Attached files
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1
To
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. Mitchell Lampert, Esq.
7841 South Garfield Way Meister Seelig & Fein LLP
Centennial, Colorado 80122 Two Grand Central Tower
Phone 303-850-7637 140 East 45th Street, 19th Floor
Fax: 303-482-2731 New York, New York 10017
Phone: (212) 655-3575 Fax: (646)539-3675
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]
2
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 we was required to
submit and post such files). Yes [ ] No [ ]
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 AMOUNT PROPOSED PROPOSED AMOUNT OF
OF SECURITIES BEING MAXIMUM MAXIMUM REGISTRATION
TO BE REGISTERED REGISTERED OFFER PRICE AGGREGATE FEE(1)
PER SHARE OFFER PRICE
Common Stock 3,000,000 (2) $5.00 (2) $15,000,000 $1,741.50 (*)
Common Stock 120,000 (3) $6.00 (3) $720,000 83.59
------------ --------- ----- ----------- ---------
Total 3,120,000 $15,720,000 $1,825.09
(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.
(2) Reflects a one-for-eight reverse stock split of the outstanding
common stock of the registrant that will be consummated prior to
completion of the offering of the securities included in this
registration statement.
(3) Represents common shares issuable upon exercise of warrants issued
to the representatives of the several selling agents.
________________________________
(*) Previously paid.
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.
3
PROSPECTUS
$15,000,000
IRON EAGLE GROUP, INC.
Common Stock
We are offering up to 3,000,000 common shares. The selling agents
named in this prospectus are acting as our agents and offering our
shares on a best efforts basis. However, a minimum of 2,000,000 shares
of common stock must be sold during an offering period currently
expiring on September 2, 2011 in order to complete this offering.
Until completion of the offering, all proceeds from the sale of our
common shares will be held in an interest bearing escrow account at
Signature Bank, New York, New York.
Our common stock is currently traded on the OTCQB under the symbol
IEAG.OTCQB. We intend to consummate a one-for-eight reverse split of
our outstanding common stock prior to completion of the offering and
apply to list our common stock on the Nasdaq Stock Exchange under the
symbol: IEAG. On August 3, 2011, the last reported sale price of our
common stock on the OTCQB was $3.20 per share, which reflects the one-
for-eight reverse stock split.
These securities involve a high degree of risk. You should consider
carefully the risk factors beginning on page 6 in this prospectus.
Total Total
Per Share Minimum Maximum
----- ----------- -----------
Price to public $5.00 $10,000,000 $15,000,000
Selling commissions (1) 0.35 700,000 1,050,000
Proceeds, before expenses ----- ----------- -----------
to Iron Eagle $4.65 $ 9,300,000 $13,950,000
__________________________
(1)Does not include a 2% non-accountable expense allowance we have
granted to Aegis Capital Corp, as the representative of the selling
agents and warrants to purchase an aggregate number our shares of
common stock equal to 4% of the total number shares sold in this
offering at an exercise price equal to 120% of the per share offering
price of our shares.
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 selling agents expect to deliver the common stock to purchasers
upon completion of this offering, subject to certain closing
conditions, including approval of the listing of our shares on Nasdaq,
and our payment of approximately $9,000,000 to retire a purchase note
payable to the former owner of our operating subsidiary.
AEGIS CAPITAL CORP.
The date of this prospectus is August 8, 2011
4
TABLE OF CONTENTS
Prospectus Summary 5
Summary Consolidated Financial Data 11
Risk Factors 18
Forward Looking Statements 29
Use of Proceeds 29
Dividend Policy 31
Dilution 31
Capitalization 32
Market for Common Equity and Recent Sales of Securities 33
Selected Consolidated Financial Data 38
Management's Discussion and Analysis of Financial
Condition and Results of Operations 51
Business 58
Management 67
Executive Compensation 71
Security Ownership of Certain Beneficial Owners
and Management 79
Certain Relationships and Related Transactions 81
Plan of Distribution 83
Description of Capital Stock 85
Shares Eligible for Future Sale 85
Disclosure of Commission Position on Indemnification
for Securities Act liabilities 86
Experts 87
Legal Matters 87
Where You Can Find More Information 87
Financial Statements 88
5
PROSPECTUS SUMMARY
You should read the entire prospectus carefully, including the risk
factors beginning on page 6 and our financial statements and the notes
thereto.
Unless the context otherwise requires, all references in this
prospectus to "the Company," "we," "our" and "us" refer to Iron Eagle
Group, Inc., formerly known as Pinnacle Resources, Inc. and our wholly-
owned subsidiaries, Sycamore Enterprises, LLC and Delta Mechanical
Contractors, LLC. Unless the context otherwise requires, all
references in this prospectus to "Iron Eagle" refers solely to Iron
Eagle Group, Inc. Unless the context otherwise requires, the
information contained in this prospectus gives effect to the January
21, 2011 acquisition of 100% of the members interest in Sycamore
Enterprises LLC which, in turn, owns 100% of the member's interest in
Delta Mechanical Contractors LLC.
All references in this prospectus to Iron Eagle's outstanding shares of
common stock and per share data gives effect to a one-for-eight reverse
stock split of our common stock that we intend to consummate prior to
completion of this offering.
Our Company
-----------
Through our DMC subsidiary, we provide construction and contracting
services in both the infrastructure and government markets. DMC 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.
We typically procure and install equipment to our customers design
specifications. We provide contracting services for both new
construction projects and the rehabilitation of existing
infrastructure, commercial, and industrial facilities. Our services
primarily consist of:
- 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
6
We service 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
Most of our work is performed on a fixed-price basis. Although we bear
the risk of project cost overruns, we believe that we have the ability
to seek to recover unforeseen additional costs through project change
orders or claims.
We had a backlog of anticipated revenue from the uncompleted portions
of awarded contracts totaling approximately $31,000,000 as at March 31,
2011 and received contract awards of $3,200,000 from Electric Boat
Company and the University of Rhode Island in the quarter ended March
31, 2011. Subsequent to March 31, 2011, we received contract awards
and change orders for an additional $3,300,000. Our backlog as of
December 31, 2010 was $39,500,000, compared to approximately
$42,400,000 as of December 31, 2009.
We believe that approximately $6,000,000 of our backlog as at March 31,
2011 is for work that is not anticipated to be completed in calendar
2011 and is expected to be reflected in 2012 revenues. The schedule
for each project is different and subject to change due to
circumstances beyond our control. Accordingly it is not reasonable to
assume that performance of backlog will be evenly distributed
throughout the course of a year. We believe that our backlog is firm
notwithstanding provisions in our contracts allowing the customers to
modify or cancel the contract at any time, subject in certain cases, to
our receipt of cost reimbursement and cancellation fees.
Our Strategy and Key Corporate Objectives
-----------------------------------------
Our goal is to become a leading construction and contracting service
provider to both the infrastructure and government markets throughout
the United States. We believe that the highly-fragmented construction
and contracting business for infrastructure and other public projects
lends itself to such strategy. We intend to achieve this goal by
implementing the following strategies:
7
- Growth through acquisitions. We believe that there are a number
of opportunities to acquire for a combination of cash, earn-outs
and our securities, the assets or equity of a number of small and
medium sized prime contractors and subcontractors to federal,
state and municipal public projects as well as government
sponsored institutions. Our acquisition model is to seek to
acquire established and profitable well-managed companies with
revenues of between $35.0 and $100.0 million at multiples of
approximately 3.5 to 5.0 times their historical earnings before
interest, taxes, depreciation and amortization, or EBITDA.
- Internal growth opportunities. We believe that there are a
number of revenue growth opportunities for DMC in its existing
markets as work repairing and upgrading certain infrastructures,
such as roads, bridge and schools in the New England market area
require municipalities to make necessary expenditures.
- Achieve a cost savings integration strategy. As we make
strategic acquisitions, we intend to pursue a non-invasive cost-
savings and integration strategy with easily-outsourced back-
office functions being integrated at the corporate-level in order
to achieve cost savings and to allow each of our operating
subsidiaries to focus on their construction operations and not
administrative tasks.
- Highly experienced management team - We believe that our
management team has the unique set of skills to effectively
implement our growth strategy. Our management team has over 30
years of experience identifying, acquiring and managing regional,
national and international construction companies which had
revenues ranging from $20.0 million to $1.8 billion.
In order to achieve our growth strategy, we will be required to raise
additional capital through a combination of loans and equity
financings. There is no assurance that such financing will be
available or terms that will be acceptable to us.
Recent Events
-------------
On January 21, 2011, Iron Eagle acquired 100% of the member's interest
of Sycamore and its DMC operating subsidiary from Bruce Bookbinder, the
sole member of Sycamore. The total purchase price was paid by delivery
of Iron Eagle's 5% $9.0 million note that was payable on or before June
2, 2011. Under the terms of our agreement, the note was subject to
reduction on a dollar for-dollar basis if the working capital of
Sycamore and its DMC subsidiary as at the January 21, 2011 closing date
was less than $5.0 million. On May 18, 2011, we and Mr. Bookbinder
agreed, based on the $4,675,463 closing date working capital of
Sycamore, to reduce the principal amount of the note to $8,675,463 and
on May 31, 2011 we agreed to extend its maturity date to September 2,
2011. The note is secured by 100% of the equity of DMC, which can
revert to Mr. Bookbinder if the entire note, together with accrued
interest thereon, is not paid in full by September 2, 2011.
8
In addition, as per the purchase agreement for DMC executed on January
18, 2011, in the event that Sycamore and its DMC subsidiary achieve
consolidated net income before interest, taxes, depreciation and
amortization, or EBITDA in any one or more of the four fiscal years
ending December 31, 2011 through December 31, 2014, we are obligated to
pay Mr. Bookbinder future contingent payments based on the DMC results
for such fiscal years 2014, with such contingent payments not to exceed
$250,000 in any one of such four fiscal years or $1.0 million in the
aggregate. We also agreed to employ Mr. Bookbinder as president of our
DMC subsidiary for a period of four years through December 31, 2014.
In connection with our May 31, 2011 agreement to extend the maturity
date of the note to September 2, 2011, we agreed, following payment of
such note, to either secure a full release to Mr. Bookbinder from his
personal indemnity liability to Berkley Regional Insurance Company, a
bonding company to DMC, or to provide an indemnity bond or other
acceptable form of indemnity to Mr. Bookbinder.
We are totally dependent upon receipt of the net proceeds from this
offering to pay the principal and accrued interest on the note payable
to Mr. Bookbinder. If only the 2,000,000 minimum number of shares are
sold, the net proceeds we expect to receive will be only approximately
$8.75 million, and we may be required to utilize approximately $192,000
of the existing cash balances of DMC in order to retire the purchase
note, including accrued interest of approximately $266,000. As a
result, DMC's bonding capability and our working capital may be
adversely impacted.
Our History
-----------
Iron Eagle Group., was originally operated as a mining and exploration
company, and was incorporated under the laws of Wyoming in January 1995
under the name of Pinnacle Resources, Inc. In March 2010, Pinnacle re-
domiciled in Delaware and changed its name to Iron Eagle Group, Inc.
We discontinued all mining and exploration activities as of April 2009.
Iron Eagle entered into a share exchange agreement to acquire 100% of
the outstanding common stock of Iron Eagle Group, Inc., a Nevada
corporation. On August 18, 2010, Iron Eagle issued 9,337,296 shares of
common stock (1,167,162 post reverse split) in exchange for a 100%
equity interest in Iron Eagle-Nevada. As a result of the share
exchange, Iron Eagle-Nevada became a wholly owned subsidiary of Iron
Eagle and the shareholders of Iron Eagle-Nevada acquired a majority of
the voting stock of Iron Eagle. As a result, 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
we after the exchange, although Iron Eagle is the legal parent company.
For accounting purposes, the share exchange was treated as a
recapitalization and Iron Eagle-Nevada and its historical financial
statements is the continuing entity for financial reporting purposes.
The financial statements have been prepared as if we 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.
9
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 in this prospectus.
Securities offered A minimum of 2,000,000 and a maximum of
3,000,000 shares of our common stock.
Terms of the Offering The selling agents will be selling the common
stock offered hereby on a "best efforts,
2,000,000 shares or none" basis during an
offering period commencing on the date of this
prospectus and ending on or before September 2,
2011, subject to extension only with the
approval of the former owner of DMC, as the
holder of our $8,675,463 purchase note.
Pending the sale during the offering period of
not less than 2,000,000 of the shares, all
proceeds will be held in a special interest
bearing escrow account at Signature Bank, New
York, New York. In addition to our receipt of
not less than $10,000,000 of gross proceeds, in
order to complete this offering, Iron Eagle
will be required to obtain approval from Nasdaq
to list its shares on such stock exchange and
retire the $8,941,669 note payable and accrued
interest to the former owner of DMC. In the
event that the offering is not completed for
any reason, all proceeds will be returned to
investors, together with accrued interest.
Offering price $5.00 per share.
Common stock 1,506,337
outstanding before
this offering
10
Common stock to be A minimum of 3,737,535 common shares and a
outstanding after maximum of 4,727,535 common shares
this offering(1) 4,737,535 common shares.
Use of proceeds We plan to use the net proceeds of this
offering to pay approximately $8,941,669 of
principal and accrued interest on a purchase
note issued in January 2011 in connection with
the acquisition of DMC. To the extent that we
sell more than 2,000,000 common shares, we will
use the additional net proceeds to reduce
certain accounts payable, and for working
capital purposes to enable us to implement our
acquisition strategy.
If only the minimum 2,000,000 common shares are
sold, the net proceeds we expect to receive
will be only approximately $8,750,000, and we
anticipate that we may be required to utilize
approximately $192,000 of the existing cash
balances of DMC in order to retire the purchase
note. As a result DMC's bonding capability on
future construction projects it bids for and
our available working capital may be adversely
impacted.
Risk Factors An investment in our common shares involves a
high degree of risk. You should carefully
consider the Risk Factors beginning on page 20
of this prospectus before deciding to invest in
Iron Eagle common shares.
(1) Includes an aggregate of 243,095 restricted common shares
issuable upon completion of this offering to certain executive officers
of Iron Eagle, members of its board of directors and other stockholders
or their affiliates in connection with their agreement to convert an
aggregate of $972,374 of Iron Eagle notes and other accrued obligations
outstanding at March 31, 2011 into common stock at a conversion price
of $4.00 per share.
The number of common shares to be outstanding after the closing of this
offering excludes:
- 24,219 shares issuable upon exercise of options outstanding
and having a weighted average exercise price of $9.47 per
share;
- a maximum of 350,000 common shares issuable upon exercise of
50,000 Series A warrants at an exercise price of $4.00 per
common share, and 50,000 Series B warrants at an exercise
price of $4.00 per common share, and 250,000 Series C warrants
at an exercise price of $0.08 per common share, issued in
connection with a private placement of $200,000 of 13% notes
due December 31, 2012 completed in August 2011, and
- a minimum of 80,000 and a maximum of 120,000 shares issuable
upon exercise of warrants issued to the selling agents in this
offering at an exercise price of $6.00 per share.
11
SUMMARY CONSOLIDATED FINANCIAL DATA
We are providing the following summary financial information to assist
you in your analysis of our financial condition and results of
operations. Iron Eagle acquired the equity of Sycamore, the parent of
our operating subsidiary DMC effective January 21, 2011, by the
issuance of Iron Eagle's 5% $8.7 million note due September 2, 2011
which is secured by a pledge of 100% of the equity of DMC and its
parent entity, Sycamore.
The summary consolidated balance sheets and statement of income of
Sycamore and subsidiaries as at September 30, 2010 and 2009 and for the
two fiscal years ended September 30, 2010 are derived from Sycamore's
consolidated financial statements audited by The Hall Group, CPAs,
independent registered public accountants. The summary consolidated
balance sheet and consolidated statement of operations data of Iron
Eagle as of December 31, 2010 and for the year ended December 31, 2010
is derived from Iron Eagle's consolidated financial statements audited
by The Hall Group, CPAs, independent registered public accountants and
are included elsewhere in this prospectus.
