadway repair and replacement as well as the
furnishment and erection of steel structure for buildings. The Company's
competitors are numerous and many have substantially greater research and
development, marketing, financial and human resources than the Company. There
can be no assurance that the Company will be able to compete successfully. See
"Business - Competition."
7. Dependence of Suppliers; Subcontractors; Union Employees. The Company
receives approximately 60% of the steel it requires from Hirschfeld Steel Co.,
Inc. The Company currently depends upon various vendors to supply spare parts,
cranes and other heavy equipment and its ability to hire skilled workers depends
upon its ability to comply with certain union agreements and contracts. The
Company does not depend on any one vendor to provide it with spare parts, cranes
and other heavy equipment. The Company does rent an immaterial amount of cranes
from Crowne Crane, Inc., a company of which Joseph Polito is a 50% shareholder
and does rent an immaterial amount of generators and other equipment from Atlas
Gem Leasing Inc., a company which is wholly owned by Joseph Polito. The Company
believes that there are a sufficient number of vendors, so that in the event any
individual or group of vendors can no longer service the Company's needs, the
Company will be able to find other vendors at competitive prices. The Company
does hire skilled steel workers represented by the International Union of
Structural Ironworkers, Local 40, operating engineers locals 14, 14B, 15, 15A,
15C and 15D and cement masons local 780 (collectively referred to as the
"Unions") and must comply with agreements between the Company and the Unions,
which agreements regulate all employment issues between the Company and the
Union employees including pay, overtime, working conditions, vacations,
benefits, etc., and which agreements expire on June 30, 1999. No assurance can
be given that the Company will continue to be in compliance with the Unions or
successfully negotiate extensions to the Company's agreements with such Unions.
In the event problems or conflicts with the Unions arise or there is a loss of
skilled steel and operating engineers, this would have a detrimental effect on
the Company's operations.
<PAGE>
The Company's success as a general contractor, in part, will be dependent,
upon its ability to hire workers and comply with union contracts and agreements,
oversee and retain qualified subcontractors to perform certain work for projects
the Company receives as general contractor. Although the Company believes that
it will be able to attract subcontractors to bid on projects it bids as general
contractor, there can be no assurances. The Company will be responsible for
performance of the entire contract, including the work done by subcontractors.
Accordingly, the Company 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 of which the Company is
currently not aware of. See "Business - Suppliers and Subcontractors" and "--
The Contract Process."
8. Government Regulation: Potential Liability for Environmental Damages and
Personal Injuries. The Company must comply with the Occupational Safety and
Health Administration ("OSHA"), a federal agency which regulates and enforces
the safety rules and standards for the construction industry. In addition, the
Company must also comply with a wide range of other state and local rules and
regulations applicable to its business, including regulations covering labor
relations, safety standards, affirmative action and the protection of the
environment including requirements in connection with water discharge, air
emissions and hazardous and toxic substance discharge. Continued compliance with
OSHA and the broad federal, state and local regulatory network is essential and
costly and the failure to comply with such regulations may have an adverse
effect on the Company's operations.
The construction industry is subject to significant risks of statutory,
contractual and common law liability for environmental damages and personal
injury. The Company, and in certain instances, its officers, directors and
employees, may be liable for claims arising from its on-site or off-site
services, including mishandling of hazardous or non-hazardous waste materials,
or environmental contamination caused by the Company or its subcontractors, the
costs for which could be substantial, even if the Company exercises due care and
complied with all relevant laws and regulations. The Company is also subject to
worker and third party claims for personal injury, resulting in substantial
liability for which it may be uninsured. The Company carries insurance which it
considers sufficient to meet regulatory and customer requirements and to protect
the Company's assets and operations. Nevertheless, an uninsured claim against
the Company could have a material adverse effect on the Company's financial
condition and results of operations. Moreover, any inability to obtain insurance
of the type and in the amounts required in connection with specific projects
could impair the Company's ability to bid or complete such projects. See
"Business - Government Regulations" and " --Litigation."
9. Tax Lien. As of December 5, 1997 the Company owes the Internal Revenue
Service, New York State and New York City withholding taxes of approximately
$976,000. If such amounts are not paid by the Company, the state and city
agencies can levy on the accounts, assets and future earnings of the Company.
The Internal Revenue Service has placed a tax lien on the Company's assets until
all such taxes are paid. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and Capital Resources for Plan of
Payment."
10. Seasonality; Weather Conditions. Though the Company does not believe
its business is seasonal, its operations slow during the winter months due to
the decreased productivity of the workers caused by the inability to work in
severe weather conditions. As a result of the foregoing, the Company's costs are
increased.
11. Control by Management, U.S. Bridge Corp. and Joseph Polito. Joseph.
Polito, president, a director owns approximately 61% of the common stock of the
Company's parent, U.S. Bridge Corp. ("Corp."). Accordingly, Mr. Polito through
his ownership of Corp. will continue to be able to elect the entire board of
directors of the Company and to direct the affairs of the Company. The investors
in this Offering will not be able to elect any of the directors.
<PAGE>
A Special Warrant was issued to Corp. under which Corp. may purchase shares
of the Company's Common Stock at a purchase price of $2.50 per share, in the
event that Corp.'s ownership of the Company's Common Stock falls below 50%, due
to the exercise of the Warrants. The Special Warrant with respect to the
exercise of Warrants is only exercisable to such extent that the number of
shares of Common Stock acquired upon its exercise shall increase Corp.'s
ownership of the Company's Common Stock to no more than 50.1% of the issued and
outstanding shares of Common Stock at the date of exercise. In addition, the
Company shall issue to Corp. one share of its Series A Preferred Stock for every
ten shares of Common Stock issued pursuant to the exercise of the Warrants. Each
share of Series A Preferred Stock shall have the right to ten votes on all
matters submitted to a vote of the shareholders. See "Description of Securities
- - Series A Preferred Stock" and "-- Special Warrant."
12. Conflicts of Interest. Joseph Polito is an officer, director and
principal shareholder of various companies in addition to the Company.
On June 16, 1995, the board of directors formed an audit committee, which
committee comprises the Company's two outside directors and one inside director,
Ronald Polito. The audit committee reviews the Company's audited financial
statements and any potential conflicts of interest between any of the Company's
officers, directors, employees, affiliates or associates. In addition to the
audit committee reviewing and resolving any conflicts of interest, the officers
and directors of the Company have a fiduciary obligation to deal fairly and in
good faith with the Company. Inasmuch as the Company leases equipment from
Crowne Crane, Inc. or Atlas Gem Leasing, Inc., the Company checks prices in the
industry prior to engaging in any such transactions and will transact business
with such companies only on terms which may be considered similar. The audit
committee intends to exercise reasonable judgment and take such steps as they
deem necessary under all of the circumstances in resolving any specific conflict
of interest which may occur and will determine what, if any, specific measures,
such as retention of an independent advisor, independent counsel or special
committee, may be necessary or appropriate. There can be no assurance that the
Company will employ any of such measures or that conflicts of interest will be
resolved in the best interest of the shareholders of the Company. The fact that
Joseph Polito is an officer, director and principal shareholder in other
companies including those that transact business with the Company, opens the
potential that there may be conflicts of interest in decisions made by Mr.
Polito, which may compromise his fiduciary duty to the Company. Any remedy under
state law, in the event such circumstances arise, would most likely by
prohibitively expensive and time consuming. Mr. Polito estimates he devotes 80%
of his business time to the operations of the Company and a combined 20% to all
the other companies he owns and operates. See "Management," "Certain
Relationships and Related Transactions," "Business-History" and "Description of
Securities."
13. Dependence on Management. The Company is dependent upon the personal
efforts and abilities of Joseph Polito, the Company's president and the majority
shareholder of Corp., of which the Company is a majority owned subsidiary. Mr.
Polito has entered into a three year employment agreement expiring April 1998,
with the Company and he is restricted from competing with the Company pursuant
to provisions in the employment agreement. Mr. Polito has agreed to devote 80%
of his time to the business of the Company. The loss of the services of Mr.
Polito would adversely affect the business of the Company. Neither the Company
nor Corp. have any key-man insurance on the life of Mr. Polito or any other
officer or director. See "Management - Employment Agreements."
14. Indemnification of Officers and Directors. As permitted under the New
York General Corporation Law, the Company's Certificate of Incorporation
provides for the indemnification and elimination of the personal liability of
the directors to the Company or any of its shareholders for damages for breaches
of their fiduciary duty as directors. As a result of the inclusion of such
provision, shareholders may be unable to recover damages against directors for
actions taken by them which constitute negligence or gross negligence or that
are in violation of their fiduciary duties. The inclusion of this provision in
the Company's Certificate of Incorporation may reduce the likelihood of
derivative litigation against directors and other types of shareholder
litigation. See "Business-Recent Developments" and "Management."
<PAGE>
15. Limited Public Market for Securities. At present there is a limited
public market for the Company's Securities, which are traded on the Nasdaq
National Market under the symbol "USBR". There is no assurance that a continued
regular trading market will develop, or if one does develop, that it will be
sustained for any period of time. Therefore, purchasers of the Company=s
securities may be unable to resell such securities at or near their original
offering price or at any price. Furthermore, it is unlikely that a lending
institution will accept the Company's securities as pledged collateral for loans
even if a regular trading market develops. The underwriter of the Company's
public offering, was a dominant influence in the market for the Company's
securities until August 1996. In August 1996, the underwriter ceased operations.
The market for the Company's securities have been significantly affected and may
continue to be affected by the loss of this market maker's participation in the
market, including decreasing significantly the liquidity of an investment in
such securities.
16. No Dividends and None Anticipated. The Company has not paid any
dividends nor, because of its present financial status and its contemplated
financial requirements, does it contemplate or anticipate paying any dividends
upon its Common Stock in the foreseeable future. See "Dividend Policy."
17. Increase Public Float Through Shares Available for Resale. A total of
2,302,515 shares of Common Stock have been issued by the Company of which
1,225,665 shares may be deemed "restricted securities" (as such term is defined
in Rule 144 issued under the Act) and, in the future, may be publicly sold only
if registered under the Act or pursuant to an exemption from registration. Any
such sales under Rule 144 would, in all likelihood, have a depressive effect on
the market price for the Company's Common Stock and Warrants. See "Shares
Eligible for Future Sale."
18. Possible Future Dilution. The Company has authorized capital stock of
10,000,000 shares of Common Stock, par value $.001 per share. Inasmuch as the
Company may use authorized but unissued shares of Common Stock without
stockholder approval in order to acquire businesses, to obtain additional
financing or for other corporate purposes, there may be further dilution of the
stockholders' interests.
19. Restrictions on Exercise of Warrants; Necessity for Updating
Registration Statement. The Warrants are not exercisable unless, at the time of
the exercise, the Company has a current prospectus covering the shares of Common
Stock issuable upon exercise of the Warrants and such shares have been
registered, qualified or deemed to be exempt under the securities laws of the
state of residence of the exercising holder of the Warrants. The Company is
filing this post-effective amendment and must have same declared effective
before the Warrants may be exercised. The Company has undertaken to use its best
efforts to have all of the shares of Common Stock issuable upon exercise of the
Warrants registered or qualified on or before the exercise date and to maintain
a current prospectus relating thereto until the expiration of the Warrants;
however, there is no assurance that it will be able to do so. The Company will
notify all Warrantholders and its transfer agent that the Warrants may not be
exercised in the event there is no current prospectus.
Although the Warrants will not knowingly be sold to purchasers in
jurisdictions in which the Warrants are not registered or otherwise qualified
for sale, purchasers may buy Warrants in the after-market or may move to
jurisdictions in which the shares underlying the Warrants are not so registered
or qualified during the period that the Warrants are exercisable. In this event,
the Company would be unable to issue shares to those persons desiring to
exercise their Warrants unless and until the shares could be qualified for sale
in the jurisdictions in which such purchasers reside, or an exemption from such
qualification exists in such jurisdictions, and Warrantholders would have no
choice but to attempt to sell the Warrants in a jurisdiction where such sale is
permissible or allow them to expire unexercised. See "Description of Securities
- - Warrants."
<PAGE>
20. Possible delisting of Securities from NASDAQ System; Risks of Low
Priced Stocks. In August 1997 Nasdaq increased its maintenance whereby in order
to continue to be listed on Nasdaq, the Company is required to maintain (i) net
tangible assets of at least $4,000,000, (ii) a minimum bid price of $1.00, (iii)
two market makers, (v) 400 stockholders, (vi) at least 750,000 shares in the
public float and (vii) a minimum market value for the public float of
$5,000,000. In the event the Company's Securities are delisted from Nasdaq,
trading, if any, in the Securities would thereafter be conducted on either the
Nasdaq SmallCap Stock Market or in over-the-counter market on the OTC Bulletin
Board. Consequently, an investor may find it more difficult to dispose of, or to
obtain accurate quotations as to the price of the Company's Securities.
Quotation on Nasdaq does not imply that a meaningful, sustained market for the
Company's Securities will develop or if developed, that it will be sustained for
any period of time.
21. Penny Stock Regulation. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on Nasdaq provided
that current price and volume information with respect to transactions in such
securities is provided by the exchange or system). The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in connection with the transaction, and monthly account statements
showing the market value of each penny stock held in the customer's account. In
addition, the penny stock rules generally require that prior to a transaction in
a penny stock, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for a stock that becomes subject to the penny stock rules. If the
Company's securities become subject to the penny stock rules, investors in this
Offering may find it more difficult to sell their securities.
22. Potential Adverse Effect of Redemption of Warrants. The Warrants may be
redeemed by the Company at any time during the period they are exercisable upon
notice of not less than 30 days, at a price of $.05 per Warrant, provided the
closing bid quotation of the Common Stock for at least 20 consecutive trading
days ending on the third day prior to the day on which the Company gives notice
has been at least 150% of the then effective exercise price of the Warrants.
Redemption of the Warrants could cause the holders to exercise the Warrants and
pay the exercise price at a time when it may be disadvantageous for the holders
to do so, to sell the Warrants at the then current market price when they might
otherwise wish to continue to hold the Warrants, or to accept the redemption
price, which is likely to be substantially less than the market value of the
Warrants at the time of redemption. The Company will not redeem the Warrants at
any time in which its registration statement is not current, so that investors
will be able to exercise their Warrants during the 30-day notice period in the
event of a Warrant redemption by the Company. See "Description of Securities -
Warrants."
<PAGE>
DIVIDEND POLICY
The Company has not paid cash dividends and intends to retain earnings,
if any, in the foreseeable future for use in its activities. Payment of cash
dividends on the Company's Common Stock in the future will be wholly dependent
upon the Company's earnings, financial condition, capital requirements and other
factors deemed relevant by the Board of Directors. It is not likely that cash
dividends will be paid on the Company's Common Stock in the foreseeable future.
USE OF PROCEEDS
The maximum net proceeds to be received if all the Warrants are
exercised is $10,483,500. However, there can be no assurances that any or any
portion of the Warrants will be exercised and due to the current bid price of
the Common Stock the Company does not expect any of the Warrants to be exercised
at this time.
9
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information.
The Company's Common Stock and Warrants are currently quoted on the Nasdaq
National Stock Market. The following table sets forth representative high and
low sale price quotes as reported by a market maker, during the period from
August 9, 1995 through September 30, 1997. Price quotations reflect prices
between dealers, do not include resale mark-ups, mark-downs or other fees or
commissions.
<TABLE>
<CAPTION>
Common Stock Warrants
Calendar Period Low High Low High
1995
<S> <C> <C> <C> <C>
08/09/95 - 09/30/95 6 7/8 9 3/8 2 7/8 4
10/01/95 - 12/31/95 7 1/4 10 3/8 3 1/2 5 7/8
1996
01/01/96 - 03/31/96 9 3/4 10 1/2 5 1/4 6 1/2
04/01/96 - 06/30/96 9 1/2 10 7/8 5 1/4 6 5/8
07/01/96 - 09/30/96 1 10 3/4 3/16 6
10/01/96 - 12/31/96 1 1/8 2 1/16 3/32 13/32
1997
01/01/97 - 03/31/97 1 3/8 2 3/4 5/32 5/8
04/01/97 - 06/30/97 1 9/16 2 5/8 9/32 17/32
07/01/97 - 09/30/97 2 3/16 2 23/32 1/4 15/32
- -----------------------
</TABLE>
Each Warrant entitles the holders thereof to purchase one share of the
Company's Common Stock at an exercise price of $3.00 per share, respectively,
until August 8, 2000. The Warrants and the underlying shares of Common Stock are
in registered form, pursuant to the terms of a Warrant agreement between the
Company and North American Transfer Co., as warrant agent, so that the holders
of the Warrants will receive upon their exercise and payment therefor,
unrestricted shares of Common Stock.
As of September 30, 1997, there were approximately 20 holders of record of
the Company's Common Stock, although the Company believes that there are
approximately 1200 additional beneficial owners of shares of Common Stock held
in street name. As of September 30, 1997, the number of shares of Common Stock
outstanding of the Company was 2,302,515.
The Company has paid no dividends and has no present plan to pay dividends.
Payment of future dividends will be determined from time to time by its board of
directors, based upon its future earnings (if any), financial condition, capital
requirements and other factors. The Company is not presently subject to any
contractual or similar restriction on its present or future ability to pay such
dividends.
