As filed with the Securities and Exchange Commission on April __, 1998
Registration No. 33-89230-NY
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST EFFECTIVE AMENDMENT NO. 2 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
2303 Camino Ramon, Suite 200
San Ramon, California 94583
(925) 327-6200
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)(a)
Showing the Location In Prospectus of
Information Required by Items of Form SB-2
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<CAPTION>
<S> <C>
Item in Form SB-2 Prospectus Caption
1.Front of Registration Statement and Outside Cover Page and Cover Page of Registration Statement
1. Front Cover Page of Prospectus
2.Inside Front and Outside Back Cover Pages Continued Cover Page, Table of Contents
3. Summary Information and Risk Factors Prospectus Summary, Risk Factors, Summary 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 Management
Control Persons
<PAGE>
11. Security Ownership of Certain Beneficial Owners and
Principal Securityholders
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Opinions, Experts
14. Disclosure of Commission Position on
Securities Act Liabilities Managementiand Item 24. Indemnification
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 and Analysis Management's Discussion and Analysis or Plan of Operations
or Plan of Operation
18. Description of Property Business
19. Certain Relationships and Related Transactions Certain Relationships and Related Transactions
20. Market for Common Equity and Related Stockholder Not Applicable
21. Executive Compensation Management
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Accountants Not Applicable
-iii-
</TABLE>
<PAGE>
Preliminary prospectus subject to completion, dated
April __, 1998
Prospectus
USA Bridge Construction of N.Y., Inc.
3,494,500 shares of Common Stock
In August 1995, USA Bridge Construction of N.Y., Inc. (the
ACompany@) consummated an initial public offering (the AOffering@) wherein (i)
it sold an aggregate of 764,500 shares (the AShares@) of common stock, par value
$.001 per share (the ACommon Stock@) and 494,500 Warrants (includes 64,500
shares and 64,500 Warrants issued upon the exercise of the over-allotment
option; the Shares and Warrants are collectively referred to throughout as
ASecurities@); and (ii) a certain selling securityholder sold 160,000 shares of
Common Stock and 3,000,000 Warrants. 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 Company=s Board of Directors voted to decrease the exercise price of the
Warrants from $6.00 to $3.00. See ADescription 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
(ANasdaq@) under the symbols as follows: AUSBR@ for the Shares and AUSBRW@ for
the Warrants. Quotation on Nasdaq does not imply that a meaningful sustained
market for the Company's Securities has developed or will develop; nor does it
imply that if developed, a meaningful sustained market 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 on the over-the-counter market on the OTC Bulletin
Board. See ARisk Factors.@
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK
TO INVESTORS. SEE ARISK 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 April __, 1998
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
ACommission@) 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 information
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, and should be read in conjunction with, the
detailed information and financial statements appearing elsewhere in this
Prospectus. Statements contained in this Prospectus which are not historical
facts are forward looking statements as defined under the Private Securities
Litigation Reform Act of 1995. These forward looking statements include
statements with respect to plans, projections, or future performance of the
Company and are subject to risks and uncertainties which could cause actual
results to differ materially from those projected.
USA Bridge Construction of N.Y., Inc. (the ACompany@) 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 U.S. Bridge of N.Y., Inc. in January 1995, and on January 12, 1998, it
amended its Certificate of Incorporation to effect a change in its name to its
current name.
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 the 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, the Company 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 December 31, 1997, the Company completed
in excess of twenty (20) projects with an aggregate project value of $39,423,724
and was engaged in three (3) projects with an aggregate value of approximately
$12,752,681. The Company plans to maintain its subcontractor presence in the
steel industry; however, it intends also 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 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 and general contracting bids for some of the roadway
projects in the Metropolitan area and is continuing to submit bids on private
projects as well.
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 an evaluation of the proposals
submitted, the soliciting entity awards the contract to the bidder it deems
appropriate.
The Company shall continue to bid on both private and public sector
projects as a general contractor and a subcontractor. Most of the steel
fabrication projects, both public and private sector, require Bid Bonds and
Payment and Performance Bonds. Rarely do the steel erection projects require
such bonds, and when the Company performs erection and fabrication services
together on a project, typically only the fabrication portion of the job is
bonded. 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.
<PAGE>
In December 1996, for its general contracting projects, the Company
obtained a commitment for a Surety Bond Line of Credit ($10,000,000 single
project limit) from United American Guarantee Company, Ltd. (AUAGC@). This
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 the Company to obtain Performance Bonds and Labor and Material
Bonds for the three subcontracting projects which have required same: the
EklecCo., Grand Central Terminal, and Korean Mission projects. Since New York
State and City agencies require bonds from bonding companies licensed by the
State of New York, however, and UAGC is not a New York licensed bonding company,
the Company is as yet unable to bid as a general contractor on projects for New
York State and City agencies.
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
3
<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 ........... 2,749,182 shares
Warrants Y...YYYY.. 3,494,500
After the Exercise of the Warrants:
Common Stock .......... 6,243,682 shares
Use Of Proceeds ......... The net proceeds from the exercise of any Warrants will be used by the
Company for working capital. See AUse 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 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
ARisk Factors.@
NASDAQ Symbol(2) Common Stock.............USBR
Warrants.....................USBRW
</TABLE>
<PAGE>
(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 1994 Senior Management Incentive Plan (the APlan@),
except for such shares as have been issued under the Plan. See AManagement -
Senior Management Incentive Plan.@
(2) The Company=s Securities are listed on the Nasdaq National Stock Market
(ANasdaq@). Quotation on Nasdaq does not imply that a meaningful, sustained
market for the shares of Common Stock or Warrants has developed 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 ARisk Factors.@
4
<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
six months ended December 31, 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 December 31, 1997 and 1996 is 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
09/30/97 06/30/97 09/30/96 06/30/96
=========================================================================================================================
=========================================================================================================================
Six Months Six Months
Ended Year Ended Ended Year Ended
12/31/97 06/30/97 12/31/96 06/30/96
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$8,918,385 $15,455,699 $3,147,941 $7,091,396
- -------------------------------------------------------------------------------------------------------------------------
Revenues $12,269,286 $15,455,699 $5,774,860 $7,091,396
- -------------------------------------------------------------------------------------------------------------------------
$562,511 $602,465 $406,122 ($824,373)
- -------------------------------------------------------------------------------------------------------------------------
Net Income (loss) $ 626,660 $ 602,465 $ 560,652 $ (824,373)
- -------------------------------------------------------------------------------------------------------------------------
$.24 $.30 $.21 ($.46)
=========================================================================================================================
- -------------------------------------------------------------------------------------------------------------------------
Net Income (loss) per share (1)
$0.27 $0.30 $0.29 $(0.46)
=========================================================================================================================
</TABLE>
<PAGE>
Summary Balance Sheets Data:
<TABLE>
<CAPTION>
=============================================================================================================
June 30 September 30 September 30
- -------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
=============================================================================================================
June 30 December 31 December 31
- -------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$5,645,087 $4,671,526 $6,205,300 $5,021,855
- -------------------------------------------------------------------------------------------------------------
Working Capital $5,645,087 $4,671,526 $ 7,696,016 $ 5,250,969
- -------------------------------------------------------------------------------------------------------------
$12,278,818 $6,223,115 $14,507,409 $7,365,943
- -------------------------------------------------------------------------------------------------------------
Total Assets $12,278,818 $6,223,115 $13,424,363 $ 8,281,214
- -------------------------------------------------------------------------------------------------------------
$6,612,286 $1,532,798 $8,278,366 $2,269,504
- -------------------------------------------------------------------------------------------------------------
Total Liabilities $6,612,286 $1,532,798 $ 7,131,171 $ 3,030,245
- -------------------------------------------------------------------------------------------------------------
$5,666,532 $4,690,317 $6,229,043 $5,096,439
=============================================================================================================
Stockholders' Equity $5,666,532 $4,690,317 $ 6,293,192 $ 5,250,969
=============================================================================================================
</TABLE>
(1) Weighted average number of shares outstanding at December 31, 1997;
December 31, 1996; June 30, 1997; and June 30, 1996 are 2,302,515; 1,907,515;
1,961,265; and 1,807,354, respectively.
5
<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. Although the Company and Mr. Polito have experience as
subcontractors in the erection and fabrication of steel structures, neither has
experience as a general contractor. The Company is expanding its operations and
is seeking projects in its capacity as a general contractor, however. There can
be no assurances that the Company will be able to implement this aspect of its
business plan successfully or that unanticipated expenses, problems, or
difficulties will not result in material delays in the implementation or ability
of the Company to implement such plan.
As general contractor, the Company will contract directly with the owner to
perform an entire project at a set value. The Company will be responsible for
all aspects of the project and will be required to hire and oversee the work of
subcontractors. 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. Though the Company has submitted
general contracting bids on several public and private sector projects, none of
such bids have been accepted.
The Company has, however, commenced two projects as a prime contractor. A
prime contractor is a contractor which performs a specific category of work on a
project. Unlike the general contractor, the prime contractor is responsible for
performance of that category alone, not the entire project. Like the general
contractor, the prime contractor typically contracts directly with the owner or
via the owner=s construction manager acting as agent therefor; thus, unlike the
subcontractor, the prime contractor is responsible exclusively to the owner.
2. Dependence on Bonding; Bonding Requirements. 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. Most government
contracts require bonding. Bids are submitted to the company accepting the bids
together with Bid 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.
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 other factors. 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 Mr. Polito.
3. Inability to Obtain New York State and City Agency Projects as a General
Contractor. New York State agencies require bonds from bonding companies they
have 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; however, as
of the date hereof, it has not been approved by any such company to receive
bonding.
There can be no assurance that the Company 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
ABusiness - The Company,@ A-- The Contract Process; Bidding@ and A-- Insurance
and Bonding.@
6
<PAGE>
4. Risk Associated with Type of Bid. There are two types of bid requests
made by a 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. See
ABusiness - The Contract Process; Bidding.@
5. Amount and Concentration of Construction Projects and Receivables. For
the year ended June 30, 1997, the Company had three unrelated customers, which
accounted for approximately 86% of total revenues. For the six months ended
December 31, 1997, the Company had two unrelated customers, which accounted for
approximately 81% of total revenues. At June 30, 1997 and December 31, 1997,
approximately 83% and 77% of contracts receivables are due from four and three
customers, respectively . 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 effect on the Company's results of
operations. See ABusiness - Work in Progress; Backlog and Concentration of
Customers.@
6. Competition. All aspects of the Company's business are and will continue
to be highly competitive. Many subcontractors and general contractors have
substantially greater personnel and financial resources and sales than those of
the Company. When general 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. Given Joseph Polito=s (and many of his employees=) thirty
plus year presence in the construction industry, the Company believes its name
is readily recognized by virtue of association therewith. As for the Company=s
prior performance, while the Company has operated only since 1993, Atlas Gem
Erectors Co. Inc. (AAtlas Gem@) - a former steel erector subcontractor or prime
contractor for private and governmental construction projects - was incorporated
in 1986 and operated as such until the Company purchased from it, in 1993, six
then existing contracts (Stillwell Avenue, 39th Street Bridge Rehabilitation,
Honeywell Street Bridge, New England Throughway, Lemon Creek and Kosciuszko
Bridge projects) for steel erection services. Mr. Polito was the President,
Director, and sole shareholder of Atlas Gem; thus, his prior performance is
identifiable.
