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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-1
Registration Statement
Under the Securities Act of 1933
IRON EAGLE GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-22965 27-1922514
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification
organization) Code Number) Number)
Jason Shapiro
61 West 62nd Street, Suite 23F 61 West 62nd Street, Suite 23F
New York, NY 10023 New York, NY 10023
888-481-4445 888-481-4445
(Address, and telephone number (Name, address and telephone number
of principal executive offices) of agent for service)
Copies to:
Ms. Jody Walker ESQ.
7841 South Garfield Way
Centennial, CO 80122
Phone 303-850-7637 Fax 303-482-2731
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box [x]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (section 232.406 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes [ ] No [ ]
2
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [x]
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF AMOUNT PROPOSED PROPOSED AMOUNT OF
SECURITIES TO BE BEING MAXIMUM MAXIMUM REGISTRATION
REGISTERED REGISTERED OFFER PRICE AGGREGATE FEE(1)
PER SHARE OFFER PRICE
Common Stock 14,285,714 $1.05 $15,000,000 $1,741.50
(1) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(a), (c) and (g) under the Securities Act of
1933, as amended.
Iron Eagle amends this registration statement on such date or dates as
may be necessary to delay its effective date until Iron Eagle shall file
a further amendment which specifically states that this registration
statement shall hereafter become effective in accordance with Section
8(a) of the Securities Act of 1933, or until the registration statement
shall become effective on such date as the Commission, acting pursuant
to Section 8(a), may determine.
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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION
$15,000,000
Iron Eagle Group, Inc.
Common Stock
We are offering 14,285,714 shares of our common stock representing an
aggregate offering price of $15,000,000. Our common stock is traded on
the OTCQB under the symbol IEAG.OTCQB. On March 29, 2011, the last
reported sale price of our common stock on the OTCQB was $1.05 per
common share.
Consider carefully the risk factors beginning on page 6 in this
prospectus.
Neither the SEC nor any state securities commission has approved these
common shares or determined that this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
Per share Total
--------- -----
Price to public $1.05 $1.05
Underwriting discount $ $
Proceeds, before expenses,
to Iron Eagle $ $
We have granted the underwriter warrants to purchase an aggregate number
of common shares as would be equal to four percent of the total number
of common shares sold pursuant to the public offering.
Neither the Securities and Exchange Commission nor any securities
commission of any state or other jurisdiction has approved or
disapproved of these securities or passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal
offense.
The underwriters expect to deliver the common stock to purchasers on or
about , 2011, subject to customary closing conditions.
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
The date of this prospectus is April 25, 2011
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TABLE OF CONTENTS
Prospectus Summary 5
Risk Factors 6
Forward Looking Statements 12
Use of Proceeds 13
Dilution 14
Business Operations 15
Underwriting 24
Dividend Policy 28
Management's Discussion and Analysis of Financial
Condition and Results of Operations 28
Directors, Executive Officers Control Persons 32
Security Ownership of Certain Beneficial Owners
and Management 38
Certain Relationships and Related Transactions 40
Description of Capital Stock 41
Shares Eligible for Future Sale 42
Disclosure of Commission Position on Indemnification
for Securities Act liabilities 43
Market for Common Stock and Related Stockholder Matters 43
Experts 45
Legal Proceedings 45
Legal Matters 46
Where You Can Find More Information 46
Financial Statements 46
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PROSPECTUS SUMMARY
To understand this offering fully, you should read the entire prospectus
carefully, including the risk factors beginning on page 6 and the
financial statements.
General Iron Eagle Group, Inc., formerly
Pinnacle Resources, Inc. was
incorporated under the laws of Wyoming
in January 1995. In March 2010, the
registrant re-domiciled in Delaware and
changed its name to Iron Eagle Group,
Inc. The registrant has discontinued
all domestic mining and exploration
activities. All foreign mining and
exploration activities were
discontinued as of April 2009.
Operations Through Delta Mechanical Contractors,
LLC, our wholly owned subsidiary, we
provide construction and contracting
services in both the infrastructure and
government markets.
Delta Mechanical is a regional
subcontractor providing commercial and
industrial installation of plumbing,
heating, ventilation and air
conditioning and fire protection
services in the regions of Rhode
Island, Southeastern Massachusetts and
Eastern Connecticut
Common Shares Outstanding 11,750,485
Common Shares being sold in
this offering 14,285,714
Termination of the Offering The offering will commence on the
effective date of this prospectus and
will terminate on or before December
31, 2012.
Market for our common stock Our common stock is quoted on the
OTCQB. However, our common stock has
limited trading of approximately 2,000
common shares per day average.
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RISK FACTORS
Our business is subject to numerous risk factors, including the
following.
1. We cannot offer any assurance as to our future financial results.
You may lose your entire investment.
As of April 1, 2010, we are considered a development stage entity
seeking to commence principal operations. We cannot assure you that we
can operate in a profitable manner. Iron Eagle had an accumulated
deficit of $(1,216,092) as of December 31, 2010.
2. We have never paid dividends and have no plans to in the future.
Holders of shares of our common stock are entitled to receive dividends
as declared by our Board of Directors. To date, we have not paid cash
dividends on our shares of common stock and we do not expect to pay cash
dividends on our common stock in the foreseeable future. We intend to
retain future earnings, if any, to provide funds for operations of our
business. Therefore, any return investors in our common stock may have
will be in the form of appreciation, if any, in the market value of
their shares of common stock.
3. Our auditors have expressed a going concern issue that notes our
need for capital and/or revenues to survive as a business. You may lose
your entire investment.
The ability of Iron Eagle to continue as a going concern is dependent on
our ability to further implement our business plan and raise capital.
Iron Eagle has incurred a net loss for the year ended December 31, 2010
of $(945,120) and has an accumulated deficit of (1,216,092) at December
31, 2010. We have no cash available and operating expenses are being
funded by Jason Shapiro, an officer and director who is also a
significant shareholder. These factors raise substantial doubt about
the entity's ability to continue as a going concern.
4. If key personnel leave unexpectedly and are not replaced, we may not
be able to execute our business plan.
We are substantially dependent on the continued services of our key
personnel. These individuals have acquired specialized knowledge and
skills with respect to our operations. If any of these individuals were
to leave unexpectedly, we could face substantial difficulty in hiring
qualified successors and could experience a loss in productivity while
any such successor obtains the necessary training and experience.
5. Future sales by our stockholders could cause the stock price to
decline and may affect your ability to liquidate your investment.
In the future, Iron Eagle may issue equity and debt securities. Any
sales of additional common shares may have a depressive effect upon the
market price of Iron Eagle' common stock causing the stock price to
decline.
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6. Our stock is quoted on the OTCQB and is limited under the penny
stock regulation.
The liquidity of Iron Eagle' common stock is restricted due to the fact
that our common stock falls within the definition of a penny stock.
Under the rules of the Securities and Exchange Commission, if the price
of our common stock on the OTCQB is below $5.00 per share, our common
stock comes within the definition of a "penny stock." As a result, Iron
Eagle common stock is subject `to the "penny stock" rules and
regulations. Broker-dealers who sell penny stocks to certain types of
investors are required to comply with the Commission's regulations
concerning the transfer of penny stock. These regulations require
broker-dealers to:
- Make a suitability determination prior to selling penny stock to
the purchaser;
- Receive the purchaser's written consent to the transaction; and
- Provide certain written disclosures to the purchaser.
These requirements may restrict the ability of broker/dealers to sell
our common stock, and may affect the ability to resell our common stock.
7. Iron Eagle' cash balances in banks and brokerage firms may exceed
the insurance limits. Our liquidity may be negatively affected if these
institutions should fail.
Iron Eagle will maintain cash balances in banks and brokerage firms.
Balances are insured up to $250,000 by the Federal Deposit Insurance
Corporation. At times, balances may exceed such insurance limits. Our
liquidity may be negatively affected if these institutions should fail.
Risks associated with activities of Delta Mechanical and other proposed
acquisitions in the construction services industry. The terms "we",
"our", etc. include the operations of the acquisition targets.
1. We will work in a highly competitive marketplace which may
negatively affect our profitability.
We will have multiple competitors in all of the areas in which we intend
to work. During economic down cycles or times of lower government
funding for public works projects, competition for the fewer available
public projects intensifies and this increased competition may result in
a decrease in new awards at acceptable profit margins. In addition,
downturns in residential and commercial construction activity increases
the competition for available public sector work, further impacting our
revenue, contract backlog and profit margins.
2. Our success depends on attracting and retaining qualified personnel
in a competitive environment.
The single largest factor affecting our ability to profitably execute
our work will be our ability to attract, develop and retain qualified
personnel. Our success in attracting qualified people will be dependent
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on the resources available in individual geographic areas and changes in
the labor supply as a result of general economic conditions, as well as
our ability to provide compensation packages and a work environment that
are competitive
3. Fixed price contracts subject us to the risk of increased project
cost. Our profitability may be adversely affected.
We will enter into fixed price contracts. The profitability of our
fixed price contracts will be adversely affected by a number of factors
that can cause our actual costs to materially exceed the costs estimated
at the time of our original bid.
4. Many of our contracts will have penalties for late completion which
could reduce our profits, if any.
In some instances, including many of our fixed price contracts, we will
guarantee that we will complete a project by a certain date. If we
subsequently fail to complete the project as scheduled we may be held
responsible for costs resulting from the delay, generally in the form of
contractually agreed-upon liquidated damages. To the extent these
events occur, the total cost of the project could exceed our original
estimate and we could experience reduced profits or, in some cases, a
loss on that project.
5. Weather can significantly affect our ability to perform work and
could have a negative effect on our quarterly revenues and
profitability.
Our ability to perform work will be significantly affected by weather
conditions such as precipitation and temperature. Changes in weather
conditions can cause delays and otherwise significantly affect our
project costs. The impact of weather conditions can result in
variability in our quarterly revenues and profitability, particularly in
the first and fourth quarters of the year.
6. Design/build contracts subject us to the risk of design errors and
omissions. We may liable for amounts not covered by subcontractor or
their errors and omissions insurance.
Design/build is increasingly being used as a method of project delivery
as it provides the owner with a single point of responsibility for both
design and construction. We will generally subcontract design
responsibility to architectural and engineering firms. However, in the
event of a design error or omission causing damages, there is risk that
the subcontractor or their errors and omissions insurance would not be
able to absorb the liability. In this case we may be responsible,
resulting in a potentially material adverse effect on our financial
position, results of operations and cash flows.
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7. Failure of our subcontractors to perform as anticipated could have a
negative effect on our results.
We will subcontract portions of many of our contracts to specialty
subcontractors, but we are ultimately responsible for the successful
completion of their work. Although we will seek to require bonding or
other forms of guarantees, we may not always be successful in obtaining
those bonds or guarantees from our higher risk subcontractors. In this
case, we may be responsible, resulting in a potentially adverse effect
on our financial position, results of operations and cash flows.
8. Timing of the award and performance of new contracts could have an
adverse effect on our operating results and cash flow.
It is generally very difficult to predict whether and when new contracts
will be offered for tender, as these contracts frequently involve a
lengthy and complex design and bidding process, which is affected by a
number of factors, such as market conditions, funding arrangements and
governmental approvals. Because of these factors, our results of
operations and cash flows may fluctuate from quarter to quarter and year
to year, and the fluctuation may be substantial.
The uncertainty of the timing of contract awards may also present
difficulties in matching the size of our equipment fleet and work crews
with contract needs. In some cases, we may maintain and bear the cost
of more equipment and ready work crews than are currently required, in
anticipation of future needs for existing contracts or expected future
contracts. If a contract is delayed or an expected contract award is
not received, we would incur costs that could have a material adverse
effect on our anticipated profit.
In addition, the timing of the revenues, earnings and cash flows from
our contracts can be delayed by a number of factors, including adverse
weather conditions, such as prolonged or intense periods of rain, snow,
storms or flooding; delays in receiving material and equipment from
suppliers and services from subcontractors; and changes for current and
future periods until the affected contracts are completed.
9. If our estimated backlog is significantly inaccurate or does not
result in future profits, this could adversely affect our future growth.
Our backlog consists of the uncompleted portion of services to be
performed under job-specific contracts and the estimated value of future
services that we expect to provide under master service agreements and
other long-term requirements contracts. Many of our contracts are
multi-year agreements, and we include in our backlog the amount of
services projected to be performed over the terms of the contracts based
on our historical experience with customers and, more generally our
experience in procurements of this type. In many instances, our
customers are not contractually committed to procure specific volumes of
services under a contract. Our estimates of a customer's requirements
during a particular future period may not prove to be accurate,
particularly in light of the current economic conditions and the
uncertainty that imposes on changes in our customer's requirements for
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our services. If our estimated backlog is significantly inaccurate or
does not result in future profits, this could adversely affect our
future growth.
10. Our contracts may require us to perform extra or change order work,
which can result in disputes and adversely affect our working capital,
profits, and cash flows.
Our contracts generally require us to perform extra work or change order
work as directed by the customer even if the customer has not agreed in
advance on the scope or price of the extra work to be performed. This
process may result in disputes over whether the work performed is beyond
the scope of the work included in the original project plans and
specifications or, if the customer agrees that the work performed
qualifies as extra work, the price that the customer is willing to pay
for the extra work. These disputes may not be settled to our
satisfaction. Even when the customer agrees to pay for the extra work,
we may be required to fund the cost of that work for a lengthy period of
time until the change order is approved by the customer and we are paid
by the customer.
To the extent that actual recoveries with respect to change orders or
amounts subject to contract disputes or claims are less than the
estimates used in our financial statements, the amount of any shortfall
will reduce our future revenues and profits, and this could have a
materially adverse effect on our reported working capital and results of
operations. In addition, any delay caused by the extra work may
adversely impact the timely scheduling of other project work and our
ability to meet specified contract milestones.
11. If we experience delays and/or defaults in customer payments, we
could be unable to recover all expenditures.
Because of the nature of our contracts, at times we commit resources to
projects prior to receiving payments from the customer in amounts
sufficient to cover expenditures on projects as they are incurred.
Delays in customer payments may require us to make a working capital
investment. If a customer defaults in making their payments on a
project in which we have devoted resources, it could have a material
negative effect on our results of operations.
12. Government contracts generally have strict regulatory requirements.
The cost of compliance may have an adverse effect on our profitability.
A portion of our income may be derived from contracts funded by federal,
state and local government agencies and authorities. Government
contracts are subject to specific procurement regulations, contract
provisions and a variety of socioeconomic requirements relating to their
formation, administration, performance and accounting and often include
express or implied certifications of compliance. Claims for civil or
criminal fraud may be brought for violations of regulations,
requirements or statutes. We may also be subject to qui tam, i.e.,
Whistle Blower, litigation brought by private individuals on behalf of
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the government under the Federal Civil False Claims Act, which could
include claims for up to treble damages. Further, if we fail to comply
with any of the regulations, requirements or statutes, our existing
government contracts could be terminated and we could be suspended from
government contracting or subcontracting, including federally funded
projects at the state level. Should one of these events occur, it
could have a material adverse effect on our financial position, results
of operations, and cash flows.
13. We will be subject to environmental and other regulation. The cost
of compliance may adversely affect our operations.
We will be subject to a number of federal, state and local laws and
regulations relating to the environment, workplace safety and a variety
of socioeconomic requirements, the noncompliance with which can result
in substantial penalties, termination or suspension of government
contracts as well as civil and criminal liability. There can be no
assurance that these requirements will not change and that the cost of
compliance will not adversely affect our operations.
14. Strikes or work stoppages could have a negative effect on our
operations and results.
We will be party to collective bargaining agreements covering a portion
of our craft workforce. Such labor actions could have a significant
effect on our operations if they occur in the future.
15. Unavailability of insurance coverage could have a negative effect
on our operations and results.
We will maintain insurance coverage as part of our overall risk
management strategy and pursuant to requirements to maintain specific
coverage that are contained in our financing agreements and in most of
our construction contracts. Although we have been able to obtain
reasonably priced insurance coverage to meet our requirements in the
past, there is no assurance that we will be able to obtain reasonably
priced insurance coverage to meet our requirement, and our inability to
obtain such coverage could materially affect our financial position,
results of operations and cash flows.
16. An inability to obtain bonding would have a negative effect on our
operations and results.
We will generally be required to provide surety bonds securing our
performance under the majority of our public and private sector
contracts. Our inability to obtain reasonably priced surety bonds in
the future could significantly affect our ability to be awarded new
contracts, which would have a material adverse effect on our financial
position, results of operations and cash flows.
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17. Our joint venture contracts with project owners subject us to joint
and several liability.
We may enter into joint venture contracts with project owners. If a
joint venture partner fails to perform we could be liable for completion
of the entire contract, we may be subject to joint and several
liability. If the contract were unprofitable, this could result in a
material adverse effect on our financial position, results of operations
and cash flows.
18. We will use certain commodity products. Price fluctuations may
adversely affect our operations.
Diesel fuel and other petroleum-based products are used to fuel and
lubricate our equipment. We will also use steel and other commodities
in our construction projects that can be subject to significant price
fluctuations. There is no guarantee that we will not be adversely
affected by price fluctuations in the future.
19. Private sector work can be affected by economic downturns which may
limit our profitability.
The availability of private sector work can be adversely affected by
economic downturns in the residential housing market, demand for
commercial property or the availability of credit. To the extent these
events occur, our operating results will be adversely affected.
20. The funding source of a project may encounter financial difficulty
therefore be unable to advance funds to the owner and prime contractor.
In most of our general contractors agreements, there are or will pay
when paid clauses. By contract definition, the general contractor is
not required nor is he obligated to pay the subcontractors until he
receives funding. Our potential recourse in these situations is to file
mechanics liens against the property. Delays in payment may adversely
affect our ability to obtain profitability.
21. We may incur expenses related to engineering and/ or product
deficiencies from third parties.
Defective equipment and/ or equipment from third parties may not perform
up to expectations. Many times we incur costs due to these engineering
and/ or product deficiencies. While we have insurance, until these
situations are remedied, this can cost us significant dollars to prove
we are not at fault or collect insurance. In addition, this may cause
delays in our projects causing increased expenses than estimated.
FORWARD LOOKING STATEMENTS
The statements contained in this prospectus that are not historical fact
are forward-looking statements which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may,"
"should," or "anticipates" or the negative thereof or other variations
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thereon or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. We have made the forward-looking
statements with management's best estimates prepared in good faith.
