COMMITMENTS AND CONTINGENCIES

3 Months Ended

Jul. 31, 2012

Commitments And Contingencies

COMMITMENTS AND CONTINGENCIES

NOTE 10 - COMMITMENTS AND CONTINGENCIES

Other payable

On July 12, 2012, the Company executed the Zurich Agreement with Zurich. Under the terms of the Zurich Agreement, as of July 31, 2012, Zurich advanced the Company $793,927 for the payment of labor and labor-related benefits to assist in completing the project contract with the Camden County Improvement Authority for work at the Cooper Medical Center in New Jersey (the Owner or Cooper Project).  The Cooper Project is a $15.1 million project being completed by the Company’s Trenton Operations. Zurich and its affiliate Fidelity and Deposit Company of Maryland (F&D), as surety, have issued certain performance and payment bonds on behalf of the Owner in regard to the Company’s work on this project. The Company was to repay Zurich the financial advances pursuant to the following repayment schedule:  (1) $397,000 on or about August 3, 2012; and (2) the balance of $396,927 on or about September 7, 2012.  As a condition precedent to the financial advance, the Company executed two letters which are held by Zurich: (1) a letter to the Owner voluntarily terminating its contract for reason of the Company’s default and assigning the contract to Zurich, and (2) a letter of direction to the Owner.  The letters may be forwarded to the Owner in an Event of Default.  An Event of Default under the Zurich Agreement includes: (a) the Company’s failure to make repayments to Zurich in accordance with the repayment schedule; (b) Zurich, at the Company’s request, advances more than $888,000; (c) Zurich pays any of the Company’s  vendors, subcontractors, suppliers or material men pursuant to Zurich’s obligations under its payment bond or any other reason; or (d) the Company uses any of the funds advanced by Zurich for any reason other than the payment of labor and labor benefits incurred in regard to the Cooper Project.  The Company is in default under the Zurich Agreement as it has not repaid Zurich the $793,927.  As a result, a letter of direction was sent to the Owner, requesting that all current and future amounts to be paid on the contract be assigned and paid to Zurich directly.

Performance and payment bonds

The Company is contingently liable to Zurich and its affiliate F&D under a general indemnity agreement. Zurich and F&D, as surety, have issued certain performance and payment bonds on behalf of owners or customers regarding the Company’s work on various projects.  The Company agrees to indemnify the surety for any payments made on contracts of suretyship, guaranty or indemnity. In this regard, Zurich and F&D have received notice of  claims to-date from certain vendors of approximately $4.3 million against payment bonds on the Cooper Project and $723,000 from certain vendors on other projects. The surety is currently investigating these claims, and to date has not disbursed any funds under such payment bonds.  The Company has recorded the appropriate accounts payable related to these projects. The Company believes that all contingent liabilities will be satisfied by its performance and payment on these contracts. 

There is $2,852,346 in current and future billings, including the base contract and approved change orders with the Owner that will be paid directly to Zurich to repay the $793,927 owed under the Zurich Agreement and to partially repay payment bond claims disbursed by Zurich.