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 solicit bids for bridge and
roadway repair and replacement projects and furnishment and erection of steel
structure for buildings projects - have been established. 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
Risk Factor 13. - ADependence on Management; Ailing Health of Joseph Polito@ and
ABusiness - Competition.@
7. Dependence on Suppliers; Subcontractors; Union Employees. The Company
receives approximately 60% of the steel it requires from Hirschfeld Steel Co.,
Inc. (AHirschfeld@). 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 rents an immaterial
amount of cranes from Crown Crane, Inc. (ACrown@), a company of which Joseph
Polito is a 50% shareholder, and an immaterial amount of generators and other
equipment from Atlas Gem Leasing Inc. (AAGLI@), 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.
<PAGE>
The Company hires skilled steel workers represented by the International
Union of Structural Ironworkers, Locals 40, 361, & 417 and International
Operating Engineers Locals 14, 14B, 15, 15A, 15C, 15D, and 825 and Cement Masons
Local 472 (collectively referred to as the AUnions@). The Company must comply
with agreements wit 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. 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 to 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 that the Company will in
fact be able to attract such subcontractors. As a general contractor, the
Company will be responsible for 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. See ABusiness - Suppliers and Subcontractors@ and A--
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 (AOSHA@), a federal agency which regulates and enforces
the safety rules and standards for the construction industry. It also must
comply with (i) the New York City Department of Buildings, which regulates the
placement and testing of cranes; and (ii) the New York Department of
Transportation which regulates the location of the cranes, vehicular traffic,
and the routing of pedestrian traffic. 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, 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 of which could be substantial, even if the Company exercises due care and
complies 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 on or complete such projects. See
ABusiness - Government Regulations@ and A --Litigation.@
9. Payroll Taxes. As of December 31, 1997, the Company owed withholding
taxes, including estimated penalties and interest, in the approximate aggregate
amount of $1,832,709, to the Internal Revenue Service, New York State, and New
York City. 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.
See AManagement's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources for Plan of Payment.@
<PAGE>
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, USABG Corp., and Joseph Polito. Joseph Polito,
President and a Director, owns approximately 62.8% of the common stock of the
Company's parent, USABG Corp. (ACorp.@). 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.
On consummation of the Offering, a Special Warrant was issued by the
Company to Corp. This Special Warrant entitles Corp. to purchase such number of
shares of the Company's Common Stock, at a purchase price of $2.50 per share, as
allow Corp. to increase its ownership of the Company=s Common Stock in the event
such ownership falls below 50% due to the exercise of the Warrants. The Special
Warrant is exercisable only to the extent that the number of shares of Common
Stock acquired upon its exercise will 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 on the date of exercise. In addition, the Company agreed
to 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 has the right to ten votes on all matters submitted to
a vote of the shareholders. See ADescription of Securities - Series A Preferred
Stock@ and A-- Special Warrant.@
12. Conflicts of Interest. Joseph Polito estimates that he devotes 80% of
his business time to the operations of the Company and a combined 20% to all of
the other companies he owns and operates. Because Mr. Polito is an Officer,
Director, and principal shareholder in other companies, some of which transact
business with the Company, certain issues may pose conflicts of interest, and
decisions made by Mr. Polito with respect to such issues may compromise Mr.
Polito=s 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.
In June 1995, the Board of Directors formed an audit committee which
comprises 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. See AManagement,@ ACertain Relationships and Related
Transactions,@ ABusiness - History@ and ADescription of Securities.@
13. Dependence on Management; Ailing Health of Joseph Polito. The Company
is dependent upon the personal efforts and abilities of Joseph Polito, the
Company's President and the majority shareholder of Corp. (the Company=s
parent). Mr. Polito has been active in the construction industry for in excess
of thirty years and it is through his name and personal and professional
relationships with general contractors that the Company is widely recognized in
the industry. In April 1995, Mr. Polito entered into a three year employment
agreement with the Company: the agreement expires in June 1998. Pursuant to the
terms of the agreement, he is restricted from competing with the Company. Mr.
Polito has agreed to devote 80% of his business time to the operations of the
Company.
<PAGE>
Mr. Polito=s cardiologist and neurologist have diagnosed him with (i)
coronary artery disease, severe angina, significant hypertension, and (ii)
cerebrovascular compromise and recurrent TIA, respectively. These diagnoses are
indicative of a high probability of acute heart attack, stroke, and possibly
sudden death given high levels of stress and anxiety. The threat of such
occurrences has prevented and shall continue to prevent Mr. Polito from
performing certain functions, such as completing full work weeks or working
excessive hours, which would exert too great a physical strain on his health.
Because the relationships forged by Mr. Polito throughout the years in the
industry are a significant factor in the Company=s obtaining projects from
general contractors, the loss of the services of Mr. Polito would adversely
affect the business of the Company. Neither the Company nor Corp. has key-man
insurance on the lives of Mr. Polito or any other Officer or Director. See
AManagement - Employment Agreements.@
14. Indemnification of Officers and Directors. As permitted under the New
York Business 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. 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. See ABusiness - Recent Developments@ and AManagement.@
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 Stock Market under the symbol AUSBR.@ There is no assurance that a
continued regular trading market will develop, or that if one does develop, it
will be sustained for any period of time; therefore, purchasers of the Company=s
Securities may be unable to resell same 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 does develop. The underwriter of the Company's 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 has 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 ADividend Policy.@
17. Increase Public Float Through Shares Available for Resale. A total of
2,749,182 shares of Common Stock have been issued by the Company. 1,225,665 of
such Shares may be deemed Arestricted 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 AShares 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.
<PAGE>
19. Restrictions on Exercise of Warrants; Necessity for Updating
Registration Statement. The Warrants are not exercisable unless, at the time of
their 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
states of residence of the exercising holders 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 (i) the shares could be qualified for
sale in the jurisdictions in which such purchasers reside, or (ii) 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 ADescription of
Securities - Warrants.@
20. Possible delisting of Securities from NASDAQ System; Risks of Low
Priced Stocks. In August 1997, Nasdaq increased its maintenance requirements
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 will thereafter be conducted on
either the Nasdaq SmallCap Stock Market or in the over-the-counter market on the
OTC Bulletin Board. As a consequence of such delisting, an investor may find it
more difficult to dispose, 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 that if developed,
it will be sustained for any period of time.
21. Penny Stock Regulation. Broker-dealer practices in connection with
transactions in Apenny 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.
<PAGE>
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 ADescription of Securities -
Warrants.@
23. 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 Warrants are exercised is
$10,483,500. Any proceeds received from the exercise of the Warrants will be
used for general working capital needs. However, there can be no assurances that
all 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.
<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 sales price quotes as reported by a market maker, during the period from
August 9, 1995 through March 18, 1998. Price quotations reflect prices between
dealers and do not include resale mark-ups, mark-downs, or other fees or
commissions.
<TABLE>
<CAPTION>
Common Stock Warrants
Calendar Period Low High Low High
1996
<S> <C> <C> <C> <C>
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
10/01/97 - 12/31/97 15/16 2 3/4 5/32 11/32
1998
01/01/98 - 03/31/98 1 13/32 3 3/8 5/32 19/32
</TABLE>
In October 1997, the Company=s Board of Directors adopted a resolution
decreasing the exercise price of the outstanding 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. Each Warrant entitles the holder thereof to purchase one share of
the Company's Common Stock, at an exercise price of $3.00 per share, until
August 8, 2000. The Warrants and the Common Stock underlying same are in
registered form pursuant to the terms of a Warrant Agreement executed by and
between the Company and North American Transfer Co., as warrant agent, so that
the holders of the Warrants will receive unrestricted shares of Common Stock
upon their exercise thereof and payment therefor. No value was attributed to the
Warrants as of the date of the decrease in exercise price to $3.00 per share as
the market price of the Common Stock for a substantial period of time prior to
the decrease was less than $3.00 per share.
As of March 31, 1998, 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. As of
March 31, 1998, the number of shares of Common Stock outstanding was 2,749,182.
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 the Board of
Directors based upon the Company=s 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.
7
<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 U.S. Bridge of N.Y., Inc. in
January 1995, and on January 12, 1998, it again amended its Certificate of
Incorporation to effect a change in its name to its current name. Also in
January 1995, 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 ( Athe Preferred Stock@); and (iv) to designate 400,000 shares of the
Company=s Preferred Stock as ASeries A Preferred Stock.@ Also at such time, 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 executed by and between the
Company and Corp. effective as of April 25, 1994, Corp. issued an aggregate of
2,820,000 shares of its common stock to the stockholders of the Company in
exchange for all of said stockholders= shares of Company Common Stock Joseph
Polito, the principal stockholder of the Company, received, in exchange for his
shares of the Company=s Common Stock, 2,380,000 shares of Corp.=s common stock.
Accordingly, the Company became a wholly owned subsidiary of Corp., and Joseph
Polito became an 80% shareholder in the Company. His ownership decreased to
75.4% upon completion of the Offering in August 1995. The AAcquisition@ was
accounted for as a Arecapitalization@ of Corp.
23. 1995 Private Placement
Immediately prior to Corp.=s Acquisition of the Company, the Company
completed a private placement offering of Common Stock, whereupon it sold an
aggregate of 148,200 post-split shares of 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 AAct@), 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 December 31, 1997, the Company had
completed in excess of twenty (20) projects, with an aggregate project value of
$39,423,724, and was engaged in three (3) projects with an aggregate value of
approximately $12,752,681. 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.
<PAGE>
On June 15, 1993, the Company purchased, from Atlas Gem Erectors Co., Inc.
(AAtlas 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 completion of its
final project in September 1994, Atlas Gem ceased operations. The Company
purchased Atlas Gem 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.
The Company
The following table lists, as of December 31, 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>
USABG Corp.(2) 1988 Pres./Director 61% Parent Company Queens, NY
R.S.J.J. Realty Corp.(3) 1983 Pres./Director 100% Leases the offices and Queens, NY
storage space to the
Company
Crown Crane, Inc.(3) 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. (3) machines and compressors
to the Company
USA Bridge 1990 Pres./Director 56.8% Provides steel erection Queens, NY
Construction buildings, roadway, and
of N.Y., Inc. (3)(4) bridge repair projects
</TABLE>
(footnotes from previous page)
(1) Except as disclosed hereunder, no company listed is beneficially owned
by another entity; nor does any company have any subsidiaries. No company
listed, except for Corp., has conducted any business operations under any name
except for its corporate name See A-History.@
(2) Incorporated in the State of Delaware. U.S. Bridge Corp. amended its
Certificate of Incorporation to effect a change in its name to USABG Corp. on
January 14, 1998.
<PAGE>
(3) Incorporated in the State of New York.
(4) Joseph Polito, through his ownership of approximately
62.8% of the outstanding shares of the Corp., may be deemed the beneficial
owner of the shares of the Company owned by Corp. The Company amended its
Certificate of Incorporation to effect a change in its name from U.S. Bridge of
N.Y., Inc. to USA Bridge Construction of N.Y., Inc. on January 12, 1998.
Schedule of Completed Projects. Below is a table detailing the projects
completed by the Company since its formation.