10
<PAGE>
BUSINESS
History
The Company was incorporated in the State of New York, on September 4,
1990, as Metro Steel Structures, Ltd. The Company amended its Certificate of
Incorporation to effect a change in its name to its current name on January 31,
1995. Additionally, the Company amended its authorized capital (i) to increase
the number of authorized shares of Common Stock from 200 to 10,000,000; (ii) to
increase the par value of the Common Stock from no par value to $.001 par value
per share; (iii) to authorize 500,000 shares of Preferred Stock, par value $.01
per share ( "the Preferred Stock"); and (iv) to designate 400,000 shares of the
Company=s Preferred Stock as "Series A Preferred Stock." Also as of such date,
the Company effected a 29,687.50 for one forward split of its Common Stock,
pursuant to which there became 950,000 shares of Common Stock outstanding.
Pursuant to an agreement and plan of merger by and between the Company and
Corp. effective as of April 25, 1994, Corp. issued an aggregate of 3,540,000
shares of its common stock to the stockholders of the Company and One Carnegie
Court Associates, Inc. ("One Carnegie") - 2,820,000 to the stockholders of the
Company and 720,000 to the stockholders of One Carnegie - in exchange for all of
said stockholders= issued and outstanding shares. Joseph Polito, the principal
stockholder of the Company and the sole stockholder of One Carnegie, received,
in exchange for his shares of the Company=s Common Stock and One Carnegie=s
common stock, 2,380,000 and 720,000 shares, respectively, of Corp.=s common
stock. The "Acquisitions" were accounted for as a "recapitalization" of Corp.
Accordingly, both the Company and One Carnegie became wholly owned subsidiaries
of Corp., of which company Joseph Polito became an 80% shareholder, which
decreased to 75.4% upon the completion of the Company=s initial public offering
in August 1995.
Immediately prior to the acquisition of the Company by Corp., the Company
completed a private placement offering of its Common Stock, whereby the Company
sold an aggregate of 148,200 shares (post stock split) of its Common Stock. The
Company received net proceeds of $502,594 after the deduction of offering
expenses of $47,406.
Pursuant to the terms of the acquisition, each subscriber in the private
placement exchanged each Company share held prior to the acquisition for 20,000
post reverse split shares of Corp.=s common stock. Corp. agreed to register the
shares purchased in the private placement in a Registration Statement under the
Securities Act of 1933, as amended (the "Act"), one time only, upon demand by
any of the investors in the private placement, after June 30, 1995.
The Company 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 New York State and in the New York City
metropolitan area. Previously, through other entities, Joseph Polito furnished
and provided steel erection as a subcontractor for private and governmental
construction projects. Since its commencement of operations in June 1993, the
Company has provided steel erection for building, roadway, and bridge repair
projects for general contractors who have been engaged by private and
municipal/governmental customers. As of September 30, 1997, the Company has
completed in excess of eighteen (18) projects, with an aggregate project value
of $22,768,614, and is currently engaged in four (4) projects with an aggregate
value of approximately $19,998,040. The Company plans to maintain its
subcontractor presence in the steel industry; however, now that it has obtained
general contractor bonding, it intends to focus on obtaining projects as a
general contractor.
Though formed to operate as a general contractor, the Company operated
initially only as a subcontractor. The Company=s goals were to become a general
contractor for municipal projects; however, it needed financing to enable it to
obtain bonding, which is required for all municipal projects.
On June 15, 1993, the Company purchased, from Atlas Gem Erectors Co., Inc.
("Atlas Gem"), six then existing contracts to perform steel erection services
for the following projects: Stillwell Avenue, 39th Street Bridge Rehabilitation,
Honeywell Street Bridge, New England Thruway, Lemon Creek, and Kosciuszko
Bridge. Upon its sale of these contracts to the Company and its completion of
its final project in September 1994, Atlas Gem ceased operations. The Company
purchased Atlas Gem=s contracts to add to its then backlog in order to avoid a
conflict of interest, as the two entities - which were controlled by Joseph
Polito as officer, director, and principal stockholder - were engaging in
similar, but different work.
<PAGE>
Recent Developments
In June 1996, the Company entered a prime contracting agreement with
EklecCo, the owner of the Palisades Power Mall located in West Nyack, New York,
to perform structural steel erection services. The estimated aggregate value of
the contract is $10,373,552. The mall is estimated to be approximately 3,900,000
square feet upon completion. The project is to be performed in two phases. The
Company commenced work on Phase I in June 1996. As of September 30, 1997, the
project is 79% complete.
In July 1996, the Company entered into a prime contracting agreement with
Tishman Construction Corporation of New York (construction manager) to perform
steel erection services on the Louis Vuitton Office Tower owned by Starre Realty
and located on East 57th Street in New York, New York. Commencement of the
project was delayed due to conflict not involving the Company, which conflict
has since been resolved. The Company expects to recommence work on this project
by the end of calendar 1997. In or about December 1996, the Company obtained
confirmation of United Casualty and Surety Insurance Company=s willingness to
issue a performance bond for the Company as general contractor of this project;
however, the construction manager subsequently waived its bond requirement. As
of September 30, 1997, the project is 67% complete.
In October 1996, the Company entered into a subcontracting agreement with
Hannibal Construction Co., Inc. (general contractor) to provide certain
structural steel work for rehabilitation of the Hellgate Viaduct Structures,
located in Philadelphia, Pennsylvania, owned by the National Railroad Passenger
Corporation (AMTRAK). Work on the project has been completed.
In November 1996, the Company entered into a subcontracting agreement with
N.Y. Iron (general contractor) to provide structural steel work for the
Indonesian Mission owned by the United Nations. Work on the contract has been
completed.
In January 1997, the Company entered into a subcontracting agreement with
Humphreys & Harding, Inc. to perform certain structural steel erection work for
the Permanent Mission to the Republic of Korea, located in New York, New York.
The contract price is $1,500,000. As of September 30, 1997, work on the project
is 16% complete.
As of May 1997, the Company was in arrears in the amount of $480,000 in
payments due under its lease with R.S.J.J. Realty Corp. ("RSJJ"). This arrearage
was converted into equity as follows: on June 19, 1997, the Company issued
270,000 shares of common stock to Corp., for the cancellation of the debt owed
to RSJJ. Corp., in turn, issued 200,000 shares of its Common Stock to Joseph
Polito and 150,000 shares of its Common Stock to RSJJ. RSJJ then transferred all
of such shares to RSJJ=s mortgagor, which agreed to accept said shares as
payment of RSJJ's outstanding mortgage. See "Item 12. Certain Relationships and
Related Transactions."
In October 1997, the Company=s Board of Directors adopted a resolution
decreasing the exercise price of the Company's outstanding public warrants from
$6.00 to $3.00. No other terms of the warrants were amended. In addition, the
Board authorized the Company to prepare and file a post-effective amendment to
its registration statement to update the information therein enabling the
warrants to become exercisable.
On January 7, 1998, the Company held its annual shareholders meeting. At
the meeting, the five existing members of the Board of Directors were
re-elected. The shareholders also approved a proposal to change the name of the
Company to USA Bridge Construction of N.Y., Inc., pursuant to a settlement
agreement with The Ohio Bridge Corporation ("Ohio") regarding the use of the
"U.S. Bridge" name trademarked by Ohio. The Company Amended its Certificate of
Incorporation to reflect the name change on January 12, 1998. Additionally, a
vote on the proposal to change the domicile of the Company to the State of
Delaware was adjourned until February 3, 1998.
11
<PAGE>
The Company
The following table lists, as of June 30, 1997, (i) all companies in
which Joseph Polito is either an Officer, Director, or principal shareholder;
and (ii) the activities engaged in by such companies with the Company or any of
its subsidiaries:
<TABLE>
<CAPTION>
Year J. Polito's Activities with the Place of
Company Name(1) of Inc. Title Ownership(%) Company and NY Business
<S> <C> <C> <C> <C> <C>
U.S. Bridge Corp.(2) 1988 Pres./Director 61% Parent Company Queens, NY
One Carnegie Court 1990 Pres./Director 0% Subsidiary of Corp. Waldorf, MD
Associates, Inc. (3)(5)(6)
R.S.J.J. Realty Corp.(4) 1983 Pres./Director 100% Leases the offices and Queens, NY
storage space to the
Company
Crown Crane, Inc.(4) 1988 -- 50% Supplies cranes to the Brooklyn, NY
Company for use in the
erection of steel
Atlas Gem Leasing, 1986 Pres./Director 100% Supplies welding Queens, NY
Inc. (4) machines and compressors
to the Company
Atlas Gem Erectors 1986 Pres./Director 100% Sold certain construction No office
Co., Inc. (4)(7) contracts to the Company;
ceased operations 9/94
Gem Steel Erectors 1966 Pres./Director 100% No business relationship; No office
Inc.(4)(8) ceased operations 3/91
Waldorf Steel 1990 Pres./Director 100% Provided steel to the No office
Fabricators, Inc.(3)(5) Company; ceased
operations in 8/95
U.S. Bridge Corp. 1994 Pres./Director 0% Subsidiary of Corp.; No office
(Maryland) (2)(9) ceased operations in 11/96
U.S. Bridge of N.Y., 1990 Pres./Director 56.3% Provides steel erection Queens, NY
Inc.(4)(10) buildings, roadway, and
bridge repair projects
</TABLE>
(1) Except as disclosed hereunder, no company listed is beneficially owned
by another entity; nor does any company have any subsidiaries. No company listed
has conducted any business operations under any name except for its corporate
name, except for Corp. See "-History." -----
(2) Incorporated in the State of Delaware.
(3) Incorporated in the State of Maryland.
(4) Incorporated in the State of New York.
(5) One Carnegie owned the property, building, and equipment which it
leased to Waldorf Steel Fabricators, Inc. ("Waldorf") prior to August 1, 1995,
as of which date it began leasing to U.S. Bridge Corp. (Maryland) ("MD") until
MD ceased operations in November 1996.
12
<PAGE>
(footnotes from previous page)
(6) Formed in December 1990, One Carnegie is a wholly-owned subsidiary of
Corp. Joseph Polito, through his ownership of approximately 61% of the
outstanding shares of Corp. may be deemed the beneficial owner of the shares of
One Carnegie owned by Corp.
(7) Ceased operations in September 1994.
(8) Ceased operations in March 1991.
(9) MD was incorporated in the state of Delaware on September 21, 1994 and
is a wholly-owned subsidiary of Corp. It was formed to provide labor for the
fabrication of steel by Waldorf, which it provided until August 1, 1995, when
Waldorf ceased operations.
(10) Joseph Polito, through his ownership of approximately 61% of the
outstanding shares of the Corp., may be deemed the beneficial owner of the
shares of the Company owned by Corp.
Schedule of Completed Contracts
<TABLE>
<CAPTION>
Project Name Contract Amount Contract Date Type of Contract
- ------------ --------------- ------------- ----------------
<S> <C> <C> <C>
Van Wyck $ 195,500 April 1992 Lump-Sum
39th Street Bridge 2,538,252 June 1993 Lump-Sum
39th Street (Demolition) 679,046 February 1993 Lump-Sum
New England Thruway 2,409,058 June 1993 Lump-Sum
Honeywell 1,100,000 June 1993 Joint Venture (1)
Kosciuszko Bridge 3,034,281 June 1993 Lump-Sum
Stillwell Avenue Bridge 8,084,655 June 1993 Lump-Sum
Cross Bronx Expressway 60,176 March 1994 Lump-Sum
Robert Moses Causeway 540,118 December 1994 Lump-Sum
4th Avenue Bridge 387,965 March 1995 Lump-Sum
201 East 80th Street 1,692,797 May 1995 Lump-Sum
Centereach 186,500 June 1995 Lump-Sum
Pro-Camera 50,275 August 1995 Lump-Sum
UDC 82,400 August 1995 Lump-Sum
Williamsburg Houses (2) 708,450 April 1996 Lump-Sum
South Avenue Plaza 274,045 May 1996 Lump-Sum
Hellgate Viaduct Structures 208,750 Oct. 1996 Lump-Sum
Indonesian Mission 348,000 Nov. 1996 Lump-Sum
Others(3) 188,346 N/A N/A
Total 22,768,614
</TABLE>
(1) Joint venture with John P. Picone, Inc. ("Picone"), whereby the Company
entered into a consulting agreement with Picone, who was awarded the project.
The agreement provided that for 50% of the profits of the project, the Company
would provide Picone with its expertise in steel erection, supply qualified
workers, and oversee the rehabilitation of the bridge. Picone put the Company's
employees on its payroll and incurred all the expenses of the project.
(2) This project, which bore an original contract price of $2,517,651, was
on hold for a considerable period of time pending a dispute not involving the
Company. The Company believes that it will not return to this project and thus
deems the project complete.
(3) Total estimated project value of a collection of smaller projects
completed.
<PAGE>
Inasmuch as the Company purchased steel from Waldorf or leases equipment
from Crown Crane, Ltd. or Atlas Gem Leasing, Inc., the Company shall check
prices in the industry prior to engaging in any such transactions and will
transact business with such companies only on terms which may be considered
similar. The audit committee of the Board of Directors intends to exercise
reasonable judgment and take such steps as it deems necessary under all of the
circumstances to resolve any specific conflict of interest which may occur and
will determine what, if any, specific measures, such as retention of an
independent advisor, independent counsel, or special committee, may be necessary
appropriate. The fact that Joseph Polito is an officer, director, and principal
shareholder in other companies, including those that transact business with the
Company, opens the potential that there may be conflicts of interest in
decisions made by Joseph Polito, which may compromise his fiduciary duty to the
Company. Any remedy under state law, in the event such circumstances arise, most
likely would be prohibitively expensive and time consuming. See "Item 1.
Description of Business-Suppliers and Subcontractors."
Industry Overview
1997 has brought about a resurrection in the construction industry in the
New York City metropolitan area. Major transportation arteries in New York are
under extensive construction programs to increase their ability to handle the
ever increasing volumes of traffic they carry. Work is in progress on the major
thruways, expressways, and parkways across New York State. The Company currently
is preparing subcontracting bids for some of the roadway projects in the New
York City metropolitan area.
These projects positively affect the availability of work in diverse
disciplines in the construction industry: landscaping, concrete, paving, steel,
etc. The Company has qualified as a bidder (and expects to place a bid by the
end of November 1997) for a project for the JFK Airport, international arrivals
building, Korean Air and Lufthansa terminals.
Apart from the infrastructure construction programs, there has been an
impressive increase in the restoration, alteration, and expansion of office
space, residential properties, and public facilities. This increase has resulted
in the Korean Mission subcontracting project. There also appears to be an
infusion of foreign investment capital into the depressed real estate market in
New York, prompting major renovations and alterations. This capital infusion
enhances the value of property and therefore increases the incentive for new
development.
Marketing
The Company obtains its projects primarily through the process of
competitive bidding. Accordingly, the Company's marketing efforts include the
following: (i) subscribing to bid reporting services; (ii) monitoring trade
journals including Engineering Record News, Dodge Report, and Brown's Letter,
Inc.; (iii) monitoring daily newspapers and real estate publications; (iv)
membership and networking in affiliated organizations including Allied Building
Trades; (v) maintaining contracts with developers and other general contractors;
and (vi) requesting notification from various government agencies as to bid
solicitations being requested.
The Contract Process; Bidding
In response to bid requests, the Company submits to the soliciting entity a
proposal detailing its qualifications, the services to be provided, and the cost
of its services. Based on its evaluation of the proposals submitted, the
soliciting entity awards the contract to the bidder it deems appropriate.
Generally, the contract for a project is awarded to the lowest bidder, although
other factors may be taken into consideration.
The Company submits its bids after management performs a detailed review of
the project specifications, an internal review of the Company=s capabilities and
equipment availability, and an assessment of whether the project is likely to
attain targeted profit margins. In bidding on contracts, there are two types of
bid requests made by the soliciting entity: a unit cost bid and a lump-sum bid.
The unit cost bid is based upon a cost per unit basis; a lump-sum bid obligates
the Company to complete the project at a fixed price. With a lump-sum bid, the
risk of estimating the quantity of units required for a particular project is on
the Company, while with a unit cost bid, the Company must estimate the per unit
cost, not the number of units needed. Any increase in the Company's unit cost
over its unit bid price or cost over its lump-sum bid, whether due to
inefficiency, faulty estimates, weather, inflation, or other factors, must be
borne by the Company and may adversely affect its results of operations.
<PAGE>
Upon receipt by a New York City agency of notification that a bid submitted
for a project has been declared the low bid, the city's procurement policy
requires that the New York Finance Committee then approve all funds to be
allocated to such project. During this time, if the Company is the low bidder,
it must provide the New York City agency with such documents as are required -
including a Payment and Performance Bond and a Labor and Material Bond - in
order to be approved to undertake the project. Once the New York City Finance
Committee has cleared the allocation of funds for a project and the agency has
cleared all the documentation required to be submitted by the contractor, a
starting date and time table is set up for the project.
Most government contracts provide for termination of the contract at the
election of the customer, although in such event, the Company is generally
entitled to receive a small cancellation fee. Many of the Company's contracts
are also subject to completion requirements with liquidated damages assessed
against it if schedules are not met.
While Joseph Polito has been in the construction business for many years,
the Company has only recently started bidding on projects as a general
contractor, and the Company may incur unanticipated expenses, problems, or
difficulties which may affect its bid prices and project profitability. Though
the Company has been the low bidder on several public sector and private sector
bids, it has not commenced any Company public or private sector projects as a
general contractor. It has, however, commenced two projects as prime contractor.
