UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[ x ]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
        EXCHANGE ACT OF 1934

               For the quarterly period ended September 30, 1998
                                              ------------------ 

                                       or

[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
        EXCHANGE ACT OF 1934

        For the transition period from        to

                        Commission File Number: 0-26262

                      USA Bridge Construction of N.Y., Inc.
                      -------------------------------------
             (Exact name of registrant as specified in its charter)

        New York                                               11-3032277
--------------------------------------------------------------------------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

53-09 97th Place, Corona, New York                                11368
--------------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip Code)

                                 (718) 699-0100
              (Registrant's telephone number, including area code)


              (Former name, former address and former fiscal year,
                          if changed since last report)

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
section 13 or 15 (d) of the  Exchange Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

                             Yes [ x ]  No [   ]

           APPLICABLE ONLY TO CORPORATE ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court.


                            Yes [  ]  No [  ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

Common stock,  par value $.001 per share:  2,749,182  shares  outstanding  as of
January 20, 1999,
<PAGE>


                      USA BRIDGE CONSTRUCTION OF N.Y., INC.
                                      INDEX

                                                                         Page
                                                                         ----
PART 1 - FINANCIAL INFORMATION:

        ITEM 1 - FINANCIAL STATEMENTS

             Balance Sheets at September 30, 1998 (Unaudited)
              and June 30, 1998                                            1   

             Statements of Operations (Unaudited)
              for the three months ended September 30, 1998 and 1997       2

             Statement of Stockholder's Equity  (Unaudited)
              for the three months ended September 30, 1998                3   

             Statements of Cash Flows (Unaudited)
              for the three months ended September 30,1998 and 1997        4   

             Notes to Financial Statements                                5-13 

        ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS                  14-22

PART 2 - OTHER INFORMATION

        ITEM 1 - LEGAL PROCEEDINGS                                        23

        ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS                23

        ITEM 3 - DEFAULTS UPON SENIOR SECURITIES                          23

        ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS      23

        ITEM 5 - OTHER INFORMATION                                        23

        ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                         23

                 SIGNATURES                                               24
<PAGE>
<TABLE>
<CAPTION>
                                USA BRIDGE CONSTRUCTION OF N.Y., INC.
                                           BALANCE SHEETS


                                                                      (Unaudited)
                                                                      September 30        June 30
                               ASSETS                                     1998              1998
                               ------                                 ------------      ------------
<S>                                                                   <C>               <C>         
Current assets:
      Cash                                                            $    118,584      $     20,822
      Contracts and retainage receivable, net                            2,630,632         2,144,262
      Costs and estimated earnings in excess of billings
       on uncompleted contracts                                             51,877           139,440
      Due from Parent Company                                              459,358           405,458
      Due from affiliates                                                  205,480           126,489
      Other current assets                                                  32,050            18,454
                                                                      ------------      ------------
           Total current assets                                          3,497,981         2,854,925
                                                                      ------------      ------------

Long term portion of contracts and retainage receivable, net             8,431,939         8,431,939
Office equipment and fixtures, net                                          24,516            23,767
Other assets                                                                19,300            10,366
                                                                      ------------      ------------

Total assets                                                          $ 11,973,736      $ 11,320,997
                                                                      ============      ============

           LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Accounts payable, including cash overdraft
       of $61 and  $36,415                                            $  1,698,575      $  1,239,097
      Accrued expenses                                                   1,875,940         1,822,670
      Payroll taxes payable                                              2,127,690         2,154,856
      Note payable                                                         300,000           300,000
      Due to officer and affiliates                                        274,108           386,457
      Income taxes payable                                                 206,889           148,889
      Billings in excess of costs and estimated earnings
       on uncompleted contracts                                             59,980            10,250
                                                                      ------------      ------------
           Total current liabilities                                     6,543,182         6,062,219

Long term portion of note payable                                        1,200,000         1,275,000
                                                                      ------------      ------------

Total Liabilities                                                        7,743,182         7,337,219

Commitments and contingencies  (Note 5)                                       --                --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                USA BRIDGE CONSTRUCTION OF N.Y., INC.
                                           BALANCE SHEETS


                                                                      (Unaudited)
                                                                      September 30        June 30
                                                                         1998               1998
                                                                     ------------      ------------



<S>                                                                   <C>               <C>         
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 2,749,182                                    504,494           504,494
Additional paid in capital                                               5,402,209         5,402,209
Accumulated deficit                                                     (1,484,614)       (1,635,140)
                                                                      ------------      ------------
           Sub-total stockholders' equity                                4,422,089         4,271,563
Less:  stockholders' deductions                                           (191,535)         (287,785)
                                                                      ------------      ------------
      Total stockholders' equity                                         4,230,554         3,983,778
                                                                      ------------      ------------

Total liabilities and stockholders' equity                            $ 11,973,736      $ 11,320,997
                                                                      ============      ============
</TABLE>


           See accompanying notes to financial statements (unaudited).

                                      -1-
<PAGE>
<TABLE>
<CAPTION>
                      USA BRIDGE CONSTRUCTION OF N.Y., INC.
                            STATEMENTS OF OPERATIONS
                    FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                                   (UNAUDITED)



                                                        1998             1997
                                                    -----------      -----------
<S>                                                 <C>              <C>        
Contract revenue                                    $ 1,768,155      $ 8,918,385

Cost of contract revenue                              1,045,215        7,541,175
                                                    -----------      -----------

Gross profit                                            722,940        1,377,210

General and administrative expenses                     478,444          590,697
                                                    -----------      -----------

Income from operations before other income
 (expense) and provision for income taxes               244,496          786,513
                                                    -----------      -----------

Other income (expense):
    Interest income                                          30            2,948
    Interest expense                                    (36,000)            --
                                                    -----------      -----------
         Total other (expense) income                   (35,970)           2,948
                                                    -----------      -----------

