UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______.
Commission File Number 0-27290
KSW, INC.
---------
(Exact name of registrant as specified in its charter)
Delaware 11-3191686
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
37-16 23rd Street, Long Island City, New York 11101
--------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
718-361-6500
------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). YES NO X
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Outstanding at
Class August 12, 2005
----- ---------------
Common stock, $.01 par value 5,470,311
KSW, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED JUNE 30, 2005
---------------------------
TABLE OF CONTENTS
Page No.
- -------------------------------------------------------------------------------------------------
PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 2005 and December 31, 2004 3
Consolidated Statements of Operations -
Three and six months ended June 30, 2005 and 2004 4
Consolidated Statements of Comprehensive Income (Loss) -
Three and six months ended June 30, 2005 and 2004 5
Consolidated Statements of Cash Flows
Six months ended June 30, 2005 and 2004 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 14
Item 4. Controls and Procedures 14
- -------------------------------------------------------------------------------------------------
PART II OTHER INFORMATION
Item 1 Legal Proceedings 14
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 14
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 5 Other Information 15
Item 6 Exhibits 16
- -------------------------------------------------------------------------------------------------
SIGNATURE 17
INDEX TO EXHIBITS 18
2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
--------------------
KSW, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, 2005 December 31, 2004
------------- -----------------
ASSETS (unaudited)
- ------
Current assets:
Cash $ 2,456 $ 2,960
Marketable securities 702 709
Accounts receivable, less allowance
for doubtful accounts of $200 at
6/30/05 and 12/31/04 8,691 4,211
Retainage receivable 2,636 1,988
Costs and estimated earnings in excess of
billings on uncompleted contracts 221 236
Prepaid expenses and other receivables 521 204
----------- -----------
Total current assets 15,227 10,308
Property and equipment, net of accumulated
depreciation and amortization of $1,935 and $1,907
at 6/30/05 and 12/31/04, respectively 93 98
Accounts receivable 2,037 2,037
Deferred income taxes and other 1,470 1,470
----------- -----------
Total assets $ 18,827 $ 13,913
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 6,993 $ 4,906
Retainage payable 1,383 1,021
Accrued payroll and benefits 348 220
Accrued expenses 394 148
Billings in excess of costs and estimated
earnings on uncompleted contracts 2,484 832
----------- -----------
Total current liabilities 11,602 7,127
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, $.01 par value, 25,000,000 shares
authorized, 5,470,311 shares issued
6/30/05 and 12/31/04 54 54
Additional paid-in capital 9,729 9,729
Accumulated deficit (2,605) (3,058)
Accumulated other comprehensive gain :
Net unrealized holding gain on available
for sale securities 47 61
----------- -----------
Total stockholders' equity 7,225 6,786
----------- -----------
Total liabilities and stockholders' equity $ 18,827 $ 13,913
=========== ===========
See accompanying notes to consolidated financial statements.