Because of the number and range of the assumptions underlying our
projections and forward-looking statements, many of which are subject to
significant uncertainties and contingencies that are beyond our
reasonable control, some of the assumptions inevitably will not
materialize and unanticipated events and circumstances may occur
subsequent to the date of this prospectus.
These forward-looking statements are based on current expectations, and
we will not update this information other than required by law.
Therefore, the actual experience of the registrant, and results achieved
during the period covered by any particular projections and other
forward-looking statements should not be regarded as a representation by
the registrant, or any other person, that we will realize these
estimates and projections, and actual results may vary materially. We
cannot assure you that any of these expectations will be realized or
that any of the forward-looking statements contained herein will prove
to be accurate.
USE OF PROCEEDS
Any proceeds received from the sale of our common shares will be
deposited directly into our operating account to fund our operations.
We will be attempting to raise up to $15,000,000 from the sale of our
common shares. These proceeds will be used as follows:
Offering Amount
---------------
Total Proceeds $15,000,000 $7,500,000 $3,750,000 $1,500,000
Offering Expenses 53,242 53,242 53,242 53,242
Commissions(1) 1,500,000 750,000 375,000 150,000
----------- ---------- ---------- ----------
Net Proceeds 13,446,758 6,696,758 3,321,758 1,296,758
Repay Outstanding Notes and
Lines of Credit(2) 9,545,000 6,500,000 3,000,000 1,100,000
Acquisition related expenses(3) 100,000 25,000 10,000 10,000
Repay Accrued Salaries and
Accounts Payable 2,000,000 - - -
Net Working Capital(4) 1,601,758 121,758 261,758 136,758
Contingencies 200,000 50,000 50,000 50,000
----------- ---------- ---------- ----------
Net Proceeds Expended $13,446,758 $6,696,758 $3,321,758 $1,296,758
=========== ========== ========== ==========
(1) Assumes 10% of the gross proceeds
(2) This consists of a
(i) $9.0 million Seller's Note and $170,000 interest related to the
acquisition of Delta Mechanical by registrant payable to Bruce A.
Bookbinder, President of Delta Mechanical who was the sole 100% owner of
Delta Mechanical prior to the acquisition;
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(ii) $325,000 of notes due to Joseph LoCurto, Jed Sabio, and Jason
Shapiro, the registrant's officers, for out-of-pocket expenses paid to
the registrant , and
(iii) $50,000 to repay the line of credit with Key Bank.
If the registrant raises less than $10,000,000, then the registrant will
negotiate with Mr. Bookbinder to attempt to restructure the Seller's
Note and pay him a portion of the note with the proceeds of this
offering and the rest due at a later set date. If the registrant is
unable to reach an agreement with Mr. Bookbinder, then the Seller's Note
will be in default, thus allowing him to exercise his option to retake
title of Sycamore Enterprises and Delta Mechanical Contractors.
(3) The registrant is currently in acquisition negotiations with several
infrastructure construction companies. The registrant is still in early
stages with these companies, but plans to enter into definitive
agreements when and if the registrant and these target companies reach
an agreement on purchase price and structure.
(4) Net working capital includes uses for general corporate purposes as
well as to increase the surety bonding capacity of the registrant.
We estimate at least $500,000 will be required to maintain minimal
operations for the next twelve months, to be used as follows:
Accounting $100,000
Legal 75,000
Rent and related 72,000
Insurance 60,000
NASDAQ / AMEX Listing 50,000
Travel 50,000
Corporate expenses 25,000
Investor Relations 25,000
IT and website maintenance 10,000
Interest Expense 5,000
Contingencies 28,000
--------
Total $500,000
DILUTION
Assuming completion of the offering, there will be up to 26,036,199
common shares outstanding. The following table illustrates the per
common share dilution that may be experienced by investors at various
funding levels.
Funding Level $15,000,000 $7,500,000 $3,750,000 $1,500,000
--------- -------- -------- --------
Offering price $1.05 $1.05 $1.05 $1.05
Net tangible book
value per common
share before offering (.10) (.10) (.10) (.10)
Increase per common
share attributable to
investors .57 .39 .24 .11
---- ---- ---- ----
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Pro forma net tangible
book value per
common share after
offering .47 .29 .14 .01
---- ---- ---- ----
Dilution to investors .58 .76 .91 1.04
Dilution as a
percentage of
offering price 55% 72% 86% 99%
Based on 11,750,485 common shares outstanding as of April 25, 2011 and
total stockholder's equity of ($1,136,125) utilizing audited December
31, 2010 financial statements.
Since inception, the officers, directors and affiliated persons have
paid an aggregate average price of $.02 per common share in comparison
to the offering price of $1.05 per common share.
Further Dilution
----------------
The registrant may issue equity and debt securities in the future.
These issuances and any sales of additional common shares may have a
depressive effect upon the market price of the registrant's common
shares and investors in this offering.
BUSINESS OPERATIONS
General
-------
The registrant was incorporated pursuant the laws of Wyoming in January
1995 under the name of Pinnacle Resources, Inc. In March 2010, we re-
domiciled in Delaware and changed our name to Iron Eagle Group, Inc.
The registrant has discontinued all domestic mining and exploration
activities. All foreign mining and exploration activities were
discontinued as of April 2009.
The registrant entered into a share exchange agreement to acquire 100%
of the outstanding common stock of Iron Eagle Group, a Nevada
corporation. On August 18, 2010, the registrant issued 9,337,296 shares
of common stock in exchange for a 100% equity interest in Iron Eagle
Nevada. As a result of the share exchange, Iron Eagle Nevada became the
wholly owned subsidiary of the registrant. The shareholders of Iron
Eagle Nevada owned a majority of the voting stock of the registrant.
Therefore, the transaction was regarded as a reverse merger whereby Iron
Eagle Nevada was considered to be the accounting acquirer as its
shareholders retained control of the registrant after the exchange,
although the registrant is the legal parent company. The share exchange
was treated as a recapitalization of the registrant. As such, Iron
Eagle Nevada and its historical financial statements is the continuing
entity for financial reporting purposes. The financial statements have
been prepared as if the registrant had always been the reporting company
and then on the share exchange date, reorganized its capital stock. At
the time of the exchange transaction, the registrant had assets of
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approximately $830,065 and equity of approximately $49,967 and Iron
Eagle Nevada had assets of approximately $10,000 with a deficit of
approximately $382,707.
Operations
----------
The registrant provides construction and contracting services in both
the infrastructure and government markets. The registrant's management
consists of business leaders in construction, government contracting,
defense, finance, operations, and business development.
The registrant intends to benefit from the $100+ billion in annual
government infrastructure spending to rebuild the nation's schools,
roads, bridges, airports, highways, power plants, military bases,
dormitories, public transit, etc. Source: "Construction Outlook 2011"
report McGraw-Hill Construction. In addition, according to
www.recovery.org, the purpose of the $787 billion federal recovery
package is to jump-start the economy to create and save jobs and over
$100 billion has been allocated to improve the nation's infrastructure.
Management has a strategic plan to capitalize on the $100 billion market
opportunity in infrastructure construction created by the Federal
government's stimulus package in addition to the billions of federal
funds that have been approved to be spent at the state level for
projects throughout the United States.
The registrant develops a comprehensive project budget using what it
believes is a proven cost estimating system. Projects are divided into
phases and line items indicating separate labor, equipment, material,
subcontractor and overhead cost estimates. As a project progresses, the
registrant's project managers are responsible for planning, scheduling
and overseeing operations and reviewing project costs compared to the
estimates. These costs are tracked on a monthly basis. The
registrant's costs have been and may in the future be impacted by lower
than expected labor productivity and higher than expected material
costs.
Since January 2010, the registrant has targeted construction companies
that have track records of positive earnings and cash flow for
acquisition and possible joint ventures. The registrant has analyzed
over 500 construction companies, held discussions with hundreds of them
to find the right acquisition target or joint venture partner. As
discussed below, the registrant's first construction acquisition
occurred in January 2011. The registrant is currently in preliminary
acquisition discussions with several construction companies.
The current economy has severely hampered our ability to obtain funds to
close on identified acquisitions. The construction market continues to
remain weak. We are uncertain what potential acquisitions will be
available to us in the near future, or whether, if they are available,
we will be able to obtain debt or equity financing necessary to take
advantage of these opportunities.
17
Aegis Capital Investment Banking Agreement
------------------------------------------
The registrant has retained Aegis Capital Corp., a middle market
investment bank, to raise $25 million for acquisitions and working
capital. The actual size of the common equity offering will depend on
the needs of the registrant and economic and market conditions. There
are many risks with the proposed offering and there is no guarantee to
the timing or that it will be successful. The term of the engagement is
one year starting on August 31, 2010. Aegis shall be compensated as
follows:
i) an underwriting discount of seven percent (7%) of the amount
raised in the public offering and
ii) warrants to purchase that aggregate number of shares as would be
equal to four percent (4%) of the total number of shares sold pursuant
to the public offering.
The registrant shall make best efforts to have the common shares
approved for quotation on the AMEX or NASDAQ exchange by the closing of
equity raise. Post-offering, the registrant shall maintain an active
investor relations program and use a transfer agent that is mutually
agreeable to Aegis and the registrant. A non-refundable engagement fee
in the amount of sixty thousand dollars ($60,000) was paid at the
signing of the agreement comprising of $30,000 in cash and $30,000 in
public restricted equity of the registrant.
Delta Mechanical Contractors, LLC
---------------------------------
Subsequent to the registrant's December year end, on January 21, 2011,
the registrant acquired all of the member interests in Sycamore
Enterprises, LLC from the sole member, Bruce A. Bookbinder. Sycamore
Enterprises, LLC, a Rhode Island limited liability company formed in
2004, is 100% holder of all of the membership interests of Delta
Mechanical Contractors, LLC, a mechanical contractor that is a Delaware
limited liability company formed in 2001.
Delta Mechanical is a regional subcontractor providing commercial and
industrial installations of plumbing, heating, ventilation, air
conditioning and fire protection systems in the regions of Rhode Island,
Southeastern Massachusetts and Eastern Connecticut.
The aggregate purchase price to be paid by the registrant for the
purchased membership interests consists of
(i) a $9,000,000 buyer note (secured by Delta Mechanical)
(ii) future contingency payment(s), based on the registrant's results
for the years ended December 31, 2011, 2012, 2013 and 2014, not to
exceed $250,000 per year or $1,000,000 in aggregate, and
(iii) a four year employment contract with the president and chief
financial officer of Delta Mechanical.
18
The registrant secured its obligations to Mr. Bookbinder by pledging to
Mr. Bookbinder and granting to Mr. Bookbinder a 100% security interest
in the membership interest in Sycamore Enterprises LLC together with the
other collateral until the buyer note is repaid.
Market
Delta Mechanical competes for business primarily in the regions of Rhode
Island, Southeastern Massachusetts and Eastern Connecticut. However,
Delta Mechanical has performed work outside of that area in the past.
Services
Delta Mechanical typically procures and installs equipment to its
customers design specifications. Virtually all of Delta Mechanical's
revenues are generated by work performed on construction projects as
Delta Mechanical does not engage in facilities management and therefore
does not generate any significant service-related revenues.
Delta Mechanical provides contracting services for both new construction
projects and rehabilitation of existing infrastructure, commercial, and
industrial facilities. Delta Mechanical offers the following services:
* Plumbing and piping systems
* Specialty, process piping & equipment
* Heating Ventilation and Air Conditioning
* Upgrades and repairs of HVAC equipment
* Medical gas piping (e.g. Hospitals)
* Laboratory service piping
* Fire protection services
* Specialty pump installation
Delta Mechanical services the following core commercial and industrial
construction markets:
* Military
* Federal, State and Local Public Works
* University/College
* Pharmaceutical Facility
* Manufacturing Facility
* Medical
* Office Building and Towers
* Specialty Plants and Mills
* Hotel/Motel
* Distribution/Warehouse
* Assisted Living
* R&D and Laboratory
* Retail/Entertainment/Recreational
* Institutional
Approximately 90% of Delta Mechanical's projects are acquired on an open
bid, plan and spec basis, whereby they will bid the work based on the
designs provided by the customer. Delta Mechanical does not currently
have the in-house capabilities to assist in the design and engineering
of plumbing, HVAC and fire protection systems. From time to time, Delta
19
Mechanical will sub-contract the engineering work used in the design
phase. Since Delta Mechanical does not self perform design work, Delta
Mechanical does not carry professional liability insurance. The primary
focus of Delta Mechanical's business is on material and equipment
procurement and installation to the specifications provided by the
customer. Most of Delta Mechanical's work is provided on a fixed-price
basis. While project cost overrun risk is generally borne by Delta
Mechanical, they do have the ability to seek to recover additional costs
through project change orders and/or claims.
As Delta Mechanical's business is project-based, their customers are
usually general contractors. On occasion, they will bid a job direct
with the end user, such as a college or university. There is usually a
general contractor that is acting in the capacity of construction
manager.
Over the years, Delta Mechanical has performed numerous projects at the
various campuses of the University of Rhode Island. Work has included
dormitories, dining halls, classrooms, laboratories, etc.
Example of Recently Completed Project
University of Rhode Island - Bio Tech and Life Science Center located in
Kingston, Rhode Island. Delta Mechanical completed over $8,500,000 of
work at this facility in the spring of 2010. Delta Mechanical was hired
by Gilbane Building Company, a nationally recognized, Providence RI
based, general contractor to install the plumbing and HVAC systems in
this LEED Silver certified project. Work included the installation of
piping to connect the steam lines from an existing plant to heat
exchangers that provided hot water, both potable and non-potable, to the
building. In addition, Delta Mechanical installed four penthouse air
handling units to provide the required air flow and ventilation. Energy
recovery units were utilized to reclaim heat from the exhaust system and
mix with the outside air. Waterless urinals are used in the plumbing
systems. Gilbane Building Company is top customer of Delta Mechanical
in terms of revenue each year.
Example of Project Under Construction
University of Rhode Island - College of Pharmacy located in Kingston
Rhode, Island. Delta Mechanical is approximately 35% complete with work
on this $10,800,000 project for Suffolk Construction Company, a general
contractor headquartered in Boston, Massachusetts. Work includes the
plumbing and HVAC for this newly constructed, 5 story, 140,000 square
foot facility. The building will include state of the art teaching
laboratories, research laboratories, laboratory support, and office
spaces. The construction is occurring on an active campus and includes
connections to two existing buildings. This project is also designed to
be certified as LEED Silver. Suffolk Construction is a repeat client of
Delta Mechanical.
Example of New Project
P451 Officer Training Command Quarters Naval Station located in Newport,
Rhode Island. Delta Mechanical has been hired as a design/build
contractor by Absher Construction Company, a Seattle Washington based
contractor. This is Delta Mechanical's first project for Absher, who is
20
also a contractor that performs work on government property. They
currently have projects as far away as Hawaii and Rhode Island. On this
Newport RI project, Delta Mechanical is performing the plumbing, HVAC
and fire protection work for $5,900,000. This project is a multi story,
LEED Silver certified, modified modules with double loaded corridors
that has training, support and administrative spaces. At completion,
this facility is expected to house and support 464 students. Work is
expected commence in the summer of 2011 and is expected to be complete
during the summer of 2012.
Cyclical Nature of Business Activities
Delta Mechanical's business is vulnerable to the cyclical nature of the
markets in which our customers operate and is dependent upon the timing
and funding of new contracts. Delta Mechanical's services are performed
primarily under lump sum contracts. The duration of each project
varies, however, completion typically occurs within one year.
Employees
As of April 1, 2011, Delta Mechanical had approximately 128 employees,
consisting of approximately 28 full-time office and project support
employees and approximately 100 field employees. The field employees
are union workers who are primarily represented by the Plumbers and Pipe
Fitters Local 51 and the Sprinkler Fitters and Apprentices of Local 676.
The number of field union workers employed varies at any given time,
depending on the number and types of ongoing projects and the scope of
projects under contract. Delta Mechanical hires union labor for
specific work assignments and can reduce the number of union workers
hired at will with no penalty. The unions were organized in 2001 and
Delta Mechanical has a positive relationship with the workers and the
unions.
Delta Mechanical pays benefits to union employees through payments to
trust funds established by the unions. Delta Mechanical's obligation is
to pay a percentage of the wages of union workers to these trust funds.
Delta Mechanical is not liable for under funding of these union plans
unless it chooses to resign from the union and perform work on an open-
shop basis. Delta Mechanical provides its full-time office employees,
not subject to collective bargaining agreements, with medical, life, and
disability insurance benefits and a discretionary matching 401(k) plan.
Dependence Upon Customers
At any given time, a material portion of Delta Mechanical's contract
revenue may be generated from a single customer through one large
contract or various contracts. The registrant's customer base will vary
each year based on the nature and scope of the projects undertaken in
that year.
For the year ended December 31, 2010, the top five customers with Delta
Mechanical were Gilbane Building Company, Dimeo Construction Company, HV
Collins Company, Bacon Construction Company, and AF Lusi Construction
Co.
21
Competition
We believe that the northeast, as well as the United States'
construction market is highly fragmented. We believe that companies
tend to be successful due to their knowledge of the local environment,
industry expertise, and specialized nature of their operations. Many of
our competitors may have greater financial and personnel resources.
On public works projects, Delta Mechanical competes by submitting a
sealed bid to the public entity or their designee. The project is
typically awarded to the lowest responsible bidder. On private
projects, Delta Mechanical and its competitors negotiate with the
developer, or its construction manager, on the costs of the work
required.
The mechanical contracting market is highly competitive. There are many
larger regional and national companies with resources greater than those
of the registrant. However, some of these large competitors are
unfamiliar with the states in which the registrant operates. On private
and institutional projects, Delta Mechanical believes it competes
favorably with such companies because of the reputation of Delta
Mechanical and the registrant's management team, and their knowledge of
the local labor force and its ability to value engineer projects. There
are also many smaller contractors and subcontractors who may also
compete for work. Management is of the opinion that there are barriers
to entry for smaller competitors, including bonding requirements, and
relationships with general contractors, subcontractors, suppliers and
unions. Some of Delta Mechanical's competitors include Arden Engineers
and Constructors, Aero Mechanical, and NB Kenney and Company.