Income before provision for income tax expense          208,526          789,461

Provision for income tax expense                         58,000          226,950
                                                    -----------      -----------

Net income                                          $   150,526      $   562,511
                                                    ===========      ===========

Income per common equivalent share:
    Basic:
         Net income                                 $       .05      $       .24
                                                    ===========      ===========

    Diluted:
         Net income                                 $       .05      $       .24
                                                    ===========      ===========


Weighted average number of shares outstanding         2,749,182        2,302,515
                                                    ===========      ===========
</TABLE>

           See accompanying notes to financial statements (unaudited)

                                      -2-
<PAGE>
<TABLE>
<CAPTION>
                                                USA BRIDGE CONSTRUCTION OF N.Y., INC.
                                                  STATEMENT OF STOCKHOLDERS' EQUITY
                                            FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
                                                             (UNAUDITED)



                                                   Common
                                                    stock
                                          -------------------------     Additional                                          Total
                                                                          paid-in        Accumulated        Other      Stockholders'
                                            Shares          Amount        capital          deficit        deductions       equity 
                                          ----------     ----------     ----------     --------------     ----------      ----------
<S>                                       <C>           <C>            <C>            <C>                <C>             <C>       
Balances at June 30, 1998                  2,749,182     $  504,494     $5,402,209     $   (1,635,140)    $ (287,785)     $3,983,778

Net income for the three months ended
  September 30, 1998                                                                          150,526                        150,526

Amortization of prepaid rent and
 deferred compensation                          --             --             --                 --           96,250          96,250
                                          ----------     ----------     ----------     --------------     ----------      ----------


Balances at September 30, 1998             2,749,182     $  504,494     $5,402,209     $   (1,484,614)    $ (191,535)     $4,230,554
                                          ==========     ==========     ==========     ==============     ==========      ==========
</TABLE>


           See accompanying notes to financial statements (unaudited)

                                      -3-
<PAGE>
<TABLE>
<CAPTION>
                               USA BRIDGE CONSTRUCTION OF N.Y., INC.
                                     STATEMENTS OF CASH FLOWS
                             FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                                            (UNAUDITED)

                                                                         1998              1997
                                                                     -----------      -----------
<S>                                                                  <C>              <C>        
Cash flows from operating activities:
    Net income                                                       $   150,526      $   562,511
    Adjustments to reconcile net (loss) income to net
     cash provided by (used for) operating activities:
         Amortization of prepaid rent and deferred compensation           96,250             --
    Deferred taxes                                                          --              3,275
    Decrease (increase) in:
         Contracts and retainage receivable                             (486,370)      (1,961,735)
         Prepaid expenses
         Costs and estimated earnings in excess of
          billings on uncompleted contracts                               87,563         (201,067)
         Other current assets                                            (13,596)         (10,715)
         Other assets                                                     (8,934)            --
    Increase (decrease) in:
         Accounts payable                                                459,478          333,665
         Accrued expenses                                                 53,270          526,978
         Payroll taxes payable                                           (27,166)         693,111
         Income taxes payable                                             58,000          223,675
         Billings in excess of costs and estimated
          earnings on uncompleted contracts                               49,730          (12,471)
                                                                     -----------      -----------
            Net cash provided by (used for) operating activities         418,751          157,227
                                                                     -----------      -----------

Cash flows from investing activities:
    Acquisition of office equipment                                         (749)            --
                                                                     -----------      -----------

Cash flows from financing activities:
    Repayments to parent company                                         (53,900)            --
    Repayments to related parties and affiliates                        (191,340)        (248,878)
    Principal payments on note payable                                   (75,000)            --
                                                                     -----------      -----------
            Net cash used for financing activities                      (320,240)        (248,878)
                                                                     -----------      -----------

Net  increase (decrease) in cash                                          97,762          (91,651)
Cash, beginning                                                           20,822          768,026
                                                                     -----------      -----------

Cash, ending                                                         $   118,584      $   676,375
                                                                     ===========      ===========

Supplemental disclosure of cash flow information:
    Interest paid                                                    $      --        $      --
                                                                     ===========      ===========
    Taxes paid                                                       $      --        $      --
                                                                     ===========      ===========
</TABLE>
           See accompanying notes to financial statements (unaudited)

                                      -4-

<PAGE>
                      USA BRIDGE CONSTRUCTION OF N.Y., INC.
                          NOTES TO FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)


NOTE 1       -    GENERAL


                  USA Bridge Construction of N.Y., Inc. ("the Company") is a New
                  York  corporation  which provides steel erection for building,
                  roadway and bridge repair  projects for  contractors  who have
                  been  engaged by private and  municipal/governmental  clients.
                  The Company was  incorporated  on  September  4, 1990 and is a
                  majority owned subsidiary of USABG Corp. ("USABG") via a 48.5%
                  direct  ownership  and  indirect  ownership  of  7.5%  of  the
                  Company's  President.  The  Company's  President  is also  the
                  majority  stockholder  of  USABG  and  may be  considered  the
                  beneficial owner of the Company

                  The  accompanying  unaudited  financial  statements  have been
                  prepared in  accordance  with  generally  accepted  accounting
                  principles  for  interim   financial   information   and  with
                  instructions to Form 10-QSB. Accordingly,  they do not include
                  all of the  information  and  footnotes  required by generally
                  accepted   accounting   principles   for  complete   financial
                  statements. In the opinion of management the interim financial
                  statements include all adjustments  necessary in order to make
                  the  financial  statements  not  misleading.  The  results  of
                  operations  for the  three  months  ended  is not  necessarily
                  indicative  of the results to be  expected  for the full year.
                  For  further  information,  refer  to  the  Company's  audited
                  financial  statements and footnotes  thereto at June 30, 1998,
                  included in the Company's Annual Report Form 10-KSB filed with
                  the Securities and Exchange Commission.