The Company expects to act as a general contractor on some of the projects
it will undertake in the near future and will need to hire subcontractors to
perform certain jobs such as electrical and mechanical work, though it shall
continue also to bid as a subcontractor at the request of other general
contractors. As general contractor, the Company will be responsible for the
performance of the entire contract, including work assigned to subcontractors.
Accordingly, the Company is subject to liability associated with the failure of
subcontractors to perform as required under the contract; thus, the Company may
require its subcontractors to furnish Performance Bonds. Affirmative action
regulations, however, require the Company to use its best efforts to hire
minority subcontractors for a portion of the project and some of these minority
subcontractors may not be able to obtain such surety bonds.
Insurance and Bonding
The Company maintains general liability and excess liability insurance,
insurance covering its construction equipment, and workers' compensation
insurance in amounts it believes are consistent with industry practices. The
Company carries liability insurance of $1,000,000 per occurrence which
management believes is adequate for its current operations.
Although the Company generally has not been required to provide
Performance Bonds to general contractors when acting as a subcontractor, it may
be required to furnish bonds guaranteeing its performance as a subcontractor in
the future. Currently, the Company is serving as a subcontractor on two
projects. For the EklecCo prime contracting project and the Grand Central
Terminal and Korean Mission subcontracting projects, the Company has been
required to provide, and has provided, Performance Bonds and Labor and Material
Bonds.
The Company expects to bid on both private and public sector projects
as a general contractor. Most of these projects, both public and private sector,
shall require Bid Bonds and Payment and Performance Bonds. A Bid Bond is a bond
issued by a bonding company which is usually in an amount equal to 10% of the
bid price and which guarantees that the contractor will be able to produce such
other additional documents and information required in order to commence the
project including the issuance of a Performance Bond. A Performance Bond is a
guarantee by a surety, customarily 100% of the value of the contract amount,
that the contractor will complete the project pursuant to the terms and
conditions of the contract. Most government contracts allow for termination of
the contract at the election of the customer, although in such event, the
Company is generally entitled to receive a small cancellation fee. Many of the
Company=s contracts are also subject to completion requirements with liquidated
damages assessed against the Company if schedules are not met. In the past, the
Company has not been materially adversely affected by these provisions as a
subcontractor.
<PAGE>
The Company=s ability to obtain bonding and its bonding capacity are
primarily determined by its net worth, liquid working capital (consisting of
cash and accounts receivable), past performance, management expertise, the
number and size of projects under construction, and various other factors. The
larger the project and/or the more projects in which the Company is engaged, the
greater the bonding, net worth, and liquid working capital requirements. Surety
companies consider such factors in light of the amount of the Company=s surety
bonds then outstanding and the surety companies' current underwriting standards,
which standards may change periodically. Therefore, the Company may be required
to maintain certain levels of tangible net worth in connection with establishing
and maintaining bonding limits. As a practical matter, such levels may limit
dividends, if the Company, which might have been declared and which would limit
corporate funds available for other purposes.
In determining whether to issue a bond, surety companies perform credit
checks and other due diligence disclosure requirements and investigate the
Company=s capitalization, working capital, past performance, management's
expertise, and such other factors, as are discussed above. The surety companies
require companies receiving bonding to maintain certain amounts of capital and
liquid assets and base the amount of bonding they will issue on a formula, which
is usually based on certain industry standards which take into account such
factors. The surety companies also require that the bonds be personally
guaranteed by Joseph Polito.
Bonding requirements vary depending upon the nature of the project to be
performed. The Company anticipates paying premiums of between 1 1/4% to 3 1/2%
of the total amount of the contracts to be performed. Since these premiums are
generally payable at the beginning of a project, the Company must maintain
sufficient working capital to satisfy the premium prior to receiving revenue
from the project. Bonding premiums are a line item in the submitted bid and are
included as part of the Company=s billing to its client.
In December 1996, the Company obtained a commitment for a Surety Bond Line
of Credit ($10,000,000 single project limit) from United American Guarantee
Company, Ltd. ("UAGC") for its general contracting projects. This commitment
will allow the Company to pursue those general contracting projects in the
public and private sectors which require performance bonds. To date, it has also
allowed the Company to obtain Performance Bonds and Labor and Material Bonds for
the one prime contracting and two subcontracting projects which have required
same: the EklecCo, Grand Central Terminal, and Korean Mission projects.
13
<PAGE>
Work in Progress; Backlog and Seasonality
Contracts as a subcontractor and general contractor often involve work
periods in excess of one year. Revenue on uncompleted fixed price contracts is
recorded under the percentage of completion method of accounting. NY begins to
recognize profit on its contracts when it first accrues direct costs. As is
standard construction industry practice, a portion of billings may be retained
by the customer until certain contractual obligations are fulfilled.
The following is a list, as of September 30, 1997, of those projects in
which the Company is currently engaged. Backlog Contract Party/ Contract Amount
at Type of % of job Project Name Amount Contract Date 9/30/97 Contract Completed
<TABLE>
<CAPTION>
Backlog
Contract Party/ Contract Amount at Type of % of job
Project Name Amount Contract Date 9/30/97 Contract Completed
<S> <C> <C> <C> <C> <C>
EklecCo/
Palisades Power Mall(1) ... $10,373,552(2) June 1996 2,178,446 Lump-sum 79%(2)
Lehrer McGovern, Bovis, Inc./
Grand Central Terminal .... 3,706,653 May 1996 1,169,449 Lump-sum 69%(2)
Tishman Construction Corp./
Louis Vuitton N.A.(1) ..... 4,417,835 July 1996 1,457,886 Lump-sum 67%(2)
Humphreys & Harding, Inc./
Korean Mission ............ 1,500,000 Jan. 1997 1,260,000 Lump-sum 16%(2)
Total Signed Contracts ...... $19,998,040 $ 6,065,781
</TABLE>
(1) The Company is prime contractor (similar to general contractor) on this
project.
(2) Completion percentage is as of September 30, 1997 and is based on the
percentage of costs incurred through that date to the estimated cost of the
project.
Though the Company does not believe its business is seasonal, its
operations slow during the winter months due to decreased productivity of
laborer caused by their inability to work in severe weather conditions. As a
result of the foregoing, the Company=s costs are increased.
Suppliers; Subcontractors; Unions
For the year ended June 30, 1997, the Company received approximately 43% of
the fabricated steel it required from MD, a subsidiary of Corp. Queens County
Ironworks and New York Iron, Inc. provided the remainder of the steel. Neither
Queens County Ironworks nor New York Iron, Inc. is affiliated with the Company,
Corp., or any other Director or principal stockholder of either company. MD
provided the Company with fabricated steel until November 1996, at which time MD
ceased operating. The prices paid and the terms for the steel purchased from MD
were comparable to competitive prices and terms; therefore, the Company believes
it now will be able to acquire same through other suppliers at similar prices
and on similar terms.
The Company currently depends upon various vendors to supply spare parts,
cranes, and other heavy equipment, and its ability to hire skilled workers
depends upon its ability to comply with certain union agreements and contracts.
The Company rents cranes from Crown Crane, Ltd., a company of which Joseph
Polito is a 50% shareholder, and rents generators and other equipment from Atlas
Gem Leasing, Inc., a company which is wholly owned by Mr. Polito. The Company
believes that there are a sufficient number of vendors, so that in the event any
individual or group of vendors can no longer service the Company=s needs, the
Company will be able to find other vendors at competitive prices.
<PAGE>
As is standard practice in the construction industry, the Company=s
employees, other than its office employees, are not salaried individuals. They
are union employees who are hired on an as-needed, or per project, basis and are
paid an hourly wage which is set by the unions with which they are associated.
The Company hires skilled steel workers represented by the International Union
of Structural Ironworkers local 40, 361, & 417 and International Operating
Engineers locals 14, 14B, 15, 15A, 15C, 15D, and 825 and Cement Masons local
472. The Company must comply with its agreements with the unions, which
agreements regulate all employment issues - including pay, overtime, working
conditions, vacations, benefits, etc. - between the Company and the union
employees. These agreements expire on June 30, 1999.
The Company believes that it has a good relationship with the Unions and is
in compliance with all union agreements. No assurance can be given that the
Company will continue to be in compliance with the Unions or successfully
negotiate extensions to the Company=s agreements with such Unions. In the event
problems or conflicts with the Unions arise or there is a loss of skilled steel
and operating engineers, this would have a detrimental effect on the Company=s
operations.
The Company=s success as a general contractor, in part, will be dependent
upon its ability to hire workers and comply with union contracts and agreements
and its ability to oversee and retain qualified subcontractors to perform
certain work. Although the Company believes that it will be able to attract
subcontractors to bid on projects it bids as general contractor, there can be no
assurance that it will be able to do so. The Company will be responsible for
performance of the entire contract, including the work done by subcontractors.
Accordingly, the Company may be subject to substantial liability if a
subcontractor fails to perform as required. In addition, in hiring and
overseeing subcontractors, there may be difficulties of which the Company is not
aware.
Competition
All aspects of the Company's business are, and will continue to be,
highly competitive. The Company is one of many subcontractors which erects and
furnishes steel for projects. Many of these subcontractors have substantially
greater financial resources and sales than those of the Company. When
contractors seek construction contracts, they request bids from numerous
subcontractors based on the various requirements of the project. These
subcontractors compete primarily as to price, name recognition, and prior
performance.
As a general contractor, the Company will be competing with many larger
and more experienced (and thus more established) contractors whose names are
more readily recognized and whose relationships with federal and state
municipalities and agencies, and those private companies who are bidding against
the Company, have been established. The Company is a subcontractor and a general
contractor specializing, but not exclusively, in bridge and roadway repair and
replacement as well and in furnishing and erecting steel structures for
buildings. The Company's competitors are numerous, and many have substantially
greater marketing, financial, bonding, and human resources.
Government Regulation
The Company must comply with the Occupational Safety and Health
Administration ("OSHA"), a federal agency which regulates and enforces the
safety rules and standards for the construction industry. In addition, the
Company must comply with a wide range of other state and local rules and
regulations applicable to its business, including regulations covering labor
relations, safety standards, affirmative action and the protection of the
environment including requirements in connection with water discharge, air
emissions and hazardous and toxic substance discharge. Continued compliance with
OSHA and the broad federal, state, and local regulatory network is essential and
costly. The failure to comply with such regulations or amendments to current
laws or regulations imposing more stringent requirements may have an adverse
effect on the Company's operations. The Company believes that it is in
substantial compliance with all applicable laws and regulations.
<PAGE>
Employees
As of June 30, 1997, the Company had three executive officers, two
administrative assistants, one comptroller, one project estimator, and two
employees in the accounting department. The number of union employees the
Company utilizes depends on the number and size of projects in which the Company
is engaged and can range from 10-200 employees, some of whom are employed
full-time and others of whom are employed part-time. These union employees are
represented by the International Union of Structural Ironworkers locals 40, 361
and 417; International Operating Engineers locals 14, 14B, 15, 15A, 15C, 15D,
825; and Cement Masons local 472. The Company's contracts with these Unions,
which contracts regulate all employment issues between the Company and the union
employees - including pay, overtime, working conditions, vacations, benefits,
etc. - expire on June 30, 1999. The Company considers its relationships with the
unions and its employees to be good.
Description Of Property
The Company's office (located at 53-09 97th Place, Corona, New York
11368) consists of approximately 25,000 square feet of office space
(approximately 24,000 square feet of which is utilized for storage space) which
is leased from an affiliate company, RSJJ. RSJJ is owned by the Company's
President, Joseph Polito. The lease, pursuant to which the Company pays rent of
$20,000 per month to RSJJ, expires in March 1998. The Company also leases a yard
from an unrelated party for storage material pursuant to an oral agreement which
requires monthly payments of $3,500. The Company believes that the terms of
these leases are comparable and competitive with that which would have been
negotiated with an unaffiliated landlord
As of May 1997, the Company was in arrears in the amount of $480,000 in
payments due under its lease with RSJJ. This arrearage was converted into equity
as follows: the Company issued 270,000 shares of Common Stock to Corp., for the
cancellation of the debt owed to RSJJ. Corp., in turn, issued 200,000 shares of
its common stock to Joseph Polito and 150,000 shares of its common stock to
RSJJ. RSJJ then transferred all of such shares to RSJJ=s mortgagor, which agreed
to accept said shares as payment of RSJJ's outstanding mortgage.
Legal Proceedings
The Company is not a party to any material litigation and is not aware
of any threatened litigation that would have a material adverse effect on its
business, except for the litigation matters discussed below. The Company
believes that the nature and number of these proceedings are typical for a
construction firm of its size and scope.
Three actions to foreclose upon mechanics liens were commenced by the
Company in the last fiscal year. The first action was commenced in New York
State Supreme Court, Kings County on February 25, 1997. The action names the
Company and Metro Steel Structures, Ltd. as plaintiffs and the Perini
Corporation, Metropolitan Transportation Authority, New York City Transportation
Authority, and Fidelity and Deposit Company of Maryland as defendants. The
Company=s claim for relief in this action is $2,199,560. The claim is based upon
filed mechanic=s liens and general contract law. The claim is for labor
performed and materials supplied including money owed under the contract and
money due for "extra" work with regard to the rehabilitation of the Viaduct at
the Stillwell Avenue Station of the Coney Island Line in Brooklyn, New York.
This action is still in the discovery phase.
The second action was filed on February 26, 1997 in New York State
Supreme Court, Queens County. It names the Company, Metro Steel Structures,
Ltd., and McKay Enterprises, Inc. as plaintiffs and Perini Corporation,
Department of Transportation of the City of New York, and Fidelity and Deposit
Company of Maryland as defendants. The Company=s claim for relief in this action
is $844,932. This claim is based upon filed mechanic=s liens and general
contract law. The claim is for labor performed and materials supplied including
money owed under the contract regarding the rehabilitation of the 39th Street
Bridge over the Long Island Rail Road and Amtrak in Queens, New York. This
action is still in the discovery phase.
<PAGE>
On February 7,1997, Perini Corporation filed a related action against the
Company and Metro Steel Structures, Ltd. in New York State Supreme Court, Kings
County. Perini=s claims against the Company total $1,140,560 and allege
defective work on the Stillwell Avenue project and upon a loss/profit agreement
for both the Stillwell Avenue project and the 39th Street Bridge project. The
Company has counterclaimed for the amounts set forth above in the discussion of
the two actions involving Perini Corporation, and its claims are based upon the
same theories as are set forth above.
The Company filed its third action in the New York Supreme Court, Suffolk
County on or about May 13, 1997. The action names Kiska Construction, the State
of New York, acting through the New York State Comptroller, the New York State
Department of Transportation, and the Seaboard Surety company as defendants. The
Company=s claim for relief in this action is $279,346. This claim is based upon
filed mechanic=s liens and general contract law. The claim is for labor
performed and materials supplied including money owed under the contract and
money due for "extra" work regarding the rehabilitation of the Robert Moses
Causeway Northbound Bridge over the State Boat Channel, in Suffolk County, New
York. This action is still in the discovery phase.
In August 1997, the Company entered into an agreement settling the January
1997 trademark infringement claim made by The Ohio Bridge Corporation. The
Company has agreed to effect a name change to USA Bridge Construction of N.Y.,
Inc. before the end of the 1997 calendar year.
In April 1995, the Company (then Metro Steel Structures, Ltd.) commenced an
Article 78 proceeding in the Supreme Court of the State of New York, County of
New York, against the Commissioners of the State Insurance Fund and the State
Insurance Fund to annul the cancellation of the Company's workers' compensation
policy and to annul the rates, classifications, and premiums assigned to the
Company. This action claims that defendants audited the Company's books for
purposes of assigning the workers' compensation rates and premiums to be
assessed against the Company and thereafter (i) "arbitrarily and capriciously
and without any foundation in law or in fact" assigned to the Company's
employees improper job classifications which were then used unlawfully as the
basis for improperly assessing the highest premium rates which could be assessed
against the Company; (ii) improperly applied said premiums retroactively; (iii)
billed the Company for premiums which were improper and excessive; and (iv)
canceled the Company's workers' compensation policy upon the Company's failure
to tender payment in the improper and excessive amount demanded by defendants.
The Company is prosecuting this action to the fullest extent possible. On
September 30, 1997, the Company and defendants were scheduled to appear before
the court for a conference in this matter. This matter was adjourned, however,
to October 28, 1997, pending settlement discussions.
In December 1995, the Commissioners of the State Insurance Fund for and on
behalf of the State Insurance Fund commenced suit against Joseph Polito, Ronald
Polito, Steven Polito, the Company, Metro Steel Structures, Ltd. (now known as
the Company), One Carnegie, and others alleging that certain workers'
compensation insurance policies obtained for various insured defendants were
obtained fraudulently and that the defendant corporations failed to pay the
appropriate premiums. The claims against the Company, amounting to approximately
$3 million, are limited to a policy covering the period April 29, 1993 through
December 1994. The Company, Messrs. Polito, and all other defendants are
defending against this action. The action is in the discovery phase, and
settlement negotiations are currently underway.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company recognizes revenue and costs for all contracts under the
percentage of completion method. Cost of contract revenues includes all direct
material and labor costs and those indirect costs related to contract
performance. General and administrative expenses are accounted for as period
costs and are, therefore, not included in the calculation of the estimates to
complete construction contracts in progress. Material project losses are
provided for in their entirety without reference to the percentage of
completion. As contracts can extend over one or more accounting periods,
revisions in costs and earnings estimated during the course of the work are
reflected during the accounting period in which the facts become known. An
amount equal to the costs attributable to unapproved change orders and claims is
included in the total estimated revenue when realization is probable.