3
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three Months Three Months Six Months Six Months
Ended June 30, 2005 Ended June 30, 2004 Ended June 30, 2005 Ended June 30, 2004
------------------- ------------------- ------------------- -------------------
Revenues $ 11,552 $ 6,407 $ 21,428 $ 12,838
Cost of revenues 10,424 5,502 19,157 11,426
---------- ---------- ---------- ----------
Gross profit 1,128 905 2,271 1,412
Selling, general and administrative
expenses 832 955 1,809 2,122
---------- ---------- ---------- ----------
Operating income (loss) 296 (50) 462 (710)
---------- ---------- ---------- ----------
Other income :
Interest income, net 3 - 10 -
Gain on sales of marketable
securities 4 9 15 26
---------- ---------- ---------- ----------
Total other income 7 9 25 26
---------- ---------- ---------- ----------
Income (loss) before provision
for income taxes 303 (41) 487 (684)
Provision for income taxes 5 10 34 11
---------- ---------- ---------- ----------
Net income (loss) $ 298 $ (51) $ 453 $ (695)
========== ========== ========== ==========
Income (loss) per common share:
Basic $ .05 $ (.01) $ .08 $ (.13)
Diluted $ .05 $ (.01) $ .08 $ (.13)
Weighted average common shares
outstanding:
Basic 5,470,311 5,470,311 5,470,311 5,470,311
Diluted 5,470,311 5,470,311 5,470,311 5,470,311
4
See accompanying notes to consolidated financial statements
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004
------------- ------------- ------------- -------------
Net income (loss) $ 298 $ (51) $ 453 $ (695)
------- -------- ------- --------
Other comprehensive income (loss)
before tax:
Net unrealized holding gains (losses)
arising during the period 19 9 (10) 26
Less: reclassification adjustment for
gains included in net income (loss) (4) (9) (15) (26)
------- -------- ------- --------
Other comprehensive income (loss)
before tax 15 - (25) -
Income (tax) benefit related to items
of other comprehensive income (loss)
(7) - 11 -
------- -------- ------- --------
Other comprehensive income (loss),
net of tax 8 - (14) -
------- -------- ------- --------
Total comprehensive income (loss) $ 306 $ (51) $ 439 $ (695)
======= ======== ======= ========
5
KSW, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Six Months
Ended June 30, 2005 Ended June 30, 2004
------------------- -------------------
Cash flows from operating activities:
Net income (loss) $ 453 $ (695)
Adjustments to reconcile net income (loss) to
cash used in operating activities:
Depreciation and amortization 28 34
Deferred income taxes 11 -
Realized gain on sales of marketable
securities (15) (26)
Changes in operating assets and liabilities:
Accounts receivable (4,480) 436
Retainage receivable (648) 840
Costs and estimated earnings in
excess of billings on uncompleted contracts 15 291
Prepaid expenses and other receivables (317) (60)
Accounts payable 2,087 (815)
Retainage payable 362 (532)
Accrued payroll and benefits 128 (77)
Accrued expenses 246 (81)
Billings in excess of costs and
estimated earnings on uncompleted contracts 1,652 (914)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (478) (1,599)
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (23) -
Proceeds from sale of marketable securities 153 336
Purchase of marketable securities (156) (340)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (26) (4)
-------- --------
NET DECREASE IN CASH
(504) (1,603)
Cash, beginning of period 2,960 3,156
-------- --------
Cash, end of period $ 2,456 $ 1,553
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 5 $ 7
Income taxes $ 23 $ 11
See accompanying notes to consolidated financial statements.
6
KSW, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Nature of Operations and Basis of Presentation
----------------------------------------------
The Company furnishes and installs heating, ventilating and air conditioning
systems and process piping systems for institutional, industrial, commercial,
high-rise residential and public works projects, primarily in the State of New
York. The Company also serves as a mechanical trade manager, performing project
management services relating to the mechanical trades and as a constructability
consultant. The Company considers itself to be one operating segment.
The unaudited consolidated financial statements presented herein have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the information and note disclosures required by accounting principles
generally accepted in the United States of America. These consolidated
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Form 10-K for the year
ended December 31, 2004.
In the opinion of management, the accompanying unaudited consolidated financial
statements include all adjustments, necessary for a fair presentation of the
financial position of the Company as of June 30, 2005 and December 31, 2004, and
the results of operations, comprehensive income (loss) for the three and six
months ended June 30, 2005 and 2004, and cash flows for six months ended June
30, 2005 and 2004. Because of the possible fluctuations in the marketplace in
the construction industry, operating results of the Company on a quarterly basis
may not be indicative of operating results for the full year.
2. Significant Accounting Policies
-------------------------------
The significant accounting policies followed by the Company and its subsidiary
in preparing its consolidated financial statements are set forth in Note (2) to
such consolidated financial statements included in Form 10-K for the year ended
December 31, 2004. The Company has made no significant changes to these policies
during 2005.