NOTE 2       -    GOING CONCERN

                  The  accompanying  financial  statements  have  been  prepared
                  assuming  that the Company will  continue as a going  concern.
                  For the year ended June 30, 1998, the Company  generated a net
                  loss amounting to $2,093,969.

                  As of  September  30 and  June 30,  1998,  the  Company  had a
                  working  capital   deficiency   amounting  to  $3,045,201  and
                  $3,207,294 respectively .

                  As of September 30, 1998,  the Company's  backlog  amounted to
                  $670,000. Backlog represents the amount of revenue the Company
                  expects to realize from work to be  performed  on  uncompleted
                  contracts and from contracts on which work has not yet begun.

                                      -5-
<PAGE>
                     USA BRIDGE CONSTRUCTION OF N.Y., INC.
                          NOTES TO FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

                  Lastly, as of September 30, 1998 and June 30, 1998 the Company
                  owes approximately $2,127,690 and $2,154,856, respectively, of
                  payroll  taxes and related  penalties  and  interest.  Certain
                  taxing  authorities  have filed liens against the Company as a
                  result  of  the  unpaid  payroll  taxes.   Should  the  taxing
                  authorities  take  further  actions,   the  results  could  be
                  detrimental to the Company's ability to operate.

                  The Company is  aggressively  attempting to obtain  additional
                  contracts in order to mitigate its low backlog and  vigorously
                  attempting to settle  disputes in connection  with  mechanic's
                  lien placed on certain completed  projects in order to collect
                  its non-current  receivables and pay its unpaid payroll taxes,
                  however,  there  can be no  assurance  that it will be able to
                  obtain additional contracts,  settle its disputes, and pay its
                  payroll taxes.

                  These  factors  raise  substantial  doubt about the  Company's
                  ability  to  continue  as  a  going  concern.   The  financial
                  statements  do  not  include   adjustments   relating  to  the
                  recoverability and realization of assets and classification of
                  liabilities  that might be  necessary  should  the  Company be
                  unable to continue in operation.

NOTE 3       -    LONG TERM DEBT

                  During  December 1997,  the Company  entered into an agreement
                  with the Iron  Workers  Local 40,  361 and 417 Joint  Security
                  Funds (the  "Union") in order to settle  $1,750,000  of unpaid
                  union  dues  previously  recorded  as  accounts  payable.  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 project as well as $1,750,000 of its related
                  mechanic's lien on the project.  Upon any funds being released
                  or paid  under  such  mechanic's  lien,  the  Union  will have
                  priority  and receive all funds until the debt is paid in full
                  before the Company may  receive  any funds.  The Company  will
                  then  receive  credit for any  payment  received  by the Union
                  related  to  the  assigned  portion  of  the  mechanic's  lien
                  received.  The amount  outstanding  at September  30, 1998 and
                  June 30, 1998 is $1,500,000 and $1,575,000. In connection with
                  such liability,  the Company has accrued  interest of $113,584
                  and  $77,584  as of  September  30,  1998 and  June 30,  1998,
                  respectively.

                                      -6-
<PAGE>
                     USA BRIDGE CONSTRUCTION OF N.Y., INC.
                          NOTES TO FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

                  As of  September  30,  1998,  union  dues  payable  mature  as
                  follows:

                     Year ending
                       June 30,
                     -----------

                         1999                                      $  225,000
                         2000                                         300,000
                         2001                                         300,000
                         2002                                         300,000
                         2003                                         300,000
                         Thereafter                                    75,000
                                                                   ---------- 

                                                                   $1,500,000
                                                                   ==========
 
NOTE 4       -    STOCKHOLDERS' EQUITY


           a)      Deferred Compensation

                  During December 1997, the Company authorized the issuance,  in
                  its third quarter, of 290,000 shares of Common Stock, pursuant
                  to its Incentive  Plan. Of the 290,000  shares issued in March
                  1998 to  management,  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.  Half of these
                  shares  vested on June 1,  1998,  and half vest on  January 1,
                  1999.   The   Company   also   authorized   the  filing  of  a
                  Post-Effective   Amendment   to  the  Form  S-8   Registration
                  Statement  initially  filed in February  1997 to register  for
                  resale  the  290,000  common  shares  issued  pursuant  to the
                  Company's  Incentive  Plan. In addition to the foregoing,  the
                  Company also  authorized  the issuance of 50,000 common shares
                  to certain of its  employees  and  consultants.  In connection
                  with  these   issuances,   the   Company   recorded   deferred
                  compensation    and   consulting    expenses    amounting   to
                  approximately  $459,000 which is based on the average  closing
                  bid price of $1.50 per share for the month of March 1998, with
                  a 10%  discount  in order to  reflect  their  fair  value as a
                  result of their  restrictions  at time of issuance.  The above
                  shares  which do not vest  immediately  and were  recorded  as
                  deferred  compensation,  are being  amortized over the vesting
                  period.  For  the  three  months  ended  September  30,  1998,
                  compensation and consulting expense amounted to $36,250.

                                      -7-

<PAGE>
                     USA BRIDGE CONSTRUCTION OF N.Y., INC.
                          NOTES TO FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

           b)     Prepaid Rent

                  During February 1998, the Company issued 106,667 shares of its
                  common stock to USABG, as  consideration  to USABG for issuing
                  48,000 shares 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 through December 31, 1998. The
                  value of the shares  issued by the  Company is recorded at the
                  value of the rent otherwise due under the lease which amounted
                  to $240,000. An amount of $60,000 was recorded as rent expense
                  for the three month period ended September 30, 1998.