The current asset, "costs and estimated earnings in excess of billings on
uncompleted contracts," represents costs and estimated earnings in excess of
amounts billed on respective uncompleted contracts at the end of each period.
The current liability, "billings in excess of costs and estimated earnings
on uncompleted contracts," represents billings which exceed costs and estimated
earnings on respective uncompleted contracts at the end of each period.
The Company was formed by Joseph Polito, its President, to serve primarily
as a general contractor for public and private sector construction projects. The
public sector projects are sponsored by federal, state, and local government
authorities in New York State and in the New York City metropolitan area.
Previously, Mr. Polito, through other entities, furnished and provided steel
erection as a subcontractor for private and governmental construction projects.
Since its commencement of operations in June 1993, the Company has provided
steel erection services for building, roadway, and bridge repair projects for
general contractors who have been engaged by private, municipal, and/or
governmental customers.
The Company's operations are substantially controlled by Joseph Polito
since he owns approximately 61% of the outstanding shares of Corp., the parent
company which owns approximately 53.5% of the Common Stock of the Company;
hence, Mr. Polito may be considered the beneficial owner of the Company. Mr.
Polito is also a 100% shareholder of RSJJ. Pursuant to a signed lease agreement
which expires on March 31, 1998, RSJJ leases office space to the Company at a
cost of $20,000 per month. Mr. Polito also has ownership interests in Waldorf
(which ceased operations on August 1, 1995), Crown Crane, Inc., and Atlas Gem
Leasing, Inc., all of which companies provided services to the Company for the
years ended June 30, 1997, and 1996. During 1997 and 1996, the Company purchased
from MD, a wholly owned subsidiary of Corp., certain materials and labor to
perform steel erection service. For the three months ended September 30, 1997
and 1996 and for the years ended June 30, 1997 and 1996, purchases by the
Company from MD amounted to $35,000, $166,000, $371,321, and $622,050,
respectively. MD ceased operations in November 1996; since then, the Company has
purchased its steel from unrelated parties.
The Company plans to continue to undertake projects as a subcontractor but
will focus on obtaining projects as a general contractor in both the public and
private sectors. In the New York City metropolitan area, there is an abundance
of subcontractors who have significant experience and are competitive with
respect to pricing and level of service. For those general contracting projects
it undertakes, the Company will be responsible for the performance of the entire
contract, including the work to be performed by subcontractors. Accordingly, the
Company may be subject to substantial liability if a subcontractor fails to
perform as required. In addition, unanticipated difficulties may arise in hiring
and overseeing subcontractors. The Company requires bonding from a New York
licensed bonding company in order to bid on projects as a general contractor.
Though the Company 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, the Company may
experience a seasonal pattern in its operating results with lower revenue in the
third quarter of each fiscal year. Interim results also may be affected by the
timing of bid solicitation, the stage of completion of major projects, and
revenue recognition policies.
<PAGE>
In determining whether to issue a bond, surety companies perform credit
checks and other due diligence disclosure requirements and require the Company
to maintain certain amounts of capital and liquid assets. Each company bases the
amount of bonding it will issue on a formula (devised individually) which takes
into account, inter alia, the Company=s capital and liquid assets. In order for
the Company to obtain and maintain bonding, it must adhere to the requirements
stipulated in the bonding agreements, which agreements vary with each bonding
company. The bonding costs for each bond are incorporated in the contract price
of each job. These costs are carried as a line item in the requisition and are
paid by the customer. Any moneys taken from the working capital for this purpose
will be replaced as monthly requisition payments are received from the customer.
Bonding requirements vary depending upon the nature of the projects to be
performed. The Company anticipates paying a fee to bonding companies of between
1 1/4% to 3 1/2% of the amount of the contracts to be performed. Since these
fees generally are payable at the beginning of a project, the Company must
maintain sufficient working capital to satisfy the fee prior to receiving
revenue from the project.
In December 1996, the Company obtained a bonding commitment for a surety
line of credit ($10,000,000 single project limit) from UAGC for its general
contracting projects. The commitment allows the Company to pursue those general
contracting projects in the public and private sectors which require performance
bonds. To date, it has also allowed NY to obtain Performance Bonds and Labor and
Material Bonds for the one prime contracting and two subcontracting projects
which have required same: the EklecCo, Grand Central Terminal, and Korean
Mission projects.
15
<PAGE>
Three months ended September 30, 1997 as compared to the three months ended
September 30, 1996
Contract revenues for the three months ended September 30, 1997 and 1996
amounted to $8,919,385 and $3,147,941, respectively. This net increase amounting
to $5,770,444 (or approximately 183%) 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 entered into during the
latter part of its June 30, 1997 fiscal year. During the three months ended
September 30, 1997, the Company obtained no new contracts but obtained
additional change orders to previous contracts amounting to approximately
$8,896,118. As of September 30, 1997, the Company=s backlog amounted to
approximately $6,065,000. 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 for which work has not yet begun.
The Company's gross profit for the three months ended September 30, 1997
and 1996 decreased from 28% to 15%, primarily due to estimated cost adjustments
decreasing previously recognized gross profit.
For the three months ended September 30, 1997 and 1996, the Company paid
$35,000 and $166,000, respectively, to MD for materials and labor necessary to
perform steel erection services. During November 1996, MD ceased substantially
all of its operations, and the Company began purchasing material and labor from
unrelated third party steel fabricators. At September 30, 1997 the Company owed
MD $57,220, 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 $103,265 (or 21%) to
$590,697 for the three months ended September 30, 1997, from $487,432 for the
three months ended September 30, 1996. The increase in general administration
costs is mainly attributable to an overall increase in the Company's
administrative salaries associated with the increase in contract revenue and
general corporate overhead.
As of September 30, 1997, the Company=s allowance for doubtful accounts
amounts to $2,287,000 against its contract receivable. In management=s opinion,
the allowance for doubtful accounts at September 30, 1997 will be sufficient to
absorb any losses that may be sustained from settlements. For the three months
ended September 30, 1997 and 1996, the Company had two and three unrelated
customers respectively, which accounted for approximately 99% of total revenues.
As of September 30, 1997 and 1996 approximately 79% and 53% of contracts and
retainage receivables are due from three customers.
For the three months ended September 30, 1997, the Company recorded an
estimated income tax expense of $226,950. For the three months ended September
30, 1996, no income tax expense was recorded by the Company as a result of its
then net operating loss carryforward which was subsequently utilized.
16
<PAGE>
Year ended June 30, 1997 as compared to the year ended June 30, 1996
Contract revenues for the years ended June 30, 1997 and 1996 amounted to
$15,455,699 and $7,091,396, respectively. This net increase of $8,364,303, or
approximately 118%, is a direct result of the Company=s $17,943,400 backlog as
of June 30, 1996. This backlog amount represents the contracts the Company
entered into during the latter part of its June 30, 1996 fiscal year. During the
year ended June 30, 1997, the Company obtained new contracts and change orders
to previous contracts aggregating to approximately $3,600,347. Included in
contract revenues are revenues from joint venture profit sharing agreements on
certain projects. Joint venture revenues for the year ended June 30, 1997
totaled $0 as compared to the year ended June 30, 1996 wherein same totaled
$200,000. Accordingly, revenues for the year ended June 30, 1997 from the
Company's core business, construction contracts, increased by approximately
$8,564,000 as compared to the year ended June 30, 1996. As of June 30, 1997, the
Company= backlog amounted to approximately $6,100,000. 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 for which work
has not yet commenced. The Company's gross profit for the years ended June 30,
1997 and 1996 has remained constant between 27% and 28%.
For the years ended June 30, 1997 and 1996, the Company purchased from
Waldorf approximately $0 and $180,333, respectively, of the materials and labor
necessary to perform fabrication services. Effective August 1, 1995, Waldorf
ceased operations. Waldorf is under the common control of the Company's majority
stockholder and President. Lastly, for the years ended June 30, 1997 and 1996,
the Company paid $371,321 and $622,050, respectively, to MD for materials and
labor necessary to perform steel erection services. MD is a wholly owned
subsidiary of Corp. In November 1996, MD ceased operations, and the Company
began purchasing material and labor from unrelated third party steel
fabricators. At June 30, 1997, the Company owed MD $62,606, principally for
advances in connection with the above services: such amounts are non-interest
bearing and are due on demand.
General and administrative expenses have increased by $221,302, or 10%, to
$2,342,309 for the year ended June 30, 1997, from $2,121,007 for the year ended
June 30, 1996. The increase in general administration costs is mainly
attributable to an overall increase in the Company's administrative salaries
associated with the material amount of increase in contract revenue and general
corporate overhead.
As of June 30, 1997, the Company increased its allowance for doubtful
accounts to $2,287,000 against its contract receivables. The bad debt expense
associated with the increase in allowance amounted to $1,287,000. The Company
increased its allowance for doubtful accounts based on a review of the factors
surrounding certain mechanic=s liens filed for certain projects and an estimate
of the future income of other projects for which no mechanic=s liens have been
filed. In management=s opinion, the allowance for doubtful accounts at June 30,
1997 will be sufficient to absorb any losses which may be sustained from a
settlement with this and other customers. For the years ended June 30, 1997 and
1996, the Company had three unrelated customers, which accounted for
approximately 86% and 62%, respectively, of total revenues. As of June 30, 1997
and 1996, approximately 83% and 89%, respectively, of contracts and retainage
receivables are due from four and three customers respectively.
Liquidity and Capital Resources
At September 30, 1997 and June 30, 1997, the Company's working capital
amounted to $6,205,300 and $5,673,712, respectively. The working capital
increase is principally attributable to the Company=s contracts receivable. As
of September 30, 1997, the Company=s net contract receivable amounted to
$10,904,882 of which approximately $2,832,783 or 26% has been collected through
November 5, 1997. As of June 30, 1997, the Company's net contract receivable
amounted to $8,943,147, of which approximately $2,424,219, or 27%, was collected
through September 9, 1997. As of September 30, 1997, the Company's net contact
receivable amounted to $10,904,882 of which approximately $2,800,000 was
collected by November 5, 1997.
<PAGE>
Net cash provided by operating activities for the three months ended
September 30, 1997 and for the year ended June 30, 1997 amounted to $152,227 and
$58,821, respectively. The major component of such cash provision was directly
attributed to the Company's income for the three months ended September 30, 1997
and for the year ended June 30, 1997, which amounted to $428,786 and $387,340,
respectively, and increases in accounts receivable net of increases in its
accounts payable, payroll taxes payable, and accrued expenses. For the three
months ended September 30, 1996 and the year ended June 30, 1996, the net cash
used for operating activities amounted to $314,588 and $2,122,223, respectively,
which amounts are principally attributable to increases in accounts receivable
and costs and estimated earnings in excess of billings on uncompleted contracts
and accounts payable.
With regards to financing activities, the Company used $248,878 of cash for
the three months ended September 30, 1997. Such cash was used primarily for
repayment of advances from affiliates and officers. The Company provided
$485,416 in cash for the year ended June 30, 1997. Such cash was provided
primarily by advances from affiliates and officers.
As of September 30, 1997 and June 30, 1997, the Company owes approximately
$2,042,336 and $1,349,225, respectively, in payroll taxes and related penalties
and interest. At June 30 ,1997 the breakdown was $1,033,226 to the IRS and
$315,999 to New York State. As of June 30, 1997, the Company has been making
monthly payments to the respective tax authorities pursuant to oral agreements
negotiated with same. Subsequent to September 30, 1997, the Company paid
approximately $755,000 towards its September 30, 1997 liability.
On August 14, 1995, the Company successfully completed its public offering.
As a result, the Company sold 791,850 shares of Common Stock which included
91,850 shares in connection with the exercise of the underwriter's
over-allotment options and 494,500 warrants which included 64,500 warrants
pursuant to the underwriter's over-allotment option. The Company yielded total
net proceeds of $2,077,903 after deducting the underwriter=s selling expenses
and expense allowance, repayment of bridge loans and promissory notes and
related accrued interest to the bridge lenders and private investors, and the
pre-payment of the first two years= financial consulting agreement with the
underwriter. Simultaneously with the offering, the Company charged all deferred
offering costs incurred to additional paid-in capital which totaled $903,820.
Accordingly, the increase in financial activities amounting to $2,242,802 for
the year end June 30, 1996 was primarily from the Company=s initial public
offering.
In June 1997, the Company and Corp. completed a transaction whereby the
Company issued 270,000 shares of its Common Stock to Corp., for the cancellation
of $480,000 in rent debt owed to RSJJ. Corp., in turn, issued 150,000 shares of
its common stock to RSJJ and 200,000 shares of its common stock to Joseph Polito
(RSJJ=s president). RSJJ then transferred all of such shares to RSJJ=s
mortgagor, which agreed to accept said shares as payment of RSJJ=s outstanding
mortgage. As a result of this transaction, Corp. increased its ownership in the
Company to approximately 53.2%. The Company recorded a gain on the forgiveness
of debt in the amount of $243,750, the difference between the debt forgiven of
$480,000 and the fair market value of the stock of $1.75 per share with a 50%,
or $236,260, discount.
In December 1994, the Board of Directors adopted the 1994 Senior Management
Incentive Plan (the "Management Plan"), which was adopted also by shareholder
consent. The Management Plan provided for the issuance of up to 150,000 shares
of the Company=s Common Stock in connection with the issuance of stock options
and other stock purchase rights to executive officers and other key employees.
In December 1996, the Board of Directors authorized an amendment to the
Management Plan to increase the amount of shares available to 1,000,000.
In February 1997, pursuant to a Form S-8 Registration Statement filed with
the Securities and Exchange Commission, the Company registered for resale
125,000 shares of Common Stock underlying an option which was issued to Joseph
Polito pursuant to the Management Plan. The option, exercisable at $1.10 per
share (110% of the bid price on November 27, 1996), was exercised on March 25,
1997 and resulted in the issuance of 125,000 shares of Common Stock, 60,000 of
which shares have been resold to date
17
<PAGE>
MANAGEMENT
Officers and Directors.
The names, ages, and positions of the Company's executive Officers and
Directors are as follows: Position with the Name Age Company
<TABLE>
<CAPTION>
<S> <C> <C>
Joseph M. Polito 63 President and Director
Ronald J. Polito 38 Secretary and Director
Steven J. Polito 35 Treasurer and Director
Philip Neilson 71 Director
Marvin Weinstein 66 Director
</TABLE>
All Directors hold office until the next annual meeting of stockholders or
until their successors are elected and qualify. Vacancies on the Board of
Directors may be filled by the remaining Directors. Officers are elected
annually by, and serve at the discretion of the Board of Directors. There are no
family relationships between or among any Officers or Directors of the
Corporation, except that Joseph Polito is the father of both Steven and Ronald
Polito. The Company has an audit committee and compensation committee, both of
which include the outside directors and Ronald Polito as the inside director.
Joseph M. Polito has been the President and a Director of the Company since
its inception in 1990 and prior to April 1994 was the sole shareholder of the
Company. Mr. Polito has been the president and Director of Corp. since April
1994. Mr. Polito oversees the running of all of the Company's operations. Since
December 1990, Mr. Polito has been the president and sole Director and
shareholder of One Carnegie Court Associates, Inc. ("One Carnegie"), a wholly
owned subsidiary of Corp. Since 1988, Mr. Polito has been a 50% shareholder of
Crown Crane, Ltd., a company which leases cranes for construction projects.
Since 1986, Mr. Polito has been the president and 100% shareholder of Atlas Gem
Leasing, Inc., a company which leases generators and other construction
equipment. Mr. Polito has also been the president and sole Director and
shareholder of Waldorf since 1990. Before it ceased operating in August 1995,
Waldorf fabricated steel and sold same to the Company. Since 1983, Mr. Polito
has been the president and 100% shareholder of RSJJ, a company which owns and
leases real property.
Since 1976, Mr. Polito has been a member of the Allied Building Metal
Industries, Inc. ("ABMII"), a trade association which has the authority to
negotiate with the unions in order to better the construction industry. He was
the president of same from 1992 until 1993. Since approximately 1987, Mr. Polito
has been the Chairman of the Steel Institute of New York, a trade association
similar to the ABMII. From the mid-1980=s to the mid-1990=s, Mr. Polito was a
member of the Building Trades Association Joint Safety Committee. Since the
mid-1970=s, Mr. Polito has been a member of the of the International Union of
Structural Ironworkers, locals 40, 361, and 417. He has been Co-Chairman of this
organization since the early 1990=s.
Ronald J. Polito has been the Secretary and a Director of the Company since
its inception in 1990. From its inception in 1990 until March 1995, he was also
the treasurer of the Company. He has been the secretary and a Director of Corp.
since April 1994. Mr. Polito oversees the daily progress on all projects and
analysis of the final costs and profits of jobs completed and the preparation
and bidding on new projects. Since 1985, Mr. Polito has been the secretary of
Gem Steel. Since December 1990, Mr. Polito has been the secretary of One
Carnegie and Waldorf. Since 1983, Mr. Polito has been the secretary of RSJJ. Mr.
Polito received a Bachelor of Science Degree in Civil Engineering from Brooklyn
Polytechnical Institute in 1981. He is the son of Mr. Joseph Polito.