7
3. Commitment and Contingencies -
----------------------------
(A) Legal
Co-op City. In February 1999, the Company sued the general contractor on
the Co-Op City Project and its bonding company in New York State Supreme
Court, Queens County to recover its contract balance and unpaid proposals.
The Company's lawsuit includes approximately $1,937,000, consisting of
accounts receivable applicable to the base contract of approximately
$437,000, and unpaid final retainage billings of approximately $1,500,000.
The Company also seeks to be compensated for unanticipated costs incurred
through 1998, in the sum, as presented at trial, of $2,303,727. These
unanticipated costs have not been reflected as a claim receivable in the
Company's consolidated financial statements because it is the policy of the
Company not to record income from claims until the claims have been
received or awarded. The defendant asserted counterclaims, as presented at
trial, totaling $1,440,905, and a claim for $3,000,000 based on the
argument that the Company's mechanic's lien was willfully overstated. The
Company believes all of the defendant's claims lack merit. While the
Company and its counsel believe its lawsuit has merit, there is no
guarantee of a favorable outcome. This case was tried for 47 days and
adjourned by the court to October 2005 for further trial proceedings. The
consolidated financial statements at June 30, 2005 and December 31, 2004
include long-term accounts receivable of approximately $1,937,000 related
to this project.
Other Proposals and Claims. During the ordinary and routine course of its
work on construction projects, the Company may incur expenses for work
outside the scope of its contractual obligations, for which the owner or
general contractor agrees that the Company will be entitled to additional
compensation, but where there is not yet an agreement on price. The
Company's consolidated financial statements include the amounts the Company
believes it will ultimately receive on these authorized proposals. Also
during the course of its work on construction projects, the Company may
incur expenses for work outside the scope of its contractual obligations,
for which no acknowledgment of liability exists from the owner or general
contractor for such additional work. These claims may include change
proposals for extra work or requests for an equitable adjustment to the
Company's contract price due to unforeseen disruptions to its work. In
accordance with accounting principles generally accepted in the United
States of America for the construction industry, until written
acknowledgment of the validity of the claims are received, they are not
recognized in the accompanying consolidated financial statements. No
accruals have been made in the accompanying consolidated financial
statements related to these proposals for which no acknowledgment of
liability exists. While the Company has been generally successful in
obtaining a favorable resolution of such claims, there is no assurance that
the Company will be successful in the future.
8
(B) Purchase Commitment
-------------------
On March 28, 2005, the Company entered into an agreement with a supplier of
steel based piping materials, whereby the Company has committed to purchase
minimum amounts of piping products used in its normal operations for a
period of 15 months from January 1, 2005. The total minimum purchase
obligation under this agreement is $1,400,000. During the three and six
months ended June 30, 2005, the Company's total purchases under this
agreement were approximately $290,000 and $440,000, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