Also included is unaudited summary consolidated statement of operations
data of Sycamore for the comparative six month periods ended March 31,
2011 and March 31, 2010, and our unaudited summary consolidated balance
sheet data as at March 31, 2011 and our unaudited summary consolidated
statement of operations data for the three months ended March 31, 2011.
We are also furnishing below the pro-forma summary consolidated balance
sheet and consolidated statement of operations of Iron Eagle as at
December 31, 2010 and for the year ended December 31, 2010. Our pro
forma summary consolidated balance sheet and consolidated statement of
operations data is derived from the audited consolidated balance sheet
and consolidated statement of operations data of Iron Eagle and the
unaudited balance sheet and consolidated statement of income of
Sycamore as at December 31, 2010, and includes pro-forma adjustments
resulting from the acquisition of Sycamore and DMC consummated on
January 21, 2011. The unaudited proforma summary consolidated balance
sheet is prepared as if the acquisition occurred on December 31, 2010
and the unaudited proforma summary consolidated statement of operations
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 Iron Eagle 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.
The related consolidated financial information presented below should
be read in conjunction with the historical consolidated financial
statements of each of Iron Eagle and Sycamore/DMC and the related
notes, and Management's Discussion and Analysis of Financial Condition
and Results of Operations contained elsewhere in this prospectus. The
historical results indicated below and elsewhere in this prospectus may
not be indicative of our future performance.
12
IRON EAGLE GROUP, INC.
Summary Consolidated Statements of Operations
For the Year Ended December 31, 2010
and the Three Months Ended March 31, 2011 and 2010
Year Ended Three Months Ended
December 31, March 31
2010 2011 2010
--------- ----------- ---------
REVENUES $ - $12,247,566 $ -
COST OF SALES - 11,411,943 -
--------- ----------- ---------
GROSS PROFIT - 835,623 -
TOTAL OPERATING EXPENSES 942,255 939,439 110,172
--------- ----------- ---------
NET OPERATING (LOSS) (942,255) (103,816) (110,172)
OTHER EXPENSE (2,865) (107,224) (782)
--------- ----------- ---------
NET (LOSS) $(945,120) $ (211,040) $(110,954)
========= =========== =========
Earnings (Loss) per Share,
basic and diluted $ (1.77) $ (0.15) $ (887.63)
========= =========== =========
Weighted Average Shares
Outstanding, basic and
diluted 534,642 1,455,099 125
========= =========== =========
13
IRON EAGLE GROUP, INC.
Summary Consolidated Balance Sheets
December 31, 2010 and March 31, 2011
---------------------------------------
December 31, March 31,
2010 2011
(audited) (unaudited)
------------ -----------
ASSETS
Current Assets $ 618,539 $18,543,516
Fixed and Other Assets 2,150 5,277,482
----------- -----------
TOTAL ASSETS $ 620,689 $23,820,998
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ 1,756,814 $23,912,518
Long-Term Liabilities - 831,910
----------- -----------
TOTAL LIABILITIES 1,756,814 24,744,428
Stockholders' Equity/(Deficit) (1,136,125) (923,430)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 620,689 $23,820,998
14
SYCAMORE ENTERPRISES, LLC AND SUBSIDIARIES
Summary Consolidated Statements of Income
For the Years ended September 30, 2010 and 2009 (audited)
and the Three Months Ended March 31, 2011 and 2010 (unaudited)
Years Ended Three Months Ended
September 30, March 31,
2010 2009 2011 2010
(audited) (audited) (unaudited) (unaudited)
----------- ----------- ----------- -----------
Contract revenues earned $43,003,070 $68,687,661 $10,605,776 $14,131,963
Cost of revenues earned 37,775,348 62,145,617 9,133,176 13,235,754
----------- ----------- ----------- -----------
Gross profit 5,227,722 6,542,044 1,472,600 896,209
Operating expenses 3,365,163 3,202,899 1,058,790 753,083
----------- ----------- ----------- -----------
Income from operations 1,862,559 3,339,145 413,810 143,126
Other (expense) income: (109,209) (8,965) (17,556) (15,092)
----------- ----------- ----------- -----------
Net income 1,753,350 3,330,180 396,254 128,034
15
PRO FORMA CONSOLIDATED SUMMARY FINANCIAL INFORMATION
Pro Forma Summary Consolidated Statement of Operations
December 31, 2010
Year Ended December 31, 2010
----------------------------
Iron Eagle(1) Sycamore(2) 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
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,
basic and diluted (3) $ (1.77) $ 1.73
========= ===========
Weighted average outstanding
shares basic and diluted(3) 534,642 534,642
========= ===========
(1) Derived from Iron Eagle's audited Consolidated Statement of
Operations for the year ended December 31, 2010.
(2) Derived from Sycamore's unaudited Consolidated Statement of
Operations for the year ended December 31, 2010.
(3) Reflects 1:8 reverse stock split.
16
Pro Forma Summary Consolidated Balance Sheet at December 31, 2010
(Unaudited)
December 31, 2010
---------------------------
Iron Eagle(1) Sycamore(2) Adjustments(3) Pro Forma
------------- ----------- ----------- -----------
ASSETS
Current Assets $ 618,539 $18,905,203 - $19,523,742
Fixed Assets, Net of
Accumulated Depreciation 2,150 303,067 - 305,217
Goodwill and Non-Compete - - 4,591,304 4,591,304
---------- ----------- ---------- -----------
Total assets $ 620,689 $19,208,270 $4,591,304 $24,420,263
========== =========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $1,756,814 $14,306,237 $7,703,089 $23,766,140
Earn-out - - 813,321 813,321
Long Term Liabilities - 4,553 - 4,553
---------- ----------- ---------- -----------
Total Liabilities $1,756,814 $14,310,790 $8,516,410 $24,584,014
---------- ----------- ---------- -----------
Total Stockholders' Equity (1,136,125) 4,897,480 (3,925,106) (163,751)
---------- ----------- ---------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 620,689 $19,208,270 4,591,304 $24,420,263
========== =========== ========== ===========
Consideration:
Seller's Note (principal, as adjusted) $8,675,463
Earnout - over 4 years 813,321 Present Value of Earnout
----------
Total Purchase Price $9,488,784
(1) Derived from Iron Eagle's audited consolidated balance sheet as at
December 31, 2010
(2) Derived from Sycamore's unaudited balance sheet as of December 31,
2010.
(3) Adjustments made to allocate the purchase price of DMC. As a
result of the acquisition of DMC, Iron Eagle Company received
$18,905,203 in current assets and $303,067 of fixed assets, which were
depreciated and approximated fair value. Iron Eagle assumed current
liabilities of $14,306,237 and a $4,553 long term note payable. Bruce
A. Bookbinder, the former owner of Sycamore has 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 $4,291,304.
17
Pro Forma Consolidated Summary Balance Sheet at March 31, 2011
(Unaudited)
March 31, 2011
Actual Adjustments(1) Pro Forma
----------- ------------- -----------
ASSETS
Current Assets $18,543,516 - $18,543,516
Fixed & Other Assets 5,277,482 - 5,277,482
----------- --------- -----------
Total Assets $23,820,998 - $23,820,998
=========== ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $23,912,518 ($972,374)(1) $22,940,145
Long Term Liabilities 831,910 - 831,910
----------- --------- -----------
Total Liabilities $24,744,428 ($972,374)(1) $23,772,055
Stockholders' Equity/(Deficit) (923,430) 972,374 48,943
----------- --------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $23,820,998 - $23,820,998
=========== ========= ===========
(1) Reflects an aggregate of 243,095 shares of common stock issuable
upon completion of this offering to certain executive officers of Iron
Eagle, members of its board of directors and other stockholders or
their affiliates in connection with their agreement to convert an
aggregate of $972,374 of Iron Eagle accrued obligations outstanding at
March 31, 2011 into common stock at a conversion price of $4.00 per
share.
18
RISK FACTORS
Our business is subject to numerous significant risk factors, including
the following.
Risks Related to our Financial Condition
----------------------------------------
1. We cannot offer any assurance as to our future financial results.
You may lose your entire investment.
Prior to January 21, 2011, we were considered a development stage
entity seeking to commence principal operations. Iron Eagle had an
accumulated deficit of $(1,216,092) as of December 31, 2010 and an
accumulated deficit of $(1,427,132) as of March 31, 2011. Even after we
acquired DMC and became an operating infrastructure construction and
contracting services company, we cannot assure you that we will ever be
able to operate in a profitable manner. Accordingly, there is a risk
that you could lose your entire investment.
2. Our auditors have issued a going concern opinion. As a result,
there is substantial uncertainty we will continue activities in which
case you could lose your investment.
Our auditors have issued a going concern opinion. This means that
there is substantial doubt that we can continue as an ongoing business
for the next twelve months. As such we may have to cease activities
and you could lose your entire investment.
3. Iron Eagle is totally dependent on the proceeds of this offering
to continue as an operating company.
The ability of Iron Eagle to continue as a going concern is totally
dependent upon its receipt the net proceeds from the sale of the
minimum 2,000,000 shares of common stock offered hereby and the
retirement of its $8,941,669 purchase note and accrued interest
obligation to the former owner of DMC. In the event that the net
proceeds of this offering and, if required, available DMC cash
resources are not adequate to pay all principal of and accrued interest
on such purchase note, it is probable that Iron Eagle will lose its
entire equity investment in DMC and be unable to implement its business
plan and raise capital. In such event there would be substantial doubt
about Iron Eagle's ability to continue as a going concern.
4. In order to achieve our growth strategy, we will need additional
capital and may not be able to obtain such capital on acceptable terms.
Capital requirements are difficult to obtain in the current economic
environment and especially in the construction and contracting
industry. We expect that we will need capital to fund our future
acquisitions, to provide bonding capacity to bid on significant
infrastructure contracts, technological infrastructure and sales and
marketing activities. Our ability to obtain additional capital on
acceptable terms is subject to a variety of uncertainties, including:
19
- Investors' perceptions of, and demand for, securities of
construction and contracting businesses;
- conditions of the United States and other capital markets in
which we may seek to raise funds;
- our future results of operations, financial condition and cash
flows;
- governmental regulation of educational program providers; and
- economic, political and other conditions in the United States.
Any failure by us to raise additional funds on terms favorable to us,
or at all, may have a material adverse effect on our business,
financial condition and results of operations. For example, we may not
be able to carry out parts of our growth strategy to acquire
vocational, training and/or technical schools that are complementary to
our existing business or necessary to maintain our growth and
competitive position.
Risks Related to our Business
-----------------------------
5. We work in a highly competitive marketplace which has recently
negatively affected our revenues and profitability.
We will have multiple competitors in all of the areas in which we
intend to work. During economic down cycles resulting in lower
government funding for public works projects, competition for the
decreased number of available public projects intensified. In addition,
downturns in residential and commercial construction activity has
caused traditional construction companies to bid on public projects,
thereby further increasing the competition for available public sector
work. In view of the fact that DMC management has made a strategic
decision not to bid on low margin or unprofitable work, increased
competition from both infrastructure and traditional construction
competitors directly led to a significant decrease in new awards bid
upon and granted to DMC, as a result of which revenues and net income
before taxes in our operating subsidiary for its fiscal year ended
September 30, 2010 were approximately $43.0 million and $1.65 million,
respectively, as compared to approximately $69.0 million and $3.2
million in fiscal 2009.
6. Our success depends on attracting and retaining qualified
personnel in a competitive environment.
We believe that the single largest factor affecting our ability to
profitably execute our work is our ability to attract, develop and
retain qualified personnel. Our success in attracting qualified people
will be dependent 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.
20
7. Fixed price contracts subject us to the risk of increased project
cost. Our profitability may be adversely affected.
We 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. Also, if we enter into an incorrect bid,
the fixed price nature of the contracts could cause losses and put the
company at risk.
8. Many of our contracts 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.
9. 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.
10. 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 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.
11. Failure of our subcontractors to perform as anticipated could
have a negative effect on our results.
We subcontract portions of many of our contracts to specialty
subcontractors, but we are ultimately responsible for the successful
completion of their work. Although we 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.
21
12. 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.
13. 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 our services. If our estimated backlog is
significantly inaccurate or does not result in future profits, this
could adversely affect our future growth.
14. 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
22
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.
15. 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.
16. 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 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.
23
17. We are subject to environmental and other regulations. The cost
of compliance may adversely affect our operations.
We are 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.
18. Strikes or work stoppages could have a negative effect on our
operations and results.
We are a party to collective bargaining agreements covering a portion
of our craft workforce. If we become subject to strikes, work
stoppages or slow-downs, such labor actions could have a significant
effect on our operations if they occur in the future.
19. Unavailability of insurance coverage could have a negative effect
on our operations and results.
We 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.
20. Our insurance coverage may not cover all losses. Our operations
and results could be negatively effected.
We 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. While we have been able to obtain appropriate
coverage in the past, there is no assurance that our available coverage
will be enough to cover any future losses we may incur.
21. Our inability to obtain bonding would have a negative effect on
our operations and results.
We are generally 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.
24
22. Our joint venture contracts with project owners subject us to
joint and several liability.
We 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.
23. Our dependence on a limited number of large contracts in a given
year may adversely affect our ability to continue operating.
We enter into a limited number of large contracts each year. Due to
the nature of the work, each contract is time consuming and represents
a large portion of our yearly income. If we do not receive enough of
these contracts, it may have a materially adverse effect on our
financial position, results of operations and cash flows.
24. We 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 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.
25. The majority of our contracts are with a concentrated group of
customers. Our operations and results may be negatively affected by
the lack of diversification.
Through DMC, our subsidiary, we provide construction and contracting
services in both the infrastructure and government markets. For the
year ended December 31, 2010, DMC's principal customers were Gilbane
Building Company, Dimeo Construction Company and HV Collins Company,
which accounted for 60% of DMC's total revenues for the year. If we
were to lose any of these customers, we might not be able to generate
the revenues necessary to continue operations.
26. Our contracts are concentrated in one geographical region. Our
operations and results may be negatively affected by the lack of
diversification.
Through DMC, we provide construction and contracting services to Rhode
Island, Southeastern Massachusetts, and Eastern Connecticut. As a
result, we are dependent on the local economy in those regions. Since
we are focused on this one region, our operating results may be
negatively affected by local conditions.
27. 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.
25
28. The funding source of a project may encounter financial
difficulty and therefore be unable to advance funds to the owner and
prime contractor.
In most of our agreements with general contractors, there are or will
be 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.
29. 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.
Risks Relating to Our Securities
--------------------------------
30. Insiders have substantial control over us, and they could delay or
prevent a change in our corporate control even if our other
stockholders wanted it to occur.
Our executive officers and directors hold approximately 34% of our
outstanding common stock, which includes (i) shares owned by our
officers and/or directors, (ii) shares attributable to certain entities
in which our officers and directors share beneficial ownership, and
(iii) shares issuable upon exercise of stock options which have vested
as of the date of this report. Accordingly, these stockholders are able
to control all matters requiring stockholder approval, including the
election of directors and approval of significant corporate
transactions. This could delay or prevent an outside party from
acquiring or merging with us even if our other stockholders wanted it
to occur.
31. There may not be sufficient liquidity in the market for our common
stock.
Our common stock is quoted on the Pink Sheets under the current symbol
"IEAG". There is a limited trading market for our common stock.
Accordingly, there can be no assurance as to the liquidity of any
markets that may develop for our common stock, the ability of holders
of our common stock to sell our common stock, or the prices at which
holders may be able to sell our common stock.
26
32. We may not be able to sell securities in all the states we
originally intended.
We do not have sufficient assets to post our securities on NASDAQ. As
a result, we must register our securities in each individual state we
wish to sell in. Since each state has its own set of rules and
regulations, there is no guarantee that each state will accept our
registration, and we may not be able to sell enough securities to meet
all of our financial obligations.
33. The offering period during which we may sell our shares
currently expires on September 2, 2011. There is no guarantee of an
extension if all the necessary funds are not raised by that time.