Schedule of Completed Contracts as of December 31, 1997
<TABLE>
<CAPTION>
Costs and Estimated
Earnings in Excess
Project Name Contract Amount Contract Date Type of Contract of Billings (1)
- ------------ --------------- ------------- ---------------- --------------------
<S> <C> <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(2) 1,100,000 June 1993 Consulting Agreement
Kosciuszko Bridge 3,034,281 June 1993 Lump-Sum 367,997
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 May 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(3) 543,627 April 1996 Lump-Sum
South Avenue Plaza 286,051 May 1996 Lump-Sum
Hellgate Viaduct Structures 286,080 Oct. 1996 Lump-Sum 69,000
Indonesian Mission
348,000 Nov. 1996 Lump-Sum 108,000
EklecCo 16,711,041 June 1996 Lump-Sum
Others(4) 207,902 N/A N/A
Total 39,423,724 544,997
</TABLE>
<PAGE>
(1) ACosts and estimated earnings in excess of billings,@ represents costs
and profits which were unbilled until after December 31, 1997.
(2) Consulting agreement with John P. Picone, Inc. (APicone@), 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 expenses of the project.
(3) 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.
(4) Total estimated project value of a collection of smaller projects
completed.
Prior to leasing equipment from Crown or AGLI, the Company compares the
costs thereof to those costs it would incur from like companies. The Company
will transact business with Crown and AGLI only on terms which may be considered
similar to the terms it might achieve elsewhere. In connection with such
transactions, the audit committee of the Board of Directors intends to exercise
reasonable judgment and take such steps as it deems necessary under the
circumstances to resolve any specific conflict of interest which may occur and
will determine what, if any, specific measures, such as retention of an
independent advisor, independent counsel, or special committee, may be necessary
or appropriate. The fact that Joseph Polito is an Officer, Director, and
principal shareholder in other companies, including those that transact business
with the Company, opens the potential that there may be conflicts of interest in
decisions made by Joseph Polito, which decisions 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.
Industry Overview
In recent years, there has been 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
is preparing subcontracting and general contracting bids for some of the roadway
projects in the
Metropolitan area and is continuing to submit bids on private projects as
well. These projects positively affect the availability of work in diverse
disciplines in the construction industry: landscaping, concrete, paving, steel,
etc.
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.
The Contract Process; Bidding
The Company obtains its projects primarily through the process of
competitive bidding. In order to be fully apprised of bid solicitations, the
Company (i) subscribes to bid reporting services; (ii) monitors trade journals
including Engineering Record News, Dodge Report, and Brown's Letter, Inc.; (iii)
monitors daily newspapers and real estate publications; (iv) utilizes membership
and networking in affiliated organizations including Allied Building Trades; (v)
maintains contracts with developers and other general contractors; and (vi)
requests notification from various government agencies as to bid solicitations
being requested.
<PAGE>
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.
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 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 and shall continue to seek subcontracting projects. It has,
however, commenced two projects as prime contractor. A prime contractor is a
contractor which performs a specific category of work on a project. Unlike the
general contractor, the prime contractor is responsible for performance of that
category alone, not the entire project. Like the general contractor, the prime
contractor typically contracts directly with the owner or via the owner=s
construction manager acting as agent therefor; thus, unlike the subcontractor,
the prime contractor is responsible exclusively to the owner.
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 that the Company 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.
<PAGE>
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, which terminated in November 1997, and the
Grand Central Terminal and Korean Mission subcontracting projects, which
continue, 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.
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. (AUAGC@) for its general contracting projects. This 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 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.
<PAGE>
UAGC is not a New York licensed bonding company; thus, the Company may be
precluded from working on certain projects. This is not always an issue,
however, as the requirement is sometimes waived (as in the Grand Central
Terminal project) for although general contractors prefer that a subcontractor
be licensed by a New York licensed bonding company, they will waive the
requirement when necessary. In addition, the Company may engage in joint
ventures with other companies who are bonded by a New York licensed bonding
company, thereby allowing it access it might otherwise not have had.
Work in Progress; Backlog and Concentration of Customers
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. The Company
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.
8
<PAGE>
The following is a list of those projects in which the Company was engaged
as of December 31, 1997.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(3)
Contract Date/ Costs incurred/ Costs & Est.
Est. Est. Costs (2) (3) Profit in Backlog Amount
Contract Party/ Contract Completion Type of to Complete % of Job Billings in Excess Excess of at 12/31/97
Project Name Amount Contract Complete of Costs & Profits Billings
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lehrer McGovern,
Bovis, Inc./Grand May 1996 3,045,393
Central Termina1 4,360,000 May 1998 Lump Sum 263,978 92% 566,506 347,928
Tishman 2,539,554
Construction Corp./ 6,197,750 July 1996 Lump Sum 1,253,288 67% 380,408 -- 2,045,258
Louis Vuitton May 1998
N.A.(1)
Humphreys &
Harding, Inc./
Korean Mission (4) Jan 1997 Lump Sum 1,049,394
2,194,931 May 1998 650,537 62% -- 326,044 834,074
Total Signed
Contracts $6,634,341
$12,752,681 $2,167,803 380,408 892,550 3,227,260
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company is prime contractor (similar to general contractor) on this
project.
(2) Completion percentage is as of December 31, 1997 and is based on the
percentage of costs incurred through that date to the estimated cost of the
project.
(3) ACosts and estimated earnings in excess of billings on uncompleted
contracts,@ represents revenues recognized in excess of amounts billed on
respective uncompleted contracts at the end of each period. ABillings in excess
of costs and estimated earnings on uncompleted contracts,@ represents billings
which exceed revenues recognized on respective uncompleted contracts at the end
of each period.
(4) In January 1998, due to unresolved disputes on this project, the
Company received a contract termination letter from the general contractor
thereof.
For the year ended June 30, 1997, the Company had three unrelated customers
which accounted for approximately 86% of total revenues. For the six months
ended December 31, 1997 the Company had two unrelated customers, which accounted
for approximately 81% of total revenues. At June 30, 1997 and December 31, 1997,
approximately 83% and 77% of contracts receivables are due from four and two
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 effect on the
Company's results of operations.
<PAGE>
Seasonality
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.
Suppliers; Subcontractors; Unions
For the year ended June 30, 1997, the Company received approximately 43% of
the fabricated steel it required from USA Bridge Construction Corp. (Maryland)
(AMD,@ formerly U.S. Bridge Corp. (Maryland)), a subsidiary of Corp. MD provided
the Company with fabricated steel until November 1996, at which time MD ceased
operating. Queens County Ironworks and New York Iron, Inc. provided the
remainder of the steel. Since January 1998, the Company has received 60% of its
steel from Hirschfeld. 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. 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, a company of which Joseph Polito is a 50%
shareholder, and rents generators and other equipment from AGLI, 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.
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. 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. Although the Company believes that it will be able to attract
subcontractors for general contracting projects it may obtain, there can be no
assurance that it will be able to do so. In addition, in hiring and overseeing
subcontractors, there may be difficulties of which the Company is not aware.
<PAGE>
Competition
All aspects of the Company's business are, and will continue to be, highly
competitive. The Company is a subcontractor and a general contractor
specializing, but not exclusively, in bridge and roadway repair and replacement
as well as in fabricating and erecting steel structures for buildings. The
Company's competitors are numerous, and many have substantially greater
marketing, financial, bonding, and human resources.
The Company is one of many subcontractors which erect and furnish 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. Given Joseph Polito=s (and
many of his employees=) thirty plus year presence in the construction industry,
the Company believes its name is readily recognized by virtue of their
association therewith. As for the Company=s prior performance, while the Company
has operated only since 1993, Atlas Gem Erectors Co. Inc. (AAtlas Gem@) - a
former steel erector subcontractor or prime contractor for private and
governmental construction projects - was incorporated in 1986 and operated as
such until the Company purchased from it, in 1993, six then existing contracts
(Stillwell Avenue, 39th Street Bridge Rehabilitation, Honeywell Street Bridge,
New England Throughway, Lemon Creek and Kosciuszko Bridge projects) for steel
erection services. Mr. Polito was the President, Director, and sole shareholder
of Atlas Gem; thus, his prior performance is identifiable.
There are approximately five to nine companies against which the Company
competes for subcontracting projects. The number of the subcontracting companies
which may bid for projects for which the Company is also bidding varies widely,
from approximately three such companies to nine. These companies vary in the
number of employees and union laborers they utilize.
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. There are approximately twelve companies against which
the Company competes for general contracting projects. These companies vary in
the number of employees and union laborers they utilize.
Government Regulation
The Company must comply with the Occupational Safety and Health
Administration (AOSHA@), a federal agency which regulates and enforces the
safety rules and standards for the construction industry. It also must comply
with (i) the New York City Department of Buildings, which regulates the
placement and testing of cranes; and (ii) the New York Department of
Transportation which regulates the location of the cranes, vehicular traffic,
and the routing of pedestrian traffic. 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 December 31, 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 is located at 53-09 97th Place, Corona, New York 11368
and 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, expired in March 1998 and was extended until December 31, 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
those which might have been negotiated with unaffiliated landlords..
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.
In February 1998, the Company agreed to issue 106,667 shares of Common
Stock to Corp. as consideration for Corp.=s issuance of its own common stock to
RSJJ in consideration for payment in full of the rent due by the Company to RSJJ
for the period from January 1, 1998 to December 31, 1998. The value of the
shares issued will be recorded at their estimated market value at the date of
issuance of $2.12 per share, with a 50% discount due to the restricted nature of
the stock. The stock was issued in March 1998.
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.
In April 1995, the Company 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) Aarbitrarily 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
<PAGE>
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. This action was initially
scheduled for trial on March 17, 1998; the trial was adjourned to April 13,
1998.
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 Court Associates, Inc. (AOne 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.
23. Claims Against Perini Corporation
Three actions to foreclose upon mechanic=s liens were commenced by the
Company in the last fiscal year.
On February 25, 1997, in New York State Supreme Court, Kings County, the
Company and Metro Steel Structures, Ltd. commenced suit against Perini
Corporation, Metropolitan Transportation Authority, New York City Transportation
Authority, and Fidelity and Deposit Company of Maryland. 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 Aextra@ 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.
On February 26, 1997, in New York State Supreme Court, Queens County, the
Company, Metro Steel Structures, Ltd., and McKay Enterprises, Inc. commenced
suit against Perini Corporation, Department of Transportation of the City of New
York, and Fidelity and Deposit Company of Maryland. 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.
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.
23. Claim Against Kiska Construction
On or about May 13, 1997, in the New York Supreme Court, Suffolk County,
the Company commenced suit against Kiska Construction, the State of New York,
acting through the New York State Comptroller, the New York State Department of
Transportation, and the Seaboard Surety Company. 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 Aextra@ 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.
9
<PAGE>
23. Claim Against EklecCo
On October 14, 1997, the Company filed a mechanic=s lien in the amount of
$13,640,767 against EklecCo (f/k/a Pyramid Company of Rockland). On October 16,
1997, in New York State Supreme Court, Rockland County, EklecCo commenced suit
against the Company seeking to vacate the mechanic=s lien and seeking specific
enforcement of the contract, declaratory relief, damages for slander of title,
and approximately $500,000,000 in damages from the Company for breach of
contract and intentional interference with contractual relations. The lien was
not vacated and on February 9, 1998, EklecCo posted a bond in the amount of
$14,254,730 to secure payment of the Company=s $13,640,747 mechanic=s lien,
interest, and court costs; accordingly, the court granted EklecCo=s motion to
discharge said lien. The court further ordered that discovery be expedited in
this matter. This action is in the discovery phase.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
23. CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 (AAct@) provides a
safe harbor for forward-looking information made on behalf of the Company. All
statements, other than statements of historical facts, which address the
Company=s expectation of sources of capital or which express the Company=s
expectation for the future with respect to financial performance or operating
strategies can be identified as forward-looking statements. Forward-looking
statements made by the Company are based on knowledge of the environment in
which it operates; however, because of the factors previously listed, as well as
other factors beyond the control of the Company, actual results may differ
materially from the expectations expressed in the forward-looking statements.