RESULTS OF OPERATIONS
- ---------------------
REVENUES
Total revenues for the quarter ended June 30, 2005 increased by $5,145,000 or
80.3% to $11,552,000, as compared to $6,407,000 for the quarter ended June 30,
2004. Total revenues for the six months ended June 30, 2005, increased by
$8,590,000 or 66.9% to $21,428,000, as compared to $12,838,000 for the six
months ended June 30, 2004. These increases in revenues were a result of the
Company's increased number of contracts in progress as of December 31, 2004, as
well as projects the Company obtained during 2005. As of June 30, 2005, the
Company had backlog of approximately $78,400,000 as compared to approximately
$34,500,000 as of June 30, 2004. Approximately $29,000,000 of the June 30, 2005
backlog is expected to be completed in the current fiscal year, with the balance
expected to be completed during the fiscal years ending December 31, 2006 and
2007. The Company is actively seeking new projects to add to its backlog.
COST OF REVENUES
Cost of revenues for the quarter ended June 30, 2005 increased by $4,922,000 or
89.5% to $10,424,000, as compared to $5,502,000 for the quarter ended June 30,
2004, which corresponds to the change in revenues noted above. Costs of revenues
for the six months ended June 30, 2005 increased by $7,731,000 or 67.7% to
$19,157,000, as compared to $11,426,000 for the six months ended June 30, 2004,
which corresponds to the change in revenues noted above. In addition, during the
three and six month periods ended June 30, 2004, the costs of revenues were
increased by the following factors: increased costs of steel based products,
revenues insufficient to absorb job costed project supervision and drafting
salaries, and increased labor costs incurred by the Company to retain
experienced field labor personnel. Management does not expect these conditions
to have the same impact in the future, since the Company has reduced pricing
volatility on purchases of steel based piping material by entering into an
agreement to purchase these products at fixed prices, and increased revenues and
backlog have allowed the Company to allocate the cost of project supervision and
drafting salaries over multiple projects and to more effectively utilize its
experienced field labor personnel.
9
GROSS PROFIT
Gross profit for the quarter ended June 30, 2005 was $1,128,000 or 9.8% of
revenues, as compared to a gross profit of $905,000 or 14.1% of revenues for the
quarter ended June 30, 2004. Gross profit for the six months ended June 30, 2005
was $2,271,000 or 10.6% of revenues, as compared to a gross profit of $1,412,000
or 11.0% for the six months ended June 30, 2004. The increased dollar amount in
gross profit for the three and six months ended June 30, 2005, as compared to
the three and six months ended June 30, 2004, was primarily a result of the
overall increase in revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") for the quarter ended June
30, 2005 decreased by $123,000 or (12.9) %, to $832,000, as compared to $955,000
for the quarter ended June 30, 2004. SG&A for the six months ended June 30, 2005
decreased by $313,000 or (14.8) % to $1,809,000 as compared to $2,122,000 for
the six months ended June 30, 2004. A portion of this change in SG&A is a result
of the Company eliminating certain home office positions during the later half
of 2004. This resulted in a SG&A decline of approximately $105,000 and $235,000
during the three and six months ended June 30, 2005, as compared to the three
and six months ended June 30, 2004. In addition, professional fees related to
the Company's public filings with the Securities and Exchange Commission and
expenses related to the Co-Op City litigation decreased by approximately $45,000
during the six months ended June 30, 2005, as compared to the six months ended
June 30, 2004.
OTHER INCOME
Other income for the quarter ended June 30, 2005 was $7,000, as compared to
other income of $9,000 for the quarter ended June 30, 2004. Other income for the
six months ended June 30, 2005 was $25,000, as compared to other income of
$26,000 for the six months ended June 30, 2004. For the quarters ended June 30,
2005 and 2004, the Company realized gains on sales of marketable securities
totaling $4,000 and $9,000, respectively. During the three months ended June 30,
2005, the Company earned net interest income of $3,000. For the six months ended
June 30, 2005 and 2004, the Company realized gains on sales of marketable
securities totaling $15,000 and $26,000, respectively. During the six months
ended June 30, 2005, the Company earned net interest income of $10,000.
PROVISION FOR TAXES
The income tax provision for the quarter ended June 30, 2005 was $5,000, as
compared to an income tax provision of $10,000 for the quarter ended June 30,
2004. For the six months ended June 30, 2005, the income tax provision was
$34,000, as compared to an income tax provision of $11,000 for the six months
ended June 30, 2004. The provision for both periods differs from the Company's
effective income tax rate primarily due to a deferred income tax valuation
allowance. In addition, the tax rates in both periods were affected by certain
state and local taxes which are based on net worth.