The offering period during which we may sell our shares currently
expires on September 2, 2011 and may only be extended by mutual
agreement between our company and Bruce A. Bookbinder, as holder of our
$8,676,000 note. In addition to payment of such note, completion of
this offering is also subject to our shares being approved for sale by
each individual state. If we cannot raise the necessary amount, we may
not have the capital necessary for continued operations.
34. The market price of our common stock may be volatile.
The market price of our common stock may be highly volatile, as is the
stock market in general, and the market for Pink Sheets quoted stocks
in particular. Some of the factors that may materially affect the
market price of our common stock are beyond our control, such as
changes in financial estimates by industry and securities analysts,
conditions or trends in the industry in which we operate or sales of
our common stock. These factors may materially adversely affect the
market price of our common stock, regardless of our performance. In
addition, the public stock markets have experienced extreme price and
trading volume volatility. This volatility has significantly affected
the market prices of securities of many companies for reasons
frequently unrelated to the operating performance of the specific
companies. These broad market fluctuations may adversely affect the
market price of our common stock.
35. We have never paid dividends and have no plans to in the future.
Holders of shares of Iron Eagle's common stock are entitled to receive
dividends as declared by our Board of Directors. To date, Iron Eagle
has not paid cash dividends on its shares of common stock and we do not
expect to pay cash dividends on its 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.
36. Future sales by our stockholders could cause the stock price to
decline and may affect your ability to liquidate your investment.
In the future, we 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.
27
37. Prior to the completion of the offering, we will effectuate a
one-for-eight reverse stock split. Regardless, the liquidity of our
common stock may not improve.
While the board of directors believes that a higher stock price may
help generate investor interest, there can be no assurance that the
reverse stock split will result in any particular price for Iron
Eagle's Common Stock or result in a per common share price that will
attract institutional investors or investment funds or that such common
share price will satisfy the investing guidelines of institutional
investors or investment funds. As a result, the trading liquidity of
our common stock may not necessarily improve.
38. The reverse stock split may not result in any change or increase
to the market price per common share in proportion to the reduction in
the number of common shares outstanding before the reverse stock split.
There can be no assurance that the market price per new common share
after a reverse stock split will remain unchanged or increase in
proportion to the reduction in the number of old common shares
outstanding before the reverse stock split. Accordingly, the total
market capitalization of our common stock after the reverse stock split
may be lower than the total market capitalization before the reverse
stock split. Moreover, in the future, the market price of our common
stock following the reverse stock split may not exceed or remain higher
than the market price prior to the reverse stock split.
39. The market price of our common stock may decline more than would
occur in the absence of a reverse stock split and the liquidity of our
common stock could be adversely affected.
If the reverse stock split is effected and the market price of our
common stock declines, the percentage decline may be greater than would
occur in the absence of a reverse stock split. The market price of our
common stock will, however, also be based on performance and other
factors, which are unrelated to the number of shares outstanding.
Furthermore, the liquidity of our common stock could be adversely
affected by the reduced number of common shares that would be
outstanding after the reverse stock split.
40. We recently conducted a private placement offering of securities.
If the sale of these securities is deemed to be integrated with this
offering, we may have to offer rescission to the investors in the
private placement offering.
In July and August 2011, Iron Eagle sold to a total of 4 investors, an
aggregate of 9 units of its securities; each unit consisting of (a)
Iron Eagle's 13% $25,000 note due December 31, 2012, (b) a Series A
Warrant expiring December 31, 2012 entitling the holder to purchase
6,250 shares of common stock at an exercise price of $4.00 per share,
(c) a Series B Warrant entitling the holder to purchase an additional
6,250 shares of common stock at an exercise price of $4.00 per share,
and (d) a Series C Warrant entitling the holder to purchase an
additional 31,250 shares of common stock at an exercise price of $4.00
per share. These funds, aggregating $180,000 after commissions and
expenses, were used solely to pay the costs related to the completion
of this offering, including legal, accounting, filing and other fees
28
and expenses. If the offering is integrated with this offering and we
are required to return any of the funds received through the sale of
the notes and warrants, our ability to meet our current expenses will
be negatively affected and we will have to seek additional funding.
41. Iron Eagle's common stock is currently quoted on the OTCQB and is
limited under the penny stock regulation.
The liquidity of Iron Eagle's common stock is restricted due to the
fact that its common stock falls within the definition of a penny
stock.
Even after giving effect to our one-for-eight reverse stock split and
the $5.00 per share offering price of the common stock offered by this
prospectus, under the rules of the Securities and Exchange Commission,
if the price of our common stock falls below $5.00 per share, the
common stock would come within the definition of a "penny stock." As a
result, the common stock would be 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.
42. The market for penny stocks has experienced numerous frauds and
abuses which could adversely impact investors in our stock.
Securities categorized as "penny stocks" are frequent targets of fraud
or market manipulation, both because of their generally low prices.
Patterns of fraud and abuse include:
- Control of the market for the security by one or a few broker-
dealers that are often related to the promoter or issuer;
- Manipulation of prices through prearranged matching of purchases
and sales and false and misleading press releases;
- "Boiler-room" practices involving high pressure sales tactics
and unrealistic price projections by inexperienced sales persons;
- Excessive and undisclosed bid-ask differentials and markups by
selling broker-dealers; and
- Wholesale dumping of the same securities by promoters and broker-
dealers after prices have been manipulated to a desired level,
along with the inevitable collapse of those prices with consequent
investor losses.
Our management is aware of the abuses that have occurred historically
in the penny stock market.
29
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
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 we, and results achieved during the
period covered by any particular projections and other forward-looking
statements should not be regarded as a representation by we, 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
The selling agents will be selling the common stock offered hereby as
our agents on a "best efforts, 2,000,000 shares or none" basis during
the offering period commencing on the date of this prospectus and
currently expiring on September 2, 2011. Pending the sale of not less
than 2,000,000 of the shares during the offering period, our payment of
the $8,676,000 note payable and $266,000 of accrued interest to the
former owner of Sycamore and DMC, and the satisfaction of other closing
conditions, all proceeds will be held in a special interest bearing
escrow account at Signature Bank, New York, New York. We are seeking to
raise gross proceeds of $15,000,000 from the sale of 3,000,000 shares.
The proceeds of this offering will be used approximately as follows:
Sources: Maximum Offering Minimum Offering
-------- ---------------- ---------------
Gross Proceeds $15,000,000 $10,000,000
Selling Commissions (1) (1,350,000) (900,000)
Other Offering Expenses (350,000) (350,000)
----------- -----------
Net Proceeds $13,300,000 $ 8,750,000
Use of Proceeds:
----------------
Repay Outstanding Purchase Note (2) 8,942,000 8,750,000 (3)
Repayment of Related Party Loans (4) 60,000 -
Net Working Capital (5) 4,298,000 -
----------- -----------
Total Use of Proceeds $13,300,000 $ 8,750,000
-========== ===========
30
(1) Consists of 7% selling commissions payable to the selling agents
and a 2% non-accountable expense allowance payable to Aegis
Capital Corp., as representative of the several selling agents.
(2) Consists of an $8,676,000 Iron Eagle note payable to Bruce A.
Bookbinder, the former owner of Sycamore and DMC, and
approximately $266,000 of accrued interest on such note.
(3) If only the minimum 2,000,000 common shares are sold, we will use
approximately $8,750,000 of the net proceeds and may be required
to utilize approximately $192,000 of the existing cash balances in
our DMC subsidiary in order to retie the purchase note. At March
31, 2011, our cash balances were $2,685,139. As a result, DMC's
ability to obtain completion bonds may be adversely affected, our
working capital for operations may be adversely impacted and, for
the near-term, we will have little or no funds to make strategic
acquisitions for cash.
(4) Represents repayment of loans to Iron Eagle, aggregating $60,000,
made in equal amounts in March 2011 by Joseph LoCurto, our former
chairman, and Jed Sabio, our executive vice president of business
development.
(5) Net working capital includes uses for general corporate purposes,
including increasing surety bonding capacity, reducing our
accounts payable and making down payments in connection with
selective acquisitions we may consider.
The offering period during which we may sell our shares currently
expires on September 2, 2011 and may only be extended by mutual
agreement between our company and Bruce A. Bookbinder, as holder of our
$8,676,000 note. In addition to payment of such note, completion of
this offering is also subject to our shares being approved for sale in
each individual state in which we register.
Following completion of this offering, we estimate at least $500,000
will be required to maintain our operations as a public company for the
next twelve months, to include professional fees, insurance, exchange
listing fees, investor relations and other general corporate overhead
expenses. We expect our operations and our DMC subsidiary to provide
cash for these expenses. If only the minimum net proceeds of this
offering are received, we will be required to use cash generated by our
operating subsidiary to defray such general corporate overhead
expenses. We will also be required to raise additional capital to
consummate additional strategic acquisitions. There can be no
assurance that such additional capital will be available on
commercially reasonable terms, if at all. In addition, to the extent
that we issue equity or equity type securities in the future, investors
in this offering will be subject to potential substantial dilution.
31
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.
DILUTION
Assuming completion of the offering, there will be up to 4,749,432
shares of common stock outstanding. The following table illustrates
the per share dilution that may be experienced by investors at various
funding levels based on the minimum and maximum proceed of this
offering.
Maximum Proceeds Minimum Proceeds
---------------- ----------------
Funding Level $15,000,000 $10,000,000
Offering price $ 5.00 $5.00
Net tangible pro forma book
value per share before offering (1) 0.03 0.03
Increase per share attributable
to investors in this offering 2.78 2.32
Pro forma net tangible book value
per share after offering 2.81 2.35
Dilution to investors 2.19 2.65
Dilution as a percentage of the
Per share offering price 44% 53%
(1) Based upon 1,506,432 common shares outstanding immediately prior
to the consummation of this offering and a pro forma consolidated
stockholders' equity at March 31, 2011 of $48,943, after giving effect
to:
- the one-for-eight reverse stock split;
- the cancellation in May 2011 of a total of $615,250 of
compensation to certain executive officers, directors and consultants
that was payable in the quarter ended March 31, 2011, and
- the issuance of an aggregate of 243,095 common shares to certain
executive officers of Iron Eagle, members of our board of directors and
32
other stockholders or their affiliates upon conversion of an aggregate
of approximately $972,374 of additional Iron Eagle accrued obligations
owed to such persons and entities at March 31, 2011.
Since inception, the officers, directors and affiliated persons have
paid an aggregate average price of $0.78 per common share in comparison
Since inception, the officers, directors and affiliated persons have
paid an aggregate average price of $0.75 per common share in comparison
to the offering price of $5.00 per common share. This per share price
includes the issuance of an aggregate of 243,095 shares of common stock
Iron Eagle will issue to certain executive officers, members of its
board of directors and other stockholders or their affiliates upon
completion of this offering at an offering price of $4.00 a share upon
the conversion of an aggregate of approximately $972,374 of Iron Eagle
accrued obligations owed to such persons and entities at March 31,
2011.
Following completion of this offering, it may be expected that we will
issue additional common stock equity and other securities convertible
into or exercisable for shares of common stock, especially in
connection with our contemplated acquisition strategy. These issuances
and any sales of additional common shares may have a depressive effect
upon the market price of our common stock will further dilute the
equity of investors in this offering.
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2011
on:
- an actual basis;
- a pro forma basis to reflect the conversion of the accrued
obligations to certain officers, directors and principal
stockholders of $972,374 which are being converted into 243,095
shares upon the close of this Offering
- a pro forma basis for the conversion of the $972,374 of accrued
obligations and as adjusted to give effect to the completion of
this offering at an offering price of $5.00 per share and the use
of net proceeds.
33
As of March 31, 2011
--------------------
Pro Forma
Actual Pro Forma As Adjusted
---------- ---------- ----------
Cash and cash equivalents $2,684,139 $2,684,139 $ 6,982,139
Note Payable - Purchase of Delta 8,757,463 8,757,463 -
Other Current Debt,
including capital Lease 1,142,869 1,142,869 1,082,869
Total Current Debt,
including capital Lease 9,900,332 9,900,332 1,082,869
Note Payable - Long-Term 3,802 3,802 3,802
Stockholders' equity (deficit) (923,430) 48,944 13,164,407
Total capitalization 8,980,704 9,953,078 14,251,078
The number of shares of our common stock to be outstanding after the
closing of this offering excludes:
- 24,219 shares issuable upon exercise of options outstanding
and having a weighted average exercise price of $9.47 per share;
- a maximum of 262,500 shares of common stock issuable upon
exercise of 50,000 Series A warrants at an exercise price of
$4.00 per share, 50,000 Series B warrants at an exercise price of
$4.00 per share, and 250,000 Series C warrants at an exercise
price of $0.08 per share, issued in connection with a private
placement of $200,000 of 13% notes due December 31, 2012 and
completed in August 2011; and
- a minimum of 80,000 and a maximum of 120,000 shares issuable
upon exercise of warrants issued to the selling agents in this
offering at an exercise price of $6.00 per share.
MARKET FOR COMMON EQUITY AND RECENT SALES OF SECURITIES
Market Information.
Iron Eagle's common stock is listed on the OTCQB over-the-counter
market under the symbol IEAG.OTCQB. As of August 3, 2011, there has
been an extremely limited market for our common stock with only an
average of approximately 350 shares being traded on a daily basis over
the 90 day period ended July 31, 2011.
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 1-for-40 reverse stock split that occurred on July 13, 2010
and the 1-for-8 reverse stock split that we will consummate prior to
completion of this offering. The quotations represent inter-dealer
prices without retail markup, markdown or commission, and may not
necessarily represent actual transactions.
34
2011
----
Quarter Ended: High Bid Low Bid
------------- -------- --------
March 31, 2011 $ 20.00 $ 5.60
2010
----
Quarter Ended: High Bid Low Bid
------------- -------- --------
December 31, 2010 $ 8.40 $ 2.40
September 30, 2010 57.60 2.40
June 30, 2010 76.80 6.40
March 31, 2010 25.60 3.20
2009
----
Quarter Ended: High Bid Low Bid
------------- -------- --------
December 31, 2009 $ 12.80 $ 3.20
September 30, 2009 12.80 3.20
June 30, 2009 38.40 16.00
March 31, 2009 25.60 9.60
At August 8, 2011, there were approximately 150 holders of record of
our common stock.
Recent Sales of Unregistered Securities
----------------------------------------
From January 2010 to the present, Iron Eagle issued the following
shares of common stock adjusted to give effect to our one-for-eight
reverse stock split that we will consummate prior to completion of this
offering:
- On January 8, 2010, 1,167,162 common shares were issued to the
former shareholders of Iron Eagle-Nevada 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, Iron Eagle issued 625 shares of common
stock, valued at $6,000, to pay fees to a non-affiliated website
development firm.
- On May 1, 2010, Iron Eagle agreed to issue 25,000 shares common
stock at a per share price of $9.60, for consideration for an investor
relations services agreement valued at $240,000 with Gary Smolen.
- On May 4, 2010, Iron Eagle entered into a director's agreement
with Gary Giulietti to become a member of its board, and issued 5,208
shares of our common stock valued at $50,000.
35
- On May 4, 2010, Iron Eagle entered into a one year consulting
agreement with CCG, an investor relations firm. In satisfaction for
the agreement, Iron Eagle issued 13,594 shares of its common stock
valued at $130,500 and a 5 year warrant to purchase up to 13,594
additional shares at an exercise price of $10.56 per share. The fair
value of the warrant was $124,703. We received three months of
services under this agreement. The portion of services that have not
been utilized are recorded as a prepaid expense as of December 31, 2010
and March 31, 2011.
- On June 5, 2010, Iron Eagle entered into a three year consulting
agreement with Steven Antebi to help it obtain financing and related
services. The value of the services to be received was agreed upon to
be $400,000. In satisfaction for the agreement, Iron Eagle issued
125,000 shares of our common stock, valued at $3.20 per share. The
portion of services that have not been utilized are recorded as a
prepaid expense as of December 31, 2010 and March 31, 2011.