General
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 the New York State and Metropolitan areas.
Though formed to operate as a general contractor, the Company has operated
primarily as a subcontractor and as a prime contractor on two projects. As of
December 31, 1997, the Company has completed in excess of twenty projects with
an aggregate project value of $39,423,724 and is currently engaged in three (3)
projects with an aggregate value of approximately $12,752,681. The Company plans
to maintain its subcontractor presence in the steel industry; however, it
intends also to focus on obtaining projects as a general contractor.
In December 1996, the Company obtained a commitment for a Surety Bond Line
of Credit ($10,000,000 single project limit) from UAGC for its general
contracting projects. This commitment allows 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 EcklecCo., Grand Central Terminal, and Korean Mission
projects. However, since New York State and City agencies require bonds from
bonding companies licensed by the State of New York and UAGC is not a New York
licensed bonding company, the Company has been unable to bid as a general
contractor on projects for New York State and City agencies. The company has
approached several New York licensed bonding companies, but as of the date
hereof, has not been approved by any company to receive bonding.
Though 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 three months. Interim results may also be affected
by the timing of bid solicitation, the stage of completion of major projects and
revenue recognition policies. For the year ended June 30, 1997 and for the six
months ended December 31, 1997, the Company obtained new contracts valued at
$1,889,000 and $20,000, respectively. The Company did not obtain any material
new contracts for the six months ended December 31, 1997 because it did not
provide the lowest bids for the projects for which it submitted same.
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
<PAGE>
work are reflected during the accounting period in which the facts become
known.
The current asset, Acosts and estimated earnings in excess of billings on
uncompleted contracts,@ represents revenues recognized in excess of amounts
billed on respective uncompleted contracts at the end of each period. The
current liability, Abillings in excess of costs and estimated earnings on
uncompleted contracts,@ represents billings which exceed revenues recognized on
respective uncompleted contracts at the end of each period.
An amount equal to the costs attributable to unapproved change orders and
claims is included in the total estimated revenue when realization is probable
and the amount can be estimated. The Company has elected not to recognize any
portion of the revenue associated with such unapproved change orders and claims
until the amounts have been received or awarded. Claims are amounts in excess of
the agreed contract price which the Company seeks to collect for customer-caused
delays, errors in specifications and designs, contract terminations, or change
orders which are either in dispute or unapproved.
Six months ended December 31, 1997 as compared to the six months ended
December 31, 1996
Contract revenues for the six months ended December 31, 1997 and 1996
amounted to $12,269,286 and $5,774,860, respectively. This net increase,
amounting to $6,494,426 or approximately 112%, is partially a result of the
Company=s backlog as of June 30, 1997 which amounted to approximately
$7,900,000, and the change orders and termination of the EklecCo project. The
change orders for the six months ended December 31, 1997 amounted to
approximately $6,337,489 for EklecCo and a total of $934,000 for the remaining
projects: Grand Central, Louis Vuitton, and Korean Mission. (In January 1998,
due to certain project disputes, the Company received a contract termination
letter from the general contractor for the Korean Mission project.) During the
six months ended December 31, 1997, approximately $7,286,000 (or 59%) of the
revenue recognized during the period was collected. The remaining amounts
uncollected represent retainage expected to be collected within the next one to
two years or amounts which the Company is attempting to collect under mechanic=s
liens. Approximately $965,000 (or 8%) of the revenue recognized was not billed
at December 31, 1997.
During the six months ended December 31, 1997, the Company did not provide
the lowest bids for the projects for which it submitted bids, and thus, obtained
no new contracts during that period. As of December 31, 1997, the Company=s
backlog amounted to approximately $3,227,000. Backlog represents the amount of
revenue the Company expects to realize from work to be performed on uncompleted
contracts in progress and from contractual agreements for which work has not yet
begun.
On October 14, 1997, the Company filed a mechanic=s lien in the amount of
$13,640,767 against EklecCo (f/k/a Pyramid Company of Rockland). On October 16,
1997, in New York State Supreme Court, Rockland County, EklecCo commenced suit
against the Company seeking to vacate a mechanic=s lien filed against EklecCo
and seeking specific enforcement of the contract, declaratory relief, damages
for slander of title, and approximately $500,000,000 in damages from the Company
for breach of contract and intentional interference with contractual relations.
The lien was not vacated, however, and on February 9, 1998, EklecCo posted a
bond in the amount of $14,254,730 to secure payment of the Company=s $13,640,747
mechanic=s lien, interest, and court costs; accordingly, the court granted
EklecCo=s motion to discharge said lien.
The Company=s gross profit for the six months ended December 31, 1997 and
1996 amounted to 18% and 28%, respectively. The decrease in gross profit for the
six months ended December 31, 1997 as compared to the six months ended December
31, 1996 is primarily a result of an overall different mix of contracts with a
lower gross profit percentage. The overall estimated gross profit for the six
months ended December 31, 1997 was approximately 22% as compared to the six
months ended December 31, 1996 whereby the overall estimated averages gross
profit was 27%. Additionally, the effect of change orders and adjustments to
estimated costs, as well as the interruption and termination of certain jobs,
has resulted in reductions of overall gross profit.
<PAGE>
For the six months ended December 31, 1997 and 1996, the Company paid
$35,000 and $337,821, respectively, to MD for material and labor necessary to
perform steel erection services. In November 1996, MD ceased substantially all
of its operations, and the Company began purchasing material and labor from
unrelated third party steel fabricators. At December 31, 1997, the Company owed
MD $47,220, principally for advances in connection with the above services. Such
amounts are non-interest bearing and are due on demand.
Below is a summary of the Company=s billings and collections for the six
months ended December 31, 1997:
<TABLE>
<CAPTION>
Gross contract and Allowances for uncollectibles Net contracts
retainage receivables receivables
<S> <C> <C> <C> <C> <C>
Balances at June 30, 1997 $ 11,230,147 $ 2,287,000 $ 8,943,147
Billings for the six months
ended December 31, 1997 13,380,093 -- 13,380,093
Collections during the
six months ended December
31, 1997 12,325,237 128,000 12,197,237
---------- ------- ----------
Balances at December 31, 1997 $ 12,285,003 $ 2,159,000 $ 10,126,003(1)
========= ========== ==========
</TABLE>
(1) Through March 20, 1998, the Company collected approximately $567,000 or
6% of its net contract receivables. As of December 31 1997, $5,917,454 (or
approximately 58%) of its net receivables is due from the EklecCo project. The
project was to be performed in two phases. The Company commenced work on Phase I
during June 1996. The project was terminated in October 1997, when it was
approximately 98% complete. On October 14, 1997, the Company filed a mechanic=s
lien in the amount of $13,640,767 against EklecCo (f/k/a Pyramid Company of
Rockland), for the EklecCo project. See Business -- Legal Proceedings -- Claim
Against EklecCo.
In addition to the EklecCo lien, the Company has filed various other liens
on certain other projects with net receivables amounting to approximately
$1,954,324. With regards to the remaining receivables, amounting to
approximately $2,260,000 (approximately $725,000 of which represents retainage
that is not expected to be collected within one year), the Company expects to
collect approximately the remaining $1,535,000 during the third and fourth
quarters of fiscal 1998.
As of December 31, 1997, the Company was engaged in three (3) major
projects (Grand Central Terminal, Louis Vuitton, and Korean Mission) with a
total contract value amounting to $12,752,681 whereby the backlog associated
therewith amounted to $3,227,260. The contract receivables associated with these
ongoing projects is approximately $974,000. In January 1998, due to certain
disputes on the Korean Mission project, the Company received a contract
termination letter from the general contractor thereof.
General and administrative expenses have increased by $186,744 (or 17%) to
$1,257,983 for the six months ended December 31, 1997 from $1,071,239 for the
six months ended December 31, 1996. The increase in general administration costs
is mainly attributable to an overall increase of the Company's administrative
salaries associated with the material increase in contract revenue and certain
general corporate overhead.
<PAGE>
For the six months ended December 31, 1997, the Company recorded an
estimated income tax expense of $312,560, whereby for the six months ended
December 31, 1996, no income tax expense was recorded by the Company as a result
of its then net operating tax carryforward which was subsequently utilized.
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 aggregated approximately $3,600,347. Included in contract
revenues are revenues from consulting and profit sharing agreements on certain
projects. Consulting 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. During the year ended June 30, 1997,
approximately $7,469,000 (or 48%) of the revenue recognized was collected.
Approximately $4,643,000 (or 30%) was collected during the subsequent six month
period ended December 31, 1997. The remaining amounts uncollected represent
retainage expected to be collected within the next one to two years or amounts
which the Company is attempting to collect under mechanic=s liens. Approximately
$1,718,000 (or 11%) of the revenue recognized was not billed at June 30, 1997.
As of June 30, 1997, the Company=s 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 fairly constant
between 27% and 28%, respectively.
Below is a summary of the Company=s billings and collections for the year
ended June 30, 1997:
<TABLE>
<CAPTION>
Gross contract and Allowances for Net contracts
retainage receivables uncollectibles receivables
<S> <C> <C> <C> <C> <C>
Balances at June 30, 1996 ................... $ 4,440,391 $ 1,000,000 $ 3,440,391
Billings for the year ended June 30, 1997 ... 15,634,098 1,287,000 14,347,098
Collections for the year ended June 30, 1997 8,844,342 -- 8,844,342
----------- -------------- ------------
Balances at June 30, 1997 ................... $$11,230,147 $ 2,287,000 $ 8,943,147
</TABLE>
As of June 30, 1997, the Company increased its allowance up to $2,287,000
to reserve for the uncollectibility of certain receivables for which mechanic=s
liens were filed. Of the total net contract receivable amounting to $8,943,147,
approximately $1,140,040 was due from the Stillwell project, $1,888,221 was due
from the EklecCo project, $1,312,904 from the Grand Central Project, and
$2,132,035 from Louis Vuitton. 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.
<PAGE>
For the years ended June 30, 1997 and 1996, the Company purchased from
Waldorf Steel Fabricators, Inc. (AWaldorf@), a company wholly owned by Mr.
Joseph Polito (which ceased operations in August 1995), approximately $0 and
$180,333, respectively, of the materials and labor necessary to perform
fabrication services. 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. 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.
Liquidity and Capital Resources
At December 31, and June 30, 1997, the Company's working capital amounted
to $7,696,016 and $5,645,287, respectively. As of December 31, and June 30,
1997, the Company's net contract receivable amounted to $10,126,003 and
$8,943,147, respectively.
Of the $10,126,003 of net contract and retainage receivables as of December
31, 1997 through March 20, 1998, the Company has collected approximately
$567,000 or 5.6%. The collectibility of $7,866,448, which represents the amount
of receivables (net of allowances) associated with mechanic=s liens placed by
the Company on certain jobs, cannot be determined by the Company due to the
surrounding circumstances and the legal process associated in collecting funds
whereby a lien has been placed on a project. The remainder of the receivables is
expected to be collected during the third and fourth quarters of fiscal 1998.
As a result of the slow collection process associated with the above
circumstances, the Company was unable to pay its payroll tax obligations and
rent on a timely basis. Upon the collection or settlement of a major portion of
contracts receivable, the Company=s first priority is to pay down its payroll
tax obligations as much as possible. The accrued and unpaid rent has been
settled by the Company with the Company issuing stock to its landlord, RSJJ, a
company wholly owned by the Company=s President, via its parent Corp.