Management Information System
Delta Mechanical's management information systems primarily consists of
off-the-shelf software packages such as AutoCAD, Quickpen, Microsoft
Office Applications, Oracles's Contract Manager (project management
software) and Sage's Timberline's Office Software for general accounting
and project information. Delta manages all accounting and financial
reporting functions internally.
Principal suppliers
Raw materials such as copper pipe and PVC are generally purchased from
one of three local vendors. They are Seekonk Supply Co., Independent
Pipe Co., and the FW Webb Company, all of which we have been doing
business for many years. Pipe valves and fittings are purchased on a
job specific basis and therefore we do not carry inventory. Fixtures
and large equipment purchases are sometimes acquired from the local
offices or distributors of nationally recognized manufacturers including
Carrier, Aaon, Trane, York, and Kohler.
Backlog
Delta Mechanical had a backlog of anticipated revenue from the
uncompleted portions of awarded contracts totaling approximately
$39,500,000 as of December 31, 2010, compared to approximately
$42,400,000 as of December 31, 2009. The backlog as of March 31, 2011
was $31,013,000. Subsequent to March 31, 2011, Delta Mechanical has
22
received letters of intent for an additional $7,300,000 of work. This
includes the recently awarded VA Hospital Bldg #3 and some dormitory
work at the University of Rhode Island.
A portion of anticipated revenue in any year is not reflected in its
backlog at the start of the year because some projects are awarded and
performed in the same year. Delta Mechanical believes that
approximately $4,700,000 of the existing backlog at December 31, 2010,
is not reasonably expected to be completed during the 2011 fiscal year.
The schedule for each project is different and subject to change due to
circumstances outside the control of Delta Mechanical. Accordingly, it
is not reasonable to assume that the performance of backlog will be
evenly distributed throughout a year. Delta Mechanical believes that
its backlog is firm, notwithstanding provisions contained in the
contracts which allow customers to modify or cancel the contracts at any
time, subject to certain conditions, including reimbursement of costs
incurred in connection with the contracts and the possible payment of
cancellation fees. Delta Mechanical is actively seeking new contracts
to add to its backlog.
Surety Bonds
Delta Mechanical's ability to obtain bonding, and the amount of bonding
required, is solely at the discretion of the surety and is primarily
based upon net worth, working capital, the number and size of projects
under construction and the surety's relationship with management. The
larger the project and/or the number of projects under contract, the
greater the requirements are for net worth and working capital. Delta
Mechanical is generally reimbursed from the general contractors for the
fee required to be paid to the bonding company. The fees are calculated
on a sliding scale and they approximate one percent of the amount of the
contract to be performed.
Since inception, Delta Mechanical has neither been denied any request
for payment or performance bonds, nor has a bonding company been
required to make a payment on any bonds issued for the registrant.
Federal, State, and Local Regulations
-------------------------------------
The construction industry is subject to various governmental regulations
from local, state and federal authorities, such as the Occupational
Safety and Health Administration and environmental agencies. The
registrant and its subsidiary must also comply with regulations as to
the use and disposal of solvents and hazardous wastes which compliance
is a normal part of its operations.
Environmental Laws
------------------
We need to comply with all the requirements of the federal, state and
local governments with respect to environmental issues. All proper
permits are secured including those for fuels and hazardous wastes. All
of our job sites contain files and product information data for all of
the materials consumed or utilized in our construction process.
23
Other Matters
-------------
The registrant does not own any patents or patent rights. The
registrant's business is not subject to large seasonal variations. The
registrant did not expend funds for research and development during 2010
and 2009 and anticipates no research and development expenses in 2011.
Properties
----------
Our operations are conducted in leased properties. The following table
lists the facilities:
Approximate Monthly Expiration
Location Square Feet Rent Date
----------------- ----------- -------- --------------
Corporate Headquarters 800 $2,100 Month-to-month
61 West 62nd Street
Suite 23F
New York, NY 10023
Delta Headquarters
44 Wilclar Street
Warwick, Rhode Island 02888 9,000 $15,750 December 2014
Additional Facilities:
9600 E. Arapahoe Road 5,000 $3,000 December 2011
Suite 260
Englewood, CO 80112
8 Webb Street Cranston
Warwick, Rhode Island 02888 4,000 $2,000 August 2011
10 Dawn Lane
Warwick, Rhode Island 02888 2,000 $950 month-to-month
Our corporate headquarters are located inside a facility leased by Belle
Haven Capital, LLC, which is owned by Jason Shapiro, who is an officer,
director, and significant shareholder of the registrant. The leases for
Delta's headquarters is leased 44 Wilclar, LLC, a Rhode Island limited
liability company, that is 100% owned by Bruce Bookbinder, Delta
Mechanical's president and chief executive officer.
In general, our facilities are sufficient to meet our present needs.
Available Information
---------------------
Our website is www.ironeaglegroup.com. Our periodic reports and all
amendments to those reports required to be filed or furnished pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934
are available free of charge through our website. Our periodic reports
on Form 10-K, 10-Q and our current reports on Form 8-K and any
amendments to those documents to our website as soon as reasonably
practicable after those reports are filed with or furnished to the
Securities and Exchange Commission. Material contained on our website
is not incorporated by reference.
24
UNDERWRITING
We are offering the common shares described in this prospectus in an
underwritten offering in which shall act as a managing
underwriter. Subject to the terms and conditions contained in the
underwriting agreement, each underwriter has severally agreed to
purchase the respective number of shares of our common stock set forth
opposite its name below:
Name Number of shares Total
---- ---------------- -----
The underwriting agreement provides that the underwriters' obligation to
purchase shares of our common stock depends on the satisfaction of the
conditions contained in the underwriting agreement, including:
- the representations and warranties made by us are true and
agreements have been performed;
- there is no material adverse change in the financial markets or in
our business; and
- we deliver customary closing documents.
Subject to these conditions, the underwriters are committed to purchase
and pay for all common share offered by this prospectus, if any such
shares are purchased. However, the underwriters are not obligated to
take or pay for the common shares covered by the underwriters' over-
allotment option described below, unless and until that option is
exercised.
Underwriting Discount
---------------------
The managing underwriter shall receive an underwriting discount of seven
percent (7%) of the amount raised in the public offering.
Underwriter's Warrants
----------------------
The managing underwriter and/or its designees, at the time of the
closing of the offering, shall receive warrants to purchase an aggregate
number of common shares as would equal four percent (4%) of the total
number of common shares sold pursuant to the public offering. Neither
the underwriter's warrants nor any of the securities underlying the
underwriter's warrants shall be redeemable by the registrant. The
underwriter's warrants shall be exercisable between the first and fifth
anniversary dates of the effective date of the registration statement.
The managing underwriter will agree that during the one year period
following the effective date, it will not transfer the underwriter's
warrants or the underlying underwriter's securities, except to the
managing underwriter's officers, partners or members of the selling
group. The underwriter's warrants shall be exercisable at a price per
25
unit equal to one hundred and twenty percent (120%) of the public
offering price of the common shares and shall be exercisable at any time
from time to time, in whole or in part, during the warrant exercise
term.
The underwriter's warrants shall contain such terms and conditions as
are satisfactory in form and substance to the managing underwriter, the
registrant, their respective counsel, including, without limitation
anti-dilution and exercise provisions. At any time during the five (5)
years commencing after the effective date of the registration statement,
the managing underwriter (or the then holders of a majority of the
underwriter's warrants of the underlying underwriter's securities) shall
have the right to require the registrant to prepare and file a post-
effective amendment to the registration statement or a new registration
statement, if then required, covering all or any portion of the
underwriter's warrants and/or the underlying underwriter's securities.
Piggy Back Registration Rights
------------------------------
In addition, if any time during the warrant exercise term, the
registrant shall prepare and file one or more registration statements
under the Securities Act of 1933, with respect to a public offering of
equity or debt securities of the registrant, or of any such securities
of the registrant held by its shareholders, the registration will
include in such registration statement such number of underwriter's
warrants and/or underlying underwriter's securities held by the managing
underwriter and its designees or transferees as may be required.
The registrant shall bear all fees and expenses incurred by the
registrant in connection with the preparation and filing of any
registrations statement. In the event of a proposed registration, the
registrant shall furnish the then holders of outstanding underwriter's
warrants and underlying underwriter's securities with not less than
thirty (3) days written notice prior to the proposed date of filing of
the registration statement. Such notice shall continue to be given
during the warrant exercise term by the registrant to such holders until
such time as all of the underwriter's warrants and underlying
underwriter's securities have been registered. The holders of the
warrant securities shall exercise the piggy-back rights by giving
written notice, within twenty (20) days of the receipt of the
registrant's notice of its intention to file a registration statement.
Success-based Non-accountable Expense Allowance
-----------------------------------------------
The registrant shall pay the managing underwriter a success-based non-
accountable expense allowance in the amount of two percent (2%) of the
gross proceeds of the offering (including the over-allotment option.
Over-Allotment Shares
---------------------
The registrant shall grant the managing underwriter an option,
exercisable no later than 60 days after the date of the underwriting
agreement, to purchase all or part of an additional number of shares as
will be equal to, but not more than fifteen percent (15%), of the total
26
number of shares initially offer to the public. Such over-allotment
period, and any shares purchased by the managing underwriter pursuant to
such option shall be resold to the public on the same terms as the
initially offered shares.
Commissions and Expenses
------------------------
The underwriters propose to offer our common stock directly to the
public at the offering price set forth on the cover page of this
prospectus and to dealers at the public offering price less a concession
not in excess of $ per share. The underwriters may allow, and the
dealers may re-allow, a concession not in excess of $ per share on
sales to other brokers and dealers. After the public offering of our
common stock, the underwriters may change the offering price,
concessions and other selling terms.
The following table shows the per share and total underwriting discount
and commissions that we will pay to the underwriters and the proceeds we
will receive before expenses. These amounts are shown assuming both no
exercise and full exercise of the underwriters' option to purchase
additional shares of our common stock.
Total
without Total with
over- over-
allotment allotment
Per share exercise exercise
--------- --------- ----------
Public offering price $ $ $
Underwriting discount $ $ $
Proceeds to us
(before expenses) $ $ $
In addition to the underwriting discount, we will reimburse the
underwriters for their reasonable out-of-pocket expenses incurred in
connection with their engagement as underwriters, regardless of whether
this offering is consummated, including, without limitation, legal fees
and expenses, marketing, syndication and travel expenses. We estimate
that the total expenses of this offering, exclusive of the underwriting
discounts and commissions, will be approximately $53,242, and are
payable by us.
Indemnification
---------------
We have agreed to indemnify the underwriters, and persons who control
the underwriters, against certain liabilities, including liabilities
under the Securities Act, and to contribute to payments that the
underwriters may be required to make in respect of these liabilities.
Stabilization
-------------
In connection with this offering, the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate
covering transactions and penalty bids.
27
- Stabilizing transactions permit bids to purchase shares of common
stock so long as the stabilizing bids do not exceed a specified maximum,
and are engaged in for the purpose of preventing or retarding a decline
in the market price of the common stock while the offering is in
progress.
- Over-allotment transactions involve sales by the underwriters of
shares of common stock in excess of the number of shares the
underwriters are obligated to purchase. This creates a syndicate short
position that may be either a covered short position or a naked short
position. In a covered short position, the number of shares of common
stock over-allotted by the underwriters is not greater than the number
of shares that they may purchase in the over-allotment option. In a
naked short position, the number of shares involved is greater than the
number of shares in the over-allotment option. The underwriters may
close out any short position by exercising their over-allotment option
and/or purchasing shares in the open market.
- Syndicate covering transactions involve purchases of common stock
in the open market after the distribution has been completed in order to
cover syndicate short positions. In determining the source of shares to
close out the short position, the underwriters will consider, among
other things, the price of shares available for purchase in the open
market as compared with the price at which they may purchase shares
through exercise of the over-allotment option. If the underwriters sell
more shares than could be covered by exercise of the over-allotment
option and, therefore, have a naked short position, the position can be
closed out only by buying shares in the open market. A naked short
position is more likely to be created if the underwriters are concerned
that after pricing there could be downward pressure on the price of the
shares in the open market that could adversely affect investors who
purchase in the offering.
- Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when the common stock originally sold
by that syndicate member is purchased in stabilizing or syndicate
covering transactions to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and
penalty bids may have the effect of raising or maintaining the market
price of our common stock or preventing or retarding a decline in the
market price of our common stock. As a result, the price of our common
stock in the open market may be higher than it would otherwise be in the
absence of these transactions. Neither we nor the underwriters make any
representation or prediction as to the effect that the transactions
described above may have on the price of our common stock. These
transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise and, if commenced, may be
discontinued at any time.
The managing underwriter will perform financial advisory and investment
banking services for us in the ordinary course of their respective
businesses, and may have received, and may continue to receive,
compensation for such services.
28
DIVIDEND POLICY
We have never declared or paid any dividends. In addition, we
anticipate that we will not declare dividends at any time in the
foreseeable future.
Instead, we will retain any earnings for use in our business. This
policy will be reviewed by our board of directors from time to time in
light of, among other things, our earnings and financial position.
No distribution may be made if, after giving it effect, we would not be
able to pay its debts as they become due in the usual course of
business; or the corporation's total assets would be less than the sum
of its total liabilities plus (unless the articles of incorporation
permit otherwise) the amount that would be needed, if we were to be
dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights are
superior to those receiving the distribution. The board of directors
may base a determination that a distribution is not prohibitive either
on financial statements prepared on the basis of accounting practices
and principles that are reasonable in the circumstances or on a fair
valuation of other method that is reasonable in the circumstances.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The financial and business analysis below provides information we
believe is relevant to an assessment and understanding of our financial
position, results of operations and cash flows. This financial and
business analysis should be read in conjunction with the financial
statements and related notes included in this registrant statement.
Trends and Uncertainties
------------------------
The current global economic and financial crisis has severely hampered
our ability to obtain additional funds with which to seek additional
natural resources, construction contracts or other types of business
opportunities. We are uncertain what potential business ventures will
be available to us in the near future, or whether, if they are
available, we will be able to obtain debt or equity financing necessary
to take advantage of those opportunities.
Going Concern
-------------
The registrant has an accumulated deficit through December 31, 2010
totaling $1,216,092 and recurring losses and negative cash flows from
operations. Because of these conditions, the registrant will require
additional working capital to develop its business operations.
The registrant's success will depend on its ability to raise money
through debt and the sale of stock to meet its cash flow requirements.
The ability to execute its strategic plan is contingent upon raising the
necessary cash to:
29
1) pursue and close acquisitions;
2) sustain limited operations; and,
3) meet current obligations.
The current economy has severely hampered the registrant's ability to
raise funds to close on identified acquisitions. The construction
market continues to remain weak. The registrant is uncertain what
potential acquisitions will be available to us in the near future, or
whether, if they are available, if they will be able to raise funds
necessary to take advantage of these opportunities. Management believes
that the efforts it has made to promote its business will continue for
the foreseeable future. These conditions raise substantial doubt about
the registrant's ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability
and classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should the
registrant be unable to continue as a going concern.
Results of Operations
---------------------
Year ended December 31, 2010
Total operating expenses for the year ended December 31, 2010 were
$942,255.
Compensation and professional fees for the year ended December 31, 2010
were $823,836. This is the result of the addition of new management
team. All compensation expense related to the registrant's officers
has been accrued and not paid as of December 31, 2010.
Our general and administrative expenses were $118,419 for the year ended
December 31, 2010. This is due to financing, media relations, and travel
expenses.
We generated no revenue and recorded no bad debt expense during the year
ended December 31, 2010.
For the year ended December 31, 2010, other expense was $2,865 due
mostly to interest expense.
Income tax expense (benefit) during the year ended December 31, 2010 was
$0.
Net loss for the year ended December 31, 2010 totaled $945,120.
For the period November 9, 2009 through December 31, 2009
Total operating expenses for the period November 9, 2009 (Inception)
through December 31, 2009 were $270,972.
Compensation and professional fees for the period November 9, 2009
(Inception) through December 31, 2009 were $270,972. All compensation
expense related to the Company's officers has been accrued and not paid
as of December 31, 2009.
30
We generated no revenue and recorded no bad debt expense during the
period November 9, 2009 (Inception) through December 31, 2009.
Other income (expense) was $0 during the period November 9, 2009
(Inception) through December 31, 2009.
Income tax expense (benefit) during the period November 9, 2009
(Inception) through December 31, 2009 was $0.
Net loss for the period November 9, 2009 through December 31, 2009
totaled $270,972.
Liquidity and Capital Resources
-------------------------------
For the year ended December 31, 2010, we relied on loans from management
and key shareholders. Our cash position increased from $0 at December
31, 2009 to $976 at December 31, 2010, primarily due to cash used
provided by our management and key shareholders.
For the year ended December 31, 2010, cash flows from operations
activities were $(96,156) due to expenses related to compensation,
legal, audit, and other general working purposes.
For the period November 9, 2009 (Inception) through December 31, 2009,
cash flows from operations activities were $(96,157) due to expenses
related to compensation, legal, audit, and other general working
purposes.
For the year ended December 31, 2010, cash flows from investing
activities were $(2,834) due to net fixed assets acquired in the reverse
merger between the registrant and Iron Eagle Nevada.
For the period November 9, 2009 (Inception) through December 31, 2009,
cash flows from investing activities were $(2,834) due to net fixed
assets acquired in the reverse merger between the registrant and Iron
Eagle Nevada.
For the year ended December 31, 2010, cash flows from financing
activities were $99,966 due to the line of credit assumed in the reverse
merger between the registrant and Iron Eagle Nevada and the
recapitalization of the registrant during the time period.
For the period November 9, 2009 through December 31, 2010, cash flows
from financing activities were $99,967 due to the line of credit assumed
in the reverse merger between the registrant and Iron Eagle Nevada and
the recapitalization of the registrant during the time period.
We have no current sources of cash and we will not be able to continue
in existence if further cash resources are not obtained.
Off-Balance Sheet Arrangements
------------------------------
The registrant has no off-balance sheet arrangements.
31
Critical Accounting Policies
----------------------------
The registrant's management selects accounting principles generally
accepted in the United States of America and adopts methods for their
application. The application of accounting principles requires the
estimating, matching and timing of revenue and expense. The accounting
policies used conform to generally accepted accounting principles which
have been consistently applied in the preparation of these financial
statements.