- On July 16, 2010, the board of directors appointed Joseph
Antonini as a director and granted him 4,808 shares of stock, valued at
$50,000, which shares vested immediately.
- On August 31, 2010, Iron Eagle entered into a financing agreement
with Aegis Capital Corp., an investment bank, to act as their selling
agent with respect to this public offering. In connection with such
agreement, Iron Eagle paid Aegis Capital Corp., $30,000 in the form of
3,572 shares of common stock, valued at $8.40 a share.
- On February 4, 2011, Iron Eagle entered into a six month
consulting agreement with IPX Capital, LLC. Pursuant to the agreement,
Iron Eagle issued to IPX 15,625 shares of its common stock valued at
$6.40 per common share. Upon our completion of a financing transaction
of $10 million or more, we will issue an additional 15,625 shares and
$100,000, plus an additional 1% of any capital raised in excess of
$40,000,000.
- On March 1, 2011, Iron Eagle entered into an investor relations
consulting agreement with Alliance Advisors, LLC that expires on May
31, 2012. Pursuant to the agreement, Iron Eagle agreed to issue 15,000
restricted shares over the term of the agreement, valued at $8.08 per
share. The agreement also provides for cash fees beginning on the
fourth month of the agreement, ranging from $5,000 a month to $8,500 a
month, with increases based upon our completion of a financing
transaction of $10 million or more.
- On March 1, 2011, Iron Eagle entered into a 12 month consulting
agreement with Hayden Investor Relations to provide corporate investor
and public relations services. Pursuant to the agreement, Iron Eagle
issued 9,375 shares of common stock, valued at $8.08 a share. The
agreement provides for no monthly cash fee for the first six months of
service.
In months seven through twelve, assuming a financing of $10 million or
more shall have occurred, the fees will be $7,000 per month. If the
financing is less than $10 million, then no cash shall be due and
instead, Iron Eagle shall issue an additional 9,375 shares of common
stock to Hayden.
36
- On March 1, 2011, Iron Eagle entered into a consulting agreement
with RJ Falkner & Company, Inc. 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. Iron Eagle agreed to pay Falkner a monthly fee of $5,000
payable in restricted shares of common stock, payable each month in
advance, calculated on the average closing price of the stock during
the prior 20 market trading days. In March and April, Iron Eagle issued
which was 962 shares at a value of $10.40 a share. In addition, Iron
Eagle issued Falkner a three-year option to purchase 10,625 shares of
the Company's common stock, at an exercise price of $8.08 a share.
- On March 1, 2011, Iron Eagle entered into a media production and
placement services agreement with NewsUSA to provide national media
exposure for Iron Eagle. NUSA will provide Iron Eagle with $500,000 of
media credit to be used in the placement of print and radio features
obtained by NUSA on behalf of Iron Eagle. Pursuant to the agreement,
Iron Eagle 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, Iron Eagle
issued 12,019 shares of stock, valued at $10.40 a share, which vested
immediately. For every release after the first media release, for each
$25,000 of media credit utilized, Iron Eagle shall debit the guaranteed
media credit by $22,500 and pay the remaining $2,500 in cash.
Following completion of this offering, our board of directors will
review the above consulting agreements with IPX, Alliance Advisors ,
Hayden Investor Relations and Falkner and determine whether or not it
is in the best interests of Iron Eagle to renew or extend any or all of
such agreements.
- On March 13, 2011, Iron Eagle granted 5,966 shares of stock to
Gary Giulietti, as compensation for his services as a director of Iron
Eagle from the time period of May 4, 2010, the date Mr. Giulietti
joined the board of directors, to March 31, 2011. These shares were
valued at $7.60 a share.
- On March 13, 2011, Iron Eagle granted 4,650 shares of stock to
JEA Energy LLC, a firm 100% owned by Joseph Antonini, as compensation
for his services as a director of the Company from the time period of
July 16, 2010, the date Mr. Antonini joined the board of directors, to
March 31, 2011. These shares were valued at $7.60 a share.
- On May 5, 2011, pursuant to a board of directors authorization,
Iron Eagle granted 625 common shares to Solar Flash Partners, LLC, a
firm 100% owned by attorney Ron Levy as consideration for Mr. Levy's
legal services. These shares were valued at $6.80 per common share.
37
- On May 19, 2011, certain of our executive officers, directors and
principal stockholders entered into an agreement under which such
persons and entities agreed that, upon consummation of this offering,
they would convert an aggregate of $972,374 of accrued obligations owed
by Iron Eagle to such persons as at December 31, 2010 into an aggregate
of 243,095 shares of Iron Eagle common stock, at an effective
conversion price of $4.00 per share. Such persons and entities also
agreed not to sell any of the shares of common stock of Iron Eagle
owned by them for a period of 12 months following completion of this
offering, without the prior consent of our board of directors.
- In addition, on May 19, 2011 each of our three senior executive
officers and non-executive directors and other former officers agreed
to waive and relinquish all cash and stock compensation and other
payments due to them for the three months period ended March 31, 2011,
aggregating $615,250.
- In July and August, 2011, Iron Eagle sold to a total of 4
investors, an aggregate of 8 units of its securities; each unit
consisting of:
(a) Iron Eagle's 13% 25,000 note due December 31, 2012,
(b) a Series A Warrant expiring December 31, 2012 entitling the
holder to purchase 6,250 shares of common stock at an exercise
price of $4.00 per share,
(c) a Series B Warrant entitling the holder to purchase an additional
6,250 shares of common stock at an exercise price of $4.00 per
share, and
(d) a Series C Warrant entitling the holder to purchase an additional
31,250 shares of common stock at an exercise price of $0.08 per
share.
The Series A Warrants and the Series B Warrants are identical in all
respects except that
(i) the Series A Warrants may be exercised either for cash or by
cancelling the Note,
(ii) the Series B Warrants has certain cashless exercise features, and
(iii) the Series A Warrants provide, among other rights, for full-
ratchet anti-dilution adjustments and the Series B Warrants
provide for weighted-average anti dilution adjustments for lower
priced issuances of common stock.
Both the Series A Warrants and the Series B Warrants included in the
units sold are callable by Iron Eagle for $0.08 per warrant if the
common stock trades at $20.00, for ten consecutive business days after
the shares underlying the warrants are registered for resale under the
Securities Act of 1933, as amended. As a result of its sale of the 6
units of securities, Iron Eagle received total proceeds of $200,000,
less $20,000 paid in commissions and related expenses to certain
broker/dealers, including Aegis Capital Corp., who acted as placement
agents in connection with the sale of such securities. Iron Eagle used
the proceeds of the sale of such securities solely to pay accrued and
unpaid professional fees, and defray certain costs of this public
offering, including fees payable to Nasdaq, additional professional
fees, printing costs, travel expenses and fees payable to the selling
agents and their counsel.
38
On July 20, 2011, Iron Eagle granted 5,000 shares of stock valued at
$5.20 a share for a total value of $26,000 to Alliance Advisors as part
of the contract entered into in March 2011 to provide investor relation
services.
On July 20, 2011, Iron Eagle granted 1,216 shares of stock valued at
$8.24 a share for a total value of $10,500 to RJ Falkner & Company,
Inc. as part of the contract entered into with RJ Falkner & Company,
Inc. in March 2011 to provide consulting services.
On July 20, 2011, Iron Eagle granted 2,841 shares of stock for a total
value of $12,500 to Gary Giulietti, as compensation for his services as
a director of Iron Eagle from the three months ended June 30, 2011 for
a total value of $12,500.
On July 20, 2011, Iron Eagle granted 2,841 shares of stock for a total
value of $12,500 to JEA Energy LLC, a firm 100% owned by Joseph
Antonini, as compensation for his services as a director of Iron Eagle
from the three months ended June 30, 2011.
On July 20, 2011, Iron Eagle granted 12,500 shares of stock for a total
value of $65,000 to Joseph LoCurto, the Company's former Chairman, as a
result of loan made by Mr. LoCurto in March 2011.
On July 20, 2011, Iron Eagle granted 12,500 shares of stock for a total
value of $65,000 to Jed Sabio, the Company's Executive Vice President
of Business Development, as a result of loan made by Mr. Sabio in March
2011.
All of these issuances were made to accredited investors pursuant to an
exemption from registration under Section 4(2) of the Securities Act of
1933.
SELECTED CONSOLIDATED FINANCIAL DATA
We are providing the following selected financial information to assist
you in your analysis of our financial condition and results of
operations. Iron Eagle acquired the entity of Sycamore, the parent of
DMC, our operating subsidiary effective January 21, 2010, by the
issuance of Iron Eagle's 5% $8.7 million note due September 2, 2011
which is secured by a pledge of 100% of the equity of DMC and its
parent entity, Sycamore.
The selected consolidated balance sheet and income statement data of
Sycamore and DMC, as of September 30, 2010 and for the two fiscal years
ended September 30, 2010 are derived from Sycamore consolidated
financial statements audited by The Hall Group CPAs, registered
independent accountants. The selected consolidated balance sheet and
statement of operations data of Iron Eagle as at December 31, 2010 and
for the year ended December 31, 2010 is derived from Iron Eagle's
consolidated financial statements audited by The Hall Group, CPAs,
independent registered public accountants and are included elsewhere in
this prospectus. Also included below are our unaudited consolidated
balance sheet as at March 31, 2011 and our unaudited consolidated
statement of operations for the three months ended March 31, 2011.
39
We are also furnishing below the proforma selected consolidated balance
sheet and statement of operations of the Iron Eagle as at December 31,
2010 and for the year ended December 31, 2010. Our pro forma selected
consolidated balance sheet and consolidated statement of operations
data is derived from the audited balance sheet and statement of
operations data of Iron Eagle and the unaudited balance sheet and
statement of income of Sycamore as at December 31, 2010, and includes
pro-forma adjustments resulting from the acquisition of Sycamore and
DMC, which was consummated on January 21, 2011. The unaudited proforma
selected consolidated balance sheet is prepared as if the acquisition
occurred on December 31, 2010 and the unaudited proforma selected
consolidated statement of operations was prepared assuming the
acquisition occurred on January 1, 2010.
We are also furnishing below the proforma selected consolidated balance
sheet and statement of operations of Iron Eagle as at March 31, 2011
and for the three month period ended March 31, 2011, which gives
proforma effect to the conversion of $972,374 of accrued Iron Eagle
obligations at March 31, 2011 to executive officers, directors and
certain other related party stockholders into 243,095 shares of common
stock. Our pro forma selected consolidated balance sheet and statement
of operations data as at March 31, 2011 and for the three months then
ended is derived from the audited consolidated balance sheet and
statement of operations data of Iron Eagle and assumes, for purposes of
such pro forma consolidated balance sheet that such conversions into
common stock occurred on March 31, 2011 and for purposes of such pro
forma consolidated statement of operations that such conversions into
common stock occurred as of January 1, 2011.
40
The proforma financial information is unaudited and not necessarily
indicative of the actual financial position of Iron Eagle 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.
The related consolidated financial information presented below should
be read in conjunction with the historical consolidated financial
statements of each of Iron Eagle and Sycamore/DMC and the related
notes, and Management's Discussion and Analysis of Financial Condition
and Results of Operations contained elsewhere in this prospectus. The
historical results indicated below and elsewhere in this prospectus may
not be indicative of our future performance.
41
IRON EAGLE GROUP, INC.
Consolidated Balance Sheets
March 31, 2011 and December 31, 2010
------------------------------------
December 31, 2010 March 31, 2011
(audited) (unaudited)
----------------- --------------
ASSETS
Current Assets
Cash $ 976 $ 2,684,139
Contracts Receivable,
net of allowance of - 14,017,527
$150,000 and $0
Costs & Estimated Earnings
in Excess of Billings - 501,203
Deposits - 132,950
Other Prepaid Assets - 902,731
Other Assets 6,000 304,966
Prepaid Expenses 611,563 -
---------- -----------
Total Current Assets 618,539 $18,543,516
Fixed Assets, Net of Accumulated
Depreciation of $784,640 and $15,714 2,150 278,688
Goodwill - 4,727,150
Non-Compete - 271,644
---------- -----------
TOTAL ASSETS $ 620,689 $23,820,998
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable - Related Parties $ 479,439 $ 479,439
Accounts Payable 78,409 10,047,370
Advances From Officer 289,758 65,599
Accrued Liabilities 795,936 945,007
Note Payable - Related Party 18,773 1,079,148
Billing In Excess of Costs &
Estimated Earnings - 2,408,276
Accrued Distributions - Taxes - 24,340
Current Maturities - Note Payable - 11,377
Capital Lease 2,344 2,344
Seller's Note - 8,757,463
Common Stock to be Issued 42,155 42,155
Line of Credit 50,000 50,000
---------- -----------
Total Current Liabilities 1,756,814 $23,912,518
Notes Payable - Long Term,
less Current portion - 3,802
Earn-out payable to former stockholder - 828,108
---------- -----------
TOTAL LIABILITIES 1,756,814 $24,744,428
42
IRON EAGLE GROUP, INC.
Consolidated Balance Sheets
March 31, 2011 and December 31, 2010
(Continued)
------------------------------------
Stockholders' Equity
Preferred Stock ($.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,
2,314,341 and 200 shares
issued and outstanding) 116 118
Additional Paid-in Capital 79,851 503,584
Accumulated Deficit (1,216,092) (1,427,132)
---------- -----------
Total Stockholders' Equity (1,136,125) (923,430)
---------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 620,689 $23,820,998
========== ===========
43
IRON EAGLE GROUP, INC.
Consolidated Statements of Operations
For the Year Ended December 31, 2010,
For the Period November 9, 2009 (Inception)
through December 31, 2009 and
for the Three Months Ended March 31, 2011
November 9, 2009
(inception) Three Months
Year Ended through Ended
December 31, December 31, March 31,
2010 2009 2011 (1)
------------ -------------- -----------
REVENUES $ - $ - $12,247,566
COST OF SALES - - 11,411,943
---------- ---------- -----------
GROSS PROFIT - - 835,623
OPERATING EXPENSES
Shares Issued for Services 30,000 -
Selling, General and
Administrative Expenses 118,419 - 322,637
Amortization of
Non-Compete Agreements - - 28,356
Compensation Expense 506,319 40,000 329,563
Professional Fees 129,117 15,972 258,883
Professional Fees to
Related Parties 158,400 215,000 -
--------- ---------- -----------
TOTAL OPERATING EXPENSES 942,255 270,972 939,439
--------- ---------- -----------
NET OPERATING (LOSS) (942,255) (270,972) (103,816)
OTHER INCOME (EXPENSE) (2,865) - (107,224)
--------- ---------- -----------
NET (LOSS) BEFORE
INCOME TAXES (945,120) (270,972) (211,040)
Provision for Income Taxes
(Expense) Benefit - - -
--------- ---------- -----------
NET INCOME (LOSS) (945,120) (270,972) $ (211,040)
========= ========== ===========
Earnings (Loss) per Share,
basic and diluted $ (1.77) $(2,167.78) $ (0.15)
========= ========== ===========
Weighted Average Shares
Outstanding:
Basic & Diluted 534,642 125 1,455,099
========= ========== ===========
(1) Reflects the waiver and cancellation in May 2011 by certain
executive officers, directors, consultants and related parties of an
aggregate of $615,250 of accrued compensation payable during the three
month period ended March 31, 2011.