NOTE  5      -    COMMITMENTS AND CONTINGENCIES


            a)    Disclosure of significant estimates - revenue recognition

                  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
                  estimates  may be subject to revision in the normal  course of
                  business.

            b)    Leases

                  The Company leases its  administrative  offices  pursuant to a
                  signed lease  agreement with RSJJ, an entity  wholly-owned  by
                  the Company's President.  Such lease requires monthly payments
                  of $20,000 and expires on December 31,  1998.  As of September
                  30, 1998, under such lease agreement, the Company was required
                  to make future  minimum  lease  payments  amounting to $60,000
                  through  December  31,  1998,  however,  as a  result  of  the
                  transaction  described in Note 4b, the Company has prepaid its
                  rent in full through December 31, 1998. Subsequent to December
                  31,  1998,  the Company  plans on leasing  such  facility on a
                  month to month basis from RSJJ for a reduced monthly amount to
                  be negotiated.

                  Included  in  general  and  administrative  expenses  is  rent
                  expense  which  amounted to $60,000 for the three months ended
                  September 30, 1998 and 1997, respectively.

                                      -8-
<PAGE>
                     USA BRIDGE CONSTRUCTION OF N.Y., INC.
                          NOTES TO FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

            c)    Significant customers and vendors

                  For the three months ended  September  30, 1998 and 1997,  the
                  Company  had two  unrelated  customers,  which  accounted  for
                  approximately 100% and 99% respectively,  of contract revenue.
                  As of  September  30,  1998,  the  Company  had two  unrelated
                  customers which accounted for  approximately  76% of total net
                  contracts and retainage receivable.

            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  or the stage of completion of major
                  projects.

            e)    Bonding requirements

                  The  Company is  required  to provide  bid and/or  performance
                  bonds in connection with governmental  construction  projects.
                  There can be no  assurance  that the  Company  will be able to
                  obtain future bonding as a result of its financial condition.

            f)    Mechanic's liens

                  Various  actions to  foreclose  upon  mechanic's  liens  filed
                  during the last two fiscal years were commenced.  Such actions
                  amounted to  approximately  $15,544,324.  The mechanic's liens
                  have been filed in relation to work completed and billed.  The
                  liens filed also include claims, interest, and other costs not
                  included in revenue or contracts and retainage receivable. The
                  Company elected not to recognize any portion of the additional
                  revenue associated which any contract claims until the amounts
                  recovered  can  be  accurately   estimated.   Based  upon  the
                  assessment  of   management,   the  Company  has  recorded  an
                  allowance  for doubtful  accounts to adjust its  receivable to
                  their estimated realizable amount.

            g)    Payroll taxes

                  As of September  30, 1998 and June 30, 1998,  the Company owed
                  approximately  $2,127,690  and $2,154,856 of payroll taxes and
                  related  estimated  penalties and interest.  Federal and state
                  tax liens have been filed  against the  Company in  connection
                  with unpaid payroll taxes. Although, as of September 30, 1998,
                  the  Company  has  not  entered  into  any  formal   repayment
                  agreements  with the respective tax  authorities,  it has been
                  attempting to make monthly payments as funds become available.

                                      -9-
<PAGE>
                     USA BRIDGE CONSTRUCTION OF N.Y., INC.
                          NOTES TO FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

            h)    Legal proceedings

                  i)    The  Company is a  defendant  in a  proposed  settlement
                        regarding the State  Insurance Fund for unpaid  workers'
                        compensation  insurance  for the  period  from April 29,
                        1993 to December 31, 1994. Currently  negotiations for a
                        final settlement are in their final stages.  The Company
                        as of June  30,  1998,  accrued  approximately  $300,000
                        based on the expected settlement amount,  which has been
                        included in accrued expenses.

                  ii)      In connection with various  mechanic's liens filed as
                           discussed   in  note  5(f),   certain   actions  were
                           commenced  against the Company prior to June 30, 1998
                           as follows:

                        a)  A customer  of the Company is seeking  judgement  in
                            the  amount  of   $500,000,000   for   violation  of
                            contract,  interference  of  contract  and  punitive
                            damages. The Company has filed a mechanic's lien for
                            $13,640,747   relating  to  work  performed  at  the
                            project.  The  Company is in the process of pretrial
                            discovery which is scheduled to be completed by June
                            1999.  The  Company  intends  to  vigorously  defend
                            against any claims as well as  vigorously  prosecute
                            its claims against the owner of the project.

                        b)  A general contractor  commenced an action to recover
                            a  total  of  $6,326,000  which  includes  costs  to
                            complete  the  job  delay  and  other  damages.  The
                            Company  has  commenced  an action  for  extras  and
                            retainage  due and  filed a  mechanic's  lien in the
                            amount of  $1,488,775.  In addition,  the Company is
                            attempting   to  recover   $759,500   for   contract
                            interference.  The  Company  intends  to  vigorously
                            defend  against  any  claims  as well as  vigorously
                            prosecute its claims against the general contractor.

                  iii)     During August 1998, a majority of the  Company's,  as
                           well  as its  President's,  affiliated  entities  and
                           USABGs'  books and records were seized in  connection
                           with a Grand Jury  Subpoena  from the  United  States
                           District Court for the Eastern  District of New York.
                           Grand  Jury  investigations  can result in a range of
                           actions from a finding of no true bill to indictments
                           and prosecutions for any number of federal  offenses.
                           Criminal  prosecutions  can result in a wide range of
                           penalties, including probation,  imprisonment, fines,
                           restitution  and forfeiture of assets  depending upon
                           the specific type and severity

                                      -10-

<PAGE>
                     USA BRIDGE CONSTRUCTION OF N.Y., INC.
                          NOTES TO FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

                           of the  offense.  As Grand  Jury  investigations  are
                           secret,  legal  counsel  is not at liberty to comment
                           upon  the  investigation.   Additionally,  since  the
                           investigation is in its initial stages, legal counsel
                           cannot  comment  regarding any possible  liability of
                           the Company.  Accordingly,  as of September 30, 1998,
                           no accrual for any  potential  loss  contingency  has
                           been made.

                  iv)      The  Company is a party to  various  claims and legal
                           proceedings    incidental   to   its   business.   In
                           management's opinion, the outcome of these claims and
                           proceedings  will not have a material  adverse effect
                           on the financial statements of the Company taken as a
                           whole.