The financial statements and notes are representations of the
registrant's management which is responsible for their integrity and
objectivity. Management further acknowledges that it is solely
responsible for adopting sound accounting practices, establishing and
maintaining a system of internal accounting control and preventing and
detecting fraud. The registrant's system of internal accounting control
is designed to assure, among other items, that
1) recorded transactions are valid;
2) valid transactions are recorded; and
3) transactions are recorded in the proper period in a timely manner
to produce financial statements which present fairly the financial
condition, results of operations and cash flows of the registrant for
the respective periods being presented.
Recent Pronouncements
---------------------
Recently Adopted Accounting Guidance
On January 1, 2010, the registrant adopted Accounting Standard
Update2009-16, "Transfers and Servicing (Topic 860): Accounting for
Transfers of Financial Assets." This ASU is intended to improve the
information provided in financial statements concerning transfers of
financial assets, including the effects of transfers on financial
position, financial performance and cash flows, and any continuing
involvement of the transferor with the transferred financial assets. The
registrant does not have a program to transfer financial assets;
therefore, this ASU had no impact on the registrant's consolidated
financial statements.
On January 1, 2010, the registrant adopted ASU 2009-17, "Consolidations
(Topic 810): Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities," which amended the consolidation
guidance applicable to variable interest entities and required
additional disclosures concerning an enterprise's continuing involvement
with variable interest entities. The registrant does not have variable
interest entities; therefore, this ASU had no impact on the registrant's
consolidated financial statements.
On January 1, 2010, the registrant adopted ASU 2010-06, "Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about
Fair Value Measurements," which added disclosure requirements about
transfers in and out of Levels 1 and 2 and separate disclosures about
activity relating to Level 3 measurements and clarifies existing
disclosure requirements related to the level of disaggregation and input
32
and valuation techniques. The adoption of this guidance did not have a
material impact on the registrant's consolidated financial statements or
the related disclosures.
Accounting Guidance Issued But Not Adopted as of December 31, 2010
In October 2009, the FASB issued ASU 2009-13, "Revenue Recognition
(Topic 605): Multiple-Deliverable Revenue Arrangements - a consensus of
the FASB Emerging Issues Task Force," which amends the criteria for when
to evaluate individual delivered items in a multiple deliverable
arrangement and how to allocate consideration received. This ASU is
effective for fiscal years beginning on or after June 15, 2010, which is
January 1, 2011 for the registrant. The registrant is currently
evaluating the impact of adopting the guidance.
Management has reviewed these new standards and believes they had or
will have no material impact on the financial statements of the
registrant
DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS
Executive Officer and Directors
-------------------------------
All holders of common stock have the right to vote for directors.
The board of directors has primary responsibility for adopting and
reviewing implementation of the business plan of the registrant,
supervising the development of the business plan, and review of the
officers' performance of specific business functions.
A director shall be elected by the shareholders to serve until the next
annual meeting of shareholders or until his or her death, or resignation
and his or her successor is elected.
The following table sets forth, as of April 20, 2011, with respect to the
individuals serving in the capacities indicated:
Name Position Terms
----------------------- ---------------------------- -------------
Joseph M. LoCurto, age 63 Director and Chairman of the November 2010
Board of Directors to present
Jason M. Shapiro, age 33 Chief Executive Officer, November 2009
Chief Financial Officer, to present
and Director
Jed M. Sabio, age 50 Executive Vice President November 2010
of Business Development to present
Joseph E. Antonini, age 69 Director July 2010
to present
Gary J. Giulietti, age 59 Director May 2010
to present
33
Jason M. Shapiro
Mr. Shapiro was the chief executive officer and sole director of Iron
Eagle Group, a Nevada corporation from its inception on November 9, 2009
to January 8, 2010 when it was acquired pursuant to the Share Exchange
Agreement described herein. From 2007-2009, Mr. Shapiro was the vice
president of Macquarie Capital Funds, a private equity group where he
was responsible for asset management and investments. In the summer and
fall of 2006, Mr. Shapiro was a legal intern for Honorable Rosemary
Gambardella, a former Chief Judge on the United States Bankruptcy Court
for the District of New Jersey. From 1999-2004, Mr. Shapiro was an
associate director of UBS Investment Bank, a global healthcare
investment banking firm. Mr. Shapiro is also currently a partner with
Lincoln Center Capital.
Mr. Shapiro earned his MBA degree from the University of Pennsylvania's
The Wharton School in 2009. Mr. Shapiro earned a JD degree from the
Seton Hall University School of Law in 2007. Mr. Shapiro earned a MS
degree in accountancy from Zicklin School of Business' Baruch College in
2006, where he graduated as valedictorian. Mr. Shapiro earned a BS
degree in computer science from Rutgers College in 1998 where he
graduated in three years and was the class valedictorian.
Mr. Shapiro has earned the following certifications:
- Certified Public Accountant
- Chartered Financial Analyst
- Certified Insolvency and Restructuring Advisor
- Certification in Distressed Business Valuation
- Certified Fraud Examiner
- Certified in Financial Forensics
- Project Management Professional
- Risk Management Professional
- Certified Lean Six Sigma Black Belt
Joseph M. LoCurto
Mr. LoCurto draws upon his four decades of mergers and acquisition
leadership in the construction field. Mr. LoCurto has served as a
founder, chief executive officer, chief operating officer and president
of regional, national, and international construction management
companies, ranging from $20 million to in excess of $1.8 billion in
annual revenues. Prior to joining Iron Eagle, Mr. LoCurto was at WDF
Inc. and its parent company Greenstar, Inc., which he joined in 2007 as
president and chief operating officer of WDF and became chief executive
officer and president of WDF and chief operating officer of Green star
in 2009. Previously, Mr. LoCurto led divisions of the multinational
construction giant Skanska where he was president and a member of the
board of Slattery Skanksa, chief executive officer of Gottlieb Skanksa,
and president/chief executive officer of Atlantic Skanksa until 2006.
Prior to joining Skanska, Mr. LoCurto held various positions at Gottlieb
Heavy Industries and NAB Construction.
His notable projects include City Water Tunnel Number 3, the
Rehabilitation of Yankee Stadium, rehabilitation of FDR Drive,
rehabilitation of the Brooklyn and Williamsburg Bridges, the 43 story
Channel club on 86th and York Ave, rehabilitation of the Statue of
34
Liberty, 500 MW Poletti Power Plant, Jacob Javits Convention Center,
Newtown Creek WPCP, rehabilitation of Roosevelt Avenue subway station,
the World Trade Center. His accomplishments in the areas of heavy
public works include projects for the MTA's New York City Transit, the
New York City Department of Environmental Protection, the New York City
Department of Transportation, the Dormitory Authority of the State of
New York, the New York City Department of Design and Construction, the
New York City School Construction Authority, New York Power Authority,
Con Edison, KeySpan, and the New York State and City Department of
Transportation.
Mr. LoCurto has been an active member in the industry. He is past
president of the Subcontractors Trade Association, a member of the
American Society of Mechanical Engineers for over thirty years and a
member of MOLES. Throughout his career, he has focused on employing
safe practices, surrounding himself with qualified, knowledgeable people
and creating profitable joint venture partnerships. Mr. LoCurto holds
both electrical and mechanical engineering degrees.
Jed M. Sabio
Mr. Sabio serves as executive vice president, business development for
the registrant. Mr. Sabio is a financial professional with over 24
years of progressively responsible analytic and managerial positions.
For the past 21 years, Mr. Sabio has worked for National Grid and its
predecessor companies (KeySpan Energy Corporation and The Brooklyn Union
Gas Company), the last two years as a full-time consultant. His most
recent positions at National Grid included Director of Mergers and
Acquisitions and Director of Finance. In his capacity as director of
merger and acquisitions, he led project valuation, coordination of
extensive due diligence on all proposed investments, mergers,
acquisitions, divestitures, joint ventures, start-up ventures and other
related investments of the corporation and its subsidiaries. Mr. Sabio
has negotiated deal structure and remuneration, and he has provided
financial counsel through deal completion. As National Grid exited the
energy services sector, Mr. Sabio was charged with de-consolidating and
divesting of the nearly thirty companies that comprised the business
unit. Mr. Sabio earned an MBA in finance from St. John's University in
1988 and a BA in Psychology from Queens College in 1985.
Joseph E. Antonini
Mr. Antonini is the former chairman, president and CEO of Kmart
Corporation. At Kmart, Mr. Antonini began as a management trainee, at
the then S.S. Kresge Company in 1964 and worked his way up to Chairman
of the Board of Directors of the giant retail chain in 1987. He is
credited with leading Kmart into a new era by launching store renewal
programs of unparalleled scope in retail history. They included
expansion of the retailer's specialty store concepts, along with
introduction of the Kmart Super Center, both contributors to setting new
sales and profit records. Mr. Antonini worked with Kmart until 1995.
From 1995 to present, Mr. Antonini has been the chairman of the board of
directors of AWG Ltd., a producer and seller of wine.
35
In the past, Mr. Antonini has been awarded key positions that include
Chairman of the National Retail Federation and the National Minority
Supplier Development Council. He served on the board of directors of:
- Polaroid Corporation, a manufacturer and seller of consumer camera
products, from 2003-2005,
- Chrysler Corporation, a car manufacturer, from 1989-1995,
- Shell Oil Company, a company engaged in oil exploration, reefing
and chemical products, from 1988-1998; and
- NBD Bank (ultimately acquired and merged into Bank One and then
JPMorgan Chase) from 1987-1989.
He is also a recipient of the Horatio Alger Award. Mr. Antonini earned
a Bachelor of Science degree in business administration from West
Virginia University in 1964. In 1992, he was recognized by West
Virginia University as its most distinguished alumni.
Gary J. Giulietti
Since 2000, Mr. Giulietti has been president of the northeast operations
and a member of the executive committee of Lockton Companies, LLC, an
independently owned commercial insurance brokerage firm. From 1980 to
2000, Mr. Giulietti was vice chairman, worldwide construction for
Willis, a construction/surety broker, where he oversaw and managed a
worldwide construction insurance practice consisting of domestic offices
and 140 international offices. He also assisted in large and mid-cap
construction companies in providing their insurance needs as they took
their businesses public. Mr. Giulietti earned a Bachelor of Arts degree
in Business and Political Science from St. Michael's College in 1973.
Non-Qualified and Incentive Stock Option Plans
----------------------------------------------
The registrant does not currently have any stock option plans.
Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
To the registrant's knowledge, based solely on a review of the copies of
these reports furnished to it, our officers, directors and 10% control
persons have not yet complied with applicable Section 16(a) filing
requirements during the year ended December 31, 2010.
Code of Ethics Policy
---------------------
We have not yet adopted a code of ethics that applies to our principal
executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
Corporate Governance
---------------------
We have not yet adopted our corporate governance policies and
procedures. Corporate governance policies and procedures are being
drafted and will be adopted upon completion.
36
The following sets forth, for the last three years, with respect to the
individuals serving as our executive officers:
Stock Option All Other
Name Year Salary Awards Awards Compensation Total
---------------------- ---- -------- ------- --- --------- ------------
Joseph M. LoCurto (1) 2010 n/a n/a n/a n/a n/a
Chairman 2009 n/a n/a n/a n/a n/a
2008 n/a n/a n/a n/a n/a
Jason M. Shapiro 2010 $200,000 - - - $200,000 (2)
Chief Executive Officer, 2009 40,000 40,000 (2)
Chief Financial Officer 2008 n/a n/a n/a n/a n/a
Jed M. Sabio (1) 2010 n/a n/a n/a n/a n/a
Executive Vice President 2009 n/a n/a n/a n/a n/a
of Business Development 2008 n/a n/a n/a n/a n/a
Michael J. Bovalino 2010 $119,134 $47,099 - - $166,233 (2)
Chief Executive Officer 2009 n/a n/a n/a n/a n/a
(Former) 2008 n/a n/a n/a n/a n/a
Eric J. Hoffman 2010 $87,812 $31,932 - - $119,744 (2)
Chief Financial Officer 2009 n/a n/a n/a n/a n/a
(Former) 2008 n/a n/a n/a n/a n/a
Glen R. Gamble 2010 $96,000 - - - $ 96,000
Chairman & President 2009 96,000 - - - 96,000
(Former) 2008 96,000 - - - 96,000
Robert A. Hildebrand 2010 $96,000 - - - $ 96,000
Secretary & Chief 2009 96,000 - - 70,000 (3) 166,000
Financial Officer 2008 96,000 - - 65,000 (3) 161,000
(Former)
(1) Mr. LoCurto and Mr. Sabio's compensation agreements started on
January 1, 2011.
(2) Mr. Bovalino, Mr. Hoffman and Mr. Shapiro' salaries and common stock
issuances were accrued and they have not received any cash or stock
payments.
(3) Mr. Hildebrand received a cash bonus of $70,000 for the year ended
December 31, 2009 and a cash bonus of $65,000 for the year ended
December 31, 2008.
Shapiro Employment Agreement
----------------------------
Mr. Shapiro was hired as the registrant's chief financial officer in
December 29, 2009 to May 4, 2010. Upon the hiring of Eric Hoffman as
chief financial officer, Mr. Shapiro's title and responsibilities
changed to Executive Vice President of Corporate Strategy. Pursuant to
the employment agreement entered into by the registrant, Mr. Shapiro
receives an annual compensation of $200,000 in cash and is eligible to
receive a cash bonus of up to 200% of base salary, at the discretion of
the board of directors.
37
On November 29, 2010, the board of directors appointed Jason M. Shapiro,
secretary and director, as chief executive officer and chief financial
officer. As of that date, Mr. Shapiro no longer served as executive
vice president of corporate strategy. Effective January 1, 2011, the
registrant entered into an employment agreement with Mr. Shapiro. The
term of the employment agreement is four years with an automatic renewal
on an annual basis thereafter. The employment agreement provides for an
initial annual base salary of $225,000 in cash and 75,000 shares per
year. The agreement also provides for an annual incentive of 100% of
his base salary payable.
Sabio Employment Agreement
--------------------------
Mr. Sabio was hired as executive vice president of business development
in November 2010. Effective January 1, 2011, the registrant entered
into an employment agreement with Mr. Sabio. The term of the employment
agreement is four years with an automatic renewal on an annual basis
thereafter. The employment agreement provides for an initial annual
base salary of $200,000 in cash and 50,000 shares in the registrant as
well as a signing bonus of $71,000 in cash and 71,000 shares in the
registrant. The agreement also provides for an initial annual incentive
of $50,000 in cash and 75,000 shares in the registrant. Mr. Sabio's
compensation, signing bonus, and other benefits will accrue until the
registrant raises the necessary capital to fund its first acquisition or
acquisitions and the raise is at least $10,000,000.
LoCurto Consulting Agreement
----------------------------
Mr. LoCurto was appointed as the chairman of the board of directors in
November 2010. Effective January 1, 2011, the registrant entered into a
consulting agreement with Mr. LoCurto. The term of the consulting
agreement is four years with an automatic renewal on an annual basis
thereafter. The consulting agreement provides for an initial annual
base fee of $250,000 in cash and 100,000 shares in the registrant as
well as a signing bonus of $130,000 in cash and 130,000 shares in the
registrant. The agreement also provides for an annual incentive of 100%
of his base salary payable. Mr. LoCurto's fee, signing bonus, and other
benefits will accrue until the registrant raises the necessary capital
to fund its first acquisition or acquisitions and the raise is at least
$10,000,000.
Former Officers and Directors Resignations
------------------------------------------
Michael Bovalino was hired as the registrant's chief executive officer
in April 26, 2010 and resigned from the registrant effective November
23, 2010. Mr. Bovalino has earned a total of compensation of $166,233
comprising $119,134 in cash and $47,099 in equity. Mr. Bovalino's
salaries and common stock issuances were accrued and he has not received
any cash or stock payments.
Eric Hoffman was hired as the registrant's chief financial officer in
May 4, 2010 and resigned from the registrant effective November 23,
2010. Mr. Hoffman has earned a total of compensation of $119,743
38
comprising $87,812 in cash and $31,932 in equity. Mr. Hoffman's salaries
and common stock issuances were accrued and he has not received any cash
or stock payments.
Glen R. Gamble resigned from the registrant effective August 18, 2010.
In connection with his resignation and to ensure a smooth transition,
the registrant agreed to pay Mr. Gamble $8,000 per month in connection
with consulting services to be provided until such time the registrant
no longer requires Mr. Gamble's services.
Robert Hildebrand resigned from the registrant effective August 18,
2010. In connection with his resignation and to ensure a smooth
transition, the registrant agreed to pay Mr. Hildebrand $8,000 per month
for consulting services to be provided until such time the registrant no
longer requires Mr. Hildebrand's services.
Director Compensation
---------------------
The following table sets forth, for the last three years, with respect
to the individuals serving as our independent directors(1):
Stock Option All Other
Name Year Cash(2) Awards Awards Compensation Total
-------------- ---- ------- ------- ----- ------- --------
Joseph Antonini 2010 $23,014 $73,014 - - $ 96,028
Director 2009 n/a n/a n/a n/a n/a
2008 n/a n/a n/a n/a n/a
39
Gary Giulietti 2010 $33,014 $83,014 - - $116,028
Director 2009 n/a n/a n/a n/a n/a
2008 n/a n/a n/a n/a n/a
(1) Independent directors receive an initial stock award of $50,000 for
joining the registrant's board of directors. They shall also receive
$100,000 a year in compensation that consists of $50,000 in stock awards
and $50,000 in cash. Non-independent directors do not receive any
compensation for serving on the board.
(2) The cash portion of the board compensation is currently being
accrued.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of April 20, 2011, with
respect to
1) each person who is known by us who beneficially owns more than 5%
of our common stock,
2) each director and named executive and
3) all of our directors and officer as a group.
39
Each named beneficial owner has sole voting and investment power with
respect to the shares set forth opposite his name.