Net cash provided by operating activities amounted to $934,852 for the six
months ended December 31, 1997. The major components of such provision of cash
was directly attributed to the Company=s income amounting to $626,660 and
increases in accounts receivable net of increases of its payroll taxes payable
and accrued expenses. For the six months ended December 31, 1996, the net cash
used for operating activities amounted to $118,544 which were principally
attributable to increases in account receivables, decreases in costs and
estimated earnings in excess of billings on uncompleted contracts, and increases
in accounts payable.
With regards to investing activities, the Company used $1,030,993 of cash
for the six months ended December 31, 1997. Such cash was used primarily as
advances to Corp. in anticipation of Corp.=s commencement of foreign operations
in Chad. Most of such funds (except for approximately $250,000) were repaid
subsequent to December 31, 1997 from funds acquired by Corp.=s consummation of a
private placement whereby it raised $450,000 for its Chad project.
As of December 31, 1997, the Company owes approximately $1,832,729 of
payroll taxes and related estimated penalties and interest. Although as of
December 31, 1997 the Company has not entered into any formal repayment
agreements with the respective tax authorities, it has been making payments to
same based on oral arrangements negotiated therewith.
<PAGE>
In November 1997, the Company entered into an agreement with the Iron
Workers Locals 40, 361, and 417 Joint Security Funds (the AUnion@) in order to
liquidate $1,750,000 owed for unpaid union dues and benefits. The Company agreed
to pay $75,000 by January 1998 and at least $25,000 monthly commencing March 1,
1998 with interest at 9.5% per annum. As collateral, the Company assigned its
retainage receivable from the EklecCo project as well as $1,750,000 of the
Company=s related mechanic=s lien (which was discharged on the lien-debtor=s
payment of a bond with the court). Upon the distribution of any funds under such
bond, the Union will be repaid any balance it is owed, in full, and the Company
shall receive the remainder thereof. The Company will receive credit for any
payments received by the Union related to the assigned portion of the bond.
Net cash provided by operating activities for the year ended June 30, 1997
amounted to $58,821. The major component of such cash provision was directly
attributed to the Company's income for the year ended June 30, 1997, $387,340,
and increases in accounts receivable net of increases in accounts payable,
payroll taxes payable, and accrued expenses. For the year ended June 30, 1996,
the net cash used for operating activities amounted to $2,122,223, which amount
is principally attributable to increases in accounts receivable and costs and
estimated earnings in excess of billings on uncompleted contracts and accounts
payable.
The Company provided $485,416 in cash from financing activities for the
year ended June 30, 1997. Such cash was provided primarily by advances from
affiliates and officers.
As of June 30, 1997, the Company owed approximately $1,514,422 in payroll
taxes and related penalties and interest. At June 30 ,1997 the breakdown was
$1,198,423 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.
In December 1997, the Company authorized the issuance, in its third fiscal
quarter, of 340,000 shares of Common Stock to management and certain employees
and consultants of the Company. 290,000 of such shares were issued pursuant to
the Company=s Management Plan as follows: 150,000 were issued to the Company=s
President, 70,000 were issued to the Company=s Secretary, and 70,000 were issued
to the Company=s Treasurer. The remaining 50,000 shares were issued to employees
and consultants. The Company also authorized the filing of a Post-Effective
Amendment to the Form S-8 Registration Statement filed in February 1997, wherein
the resale of the aforesaid shares is to be registered.
23. Legal Proceedings
The Company is a party to various claims and legal proceedings incidental
to its business. While the amounts claimed may be substantial, the ultimate
liability cannot now be determined because of the considerable uncertainties
that exist with respect thereto. Accordingly, it is possible that results of
operations or liquidity in a particular period could be materially affected by
certain contingencies. However, based on facts currently available, management
believes that the disposition of matters that are pending or asserted will not
have a materially adverse effect on the financial position of the Company.
23. Claims against and by State Insurance Fund
In April 1995, the Company 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 was
initially scheduled for trial on March 17, 1998; the trial was adjourned to
April 13, 1998.
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.
<PAGE>
23. Claims Against Perini Corporation
On February 25, 1997, in New York State Supreme Court, Kings County, the
Company and Metro Steel Structures, Ltd. commenced suit against Perini
Corporation, Metropolitan Transportation Authority, New York City Transportation
Authority, and Fidelity and Deposit Company of Maryland. The Company=s claim for
relief in this action is $2,199,560. The claim is for labor performed and
materials supplied including money owed under the contract and money due for
Aextra@ 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.
On February 26, 1997, in New York State Supreme Court, Queens County, the
Company, Metro Steel Structures, Ltd., and McKay Enterprises, Inc. commenced
suit against Perini Corporation, Department of Transportation of the City of New
York, and Fidelity and Deposit Company of Maryland. The Company=s claim for
relief in this action is $844,932. 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.
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.
23. Claim Against Kiska Construction
On or about May 13, 1997, in the New York Supreme Court, Suffolk County,
the Company commenced suit against Kiska Construction, the State of New York,
acting through the New York State Comptroller, the New York State Department of
Transportation, and the Seaboard Surety Company. The Company=s claim for relief
in this action is $279,346. The claim is for labor performed and materials
supplied including money owed under the contract and money due for Aextra@ 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.
23. Claim Against EklecCo
On October 14, 1997, the Company filed a mechanic=s lien in the amount of
$13,640,767 against EklecCo (f/k/a Pyramid Company of Rockland). On October 16,
1997, in New York State Supreme Court, Rockland County, EklecCo commenced suit
against the Company seeking to vacate the mechanic=s lien and seeking specific
enforcement of the contract, declaratory relief, damages for slander of title,
and approximately $500,000,000 in damages from the Company for breach of
contract and intentional interference with contractual relations. The lien was
not vacated and on February 9, 1998, EklecCo posted a bond in the amount of
$14,254,730 to secure payment of the Company=s $13,640,747 mechanic=s lien,
interest, and court costs; accordingly, the court granted EklecCo=s motion to
discharge said lien. The court further ordered that discovery be expedited in
this matter. This action is in the discovery phase.
11
<PAGE>
MANAGEMENT
Officers and Directors.
The names, ages, and positions of the Company's Executive Officers and
Directors are as follows: Position with the
<TABLE>
<CAPTION>
Name Age Company
<S> <C> <C>
Joseph M. Polito 63 President and Director
Ronald J. Polito 38 Secretary and Director
Steven J. Polito 35 Treasurer and Director
Marvin Weinstein 66 Director
Ronald Murphy 56 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. (AOne 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 AGLI, 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. (AABMII@), 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.
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.
Ronald Murphy was elected Director of the Company in February 1998. Mr.
Murphy has been a private investigator since 1997. Prior thereto, from 1983 to
1996, Mr. Murphy was involved in the construction industry. From 1993-1996, he
was Field Operations Supervisor for The Steel Institute of New York. From
1983-1993, he was office manager and supervisor for Crown Crane Ltd. and Atlas
Gem Erectors Co., Inc., respectively. Prior to entering the construction
industry, from 1966 to 1982, Mr. Murphy was a New York City police officer.
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. (ADynamic@), 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 Business 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.
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.
12
<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 or 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 -- --
Director ..... 1995 378,000 -- 68,200 -- 25,000
Ronald Polito . 1997 $118,800 - $ 17,194 -- --
Secretary and 1996 125,000 -- 15,144 -- --
Director ..... 1995 121,000 -- 21,200 -- --
Steven Polito . 1997 $ 86,580 - $ 8,572 -- --
Treasurer and 1996 94,000 -- 8,275 -- --
Director ..... 1995 91,575 -- 9,900 -- --
</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 did 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 $10,722, $54,362, and $46,000 in premiums
on life insurance policies of, (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 A -- 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 $3,200 for the years ended June
30, 1997, 1996 and 1995, respectively.
13
<PAGE>
Stock Options
The following table sets forth certain information concerning the grant
of stock options made during the year ended June 30, 1997 under the Company's
1994 Senior Management Incentive Plan.
<TABLE>
<CAPTION>
====================================================================================================================================
Individual Grants
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
% of Total
# of Securities Options/SAR's
underlying Granted to
Options/SAR's Employees in Exercise or Base
Name Granted (1) Fiscal Year Price ($/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 subsequently sold 60,000 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. Employment Agreement
<PAGE>
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 and expires on 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 Incentive
Plan (the AManagement Plan@) which was thereafter approved by shareholder
consent. The Management Plan provides for the issuance of up to 1,000,000 shares
of the Company's Common Stock in connection with the issuance of stock options
and other stock purchase rights to Executive Officers and other key employees.
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 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 Executive Officers 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, Marvin Weinstein, and
Ronald Murphy, though the Management 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 AAdministrator@).
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 Adisinterested persons@ set forth in Rule 16b-3
(ARule 16b-3@) promulgated under the Exchange Act - to the approval of an
auxiliary committee consisting of not less than two individuals who are
considered Adisinterested 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 Achange 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 (AISOs@) or options which do not qualify as ISOs
(Anon-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 (A
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 Apyramiding.@ 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.
In December 1997, the Company authorized the issuance, in its third fiscal
quarter, of 340,000 shares of Common Stock to management and certain employees
and consultants of the Company. 290,000 of such shares were issued pursuant to
the Company=s Management Plan as follows: 150,000 were issued to the Company=s
President, 70,000 were issued to the Company=s Secretary, and 70,000 were issued
to the Company=s Treasurer. The remaining 50,000 shares were issued to employees
and consultants. The Company also authorized the filing of a Post-Effective
Amendment to the Form S-8 Registration Statement filed in February 1997, wherein
the sale of the aforesaid shares is to be registered.
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 (AGeneral
SARs@) or limited SARs (ALimited 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
<PAGE>
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 AChange 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.
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 Arestricted 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 Aretained
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
<PAGE>
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
AApproved Transaction@; (b) a AControl Purchase@; or (c) a ABoard Change.@
An AApproved 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.
A AControl 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 Abeneficial
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 ABoard 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.
PRINCIPAL SECURITYHOLDERS
The following table sets forth information as of March 25, 1998 with
respect to the beneficial ownership of shares of Common Stock by (i) each person
(including any Agroup@ 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.
<PAGE>
<TABLE>
<CAPTION>
Percent of Common
Name and Address Number of Shares Owned Stock Owned (1)
- ---------------- ---------------------- ---------------
`
USABG Corp. (1)(2)
<S> <C> <C>
53-09 97th Place 1,562,332 56.8%
Corona, New York 11368
Joseph M. Polito (2)
c/o USABG Corp.
53-09 97th Place 1,562,332 56.8%
Corona, New York 11368
Steven J. Polito
c/o USABG Corp. 70,000 2.5%
53-09 97th Place
Corona, New York 11368
Ronald J. Polito
c/o USABG Corp. 70,000 2.5%
53-09 97th Place
Corona, New York 11368
Marvin Weinstein
c/o USABG Corp. -- --
53-09 97th Place
Corona, New York 11368
Ronald Murphy
c/o USABG Corp. -- --
53-09 97th Place
Corona, New York 11368
All Officers and Directors
as a group (5 persons) 1,702,332 61.9%
</TABLE>
(footnotes from previous page)
(1) Includes (i) 205,000 shares of Common Stock issued to Joseph M. Polito,
as President of the Company, 55,000 of which shares were issued pursuant to the
exercise of an option granted pursuant to the Management Plan and 150,000 of
which shares were issued pursuant to the Management Plan; and (ii) 25,000 shares
issuable to Mr. Polito upon exercise of a vested option. See ACertain
Relationships and Related Transactions.@
(2) Joseph Polito owns approximately 62.8% of the outstanding shares of
Corp. and may be considered the beneficial owner of the shares of the Company
owned by Corp. Includes 25,000 shares issuable upon exercise of a vested option
granted to Joseph Polito. See ACertain Relationships and Related Transactions.@
14
<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 is qualified in its entirety by reference to
the Company's Certificate of Incorporation and amendments thereto.