10
NET INCOME (LOSS)
As a result of all the items mentioned above, the Company reported net income of
$298,000 for the quarter ended June 30, 2005, as compared to a reported net loss
of $51,000 for the quarter ended June 30, 2004. For the six months ended June
30, 2005, the Company reported net income of $453,000, as compared to a reported
net loss of $695,000 for the six months ended June 30, 2004.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
GENERAL
The Company's principal capital requirement is to fund its work on construction
projects. Projects are billed on a monthly basis based on the work performed to
date. These project billings, less a withholding of retention, which is received
as the project nears completion, are collectible based on their respective
contract terms. The Company has historically relied primarily on internally
generated funds and bank borrowings to finance its operations. The Company has
not relied on bank borrowings to finance its operation since July 2003. On March
28, 2005, the Company obtained a line of credit which is subject to certain
conditions. See discussion of credit facility below.
As of June 30, 2005, total cash was $2,456,000, a $903,000 increase over the
$1,553,000 reported as of June 30, 2004.
CASH USED IN OPERATIONS
Net cash used in operations was $478,000 and $1,599,000 for the six months ended
June 30, 2005 and 2004, respectively.
The net cash used in operating activities for the six months ended June 30,
2005, was a result of the funding of the Company's increased revenues.
The net cash used in operating activities for the six months ended June 30,
2004, was lowered by operating losses incurred during the period as well as by
payments of liabilities in excess of receivables collected.
CASH USED IN INVESTING ACTIVITIES
Net cash used in investing activities was $26,000 and $4,000 during the six
months ended June 30, 2005 and 2004, respectively.
The Company received proceeds on the sale of marketable securities of $153,000
and $336,000 during the six months ended June 30, 2005 and 2004, respectively.
The Company purchased marketable securities of $156,000 and $340,000 during the
six months ended June 30, 2005 and 2004, respectively. In addition, the Company
purchased property and equipment totaling $23,000 during the six months ended
June 30, 2005.
CASH PROVIDED BY FINANCING ACTIVITIES
No net cash was provided by financing activities during the six months ended
June 30, 2005 and 2004.
11
CREDIT FACILITY
The Company had a $2,000,000 line of credit which expired in August 2004.
On March 28, 2005, the Company obtained a new line of credit facility from Fleet
National Bank, a Bank of America Company, which provides borrowings for working
capital purposes up to $2,000,000. This facility expires on April 1, 2006, is
secured by the Company's assets and is guaranteed by the Company's subsidiary,
KSW Mechanical Services, Inc.
The amount of advances available is determined based on the amount of secured
cash and margined marketable securities held at the bank and its affiliates and
is subject to certain profitability and net worth requirements. Based on these
requirements, the Company may currently borrow up to approximately $1,240,000.
There were no outstanding borrowings against this facility at June 30, 2005.
Secured cash and margined marketable securities advances bear interest at the
bank's prime lending rate plus one-quarter of one percent per annum. Advances
determined by certain profitability and net worth requirements bear interest at
the bank's prime lending rate plus three- quarters of one percent per annum.
Payment of outstanding borrowings may be accelerated by certain events of
default such as unfavorable credit factors, the occurrence of a material adverse
change in the Company's business, properties or financial condition, a default
in payment on the line, impairment of security, or the Company ceasing
operations or being unable to pay its debts. Unless renewed, the line of credit
must be paid in full at the end of the term, April 1, 2006.
The Company currently has no significant capital expenditure commitments.
SURETY
On some of its projects, the Company is required to provide a surety bond. The
Company's ability to obtain bonding, and the amount of bonding required, is
solely at the discretion of the surety and is primarily based upon the Company's
net worth, working capital, the number and size of projects under construction
and the surety's relationship with management. The Company is contingently
liable to the surety under a general indemnity agreement. The Company agrees to
indemnify the surety for any payments made on contracts of suretyship, guaranty
or indemnity as a result of the Company not having the financial capacity to
complete projects. Management believes the likelihood of the surety having to
complete projects is remote. The contingent liability is the cost of completing
all bonded projects, which is an undeterminable amount because it is subject to
bidding by third parties. Management believes that all contingent liabilities
will be satisfied by the Company's performance on the specific bonded contracts
involved. The surety provides bonding solely at its discretion, and the
arrangement with the surety is an at-will arrangement subject to termination.