Percentage of
Number & Class (1) Outstanding
Name and Address of Shares Common Shares
---------------- ----------------- -------------
Jason M. Shapiro
61 West 62nd Street, Suite 23F
New York, NY 10023 2,212,268 18.83%
Joseph M. LoCurto
61 West 62nd Street, Suite 23F
New York, NY 10023 250,000 2.13%
Jed M. Sabio
61 West 62nd Street, Suite 23F
New York, NY 10023 250,000 2.13%
Joseph E. Antonini(1)
61 West 62nd Street, Suite 23F
New York, NY 10023 75,665 0.64%
Gary J. Giulietti
61 West 62nd Street, Suite 23F
New York, NY 10023 89,396 0.76%
All Directors & Officers
as a group (6 persons) 3,143,802 26.75%
Other 5% shareholders
Jake A. Shapiro
61 West 62nd Street, Suite 23F
New York, NY 10023 2,415,468 20.56%
Steve Gropp
1803 North Stafford Street
Arlington, VA 22207 2,478,741 21.09%
Gary E. Smolen
104 Pleasant Street
Meredith, NH 03253 1,057,164 9.00%
Nevada Irrevocable Trust(2)
3540 W. Sahara Ave.
Suite 153
Las Vegas, NV 89102 857,164 7.29%
(1) This consists of 38,462 shares in the name of Joseph E. Antonini and
24,225 shares in the name of JEA Energy LLC, a company solely owned by
Joseph E. Antonini.
(2) The trustee for the Nevada Irrevocable Trust is Mio L. Bonilla, a
non-affiliate.
40
Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
beneficial ownership of a security consists of sole or shared voting
power or investment power with respect to a security whether through a
contract, arrangement, understanding, relationship or otherwise.
Unless otherwise indicated, each holder above has sole voting or
investment power with respect to all shares of common stock listed as
beneficially owned by that holder.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Jason M. Shapiro, chief executive officer, chief financial officer, and
director, is a significant shareholder and the brother of Jake Shapiro,
also a significant shareholder. As of April 25, 2011, Jason Shapiro
owns 21.09% of the registrant's common stock and Jake Shapiro owns
20.56% of the registrant's common stock. Jason M. Shapiro is not
independent as such term is defined by a national securities exchange or
an inter-dealer quotation system.
The registrant entered into an agreement on November 15, 2009 with Belle
Haven Partners, LLC to assist Iron Eagle Nevada with business
development planning, raising additional capital, and accessing the
public markets. Jason Shapiro, one of Belle Haven's employees is also
on the registrant's management team and is 100% owned by Jake Shapiro, a
major shareholder. Iron Eagle Nevada agreed to pay Belle Haven $20,000
per month starting September 1, 2009, as well as to reimburse them for
all out-of-pocket expenses. As of December 31, 2010 and December 31,
2009, the registrant had accrued $453,000 and $213,000, respectively in
amounts due to Belle Haven for both out-of-pocket and consulting
expenses. This agreement was unanimously approved by all shareholders
of Iron Eagle Group Nevada and all the independent directors of the
registrant.
On December 31, 2009, the registrant entered in two note agreements with
Jason Shapiro, the registrant's current chief executive officer, for a
total of $15,000 as consideration for receipt of cash by the registrant.
These notes, which bear a 10% interest rate, were originally due on June
30, 2010, and have been extended until June 30, 2011.
On March 17, 2011, the registrant entered in a note agreement with Jason
Shapiro, the registrant's current chief executive officer, for $250,000
as consideration for reducing the amount owed to Jason Shapiro by
$250,000 for out-of-pocket expenses incurred by Jason Shapiro since
November 2009. This note is due December 31, 2011 and bears an interest
rate of 10% starting on April 1, 2011.
The registrant also owes its current chief executive officer $271,259 as
of December 31, 2010 and $2,000 as of December 31, 2009 for operating
expenses, which, in general include professional fees for audit, legal
and investor relations.
41
On March 8, 2011, the registrant entered in a note agreement with Joseph
LoCurto, the registrant's chairman, for $30,000 as consideration for
receipt of cash by the registrant. This note is due upon the registrant
receiving at least $75,000 of funding. The note will start to accrue at
interest rate of 10% starting on April 1, 2011.
On March 8, 2011, the registrant entered in a note agreement with Jed
Sabio, the registrant's executive vice president of business
development, for $30,000 as consideration for receipt of cash by the
registrant. This note is due upon the registrant receiving at least
$75,000 of funding. The note will start to accrue at interest rate of
10% starting on April 1, 2011.
The registrant also leases its New York, New York facility under a
rental agreement that has a one year lease starting September 1, 2010
for $2,100 a month with Belle Haven, a company of which Jason Shapiro,
an officer and director of the registrant, is a principal.
During the years ended December 31, 2010 and 2009, we paid affiliated
companies $11,200 and $202,500, respectively, for consulting services.
Glen Gamble, our former chairman and president, and Dutch Hildebrand,
our former chief financial officer and secretary are executives with the
affiliated companies.
DESCRIPTION OF CAPITAL STOCK
The following statements constitute brief summaries of the registrant's
certificate of incorporation and bylaws, as amended.
Common Shares
-------------
Our articles of incorporation authorize us to issue up to 875,000,000
common shares, $0.00001 par value per common share.
Liquidation Rights
------------------
Upon liquidation or dissolution, each outstanding common share will be
entitled to share equally in the assets of the registrant legally
available for distribution to shareholders after the payment of all
debts and other liabilities.
Dividend Rights
---------------
There are no limitations or restrictions upon the rights of the board of
directors to declare dividends out of any funds legally available
therefore. The registrant has not paid dividends to date and it is not
anticipated that any dividends will be paid in the foreseeable future.
The board of directors initially may follow a policy of retaining
earnings, if any, to finance the future growth of the registrant.
Accordingly, future dividends, if any, will depend upon, among other
considerations, the registrant need for working capital and its
financial conditions at the time.
42
Voting Rights
-------------
Holders of common shares of the registrant are entitled to voting rights
of one hundred percent. Holders may cast one vote for each share held
at all shareholders meetings for all purposes.
Other Rights
------------
Common shares are not redeemable, have no conversion rights and carry no
preemptive or other rights to subscribe to or purchase additional common
shares. Common Shares do not have cumulative voting features. Our
bylaws allow action to be taken by written consent rather than at a
meeting of stockholders with the consent of the holders of a majority of
shares entitled to vote.
Transfer Agent
--------------
Corporate Stock Transfer acts as our transfer agent.
SHARES ELIGIBLE FOR FUTURE SALE
At December 31, 2010, there were 11,571,706 shares of our common stock
outstanding of which 721,359 common shares may be freely traded without
restriction.
The remaining common shares will be restricted within the meaning of
Rule 144 under the Securities Act, and are subject to the resale
provisions of Rule 144.
At the present time, resales or distributions of such shares are
provided for by the provisions of Rule 144. That rule is a so-called
safe harbor rule which, if complied with, should eliminate any questions
as to whether or not a person selling restricted shares has acted as an
underwriter.
Rule 144(d)(1) states that if the issuer of the securities is, and has
been for a period of at least 90 days immediately before the sale,
subject to the reporting requirements of section 13 or 15(d) of the
Exchange Act, a minimum of six months must elapse between the later of
the date of the acquisition of the securities from the issuer, or from
an affiliate of the issuer, and any resale of such securities.
Sales under Rule 144 are also subject to notice and manner of sale
requirements and to the availability of current public information and
must be made in unsolicited brokers' transactions or to a market maker.
A person who is not an affiliate of Iron Eagle under the Securities Act
during the three months preceding a sale and who has beneficially owned
such shares for at least six months is entitled to sell the shares under
Rule 144 without regard to the volume, notice, information and manner of
sale provisions. Affiliates must comply with the restrictions and
requirements of Rule 144 when transferring restricted shares even after
43
the six month holding period has expired and must comply with the
restrictions and requirements of Rule 144 in order to sell unrestricted
shares.
No predictions can be made of the effect, if any, that market sales of
shares of common stock or the availability of such shares for sale will
have on the market price prevailing from time to time. Nevertheless,
sales of significant amounts of our common stock could adversely affect
the prevailing market price of the common stock, as well as impair our
ability to raise capital through the issuance of additional equity
securities.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the registrant as provided in the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities,
other than the payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding, is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
a) Market Information. The registrant's common stock is listed on the
OTCQB over-the-counter market under the symbol IEAG.OTCQB. As of April
25, 2011, there was a limited market for our common stock.
The following table sets forth the range of high and low bid quotations
for our common stock for each quarter. The range has been revised to
reflect the 40 for 1 reverse stock split that occurred on July 13, 2010.
The quotations represent inter-dealer prices without retail markup,
markdown or commission, and may not necessarily represent actual
transactions.
44
2010
----
Quarter Ended: High Bid Low Bid
------------- -------- --------
December 31, 2010 $ 1.05 $ 0.30
September 30, 2010 7.20 0.30
June 30, 2010 9.60 0.80
March 31, 2010 3.20 0.40
2009
----
Quarter Ended: High Bid Low Bid
------------- -------- --------
December 31, 2009 $ 1.60 $ 0.40
September 30, 2009 1.60 0.40
June 30, 2009 4.80 2.00
March 31, 2009 3.20 1.20
b) At April 26, 2011, there were approximately 161 holders of record of
the registrant's common stock.
c) Holders of the registrant's common stock are entitled to receive
dividends. The payment and amount of future dividends is at the
discretion of our board of directors. No dividends have ever been
paid, and the registrant does not anticipate that dividends will be paid
on its common stock in the foreseeable future.
d) No securities are authorized for issuance by the registrant under
equity compensation plans.
e) Performance graph. Not applicable.
f) Sale of unregistered securities.
During the year ended December 31, 2010, the registrant issued common
stock as follows:
On January 8, 2010, 9,337,296 common shares were issued to the former
shareholders of Iron Eagle Group, Inc., a Nevada Corporation in
connection with a business combination. These shares were held in
escrow until August 18, 2010. In exchange, the Iron Eagle Nevada
shareholders surrendered all of their issued and outstanding Iron Eagle
Nevada one-class common stock.
On February 23, 2010, the registrant entered into a services agreement
with a non-affiliated website development firm. In satisfaction for the
agreement, the registrant agreed to issue 5,000 shares of the
registrant's common stock at a share price of $1.20.
On May 1, 2010, the registrant entered into a services agreement with
Gary Smolen for investor relations services. In satisfaction for the
agreement, the registrant agreed to issue 200,000 shares of the
registrant's common stock at a share price of $1.20.
45
On May 4, 2010, the registrant entered into a director's agreement with
Gary Giulietti to become a member of the registrant's board. In
connection with the agreement, the registrant issued 41,667 shares of
the registrant's common stock at a share price of $1.20.
On May 4, 2010, the registrant entered into a one year consulting
agreement with CCG, an investor relations firm. In satisfaction for the
agreement, the registrant issued 108,750 shares of the registrant's
common stock at a per share price of $1.20 and a 5 year warrant to
purchase up to 108,750 shares with an exercise price of $0.033 per
share. The shares issued vested immediately. The fair value of the
warrant was $126,107. The registrant has received three months of
services under this agreement, and the remaining services are currently
on hold pending the registrant's decision to resume services. The
portion of services that have not been utilized are recorded as a
prepaid expense as of December 31, 2010.
On June 5, 2010, the registrant entered into a three year consulting
agreement with Steven Antebi to help the registrant obtain financing and
related services. The value of the services to be received is $400,000.
In satisfaction for the agreement, the registrant issued 1,000,000
shares of the registrant's common stock, resulting in a per share price
of $.40. The portion of services that have not been utilized are
recorded as a prepaid expense as of December 31, 2010.
On July 16, 2010, the board of directors appointed Joseph Antonini as a
director and granted him 38,462 shares of stock, valued at $1.30 a
share, which vested immediately.
On August 31, 2010, the registrant entered into a non-exclusive
agreement with Aegis Capital Corp., an investment bank, to act as their
underwriter with respect to a forthcoming public offering. In connection
with this agreement the registrant issued 28,572 shares of stock, valued
at $1.05 a share, which vested immediately.
All of these issuances were made to sophisticated investors pursuant to
an exemption from registration under Section 4(2) of the Securities Act
of 1933.
EXPERTS
The financial statements of the registrant appearing in this
registration statement have been audited by The Hall Group, CPAs, an
independent registered public accounting firm and are included in
reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
LEGAL PROCEEDINGS
We are not a party to any legal proceedings the outcome of which, in the
opinion of our management, would have a material adverse effect on our
business, financial condition, or results of operation.
46
LEGAL MATTERS
The validity of the common shares being offered hereby will be passed
upon by Jody M. Walker, Attorney At Law, Centennial, Colorado.
WHERE YOU CAN FIND MORE INFORMATION
At your request, we will provide you, without charge, a copy of any
document filed as exhibits in this prospectus. If you want more
information, write or call us at:
Iron Eagle Group, Inc.
61 West 62nd Street, Suite 23F,
New York, NY 10023
Attention: Jason Shapiro, Chief Executive Officer
Our fiscal year ends on December 31. We are a reporting company and
file annual, quarterly and current reports with the SEC. You may read
and copy any reports, statements, or other information we file at the
SEC's public reference room at 100 F Street, Washington D.C. 20549. You
can request copies of these documents, upon payment of a duplicating fee
by writing to the SEC. Please call the SEC at 1-800- SEC-0330 for
further information on the operation of the public reference rooms. Our
SEC filings are also available to the public on the SEC Internet site at
http:\\www.sec.gov.
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm 47
Consolidated Balance Sheets 49
Consolidated Statements of Operations 50
Consolidated Statement of Changes in Stockholders' Equity 51
Consolidated Statements of Cash Flows 52
Notes to the Consolidated Financial Statements 54
47
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Management of
Iron Eagle Group, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Iron
Eagle Group, Inc. (a development stage enterprise) as of December 31,
2010 and 2009 and the related consolidated statements of operations,
stockholders' equity and cash flows for the year ended December 31,
2010, for the period from November 9, 2009 (Inception) through December
31, 2009 and for the period November 9, 2009 (Inception) through
December 31, 2010. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
We were not engaged to examine management's assertion about the
effectiveness of Iron Eagle Group, Inc.'s internal control over
financial reporting as of and for the years ended December 31, 2010 and
2009 and, accordingly, we do not express an opinion thereon.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Iron Eagle
Group, Inc. as of December 31, 2010 and 2009 and the results of its
operations and cash flows for the year ended December 31, 2010, for the
period from November 9, 2009 (Inception) through December 31, 2009, and
for the period November 9, 2009 (Inception) through December 31, 2010,
in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 11
to the financial statements, the Company has suffered significant losses
and will require additional capital to develop its business until the
Company either (1) achieves a level of revenues adequate to generate
sufficient cash flows from operations; or (2) obtains additional
financing necessary to support its working capital requirements. These
conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these
48
matters are also described in Note 11. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
The Hall Group, CPAs
Dallas, Texas
March 17, 2011
49
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Consolidated Balance Sheets
December 31, 2010 and December 31, 2009
---------------------------------------
December 31, December 31,
2010 2009
------------ ------------
ASSETS
Current Assets
Cash $ 976 $ -
Other Assets 6,000 -
Prepaid Expenses 611,563 -
-------- --------
Total Current Assets 618,539 -
Other Assets
Note Receivable - 10,000
Fixed Assets, Net of Accumulated
Depreciation of $15,714 and $0 2,150 -
-------- --------
TOTAL ASSETS $620,689 $ 10,000
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable - Related Parties $ 479,439 $ 215,000
Accounts Payable 78,409 10,971
Advances From Officer 289,758 -
Accrued Liabilities 795,936 40,000
Note Payable - Related Party 18,773 15,000
Capital Lease 2,344 -
Common Stock to be Issued 42,155 -
Line of Credit 50,000 -
---------- ----------
Total Current Liabilities 1,756,814 280,971
---------- ----------
TOTAL LIABILITIES 1,756,814 280,971
Stockholders' Equity
Preferred Stock ($.00001 par value,
20,000,000 shares authorized, 0 and 0
shares issued and outstanding) - -
Common Stock ($.00001 par value,
875,000,000 shares authorized,
11,571,706 and 1,000 shares
issued and outstanding) 116 1
Additional Paid-in Capital 79,851 -
Accumulated Deficit (1,216,092) (270,972)
---------- ----------
Total Stockholders' Equity (1,136,125) (270,971)
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 620,689 $ 10,000
========== ==========
See accompanying notes to financial statements.
50
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Consolidated Statements of Operations
For the Year Ended December 31, 2010,
For the Period November 9, 2009 (Inception)
through December 31, 2009 and Cumulative Since Inception
Year November 9, 2009 Cumulative
Ended through Since Inception
December 31, 2010 December 31, 2009 (November 9, 2009)
----------------- ----------------- ----------------
REVENUES $ - $ - $ -
OPERATING EXPENSES
Shares Issued for Services 30,000 - 30,000
General and Administrative
Expenses 118,419 - 118,419
Compensation Expense 506,319 40,000 546,319
Professional Fees 129,117 15,972 145,089
Professional Fees to
Related Parties 158,400 215,000 373,400
---------- -------- -----------
TOTAL OPERATING EXPENSES 942,255 270,972 1,213,227
---------- -------- -----------
NET OPERATING INCOME (LOSS) (942,255) (270,972) (1,213,227)
OTHER INCOME (EXPENSE) (2,865) - (2,865)
---------- -------- -----------
NET INCOME (LOSS) BEFORE
INCOME TAXES (945,120) (270,972) (1,216,092)
Provision for Income Taxes
(Expense) Benefit - - -
---------- -------- -----------
NET INCOME (LOSS) $ (945,120) (270,972) $(1,216,092)
========== ======== ===========
Earnings (Loss) per Share,
basic and diluted $ (0.22) $(271.00)
========== ========
Weighted Average Shares
Outstanding, basic and
diluted 4,277,132 1,000
========= =====
See accompanying notes to financial statements.
51
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Consolidated Statement of Changes in Stockholders' Equity
For the Period November 9, 2009 (Inception) Through December 31, 2010
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings Total
---------- ---- ------- --------- -----------
Balance at November 9, 2009 - $ - $ - $ - $ -
Capital Contribution on
November 9, 2009 1,000 1 - - 1
Net Income (Loss) - - - (270,972) (270,972)
---------- ---- ------- ----------- -----------
Balance at December 31, 2009 1,000 $ 1 - $ (270,972) $ (270,971)
========== ==== ======= =========== ===========
Share Exchange (1,000) (1) - - (1)
Recapitalization 11,543,134 115 49,852 - 49,967
Shares Issued for Services 28,572 1 29,999 - 30,000
Net Loss - - - (945,120) (945,120)
---------- ---- ------- ----------- -----------
Balance at December 31, 2010 11,571,706 $116 $79,851 $(1,216,092) $(1,136,125)
========== ==== ======= =========== ===========
See accompanying notes to financial statements.