44
SYCAMORE ENTERPRISES, LLC AND SUBSIDIARIES
Consolidated Balance Sheets
Assets September 30,
---------------
2010 2009
----------- -----------
Current assets:
Cash and cash equivalents $ 3,186,002 $ 7,439,029
Contracts receivable, net 11,109,466 16,783,107
Costs and estimated earnings in excess
of billings on uncompleted contracts 472,446 248,238
Deposits 133,950 134,450
Subchapter-S deposit 86,364 103,982
Prepaid expenses and other current
assets 73,935 79,756
----------- -----------
Total current assets 15,062,163 24,788,562
----------- -----------
Property and equipment:
Building 803,163 803,163
Motor vehicles 387,120 527,661
Machinery and equipment 324,861 318,441
Land 211,931 211,931
Computer equipment 157,317 152,249
Office equipment 154,283 195,289
Leasehold improvements 21,885 20,072
----------- -----------
2,060,560 2,228,806
Less accumulated depreciation 782,478 863,588
----------- -----------
1,278,082 1,365,218
Other assets - Subchapter-S deposit,
less current portion 209,888 295,796
----------- -----------
$16,550,133 $26,449,576
=========== ===========
Liabilities
Current liabilities:
Current maturities of long-term debt $ 109,551 $ 170,837
Accounts payable 5,605,946 9,929,815
Billings in excess of costs and
estimated earnings on uncompleted
contracts 3,048,913 4,683,674
Accrued expenses:
Payroll 390,905 587,420
Distributions 299,478 34,751
Other 433,267 199,123
----------- -----------
Total current liabilities 9,888,060 15,605,620
----------- -----------
45
SYCAMORE ENTERPRISES, LLC AND SUBSIDIARIES
Consolidated Balance Sheets
(Continued)
Long-term liabilities:
Long-term debt, less current maturities 570,564 768,191
Due to member 1,000,000 1,000,000
----------- -----------
Total long-term debt 1,570,564 1,768,191
----------- -----------
Total equity 5,091,509 9,075,765
----------- -----------
Total Liabilities and Equity $16,550,133 $26,449,576
=========== ===========
46
SYCAMORE ENTERPRISES, LLC AND SUBSIDIARIES
Consolidated Statements of Operations
For the Years Ended September 30, 2010 and 2009 (audited)
And for the Three Months Ended March 31, 2011 and 2010 (unaudited)
Year Ended Three Months Ended
September 30, March 31,
2010 2009 2011 2010
(audited) (audited) (unaudited) (unaudited)
----------- ----------- ----------- -----------
Contract revenues earned $43,003,070 $68,687,661 $10,605,776 $14,131,963
Cost of revenues earned 37,775,348 62,145,617 9,133,176 13,235,754
----------- ----------- ----------- -----------
Gross profit 5,227,722 6,542,044 1,472,600 896,209
Operating expenses 3,365,163 3,202,899 1,058,790 753,083
----------- ----------- ----------- -----------
Income from operations 1,862,559 3,339,145 413,810 143,126
Other (expense) income: (109,209) (8,965) (17,556) (15,092)
----------- ----------- ----------- -----------
Net income 1,753,350 3,330,180 396,254 128,034
47
Pro Forma Consolidated Statement of Operations
IRON EAGLE GROUP, INC.
Year Ended December 31, 2010
(Unaudited)
----------------------------
Iron Eagle(a) Sycamore(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,
basic and diluted (3) $ (1.77) $ 1.73
========= ===========
Weighted average
outstanding shares
basic and diluted (3) 534,642 534,642
========= ===========
(1) Derived from Iron Eagle's audited consolidated statement of
Operations for the year ended December 31, 2010.
(2) Derived from Sycamore's unaudited statement of operations for the
year ended December 31, 2010.
(3) Reflects 1:8 reverse stock split.
48
Pro Forma Consolidated Balance Sheet - December 31, 2010
(Unaudited)
December 31, 2010
---------------------------
Iron Eagle(1) Sycamore(1) Adjustments(2) Pro Forma(3)
---------- ----------- ---------- -----------
(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 - - 4,291,304 4,291,304
Non-Compete - - 300,000 300,000
---------- ----------- ---------- -----------
TOTAL ASSETS $ 620,689 $19,208,270 $4,591,304 $24,420,263
========== =========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable -
Related Parties $ 479,439 $ - $ (479,439) $ -
Accounts Payable 78,409 10,051,160 (216,000) 9,913,569
Advances From Officer 289,758 - - 289,758
Other Accrued
Liabilities 795,936 233,708 (276,935) 752,709
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 - - 8,675,463 8,675,463
Shares to be Issued 42,155 - - 42,155
Line of Credit 50,000 - - 50,000
---------- ----------- ---------- -----------
Total Current
Liabilities $1,756,814 $14,306,237 $7,703,089 $23,766,140
---------- ----------- ---------- -----------
49
Pro Forma Consolidated Balance Sheet - December 31, 2010
(Unaudited)
(Continued)
Note Payable - Long Term,
Less Current - 4,553 - 4,553
Earn-out - - 813,321 813,321
---------- ----------- ---------- -----------
TOTAL LIABILITIES $1,756,814 $14,310,790 $8,516,410 $24,584,014
Stockholders' Equity
Preferred Stock
(0 and 0 shares
issued and
outstanding) - - - -
Common Stock (2,314,341
and 200 shares issued
and outstanding) 116 - 12 128
Additional Paid in
Capital 79,851 - 972,362 1,052,213
Accumulated Deficit (1,216,092) 4,897,480 (4,897,480) (1,216,092)
----------- ----------- ---------- -----------
TOTAL STOCKHOLDERS'
EQUITY (1,136,125) 4,897,480 (3,925,106) (163,751)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 620,689 $19,208,270 4,591,304 $24,420,263
========== =========== ========== ===========
Consideration:
Seller's Note $8,675,463
Earnout - over 4 years 813,321 Present Value of Earnout
----------
Total Purchase Price $9,488,784
Allocation of Purchase Price
----------------------------
Equity of Delta Mechanical Contractors 4,897,480
Non-compete 300,000
Customer Contracts -
Goodwill 4,291,304
----------
Total Allocation $9,488,784
(1) Derived from Iron Eagle's audited consolidated balance sheet as at
December 31, 2010 and from Sycamore's unaudited balance sheet as of
December 31, 2010.
(2) Adjustments made to allocate the purchase price of DMC. As a
result of the acquisition of DMC, Iron Eagle received $18,905,203 in
current assets and $303,067 of fixed assets, which were depreciated and
approximated fair value. Iron Eagle assumed current liabilities of
$14,306,237 and a $4,553 long term note payable. The former DMC
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 $4,291,304.
50
(3) Reflects an aggregate of 243,095 shares of common stock issuable
upon completion of this offering to certain executive officers of Iron
Eagle, members of its board of directors and other stockholders or
their affiliates in connection with their agreement to convert an
aggregate of $972,374 of Iron Eagle accrued obligations outstanding at
March 31, 2011 into common stock at a conversion price of $4.00 per
share.
Pro Forma Consolidated Balance Sheet at March 31, 2011
(Unaudited)
March 31, 2011
---------------------------
Actual Adjustments(1) Pro Forma
----------- ----------- -----------
ASSETS
Current Assets $18,543,516 - $18,543,516
Fixed and Other Assets 5,277,482 - 5,277,482
----------- --------- -----------
TOTAL ASSETS $23,820,998 - $23,820,998
=========== ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $23,912,518 ($972,374) $22,940,144
Long-Term Liabilities 831,910 - 831,910
----------- --------- -----------
Total Liabilities $24,744,428 (972,374) 23,772,054
Total Stockholders' Equity (923,430) 972,374 48,944
----------- --------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $23,820,998 - $23,820,998
=========== ========= ===========
(1) Reflects an aggregate of 243,095 shares of common stock issuable
upon completion of this offering to certain executive officers of
Iron Eagle, members of its board of directors and other
stockholders or their affiliates in connection with their
agreement to convert an aggregate of $972,374 of Iron Eagle
accrued obligations outstanding at March 31, 2011 into common
stock at a conversion price of $4.00 per share.
51
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.
General
-------
On January 21, 2011, Iron Eagle acquired its only operating business,
DMC. The total purchase price (including earnout) of approximately
$9,489,000 was paid primarily by Iron Eagle's issuance of a purchase
note originally due on June 2, 2011. In May 2011, Bruce A. Bookbinder,
the former owner of DMC and its parent entity agreed to extend the due
date of this note to September 2, 2011. Iron Eagle's debt obligation
is secured by a pledge of 100% of the membership interest in Sycamore,
DMC's parent entity and our wholly-owned subsidiary. In the event that
such note is not paid when due, it is highly probable that Mr.
Bookbinder will exercise his rights to the collateral and retake
possession and ownership of Sycamore and DMC. As a result Iron Eagle
will lose its entire equity investment in DMC and have no business
operations. Iron Eagle is totally dependent upon receipt of the
minimum net proceeds of this offering to raise the capital necessary to
retire its $8,676,000 debt obligation plus accrued interest of
approximately $266,000 to Mr. Bookbinder. Failure to do so would have
a material adverse effect on the Company and cast significant doubt as
to its ability to continue as a going concern.
Due primarily to the current global economic and financial crisis, DMC
revenues in the year ended September 30, 2010 were approximately $25.0
million less than its revenues in the prior year ended September 30,
2009, and the overall construction market continues to remain weak.
In addition, the adverse economic conditions have hampered our ability
to obtain additional funds with which to seek additional 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, if they are available, whether we will be able to obtain
debt or equity financing necessary to take advantage of those
opportunities. We are also uncertain what potential acquisitions will
be available to us in the near future, or, if they are available,
whether we will be able to raise funds necessary to take advantage of
these opportunities
Iron Eagle 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, it will require additional
working capital to develop its business operations.
Our ability to pursue and consummate additional acquisitions, sustain
or operations and meet our current obligations are dependent on our
ability to raise money through the sale of its debt or equity
securities.
52
Results of Operations
---------------------
Three Months Ended March 31, 2011 Compared to the Three Months Ended
March 31, 2010
Revenues
Total revenues for the quarter ended March 31, 2011 increased by
$12,248,000 as compared to $0 for the quarter ended March 31, 2010.
The increase in revenue was due to the acquisition of DMC.
The backlog as of March 31, 2011 was $31,000,000. During the 2011
first quarter, Iron Eagle received awards for $3,200,000 for work at
Electric Boat and the University of Rhode Island. Subsequent to March
31, 2011, DMC has received contracts, change orders and letters of
intent for an additional $3,300,000 of work. This includes projects at
the US Navy Base in Groton CT, a Veterans Hospital Specialty Clinic in
Providence RI and the Railroad Station in Worcester, MA.
A portion of anticipated revenue in any year is not reflected in its
backlog at a certain time because some projects are awarded and
performed in the same year. DMC believes that approximately $6,000,000
of the existing backlog at March 31, 2011, is not reasonably expected
to be completed during the 2011 calendar year.
The schedule for each project is different and subject to change due to
circumstances outside the control of DMC. Accordingly, it is not
reasonable to assume that the performance of backlog will be evenly
distributed throughout a year. DMC 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. DMC is actively seeking new contracts to add to its backlog.
Cost of Revenues
Cost of revenues for the quarter ended March 31, 2011 was $11,412,000
as compared to $0 for the quarter ended March 31, 2010. The increase
in cost of revenues for the quarter ended March 31, 2011, as compared
to March 31, 2010, was due to the acquisition of DMC.
Gross Profit
Gross profit for the quarter ended March 31, 2011 was $836,000, or 6.8%
of revenues, as compared to a gross profit of $0 for the quarter ended
March 31, 2010. The increase in gross profits for the quarter ended
March 31, 2011, as compared to March 31, 2010, was due to the
acquisition of DMC.
Operating Expenses
Selling, general and administrative expenses for the quarter ended
March 31, 2011 was $323,000, as compared to $172 for the quarter ended
March 31, 2010. This increase was primarily a result of the acquisition
of DMC.
53
Compensation expense for the three months ended March 31, 2011 were
$330,000 compared to $50,000 for the three months ended March 31, 2010.
This increase was primarily a result of the acquisition of DMC and the
addition of senior managers and board of directors. All compensation
expense related to Iron Eagle's officers has been accrued and not paid
as of March 31, 2011.
Professional expenses for the quarter ended March 31, 2011 was
$259,000, as compared to $60,000 for the quarter ended March 31, 2010.
This increase was primarily a result of the acquisition of DMC and
consulting expenses.
Total operating expenses for the three months ended March 31, 2011 were
$939,000 compared to $110,000 for the three months ended March 31,
2010. This increase was primarily a result of the acquisition of DMC.
We generated no bad debt expense during the three months ended March
31, 2011 nor for the three months ended March 31, 2010.
Other Income (Expense)
Other income (expense) for the quarter ended March 31, 2011 was
$(107,000), as compared to $(782) for the quarter ended March 31, 2010.
This increase in other income was a primarily a result of the
acquisition of DMC including $82,000 from interest expense on the
seller note and $15,000 due to the increase of the present value of the
earn-out payments.
Provision for Income Taxes
The provision for income taxes for the quarter ended March 31, 2011 was
$0, as compared to the provision for income taxes of $0 for the quarter
ended March 31, 2010.
Net Income/(Loss)
As a result of the above mentioned items, Iron Eagle reported a net
loss of $211,000, or $0.02 per share-basic and diluted, for the quarter
ended March 31, 2011, as compared to reported net loss of $111,000, or
$110.95 per share-basic and diluted, for the quarter ended March 31,
2010.
Liquidity and Capital Resources
Other than our obligation to pay the $8,676,000 purchase note and
accrued interest to the former owner of DMC, our principal capital
requirement is to fund its work on construction projects. Projects are
billed monthly based on the work performed to date. These project
billings, less a withholding of retention, which is received as the
project nears completion, are collectible based on their respective
contract terms. Iron Eagle's subsidiary Delta has historically relied
primarily on internally generated funds and bank borrowings to finance
its operations.
Since inception Iron Eagle obtained working capital to pay professional
fees and related costs of being a public company based solely upon
loans from and services provided without compensation by our executive
officers and key stockholders. In May 2011, current and former
executive officers, directors and certain key stockholders of Iron
Eagle agreed to convert $972,374 of their obligations into an aggregate
of 243,095 shares of Iron Eagle common stock.
54
In July and August 2011, Iron Eagle sold in a private placement to 3
accredited investors an aggregate of $200,000 of notes, 50,000 Series A
warrants at an exercise price of $4.00 per share, 50,000 Series B
warrants at an exercise price of $4.00 per share, and 250,000 Series C
warrants at an exercise price of $0.08 per share issued in connection
with the notes. These funds, aggregating $180,000 after commissions and
expenses, were used solely to pay the costs related to the completion
of this offering, including legal, accounting, filing and other fees
and expenses.
During the three months ended March 31, 2010, we relied on loans from
management and key shareholders. As of March 31, 2011, total cash and
cash equivalents was $2,684,000, compared to the $976 reported as of
March 31, 2010. This increase was primarily a result of the acquisition
of DMC.
Cash used in operations
Net cash used in operations was $6,820,000 for the quarter ended March
31, 2011, as compared to $782 for the quarter ended March 31, 2010.
This increase was primarily a result of the increase in accounts
receivable due to the acquisition of DMC, offset by an increase in
payables related to the acquisition.
Cash used in investing activities
Net cash used in investing activities was $(330,000) for the quarter
ended March 31, 2011 compared to $0 used in investing activities for
the quarter ended March 31, 2010. This increase was primarily a result
of the acquisition of DMC.
Cash provided by financing activities
Net cash provided by financing activities during the quarter ended
March 31, 2011 was $9,833,017 compared to $782 for the quarter ended
March 31, 2010. This increase was primarily a result of the issuance
of the note payable in conjunction with the acquisition of DMC.
Commitments
Iron Eagle currently has no significant capital expenditure
commitments.
Surety
On some of its projects, Iron Eagle is required to provide a surety
bond. Iron Eagle obtains its surety bonds from Berkley Surety. DMC'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.
DMC 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.
55
Since inception, DMC 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 Iron Eagle.
Iron Eagle's bonding limits have been sufficient given the volume and
size of Iron Eagle's contracts. Iron Eagle's surety may require that
Iron Eagle maintain certain tangible net worth levels, and may require
additional guarantees if Iron Eagle should desire increased bonding
limits. At March 31, 2011, approximately $23,000,000 of Iron Eagle's
backlog of $31,000,000 is anticipated to be bonded.