12
The Company's bonding limits have been sufficient given the volume and size of
the Company's contracts. The Company's surety may require that the Company
maintain certain tangible net worth levels and may require additional guarantees
if the Company should desire increased bonding limits. At June 30, 2005,
approximately $21,300,000 of the Company's backlog of $78,400,000 was bonded.
The Company's surety has advised that it is winding down its operations and
after a transition period, it will no longer be writing surety bonds. This
withdrawal from the market will not affect currently bonded jobs, nor should it
affect the Company's ability to bond new work in the near term. The Company and
its bonding agent have begun the process of obtaining a new surety, and have had
discussions with representatives from several bonding companies.
If the Company is unable to secure a replacement surety, it would be unable to
bid on certain public projects and certain privately financed projects which
require surety bonds. This could have a material adverse effect on the Company.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report are not historical facts, constitute
"forward-looking statements" (as such term is defined in the Private Securities
Litigation Reform Act of 1995). These forward looking statements generally can
be identified as statements that include phrases such as "believe", "expect",
"anticipate", "intend", "plan", "foresee", "likely", "will" or other similar
words or phrases. Such forward-looking statements concerning management's
expectations, strategic objectives, business prospects, anticipated economic
performance and financial condition, and other similar matters involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of results to differ materially from
any future results, performance or achievements discussed or implied by such
forward-looking statements. This document describes factors that could cause
actual results to differ materially from expectation of the Company. All written
and oral forward-looking statements attributable to the Company or persons
acting on behalf of the Company are qualified in their entirety by such factors.
Such risks, uncertainties, and other important factors include, among others:
inability to obtain bonding, inability to retain senior management, low labor
productivity and shortages of skilled labor, a rise in the price of steel
products, economic downturn, reliance on certain customers, competition,
inflation, the adverse effect of terrorist concerns and activities on public
budgets and insurance costs, the unavailability of private funds for
construction, and other various matters, many of which are beyond the Company's
control and other factors as are described at the end of "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" of the
Company's Form 10-K for the fiscal year ended December 31, 2004. Forward-looking
statements speak only as of the date of the document in which they are made. The
Company disclaims any obligation or undertaking to provide any updates or
revisions to any forward-looking statement to reflect any change in the
Company's expectations or any change in events, conditions or circumstances on
which the forward-looking statement is based.
13
ITEM 3. QUANTITITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
------------------------------------------------------------
The Company does not utilize futures, options or other derivative instruments.
As of June 30, 2005, the Company has $702,000 invested in marketable securities.
ITEM 4. CONTROLS AND PROCEDURES
-----------------------
The Company carried out an evaluation, under the supervision and with the
participation of management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
as of June 30, 2005. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
were effective as of June 30, 2005.
There has been no change in the Company's internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
during the Company's fiscal quarter ended June 30, 2005, that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
See Note 3 to the Consolidated Financial Statements, which in incorporated
herein by reference.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on May 10, 2005, in
Queens, New York, for the purpose of (i) electing two Class I Directors to serve
until the annual meeting of stockholders in the year 2008 and (ii) ratifying the
appointment of Marden, Harrison & Kreuter CPAs, P.C., as independent auditors
for the fiscal year ending December 31, 2005. Proxies were solicited from
holders of 5,470,311 outstanding shares of Common Stock as of the close of
business on April 5, 2005, as described in the Company's Proxy Statement dated
14
April 7, 2005. Stanley Kreitman and John Cavanagh were elected as Class I
Directors, and the appointment of Marden, Harrison & Kreuter CPAs, P.C. was
ratified by the following votes:
(1) To elect two Class I Directors to serve until the annual meeting of
stockholders in the year 2008.