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. 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 ADividend 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 provides 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 cannot issue any shares of Preferred Stock, except for the Series A
Preferred Stock, without the consent of the Underwriter. See A-- 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 ASeries A Preferred Stock.@ On
consummation of the Offering, the Company agreed to issue to Corp. one share of
its Series A Preferred Stock for every share of Common Stock issued pursuant to
the exercise of the Warrants. Each share of Series A Preferred Stock has the
right to ten votes on all matters submitted to a vote of the shareholders. 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
In October 1997, the Company=s Board of Directors adopted a resolution
decreasing the exercise price of the outstanding 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. Each Warrant entitles the holder thereof to purchase one share of
the Company's Common Stock, at an exercise price of $3.00 per share, until
August 8, 2000. The Warrants and the Common Stock underlying same are in
registered form pursuant to the terms of a Warrant Agreement executed by and
between the Company and North American Transfer Co., as warrant agent, so that
the holders of the Warrants will receive unrestricted shares of Common Stock
upon their exercise thereof and payment therefor. No value was attributed to the
Warrants as of the date of the decrease in exercise price to $3.00 per share as
the market price of the Common Stock for a substantial period of time prior to
the decrease was less than $3.00 per share.
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.
<PAGE>
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 the Warrants; however, the Company shall
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 matter, or to vote at any such meeting, or to exercise any rights
whatsoever as shareholders of the Company.
The Warrants may not be exercisable at any time this Prospectus shall not
be deemed to be current. If this Prospectus is deemed not 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 ASpecial Warrant@ is a warrant which was issued by the Company to Corp.
on consummation of the Company's Offering of Securities. The Special Warrant is
not transferable by Corp., and neither the Special Warrant nor the underlying
shares of Common Stock upon exercise thereof were in registered form. The
following statements are summaries of certain provisions of the ASpecial Warrant
Agreement.@
This Special Warrant entitles Corp. to purchase such number of shares of
the Company's Common Stock, at a purchase price of $2.50 per share, as allow
Corp. to increase its ownership of the Company=s Common Stock in the event such
ownership falls below 50% due to the exercise of the Warrants. The Special
Warrant is exercisable only to the extent that the number of shares of Common
Stock acquired upon its exercise will 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 on the date of exercise. On September 1, 1995, in
conjunction with the Company=s underwriter=s (of the Offering) exercise of its
over-allotment option to purchase 91,850 additional shares of the Company's
Common Stock, Corp. exercised its Special Warrant and purchased 5,665 shares of
the Company's Common Stock at $2.50 per share.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 six months ended December 31, 1997 and 1996 and for the years
ended June 30, 1997 and 1996, the Company paid $35,000, $337,821, $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 Crown for leasing of cranes necessary to perform
steel erection services. Mr. Polito owns 50% of Crown.
During the six months ended December 31, 1997 and 1996 and the years ended
June 30, 1997 and 1996, the Company paid certain expenses on behalf of Corp. or
advanced funds to it. These advances are non-interest bearing and are due on
demand. As of December 31, 1997 and June 30, 1997, these advances to Corp.
amounted to $1,022,016 and $18,566, respectively.
During the year ended June 30, 1997, the Company paid $35,000 to AGLI for
certain machinery necessary to perform steel erection services. AGLI 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 resale 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 expired on March 31,
1998 but was extended through and until December 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.
In February 1998, the Company agreed to issue 106,667 shares of Common
Stock to Corp. as consideration for Corp.=s issuance of its own common stock to
RSJJ in consideration for payment in full of the rent due by the Company to RSJJ
for the period from January 1, 1998 to December 31, 1998. The value of the
shares issued will be recorded at their estimated market value at the date of
issuance of $2.12 per share, with a 50% discount due to the restricted nature of
the stock. The aforesaid stock was issued in March 1998.
In March 1998, the Company issued 250,000 shares of Common Stock to its
management as follows: 150,000 was issued to Joseph Polito, 70,000 was issued to
Ronald Polito, and 70,000 was issued to Steven Polito. See AExecutive
Compensation@ for information regarding management=s compensation.
Corp. is the sole parent of the Company, holding 1,562,332 shares (or
56.8%) of the Company=s Common Stock (inclusive of (i) 106,667 shares issued in
exchange for 192,000 shares of Corp. common stock issued to RSJJ as part of the
Company=s conversion of lease payments into equity; (ii) 205,000 shares of
Common Stock issued to Joseph M. Polito, as President of the Company, 55,000 of
which shares were issued pursuant to the exercise of an option granted pursuant
to the Management Plan and 150,000 of which shares were issued pursuant to the
Management Plan; and (iii) 25,000 shares issuable to Mr. Polito upon exercise of
a vested option.)
<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
ACommission@) 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.
USA BRIDGE CONSTRUCTION OF N.Y., INC.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
AND
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
POST EFFECTIVE AMENDMENT #2
15
<PAGE>
USA BRIDGE CONSTRUCTION OF N.Y., INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
<S> <C>
Independent auditors' report 61
Balance sheets as of December 31, 1997 (unaudited)
and June 30, 1997 62
Statements of operations for the six months ended
December 31, 1997 and 1996 (unaudited) and for the years
ended June 30, 1997 and 1996 63
Statement of stockholders' equity for the six months ended
December 31, 1997 (unaudited) and for the years ended
June 30, 1997 and 1996 64
Statements of cash flows for the six months ended December 31, 1997 and 1996
(unaudited) and for the years ended
June 30, 1997 and 1996 65 - 66
Notes to financial statements 67-80
</TABLE>
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of USA Bridge Construction of
N.Y., Inc.
We have audited the accompanying balance sheet of USA Bridge Construction
of N.Y., Inc. (Athe 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
17
<PAGE>
USA BRIDGE CONSTRUCTION OF N.Y., INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31, June 30,
1997 (unaudited) 1997
Current assets:
<S> <C> <C>
Cash ...................................................... $ 211,724 $ 554,025
Cash, restricted .......................................... 219,199 214,001
Contracts and retainage receivable, net ................... 10,126,003 8,943,147
Costs and estimated earnings in excess of billings
on uncompleted contracts ................................. 1,437,547 2,225,723
Deferred tax asset ........................................ 224,775 239,750
Due from parent company ................................... 1,022,016 --
Other current assets ...................................... 160,923 80,727
----------- -----------
Total current assets .................................. 13,402,187 12,257,373
Other assets .................................................. 22,176 21,445
----------- -----------
Total assets .................................................. $13,424,363 $12,278,818
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, including cash overdraft
of $21,256 and $119,658, respectively .................... $ 1,162,668 $ 3,392,317
Accrued expenses .......................................... 1,124,688 749,819
Payroll taxes payable ..................................... 1,832,709 1,514,422
Due to related parties .................................... 75,734 321,894
Current portion of long-term obligations .................. 325,000 --
Income taxes payable ...................................... 804,964 507,379
Billings in excess of costs and estimated earnings
on uncompleted contracts ................................. 380,408 126,455
----------- -----------
Total current liabilities ............................. 5,706,171 6,612,286
----------- -----------
Long-term obligations ......................................... 1,425,000 --
----------- -----------
Commitments and contingencies (Note 10) ....................... -- --
Stockholders' equity:
Preferred stock $.01 par value, authorized 500,000 shares,
issued and outstanding -0- ............................... -- --
Common stock $.001 par value, authorized 10,000,000 shares,
issued and outstanding 2,302,515 ......................... 504,047 504,047
Additional paid in capital ................................ 4,459,906 4,459,906
Retained earnings ......................................... 1,329,239 702,579
----------- -----------
Total stockholders' equity ............................ 6,293,192 5,666,532
----------- -----------
Total liabilities and stockholders' equity .................... $13,424,363 $12,278,818
=========== ===========
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
USA BRIDGE CONSTRUCTION OF N.Y., INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
For the six months ended For the years ended
December 31, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Contract revenue ........................... $ 12,269,286 $ 5,774,860 $ 15,455,699 $ 7,091,396
Cost of contract revenue ................... 10,077,282 4,142,957 11,167,130 5,197,215
Gross profit ............................... 2,192,004 1,631,903 4,288,569 1,894,181
Expenses:
General and administrative ............. 1,257,983 1,071,239 2,342,309 2,121,007
Bad debt expense ....................... -- -- 1,287,000 1,019,127
Total expenses ..................... 1,257,983 1,071,239 3,629,309 3,140,134
Income (loss) from operations
before other income (expense)
and provision (benefit) for
income taxes .............................. 934,021 560,664 659,260 (1,245,953)
Other income (expenses):
Interest expense ....................... -- (1,011) (43,341) (19,285)
Amortization of financing costs (Note 6) -- -- -- (441,863)
Gain on forgiveness of accounts
payable ............................... -- -- 243,750
------------
Interest income ........................ 5,199 999 10,425 27,478
Total other income (expenses) ...... 5,199 (12) 210,834 (433,670)
Income (loss) before provision (benefit)
for income taxes .......................... 939,220 560,652 870,094 (1,679,623)
Provision (benefit) for income taxes ....... 312,560 -- 267,629 (855,250)
Net income (loss) .......................... $ 626,660 $ 560,652 $ 602,465 $ (824,373)
Earnings per common share:
Basic:
Net income (loss) .................. $ .27 $ .29 $ .30 $ (.46)
Diluted:
Net income (loss) .................. $ .27 $ .20 $ .25 $ (.46)
Weighted average number of shares
outstanding ............................... 2,302,515 1,907,515 1,961,265 1,807,354
Weighted average number of
shares outstanding - assuming dilution .... 2,302,515 2,787,264 2,416,053 1,807,354
</TABLE>
See accompanying notes to financial statements
<PAGE>
USA BRIDGE CONSTRUCTION OF N.Y., INC.