                          While the ultimate  outcome of these matters cannot be
                          determined presently with certainty,  management is of
                          the opinion  that the outcome will not have a material
                          adverse effect on the Company's financial position.

            i)    Claims

                         The Company elected not to recognize any portion of the
                         revenue  associated  with any contract claims until the
                         amounts recoverable can be accurately estimated. Claims
                         are  amounts  in excess of the  agreed  contract  price
                         which the Company seeks to collect for customer  caused
                         delays, errors in specifications and designs,  contract
                         terminations,   and   change   orders  in   dispute  or
                         unapproved.

            j)    Year 2000 Compliance

                  The Company has reviewed  its computer  software for Year 2000
                  compliance and does not anticipate any adverse  effects on its
                  financial condition, liquidity or results of operations.

            k)     Environmental

                  The Company is subject to rules and  regulations  from federal
                  and  state  agencies  in  connection  with  safety  rules  and
                  environmental  safety.  The  failure to comply with such rules
                  and  regulations  may have an adverse  effect on the Company's
                  operations.  The Company  believes  that it is in  substantial
                  compliance with all applicable rules and regulations.

                                      -11
<PAGE>
                     USA BRIDGE CONSTRUCTION OF N.Y., INC.
                          NOTES TO FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)


NOTE 6       -    RELATED PARTY TRANSACTIONS

            a)    Due from affiliates

                  As of September  30, 1998,  the Company has advanced  funds to
                  various  affiliates.  These advances are non-interest  bearing
                  and are due on demand.  As of September  30, 1998 and June 30,
                  1998  such   advances   amounted  to  $205,480  and  $126,489,
                  respectively.

             b)   Due from parent company

                  As of September  30, 1998 and June 30,  1998,  the Company has
                  advanced  $459,358 and $405,458,  respectively  to its parent,
                  USABG. Such advances bear no interest and are due on demand.

            c)    Due to officer and affiliates

                  As of September  30, 1998 and June 30, 1998,  the total due to
                  officers and  affiliates,  amounting to $274,108 and $386,457,
                  respectively, represents advances made by the President of the
                  Company and affiliated entities which bear no interest and are
                  due on demand.

            d)    Rent expense

                  Included  in  general  and  administrative  expenses  is  rent
                  expense  paid in cash and stock by the  Company  pursuant to a
                  signed  lease  agreement  with  RSJJ,  a company  owned by the
                  Company's President. The lease expires December 31, 1998. Rent
                  expense for both three  months  ended  September  30, 1998 and
                  1997 amounted to $60,000.

            e)    Purchase of material and labor

                  For the three months ended September 30, 1997 the Company paid
                  to U.S. Bridge Corp. (Maryland) ("US Bridge MD") approximately
                  $35,000 for  materials  and labor  necessary to perform  steel
                  erection services.  US Bridge MD is a wholly-owned  subsidiary
                  of USABG. Crown Crane, Inc. is an entity which is 50% owned by
                  the Company's President. As of September 30, 1998 and June 30,
                  1998,  $113,584,  was owed to Crown Crane, Inc. which has been
                  included in due to officer and affiliates.

                  Atlas Gem Leasing  Inc.  ("AGLI") is an entity which is wholly
                  owned by the Company's President.  As of September 30, 1998, $
                  34,068  was owed to AGLI  which  has been  included  in due to
                  officer and affiliates.

                                      -12-
<PAGE>
                     USA BRIDGE CONSTRUCTION OF N.Y., INC.
                          NOTES TO FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

            f)    Employment agreement

                  On  April 4,  1995  the  Company  entered  into an  employment
                  agreement with its President for a term of approximately three
                  (3)  years  which  expired  on June 30,  1998.  The  Company's
                  President  formally  elected  to extend the  agreement  for an
                  additional  three  years  until  June 30,  2001 under the same
                  terms. The employment  agreement provides for an annual salary
                  of $300,000 with a 10% annual escalation subject to adjustment
                  by the Board of  Directors.  In addition,  the  President  was
                  granted  options to  purchase  6,250  shares of the  Company's
                  common stock, all of which options vested  immediately and are
                  due to expire in April 2000. The exercise price of the options
                  is equal to 110% of the  stock  price  in the  initial  public
                  offering.  The  foregoing  options are  intended to qualify as
                  incentive stock options.  In addition,  the President receives
                  an annual non-accountable expense allowance of $50,000 and the
                  Company  shall pay  premiums on a  $3,500,000  life  insurance
                  policy  for  the  benefit  of  individuals  designated  by the
                  President, with an estimated annual premium of $80,000.

                                      -13-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS  OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

General


         The  Company's  operations  are  substantially  controlled by Joseph M.
Polito,  its President,  since he owns  approximately  66.3% of the  outstanding
shares of USABG and may be considered the beneficial  owner of the Company.  Mr.
Polito is also a 100% shareholder of RSJJ. RSJJ leases the administrative office
space to the Company at a cost of $20,000 per month  pursuant to a signed  lease
agreement  expiring on December 31, 1998. Mr. Polito has ownership  interests in
Waldorf Steel Fabricators,  Inc.  ("Waldorf") (which ceased operations on August
1, 1995),  Crown and AGLI which  provide   services to the Company.

         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.  The Company has  completed in excess of twenty-one  (21) projects
with an aggregate  project value of  approximately  $40,000,000 and is currently
engaged in two (2) projects with an aggregate value of approximately $11,600,000
(inclusive of change  orders).  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.