Completed Agreements
On January 8, 2010, Iron Eagle agreed to the terms of a share exchange
agreement with Iron Eagle -Nevada and its shareholders. The terms of
this agreement were completed on August 18, 2010.
On January 21, 2011, Iron Eagle acquired all of the members' interests
in Sycamore, through the principal owner's membership interests.
Sycamore is 100% holder of all of the membership interests of DMC, a
mechanical contractor. Iron Eagle is currently engaged in the
identification and ongoing negotiations for the acquisition of
construction related entities.
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 our 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.
56
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 Iron Eagle 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 Iron Eagle 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 us and Iron Eagle-Nevada and the
recapitalization of Iron Eagle 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 us and Iron Eagle Nevada and the
recapitalization of us during the time period.
Off-Balance Sheet Arrangements
------------------------------
We have no off-balance sheet arrangements.
57
Critical Accounting Policies
----------------------------
Our 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 Iron Eagle'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. Our 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 us for the
respective periods being presented.
Recent Pronouncements
---------------------
Recently Adopted Accounting Guidance
On January 1, 2010, we 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. Iron Eagle does
not have a program to transfer financial assets; therefore, this ASU
had no impact on our consolidated financial statements.
On January 1, 2010, we 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. We do not have variable interest
entities; therefore, this ASU had no impact on our consolidated
financial statements.
On January 1, 2010, we 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 our consolidated financial statements or the related
disclosures.
58
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 we. We are 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 our financial statements.
BUSINESS
General
-------
Through DMC, our subsidiary, we provide construction and contracting
services in both the infrastructure and government markets. DMC 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.
We typically procure and install equipment to our customers design
specifications. We provide contracting services for new construction
projects as well as the rehabilitation of existing infrastructure,
commercial, and industrial facilities. Our services primarily consist
of:
- 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
We service 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
59
Our DMC operating subsidiary competes for business primarily in the
regions of Rhode Island, Southeastern Massachusetts and Eastern
Connecticut. However, DMC has performed work outside of that area in
the past. Most of our work is performed on a fixed-price basis.
Although we bear the risk of project cost overruns, we believe that we
have the ability to seek to recover unforeseen additional costs through
project change orders or claims.
Our Strategy and Key Corporate Objectives
-----------------------------------------
Our goal is to become a leading construction and contracting service
provider to both the infrastructure and government markets throughout
the United States. We believe that the highly-fragmented construction
and contracting business lends itself to such strategy. We intend to
achieve this goal by implementing the following strategies:
- Growth through acquisitions. We believe that there are a number
of opportunities to acquire for a combination of cash, earn-outs
and our securities, the assets or equity of a number of small and
medium sized prime contractors and subcontractors to federal,
state and municipal public projects as well as government
sponsored institutions. Our acquisition model is to seek to
acquire established and profitable well-managed companies with
revenues of between $35.0 and $100.0 million at multiples of
approximately 3.5 to 5.0 times their historical earnings before
interest, taxes, depreciation and amortization, or EBITDA.
- Internal growth opportunities. We believe that there are a
number of revenue growth opportunities for DMC in its existing
markets as work repairing and upgrading certain infrastructures,
such as roads, bridge and schools in the New England market area
require municipalities to make necessary expenditures.
- Achieve a cost savings integration strategy. As we make
strategic acquisitions, we intend to pursue a non-invasive cost-
savings and integration strategy with easily-outsourced back-
office functions being integrated at the corporate-level in order
to achieve cost savings and to allow each of our operating
subsidiaries to focus on their construction operations and not
administrative tasks.
- Highly experienced management team - We believe that our senior
and operating management team consists of business leaders in the
construction, government contracting and defense industries, and
has the unique set of skills to effectively implement our growth
strategy. Our management team has over 30 years of experience
identifying, acquiring and managing regional, national and
international construction companies which had revenues ranging
from $20.0 million to over $1.0 billion.
In order to achieve our growth strategy, we will have to raise
additional capital through a combination of loans and equity
financings. There is no assurance that such capital will be available
or terms that will be acceptable to us.
60
We intend 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 economic 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.
We have developed a comprehensive project budget using what we believe
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,
our 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. Out 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, Iron Eagle management has targeted construction
companies that have track records of positive earnings and cash flow
for acquisition and possible joint ventures. Iron Eagle's first
acquisition in the construction and contracting industry was
consummated in January 2011 with its purchase of 100% of the member's
interest of DMC. We have also analyzed a number of other construction
companies, and held preliminary discussions with certain of them to
find the right acquisition targets or joint venture partners. We have
not, as yet, agreed upon price or terms or entered into any agreements
or non-binding understandings with any third parties, other than
Sycamore and its DMC subsidiary.
However, the construction market continues to be weak, and the current
economy has severely hampered our ability to obtain financing to
implement our acquisition strategy. 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.
DMC Services and Customers
--------------------------
DMC typically procures and installs equipment to its customers design
specifications. Virtually all of DMC's revenues are generated by work
performed on construction projects as it does not engage in facilities
management and therefore does not generate any significant service-
related revenues.
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Approximately 90% of DMC'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. DMC 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, DMC will sub-contract
the engineering work used in the design phase. Since DMC does not self
perform design work, it does not carry professional liability
insurance. The primary focus of DMC's business is on material and
equipment procurement and installation to the specifications provided
by the customer. Most of DMC's work is provided on a fixed-price basis.
While project cost overrun risk is generally borne by DMC, they do have
the ability to seek to recover additional costs through project change
orders and/or claims.
As DMC'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, DMC has performed numerous projects at the various
campuses of the University of Rhode Island. Work has included
dormitories, dining halls, classrooms, laboratories, and other
university buildings.
DMC'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. DMC's services are performed primarily under
lump sum contracts. The duration of each project varies, however,
completion typically occurs within one year.
At any given time, a material portion of DMC's contract revenue may be
generated from a single customer through one large contract or various
contracts. Our 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, DMC's two principal customers
were Gilbane Building Company, Dimeo Construction Company and HV
Collins Company, which accounted for 60% of DMC's total revenues in
such year.
Backlog
-------
We had a backlog of anticipated revenue from the uncompleted portions
of awarded contracts totaling approximately $31,000,000 as at March 31,
2011 and received contract awards of $3,200,000 from Electric Boat
Company and the University of Rhode Island in the quarter ended March
31, 2011. Subsequent to March 31, 2011, we received contract awards
and change orders for an additional $3,300,000. Our backlog as of
December 31, 2010 was $39,500,000, compared to approximately
$42,400,000 as of December 31, 2009.
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We anticipated that approximately $6,000,000 of our backlog as at March
31, 2011 is for work that is not expected to be completed in calendar
2011 and is expected to be reflected in 2012 revenues. The schedule
for each project is different and subject to change due to
circumstances beyond our control. Accordingly it is not reasonable to
assume that performance of backlog will be evenly distributed
throughout the course of a year. We believe that our backlog is firm
notwithstanding provisions in our contracts allowing the customers to
modify or cancel the contract at any time, subject in certain cases, to
our receipt of cost reimbursement and cancellation fees.
We are actively seeking new contracts to add to its backlog.
Projects Recently Completed and in Progress
-------------------------------------------
Set forth below are examples of a recently completed project and
certain other projects currently being undertaken by our DMC
subsidiary.
University of Rhode Island - Bio Tech and Life Science Center located
in Kingston, Rhode Island.
DMC completed over $8,500,000 of work at this facility in the spring of
2010. DMC was hired by Gilbane Building Company, a nationally
recognized, Providence Rhode Island 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, DMC
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
largest customer of DMC in terms of revenue each year, and accounted
for 37%, 32% and 24% of DMC annual revenues in each of fiscal years
ending September 30 for 2008, 2009 and 2010, respectively.
University of Rhode Island - College of Pharmacy located in Kingston
Rhode, Island.
DMC 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 DMC.
P451 Officer Training Command Quarters Naval Station located in
Newport, Rhode Island.
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DMC has been hired as a design/build contractor by Absher Construction
Company, a Seattle Washington based contractor. This is DMC's first
project for Absher, who is 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, DMC 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.
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.
Surety Bonds
------------
DMC's ability to obtain performance and completion bonds, and the
amount of bonding required, is solely at the discretion of the surety
and is primarily based upon the net worth, working capital, the number
and size of the project under construction and the surety's
relationship with management. As a general rule, surety bonding
companies will provide bonding of approximately 15 times the net
working capital of the construction company in question, and
customarily require personal guarantees from the owners. Accordingly,
the larger the project and/or the number of projects under contract,
the greater the net worth and working capital requirements. Prime
contractors are always required to obtain performance and completion
bonding and sub-contractors, such as DMC, are required to obtain
bonding on a case by case basis. DMC is generally reimbursed from the
general or prime 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, DMC 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 it.
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.
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On public works projects, DMC 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, DMC 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 us.
However, some of these large competitors are unfamiliar with the states
in which we operate. On private and institutional projects, DMC
believes it competes favorably with such companies because of the
reputation of DMC and our 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 DMC's competitors include Arden Engineers and
Constructors, Aero Mechanical, and NB Kenney and Company.
During economic down cycles resulting in lower government funding for
public works projects, competition for the decreased number of
available public projects intensified. In addition, downturns in
residential and commercial construction activity has caused traditional
construction companies to bid on public projects, thereby further
increasing the competition for available public sector work. In view
of the fact that DMC management has made a strategic decision not to
bid on low margin or unprofitable work, increased competition from both
infrastructure and traditional construction competitors directly led to
a significant decrease in new awards bid upon and granted to DMC, as a
result of which revenues and net income before taxes in our operating
subsidiary for its fiscal year ended September 30, 2010 was only
approximately $43.0 million and $1.65 million, as compared to
approximately $69.0 million and $3.2 million in fiscal 2009.
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. Iron Eagle 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.
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Employees
---------
As of August 3, 2011, DMC had approximately 136 employees, consisting
of approximately 26 full-time office and project support employees and
approximately 110 full-time 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. DMC hires union labor for specific
work assignments and can reduce the number of union workers hired at
will with no penalty. The unions organized DMC in 2001. DMC believes
that its relationship with its workers and the unions are good.
DMC pays benefits to union employees through payments to trust funds
established by the unions. DMC's obligation is to pay a percentage of
the wages of union workers to these trust funds. DMC 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. DMC 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.
Intellectual Property and Management Information System
-------------------------------------------------------
We do not own any patents or patent rights. Our business is not
subject to large seasonal variations. Iron Eagle did not expend funds
for research and development during 2010 and 2009 and anticipates no
research and development expenses in 2011.
DMC'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. DMC manages all accounting and financial reporting
functions internally.
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 consolidated results of
operation.
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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
DMC Headquarters
44 Wilclar Street
Warwick, Rhode Island 02888 9,000 $15,750 December 2014
Additional Facilities:
9600 E. Arapahoe Road 5,000 $ 2,885 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 Iron Eagle. The
leases for DMC's headquarters are leased from 44 Wilclar, LLC, a Rhode
Island limited liability company, that is 100% owned by Bruce
Bookbinder, DMC's president and chief executive officer.
In general, our facilities are sufficient to meet our present needs.
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MANAGEMENT
Executive Officer and Directors
All holders of common stock have the right to vote for directors. 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 board of directors has primary responsibility for adopting and
reviewing implementation of our business plan, supervising the
development of the business plan, and review of the officers'
performance of specific business functions.
Our board of directors and executive officers are:
Name Age Position Term
---------------- --- ----------------------- -------------
Jason M. Shapiro 33 Chief Executive Officer November 2010
Chief Financial Officer to present
Director December 2009
to present
Jed M. Sabio 50 Executive Vice President November 2010
of Business Development to present
Joseph E. Antonini 70 Chairman of the Board July 2011
of Directors and to present
Director July 2010
to present
Gary J. Giulietti 59 Director May 2010
to present
Jason M. Shapiro is currently our chief executive officer, chief
financial officer and a director of Iron Eagle. He was hired as Iron
Eagle'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. 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.
Mr. Shapiro was the chief executive officer and sole director of Iron
Eagle Nevada from its inception on November 9, 2009 to August 18, 2010
when it was acquired by Iron Eagle. 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,
68
Mr. Shapiro was an associate director of UBS Investment Bank, a global
healthcare investment banking firm. Mr. Shapiro is also currently vice
president of due diligence and owner of Lincoln Center Capital, a media
private equity firm. Mr. Shapiro earned his MBA degree from the
University of Pennsylvania 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 is a certified public accountant and
chartered financial analyst.
Jed M. Sabio has served as our executive vice president, business
development since November 2010. 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 has served as our chairman of the board to Iron
Eagle since July 2011 and has served as a director to Iron Eagle since
July 2010. 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. 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 from 2003-2005, Chrysler Corporation, from 1989-
1995, Shell Oil Company, 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.
69
Gary J. Giulietti has served as a director to Iron Eagle since July
2010. 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.
Other Key Executives
Name Age Position Term
------------------- --- --------------------- ------------
Bruce A. Bookbinder 58 President and Chief Executive January 2011
Officer of Delta Mechanical to present
Contractors LLC
David Greenberg 54 Chief Financial Officer of January 2011
Delta Mechanical Contractors to present
Independence of Directors
-------------------------
We adhere to the rules of Nasdaq in determining whether a director is
independent. Our board of directors also consults with our counsel to
ensure that the board's determinations are consistent with those rules
and all relevant securities and other laws and regulations regarding
the independence of directors. The Nasdaq listing standards define an
"independent director" generally as a person, other than an officer of
a company, who does not have a relationship with the company that would
interfere with the director's exercise of independent judgment.
Consistent with these considerations, our board of directors has
affirmatively determined that Messrs. Antonini and Giulietti are the
independent directors. Mr. Shapiro is not independent.
Board Committees
----------------
Our board of directors currently has an audit committee, a compensation
committee, and a nominating and governance committee. Our board may
establish other committees from time to time to facilitate our
management.
Audit Committee. The principal functions of the audit committee are
to assist the board in monitoring the integrity of our consolidated
financial statements, the independent auditor's qualifications and
independence, the performance of our independent auditors and our
compliance with legal and regulatory requirements. The audit committee
will have the sole authority to retain and terminate our independent
auditors and to approve the compensation paid to our independent
auditors. The audit committee also will be responsible for overseeing
our internal audit function.
70
The audit committee currently consists of Messrs. Antonini and
Giulietti, with Mr. Giulietti acting as the chairman. Antonini and
Giulietti are "independent," and Mr. Antonini is our audit committee
financial expert, under the listing standards of the Nasdaq and under
SEC rules and regulations.
Compensation Committee. The principal functions of the compensation
committee are to determine awards to employees of stock or other equity
compensation, establish performance criteria for and evaluate the
performance of the chief executive officer and approve compensation of
all senior executives and directors. The compensation committee is
currently comprised of Messrs. Antonini and Giulietti, with Mr.
Giulietti acting as the chairman. None of the members of our
compensation committee is one of our officers or an officer of any of
our subsidiaries.
Nominating and Governance Committee. Our board of directors has
established a nominating and governance committee. The members are
Messrs. Antonini and Giulietti, with Mr. Giulietti acting as Chairman.
Each is an independent director under Nasdaq listing standards. The
nominating and governance committee is responsible for overseeing the
selection of persons to be nominated to serve on our board of
directors. The nominating and governance committee will consider
persons identified by our members, management, stockholders, investment
bankers and others. During the period ending immediately after our 2011
annual meeting, the nominees for our board of directors will be
approved by the nominating and governance committee.
We do not have any restrictions on stockholder nominations under our
certificate of incorporation or by-laws. However, any stockholder
nominations must be received by us not less than sixty (60) days nor
more than ninety (90) days prior to the annual meeting; provided
however, that in the event that less than seventy (70) days notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder, to be timely, must be received
no later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs. The
stockholder's notice to our secretary shall set forth
(i) as to each person whom the stockholder proposes to nominate for
election or reelection as a director,
(a) the name, age, business address and residence address of the
person,
(b) the principal occupation or employment of the person,
(c) the class and number of shares of our capital stock which are
beneficially owned by the person, and
(d) any other information relating to the person that is required to
be disclosed in solicitations for proxies for election of
directors pursuant to the rules and regulations of the SEC
under Section 14 of the Securities Exchange Act of 1934, as
amended, and
(ii) as to the stockholder giving the notice
(a) the name and record address of the stockholder and
(b) the class and number of shares of our capital stock which is
beneficially owned by the stockholder.