Votes Votes Broker
Name FOR WITHHELD Non-votes
---- --- -------- ---------
Stanley Kreitman (Class I) 4,208,343 22,359 0
John Cavanagh (Class I) 4,217,366 13,366 0
Floyd Warkol, Burton Reyer, Russell Molina and Innis O'Rourke continue to
serve as directors of the Company after the Annual Meeting of Stockholders.
(2) To ratify the appointment of Marden, Harrison & Kreuter CPAs, P.C. as
the Company's independent auditors for the fiscal year ending December
31, 2005.
Votes Votes Votes Broker
FOR AGAINST ABSTAINED Non-votes
--- ------- --------- ---------
4,228,736 1,570 396 0
ITEM 5. OTHER INFORMATION
The following is being provided pursuant to Question No. 1 of the SEC's
Frequently Asked Questions, dated November 23, 2004, to include disclosure under
Item 1.01 of Form 8-K:
On August 8, 2005, the Board of Directors of the Company (the "Board")
unanimously approved the amendment of the Company's 1995 Stock Option Plan (the
"Plan") to provide that the duration of any option to purchase shares of common
stock, $.01 par value per share, of the Company (the "Common Stock") is not to
exceed ten years from the date of grant of such option unless otherwise provided
in the award letter for such option.
The Board also, on August 8, 2005, unanimously approved the amendment of the
following options issued to the directors and employees of the Company set forth
below to extend the duration of such options by a period of five years from
December 15, 2005 to December 15, 2010:
15
Total Options
Director/Employee Issue Date Outstanding
- ----------------- ---------- -----------
Floyd Warkol 12/28/95 199,999
Floyd Warkol 12/28/95 100,001
Burton Reyer 12/28/95 150,000
James Oliviero 12/28/95 20,000
Nevio Dobry 12/28/95 20,000
Al Schroeder 12/28/95 20,000
Ed Kochoumian 12/28/95 10,000
Vincent Terraferma 12/28/95 6,667
In addition, on August 8, 2005, the Board unanimously approved the grant of
options to the following directors and executive officers to purchase the number
of shares of Common Stock set forth opposite such individuals' respective names:
Number of Shares Subject
Director/Executive Officer to Stock Options
- -------------------------- ----------------
Innis O'Rourke 20,000
Russell Molina 20,000
John Cavanagh 20,000
Richard W. Lucas 20,000
Each such option has a term of ten years from the date of grant, expiring on
August 8, 2015 (subject to earlier termination as set forth in the Plan), and
vests at the rate of 33-1/3% on each of the first, second and third
anniversaries of the date of grant. Each option has an exercise price of $1.66.
Pursuant to, and subject to the terms and conditions set forth in, the Plan, all
unexercised options become immediately exercisable upon the holder's retirement
from the Company at age 65, upon the disability or death of the holder or upon a
change of control (except, in each case, if such event occurs within six months
after the date of grant).
ITEM 6. EXHIBITS
Exhibit 11 - Statement regarding Computation of Income (Loss) per
Share
Exhibit 31.1 - Certification of Chief Executive Officer required by
Rule 13a-14(a)
Exhibit 31.2 - Certification of Chief Financial Officer required by
Rule 13a-14(a)
Exhibit 32.1 - Certification of Chief Executive Officer required by
Rule 13a-14(b) and 18 U.S.C. Section 1350
Exhibit 32.2 - Certification of Chief Financial Officer required by
Rule 13a-14(b) and 18 U.S.C. Section 1350
16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KSW, INC.
Date: August 12, 2005
/s/Richard W. Lucas
-------------------------------------------
Richard W. Lucas
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)
17
KSW, INC.
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
11 Statement regarding Computation of Income (Loss) per Share
31.1 Certification of Chief Executive Officer required by Rule
13a-14(a)
31.2 Certification of Chief Financial Officer required by Rule
13a-14(a)
32.1 Certification of Chief Executive Officer required by Rule
13a-14(b) and 18 U.S.C. Section 1350
32.2 Certification of Chief Financial Officer required by Rule
13a-14(b) and 18 U.S.C. Section 1350
18