                                      -14-
<PAGE>
         As of September  30, 1998,  the backlog  balance on these two remaining
contracts  amounted to  $670,000.  Such  contracts  are expected to be completed
during January and February 1999.

         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  allowed  the  Company to pursue  those
general  contracting  projects in the public and private  sectors  which require
Performance Bonds. 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 New York 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.

         The UAGC  bonding  commitment  ceased as a result of UAGC's  filing for
bankruptcy. Accordingly, the Company currently does not have any 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 year.  Interim  results may also be affected by the
timing of bid  solicitation,  the stage of  completion  of major  projects,  and
revenue recognition policies. For the three months ended September 30, 1998, the
Company did not obtained new contracts, however change order to the two existing
contracts  amounted to  approximately  1,500,000. The Company did not obtain any
contracts  for the three  months  ended  September  30,  1998.  The Company will
attempt to bid on available contracts,  however,  there can be no assurance that
it will be able to obtain any.
 
         The  following  schedule  summarizes  changes in  backlog on  contracts
during the three ended  September  30, 1998.  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 on which work has not yet
begun.
<TABLE>
<CAPTION>


<S>                                                                   <C>       
Backlog balance at July 1, 1997                                       $  877,410
Change orders to contracts in progress at June 30, 1998                1,560,745
New contracts during the three months ended September 30, 1998              --
                                                                      ----------
                                                                       2,438,155

Less: contract revenue earned during the year ended June 30, 1998      1,768,155
                                                                      ----------

   Backlog balance at September 30, 1998                              $  670,000
                                                                      ----------
</TABLE>
                                      -15-
<PAGE>
         The  Company's  failure  to obtain new  contracts  will have a material
impact on net revenues and income from  continuing  operations  in the future if
this trend continues.  The Company's current backlog and the expected collection
on liens over the next six to twelve months is not  anticipated to be sufficient
to meet its operating needs and accordingly raises the issue about the Company's
ability to continue as a going concern.

         The Company  recognizes  revenue and costs for all contracts  under the
percentage of completion  method measured by the percentage of costs incurred to
date to  estimated  total costs for each  contract.  Cost of  contract  revenues
includes all direct material and labor costs and those indirect costs related to
contract performance.  General and administrative  expenses are accounted for as
period  costs  and  are,  therefore,  not  included  in the  calculation  of the
estimates  to complete  construction  contracts in  progress.  Material  project
losses are provided for in their entirety without reference to the percentage of
completion.  As  contracts  can  extend  over  one or more  accounting  periods,
revisions  in costs and  earnings  estimated  during  the course of the work are
reflected during the accounting period in which the facts became known.

         The current asset,  "costs and estimated earnings in excess of billings
on uncompleted  contracts,"  represents revenues recognized in excess of amounts
billed  on  respective  uncompleted  contracts  at the end of each  period.  The
current  liability,  "billings  in  excess  of costs and  estimate  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.

Three months ended  September 30, 1998 compared to three months ended  September
30, 1997

         Contract  revenues for the three months  ended  September  30, 1998 and
1997  amounted to $1,768,155  and $ 8,918,385  respectively.  This  represents a
decrease of $7,150,230 (or approximately 80%). This material decrease in revenue
is a direct  result of the  Company's  inability  to  obtain  any  material  new
contracts during the year ended June 30, 1998 and subsequent thereto.

                                      -16-
<PAGE>
         The Company increased its allowance for uncollectibles up to $4,664,932
to reserve for the potential  uncollectibility  of certain receivables for which
mechanic's liens were filed and for the settlement of certain mechanics liens on
a certain  jobs.  For the three months ended  September  30, 1998 and 1997,  the
Company  had  two  unrelated  customers,   respectively,   which  accounted  for
approximately 100%, and 99%,  respectively,  of total revenues.  As of September
30,  1998  the  Company  had  two  unrelated   customers   which  accounted  for
approximately 76% of total net contract and retainage receivables.

         The  Company  classified  a portion  of its  contracts  receivables  as
non-current  since the  Company  cannot  reasonably  estimate  the  timing  such
receivables will be collected as a result of various mechanic liens filed.
 
         Despite the Company's inability to obtain new contracts during the year
ended June 30, 1998 and the three months ended September 30, 1998, the Company's
gross profit for the three months ended  September  30, 1998  amounted to 41% as
compared to 15%, for the three months ended September 30, 1997. This increase in
gross profit is  primarily a result of the change  orders to the  remaining  two
contracts the Company is about to complete. Normally change orders tend to yield
a higher gross profit.

         General and administrative expenses have decreased by $112,253 (or 19%)
to $478,444 for the three months ended September 30, 1998, from $590,697 for the
three months ended  September 30, 1997.  The decrease in general  administration
costs is mainly  attributable to the Company's attempt to reduce its overhead as
a result of its lack of new contracts.

                                      -17-
<PAGE>
                     USA BRIDGE CONSTRUCTION OF N.Y., INC.
                          NOTES TO FINANCIAL STATEMENTS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)


Liquidity and Capital Resources

         The accompanying financial  statements have been prepared assuming that
the Company will continue as a going concern.  Despite the fact that the Company
generated net income of $150,526 for the quarter ended  September 30, 1998,  for
the year ended June 30,  1998 the  Company  generated  a net loss  amounting  to
$2,093,968  after  recording  a bad debt  expense  amounting  to  $2,376,187  in
connection with the settlement of certain contract  receivable and by increasing
its  allowance for bad debts as a result of various  mechanic's  liens placed on
completed  contracts  during the year ended June 30, 1998 and the recording of a
non-recurring  charge of $300,000 for a potential settlement of unpaid insurance
resulting from an ongoing lawsuit from the State Insurance Fund.