71
We may require any proposed nominee to furnish such other information
as may reasonably be required by us to determine the eligibility of
such proposed nominee to serve as a director.
EXECUTIVE COMPENSATION
Overview of Compensation Program
--------------------------------
Our board of directors has overall responsibility for establishing
compensation for our directors and executive officers. Our board has
delegated to the compensation committee of the Board the responsibility
for establishing, implementing and continually monitoring adherence
with our compensation philosophy with respect to our executive
officers. The committee ensures that the total compensation paid to our
executive officers is fair, reasonable and competitive. Throughout this
prospectus, the individuals who served as our chief executive officer
and chief financial officer during fiscal 2011, as well as the other
individuals included in the summary compensation table provided below,
are referred to as our named executive officers. Compensation and
benefits provided to our key executive officers, including Jason
Shapiro, Jed Sabio, and Bruce Bookbinder are controlled by their
employment agreements described below.
Compensation Philosophy and Objectives
--------------------------------------
The committee believes that the most effective executive compensation
program is one designed to retain our key executives, reward the
achievement of annual, long-term and strategic goals, align the
executives' interests with those of the stockholders and ultimately
improve stockholder value. The Committee evaluates both performance and
compensation to ensure we maintain our ability to attract and retain
superior employees in key positions and that compensation provided to
our key employees remains competitive relative to the compensation paid
to similarly situated executives of our peer companies. To that end,
the committee believes executive compensation packages provided to our
executives, including our named executive officers, should include both
cash and stock-based compensation.
Role of Executive Officers in Compensation Decisions
----------------------------------------------------
The committee makes all compensation decisions for all of our executive
officers and, after consultation with our chief executive officer,
approves equity awards to our employees. Decisions regarding the non-
equity compensation of other employees are made by our chief executive
officer after consultation with the Committee.
Our chief executive officer annually reviews the performance of each
executive officer other than himself, whose performance is reviewed by
the committee. The conclusions reached as the result of and
recommendations based on these reviews, including recommendations with
respect to salary adjustments and annual bonus or equity award amounts,
are presented to the committee. The committee then exercises its
discretion in determining adjustments or awards to executive officers.
72
Setting Executive Compensation
------------------------------
Based on the foregoing objectives, the committee has structured our
annual and long-term cash and non-cash executive compensation to:
- Reward key executives who have been with us and contributed to
our success;
- Entice executives to join us and provide incentive to remain
employed; Motivate performance that will lead to long-term
improvements in our oil and natural gas operations;
- Strengthen the alignment between shareholders and executive and
key personnel; and
- Encourage and facilitate executive ownership of our stock.
To meet our objectives, the committee has determined to allocate a
significant percentage of total compensation to incentive-based
compensation. There is no pre-established policy or target for the
allocation between cash and non-cash or short-term and long-term
incentive compensation. Rather, the committee reviews information
provided by our president and chief executive officer, outside
consultants and industry surveys and reports to determine the
appropriate level and mix of incentive compensation versus base salary.
Executive Compensation Components
---------------------------------
Following completion of this offering, in addition to the terms of the
employment agreements with Messrs. Shapiro, Sabio, and Bookbinder, the
principal components of compensation for our named executive officers
will be:
- base salary;
- performance-based incentive compensation;
- retirement and other benefits; and
- perquisites and other personal benefits.
Base Salary
We provide our named executive officers and other employees with base
salary to compensate them for services rendered during the fiscal year.
Base salary ranges for our named executive officers are determined for
each executive based on his or her position and responsibility by using
market data. Base salary ranges are designed so that salary
opportunities for a given position generally will be within the upper
25% quartile of the base salaries for construction and contracting
executives in publicly traded companies. In reviewing base salaries
for executives, the Committee will primarily consider:
- market data, to the extent available;
- internal review of the executive's compensation, both individually
and relative to other officers; and
- individual performance of the executive.
Salary levels are typically considered annually as part of our
performance review process as well as upon a promotion or other change
in job responsibility. Merit-based increases to salaries of executive
officers will be based on the Committee's assessment of the
individual's performance.
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Performance-Based Incentive Compensation
----------------------------------------
Cash Bonus Plan
On May 19, 2011, our board approved a cash bonus plan pool for our
senior executive officers. Under the terms of the cash bonus plan, our
senior executive officers would be entitled to receive 10% of the
consolidated net pre-tax profits of Iron Eagle for each of the four
consecutive 12 month periods from April 1 to March 31, commencing April
1, 2011 and ending March 31, 2015. Any bonus payments due for each of
the 12 month measuring periods ending March 31st are payable on or
before July 31st in each of 2012 through 2015, inclusive; provided,
that not more than $1,000,000 may be paid under the cash bonus plan
pool with respect any one of the four 12 month measuring periods ending
March 31, 2012 through March 31, 2015.
Long Term Stock Incentive Plan
On July 14, 2011, the compensation committee adopted our Long-Term
Stock Incentive Plan, which was approved by the holders of a majority
of our outstanding shares of common stock.
Under the terms of the Plan, the committee has the latitude to design
cash and stock-based incentive compensation awards intended to promote
and reward high performance and achievement of corporate goals by key
employees, encourage the growth of stockholder value and allow key
employees to participate in our long-term growth and profitability.
Compensation is paid in the form of cash bonuses, grants of restricted
stock, share units, stock options, stock appreciation rights,
performance units and performance bonuses, or some combination of these
awards. In granting these awards, the committee may establish any
conditions or restrictions it deems appropriate. Stock-based awards
will generally vest over a two or three year period after the date of
the grant.
If made, all stock-based awards under our Incentive Plan will be made
at or above the market price of our common stock at the time of the
award. The committee may grant awards of stock options or restricted
stock awards to executives at any regularly scheduled or special
meeting. The grant date of any stock option or restricted stock award
will be determined in accordance with FAS 123(R).
Three grant decisions were made in prior to the date of this
prospectus. Independent directors receive an initial stock award of
$50,000 for joining our board of directors. Following completion of
this offering, our independent directors shall also receive $100,000 a
year in compensation to consist of $50,000 in stock awards (valued at
the then market price of Iron Eagle common stock at the time of grant
of each award) and $50,000 in cash. Non-independent directors do not
receive any compensation for serving on the board. These restricted
stock grants provide a participation by our non-employee directors in
our performance and growth.
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The committee does not use specific financial or operational targets to
determine awards of incentive compensation. The nature of the
construction industry makes targets difficult, because many of the
components of financial and operational targets tend to be outside of
management's control. These components include general economic
conductions, municipality budgets and bidding procedures, weather
conditions and unanticipated delays in completion of projects based
upon completion schedules under the control of third parties, among
others.
Cash bonuses to our executive officers for performance in 2011, if any,
have not yet been determined by the Committee. We anticipate the
Committee will meet in the first quarter of 2012 to discuss whether
cash bonuses are merited by our executive officers. If cash bonuses are
granted, we will file a timely Form 8-K disclosing the bonus grants.
Retirement and Other Benefits
-----------------------------
Our senior management does not currently have a 401(k) Profit Sharing
Plan. If we create a 401(k) Profit Sharing Plan for our senior
management, we will file a timely Form 8-K disclosing the plan.
Perquisites and Other Personal Benefits
---------------------------------------
We provide our executive officers with perquisites and other personal
benefits that we believe are reasonable and consistent with our overall
compensation program to better enable us to attract and retain superior
employees for key positions. The committee periodically reviews the
levels of perquisites and other personal benefits provided to our
executive officers. The perquisites provided to our named executive
officers are set forth in footnotes 5 and 6 of the Summary Compensation
Table below. Attributed costs of the personal benefits for the named
executive officers for the fiscal year ended December 31, 2010, are
included in column (i) of the Summary Compensation Table below.
Tax and Accounting Implications
-------------------------------
The committee reviews and considers the deductibility of executive
compensation under Section 162(m) of the Internal Revenue Code, which
provides that we may not deduct compensation of more than $1,000,000
paid to certain individuals. We believe compensation paid under our
incentive compensation plans is generally fully deductible for federal
income tax purposes. However, in certain situations, the committee may
approve compensation that will not meet these requirements in order to
ensure competitive levels of total compensation for our executive
officers. For fiscal 2010, all amounts paid to our named executive
officers were deductible.
We intend to account for stock-based payments including grants and
awards under our 2011 Long-Term Incentive Plan in accordance with the
requirements of FAS 123(R).
75
Compensation Committee Report
-----------------------------
The compensation committee has reviewed and discussed the compensation
discussion and analysis required by Item 402(b) of Regulation S-K with
management. Based on such review and discussions, the compensation
committee recommended to the board that the compensation discussion and
analysis be included in this prospectus.
THE COMPENSATION COMMITTEE
Gary J. Giulietti, Chairman
Joseph E. Antonini
Summary Compensation Table
--------------------------
The table below summarizes the total compensation paid or earned by
each of the named executive officers for the fiscal year ended December
31, 2010.
Stock Option All Other
Name Year Salary Awards Awards Compensation Total
------------------ ---- -------- ------- ------ --------- --------
Jason M. Shapiro (1) 2010 $200,000 - - - $200,000
Chief Executive Officer, 2009 40,000 - - - 40,000
Chief Financial Officer 2008 n/a n/a n/a n/a n/a
Jed M. Sabio (2) 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 (3) 2010 $ 96,000 - - - $ 96,000
Chairman & President 2009 96,000 - - - 96,000
(Former) 2008 96,000 - - - 96,000
Robert A. Hildebrand (3) 2010 $ 96,000 - - - $ 96,000
Secretary & Chief 2009 96,000 - - 70,000 (4) 166,000
Financial Officer 2008 96,000 - - 65,000 (4) 161,000
(Former)
(1) As at March 31, 2011, an aggregate of $296,250 of accrued cash and
stock compensation was owed to Jason M. Shapiro. On May 19, 2011, Mr.
Shapiro agreed to convert $221,250 of such amount that had accrued
through December 31, 2010 into 55,313 shares of common stock at an
effective conversion price of $4.00 per share upon completion of this
offering. In addition, Mr. Shapiro agreed to waive and relinquish an
additional $75,000 of such payments that accrued during the three month
period ended March 31, 2011.
76
(2) Mr. Sabio's compensation agreements started on January 1, 2011. As
at March 31, 2011 an aggregate of $151,250 of accrued cash and stock
compensation was owed to Mr. Sabio. On May 19, 2011, Mr. Sabio agreed
to waive and relinquish all rights to receive such payments. See below.
(3) Glen R. Gamble and Robert Hildebrand each resigned as executive
officers, effective August 18, 2010. In connection with their
resignations, we agreed to pay Mr. Gamble $8,000 per month and Mr.
Hildebrand $8,000 per month for consulting services to be provided
until such time we no longer requires their services. Messrs. Gamble
and Hildebrand's salaries and common stock issuances were accrued and
they have not received any cash or stock payments. As at March 31,
2011, an aggregate of $270,000 of accrued compensation was owed to such
persons. On May 19, 2011, such Messrs. Gamble and Hildebrand agreed to
convert $216,000 of such amount that had accrued through December 31,
2010 into 54,000 shares of common stock at an effective conversion
price of $4.00 per share upon completion of this offering. In
addition, such persons agreed to waive and relinquish an additional
$54,000 of such payments that accrued during the three month period
ended March 31, 2011. We have agreed, to terminate their consulting
contract upon the closing of raising $10,000,000 with this offering
payable at the rate of $9,000 per month to each of Gamble and
Hildebrand.
(4) 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.
Michael Bovalino was hired as our chief executive officer in April 26,
2010 and resigned 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 our chief financial officer in May 4, 2010
and resigned effective November 23, 2010. Mr. Hoffman has earned a
total of compensation of $119,743 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.
Employment Agreements
---------------------
Jason M. Shapiro
On January 1, 2011, Iron Eagle entered into a four year employment
agreement with Mr. Shapiro providing for an annual base salary of
$225,000 in cash and 75,000 shares per year.
On May 19, 2011, Mr. Shapiro agreed to convert an aggregate of $221,250
of cash and stock compensation owed to him that had accrued through
December 31, 2010 into an aggregate of 55,313 additional shares of
common stock, and agreed to waive and relinquish an additional $75,000
of accrued cash and stock compensation that accrued during the three
month period ended March 31, 2011.
77
On May 24, 2011, we entered into a new employment agreement with Mr.
Shapiro that is effective as of April 1, 2011 and expires on March 31,
2015, with annual renewals thereafter, unless previously terminated by
either party. Pursuant to such employment agreement, Mr. Shapiro
agreed to serve as our chief executive officer, chief financial officer
and a member of our board of directors. Such employment agreement
provides for an annual base salary of $225,000 through December 31,
2011, with minimum increases in such base salary of $25,000 per year in
each of calendar 2012, 2013 and 2014, and thereafter. In addition under
the terms of his employment agreement, Mr. Shapiro will be entitled to
participate in 25% of our cash bonus plan pool and will be entitled to
receive other incentive bonuses of up to 100% of his base salary,
payable in such amounts and at such times as determined in the sole
discretion of the compensation committee of the board of directors.
Jed M. Sabio
Mr. Sabio was hired as executive vice president of business development
in November 2010. Effective January 1, 2011, we entered into a four
year employment agreement with Mr. Sabio, which originally provided for
a $200,000 annual base salary, a signing bonus of $71,000 and 8,875
shares of Iron Eagle common stock with annual incentive bonuses of
$50,000 and 15,000 shares of Iron Eagle common stock.
On May 19, 2011, Mr. Sabio agreed to waive and relinquish all cash and
stock compensation, aggregating $151,250, that accrued under the
consulting agreement for the three month period ended March 31, 2011,
represented by the $71,000 cash signing bonus, 6,050 shares of common
stock having a contractual value of $30,250 and $50,000 of accrued
salary. On May 24, 2011, we entered into a new employment agreement
with Mr. Sabio that is effective as of April 1, 2011 and expires on
March 31, 2015, with annual renewals thereafter, unless previously
terminated by either party. Pursuant to such employment agreement, Mr.
Sabio agreed to continue to serve as our executive vice president of
corporate development and a member of our board of directors. Such
employment agreement provides for an annual base salary of $225,000
through December 31, 2011, with minimum increases in such base salary
of $25,000 per year in each of calendar 2012, 2013 and 2014, and
thereafter. In addition under the terms of his employment agreement,
Mr. Sabio will be entitled to participate in 25% of our cash bonus plan
pool and will be entitled to receive other incentive bonuses of up to
100% of his base salary, payable in such amounts and at such times as
determined in the sole discretion of the compensation committee of the
board of directors.
78
Director Compensation
----------------------
The following table sets forth, for the last three years, with respect
to the individuals serving as our independent directors(1)(2):
Stock Option All Other
Name Year Cash(3) Awards Awards Compensation Total
-------------- ---- ------- ------- ------ ------------ --------
Joseph Antonini 2010 $23,014 $73,014 - - $ 96,028
Chairman and 2009 n/a n/a n/a n/a n/a
Director 2008 n/a n/a n/a n/a n/a
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 our 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) Mr. LoCurto was chairman of the board of directors from November
2010 to July 2011. Effective January 1, 2011, we entered into a
consulting agreement with Mr. LoCurto. The term of the consulting
agreement was four years with an automatic renewal on an annual basis
thereafter, unless previously terminated by either party. The
consulting agreement provided for an initial annual base fee of
$250,000 in cash, 86,203 shares of common stock in Iron Eagle payable
in annual installments over the term of the agreement and a signing
bonus of $130,000 in cash and 26,000 additional shares of common stock.