<PAGE>
Steven J. Polito was elected Treasurer of the Company in March 1995. He had
previously been a Project Manager and has been a Director of the Company since
its inception in 1990. Mr. Polito oversees the daily operations for projects in
process and projects completed, including purchasing and leasing of materials
and machinery and the distribution of labor. Mr. Polito has been treasurer of
Corp. since March 1995 and a Director of Corp. since April 1994. Since 1988, Mr.
Polito has been the treasurer of Gem Steel. Since 1988, Mr. Polito has been the
treasurer of One Carnegie, Waldorf, and RSJJ. From 1988 until April 1994, Mr.
Polito worked as a Project Manager of Atlas Gem, a company which furnished and
erected steel structures. He is the son of Mr. Joseph Polito.
Philip Neilson was elected Director of the Company in June 1995. Mr.
Neilson was the President and a principal shareholder of Adler & Neilson Co.,
Inc., a steel fabricating company, from 1951 to 1997. Currently, Mr. Neilson is
providing private consulting services in the field of steel fabricating. The
Company did not purchase any steel from Adler & Neilson Co., Inc.
Marvin Weinstein was elected Director of the Company in June 1995. Mr.
Weinstein was the President and sole shareholder of M. Weinstein Associates from
1988 to 1996. This company provided consulting services to the companies in the
steel industry. Mr. Weinstein retired in 1996. The Company did not engage M.
Weinstein Associates to provide any consulting services to the Company.
Significant Employees
John G. Bauer has been the chief administrative officer (a non-executive
position) of the Company since February 1995. Since its inception in March 1992,
Mr. Bauer has been the President and a Director of Dynamic Construction
Consulting, Inc. ("Dynamic"), a company of which Mr. Bauer was the founder.
Dynamic provides construction management and consulting services to the Company
and other companies. From July 1988 to March 1992, Mr. Bauer was a Vice
President of Tishman Construction Corp. of N.Y., a construction company.
Michael Panayi has been a structural engineer for the Company since its
commencement of operations in June 1993. From 1987 to 1993, Mr. Panayi was a
structural engineer for Atlas Gem.
William J. Kubilus, a professional estimator in the field of general
contracting and subcontracting since 1966, joined the Company in 1996 to provide
estimating expertise for Corp.=s general contracting and subcontracting bids.
Prior to joining the Company, from 1993 to 1996, Mr. Kubilus was an estimator
for Lazzinarro General Contracting. From 1989 to 1993, he was an estimator for
NICO Construction.
As permitted under New York Corporation Law, the Company's certificate of
incorporation eliminates the personal liability of the Directors to the Company
or any of its shareholders for damages for breaches of their fiduciary duty as
Directors. As a result of the inclusion of such provision, stockholders may be
unable to recover damages against Directors for actions taken by them which
constitute negligence or gross negligence or that are in violation of their
fiduciary duties. The inclusion of this provision in the Company's Certificate
of Incorporation may reduce the likelihood of derivative litigation against
Directors and other types of shareholder litigation.
18
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, the Company's Executive Officers, during the years ended June 30,
1997, 1996 and 1995.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
(a) (b) (c) (d) (e) (f) (g)
Name Restricted
and Principal Other Annual Stock Options/
Position Year Salary ($) Bonus ($) Compensation ($) Awards ($) (1) SARS (#)
- ------------------ ---- ---------- --------- ---------------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Joseph Polito 1997 $330,000 - $ 68,642 (2) - 125,000
President and 1996 300,000 - 111,911 (2) - -
Director 1995 378,000 - 68,200 (2) - 25,000
Ronald Polito 1997 $118,800 - $ 17,194 (3) - -
Secretary and 1996 125,000 - 15,144 (3) - -
Director 1995 121,000 - 21,200 (3) - -
Steven Polito 1997 $86,580 - $ 8,572 (4) - -
Treasurer and 1996 94,000 - 8,275 (4) - -
Director 1995 91,575 - 9,900 (4) - -
</TABLE>
(1) At the end of the fiscal year, Joseph Polito owned 65,000 shares of
Common Stock valued at $158,600. Ronald Polito and Steven Polito do not own any
Common Stock of the Company. The valuation is based on the closing price of
Common Stock ($2.44) on June 27, 1997 (the last day of the fiscal year in which
the stock traded), as reported by a market maker.
(2) Includes (i) the payment of premiums on a life insurance policy of
$10,722, $54,362, and $46,000, (ii) the payment of travel expenses of $50,000,
$50,000, and $22,200; for the years ended June 30, 1997, 1996 and 1995,
respectively, and (iii) the payment of an automobile lease of $7,920 and $7,549
for the years ended June 30, 1997 and 1996, respectively. See " -- Employment
Agreements."
(3) Includes (i) payments on the lease of an automobile of $5,416, $5,416,
and $8,000, (ii) the payment of premiums on a term life insurance policy of
$8,510, $4,684, and $5,800, and (iii) a travel allowance of $3,268, $2,971, and
$7,400; for the years ended June 30, 1997, 1996 and 1995, respectively.
(4) Includes payment on a lease automobile of $5,304, $5,304, and $6,700
and a travel allowance of $3,268, $2,971, and $3,200 for the years ended June
30, 1997, 1996 and 1995, respectively.
19
<PAGE>
Stock Options
The following table sets forth certain information concerning the grant
of stock options made during the year ended June 30, 1997 under the Company's
1994 Senior Management Incentive Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
====================================================================================================================================
Individual Grants
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
% of Total
# of Securities Options/SAR's
underlying Granted to
Options/SAR's Employees in Exercise or Base
Name Granted (1) Fiscal Year Price ($/SH) Expiration Date
---- ------------ ------------ ------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joseph M. Polito 125,000 100% $1.10 December 1, 2001
====================================================================================================================================
- ------------------------
</TABLE>
(1) Represents incentive stock options granted under the Management Plan.
Mr. Polito exercised this option in full and resold 60,000 shares of
same.
The following table contains information with respect to employees of
the Company and options held as of June 30, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
================================================================================================================================
(a) (b) (c) (d) (e)
- --------------------------------------------------------------------------------------------------------------------------------
Value of
Unexercised In-The-
Number of Money
Unexercised Options/SAR's at
Options/SAR's at FY- FY-End($)
Shares Acquired on Value End (#) Exercisable/ Exercisable/
Name Exercise (#) (1) Realized($) (2) Unexercisable Unexercisable (3)
---- ----------------- --------------- ------------- -----------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joseph M. Polito 125,000 $100,000 15,000/10,000 0/0
================================================================================================================================
- ----------------------------
</TABLE>
(1) Joseph Polito sold 65,000 of the shares acquired on exercise.
(2) Based on the closing price of Common Stock ($1.90) on March 25, 1997,
as reported by a market maker.
(3) Based on the closing price of Common Stock ($2.44) on June 27, 1997
(the last day of the fiscal year in which the stock traded), as reported by a
market maker. Since the Options are exercisable at $5.50, there is no value to
such options as of such date.
20
<PAGE>
Employment Agreement
Joseph Polito entered into an employment agreement with the Company dated
April 4, 1995, whereby Mr. Polito agreed to devote 80% of his business time to
the affairs of the Company. The agreement is for a term of approximately three
years expiring June 30, 1998. Pursuant to the terms of the agreement Mr. Polito
is to receive an annual salary of $300,000 per annum until June 30, 1996 with
10% yearly escalation, subject to adjustment by the Board of Directors. Mr.
Polito is also to receive a yearly non-accountable expense allowance of $50,000.
Mr. Polito received stock options under the Company's 1994 Senior Management
Incentive Plan to purchase 25,000 shares at $5.50 per share, vesting at the rate
of 7,500 in each of April 1996 and 1997 and 10,000 in April 1998. Mr. Polito
also has the right to receive a yearly bonus equal to five percent (5%) of the
first $1,000,000, upon reaching $1,000,000 and five percent (5%) of the next
$500,000, upon reaching $1,500,000 and five percent (5%) after $1,500,000, of
all the pre-tax profits of the Company. The Company shall pay to Mr. Polito a
monthly draw of $10,000 against the bonus. Pursuant to the agreement the Company
shall pay the premiums on a $3,500,000 life insurance policy for the benefit of
individuals as directed by Mr. Polito, with an estimated yearly premium of
$80,000. The agreement restricts Mr. Polito from competing with the Company for
a period of one year after the termination of his employment. The agreement
provides for severance compensation to be paid to Mr. Polito if his employment
with the Company is terminated or there is a decrease in responsibilities or
duties following a change in control of the Company. The severance compensation
shall be made in one payment equal to three times the aggregate annual
compensation paid to the Employee during the preceding calendar year.
Steven and Ronald Polito receive annual salary compensations of $94,000 and
$125,000, respectively, from the Company, which compensation levels commenced in
March 1995 and April 1994, respectively. Both individuals also receive a car
allowance equal to the monthly lease payments on their automobiles and travel
expenses. Ronald Polito receives the payment of premiums on a life insurance
policy of which he chooses the beneficiaries. Neither individual has entered
into an employment agreement with the Company.
1994 Senior Management Incentive Plan
In December, 1994, the Board of Directors adopted the Management Plan,
which was adopted by shareholder consent. The Management Plan provided for the
issuance of up to 150,000 shares of the Company's Common Stock in connection
with the issuance of stock options and other stock purchase rights to Executive
Officers and other key employees. In December, 1996, the board of Directors
authorized an amendment the Management Plan to increase the amount of stock
provided for to 1,000,000. The amendment was adopted by shareholder consent.
The adoption of the Management Plan was prompted by the Company=s desire
(i) to attract and retain qualified personnel, whose performance is expected to
have a substantial impact on the Company's long-term profit and growth
potential, by encouraging those persons to acquire equity in the Company; and
(ii) to provide the Board with sufficient flexibility regarding the forms of
incentive compensation which the Company will have at its disposal in rewarding
executive Officers, key employees, and consultants without unnecessarily
depleting the Company=s cash reserves. The Management Plan is designed to
augment the Company=s existing compensation programs and is intended to enable
the Company to offer executives, key employees, and consultants a personal
interest in the Company's growth and success through the grant of stock options
and/or other rights pursuant to the Management Plan. It is contemplated that
only those executive management employees (generally the Chairman of the Board,
Vice-Chairman, Chief Executive Officer, Chief Operating Officer, President, and
Vice Presidents of the Company) who perform services of special importance to
the Company will be eligible to receive compensation under the Management Plan.
As of the date of this Prospectus, the Company's Officers and Directors are
Joseph Polito, Ronald Polito, Steven Polito and Philip Neilson, though the Plan
also includes Messrs. Bauer, Panayi and Kubilus. A total of 1,000,000 shares of
Common Stock will be reserved for issuance under the Management Plan.
<PAGE>
Unless otherwise indicated, the Management Plan is to be administered by
the Board of Directors or a committee of the Board, if such a committee is
appointed for this purpose (the Board or such committee, as the case may be,
shall be referred to in the following description as the "Administrator").
Subject to the specific provisions of the Management Plan, the Administrator
will have the discretion to determine (i) the recipients of the awards; (ii) the
nature of the awards to be granted; (iii) the dates such awards will be granted;
(iv) the terms and conditions of the awards; and (v) the interpretation of the
Management Plan, except that any award granted to any employee of the Company
who is also a Director of the Company shall also be subject - in the event the
persons serving as members of the Administrator of the Management Plan at the
time such award is proposed to be granted do not satisfy the requirements
regarding the participation of "disinterested persons" set forth in Rule 16b-3
("Rule 16b-3") promulgated under the Exchange Act - to the approval of an
auxiliary committee consisting of not less than two individuals who are
considered "disinterested persons" as defined under Rule 16b-3. As of the date
hereof, the Company has not yet determined who will serve on such auxiliary
committee, if one is required.
The Management Plan generally provides that, unless the Administrator
determines otherwise, each option or right granted shall become exercisable in
full upon certain "change of control" events as described in the Management
Plan, or subject to any right or option granted under the Management Plan
(through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure, or otherwise), the Administrator will make appropriate adjustments to
such plans and the classes, number of shares, and price per share of stock
subject to outstanding rights or options. Generally, the Management Plan may be
amended by action of the Board of Directors, except that any amendment which (i)
would increase the total number of shares subject to such plan; (ii) extend the
duration of such plan; (iii) materially increase the benefits accruing to
participants under such plan; or (iv) change the category of persons who can be
eligible for awards under such plan, must be approved by the affirmative vote of
a majority of the shareholders entitled to vote. The Management Plan permits
awards to be made thereunder until November 2004.
Directors who are not otherwise employed by the Company will not be
eligible for participation in the Management Plan. The Management Plan provides
for four types of awards: stocks options, incentive stock rights, stock
appreciation rights (including limited stock appreciation rights) and Restricted
Stock purchase agreements (as described below).
Stock Options. Options granted under the Management Plan may be either
incentive stock options ("ISOs") or options which do not qualify as ISOs
("non-ISOs"). ISOs may be granted at an option price of not less than 100% of
the fair market value of the Common Stock on the date of grant, except that an
ISO granted to any person who owns capital stock representing more than 10% of
the total combined voting power of all classes of Common Stock of the Company
("10% stockholder") must be granted at an exercise price of at least 110% for
the fair market value of the Common Stock on the date of the grant. The exercise
price of the non-ISOs may not be less than 85% of the fair market value of the
Common Stock on the date of grant. Unless the Administrator determines
otherwise, no ISO or non-ISO may be exercisable earlier than one year from he
date of grant. ISOs may not be granted to persons who are not employees of the
Company. ISOs granted to persons other than 10% stockholders may be exercisable
for a period of up to ten (10) years form the date of grant; ISOs granted to 10%
stockholders may be exercisable for a period of up to five years from he dated
of grant. No individual may be granted ISOs that become exercisable in any
calendar year for Common Stock having a fair market value at the time of grant
in excess of $100,00. Non-ISOs may be exercisable for a period of up to thirteen
(13) years from the date of grant.
<PAGE>
Payment for shares of Common Stock purchases pursuant to exercise of stock
options shall be paid in full in (i) cash, (ii) by certified check, or, (iii) at
the discretion of the Administrator by shares of Common Stock having a fair
market value equal to the total exercise price or (iv) by a combination of the
above. The provision that permits the delivery of already owned shares of stocks
as payment for the exercise of an option may permit "pyramiding." In general,
pyramiding enables a holder to start with as little as one share of common stock
and, by using the shares of common stock acquired in successive, simultaneous
exercises of the option, to exercise the entire option, regardless of the number
of shares covered thereby, with no additional cash or investment other than the
original share of common stock used to exercise the option.
Upon termination of employment or consulting services, an optionee will
be entitled to exercise the vested portion of an option for a period of up to
three months after the date of termination, except that if the reason for
termination was a discharge for cause, the option shall expire immediately, and
if the reason for termination was for death or permanent disability of the
optionee, the vested portion of the option shall remain exercisable for a period
of twelve (12) months thereafter.
On December 2, 1996, the Company granted to Joseph Polito, the
Company's president, an option to purchase 125,000 shares at an exercise price
of $1.10 per share (110% of the ten market price) in accordance with the
Management Plan. The shares were registered for resale pursuant to a Form S-8
registration statement filed in February 1997. On March 25, 1997, Mr. Polito
exercised the option. On April 11, 1997, Mr. Polito re-sold 60,000 of these
shares.
Incentive Stock Rights. Incentive stock rights consist of incentive
stock units equivalent to one share of Common Stock in consideration for
services performed for the Company. Each incentive stock unit shall entitle the
holder thereof to receive, without payment of cash or property to the Company,
one share of Common Stock in consideration for services performed for the
Company or any subsidiary by the employee, subject to the lapse of the incentive
periods, whereby the Company shall issue such number of shares upon the
completion of each specified period. If the employment or consulting services of
the holder with the Company terminate prior to the end of the incentive period
relating to the units awarded, the rights shall thereupon be null and void,
except that if termination is caused by death or permanent disability, the
holder or his/her heirs, as the case may be, shall be entitled to receive a pro
rata portion of the shares represented by the units, based upon that portion of
the incentive period which shall have elapsed prior to the holder=s death or
disability.
Stock Appreciation Rights (SARs). SARs may be granted to recipients of
options under the Management Plan. SARs may be granted simultaneously with, or
subsequent to, the grant of a related option and may be exercised to the extent
that the related option is exercisable, except that no general SAR (as
hereinafter defined) may be exercised within a period of six months of the date
of grant of such SAR, and no SAR granted with respect to an ISO may be exercised
unless the fair market value of the Common Stock on the date of exercise exceeds
the exercise price of the ISO. A holder may be granted general SARs ("General
SARs") or limited SARs ("Limited SARs"), or both. General SARs permit the holder
thereof to receive an amount (in cash, shares of Common Stock, or a combination
of both) equal to the number of SARs exercised multiplied by the excess of the
fair market value of the Common Stock on the exercise date over the exercise
price of the related option. Limited SARs are similar to General SARs, except
that, unless the Administrator determines otherwise, they may be exercised only
during a prescribed period following the occurrence of one or more of the
following "Change of Control" transaction: (i) the approval of the Board of
Directors of consolidation or merger in which the Company is not the surviving
corporation, the sale of all of substantially all the assets of the Company, or
the liquidation or dissolution of the Company; (ii) the commencement of a tender
or exchange offer for the Company's Common Stock (or securities convertible into
Common Stock) without the prior consent of the Board; (iii) the acquisition of
beneficial ownership by any person or other entity (other than the Company or
any employee benefit plan sponsored by the Company) of securities of the Company
representing 25% or more of the voting power of the Company's outstanding
securities; or (iv) if during any period of two years or less, individuals who
at the beginning of such period constitute the entire Board cease to constitute
a majority of the Board, unless the election, or the nomination for election, of
each new Director is approved by at least a majority of the Directors then still
in office.