         Additionally,  as of  September  30,  1998,  the  Company has a working
capital deficiency amounting to approximately $2,970,201. The Company classifies
certain contracts and retainages  receivables as non-current as a result pending
litigations in connection with claims and pending change orders. As of September
30, 1998, the Company's  backlog  amounted to  approximately  $670,000.  Backlog
represents the amount of revenue the Company  expects to realize from work to be
performed on uncompleted  contracts and from contracts on which work has not yet
begun.  Lastly,  as of  September  30,  1998,  the  Company  owes  approximately
$2,127,690 of payroll taxes and related  penalties and interest.  Certain taxing
authorities  have filed  certain  liens  against  the Company as a result of the
unpaid payroll taxes.

         The Company is aggressively  trying to obtain  additional  contracts in
order to  mitigate  its low  backlog  and is  vigorously  attempting  to  settle
disputes in connection with mechanics' liens placed on certain projects in order
to collect its receivables and liquidate its payroll taxes,  however,  there can
be no  assurance  that it will be able to  obtain  additional  contracts.  These
factors raise  substantial  doubt about the  Company's  ability to continue as a
going concern.  The financial  statements do not include adjustments relating to
the  recoverability  and realization of assets and classification of liabilities
that might be necessary should the Company be unable to continue in operation.

         The timing of the  collectibility  of $8,400,750,  which represents the
noncurrent 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 allowance for doubtful accounts was increased to $4,396,383 through
June 30,  1998  from  $2,287,000  at June 30,  1997 to  reflect  the  filing  of
mechanic's  liens  on  certain  jobs as well as a  review  of the  aging  of the
accounts receivable and the settlement of certain receivables subsequent to year
end. No further  adjustments  to the  allowance  have been deemed  necessary  by
management as of September 30, 1998.

                                      -18-
<PAGE>
         As a result of the slow  collection  process  associated with the above
circumstances,  the Company was unable to pay its  payroll tax  obligations  and
rent on a timely basis.  Upon the collection or settlement of a major portion of
contracts  receivable,  the Company's  first priority is to pay down its payroll
tax  obligations  as much as  possible.  The  accrued  and unpaid  rent has been
settled by the Company with USABG  issuing  stock to its  landlord,  RSJJ. As of
September 30, 1998, the Company owes  approximately  $2,127,690 of payroll taxes
and related estimated  penalties and interest.  Federal and state tax liens have
been filed against the Company in connection with unpaid payroll taxes. Although
as of September 30, 1998, the Company has not entered into any formal  repayment
agreements with the respective tax  authorities,  it has been attempting to make
monthly payments based on oral agreements and available funds.

         In December 1997,  the Company  entered into an agreement with the Iron
Workers  Local 40, 361 and 417 Joint  Security  Funds (the  "Union") in order to
liquidate $1,750,000 owed for unpaid union dues and benefits previously recorded
as accounts  payable.  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. The amount  outstanding at September 30, 1998
is $1,500,000,  of which $300,000 has been  classified as current and $1,200,000
as non-current.

         Net cash  provided by operating  activities  for the three months ended
September  30, 1998 and 1997 amount to $418,751 and $157,227  respectively. 

         The Company  used  $320,240  and  $248,878  for the three  months ended
September 30, 1998 and 1997 respectively in cash from financing activities. Such
cash was used primarily for repayments of advances to affiliates and officers.

         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.
 
Mechanics Liens

39th St. Bridge

         This  action was filed on February  26, 1997 in New York State  Supreme
Court,  Queens County. It names The Company,  Metro Steel Structures,  Ltd., and
McKay  Enterprises,  Inc. as plaintiffs  and Perini  Corporation,  Department of
Transportation  of the City of New York,  and  Fidelity  and Deposit  Company of

                                      -19-
<PAGE>
Maryland  as  defendants.  The  Company's  claim for  relief in this  action was
$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.  On October 7,
1998,  the Company  entered into an agreement  with Perini  whereby it agreed to
release  and  discharge  in full its  claims  against  Perini for 20% of the net
amount to be recovered  and  collected  by Perini in  connection  with  Perini's
action against the City of New York.

Robert Moses Causeway

         This action was  commenced May 9, 1997,  and involves  money due to The
Company for work it performed at the Robert Moses Causeway Project.  The Company
filed a  mechanic's  lien in the  amount of  $279,346.  This claim is based upon
filed  mechanic's  liens  and  general  contract  law.  The  claim is for  labor
performed and  materials  supplied  including  money owed under the contract and
money due for "extra"  work  regarding  the  rehabilitation  of the Robert Moses
Causeway  Northbound Bridge over the State Boat Channel,  in Suffolk County, New
York.  The action  against Kiska  Construction  Corp.  seeks  foreclosure of the
mechanic's  lien  and a  judgment  for the  amount  of  $279,346  against  Kiska
Construction Corp. and the bonding company, Seaboard Surety Company.  Currently,
USABG is in the process of completing pre-trial  discovery.  The Company intends
to  prosecute  the action  until such time as a judgment  or  settlement  can be
obtained.

Claims By Perini Corporation

         On February 7, 1997,  Perini  Corporation  filed an 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 in the above discussion of
the two actions involving Perini Corporation,  and its claims are based upon the
same theories as those set forth above. (See above "Mechanics Liens").