STATEMENT OF STOCKHOLDERS EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
AND FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Common
stock
Additional Total
paid in Retained stockholders
Shares Amount capital earnings equity
<S> <C> <C> <C> <C> <C>
Balances at July 1, 1995 ........ 1,110,000 $ 502,854 $ 968,306 $ 924,487 $ 2,395,647
Issuance of common stock and
warrants from initial public
offering ....................... 791,850 792 4,007,908 -- 4,008,700
Cost associated with initial
public offering ................ -- -- (903,820) -- (903,820)
Issuance of shares in connection
with exercise of special warrant 5,665 6 14,157 -- 14,163
Net loss for the year
ended June 30, 1996 ............ -- -- -- (824,373) (824,373)
----------- ----------- ----------- ----------- -----------
Balances at June 30, 1996 ....... 1,907,515 503,652 4,086,551 100,114 4,690,317
Issuance of common shares
in connection with the exercise
of options ..................... 125,000 125 137,375 -- 137,500
Issuance of common stock
in connection with settlement
of related party debt .......... 270,000 270 235,980 -- 236,250
Net income for the year
ended June 30, 1997 ............ -- -- -- 602,465 602,465
----------- ----------- ----------- ----------- -----------
Balances at June 30, 1997 ....... 2,302,515 504,047 4,459,906 702,579 5,666,532
Net income for the six
months ended December 31, 1997 . -- -- -- 626,660 626,660
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1997 ... 2,302,515 $ 504,047 $ 4,459,906 $ 1,329,239 $ 6,293,192
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
USA BRIDGE CONSTRUCTION OF N.Y., INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
For the six months ended For the years ended
December 31, June 30,
1997 1996 1997 1996
------- -----------------------------------
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income (loss) .................................... $ 626,660 $ 560,652 $ 602,465 $ (824,373)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Amortization .................................. 3,048 2,327
Amortization of financing costs ............... -- -- -- 441,863
Bad debt expense .............................. -- -- 1,287,000 1,019,127
Deferred income tax benefit ................... 14,975 -- (239,750) --
Gain on issuance of stock ..................... -- -- (243,750) --
Decrease (increase) in:
Contracts and retainage receivable ......... (1,182,856) (3,324,289) (6,789,756) (1,539,045)
Costs and estimated earnings in excess of
billings on uncompleted contracts ........ 788,176 1,361,524 207,801 (607,395)
Other current assets ....................... (80,196) (11,738) (20,415) (11,256)
Increase (decrease) in:
Accounts payable ........................... (479,649) 1,134,370 2,946,778 381,199
Accrued expenses ........................... 374,869 14,597 629,622 (220,934)
Payroll taxes payable ...................... 318,287 152,870 1,061,559 77,274
Income taxes payable ....................... 297,585 -- 507,379 (855,250)
Billings in excess of costs and estimated
earnings on uncompleted contracts ......... 253,953 (8,857) 109,888 16,567
----------- ----------- -----------
Net cash provided by (used for) operating activities . 934,852 (118,544) 58,821 (2,122,223)
----------- ----------- -----------
Cash flows from investing activities:
Advances to parent company ....................... (1,022,016) -- -- --
Increase in restricted cash ...................... (5,198) (756) (10,126) (203,875)
Purchase of fixed assets ......................... (3,779) (5,677) -- --
----------- ----------- -----------
Net cash used by investing activities ......... (1,030,993) (6,433) (10,126) (203,875)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Financing costs incurred ......................... -- -- (35,000) --
Proceeds from (repayments to) officers ........... -- -- 273,181 (5,963)
Proceeds from (repayments to) affiliates ......... -- -- 128,410 (19,784)
Proceeds from (repayments to) related parties .... (246,160) 266,963 118,825 16,752
Proceeds from initial public offering and
exercise of special warrants net of costs ....... -- -- -- 3,222,597
Repayment of notes payable ....................... -- -- -- (972,000)
----------- ----------- -----------
Net cash (used for) provided by financing activities . (246,160) 266,963 485,416 2,241,602
----------- -----------
Net (decrease) increase in cash ...................... (342,301) 141,986 534,111 (84,496)
Cash, beginning ...................................... 554,025 19,914 19,914 104,410
-----------
Cash, ending ......................................... $ 211,724 $ 161,900 $ 554,025 $ 19,914
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
USA BRIDGE CONSTRUCTION OF N.Y., INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
For the six months ended For the years ended
December 31, June 30,
1997 1996 1997 1996
------- ------- ---------------------
Supplemental disclosure of cash flow information:
<S> <C> <C> <C> <C>
Interest paid $ - $ 1,011 $ 21,612 $ 11,342
============ ============= ========= ==============
Taxes paid $ - $ - $ 678 $ 704
============ =========== ====== ==============
Supplemental disclosure of non-cash financing activities:
Issuance of 270,000 shares of common stock in
connection with settlement of related party debt $ - $ - $ 236,250 $ -
============= ============= ========= ==============
Issuance of 125,000 shares of common stock in
connection with exercise of options $ - $ - $ 137,500 $ -
============= ============= ========== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTE 1 - ORGANIZATION
USA Bridge Construction of N.Y., Inc. (the ACompany@) 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. In January 1998, the Company effected a name
change from U.S. Bridge of N.Y., Inc. to USA Bridge Construction of N.Y., Inc.
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 majority-owned subsidiary of USABG Corp. (ACorp.@). The Company's
President is also the majority stockholder of Corp. and may be considered the
beneficial owner of the Company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of presentation - Six months ended December 31, 1997 and 1996
The unaudited interim financial statements for the six months ended
December 31, 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 six 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 three months or
less to be cash equivalents. The Company at December 31, 1997 and June 30, 1997
maintains its cash deposits in accounts which are in excess of federal deposit
insurance corporation limits by $138,035 and $244,625, respectively.
As of December 31, 1997 and June 30, 1997 the Company maintains $219,199
and $214,001, respectively, of restricted cash securing a credit line from a
financial institution on behalf of Corp.
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.
<PAGE>
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 and the
amount can be reasonably estimated. No such costs or revenues have been
recognized during the years ended June 30, 1997 and 1996 or the six months ended
December 31, 1997 and 1996. The Company generally determines a contract complete
pursuant to substantial completion clauses stipulated in each contract.
The current asset, Acosts and estimated earnings in excess of billings on
uncompleted contracts@, represents revenues recognized in excess of amounts
billed on uncompleted contracts at the end of each period. The current
liability, Abillings in excess of costs and estimated earnings on uncompleted
contracts,@ represents billings which in excess of revenues recognized on
uncompleted contracts at the end of each period.
f) Earnings (loss) per common share
Earnings (loss) per common share for the six months ended December 31, 1997
and 1996 and for the year ended June 30, 1997 and 1996 are based upon the
weighted average number of shares of common stock outstanding during the
respective periods. (See Note 12 for additional disclosures).
g) Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, AAccounting for Income Taxes@ which
requires the use of the Aliability 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, accrued expenses, and payroll taxes payable are a reasonable estimate
of their fair value.
i) Balance sheet classifications
In accordance with normal practice in the construction industry, the
Company included in current assets and current liabilities amounts related to
construction contracts receivable and payable over a period in excess of one
year.
In general, contract related receivables and payables other than retainage
receivables are expected to be collected and paid within one year.
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.
<PAGE>
k) Reclassifications
Certain reclassifications have been made to the December 31, 1996 and June
30, 1996 financial statements in order to conform to the December 31, 1997 and
June 30, 1997 presentation.
NOTE 3 - CONTRACTS AND RETAINAGE RECEIVABLE
Contract and retainage receivable consist of the following at:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
<S> <C> <C>
Contracts in progress $ 973,525 $ 5,087,169
Completed contracts 10,554,091 4,920,134
Retainage on completed and
uncompleted contracts 757,387 1,222,844
--------------- ---------------
12,285,003 11,230,147
Less: allowance for doubtful accounts (2,159,000) (2,287,000)
---------------- ---------------
Contracts and retainage receivable, net $ 10,126,003 $ 8,943,147
================ ===============
</TABLE>
The allowance for doubtful accounts was increased to $2,287,000 during the
year ended June 30, 1997 from $1,000,000 at June 30, 1996 to reflect the filing
of mechanic=s liens on certain projects as well as a review of the aging of the
accounts receivable. During the six months ended December 31, 1997, receivables
amounting to $128,000 which were previously reserved were collected. No further
adjustments to the allowance have been deemed necessary by management as of
December 31 and June 30, 1997.
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>
December 31, June 30,
1997 1997
<S> <C> <C>
Costs incurred on uncompleted contracts $ 11,884,787 $ 14,025,808
Profits earned to date 1,293,621 4,190,473
--------------- ---------------
13,178,408 18,216,281
Less: billings to date (12,121,269) (16,117,013)
--------------- ---------------
$ 1,057,139 $ 2,099,268
=============== ===============
</TABLE>
Included in the accompanying balance sheet under the following captions at:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
Costs and estimated earnings in excess of
<S> <C> <C>
billings on uncompleted contracts $ 1,437,547 $ 2,225,723
Billings in excess of costs and estimated
earnings on uncompleted contracts (380,408) (126,455)
------------- ------------
$ 1,057,139 $ 2,099,268
=============== ===============
</TABLE>
<PAGE>
NOTE 5 - BACKLOG
The following schedule summarizes changes in backlog on contracts during
the six months ended December 31, 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. The Company has not included in its
computation of backlog any unapproved change orders or claims unless the
realization is probable and the amount is estimable. No such items meet these
criteria, however, thus same are not included in the following table.
Six months ended Year ended
December 31, June 30,
1997 1997
----------------- -----------
Backlog balance at July 1, 1997 and 1996 ...... $ 6,088,048 $ 17,943,400
Change orders to contracts in progress ........ 9,388,852 1,711,347
New contracts during the period 19,646 1,889,000
15,496,546 21,543,747
Less: contract revenue earned during the period (12,269,286) (15,455,699)
Backlog balance ............................... $ 3,227,260 $ 6,088,048
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, for the year ended
June 30, 1996, the Company recorded the balance of the amortization expense of
$441,863. The Company=s effective interest rate amounted to approximately 235%
when including both the financing costs and interest expense. 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.
NOTE 7 - ACCRUED EXPENSES
<TABLE>
<CAPTION>
Accrued expenses consisted of the following at:
December 31, June 30,
1997 1997
<S> <C> <C>
Wages and related union benefits $ - $ 307,934
Professional fees 9,500 20,000
Accrued insurance expense 1,115,188 421,885
---------------- -----------------
$ 1,124,688 $ 749,819
================ =================
</TABLE>
<PAGE>
NOTE 8 - INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 109, AAccounting 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 provision (benefit) rate 31% (51%)
======= ========
</TABLE>
The tax effects of significant items comprising the Company's net deferred
tax assets are as follows at June 30, 1997:
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
================
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, 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 Corp. was treated as a recapitalization
for accounting purposes. Accordingly, after such transaction, the Company was a
wholly-owned subsidiary of Corp. The Company became a majority-owned subsidiary
of Corp. as a result of the Company's initial public offering, the exercise of a
special warrant by Corp. and the exchange of Corp. stock for Company stock held
by related parties.
<PAGE>
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. The payment of the first two year=s
financial consulting agreement was recorded as a prepaid expense and has been
amortized over the period covered.
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.
c) Special Warrant
On September 9, 1995, the Company's majority stockholder, Corp., purchased,
at $2.50 per share, 5,665 common shares of the Company by exercising its rights
pursuant to the terms of a special warrant issued only to such stockholder in
conjunction with the initial public offering in order to maintain its 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 Management Plan. The options were
granted December 2, 1996 and 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 R.S.J.J. 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 Corp. by RSJJ in exchange for shares
in 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.
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.
<PAGE>
b) Lease agreement
The Company leases its administrative offices and storage space pursuant to
a signed lease agreement with RSJJ. Such lease required monthly payments of
$20,000 and expired on March 31, 1998; in February 1998, however, the lease was
extended through and until December 31, 1998. Under such lease agreement, the
Company is required to make future minimum lease payments as follows (See Note
14(a)(i) for additional information):
Year Ending
June 30,
1998 $ 180,000
================
Included in general and administrative expenses is rent expense which
amounted to $120,000 for the six months ended December 31, 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 six months ended December 31, 1997 and 1996 amounted
to $141,000. Total rent expense for the years ended June 30, 1997 and 1996
amounted to $282,000. As of December 31, 1997 and June 30, 1997, $87,500 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.
c) Significant customers and vendors
For the six months ended December 31, 1997 and 1996, the Company had two
and three unrelated customers, respectively, which accounted for approximately
69% and 12%, and 38%, 30% and 17%, respectively of total revenues. As of
December 31, 1997 approximately 19% and 58% of contracts and retainage
receivables, net of allowances for doubtful accounts, are due from two
customers.