52
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
For the Year Ended December 31, 2010,
For the Period November 9, 2009 through
December 31, 2009 and Cumulative Since Inception
Year November 9, Cumulative
Ended 2009 through Since Inception
December 31, December 31, (November 9,
2010 2009 2009
----------- ------------ ---------------
CASH FLOWS FROM OPERATINGS ACTIVITIES
Net (Loss) $(945,120) $(270,972) $(1,216,092)
Adjustments to reconcile
net income to net cash
provided by operating activities:
Stock Issued for Services 30,000 - 30,000
Depreciation Expense 684 - 684
(Increase) in Other Assets (6,000) - (6,000)
(Increase) in Prepaid Expenses (611,563) - (611,563)
(Increase) Decrease in Note Receivable 10,000 (10,000) -
Increase in Accounts Payable -
Related Party 264,439 215,000 479,439
Increase in Accounts Payable 67,438 10,971 78,409
Increase in Advances from Officer 289,758 - 289,758
Increase in Note Payable -
Related Party 3,773 15,000 18,773
Increase in Capital Lease 2,344 - 2,344
Increase in Stock to be Issued 42,155 - 42,155
Increase in Accrued Liabilities 755,936 40,000 795,936
--------- --------- ----------
Net Cash (Used) by Operating Activities (96,156) (1) (96,157)
CASH FLOWS FROM INVESTING ACTIVITIES
Net Fixed Assets Acquired in
Reverse Merger (2,834) - (2,834)
CASH FLOWS FROM FINANCING ACTIVITIES
Line of Credit Assumed in Reverse Merger 50,000 - 50,000
Recapitalization of Company 49,967 - 49,967
Contributed Capital (1) 1 -
--------- --------- ----------
Net Cash Provided by
Financing Activities 99,966 1 99,967
--------- --------- ----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 976 - 976
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD - - -
--------- --------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 976 $ - $ 976
========= ========= ==========
53
SUPPPLEMENTAL NON-CASH DISCLOSURES:
Stock Issued
for Services $ 30,000 $ $ 30,000
========= ========= ===========
Cash Paid for
Interest Expense - - -
========= ========= ===========
Net Fixed Assets Acquired
in Reverse Merger 2,834 - 2,834
========= ========= ===========
Line of Credit Assumed
in Reverse Merger 50,000 - 50,000
========= ========= ===========
Recapitalization of
Company 49,967 - 49,967
========= ========= ===========
See accompanying notes to financial statements.
54
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities, History and Organization:
Iron Eagle Group, Inc. (formerly Pinnacle Resources, Inc.) ("Iron Eagle"
or the "Company") was incorporated under the laws of Wyoming in January
1995. In March 2010, the Company re-domiciled in Delaware and changed
its name to Iron Eagle Group, Inc. The Company has discontinued all
domestic mining and exploration activities. All foreign mining and
exploration activities were discontinued as of April 2009.
Iron Eagle provides construction and contracting services in both the
commercial and government markets. Iron Eagle's management consists of
business leaders in construction, government contracting, defense,
finance, operations, and business development. Management has a
strategic plan to capitalize on the $100 billion market opportunity in
infrastructure construction created by the Federal government's stimulus
package in addition to the billions of federal funds that have been
approved to be spent at the state level for projects throughout the
United States. There can be no assurance that the Company will not
encounter problems as it attempts to implement its business plan.
The Company is in the development stage and presents its financial
statements in accordance with Accounting Standards Codification ("ASC")
915 "Development Stage Entities" (formerly Statement of Financial
Accounting Standard ("SFAS") No. 7, "Accounting and Reporting by
Development Stage Enterprises"). As of December 31, 2010, the Company
had three full-time employees, owned minimal fixed assets and did not
generate revenue.
On January 21, 2011, Iron Eagle Group, Inc. acquired all of the members'
interests in Sycamore Enterprises, LLC, through the Principal Owner's
(Bruce A. Bookbinder) membership interests (100%). Sycamore
Enterprises, LLC is 100% holder of all of the membership interests of
Delta Mechanical Contractors, LLC, a mechanical contractor ("Delta").
The Company is currently engaged in the identification and ongoing
negotiations for the acquisition of construction related entities.
Iron Eagle entered into a share exchange agreement to acquire 100% of
the outstanding common stock of Iron Eagle Group (a Nevada corporation)
("Iron Eagle Nevada"). On August 18, 2010, Iron Eagle issued 9,337,296
shares of common stock in exchange for a 100% equity interest in Iron
Eagle Nevada. As a result of the share exchange, Iron Eagle Nevada
became the wholly owned subsidiary of Iron Eagle. The shareholders of
Iron Eagle Nevada owned a majority of the voting stock of Iron Eagle.
Therefore, the transaction was regarded as a reverse merger whereby Iron
Eagle Nevada was considered to be the accounting acquirer as its
shareholders retained control of Iron Eagle after the exchange, although
Iron Eagle is the legal parent company. The share exchange was treated
as a recapitalization of Iron Eagle.
55
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
As such, Iron Eagle Nevada (and its historical financial statements) is
the continuing entity for financial reporting purposes. The financial
statements have been prepared as if Iron Eagle had always been the
reporting company and then on the share exchange date, reorganized its
capital stock. At the time of the exchange transaction, Iron Eagle had
assets of approximately $830,065 and equity of approximately $49,967 and
Iron Eagle Nevada had assets of approximately $10,000 with a deficit of
approximately $382,707.
The exchange agreement has been treated as a recapitalization and not a
business combination and therefore, no proforma information is
presented.
Nature of Activities, History and Organization (Continued):
As a result of the recapitalization, the Company changed its fiscal year
from June 30th to December 31st, to conform to the merged entity.
Significant Accounting Policies:
The Company's management selects accounting principles generally
accepted in the United States of America and adopts methods for their
application. The application of accounting principles requires the
estimating, matching and timing of revenue and expense. The accounting
policies used conform to generally accepted accounting principles which
have been consistently applied in the preparation of these financial
statements.
The financial statements and notes are representations of the Company's
management which is responsible for their integrity and objectivity.
Management further acknowledges that it is solely responsible for
adopting sound accounting practices, establishing and maintaining a
system of internal accounting control and preventing and detecting
fraud. The Company's system of internal accounting control is designed
to assure, among other items, that 1) recorded transactions are
valid; 2) valid transactions are recorded; and 3) transactions are
recorded in the proper period in a timely manner to produce financial
statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods
being presented.
56
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
FASB Accounting Standards Codification:
In June 2009, the Financial Accounting Standards Board ("FASB") issued
new guidance concerning the organization of authoritative guidance under
U.S. Generally Accepted Accounting Principles ("GAAP"). This new
guidance created the FASB Accounting Standards Codification ("ASC")("the
Codification"). The Codification has become the source of authoritative
U.S. GAAP recognized by the FASB to be applied by nongovernmental
entities. The Codification became effective for the Company as of
September 15, 2009, the required date of adoption. As the Codification
is not intended to change or alter existing U.S. GAAP, it did not have
any impact on the Company's financial statements.
Basis of Presentation and Principles of Consolidation:
The Company prepares its financial statements on the accrual basis of
accounting. The Company is consolidated with its wholly owned
subsidiary, Iron Eagle Nevada, as of the date of August 18, 2010, the
date of the reverse merger. All intercompany transactions have been
eliminated.
Significant Accounting Policies (Continued):
Income Taxes:
The Company has adopted ASC 740-10 "Income Taxes" (formerly SFAS No.
109, "Accounting for Income Taxes"), which requires the use of the
liability method in computation of income tax expense and the current
and deferred income tax payable (deferred tax liability) or benefit
(deferred tax asset). Valuation allowances will be established when
necessary to reduce deferred tax assets to the amount expected to be
realized.
Earnings per Share:
Earnings per share (basic) is calculated by dividing the net income
(loss) by the weighted average number of common shares outstanding for
the period covered.
The inclusion of the Company's warrants, which are considered common
stock equivalents as of December 31, 2010, in the earnings (loss) per
share computation has not been included because the results would be
anti-dilutive under the treasury stock method, as the Company incurred a
net loss in the periods presented.
57
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
Comprehensive Income (Loss):
ASC 220 "Comprehensive Income" (formerly SFAS No. 130, "Reporting
Comprehensive Income" (SFAS No. 130")), establishes standards for
reporting and display of comprehensive income and its components in a
full set of general-purpose financial statements. For the years ended
December 31, 2010 and 2009, the Company had no items of other
comprehensive income. Therefore, net loss equals comprehensive loss
for the years ended December 31, 2010 and 2009.
Prepaid Expenses:
Prepaid expenses are recognized for services that the Company has paid
in advance. The value of the services to be rendered are amortized on
a straight line basis each month over the term of the contract service
period.
Fixed Assets:
Fixed assets are recorded at historical cost. Equipment is depreciated
on a straight-line basis over its estimated useful life (generally 5 to
7 years). Leasehold improvements are amortized over the shorter of the
estimated useful life or lease term. Capital Leases are amortized over
the life of the lease. Maintenance and repairs are expensed as
incurred. Expenditures for major renewals and betterments, which extend
the useful lives of existing equipment, are capitalized and depreciated.
Upon retirement or disposition of property and equipment, the cost and
related accumulated depreciation are removed from the accounts and any
resulting gain or loss is recognized in the statement of operations.
The Company reviews long-lived assets, including property and equipment,
for impairment whenever events or changes in business circumstances
indicate that the carrying amount of the assets may not be fully
recoverable. If impairment is indicated, the carrying value of the asset
is reduced to fair value.
Share Based Payments:
The Company accounts for share based payments using a fair value based
method whereby compensation cost is measured at the grant date based on
the value of the services received and is recognized over the service
period. The Company uses the Black-Scholes pricing model to calculate
the fair value of options and warrants issued. In calculating this fair
value, there are certain assumptions used such as the expected life of
the option, risk-free interest rate, dividend yield, volatility and
58
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
forfeiture rate. The use of a different estimate for any one of these
components could have a material impact on the amount of calculated
compensation expense.
Recent Accounting Pronouncements:
The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flow. See Note 10 for a
discussion of new accounting pronouncements.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Fair Value of Financial Instruments:
In accordance with the reporting requirements of ASC 820 "Fair Value
Measurement and Disclosure" (formerly SFAS No. 157, "Disclosures About
Fair Value of Financial Instruments"), the Company calculates the fair
value of its assets and liabilities which qualify as financial
instruments under this statement and includes this additional
information in the notes to the financial statements when the fair value
is different than the carrying value of those financial instruments. As
of December 31, 2010 and 2009 the Company did not have any financial
instruments other than cash and cash equivalents.
NOTE 2 - PREPAID EXPENSES
The Company has entered into contracts for investor relations and
consulting services to assist in the financing and purchasing of
construction related entities. All services were prepaid with Company
shares and warrants that vested immediately. The value of the services
to be rendered are amortized on a straight line basis each month over
the terms of the contract service periods. The services remaining to be
provided as of December 31, 2010 are reflected as a prepaid expense.
The gross prepaid expense as of December 31, 2010 is $827,860. The net
prepaid expense as of December 31, 2010 is $611,563, reflecting
amortization for the year ended December 31, 2010 was $216,297. There
were no amounts prepaid as of December 31, 2009.
59
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 3 - FIXED ASSETS
Fixed assets at December 31, 2010 and 2009 consist of the following:
December 31, December 31,
2010 2009
------- -------
Office Equipment and Capital Leases $14,655 $ -
Furniture 3,209 -
------- -------
Subtotal 17,864 -
Accumulated Depreciation (15,714) -
------- -------
Total $ 2,150 $ -
======= =======
Fixed assets are stated at cost less accumulated depreciation. Major
renewals and improvements are capitalized; minor replacements,
maintenance and repairs are charged to current operations. Depreciation
is computed by applying the straight-line method over the estimated
useful lives which are generally five to seven years.
In August 2008, Iron Eagle entered into a lease agreement for a copier
for 39 months which is classified as a capital lease. Depreciation and
amortization expense for the years ended December 31, 2010 and 2009 was
$684 and $0, respectively.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company entered into an agreement on November 15, 2009 with Belle
Haven Partners, LLC ("Belle Haven") to assist Iron Eagle Nevada with
business development planning, raising additional capital, and accessing
the public markets. One of Belle Haven's principals is also on Iron
Eagle's management team, and the entities have common ownership. Iron
Eagle Nevada agreed to pay Belle Haven $20,000 per month starting
September 1, 2009, as well as to reimburse them for all out-of-pocket
expenses. The Company also leases its New York, New York facility under
a rental agreement that has a one-year lease starting September 1, 2010
for $2,100 a month with Belle Haven. As of December 31, 2010 and 2009,
the Company had accrued $453,000 and $213,000, respectively in amounts
due to Belle Haven.
60
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
On December 31, 2009, the Company entered in two note agreements with
the Jason Shapiro, the Company's current Chief Executive Officer, for a
total of $15,000. These notes, which bear a 10% interest rate, were
originally due on June 30, 2010, and have been extended until June 30,
2011. The Company also owes its current Chief Executive Officer
$271,259 as of December 31, 2010 and $2,000 as of December 31, 2009 for
operating expenses, which, in general include professional fees for
audit, legal and investor relations.
NOTE 5 - ACCRUED COMPENSATION
The Company has entered into employment agreements with the Company's
management team, as outlined in Note 9. As of December 31, 2010, no
cash compensation has been paid, and the Company has accrued amounts
pursuant to these agreements.
NOTE 6 - LINE OF CREDIT
The Company has a $50,000 line of credit with a major U.S. financial
institution. The current balance is $50,000 plus accrued interest of
$469 and carries an interest rate of 6.25%.
NOTE 7 - EQUITY
In December 2009, Iron Eagle Nevada (pre-merger) issued 1,000 shares
pursuant to the "Founder's Agreement" dated December 1, 2009. Three of
the founders contributed intellectual capital in exchange for 81.639% of
the shares. As no specific intangible assets were identified, the sales
were valued at par. 18.36% of the shares were issued in change for
200,000 shares of The Saint James Company. The fair value of the shares
obtained, based upon level 3 fair value inputs was $0. The shares are
restricted as to their transferability.
The Company entered into a share exchange agreement to acquire 100% of
the outstanding common stock of Iron Eagle Group, (a Nevada corporation)
("Iron Eagle Nevada"). On August 18, 2010, Iron Eagle issued 9,337,296
shares of common stock in exchange for a 100% equity interest in Iron
Eagle Nevada. As a result of the share exchange, Iron Eagle Nevada
became the wholly owned subsidiary of Iron Eagle. As a result, the
shareholders of Iron Eagle Nevada owned a majority of the voting stock
of Iron Eagle. The transaction was regarded as a reverse merger whereby
Iron Eagle Nevada was considered to be the accounting acquirer as its
shareholders retained control of Iron Eagle after the exchange, although
Iron Eagle is the legal parent company. The share exchange was treated
as a recapitalization of Iron Eagle. As such, Iron Eagle Nevada (and
its historical financial statements) is the continuing entity for
financial reporting purposes. The financial statements have been
61
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 7 - EQUITY (Continued)
prepared as if Iron Eagle had always been the reporting company and then
on the share exchange date, reorganized its capital stock. At the time
of the exchange transaction, Iron Eagle had assets of approximately
$830,065 and equity of approximately $49,967 and Iron Eagle Nevada had
assets of approximately $10,000 with a deficit of approximately
$382,707.
In March, 2010, the Company re-domiciled from Wyoming to Delaware. Also
at this time, the par value of its preferred shares was changed from
$.01 to $.00001. It also changed its total authorized preferred shares
from 2,000,000 to 20,000,000. No preferred shares are issued or
outstanding as of December 31, 2010 and 2009, respectively.
Stock Issued for Services:
On May 1, 2010, the Company entered into a one year consulting agreement
with an individual for investor relations services. In satisfaction of
the agreement, the Company issued 200,000 shares of the Company's common
stock at a per share price of $1.20. The portion of services that have
not been utilized are recorded as a prepaid expense as of December 31,
2010.
On May 4, 2010, the Company entered into a consulting agreement with a
website development firm. In satisfaction for the agreement, the
Company issued 5,000 shares of the Company's common stock at a per share
price of $1.20.
On May 4, 2010, the Board appointed Gary Giulietti as a Director and
granted him 41,667 shares of the Company's common stock at a per share
price of $1.20, which vested immediately.
On May 4, 2010, the Company entered into a one year consulting agreement
with an investor relations firm. In satisfaction for the agreement, the
Company issued 108,750 shares of the Company's common stock at a per
share price of $1.20 and a 5 year warrant to purchase up to 108,750
shares with an exercise price of $1.32 per share. The shares issued
vested immediately. The fair value of the warrant was $124,703. The
Company has received three months of services under this agreement, and
the remaining services are currently on hold pending the Company's
decision to resume services. The portion of services that have not been
utilized are recorded as a prepaid expense as of December 31, 2010.
On June 5, 2010, the Company entered into a three year consulting
agreement with an individual to help the Company obtain financing and
related services. The value of the services to be received is $400,000
a year. In satisfaction for the agreement, the Company issued 1,000,000
62
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 7- EQUITY (Continued)
shares of the Company's common stock, resulting in a per share price of
$.40. The portion of services that have not been utilized are recorded
as a prepaid expense as of December 31, 2010.
On July 16, 2010 the Board appointed Joseph Antonini as a Director and
granted him 38,462 shares of stock, valued at $1.30 a share, which
vested immediately.
On August 31, 2010 the Company entered into a non-exclusive agreement
with Aegis Capital Corp., an investment bank, to act as their
underwriter with respect to a forthcoming public offering. In connection
with this agreement the company issued 28,572 shares of stock, valued at
$1.05 a share, which vested immediately.
Other than the plans mentioned under Subsequent Events (Note 13) and the
compensation plans of Michael Bovalino and Eric Hoffman, there are no
other stock option or other equity based compensation plans. As of
December 31, 2010, the Company has accrued $42,155 in shares to be
issued to Mr. Bovalino and Mr. Hoffman pursuant to these compensation
agreements.
Warrants:
As described above, on May 4, 2010, the Company entered into a one year
consulting agreement with an investor relations firm. In satisfaction
of the agreement, the Company issued 108,750 shares of the Company's
common stock at a per share price of $1.20 and a 5 year warrant to
purchase up to 108,750 shares with an exercise price of $1.32 per share.