Claims by and against EklecCo

This action  involves  work  performed by The Company at the  Palisades  Mall in
Nyack,  New York. This action was commenced ins October,  1997 by EklecCo (f/k/a
Pyramid Company of Rockland) seeking to vacate The Company's  mechanic's lien in
the amount of $13,640,747,  seeking  judgment in the amount of $500,000,000  for
violations  of  contract,   interference  of  contract  and  punitive   damages.
Thereafter, The Company served an answer with counterclaims seeking to foreclose
on its  $13,640,747  mechanic's  lien,  seeking  a  judgment  in the  amount  of
$13,640,747  relating to work  performed at the project,  seeking  $1,420,000 in
bonus money promised to The Company and seeking punitive damages.  The Company's
mechanic's  lien was reinstated by the court and a bond was purchased by EklecCo
and issued for the amount of the lien,  plus interest.  The Company is currently
in the process of  pre-trial  discovery,  which is  scheduled to be completed by
June 1999. The Company intends to vigorously  defend against EklecCo's claims as
well as vigorously prosecute its claims against EklecCo.

                                      -20-
<PAGE>
Humphreys & Harding, Inc. Claim against The Company

         The Company performed the steel erection work to construct the Republic
of Korea  Permanent  Mission  to the  United  Nations  at 335 East 45th  Street,
Manhattan.  Humphreys & Harding commenced an action to recover $6,326,000, which
includes  $1,604,000  as cost to  complete  after  The  Company  left  the  job,
$2,790,000 for delay and other damages, $234,000 as liquidated damages under the
"time of the essence"  provision to the  contract and  $1,698,000  for claims by
other  subcontractors for delay. The Company has commenced a separate action for
$1,878,872  representing  extras and retainage due, $1,488,775 on the mechanic's
lien,  and  $667,000  and $92,500 for  interference  with  contracts of Wheeling
Corrugated and Canam Steel.

Claim Against and By State Insurance Fund

         In December 1995, the  Commissioners of the State Insurance Fund of New
York 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 in the US District  Court
for  the  Southern  District  of  New  York,   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 and believe that State Insurance Fund's legitimate
claims should not exceed $300,000.

         A settlement  conference was requested by  plaintiff's  counsel and the
parties have met on several occasions to discuss settlement. Plaintiff's counsel
requested that the defendant submit documentary evidence to support its position
and the same has now been  furnished to  plaintiff's  counsel.  This  submission
supports  defendant's  contention  that its  liability  for premiums  should not
exceed three hundred thousand  dollars.  Active  negotiations are in their final
stages and  plaintiff's  counsel is in the process of drafting final  settlement
documents. The Company believes this matter will likely be settled with a modest
cash payment to be made to the plaintiff  (less than  $60,000.00) on the signing
of settlement  documents.  Any additional  payments would involve assignments of
portions  of  current  accounts  receivable,  to be due and  payable  only  when
received and any  balances  then  remaining  would be payable at the end of five
years. It is expected that based upon current negotiations a final settlement of
all the terms and conditions  will be in place by the end of this year but until
all settlement documents are formally and finally executed, no assurances may be
made.

Subpoena by the Securities and Exchange Commission and Grand Jury Subpoena

         The Company  effected an  underwritten  initial public  offering of its
securities  in August 1996 (the "IPO").  In January  1998, as part of an inquiry
into the  activities of a principal  underwriter of the IPO, an Order of Private
Investigation was issued by the SEC relating to such underwriter and three

                                      -21-
<PAGE>
companies,  including  the  Company,  in  which  the  underwriter  had  acted as
principal underwriter, in which The Company was subpoenaed by the SEC to produce
certain  records.  The  Company  and  its  officers  and  directors  have  fully
cooperated  with the SEC and there has been no additional  inquiry from the SEC.
At this  juncture,  the  inquiry is too  preliminary  to form any  judgments  or
assessments regarding any possible liability of the Company.

         In September  1998,  the Company  received a Grand Jury Subpoena  Duces
Tecum from the United States District Court for the Eastern District of New York
and a  search  warrant,  for  the  records  of the  Company  and  USABG  and any
affiliated  companies as well as those of Joseph  Polito.  the Company  believes
that the Grand Jury  investigation is in connection with an investigation of the
underwriter  pending  in the  United  States  District  Court  for the  Southern
District of New York. Grand Jury investigations can result in a range of actions
from a finding of no true bill to indictments and prosecutions for any number of
federal offenses. Criminal prosecutions can result in a wide range of penalties,
including probation,  imprisonment,  fines, restitution and forfeiture of assets
depending  upon the specific  type and  severity of the offense.  In view of the
fact  that  this  investigation  appears  to be in its  initial  stage,  at this
juncture  the  investigation  is too  preliminary  to  assert  any  judgment  or
assessments regarding any possible liability of USABG and The Company.

                                      -22-
<PAGE>
                           PART II - OTHER INFORMATION

        ITEM 1 - LEGAL PROCEEDINGS  None.      

        ITEM 2 - CHANGES IN SECURITIES None.          

        ITEM 3 - DEFAULTS UPON SENIOR SECURITIES  None.                         

        ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  None.    

        ITEM 5 - OTHER INFORMATION  None.                                       

        ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 

                  (a) Exhibits:

                     27.1 Financial Data Schedule

                  (b) Reports on Form 8-K;  The  Company  filed a report on Form
8-K on  November  24,  1998,  disclosing  the  Company's  change  in  certifying
accountant  from  Scarano and Tomaro,  P.C. to Massella,  Tomaro & Co.,  LLP. On
November 30, 1998, the Company filed an amendment to the November 24, 1998, Form
8-K to include exhibit 16.1, a letter on change in certifying public accountant.
                     
                                      -23-
<PAGE>
                                  EXHIBIT INDEX





                  27.1 Financial Data Schedule
<PAGE>
SIGNATURES


                  Pursuant to the  requirements  of the  Securities and Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, therunto daily authorized.

Dated:  January 28, 1999                   USA Bridge Construction of N.Y., Inc.

                                             By:  /s/Joseph M. Polito
                                                  -------------------
                                                  Joseph M. Polito, President

                                             By:  /s/Steven Polito
                                                  ----------------
                                                  Steven Polito, Treasurer