<PAGE>
The exercise of any portion of either the related option or the tandem
SARs will cause a corresponding reduction in the number of shares remaining
subject to the option or the tandem SARs, thus maintaining a balance between
outstanding options and SARs.
Restricted Stock Purchase Agreements. Restricted Stock purchase
agreements provide for the sale by the Company of shares of Common Stock at
prices to be determined by the Board, which shares shall be subject to
restrictions on disposition for a stated period during which the purchaser must
continue employment with the Company in order to retain the shares. Payment must
be made in cash. If termination of employment occurs for any reason within six
months after the date of purchase, or for any reason other than death or by
retirement with the consent of the Company of the Company after the six-month
period but prior to the time that the restrictions on disposition lapse, the
Company shall have the option to reacquire the shares at the original purchase
price.
Restricted shares awarded under the Management Plan will be subject to
a period of time designated by the Administrator (the "restricted period")
during which the recipient must continue to render services to the Company
before the restricted shares will become vested. The Administrator may also
impose other restrictions, terms and conditions that must be fulfilled before
the restricted shares may vest.
Upon the grant of restricted shares, stock certificates registered in
the name of the recipient will be issued and such shares will constitute issued
and outstanding shares of Common Stock for all corporate purposes. The holder
will have the right to vote the restricted shares and to receive all regular
cash dividends (and such other distributions as the Administrator may
designate), if any, which are paid or distributed on the restricted shares, and
generally to exercise all other rights as a holder of Common Stock, except that,
until the end of the restricted period; (i) the holder will not be entitled to
take possession of the stock certificates representing the restricted shares and
(ii) the holder will not be entitled to sell, transfer or otherwise dispose of
the restricted shares. A breach of any restrictions, terms or conditions
established by the Administrator with respect to any restricted shares will
cause a forfeiture of such restricted shares.
Upon expiration of the applicable restriction period and the
satisfaction of any other applicable conditions, all or part of the restricted
shares and any dividends or other distributions not distributed to the holder
(the "retained distributions") thereon will become vested. Any restricted shares
and any retained distributions thereon which do not so vest will be forfeited to
the Company. If prior to the expiration of the restricted period a holder is
terminated without cause or because of a total disability (in each case as
defined in the Management Plan), or dies, then, unless otherwise determined by
the Administrator at the time of the grant, the restricted period applicable to
each award of restricted shares will thereupon be deemed to have expired. Unless
the Administrator determines otherwise, if a holder's employment terminates
prior to the expiration of the applicable restricted period for any reason other
than as set forth above, all restricted shares and any retained distributions
thereon will be forfeited.
Accelerating of the vesting of the restricted shares shall occur, under
the provisions of the Management Plan, on the first day following the occurrence
of any of the following: (a) the approval by the stockholders of the Company of
an "Approved Transaction"; (b) a "Control Purchase"; or (c) a "Board Change."
An "Approved Transaction" is defined as (A) any consolidation or merger
of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock would be converted into
cash, securities or other property other than a merger of the Company in which
the holders of the Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock of the surviving corporation immediately
after the merger, or (B) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (C) the adoption of any plan or proposal for
the liquidation or dissolution of the Company.
<PAGE>
A "Control Purchase" is defined as circumstances in which any person
(as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act),
corporation or other entity (other than the Company or any employee benefit plan
sponsored by the Company) (A) shall purchase any Common Stock of the Company (or
securities convertible into the Company's Common Stock) for cash, securities or
any other consideration pursuant to at tender offer or exchange offer, without
the prior consent of the Board of Directors, or (B) shall become the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing twenty-five percent
(25%) or more of the combined voting power of the then outstanding securities of
the Company ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of Directors (calculated
as provided in paragraph (d) of such Rule 13d-3 in the case of rights to acquire
the Company's securities).
A "Board Change" is defined as circumstances in which, during any
period of two consecutive years or less, individuals who at the beginning of
such period constitute the entire Board shall Cease for any reason to constitute
a majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new Director was approved by a vote of at least
a majority of the Directors then still in office.
21
<PAGE>
PRINCIPAL SECURITYHOLDERS
The following table sets forth information as of September 30, 1997
with respect to the beneficial ownership of shares of Common Stock by (i) each
person (including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended), known by the Company to be the
owner of more than 5% of the outstanding shares of Common Stock; (ii) each
Director; and (iii) all Officers and Directors as a group. Except to the extent
indicated in the footnotes to the following table, each of the individuals
listed below possesses sole voting power with respect to the shares of Common
Stock listed opposite his name.
<TABLE>
<CAPTION>
Percent of
Number of Common
Name Shares Stock Owned
- ---- --------- -----------
<S> <C> <C>
U.S. Bridge Corp.(1) 1,240,665 53.5%
53-09 97th Place
Corona, New York 11368
Joseph Polito (2) 1,305,665 56.3%
c/o U.S. Bridge Corp.
53-09 97th Place
Corona, New York 11368
Steven Polito - -
c/o U.S. Bridge Corp.
53-09 97th Place
Corona, New York 11368
Ronald Polito - -
c/o U.S. Bridge Corp.
53-09 97th Place
Corona, New York 11368
Philip Neilson - -
c/o U.S. Bridge Corp.
53-09 97th Place
Corona, New York 11368
Marvin Weinstein - -
c/o U.S. Bridge Corp.
53-09 97th Place
Corona, New York 11368
All Officers and Directors
as a group (5 persons) (2) 1,305,665 56.3%
- -----------------------------------------------------
</TABLE>
(footnotes from previous page)
(1) Does not include the shares issuable upon the exercise of the Special
Warrant or the voting rights included in the shares of Series A Preferred Stock
issuable upon the happening of certain events.
(2) Mr. Polito owns approximately 61% of the outstanding shares of Corp.
and may be considered the beneficial owner of the shares of the Company owned by
Corp. Includes 15,000 shares issuable upon the exercise of stock options granted
to Mr. Polito, all of which are vested. Does not include (i) 10,000 shares
issuable upon the exercise of options not presently vested; or (ii) 60,000
shares which were resold upon the exercise of an option.
<PAGE>
DESCRIPTION OF SECURITIES
The Company's authorized capitalization consists of 10,000,000 shares
of Common Stock, par value $.001 per share and 500,000 shares of Preferred
Stock, par value $.01 per share, which may be issued in one or more series at
the discretion of the board of directors. The following summary description of
the Common Stock and Preferred Stock are qualified in their entirety by
reference to the Company's Articles of Incorporation.
Common Stock
Each share of Common Stock entitles its holder to one non-cumulative vote
per share and, subject to the preferential rights of the Preferred Stockholders,
the holders of more than fifty percent (50%) of the shares voting for the
election of directors can elect all the directors if they choose to do so, and
in such event the holders of the remaining shares will not be able to elect a
single director. Holders of shares of Common Stock are entitled to receive such
dividends as the board of directors may, from time to time, declare out of
Company funds legally available for the payment of dividends. The Company has
not paid cash dividends on its common stock and intends to retain earnings, if
any, for use in its activities. Payment of cash dividends in the future will be
wholly dependent upon the Company's earnings, financial condition, capital
requirements and other factors deemed relevant by the board of directors. It is
not likely that cash dividends will be paid in the foreseeable future. Upon any
liquidation, dissolution or winding up of the Company, holders of shares of
Common Stock are entitled to receive pro rata all of the assets of the Company
available for distribution to shareholders after the satisfaction of the
liquidation preference of the preferred stockholders. See "Dividend Policy."
Shareholders do not have any preemptive rights to subscribe for or purchase
any stock, warrants or other securities of the Company. The Common Stock is not
convertible or redeemable. Neither the Company's Certificate of Incorporation
nor its By-Laws provide for preemptive rights.
Preferred Stock
The Preferred Stock may be issued in one or more series, to be determined
and to bear such title or designation as may be fixed by resolution of the board
of directors prior to the issuance of any shares thereof. Each series of the
Preferred Stock will have such voting powers (including, if determined by the
board of directors, no voting rights), preferences, and other rights as
determined by the board of directors, with such qualifications, limitations or
restrictions as may be stated in the resolutions of the board of directors
adopted prior to the issuance of any shares of such series of Preferred Stock.
Purchasers of the securities offered hereby should be aware that the
holders of any series of the Preferred Stock which may be issued in the future
could have voting rights, rights to receive dividends or rights to distribution
in liquidation superior to those of holders of the Common Stock, thereby
diluting or negating the voting rights, dividend rights or liquidation rights of
the holders of the Common Stock. Except for the Series A Preferred Stock, the
Company has no present intention to issue any shares of Preferred Stock.
Pursuant to the terms of the underwriting agreement with the Underwriter, the
Company can not issue any shares of Preferred Stock, except for the Series A
Preferred Stock, without the consent of the Underwriter. See "-- Series A
Preferred Stock."
Because the terms of each series of Preferred Stock may be fixed by the
Company's board of directors without shareholder action, the Preferred Stock
could be issued with terms calculated to defeat a proposed takeover of the
Company, or to make the removal of the Company's management more difficult.
Under certain circumstances, this could have the effect of decreasing the market
price of the Common Stock. Management of the Company is not aware of any such
threatened transaction to obtain control of the Company.
<PAGE>
Series A Preferred Stock
The Company has designated 400,000 shares as "Series A Preferred Stock".
The Company shall issue to Corp. one share of the Series A Preferred Stock for
every share of Common Stock issued upon the exercise of (a) the Corp. Warrants,
(b) Warrants issued in this Offering or (c) the exercise of the Underwriter's
over-allotment option. No shares of Series A Preferred Stock have been issued.
The shares of the Series A Preferred Stock shall have the right to vote
with the shares of Common Stock at all meetings of the shareholders of the
Company, or consent in writing in lieu of voting, or otherwise, in respect to
any matter upon which the vote, or consent in lieu of voting of the shareholders
is required, including without limitation the election of directors. Each share
of Series A Preferred Stock shall be entitled to ten (10) votes.
At such times as there are shares of Series A Preferred Stock outstanding,
the board of directors shall be comprised of such odd number of directors as
shall be fixed by the board of directors or as stated in the Company's
certificate of incorporation; provided however that such number of directors
shall not be less than three (3) nor more than fifteen (15).
The shares of Series A Preferred Stock shall not be entitled to receive or
earn any dividends or preference upon liquidation. The shares of Series A
Preferred Stock then issued and outstanding shall be deemed canceled and no
longer designated, issued or outstanding upon the happening of the expiration of
the Warrants. The shares of Series A Preferred Stock are not redeemable by the
Company.
Warrants
Each warrant gives the holder the right to purchase one share of the
Company's Common Stock, subject to adjustment in certain events at an initial
price of $3.00 per share until August 8, 2000. The Warrants are redeemable by
the Company at any time upon thirty (30) days' notice at a redemption price of
$.05 per Warrant, provided that the closing bid quotation of the Common Stock
for each of the twenty (20) trading days ending on the third day prior to the
day on which the Company gives notice has been at least 150% of the then
effective exercise price of the Warrants. The Company may elect to redeem the
Warrants at such time as the Company requires additional capital. Redemption of
the Warrants could force the holders to exercise the Warrants and pay the
exercise price at a time when it may be disadvantageous for the holders to do
so, to sell the Warrants at the then current market price when they might
otherwise wish to hold the Warrants, or to accept the redemption price, which is
likely to be substantially less than the market value of the Warrants at the
time of redemption. The Company will not redeem the Warrants at any time in
which its registration statement is not current, so that investors will be able
to exercise their Warrants during the 30 day notice period in the event of a
warrant redemption by the Company.
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of each Warrant are subject to adjustment in certain events,
including the issuance of a stock dividend to holders of Common Stock, or a
combination, subdivision or reclassification of Common Stock. No fractional
shares will be issued upon exercise of Warrants, but the Company will pay the
cash value of the fractional shares otherwise issuable.
Notwithstanding the foregoing, in case of any consolidation, merger,
sale or conveyance of the property of the Company as an entirety or
substantially as an entirety, the holder of each outstanding Warrant shall
continue to have the right to exercise the Warrant for the kind and amount of
shares and other securities and property (including cash) receivable by a holder
of the number of shares of Common Stock for which such Warrants were exercisable
immediately prior thereto.
Holders of Warrants are not entitled, by virtue of being such holders,
to receive dividends or to consent or to receive notice as shareholders in
respect of any meeting of shareholders for the election of directors of the
Company or any other mater, or to vote at any such meeting, or to exercise any
rights whatsoever as shareholders of the Company.
<PAGE>
The Warrants may not be exercisable at any time this Prospectus shall not
be deemed to be current. If this Prospectus is deemed no current, prior to the
exercise of any Warrants, the Company must file a Post-Effective Amendment to
the registration statement of which this Prospectus forms a part, and such
Post-Effective Amendment must be declared effective by the Commission. The
Company will notify all Warrantholders and its transfer agent that the Warrants
may not be exercised in the event that a Post-Effective Amendment has not been
declared effective on or before such date so as to prevent the Warrants from
being exercised in the absence of a current, effective Registration Statement.
In the event the Company reduces the exercise price or extends the
exercise period of the Warrants, the Company will undertake the notification
filing provisions herein referred to with respect to notification of
Warrantholders and the filing of a Post-Effective Amendment. No such changes are
currently contemplated by the Company.
Special Warrant
The "Special Warrant" is a warrant issued to Corp. in connection with the
issuance and sale of the Securities in the Company's initial offering. upon the
consummation thereof. The Special Warrant is not transferable by Corp. and
neither the Special Warrant nor the underlying shares of Common Stock upon
exercise will be in registered form. The following statements are summaries of
certain provisions of the "Special Warrant Agreement."
The Special Warrant entitles Corp. to purchase one share of Common
Stock at an exercise price of $2.50, during the term when any of the below
referenced warrants are exercisable or if the Company meets the after-tax
earnings specified below. The Special Warrant may only be exercised by Corp. in
the event (i) that Corp.'s ownership of the Company's Common Stock falls below
50%, due to (a) the exercise of the Corp. Warrants, (b) exercise of the Warrants
or (c) the exercise of the Underwriter's ove allotment option; or (ii) the
Company earns, after taxes, in excess of $1,000,000 in each of fiscal 1995, 1996
or 1997, whereby, Corp. would be able to purchase one share for each $2.50 of
after tax earnings in excess of $1,000,000 up to an aggregate of 350,000 shares.
The Special Warrant with respect to the exercise of warrants as described in
(i)(a)-(c) above, may only be exercised to such extent that the number of shares
of Common Stock acquired upon its exercise shall increase Corp.'s ownership of
the Company's Common Stock to no more than 50.1% of the issued and outstanding
shares of Common Stock at the date of exercise. On September 1, 1995, in
conjunction with the underwriter of the Company's public offering exercising its
over-allotment option to purchase 91,850 additional shares of the Company's
Common Stock, the Corp. exercised its Special Warrant and purchased 5,665 shares
of the Company's Common Stock at $2.50 per share.
22
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 11, 1995, the Company paid One Carnegie $50,000 on behalf of
MD, a wholly owned subsidiary of Corp., for fabrication services performed by
MD. Such payment was treated as payment on account by the Company to MD. From
July 1995 to October 1995 the Company paid MD approximately $183,000 for the
labor associated with the fabrication of steel.
On September 1, 1995, in conjunction with the underwriter of the
Company's public offering exercising its over-allotment option to purchase
91,850 additional shares of the Company's Common Stock, the Company exercised
its Special Warrant and purchased 5,665 shares of the Company's Common Stock at
$2.50 per share.
During the year ended June 30, 1996, the Company purchased from Waldorf
approximately $180,333 of fabricated steel. Such amount paid to Waldorf
represented approximately 18% of the steel purchased by the Company for the year
ended June 30, 1996. Waldorf is wholly owned by Joseph Polito.
During the three months ended September 30, 1997 and 1996 and for the
years ended June 30, 1997 and 1996, the Company paid $35,000, $166,000, $371,321
and $622,050, respectively, to MD for certain materials and labor necessary to
perform steel erection services.
During the years ended June 30, 1997 and 1996, the Company paid $214,000
and $163,000, respectively, to Crowne Crane, Inc. for leasing of cranes
necessary to perform steel erection services. Mr. Polito owns 50% of Crowne
Crane, Inc.
During the year ended June 30, 1997, the Company paid $35,000 to Atlas Gem
Leasing, Inc. for certain machinery necessary to perform steel erection
services. Atlas Gem Leasing, Inc. is wholly owned by Joseph Polito.
On March 25, 1997, the Company issued 125,000 shares of Common Stock to Mr.
Polito upon exercise by Joseph Polito of an option to purchase 125,000 shares at
an exercise price of $1.10 per share, which option was granted under the
Company=s Management Plan in December 1996. In February 1997, a Form S-8
Registration Statement was filed with the Securities and Exchange Commission,
registering the sale of the shares underlying the option. On April 11, 1997, Mr.
Polito sold 60,000 of these shares.