The fair value of the warrant was $124,703. The fair value of the
warrant was determined using the Black Scholes option pricing model with
the following assumptions:
Risk free interest rate 2.57%
Volatility 333%
Dividend 0
Weighted average expected life 5 years
63
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 7- EQUITY (Continued)
The following schedule summarizes the Company's warrant activity since
inception through December 31, 2010:
Weighted Weighted
Average Average Aggregate
Exercise Remaining Intrinsic
Warrants Price Term Value
------- ------ -------- -------
Outstanding at
November 9, 2009 0 $ 0 $ 0 $ 0
Warrants granted
during 2010 108,750 1.32 4.02 0
Warrants exercised 0 0 0 0
Warrants expired 0 0 0 0
------- ------ ------ ------
Outstanding at
December 31, 2010 108,750 $ 1.32 $ 4.02 $ 0
======= ====== ====== ======
NOTE 8 - INCOME TAXES
The Company has adopted ASC 740-10 "Income Taxes" (formerly SFAS No.
109, "Accounting for Income Taxes"), which requires the use of the
liability method in computation of income tax expense and the current
and deferred income tax payable (deferred tax liability) or benefit
(deferred tax asset). Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
realized.
The cumulative tax effect at the expected tax rate of 25% of significant
items comprising the Company's net deferred tax amounts as of December
31, 2010 and 2009, respectively are as follows:
Deferred Tax Asset Related to:
December 31, December 31,
2010 2009
--------- ---------
Prior Year $ (67,743) $ 0
Tax Benefit for Current Year 236,280 67,743
Total Deferred 304,023 67,743
--------- ---------
Less: Valuation Allowance (304,023) (67,743)
--------- ---------
Net Deferred Tax Asset $ 0 $ 0
64
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
Note 8 - INCOME TAXES (continued)
The net deferred tax asset generated by the loss carryforward has been
fully reserved. The cumulative net operating loss carry-forward is
approximately $1,216,092 at December 31, 2010, and will expire in the
years 2029 and 2030.
The realization of deferred tax benefits is contingent upon future
earnings and has been fully reserved at December 31, 2010 and 2009,
respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Employment Agreements:
On November 5, 2009, the Company entered into a three-year employment
agreement with Jason Shapiro, the Company's current Chief Financial
Officer, Acting Chief Executive Officer and Director on the Company's
Board. The agreement provides a salary of $200,000 per year and
reasonable and customary terms related to vacation, holidays and travel.
The agreement provides for a cash bonus of up to 200% of his base salary
based upon reaching certain objectives of the Company and at the sole
discretion of the board. The agreement may be terminated by the Company
or employee with three months advance written notice. This employment
agreement was amended with the amendment becoming effective January 1,
2011.
On May 4, 2010, the Company hired Eric J. Hoffman as the Chief Financial
Officer and entered into a 24 month employment agreement. The
employment agreement provided for an annual base salary of $225,000,
payable as $125,000 in cash and $100,000 in stock awards. The agreement
also provides for an annual incentive of 100% of his base salary payable
in a ratio consistent with his base salary. On September 13, 2010, the
Company amended the employment agreement with Mr. Hoffman. The
amendments changed the allocation between cash and stock payments for
base and bonus compensation, but had no impact on total compensation.
Mr. Hoffman's cash based salary increased to $165,000 and stock based
salary decreased to $60,000. The allocation of the annual incentive
payment between cash and stock changed to $125,000 and $100,000,
respectively. On November 23, 2010, the Company accepted Mr. Hoffman's
resignation. The Company has accrued all compensation due to Mr.
Hoffman. As of December 31, 2010, no cash payments have been made and
no stock has been issued.
On April 20, 2010, the Company hired Michael J. Bovalino as the Chief
Executive Officer and entered into a 30 month employment agreement.
The employment agreement provides for an annual base salary of $300,000,
payable as $175,000 in cash and $125,000 in stock awards. The agreement
also provides for an annual incentive of 100% of his base salary. Upon
termination by the registrant for cause or employee's voluntary
65
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
termination without good reason, Employee will receive a) three months
of base salary if such termination occurred within one year of the
signing of his employment agreement or b) nine months of base salary if
such termination occurred over one year from the signing of his
employment agreement. On September 13, 2010, the Company amended the
employment agreement with Mr. Bovalino.
The amendment changed the allocation between cash and stock payments for
base and bonus compensation, but had no impact on total compensation.
Mr. Bovalino's cash based salary increased to $215,000 and stock based
salary decreased to $85,000. The allocation of the annual incentive
payment between cash and stock changed to $175,000 and $125,000,
respectively. On November 23, 2010, the Company accepted Mr.
Bovalino's resignation. The Company has accrued all compensation due to
Mr. Bovalino. As of December 31, 2010, no cash payments have been made
and no stock has been issued.
Belle Haven Agreement:
The Company entered into an agreement on November 15, 2009 with Belle
Haven Partners, LLC ("Belle Haven") to assist Iron Eagle Nevada with
business development planning, raising additional capital, and accessing
the public markets. One of Belle Haven's employees is also on Iron
Eagle's management team, and the entities have common ownership. Iron
Eagle Nevada agreed to pay Belle Haven $20,000 per month starting
September 1, 2009, as well as to reimburse them for all out-of-pocket
expenses.
Facilities Leases:
The Company leases office space and equipment under noncancelable
operating leases with terms of three years. The Company occupies its
Englewood, Colorado facility under a rental agreement that has a lease
term that was to expire in December 2008. On October 1, 2008, the
Company entered into an agreement to extend the lease for an additional
36 months ending December 2011 at a rate of $2,885 a month. The Company
also leases its New York, New York facility under a rental agreement
that has a one year lease starting September 1, 2010 for $2,100 a month
with Belle Haven Capital, LLC, a company of which Jason Shapiro (CEO),
is a principal. The following is a schedule of future minimum rentals
under the leases for the years ending December 31:
66
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
Year Amount
---- -------
2011 $50,878
2012 0
2013 0
2014 and beyond 0
-------
Total $50,878
=======
At times, the Company has subleased space in its Colorado facility to
two tenants. Sublease income for the years ended December 31, 2010 and
2009 was $0, and $2,000, respectively. All sublease income is treated
as a reduction in rent expense.
Loss Contingencies:
Certain conditions may exist as of the date the consolidated financial
statements are issued, which may result in a loss to the Company, but
which will only be resolved when one or more future events occur or fail
to occur. The Company's management and its legal counsel assess such
contingent liabilities, and as such, assessment inherently involves an
exercise of judgment. In assessing loss contingencies related to legal
proceedings that are pending against the Company or unasserted claims
that may result in such proceedings, the Company's legal counsel
evaluates the perceived merits of any legal proceedings or unasserted
claims as well as the perceived merits of the amount of relief sought or
expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a
material loss has been incurred and the amount of the liability can be
estimated, then the estimated liability would be accrued in the
Company's combined financial statements. If the assessment indicates
that a potentially material loss contingency is not probable but is
reasonably possible, or is probable but cannot be estimated, then the
nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless
they involve guarantees, in which case the guarantees would be
disclosed.
67
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 10 - RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Guidance:
On January 1, 2010, the Company adopted Accounting Standard Update
("ASU") 2009-16, "Transfers and Servicing (Topic 860): Accounting for
Transfers of Financial Assets." This ASU is intended to improve the
information provided in financial statements concerning transfers of
financial assets, including the effects of transfers on financial
position, financial performance and cash flows, and any continuing
involvement of the transferor with the transferred financial assets. The
Company does not have a program to transfer financial assets; therefore,
this ASU had no impact on the Company's consolidated financial
statements.
On January 1, 2010, the Company adopted ASU 2009-17, "Consolidations
(Topic 810): Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities," which amended the consolidation
guidance applicable to variable interest entities and required
additional disclosures concerning an enterprise's continuing involvement
with variable interest entities. The Company does not have variable
interest entities; therefore, this ASU had no impact on the Company's
consolidated financial statements.
On January 1, 2010, the Company adopted ASU 2010-06, "Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about
Fair Value Measurements," which added disclosure requirements about
transfers in and out of Levels 1 and 2 and separate disclosures about
activity relating to Level 3 measurements and clarifies existing
disclosure requirements related to the level of disaggregation and input
and valuation techniques. The adoption of this guidance did not have a
material impact on the Company's consolidated financial statements or
the related disclosures.
Accounting Guidance Issued But Not Adopted as of December 31, 2010:
In October 2009, the FASB issued ASU 2009-13, "Revenue Recognition
(Topic 605): Multiple-Deliverable Revenue Arrangements - a consensus of
the FASB Emerging Issues Task Force," which amends the criteria for when
to evaluate individual delivered items in a multiple deliverable
arrangement and how to allocate consideration received. This ASU is
effective for fiscal years beginning on or after June 15, 2010, which is
January 1, 2011 for the Company. The Company is currently evaluating
the impact of adopting the guidance.
Management has reviewed these new standards and believes they had or
will have no material impact on the financial statements of the Company.
68
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 11 - FINANCIAL CONDITION AND GOING CONCERN
The Company has an accumulated deficit through December 31, 2010
totaling $1,216,092 and recurring losses and negative cash flows from
operations. Because of these conditions, the Company will require
additional working capital to develop its business operations.
The Company's success will depend on its ability to raise money through
debt and the sale of stock to meet its cash flow requirements. The
ability to execute its strategic plan is contingent upon raising the
necessary cash to 1) pursue and close acquisitions; 2) sustain limited
operations; and, 3) meet current obligations. The current economy has
severely hampered the Company's ability to raise funds to close on
identified acquisitions. The construction market continues to remain
weak. The Company is uncertain what potential acquisitions will be
available to us in the near future, or whether, if they are available,
if they will be able to raise funds necessary to take advantage of these
opportunities. Management believes that the efforts it has made to
promote its business will continue for the foreseeable future. These
conditions raise substantial doubt about Iron Eagle Group, Inc.'s
ability to continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should Iron Eagle
Group, Inc. be unable to continue as a going concern.
NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS AND LIABILITIES
The Company has adopted fair value guidance and utilized the market
approach to measure fair value of financial assets. The market approach
uses prices and other relevant information generated by market
transactions involving identical or comparable assets. The standard
describes a fair value hierarchy based on three levels of inputs, of
which the first two are considered observable and the last unobservable,
that may be used to measure fair value which are the following:
Level 1: Quoted prices (unadjusted) in active markets that are
accessible at the measurement date for assets or liabilities. The fair
value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted
on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market
Data is available. The fair value hierarchy gives the lowest
priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques
that maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible.
69
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS AND LIABILITIES
(continued)
As of December 31, 2010, the Company's financial assets and liabilities
are measured at fair value using Level 3 inputs, with the exception of
cash, which was valued using Level 1 inputs. There were no financial
assets or liabilities as of December 31, 2009.
Fair Value Measurement at
December 31, 2010 Using:
------------------------------------
Quoted
Prices In
Active
Markets Significant
For Other Significant
Identical Observable Unobservable
December Assets Inputs Inputs
(31, 2010)(Level 1)(Level 2) (Level 3)
------- ------ ------- -------
Assets:
Cash and Cash Equivalents $ 976 $976 $ - $ -
------- ---- ---- -------
976 976 - -
------- ---- ---- -------
Liabilities:
Capital Lease 2,344 - - 2,344
Line of Credit 50,000 - - 50,000
------- ---- ---- -------
$52,344 $ - $ - $52,344
======= ==== ==== =======
70
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS AND LIABILITIES (Continued)
Fair Value Measurement at
December 31, 2009 Using:
------------------------------------
Quoted
Prices In
Active
Markets Significant
For Other Significant
Identical Observable Unobservable
December Assets Inputs Inputs
(31, 2009)(Level 1)(Level 2) (Level 3)
------- ------ ------- -------
Assets:
Cash and Cash Equivalents $ - $ - $ - $ -
------- ---- ---- -------
- - - -
------- ---- ---- -------
Liabilities:
Capital Lease - - - -
Line of Credit - - - -
------- ---- ---- -------
$ - $ - $ - $ -
======= ==== ==== =======
NOTE 13 - SUBSEQUENT EVENTS
In May 2009, the FASB issued ASC 855-10, "Subsequent Events", (formerly
SFAS No. 165, "Subsequent Events," which establishes general standards
for accounting for and disclosure of events that occur after the balance
sheet date but before the financial statements are issued or are
available to be issued. The pronouncement requires the disclosure
through the date on which an entity has evaluated subsequent events and
the basis for that date, whether that date represents the date the
financial statements were issued or were available to be issued.
In February 2010, the FASB issued Accounting Standards Update 2010-09,
"Amendments to Certain Recognition and Disclosure Requirements", which
amended ASC 855 and which requires issuers of financial statements to
evaluate subsequent events through the date on which the financial
statements are issued. FASB 2010-09 defines the term "SEC Filer" and
eliminates the requirement that an SEC filer disclose the date through
which subsequent events have been evaluated.
71
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 13 - SUBSEQUENT EVENTS (Continued)
This change was made to alleviate potential conflicts between ASC 855-10
and the reporting requirements of the SEC. FASB 2010-09 is effective
immediately, but is not expected to have a material effect on the
Company's financial statements.
In conjunction with the preparation of these financial statements, an
evaluation of subsequent events was performed and the following items
were noted:
Acquisition:
On January 21, 2011, Iron Eagle Group, Inc. acquired all of the members'
interests in Sycamore Enterprises, LLC, through Bruce A. Bookbinder's
membership interests (100%). Sycamore Enterprises, LLC is 100% holder
of all of the membership interests of Delta Mechanical Contractors, LLC,
a mechanical contractor ("Delta").
Delta is a regional subcontractor providing commercial and industrial
installation of plumbing, heating, ventilation and air conditioning and
fire protection services in the regions of Rhode Island, Southeastern
Massachusetts and Eastern Connecticut.
The aggregate purchase price to be paid by Buyer for the purchased
membership interests consists of (i) a $9,000,000 buyer note (secured by
Delta) and (ii) future contingency payment(s), based on the Company's
results for the years ended December 31, 2011, 2012, 2013 and 2014, not
to exceed $250,000 per year or $1,000,000 in aggregate, and (iii) a four
year employment contract with the President and Chief Financial Officer
of Delta.
The Company has agreed to secure its obligations to Mr. Bookbinder by
pledging to Mr. Bookbinder and granting to Mr. Bookbinder a 100%
security interest in the membership interest in Sycamore Enterprises,
LLC together with the other Collateral until the buyer note is repaid.
The Company filed a Form 8-K on February 4, 2011 with details of the
acquisition. The Company will consolidate Delta and the combined
results will be reflected in the Company's March 31, 2011 Form 10-Q.
The following proforma information reflects the acquisition of Delta by
Iron Eagle. The Unaudited Proforma Consolidated Balance Sheet as of
December 31, 2010 and Unaudited Proforma Consolidated Income Statement
for the year ended December 31, 2010 have been prepared to reflect the
acquisition and the adjustments described in the accompanying notes.
The historical financial statements for Iron Eagle are presented from
audited financial statements as of and for the year ended December 31,
2010. The historical unaudited financial statements for Delta are
72
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
ITEM 13 - SUBSEQUENT EVENTS (Continued)
prepared as of and for the year ended December 31, 2010. The Unaudited
Proforma Consolidated Balance Sheet is prepared as of the acquisition
occurred on December 31, 2010.
The Unaudited Proforma Consolidated Income Statement was prepared
assuming the acquisition occurred on January 1, 2010. The proforma
financial information is unaudited and not necessarily indicative of the
actual financial position of the Company as of December 31, 2010 or what
the actual results would have been assuming the acquisition had been
consummated at the beginning of the periods presented, nor does it
purport to represent the future financial position and results of
operations for future periods.
IRON EAGLE GROUP, INC. FINANCIALS
Pro Forma Consolidated Balance Sheet
December 31, 2010
(Unaudited)
December 31, 2010
---------------------------
Delta
Iron Eagle(a) Mechanical(b) Adjustments(c) Pro Forma
------------- ------------- -------------- ---------
(Unaudited)
ASSETS
Current Assets
Cash $ 976 $ 2,168,186 $ - $ 2,169,162
Contracts Receivable, Net - 15,571,073 - 15,571,073
Costs and Estimated
Earnings in Excess
of Billings - 701,615 - 701,615
Deposits - 133,950 - 133,950
Other Prepaid Assets 611,563 330,379 - 941,942
Other Assets 6,000 - - 6,000
---------- ----------- ---------- -----------
Total Current Assets $ 618,539 $18,905,203 - $19,523,742
Fixed Assets, Net of
Accumulated Depreciation $ 2,150 $ 303,067 - $ 305,217
Goodwill - - 4,615,841 4,615,841
Non-Compete - - 300,000 300,000
---------- ----------- ---------- -----------
TOTAL ASSETS $ 620,689 $19,208,270 $4,915,841 $24,744,800
========== =========== ---======= ===========
73
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
ITEM 13 - SUBSEQUENT EVENTS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable -
Related Parties $ 479,439 $ 0 - $479,439
Accounts Payable 78,409 10,051,160 - 10,129,569
Advances From Officer 289,758 - - 289,758
Other Accrued Liabilities 795,936 233,708 - 1,029,644
Note Payable - Related Party 18,773 750,000 - 768,773
Billings in Excess of Costs
and Estimated Earnings - 2,646,431 - 2,646,431
Current Maturities -
Note Payable - 3,460 - 3,460
Accrued Distribution -
Taxes - 621,478 - 621,478
Capital Lease 2,344 - - 2,344
Seller's Note - - 9,000,000 9,000,000
Shares to be Issued 42,155 - - 42,155
Line of Credit 50,000 - - 50,000
---------- ----------- ---------- -----------
Total Current Liabilities $1,756,814 $14,306,237 $9,000,000 $25,063,051
---------- ----------- ---------- -----------
Note Payable - Long Term,
Less Current - 4,553 - 4,553
Earn-out - - 813,321 813,321
---------- ----------- ---------- -----------
TOTAL LIABILITIES $1,756,814 $14,310,790 $9,813,321 $25,880,925
Stockholders' Equity
Preferred Stock (0 and 0
shares issued and outstanding) - - - -
Common Stock (11,571,706 and
1,000 shares issued and
outstanding) 116 - - 116
Additional Paid in Capital 79,851 - - 79,851
Accumulated Deficit (1,216,092) 4,897,480 (4,897,480) (1,216,092)
---------- ----------- ---------- -----------
Total Stockholders' Equity (1,136,125) 4,897,480 (4,897,480) (1,136,125)
---------- ----------- ---------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 620,689 $19,208,270 4,915,841 $24,744,800
========== =========== ========== ===========
Consideration:
Seller's Note 9,000,000
Earnout - over 4 years 813,321 Present Value of
----------- Earnout
Total Purchase Price $ 9,813,321
74
Allocation of Purchase Price
----------------------------
Equity of Delta Mechanical Contractors $ 4,897,480
Non-compete 300,000
Customer Contracts -
Goodwill 4,615,841
-----------
Total Allocation $ 9,813,321
75
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 13 - SUBSEQUENT EVENTS (Continued)
(a) Scheduled from Iron Eagle's audited consolidated balance sheet as of
December 31, 2010
(b) Scheduled from Delta's unaudited balance sheet as of December 31,
2010
(c) Adjustments made to allocate the purchase price of Delta. With the
acquisition of Delta, the Company received $18,905,203 in current assets
and $303,067 of fixed assets, which were depreciated and approximated
fair value. The Company assumed current liabilities of $14,306,237
and a $4,553 long term note payable. The former Delta members have a
four year earn-out that has been recorded at the net present value of
the future cash flows. Specifically identified intangibles include
$300,000 for non-compete agreements with the former owner and goodwill
of $4,802,520.