For the years ended June 30, 1997 and 1996, the Company had three and two
unrelated customers respectively, which accounted for approximately 53%, 19% and
15%, and 22% and 28% respectively, of total revenues. As of June 30, 1997
approximately 22%, 21%, 15% and 24% of contracts and retainage receivables, net
of allowances for doubtful accounts, are due from four customers, respectively.
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) Mechanic=s liens
As of June 30, 1997, three actions to foreclose upon mechanic=s liens filed
during the fiscal year were commenced. Such actions seek relief in the amount of
$3,278,775. As of December 31, 1997, additional mechanic=s liens had been filed,
bringing the total relief sought to $16,919,542.
<PAGE>
The mechanic=s liens have been filed in relation to work completed and
billed. Based upon the assessment of management, the Company has recorded on
allowance for doubtful account to adjust the receivables to their estimated
realizable amount.
g) Legal Proceedings
i) The Company is a party to various claims and legal proceedings
incidental to its business. While the amounts claimed may be substantial, the
ultimate liability cannot now be determined because of the considerable
uncertainties that exist with respect thereto. Accordingly, it is possible that
results of operations or liquidity in a particular period could be materially
affected by certain contingencies. However, based on facts currently available,
management believes that the disposition of matters that are pending or asserted
will not have a materially adverse effect on the financial position of the
Company.
h) Payroll taxes
As of December 31, 1997 and June 30, 1997, the Company owes approximately
$1,832,709 and $1,514,422, respectively, of payroll taxes and related estimated
penalties and interest computed on a quarterly basis. 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 payments based on oral
agreements.
i) Accounts payable
In November 1997, the Company entered into an agreement with the Iron
Workers Local 40, 361, and 417 Joint Security Funds (AThe Union@) in order to
liquidate $1,750,000 owed relating to unpaid union dues and benefits. The
Company agreed to pay $75,000 by January 1998 and at least $25,000 monthly
commencing March 1, 1998 with interest at 9.5% per annum. As collateral, the
Company assigned its retainage receivable from a certain project as well as
$1,750,000 of the Company=s related mechanic=s lien. Upon any funds being
released or paid under such mechanic=s lien, The Union will be repaid any
balance owed in full before the Company may receive any funds. The Company will
receive credit for any payments received by The Union to the assigned portion of
the mechanic=s lien.
NOTE 11 - RELATED PARTY TRANSACTIONS
a) Purchase of material and labor
For the six months ended December 31, 1997 and 1996 and for the years ended
June 30, 1997 and 1996, the Company paid $35,000, $337,821, $371,321 and
$622,050, respectively, to USA Bridge Construction Corp. (Maryland) (AMD@) for
materials and labor necessary to perform steel erection services. MD is a
wholly-owned subsidiary of Corp. During September 1996, MD ceased substantially
all of its operations and the Company began purchasing material and labor from
unrelated third party steel fabricators. At December 31, 1997 and June 30, 1997,
the Company owed MD $47,220 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 six months ended December 31,
1997 and 1996. Said vendor is under the common control of the Company's majority
stockholder and President.
<PAGE>
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 $120,000 for the six months ended
December 31, 1997 and 1996 and $240,000 for the years ended June 30, 1997 and
1996. See Note 14(a)(i) for additional information.
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 and which expire April
2000. The exercise price of the options is $5.50 per share. The foregoing
options are intended to qualify as incentive stock options.
d) Due from parent company
During the six months ended December 31, 1997 and 1996 and the years ended
June 30, 1997 and 1996 the Company paid certain expenses on behalf of Corp. or
advanced funds to it. These advances are non-interest bearing and are due on
demand. As of December 31, 1997 and June 30, 1997, such advances to Corp.
amounted to $1,022,016 and $18,566, respectively.
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
December 31, 1997 and June 30, 1997 amounts due to the President amounted to
$946 and $225,368, respectively.
(ii) As of December 31, 1997 and June 30, 1997, the Company owes
approximately $74,788 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 - EARNINGS PER SHARE
<PAGE>
Effective December 31, 1997, the Company implemented Statement of Financial
Accounting Standards No. 128 AEarnings Per Share (AEPS@) (ASFAS #128@). The
following is the reconciliation of the numerators and denominators of the basic
and diluted EPS for the years ended June 30, 1997 and 1996, and for the six
months ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
(Unaudited)
For the six months For the year
ended December 31, ended June 30,
Numerator: 1997 1996 1997 1996
---------- ---------- ---------- ------------ -------
<S> <C> <C> <C> <C>
Net income (loss) $ 626,660 $ 560,652 $ 602,465 $ (824,373)
=========== ============ =========== =================
Denominator:
Computation of basic EPS:
Weighted average common shares
outstanding 2,302,515 1,907,515 1,961,265 1,807,354
============ ========= ============ ==================
Basic EPS .27 .29 .31 (.46)
============= ========= ======= ==========
Computation of diluted EPS:
Weighted average common shares
outstanding 2,302,515 1,907,515 1,961,265 1,807,354
Potentially dilutive shares:
Weighted average shares issuable
under warrants (A)- 872,249 436,124 (C)-
Weighted average shares issuable
under options (B)- (B)7,500 (B)18,664 (C)-
------- --------- --------- -------------
Weighted average shares
outstanding & available 2,302,515 2,787,264 2,416,053 1,807,354
=========== ========= ======== =================
Diluted EPS $.27 $ .20 $ .25 $ (.46)
==== ===== ======= ======
</TABLE>
(A) Shares issuable under warrants, totaling 3,607,500 outstanding during
the six months ended December 31, 1997 were not included in the computation of
diluted EPS since the warrants= exercise price was greater than the average
market price of the common shares.
(B) Shares issuable under options, totaling 7,500 outstanding during the
six months ended December 31, 1996 and 15,000 outstanding during the year ended
June 30, 1997 and the six months ended December 31, 1997 were not included in
the computation of diluted EPS since the options exercise price was greater than
the average market price of the common shares.
(C) In accordance with the provisions of SFAS #128 no potential dilutive
shares have been included in the computation of diluted EPS as the Company has a
loss from continuing operations.
<PAGE>
NOTE 13 - STOCK BASED COMPENSATION
A summary of the status of the Company=s stock options outstanding as of
June 30, 1997 and 1996, and changes during the years then ended on those dates
is as follows:
<TABLE>
<CAPTION>
1996 1997
Weighted Weighted
Average Average
Exercise Exercise
Stock Options Shares Price Shares Price
<S> <C> <C> <C> <C>
Outstanding at beginning of year ... 25,000 5.50 25,000 5.50
Additional options granted ......... 0 N/A 125,000 1.10
Options exercised .................. 0 N/A (125,000) 1.10
Outstanding at end of year ......... 25,000 25,000
Options exercisable at year end .... 7,500 15,000
Weighted average fair value
of options granted during the year $ 0 $ 1.10
</TABLE>
See Note 9(d)(ii) for additional information concerning options granted and
exercised during the year ended June 30, 1997.
NOTE 14 - SUBSEQUENT EVENT
a) Issuance of common stock
i) On February 5, 1998, the Company agreed to issue 106,667 shares of its
common stock to Corp. as consideration to Corp. for issuing shares of its own
stock to RSJJ in consideration for payment in full of the rent due by the
Company to RSJJ for the period from January 1, 1998 to December 31, 1998. The
value of the shares issued will be recorded at their estimated market value at
the date of issuance of $2.12 per share, with a 50% discount due to the
restricted nature of the stock. Accordingly, the Company will record prepaid
rent amounting to $240,000, $127,000 as a gain on prepayment of rent, and
increase in equity amounting to $113,000. The Company issued such stock in March
1998.
ii)In December 1997, the Company authorized the issuance, in its third
quarter, of 290,000 shares of Common Stock, pursuant to the Management Plan, to
its management. The Company authorized the issuance of an additional 50,000
shares to certain of its employees and consultants. Of the 340,000 shares issued
in March 1998, 150,000 were issued to the Company=s President, 70,000 were
issued to the Company=s Secretary, and 70,000 were issued to the Company=s
Treasurer. The Company also authorized the filing of an amended Form S-8
Registration Statement to register the aforesaid 340,000 shares for resale and
to reflect an increase (to 1,000,000 shares) of the shares which may be issued
under the Management Plan. In connection with such issuance, the Company will
record compensation and consulting expense amounting to approximately $510,000
which is based on the average closing bid price of $1.50 per share for the month
of March 1998.
21
<PAGE>
USA BRIDGE CONSTRUCTION OF N.Y., INC.
NOTES TO FINANCIAL STATEMENTS
Information with respect to the six months ended December 31, 1997 and 1996
is unaudited.
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
<PAGE>
II-
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.
<TABLE>
<CAPTION>
Item 25. Other Expenses of Issuance and Distribution.
<S> <C>
Registration Fee $ -
Printing and Engraving $ 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)
</TABLE>
(1) Estimated.
Item 26. Recent Sales of Unregistered Securities.
On consummation of its Initial Public Offering, a Special Warrant was
issued by the Company to Corp. This Special Warrant entitles Corp. to purchase
such number of shares of the Company's Common Stock, at a purchase price of
$2.50 per share, as allow Corp. to increase its ownership of the Company=s
Common Stock in the event such ownership falls below 50% due to the exercise of
the Warrants. The Special Warrant is exercisable only to the extent that the
number of shares of Common Stock acquired upon its exercise will increase
Corp.'s ownership of the Company's Common Stock to no more than 50.1% of the
<PAGE>
issued and outstanding shares of Common Stock on the date of exercise. In
addition, the Company agreed to 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 has the right
to ten votes on all matters submitted to a vote of the shareholders. On
September 1, 1995, in conjunction with the Company=s underwriter=s (of the
Offering) exercise of its over-allotment option to purchase 91,850 additional
shares of the Company's Common Stock, Corp. exercised its Special Warrant and
purchased 5,665 shares of the Company's Common Stock at $2.50 per share.
In June 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.
In March 1998, the Company issued 106,667 shares of Common Stock to Corp.
as consideration for Corp.=s issuance of its own common stock to RSJJ in
consideration for payment in full of the rent due by the Company to RSJJ for the
period from January 1, 1998 to December 31, 1998. The value of the shares issued
will be recorded at their estimated market value at the date of issuance of
$2.12 per share, with a 50% discount due to the restricted nature of the stock.
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 are incorporated herein, pursuant to 17 C.F.R.
'230.411, by reference to the document wherein same were initially filed. 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 - USABG 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.
<PAGE>
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 USABG 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 EklecCo. (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).
10.25* - Agreements, dated November 1997, by and between the Company and The Iron Workers Locals 40, 361 &
417 Joint Security Funds in connection with the EklecCo project.
23.01* - Consent of Scarano & Tomaro, P.C.
23.02 - Opinion of Klarman & Associates, as annexed to Exhibit 5.0.
99.01* - Klarman & Associates Response, dated April 8, 1998, to SEC Letter
</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.
<PAGE>
(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 8th day of April 1998.
USA BRIDGE CONSTRUCTION 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 04/08/98
Joseph M. Polito Chief Executive Officer Date
/s/ Ronald J. Polito Secretary and Director 04/08/98
Ronald J. Polito Date
/s/ Steven J. Polito Treasurer 04/08/98
Steven J. Polito Date
/s/ Marvin Weinstein Director 04/08/98
Marvin Weinstein Date
</TABLE>