On June 19, 1997, the Company was in arrears in the amount of $480,000
in payments due under its lease with RSJJ. The Company leases its administrative
office space and certain storage space from RSJJ, a corporation owned by Joseph
Polito. In accordance with a signed lease agreement which expires on March 31,
1998 the Company pays rent in the amount of $20,000 per month. This arrearage
was converted into equity as follows: the Company issued 270,000 shares of
Common Stock to Corp., for the cancellation of the debt owed, which in turn
issued 200,000 shares of Corp.'s common stock to Mr. Polito and 150,000 shares
of Corp. common stock to RSJJ, who in turn then transferred all of its shares to
RSJJ=s mortgagor, who agreed to accept said shares as payment of RSJJ's
outstanding mortgage.
See "Executive Compensation" for information regarding management=s
compensation.
23
<PAGE>
LEGAL OPINIONS
Legal matters relating to the shares of Common Stock and Warrants will
be passed on for the Company by its counsel, Klarman & Associates, New York, New
York.
EXPERTS
The financial statements of the Company as of and for the years ended
June 30, 1997 and 1996 have been audited by Scarano & Tomaro, P.C., Independent
Certified Public Accountants, to the extent and for the period set forth in
their report appearing elsewhere herein and are included in reliance upon such
report given upon the authority of that firm as experts in giving said reports.
In July 1997, Scarano & Tomaro, P.C. was formed and is considered a successor
firm of Scarano & Lipton, P.C. for auditing purposes, which firm has executed
the report referenced above and consent annexed hereto.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 under the Securities Act of
1933, as amended, with respect to the shares of Common Stock and Warrants to
which this Prospectus relates. As permitted by the rules and regulations of the
Commission, its Prospectus does not contain all of the information set forth in
the Registration Statement. For further information with respect to the Company
and the Shares and Warrants offered hereby, reference is made to the
Registration Statement, including the exhibits thereto, which may be copied and
inspected at the Public Reference Section of the Commission at its principal
office at 450 Fifth Street, N.W., Washington, D.C., 20549.
24
<PAGE>
U.S. BRIDGE OF N.Y., INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
<S> <C>
Independent auditors' report F-1
Balance sheets as of September 30, 1997 (unaudited)
and June 30, 1997 F-2
Statements of operations for the three months ended September 30, 1997 and 1996
(unaudited) and for the years ended June 30,
1997 and 1996 F-3
Statement of stockholders' equity for the three months ended September 30, 1997
(unaudited) and for the years ended
June 30, 1997 and 1996 F-4
Statements of cash flows for the three months ended September
30, 1997 and 1996 (unaudited) and for the years ended June 30, 1997 and 1996 F-5
Notes to financial statements F-6 - F-17
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of U.S. Bridge of N.Y., Inc.
We have audited the accompanying balance sheet of U.S. Bridge of N.Y., Inc.
(the "Company") as of June 30, 1997 and the related statements of operations,
stockholders' equity and cash flows for the years ended June 30, 1997 and 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with the generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of June 30, 1997, and the results of its operations and cash flows
for the years ended June 30, 1997 and 1996 in conformity with generally accepted
accounting principles.
Scarano & Tomaro, P.C.
Syosset, New York
October 4, 1997
<PAGE>
U.S. BRIDGE OF N.Y., INC.
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
September 30, June 30,
1997 (unaudited) 1997
Current assets:
<S> <C> <C>
Cash ............................................. $ 459,426 $ 554,025
Cash, restricted ................................. 216,949 214,001
Contracts and retainage receivable, net .......... 10,904,882 8,943,147
Costs and estimated earnings in excess of billings
on uncompleted contracts ........................ 2,426,790 2,225,723
Deferred tax asset ............................... 236,475 239,750
Other current assets ............................. 239,144 80,727
----------- -----------
Total current assets ......................... 14,483,666 12,257,373
Other assets ......................................... 23,743 21,445
----------- -----------
Seeaaccompanying notes to financial statements ....... $14,507,409 $12,278,818
=========== ===========
</TABLE>
<PAGE>
U.S. BRIDGE OF N.Y., INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
For the three months ended For the years ended
September 30, June 30,
1997 1996 1997 1996
------------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Contract revenue ....................... $ 8,918,385 $ 3,147,941 $ 15,455,699 $ 7,091,396
Cost of contract revenue ............... 7,541,175 2,254,387 11,167,130 5,197,215
----------- ------------ ------------ ------------
Gross profit ........................... 1,377,210 893,554 4,288,569 1,894,181
Expenses:
General and administrative ......... 590,697 487,432 2,342,309 2,121,007
Bad debt expense ................... -- -- 1,287,000 1,019,127
------------ ------------ ------------ ------------
Total expenses ................. 590,697 487,432 3,629,309 3,140,134
------------ ------------ ------------ ------------
Income (loss) from operations
before other income (expense)
and provision (benefit) for
income taxes .......................... 786,513 406,122 659,260 (1,245,953)
Other income (expenses):
Interest expense ................... -- -- (43,341) (19,285)
Unusual item (Note 6) .............. -- -- -- (441,863)
Gain on forgiveness of accounts
payable ........................... -- -- 243,750 --
Interest income .................... 2,948 -- 10,425 27,478
------------ ------------ ------------ ------------
Total other income (expenses) .. 2,948 -- 210,834 (433,670)
Income (loss) before provision (benefit)
for income taxes ...................... 789,461 406,122 870,094 (1,679,623)
Provision (benefit) for income taxes ... 226,950 -- 267,629 (855,250)
------------ ------------ ------------ ------------
Net income (loss) ..................... $ 562,511 $ 406,122 $ 602,465 $ (824,373)
============ ============ ============ ============
Income (loss) per common
equivalent share:
Income (loss) before provision
(benefit) for income taxes ........ $ .34 $ .21 $ .44 $ (.93)
============ ============ ============ ============
Provision (benefit) for income
taxes ............................. $ .10 $ - $ .14 $ (.47)
============ ============ ============
Net income (loss) .................. $ .24 $ .21 $ .30 $ (.46)
============ ============ ============
Weighted average number of shares
outstanding ........................... 2,302,515 1,907,515 1,961,265 1,807,354
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements
<PAGE>
NOTE 1 - ORGANIZATION
U.S. Bridge of N.Y., Inc. (the "Company") is a New York corporation which
provides steel erection for building, roadway and bridge repair projects for
contractors who have been engaged by private and municipal/governmental clients.
During June 1996, the Company began providing prime contracting (similar to
general contracting services). The Company was incorporated on September 4, 1990
and is a 53.23% owned subsidiary of U.S. Bridge Corp. ("Bridge Corp."). The
Company's President is also the majority stockholder 61% of Bridge Corp. and may
be considered the beneficial owner of the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of presentation - Three months ended September 30, 1997 and 1996
- ----------------------------------------------------------------------
The unaudited interim financial statements for the three months ended
September 30, 1997 and 1996 included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission and, in the opinion of the Company, reflect all adjustments
(consisting only of normal recurring adjustments) and disclosure which are
necessary for a fair presentation. The results of operations for the three
months ended are not necessarily indicative of the results for the full year.
b) Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported as assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. The most significant estimates with regard to these financial statements
relate to the estimating of final construction contract profits in accordance
with accounting for long-term contracts and estimating potential liabilities in
conjunction with certain contingencies and commitments. Actual results could
differ from these estimates.
c) Cash and cash equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of six months or
less to be cash equivalents. The Company at September 30, 1997 and June 30, 1997
maintains its cash deposits in accounts which are in excess of federal deposit
insurance corporation limits by $204,708 and $244,625, respectively.
As of September 30, 1997 and June 30, 1997 the Company maintains $216,949
and $214,001, respectively, of restricted cash securing a credit line from a
financial institution on behalf of Bridge Corp.
<PAGE>
U.S. BRIDGE OF N.Y., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont=d)
d) Contracts and retainage receivable
Contracts receivable include receivables which represent amounts billed but
uncollected on completed construction contracts and construction contracts in
progress and unbilled retainage on completed and in progress construction
contacts.
The Company utilizes the allowance method for recognizing the
collectibility of its contracts receivable. The allowance method recognizes bad
debt expense based on a review of the individual accounts outstanding based on
the surrounding facts and estimates made by management.
e) Revenue recognition
The Company 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. 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.
f) Earnings (loss) per common share
Earnings (loss) per common share for the three months ended September 30,
1997 and 1996 and for the year ended June 30, 1997 and 1996 are based upon the
weighted average number of common stock outstanding during the respective
periods.
<PAGE>
U.S. BRIDGE OF N.Y., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont=d)
g) Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" which
requires the use of the "liability method" of accounting for income taxes.
Accordingly, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. In addition, future tax benefits, such as
net operating loss carryforwards, are recognized currently to the extent such
benefits are more likely than not to be realized as an economic benefit in the
form of a reduction of income taxes in future years. Current income taxes are
based on the respective periods= taxable income for Federal, State and City
income tax reporting purposes.
h) Fair value disclosure as of June 30, 1997
The carrying value of cash, contract and retainage receivable, accounts
payable, and accrued expenses, and payroll taxes payable are a reasonable
estimate of their fair value.
i) Balance sheet classifications
The Company includes in current assets and liabilities amounts receivable
and payable under construction contracts which may extend beyond one year. A
one-year time period is used as the basis for classifying all other current
assets and liabilities.
j) Impact of recently issued accounting standards
During 1995, SFAS No. 123, AAccounting for Stock-based Compensation" was
issued. The statement requires the fair value of stock options and other
stock-based compensation issued to employees to be either included as
compensation expense in the income statement, or the pro-forma effect on net
income and earnings per share to be disclosed in the footnotes to the financial
statements commencing in 1996. The Company has elected to adopt SFAS No. 123
effective July 1, 1995.
k) Reclassifications
Certain reclassifications have been made to the September 30, 1996 and June
30, 1996 financial statements in order to conform to the September 30, 1997 and
June 30, 1997 presentation.
<PAGE>
U.S. BRIDGE OF N.Y., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED
NOTE 3 - CONTRACTS AND RETAINAGE RECEIVABLE
Contract and retainage receivable consist of the following at:
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
<S> <C> <C>
Contracts in progress $ 6,003,052 $ 5,087,169
Completed contracts 5,057,991 4,920,134
Unbilled retainage on completed and in
progress contracts 2,102,839 1,222,844
--------------- ---------------
13,163,882 11,230,147
Less: allowance for doubtful accounts (2,259,000) (2,287,000)
---------------- ---------------
$ 10,904,882 $ 8,943,147
=============== ===============
</TABLE>
NOTE 4 - CONTRACTS IN PROGRESS
Costs and estimated earnings in excess of billings and billings in excess
of costs and estimated earnings on uncompleted contracts consist of the
following at:
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
<S> <C> <C>
Costs incurred on uncompleted contracts $ 21,070,977 $ 14,025,808
Profits earned to date 5,587,216 4,190,473
--------------- ---------------
26,658,193 18,216,281
Less: billings to date (24,345,387) (16,117,013)
--------------- ---------------
$ 2,312,806 $ 2,099,268
=============== ===============
Included in the accompanying balance sheet under
the following captions at:
September June
30, 1997 30, 1997
-------------------- -----------
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 2,426,790 $ 2,225,723
Billings in excess of costs and estimated
earnings on uncompleted contracts (113,984) (126,455)
-------------- -----------------
$ 2,312,806 $ 2,099,268
=============== =============
</TABLE>
<PAGE>
U.S. BRIDGE OF N.Y., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED
NOTE 5 - BACKLOG
The following schedule summarizes changes in backlog on contracts during
the three months ended September 30, 1997 and the year ended June 30, 1997.
Backlog represents the amount of revenue the Company expects to realize from
work to be performed on uncompleted contracts in progress at year end and from
contractual agreements on which work has not yet begun.
<TABLE>
<CAPTION>
Three
months ended Year ended
September 30, June 30,
1997 1997
<S> <C> <C>
Backlog balance at July 1, 1997 and 1996 $6,088,048 $17,943,400
Change orders to contracts in progress 8,896,118 2,486,885
New contracts during the period - 1,113,462
-------- ---------
14,984,166 21,543,747
Less: contract revenue earned during the (8,918,385) (15,455,699)
period
Backlog balance $ 6,065,781 $6,088,048
============ ==========
</TABLE>
NOTE 6 - PROMISSORY NOTES
On January 16, 1995, an Underwriter commenced and privately offered on a
best-efforts basis, sixteen (16) units of the Company=s securities at a price of
$55,000 per unit. Each unit consisted of a promissory note in the principal
amount of $45,000 bearing interest at 12% per annum, and 10,000 shares of common
stock at $1.00 per share. The 160,000 shares sold in this offering were assigned
a value of 100% of the initial public offering price of $5.00 per share. In
relation to the common stock sold in the offering, the Company recorded deferred
financing costs of $640,000 (160,000 shares at $5.00 per share less original
cost of $1.00 per share). Deferred financing costs were amortized on a monthly
basis until the earlier of March 1996, the due of the related promissory notes,
or the initial public offering of the Company. As a result, at June 30, 1996,
the Company had recorded amortization expense of $441,863. No amortization was
recorded during the three months ended September 30, 1996 and September 30, 1997
or the year ended June 30, 1997. The holders of such shares included their
shares in the Company=s initial public offering. The offering was completed on
March 9, 1995 resulting in all sixteen (16) units being sold netting proceeds to
the Company of approximately $696,851.
<PAGE>
U.S. BRIDGE OF N.Y., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED
NOTE 7 - ACCRUED EXPENSES
Accrued expenses consisted of the following at:
September 30,June 30,
1997 1997
Wages and related union benefits $ 535,642 $ 307,934
Professional fees .............. 3,500 20,000
Accrued insurance expense ...... 737,655 421,885
Accrued interest and penalties . 165,197 165,197
---------- ----------
$1,441,994 $ 915,016
========== ==========
NOTE 8 - INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes". Income taxes are provided for the tax
effects of transactions reported in the financial statements and consist of
taxes currently due plus deferred taxes related primarily to differences between
the financial and tax basis of assets and liabilities. The deferred tax assets
and liabilities represent the future tax return consequences of these temporary
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. The Company's only such significant items
relate to its allowance for doubtful accounts and Section 144 stock issued for
services.
For income tax purposes, the Company reports using a year end of December
31.
The reconciliation of income tax computed at the federal statutory tax rate
to income tax expense is as follows:
<TABLE>
<CAPTION>
For the years ended June 30,
1997 1996
-------------- -----
<S> <C> <C>
Federal statutory income tax rate 34% 34%
Increases (reductions) resulting from:
State and local income taxes net of
federal benefit 13% 13%
Deferred income tax benefit, net
operating losses and other
miscellaneous permanent
differences (16%) 4%_
Effective income tax rate 31% 51%
========= ========
</TABLE>
<PAGE>
NOTE 8 - INCOME TAXES (Cont=d)
The tax effects of significant items comprising the Company's net deferred
tax assets are as follows at June 30, 1997:
<TABLE>
<CAPTION>
<S> <C>
Allowance for doubtful accounts $ 1,073,500
Section 144 restricted stock (114,500)
Less: Valuation allowance (719,250)
--------------
Current portion of deferred tax asset $ 239,750
==============
</TABLE>
The Company has recorded a deferred tax asset with an estimated valuation
allowance of 75% as of June 30, 1997 based on the estimated deductibility of the
above items in the future.
NOTE 9 - STOCKHOLDERS EQUITY
a) Recapitalization
On April 24, 1994, the Company's parent, Bridge Corp., issued 2,820,000
shares of its own common stock to the previous stockholders of the Company in
exchange for all of the Company's outstanding shares.
The acquisition of the Company by Bridge Corp., was treated as a
recapitalization for accounting purposes. Accordingly, after such transaction,
the Company was a wholly-owned subsidiary of Bridge Corp. The Company became a
majority-owned subsidiary of Bridge Corp. as a result of the Company's initial
public offering, the exercise of a special warrant by Bridge Corp. and the
exchange of Bridge Corp., stock for Company stock held by related parties.
b) Initial Public Offering
On August 14, 1995 the Company successfully completed its public offering.
As a result, the Company sold 791,850 shares which included 91,850 shares in
connection with the exercise of the underwriter's over-allotment options and
494,500 warrants which included 64,500 warrants pursuant to the underwriter's
over-allotment option. The Company yielded a total net proceeds of $2,077,903
after deducting underwriter selling expenses and expense allowance, repayment of
bridge loans and promissory notes and related accrued interest to the bridge
lenders and private investors, and the pre-payment of the first two year's
financial consulting agreement with the underwriter. Simultaneously with the
offering, the Company charged all deferred offering costs incurred to additional
paid-in capital which totaled $903,820.
Upon the closing of the sale of the Shares and Warrants offered, the
Company sold to the underwriter individually and not as a representative of the
Underwriters, warrants to purchase 70,000 common shares and 43,000 Warrants
exercisable for a period of four years commencing one year after the IPO
effective date (August 9, 1995) at 120% of the initial offering price.