76
IRON EAGLE GROUP, INC. FINANCIALS
Pro Forma Consolidated Income Statement
For the Year Ended December 31, 2010
Year Ended December 31, 2010
----------------------------
Delta
Iron Eagle(a) Mechanical(b) Adjustments Pro Forma
--------- ----------- --------- -----------
REVENUES $ - $47,274,347 $ - $47,274,347
COST OF SALES - 41,848,069 - 41,848,069
--------- ---------- -------- -----------
GROSS PROFIT - 5,426,278 5,426,278
OPERATING EXPENSES
Shares Issued for
Services 30,000 - - 30,000
Operating Expenses 118,419 1,247,499 - 1,365,918
Compensation Expense 506,319 1,541,703 - 2,048,022
Professional Fees 129,117 681,666 - 810,783
Professional Fees to
Related Parties 158,400 - - 158,400
--------- ---------- -------- -----------
TOTAL OPERATING EXPENSES 942,255 3,470,868 - 4,413,123
--------- ---------- -------- -----------
NET OPERATING
INCOME (LOSS) (942,255) 1,955,410 - 1,013,155
OTHER INCOME (EXPENSE) (2,865) (85,771) - (88,636)
--------- ---------- -------- -----------
NET INCOME (LOSS) BEFORE
INCOME TAXES (945,120) 1,869,639 - 924,519
Provision for Income
Taxes (Expense)
Benefit - - - -
--------- ---------- -------- -----------
NET INCOME (LOSS) $(945,120) $1,869,639 $ - $ 924,519
========= ========== ======== ===========
EARNINGS PER SHARE
Earnings per Share,
basic and diluted $ (0.22) $ 0.22
========= ===========
Weighted Average Shares
Outstanding,
basic and diluted 4,277,132 4,277,132
========= ===========
77
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 13 - SUBSEQUENT EVENTS (Continued)
(a) Scheduled from Iron Eagle's audited consolidated income statement
for the year ended December 31, 2010
(b) Scheduled from Delta's unaudited income statement for the year
December 31, 2010
Shares Issued for Services:
On January 21, 2011, the board of directors ratified its media relations
agreement dated December 7, 2010 between the registrant and Market
Update Network Corp. ("MUNC") Pursuant to the agreement, the Company
granted MUNC 15,759 common shares valued at $0.95 per common share.
On February 4, 2011, the registrant executed a consulting agreement with
IPX Capital, LLC ("IPX"). Pursuant to the agreement, the Company granted
IPX 125,000 common shares valued at $0.80 per common share, which vested
immediately. A success fee of $100,000 in cash will be due upon
raising up to $40,000,000, plus an additional 1% of any capital raised
in excess of $40,000,000. An additional 125,000 shares will be earned
and vest upon the completion of raising the necessary capital to find
the Company's first acquisition.
On March 1, 2011, the Company entered into an investor relations
consulting agreement with Alliance Advisors, LLC. Pursuant to the 15
month agreement, the Company will issue 120,000 restricted shares over
the term of the agreement, including 40,000 to be issued within the
first 30 days of the agreement. In March 2011, the Company issued 40,000
shares of common stock, valued at $1.01 a share, which vested
immediately. The agreement also provides for cash fees beginning on the
fourth month of service. The fees range from $5,000 a month to $8,500
a month, with the escalations occurring upon closing of a financing
transaction of $10 million or more and upon a successful listing on the
American Stock Exchange of NASDAQ.
On March 1, 2011, the Company entered into a 12 month consulting
agreement with Hayden IR to provide corporate investor and public
relations services. Pursuant to the agreement, the Company will issue
75,000 shares of common stock within 30 days of engagement. In March
2011, the Company issued the 75,000 shares, valued at $1.01 a share,
which vested immediately. The agreement provides for no monthly cash
fee for the first six months of service. In months seven through
twelve, assuming a funding event of $10 million or more occurs, the fees
will be $7,000 per month. If the Company does not raise enough money to
pay the fee, an additional 75,000 shares of restricted common stock will
be issued to Hayden IR within 30 days following the sixth month of
engagement.
78
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 13 - SUBSEQUENT EVENTS (Continued)
On March 1, 2011, the Company entered into a consulting agreement with
RJ Falkner & Company, Inc. ("Falkner") to prepare and distribute
"Research Profile" reports to over 9,500 investment professionals on a
recurring basis, follow-up with investment professionals and investors
on a continuing basis, and respond to inquiries from brokers, money
managers and investors. The Company will pay Falkner a monthly retainer
fee of $5,000 payable in restricted shares of common stock, payable each
month in advance, calculated on the average closing price of the
Company's stock during the prior 20 market trading days, which was 7,693
shares at $1.30 a share for the first two months of service. In
addition, the Company issued Falkner a three-year option to purchase
85,000 shares of the Company's common stock, at an exercise price that
is equivalent to the last trade price of the Company's common stock on
the date prior to the start date of the consulting agreement, which was
$1.01 a share.
On March 1, 2011, the Company entered into a media production and
placement services agreement with NewsUSA ("NUSA") to provide national
media exposure for the Company. NUSA will provide the Company with
$500,000 of media credit to be used in the placement of print and radio
features obtained by NUSA on behalf of the Company. Pursuant to the
agreement, the Company was to issue $125,000 of restricted common shares
valued at the 30 day weighted average price as of the effective day of
the agreement. In March 2011, pursuant to this agreement, the Company
issued 96,154 shares of stock, valued at $1.30 a share, which vested
immediately. For every release after the first media release, for each
$25,000 of media credit utilized, the Company shall debit the guaranteed
media credit by $22,500 and pay the remaining $2,500 in cash.
Debt Issuance
On March 8, 2011, the Company entered into a note agreement with
Alliance Advisors for $7,500 as consideration for receipt of cash by the
Company. This note has an interest rate of 12% and is due upon the
earlier of June 8, 2011 or the registrant receiving at least $100,000 of
funding.
79
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 13 - SUBSEQUENT EVENTS (Continued)
On March 8, 2011, the Company entered into note agreements with 2
related parties (the Company's Chairman of the Board and the Company's
Executive Vice President) for receipt of $60,000 cash for working
capital purposes. These notes have similar terms and bear an interest
rate of 10% and are due in full upon the earlier of the registrant
receiving at least $75,000 of funding or 90 days of issuance with
renewable 30 day periods, at the holder's sole discretion.
On March 17, 2011, the Company converted $250,000 of the "Advances from
Officer" from the Company's CEO into a note agreement. The note bears
an interest rate of 10% and is due December 15, 2011. Should the note
not be repaid in it's entirely by December 15, 2011, it will be
considered to be in default and the interest rate shall increase to 15%.
Purchase of Marketable Securities:
On March 15, 2011, the Company purchased 250,000 common shares of the
registrant from Galileo Partners, LLC for $100. Galileo Partners is an
investment firm where Steven Antebi, a non-affiliate, is the president
and chief executive officer.
Compensation Agreements:
Effective as of January 1, 2011, the Board ratified compensation
agreements for Joseph LoCurto, Jed Sabio, and Jason Shapiro.
No other reportable subsequent events were noted.
80
Up to 14,285,714 Common Shares at $1.05 per Common Share
Prospectus
Iron Eagle Group, Inc.
April 25, 2011
YOU SHOULD ONLY RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT
FROM THAT CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND
SEEKING OFFERS TO BUY, COMMON SHARES ONLY IN JURISDICTIONS WHERE OFFERS
AND SALES ARE PERMITTED.
All dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments
or subscriptions.
81
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the securities being registered.
The registrant shall pay the expenses.
SEC Registration Fee $ 1,741.50
Printing and Engraving Expenses 1,500.00
Legal Fees and Expenses 25,000.00
Accounting Fees and Expenses 20,000.00
Miscellaneous 5,000.00
-----------
TOTAL $ 53,241.50
Item 14. Indemnification of Directors and Officers
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the registrant as provided in the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities,
other than the payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding, is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
Item 15. Recent Sales of Unregistered Securities
During the year ended December 31, 2010, the registrant issued common
stock as follows:
On January 8, 2010, 9,337,296 common shares were issued to the former
shareholders of Iron Eagle Group, Inc., a Nevada Corporation in
connection with a business combination. These shares were held in
escrow until August 18, 2010. In exchange, the Iron Eagle Nevada
shareholders surrendered all of their issued and outstanding Iron Eagle
Nevada one-class common stock.
On May 1, 2010, the registrant entered into a services agreement with
Gary Smolen for investor relations services. In satisfaction for the
agreement, the registrant agreed to issue 200,000 shares of the
registrant's common stock at a share price of $1.20.
82
On May 4, 2010, the registrant entered into a services agreement with a
non-affiliated website development firm. In satisfaction for the
agreement, the registrant agreed to issue 5,000 shares of the
registrant's common stock at a share price of $1.20.
On May 1, 2010, the registrant entered into a services agreement with
Gary Smolen for investor relations services. In satisfaction for the
agreement, the registrant agreed to issue 200,000 shares of the
registrant's common stock at a share price of $1.20.
On May 4, 2010, the registrant entered into a director's agreement with
Gary Giulietti to become a member of the registrant's board. In
connection with the agreement, the registrant issued 41,667 shares of
the registrant's common stock at a share price of $1.20.
On May 4, 2010, the registrant entered into a one year consulting
agreement with CCG, an investor relations firm. In satisfaction for the
agreement, the registrant issued 108,750 shares of the registrant's
common stock at a per share price of $1.20 and a 5 year warrant to
purchase up to 108,750 shares with an exercise price of $1.32 per share.
The shares issued vested immediately. The fair value of the warrant was
$126,107. The registrant has received three months of services under
this agreement, and the remaining services are currently on hold pending
the registrant's decision to resume services. The portion of services
that have not been utilized are recorded as a prepaid expense as of
December 31, 2010.
On June 5, 2010, the registrant entered into a three year consulting
agreement with Steven Antebi to help the registrant obtain financing and
related services. The value of the services to be received is $400,000.
In satisfaction for the agreement, the registrant issued 1,000,000
shares of the registrant's common stock, resulting in a per share price
of $.40. The portion of services that have not been utilized are
recorded as a prepaid expense as of December 31, 2010.
On July 16, 2010, the board of directors appointed Joseph Antonini as a
director and granted him 38,462 shares of stock, valued at $1.30 a
share, which vested immediately.
On August 31, 2010, the registrant entered into a non-exclusive
agreement with Aegis Capital Corp., an investment bank, to act as their
underwriter with respect to a forthcoming public offering. In connection
with this agreement the registrant issued 28,572 shares of stock, valued
at $1.05 a share, which vested immediately.
All of these issuances were made to sophisticated investors pursuant to
an exemption from registration under Section 4(2) of the Securities Act
of 1933.
83
Item 16. Exhibits and Financial Statement Schedules
INDEX TO EXHIBITS
Exhibit Number and Identification of Exhibit
(3.1) Articles of Incorporation incorporated by referenced to Form 10SB
filed August 7, 1997, File No. 0-22965
(3.2) Amendment to Articles of Incorporation incorporated by referenced
to Form 10SB filed August 7, 1997, File No. 0-22965
(3.3) Bylaws incorporated by reference to Form 10SB filed August 7,
1997, File No. 0-22965
(4.1) Specimen Common Stock Certificate incorporated by reference to
Form 10SB filed August 7, 1997, File No. 0-22965
(5) Opinion of Jody M. Walker, Attorney At Law
(10) Material Contracts
Share Exchange between Pinnacle Resources, Inc. and the Shareholders
of Iron Eagle Group and Meister Seelig & Fein LLP incorporated by
reference to Form 8-K filed on January 11, 2010
Escrow Agreement between Pinnacle Resources, Inc. and the
Shareholders of Iron Eagle Group and Meister Seelig & Fein LLP
incorporated by reference to Form 8-K filed on January 11, 2010
Letter of Engagement dated December 22, 2009 between CCG Investor
Relations Partners LLC incorporated by reference to Form 8-K filed
on July 2, 2010
Antebi Advisory Agreement incorporated by reference to Form 8-K
filed on July 2, 2010
Sycamore Enterprises Pledge and Assignment of Membership Interest
incorporated by reference to Form 8-K on February 4, 2011.
Jason M. Shapiro Employment Agreement incorporated by reference to
Form 8-K on February 4, 2011.
Joseph Locurto Consulting Agreement incorporated by reference to
Form 8-K on February 4, 2011.
Jed Sabio Employment Agreement incorporated by reference to Form 8-K
on February 4, 2011.
Lease Between the registrant and Belle Haven Capital, LLC
incorporated by reference to Form 8-K on February 4, 2011.
Media Relations Agreement incorporated by reference to Form 8-K on
February 4, 2011.
IPX Consulting Agreement incorporated by reference to Form 8-K filed
on March 28, 2011.
Alliance Advisors Consulting Agreement incorporated by reference to
Form 8-K filed on March 28, 2011.
Alliance Note Agreement incorporated by reference to Form 8-K filed
on March 28, 2011.
Hayden IR Consulting Agreement incorporated by reference to Form 8-K
filed on March 28, 2011.
RJ Falkner Consulting Agreement incorporated by reference to Form
8-K filed on March 28, 2011.
NewUSA Agreement incorporated by reference to Form 8-K filed on
March 28, 2011.
Locurto Note Agreement incorporated by reference to Form 8-K filed
on March 28, 2011.
Sabio Note Agreement incorporated by reference to Form 8-K filed on
March 28, 2011.
84
Shapiro Note Agreement incorporated by reference to Form 8-K filed
on March 28, 2011.
(11) Statement of Computation of Per Share Earnings
This Computation appears in the Financial Statements.
(21) Subsidiaries of the registrant
(23)(i) Consent of Certified Public Accountants
(23)(ii) Consent of Jody M. Walker, Attorney
At Law, included in Exhibit 5
Item 17. Undertakings
(a) The undersigned registrant undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
i. To include any prospectus required by Section 10(a) (3) of the
Securities Act;
ii. Reflect in the prospectus any facts or events arising after
the effective date of which, individually or together, represent a
fundamental change in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered, if the total dollar value of securities offered
would not exceed that which was registered and any deviation from the
low or high end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the SEC in accordance with Rule
424(b) of this chapter, if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
iii. Include any additional or changed material on the plan of
distribution.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered, and the
offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
84
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for the purpose of determining liability under the Securities
Act to any purchaser in the initial distribution of the securities, the
undersigned small business issuer will be a seller to the purchaser and
will be considered to offer or sell such securities to such purchaser:
i. Any preliminary prospectus or prospectus of the undersigned
small business issuer relating to the offering required to be filed
pursuant to Rule 424 (section 230.424 of this chapter);
ii. Any free writing prospectus relating to the offering prepared
by or on behalf of the undersigned small business issuer or used or
referred to by the undersigned small business issuer;
iii. The portion of any other free writing prospectus relating to
the offering containing material information about the undersigned small
business issuer or its securities provided by or on behalf of the
undersigned small business issuer; and
iv. Any other communication that is an offer in the offering made
by the undersigned small business issuer to the purchaser.
(5) That, for the purpose of determining liability under the Securities
Act of 1933 to any purchaser:
i. If Iron Eagle is relying on Rule 430B (230.430B of this
chapter):
A. Each prospectus filed by Iron Eagle pursuant to Rule 424(b) (3) shall
be deemed to be part of the registration statement as of the date the
filed prospectus was deemed part of and included in the registration
statement; and
B. Each prospectus filed by Iron Eagle pursuant to Rule 424(b) (2), (b)
(5), or (b) (7) as part of the registration statement in reliance on
Rule 430B relating to an offering made pursuant to Rule 415(a) (1) (i),
(vii), or (x) for the purpose of providing the information required by
section 10(a) of the Securities Act of 1933 shall be deemed to be part
of the first contract of sale of securities in the offering described in
the prospectus. As provided in Rule 430B, for liability purposes of the
issuer and any person that is at that date an underwriter, such date
shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof. Provided,
however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior
to such effective date, supersede or modify any statement that was made
in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such effective date; or
85
ii. If the registrant is subject to Rule 430C, each prospectus
filed pursuant to Rule 424(b) as part of the registration statement
relating to an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on Rule 430A,
shall be deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided, however,
that no statement made in a registration statement or prospectus that is
part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or
prospectus that is part of the registration statement will as to a
purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or
made in any such document immediately prior to such date of first use.
86
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, Iron
the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form S-1 and authorized
this registration statement to be signed on its behalf by the
undersigned, in the City of New York, State of New York on the 25th day
of April, 2011.
Iron Eagle Group, Inc.
/s/Jason M. Shapiro
------------------------------------
By: Jason M. Shapiro
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ Jason M. Shapiro Chief Executive Officer April 25, 2011
------------------------ Chief Financial Officer
Jason M. Shapiro Controller/Director
/s/ Joseph M. LoCurto Director April 25, 2011
------------------------
Joseph M. LoCurto
/s/ Gary J. Giulietti Director April 25, 2011
------------------------
Gary J. Giulietti
/s/ Joseph E. Antonini Director April 25, 2011
------------------------
Joseph E. Antonini