<PAGE>
NOTE 9 - STOCKHOLDERS EQUITY (Cont=d)
c) Special Warrant
On September 9, 1995, the Company's majority stockholder., Bridge Corp.
purchased at $2.50 per share 5,665 common shares of the Company by exercising
its right pursuant to the terms of a special warrant issued only to such
stockholder in order to maintain an ownership interest above 50%.
d) Issuance of common stock
i) In December 1994, the board of directors adopted the 1994 Senior
Management Incentive Plan (the AManagement Plan@), which was adopted by
shareholder consent. The Management Plan provided for the issuance of up to
150,000 shares of the Company=s Common Stock in connection with the issuance of
stock options and other stock purchase rights to executive officers and other
key employees. During December 1996, the board of directors authorized an
amendment to the Management Plan to increase the amount of stock options
available to 1,000,000.
ii) During February 1997, pursuant to a Form S-8 Registration Statement
filed with Securities and Exchange Commission, the Company registered 125,000
shares of common stock underlying option to issue common stock of the Company to
the Company=s President pursuant to the 1994 Senior Management Incentive Plan.
The options were exercisable at $1.10 per share (110% of the bid price on
November 27, 1996). These options were exercised March 25, 1997 resulting in the
issuance of 125,000 shares of common stock.
iii) During June 1997, pursuant to an agreement with RSJJ Realty Corp.,
(ARSJJ@), (a Company wholly-owned by the Company=s President) the Company issued
270,000 shares of its common stock to RSJJ for settlement of $480,000 of accrued
rent. These shares were then transferred to Bridge Corp. by RSJJ in exchange for
shares in Bridge Corp. These shares have been recorded at the estimated market
value at the date of issuance of $1.75 per share with a 50% haircut due to the
restricted nature of the stock, or $236,750. As a result, the Company has
recorded a gain on the forgiveness of accounts payable of $243,250.
<PAGE>
U.S. BRIDGE OF N.Y., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED
NOTE 10 - COMMITMENT AND CONTINGENCIES
a) Disclosure of significant estimates - revenue recognition
As outlined in the Summary of Significant Accounting Policies, the
Company=s construction revenue is recognized on the percentage of completion
basis. Consequently, construction revenue and gross margin for each reporting
period is determined on a contract by contract basis by reference to estimates
by the Company=s management and engineers of expected costs to be incurred to
complete each project. These estimates include provisions for known and
anticipated cost overruns, if any exist or are expected to occur. These
estimated may be subject to revision in the normal course of business.
b) Lease agreement
The Company leases its administrative offices and storage space pursuant to
a signed lease agreement with RSJJ. Such lease requires monthly payments of
$20,000 and expires on March 31, 1998. Under such lease agreement, the Company
is required to make future minimum lease payments as follows:
<TABLE>
<CAPTION>
September 30, June 30,
Year Ending 1997 1997
----------------------- --------
June 30,
<S> <C> <C> <C>
1998 $ 120,000 $ 180,000
======================= ===========
</TABLE>
Included in general and administrative expenses is rent expense which
amounted to $60,000 for the three months ended September 30, 1997 and 1996 and
$240,000 for the years ended June 30, 1997 and 1996. In addition, pursuant to an
oral agreement the Company leases a yard for storage material with an unrelated
party which requires monthly payments of approximately $3,500. Accordingly,
total rent expense for the three months ended September 30, 1997 and 1996
amounted to $70,500. Total rent expense for the years ended June 30, 1997 and
1996 amounted to $282,000. As of September 30, 1997 and June 30, 1997, $77,000
and $66,500, respectively, of rent remains unpaid and is included in accounts
payable. During June 1997, the Company issued 270,000 shares of its common stock
to settle $480,000 of accrued rent. (See Note 9(d)(iii).)
c) Significant customers and vendors
For the three months ended September 30, 1997 and 1996, the Company had two
and three unrelated customers respectively, which accounted for approximately
99% of total revenues. As of September 30, 1997 and June 30, 1997, approximately
79% and 53% of contracts and retainage receivables are due from three customers.
For the years ended June 30, 1997 and 1996, the Company had three unrelated
customers respectively, which accounted for approximately 86% and 62%,
respectively, of total revenues. As of June 30, 1997 and 1996 approximately 83%
and 89% of contracts and retainage receivables are due from four and three
customers, respectively.
<PAGE>
U.S. BRIDGE OF N.Y., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED
NOTE 10 - COMMITMENT AND CONTINGENCIES (Cont=d)
d) Seasonality
The Company operates in an industry which may be seasonal, generally due to
inclement weather occurring during the winter months. Accordingly, the Company
may experience a seasonal pattern in its operating results with lower revenue in
the third quarter of each fiscal year. Quarterly results may also be affected by
the timing of bid solicitations by governmental authorities, the stage of
completion of major projects and revenue recognition policies.
e) Bonding requirements
The Company is required to provide bid and/or performance bonds in
connection with governmental construction projects. To date, the Company has
been able to sufficiently obtain bonding for its private projects. The Company
is continuously pursuing obtaining bonding for its governmental construction
projects. In addition, new or proposed legislation in various jurisdictions may
require the posting of substantial additional bonds or require other financial
assurances for particular projects.
f) Mechanics liens
As of June 30, 1997, three actions to foreclose upon mechanics liens filed
during the fiscal year were commenced. Such actions seek relief in the amount of
$3,278,775.
g) Legal Proceedings
i) During January 1997, an action was commenced by the Ohio Bridge
Corporation (AOhio@) against the Company. Ohio claims that the Company has
infringed its trademark AU.S. Bridge@. During August 1997, the Company agreed to
effect a name change to AUSA Bridge Construction of NY@ before the end of the
1997 calendar year.
ii) The Company is a party to various claims and legal proceedings
incidental to its business. In management=s opinion, the outcome of these claims
and proceedings will not have a material adverse effect on the financial
statements of the Company taken as a whole.
h) Payroll taxes
As of September 30, 1997 and June 30, 1997, the Company owes approximately
$2,042,336 and $1,349,225, respectively of payroll taxes and related penalties
and interest. Although as of June 30, 1997, the Company has not entered into any
formal repayment agreements with the respective tax authorities, it has been
making monthly payments based on oral agreements.
<PAGE>
U.S. BRIDGE OF N.Y., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED
NOTE 11 - RELATED PARTY TRANSACTIONS
a) Purchase of material and labor
For the three months ended September 30, 1997 and 1996 and for the years
ended June 30, 1997 and 1996, the Company paid $35,000, $166,000, $371,321 and
$622,050, respectively, to US Bridge Corp. (Maryland) (AUS Bridge MD@) for
materials and labor necessary to perform steel erection services. US Bridge MD
is a wholly-owned subsidiary of Bridge Corp. During September 1996, US Bridge MD
ceased substantially all of its operations and the Company began purchasing
material and labor from unrelated third party steel fabricators. At September
30, 1997 and June 30, 1997, the Company owed US Bridge MD $57,220 and $62,606,
respectively, principally for advances in connection with above services and
such amounts are non-interest bearing and due on demand. Lastly, for the year
ended June 30, 1996 the Company purchased from Waldorf Steel Fabricators, Inc.,
(AWaldorf@) approximately $180,333 of the materials and labor necessary to
perform fabrication services. Effective August 1, 1995 Waldorf ceased
operations. As result, the Company had no purchases from Waldorf during the year
ended June 30, 1997 or the three months ended September 30, 1997 and 1996. Said
vendor is under the common control of the Company's majority stockholder and
President.
b) Rent expense
Included in general and administrative expenses is rent expense paid
pursuant to a signed lease agreement with a company wholly-owned by the
Company's President. Such rent amounted to $60,000 for the three months ended
September 30, 1997 and 1996 and $240,000 for the years ended June 30, 1997 and
1996.
c) Employment agreement
On April 4, 1995, the Company entered into an employment agreement with its
President and Director for a term of approximately three (3) years expiring on
June 30, 1998. The employment agreement provides for an annual salary of
$300,000 with a 10% annual escalation. In addition, the President and Director
has been granted options to purchase 25,000 shares of the Company's common
stock, all of which options shall vest through April 1998. The exercise price of
the options shall be equal to the 110% of the stock price in the initial public
offering. The foregoing options are intended to qualify as incentive stock
options.
d) Due from related parties
During the three months ended September 30, 1997 and 1996 and the years
ended June 30, 1997 and 1996 the Company paid certain expenses on behalf of
Bridge Corp. These advances are non-interest bearing and are due on demand. As
of September 30, 1997 and June 30, 1997 such advances to Bridge Corp. amounted
to $88,566 and $18,566, respectively, and are included in other current assets.
<PAGE>
NOTE 11 - RELATED PARTY TRANSACTIONS (Cont=d)
e) Due to related parties
(i) Since June 1995 the President of the Company has advanced the Company
certain funds. The advances are non-interest bearing and are due on demand. At
September 30, 1997 and June 30, 1997 amounts due to the President amounted to
$82,783 and $225,368, respectively.
(ii) As of September 30, 1997 and June 30, 1997, the Company owes
approximately $140,233 and $96,526, respectively, for advances made by
affiliates and related parties on its behalf. Such advances are non-interest
bearing and are due on demand.
NOTE 12 - SUBSEQUENT EVENT
During November 1997, the Company paid approximately $755,000 of payroll
taxes towards its September 30, 1997 liability.
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING CONTAINED HEREIN, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY STATE TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH AN OFFER. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME
DOES NOT IMPLY THAT THE INFORMATION STATED IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF.
--------------------
TABLE OF CONTENTS
PROSPECTUS SUMMARY............................................
RISK FACTORS..................................................
DIVIDEND POLICY...............................................
DILUTION......................................................
USE OF PROCEEDS...............................................
CAPITALIZATION................................................
BUSINESS......................................................
MANAGEMENT....................................................
PRINCIPAL SECURITYHOLDERS.....................................
DESCRIPTION OF
SECURITIES ...................................................
SHARES ELIGIBLE FOR
FUTURE SALE...................................................
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................
UNDERWRITING..................................................
LEGAL OPINIONS................................................
EXPERTS.......................................................
AVAILABLE INFORMATION.........................................
INDEX TO FINANCIAL STATEMENTS.............................F-0
II-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
As permitted under the New York General Corporation Law, the Company's
Certificate of Incorporation and By-laws provide for indemnification of a
director or officer under certain circumstances against reasonable expenses,
including attorneys fees, actually and necessarily incurred in connection with
the defense of an action brought against him by reason of his being a director
or officer. In addition, the Company's charter documents provide for the
elimination of directors' liability to the Company or its shareholders for
monetary damages except in certain instances of bad faith, intentional
misconduct, a knowing violation of law or illegal personal gain.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to any charter, provision, by-law, contract, arrangement,
statute or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer, or controlling person of the Company in the successful
defense of any such action, suit or proceeding) is asserted by such director,
officer or controlling person of the Company in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 25. Other Expenses of Issuance and Distribution.
Registration Fee $ -
Printing and Engra $ 2,500 (1)
Legal Fees $20,000 (1)
Accounting $ 7,500 (1)
Transfer Agent $ -- (1)
NASD Filing Fees $ --
Miscellaneous $ 2,500 (1)
--------
Total $32,500 (1)
(1) Estimated.
Item 26. Recent Sales of Unregistered Securities.
On June 19, 1997, the Company issued 270,000 shares in accordance with
the cancellation of the debt of $480,000, owed pursuant to the Company's lease.
This transaction was exempt from registration under the Act, in reliance upon
the exemption afforded by Section 4(2) of the Act for transactions not involving
a public offering. The certificate evidencing such sales bear an appropriate
restrictive legend.
Item 27. Exhibits.
All exhibits, except those designated with an asterisk (*), which are
filed herewith have previously been filed with the Commission in connection with
the Company's Registration Statement on Form SB-2, dated August 9, 1995 under
file No. 33-89230-NY (the "SB-2") or as referenced herein and pursuant to 17
C.F.R. '230.411, are incorporated by reference herein. All exhibits which do not
include an * or specific reference are incorporated by reference to the SB-2.
<TABLE>
<CAPTION>
<S> <C>
3.1 - Certificate of Incorporation of the Company filed September 4, 1990.
3.2 - Certificate of Amendment to the Certificate of Incorporation of the Company filed January 31, 1995.
3.3 - By-Laws of the Company.
3.3 - Specimen Common Stock Certificate.
4.1 - Specimen Redeemable Common Stock Warrant Certificate.
4.3 - Form of Redeemable Common Stock Warrant Agreement between the Company and Continental Stock Transfer &
Trust Company.
4.4 - Form of Special Warrant.
4.6 - U.S. Bridge Corp. note issued in January 1995.
4.7 - Form of Promissory Note sold in Private Placement in March 1995.
4.8 - Stock option and Agreement issued to Joseph Polito.
5.0 - Opinion of Klarman & Associates.
10.2 - Stock Purchase Agreement between Corp. and the Company.
10.3 - Employment Agreement of Joseph Polito
10.4 - Lease Agreement between the Company and R.S.J.J. Realty Corp.
10.5 - The Company Incentive Stock Option Plan
10.6 - Agreement between Iron Workers Local Union 40 and the Company.
10.7 - Agreement between Local Union 14, 14B, 15, 15A, 15C, 15D, International Union of Operating Engineers,
AFL-CIO and the Company.
10.8 - Agreement between Local 780 and the Company.
10.9 - Subcontractor agreement between the Company and McKay Enterprises, Inc., with respect to the
reconstruction of 4th Avenue Bridge.
10.10 - Subcontractor agreement between the Company and Perini Corporation, with respect to the rehabilitation of
Stillwell Avenue Station on Coney Island.
10.11 - Subcontractor agreement between the Company and Perini Corporation, with respect to the rehabilitation of
39th Street Bridge over L.I.R.R.
10.12 - Subcontractor agreement between the Company and KISKA Construction Corporation-USA, with respect to the
rehabilitation of Robert Mosses Causeway.
10.13 - Agreement between Atlas and the Company pursuant to the sale of contracts.
10.14 - Promissory Note issued to First Bank of the Americas.
10.15 - Subcontractor agreement between the Company and McKay Enterprises, Inc., with respect to the
rehabilitation of the Kosciuszko Bridge.
10.17 - Agreement to capitalize the $400,000 debt into 320,000 shares of U.S. Bridge Corp.
10.18 - Subcontractor agreement between the Company and Trataros Construction Inc. (the Williamsburg Houses
project), dated April 11, 1996. (Incorporated by reference to Exhibit 10.18 to Form 10-KSB for the
year ended June 30, 1997.)
10.19 - Subcontractor agreement between the Company and Hannibal Construction Co., Inc. (the "Hellgate Viaduct
Structures project), dated October 30, 1996. (Incorporated by reference to Exhibit 10.19 to Form
10-KSB for the year ended June 30, 1997.)
10.20 - Subcontractor agreement between the Company and N.Y. Iron (the Indonesian Mission project), dated
November 6, 1996. (Incorporated by reference to Exhibit 10.20 to Form 10-KSB for the year ended June
30, 1997.)
10.21 - Prime contractor agreement between the Company and Eklec Co. (the Palisades Power Mall project), dated
June 17, 1996. (Incorporated by reference to Exhibit 10.21 to Form 10-KSB for the year ended June 30,
1997.)
10.22 - Subcontractor agreement between the Company and Lehrer McGovern, Bovis, Inc. (the Louis Vuitton project),
dated May 15, 1996. (Incorporated by reference to Exhibit 10.22 to Form 10-KSB for the year ended June
30, 1997.)
10.23 - Prime contractor agreement between the Company and Tishman Construction Corporation of New York, dated
July 24, 1996. (Incorporated by reference to Exhibit 10.23 to Form 10-KSB for the year ended June 30,
1997.)
10.24 - Subcontractor agreement between the Company and Humphreys & Harding, Inc. (the Korean Mission project),
dated January 15 1997. (Incorporated by reference to Exhibit 10.24 to Form 10-KSB for the year ended
June 30, 1997.)
23.01* - Consent of Scarano & Tomaro, P.C.
23.02 - Consent of Klarman & Associates, as annexed to Exhibit 5.0.
</TABLE>
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
Post-Effective Amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent Post-Effective
Amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement, including but
not limited to any addition or deletion of a managing Underwriter.
(2) That, for the purpose of determining any liability under the Act, each
such Post-Effective Amendment shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of Post-Effective Amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) That, for the purpose of determining any liability under the Act, each
such Post-Effective Amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company,
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the Securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue by such court. See Item 24.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Corona, New York on the 30th day of January, 1998.
U.S. BRIDGE OF N.Y., INC.
By: \s\ Joseph M. Polito
Joseph M. Polito,
President
Pursuant to the requirements of the Securities Act of 1933 as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Joseph M. Polito President and Director 1/30/98
Joseph M. Polito (Chief Executive Date
Officer)
/s/ Ronald J. Polito Secretary and Director 1/30/98
Ronald J. Polito Date
/s/ Steven J. Polito Treasurer 1/30/98
Steven J. Polito Date
/s/ Philip Neilson Director 1/30/98
Philip Neilson Date
/s/ Marvin Weinstein Director 1/30/98
Marvin Weinstein Date
</TABLE>
Exhibit 23.01 Consent of
Scarano & Tomaro, P.C.
<PAGE>
January 28, 1997
U.S. Bridge of N.Y., Inc.
53-09 97th Place
Corona, New York 11368
We hereby consent to the use of our name "as experts", in the "Summary Financial
Data" section and the use of our opinion dated October 4, 1997 for U.S. Bridge
of N.Y., Inc. to be included in the Post Effective Amendment No. 1 to Form SB-2
Registration Statement being filed for U.S Bridge of N.Y., Inc..
Very truly yours,
Scarano & Tomaro, P.C.