The agreement also provides for an annual incentive of up to 100% of
his base salary, payable at the discretion of the board of directors.
On May 19, 2011, Mr. LoCurto agreed to waive and relinquish all cash
and stock compensation, aggregating $250,000, that accrued under the
consulting agreement for the three month period ended March 31, 2011,
represented by the $130,000 cash signing bonus, 11,500 shares of common
stock having a contractual value of $57,500 and $62,500 of accrued
consulting fees. On July 12, 2011, Iron Eagle and Mr. LoCurto agreed to
terminate the consulting agreement and accepted $67,500 for his
services.
(3) Messrs. Antonini and Giulietti accrued $80,685 for the cash portion
of their board compensation, as of March 31, 2011. Messrs. Antonini
and Giulietti have each agreed to convert $55,685 of such accrued cash
board compensation that accrued as of December 31, 2010 into 13,921
shares of common stock, and agreed to waive $25,000 of such cash
compensation that accrued during the three month period ended March 31,
2011.
79
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 May 31, 2011, with
respect to
- each person who is known by us who beneficially owns more than 5%
of our common stock,
- each director and named executive and
- all of our directors and officer as a group.
Each named beneficial owner has sole voting and investment power with
respect to the shares set forth opposite his name.
Number & Class(1) Percentage of Outstanding Shares
Name and Address of Shares Before Offering After Offering
-------------- --------------- --------------
Jason M. Shapiro
61 West 62nd Street,
Suite 23F
New York, NY 10023 333,906 (2) 19.1% 7.0%
Jed M. Sabio
61 West 62nd Street,
Suite 23F
New York, NY 10023 106,250 (3) 6.1% 2.2%
Joseph E. Antonini
61 West 62nd Street,
Suite 23F
New York, NY 10023 18,010 (4) 1.0% 0.4%
Gary J. Giulietti
61 West 62nd Street,
Suite 23F
New York, NY 10023 22,227 (5) 1.3% 0.4%
All Directors & Officers
as a group (4 persons) 480,393 27.5% 10.1%
Other 5% shareholders:
Jake A. Shapiro (2)
61 West 62nd Street,
Suite 23F
New York, NY 10023 340,144 (6) 19.4% 7.2%
Stephen Gropp
1803 North Stafford Street
Arlington, VA 22207 309,843 17.7% 6.5%
Gary E. Smolen
104 Pleasant Street
Meredith, NH 03253 132,146 7.6% 2.8%
80
Nevada Irrevocable Trust(7)
3540 W. Sahara Ave.
Suite 153
Las Vegas, NV 89102 107,146 6.1% 2.3%
(1) Based on 1,749,432 shares of common stock outstanding prior to
this offering (including 243,095 shares we have agreed to issue to
certain officers, directors and principal stockholders upon conversion
of $972,374 of accrued obligations owed to such persons or entities)
and 4,749,432 shares to be outstanding immediately following completion
of this offering.
(2) Consists of 278,593 shares of common stock owned of record and
beneficially as of June 30, 2011 plus 55,313 additional shares to be
issued to Jason M. Shapiro upon completion of this offering and
conversion into common stock of $221,250 of accrued Iron Eagle
obligations owed to Mr. Shapiro at December 31, 2010. Jake A. Shapiro
is the brother of Jason M. Shapiro, an officer and director of Iron
Eagle. Jason M. Shapiro disclaims any beneficial interest in the
shares owned of record and beneficially by his brother.
(3) Includes 62,500 shares of common stock acquired by Mr. Sabio in
June 2011 for nominal consideration from Jason M. Shapiro and Jake A.
Shapiro.
(4) Consists of 12,299 shares owned of record by Mr. Antonini and in
the name of JEA Energy LLC, a company solely owned by Joseph E.
Antonini, plus 5,711 shares to be issued upon completion of this
offering upon conversion of $22,842 of accrued cash directors' fees
owed to Mr. Antonini as of December 31, 2010.
(5) Consists of 14,016 shares owned of record by Mr. Giulietti and
8,211 shares to be issued upon completion of this offering upon
conversion of $32,842 of accrued cash directors' fees owed to Mr.
Giulietti as of December 31, 2010.
(6) Consists of 220,284 shares of common stock owned of record and
beneficially as of June 30, 2011 plus 119,860 additional shares to be
issued to Jake Shapiro or his affiliate Belle Haven Partners LLC, upon
completion of this offering and conversion into common stock of
$479,440 of accrued Iron Eagle obligations owed to Belle Haven and its
affiliates as of December 31, 2010. Jason M. Shapiro, an officer and
director, is the brother of Jake A. Shapiro. Jake A. Shapiro and Belle
Haven each disclaim any beneficial interest in the shares owned of
record and beneficially by his brother. Jake Shapiro is 100% owner of
Belle Haven Partners and has a consulting contract with Iron Eagle
which has independent board approval. Jason Shapiro is 100% owner of
Belle Haven Capital. Belle Haven Capital receives $2,100 per month for
rent.
(7) The trustee for the Nevada Irrevocable Trust is Mio L. Bonilla, a
non-affiliate.
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.
81
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
We 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.
Belle Haven Partners, LLC is 100% owned by Jake Shapiro, a major
shareholder of Iron Eagle-Nevada. Jason Shapiro is an employee of
Belle Haven Partners, LLC, and is also on our management team. 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 March 31, 2011, December 31, 2010 and December 31,
2009, we had accrued $515,000, $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-Nevada and all the independent directors of Iron Eagle.
In accordance with an agreement we entered into with Belle Haven and
Jake A. Shapiro on May 19, 2011, Belle Haven and Jake A. Shapiro agreed
to waive and relinquish $60,000 of obligations owed to such persons
that accrued during the three month period ended March 31, 2011, and
further agreed upon completion of this offering to convert $479,440 of
Iron Eagle accrued obligations as at December 31, 2010 into 119,860
shares of common stock at an effective conversion price of $4.00 per
share. In addition the recipients of such shares have agreed not to
sell or offer to sell such shares or other shares of common stock they
own in Iron Eagle for a period of 12 months following the completion of
this offering, except pursuant to a Board approved lock-up agreement.
On December 31, 2009, we entered in two note agreements with Jason M.
Shapiro, an officer and director, for a total of $15,000 as
consideration for receipt of cash by us. These notes, which bear a 10%
interest rate, were originally due on June 30, 2010, and were extended
until June 30, 2011. On March 17, 2011, we entered in a note agreement
with Jason Shapiro 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.
In May 19, 2011, Jason M. Shapiro also agreed to waive and relinquish
$75,000 of obligations owed to him that accrued during the three month
period ended March 31, 2011, and further agreed upon completion of this
offering to convert $221,250 of other Iron Eagle accrued obligations
owed to him as at December 31, 2010 excluding the above $265,000 notes
into 55,313 shares of common stock at an effective conversion price of
$4.00 per share. In addition Mr. Shapiro has agreed not to sell or
offer to sell such shares or other shares of common stock he owns in
Iron Eagle for a period of 12 months following the completion of this
offering, except as per a Board approved lock-up agreement.
82
Upon completion of this offering our only remaining outstanding
obligations to Jason M. Shapiro shall consist of accrued salary and
out-of-pocket expenses from April 1, 2011 and the notes referred to
above.
In January 2011, Joseph LoCurto, our former chairman and Jed Sabio, our
executive vice president of business development, each lent Iron Eagle
the sum of $30,000 that we intend to repay upon completion of this
offering.
On May 19, 2011, Mr. Sabio purchased for a consideration of $500 from
Jason M. Shapiro and Jake Shapiro an aggregate of 62,500 shares of Iron
Eagle common stock (31,500 shares purchased from each). Mr. Sabio has
agreed not to sell or offer to sell such shares or other shares of
common stock they own in Iron Eagle for a period of 12 months following
the completion of this offering, except as per a Board approved lock-up
agreement. In addition, in accordance with an agreement we entered into
with Mr. Sabio on May 19, 2011, effective upon completion of this
offering, Mr. Sabio waived and relinquished $151,250 of Iron Eagle cash
and stock compensation obligations that accrued for the benefit of Mr.
Sabio during the three month period ended March 31, 2011. Upon
completion of this offering our only remaining outstanding obligations
to Jed Sabio shall consist of accrued salary and out-of-pocket expenses
from April 1, 2011
Joseph E. Antonini and Gary J. Giulietti, two of our non-executive
directors, have agreed to waive an aggregate of $25,000 of directors
fees that accrued during the three month period ended March 31, 2011,
and convert a total of $55,685 of directors compensation accrued as at
December 31, 2010 into an aggregate of 13,922 additional shares of
common stock, and have further agreed to enter into a lockup" agreement
as to their Iron Eagle shares identical to the terms of such agreements
entered into with other executive officers and directors.
Our DMC subsidiary is currently indebted to Bruce Bookbinder
approximately $750,000 for loans and advances previously made to it
prior to the date of Iron Eagle's January 2011 acquisition. The
obligation to Mr. Bookbinder is evidenced by a demand note of DMC to
Mr. Bookbinder.
Iron Eagle 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, a company of which Jason
Shapiro, an officer and director, is a principal. Jason Shapiro is 100%
owner of Belle Haven Capital.
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.
83
PLAN OF DISTRIBUTION
Iron Eagle is offering the common stock described in this prospectus in
a best efforts offering. Aegis Capital Corp. shall act as a selling
agent and as the representative of the several selling agents named
below. Subject to the terms and conditions contained in the selling
agents' agreement, each of the selling agents have agreed to act as
agents for Iron Eagle and will use their best efforts to sell, during
an offering period commencing on the date of this prospectus and ending
not later than September 2, 2011, unless such date is extended by the
Company with the written consent of Bruce A. Bookbinder, as holder of
the Company's purchase Note due September 2, 2011, a minimum of
2,000,000 shares and a maximum of 3,000,000 shares of common stock, at
an initial offering price of $5.00 per share. Neither Aegis Capital
Corp. nor any of the other selling agents are acting as underwriters
nor will any of the selling agents commit to purchase or purchase any
shares of common stock for resale.
A minimum of 2,000,000 shares of common stock must be sold by the
expiration of the offering period in order to complete this offering.
Until completion of the offering, all proceeds from the sale of our
shares will be held in an interest bearing escrow account at Signature
Bank, New York, New York. In the event that, for any reason, a minimum
of $10,000,000 from the sale of 2,000,000 shares are not received by
the expiration of the offering period, or the other conditions to
closing set forth below are not met, all escrowed proceeds will be
returned to investors in full, together with accrued interest thereon,
calculated from the date of deposit to the date immediately prior to
the date such proceeds are refunded.
Iron Eagle's common stock is currently traded on the OTCQB under the
symbol IEAG.OTCQB. On August 2, 2011, the last reported sale price of
the common stock on the OTCQB was $3.20 per common share. Prior to
completion of the offering described in this prospectus, Iron Eagle
will consummate a one-for-eight reverse split of its outstanding common
stock.
Under the terms of the selling agents' agreement with the selling
agents, as a condition to completion of this offering and release of
the escrowed funds, Iron Eagle is required to:
- Retire in full the principal of and accrued interest (estimated
at approximately $8,942,000) on its promissory note payable to
Bruce A. Bookbinder, the former owner of 100% of the equity of
Sycamore Enterprises LLC and its DMC subsidiary; and
- List its common stock on either the Nasdaq Stock Exchange, Inc.
or the NYSE:AMEX Stock Exchange, Inc.
In addition to the above,
- the representations and warranties made by us shall be true and
correct and all or our agreements shall have been performed;
- there shall be no material adverse change in the financial
markets, in our business or in our consolidated financial
condition; and
84
- we shall deliver customary closing documents.
We will apply to list our common stock on the Nasdaq Stock Exchange
under the symbol: IEAG. There is no assurance that Nasdaq will approve
our listing application.
The selling agents shall receive selling commissions equal to seven
percent (7%) of the amount raised in the public offering. In addition,
Aegis Capital Corp. shall receive an expense allowance equal to two
percent (2%) of the amount raised in the public offering, for which it
need not account.
Aegis Capital Corp. and/or its designees, at the time of the closing of
the offering, shall receive warrants to purchase an aggregate number of
shares of common stock as shall equal 4% of the total number of shares
sold in the public offering. Neither the warrants nor any of the
securities underlying the warrants shall be redeemable by us. The
warrants shall be exercisable between the first and fifth anniversary
dates of the effective date of this prospectus. The holders of the
warrants have agreed that until August 5, 2011 (one year from the date
of this prospectus), they will not transfer the warrants or the
underlying securities, except to their respective officers, partners or
other members of the selling group. The warrants are exercisable at a
price per share equal to $6.00, or 120% of the public offering price of
the shares offered hereby, and are exercisable at any time or from time
to time, in whole or in part, during the warrant exercise term.
At any time during the five years commencing after the effective date
of this prospectus, Aegis Capital Corp. or the then holders of a
majority of the warrants or the underlying securities shall have the
right to require we to prepare and file a post-effective amendment to
the registration statement of which this prospectus is a part or a new
registration statement, if then required, covering all or any portion
of the warrants and/or the underlying securities. In addition, if any
time during the warrant exercise term, we 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, or of any
such securities held by our shareholders, we have agreed to include in
such registration statement such number of the representative's
warrants and/or underlying securities as the holders of such securities
may require.
In addition to the selling commissions and non-accountable expense
allowance, we have agreed to reimburse Aegis Capital Corp. for their
reasonable out-of-pocket expenses incurred in connection with their
engagement as selling agents, regardless of whether this offering is
consummated, including, without limitation, legal fees and expenses,
marketing, syndication and travel expenses. We estimate that such
expenses payable by us will be approximately $50,000.
We have agreed to indemnify Aegis Capital Corp. and the other selling
agents, and persons who control such persons, against certain
liabilities, including liabilities under the Securities Act, and to
contribute to payments that the selling agents may be required to make
in respect of these liabilities.
85
Aegis Capital Corp. will perform financial advisory and investment
banking services for us in the ordinary course of our businesses, and
may continue to receive, compensation for such services.
DESCRIPTION OF CAPITAL STOCK
The following statements constitute brief summaries of our certificate
of incorporation and bylaws, as amended.
Common Stock
Iron Eagle's certificate of incorporation authorizes Iron Eagle to
issue up to 875,000,000 shares of common stock, $0.00001 par value per
share.
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.
There are no limitations or restrictions upon the rights of the board
of directors to declare dividends out of any funds legally available
therefore. We have 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 our future growth. Accordingly, future
dividends, if any, will depend upon, among other considerations, we
need for working capital and its financial conditions at the time.
Holders of Iron Eagle common stock we are entitled to voting rights of
one vote for each share owned of record at all shareholders meetings
for all purposes.
Common stock is not redeemable, has no conversion rights and carries no
preemptive or other rights to subscribe to or purchase additional
common stock. Our common stock does 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 Company, Inc. acts as our transfer agent.
SHARES ELIGIBLE FOR FUTURE SALE
As of August 8, 2011, assuming completion of the one-for-eight reverse
stock split, there were 1,506,337 shares of our common stock
outstanding of which 242,320 shares may be freely traded without
restriction. The remaining common shares are restricted within the
meaning of Rule 144 under the Securities Act, and are subject to the
resale provisions of Rule 144.
86
Resales or distributions of restricted 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 selling
agent.
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 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
Iron Eagle as provided in the foregoing provisions, or otherwise, we
have 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 us of expenses incurred or paid by a
director, officer or controlling person of we 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, we 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.
87
EXPERTS
The financial statements of Iron Eagle appearing in this prospectus
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 MATTERS
The validity of the common shares being offered hereby will be passed
upon for the Company by Jody M. Walker, Attorney At Law, Centennial,
Colorado. Meister Seelig & Fein LLP, New York, New York, will act as
counsel to the Representative and the selling agents.
WHERE YOU CAN FIND MORE INFORMATION
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.
88
FINANCIAL STATEMENTS
Consolidated Balance Sheets at March 31, 2011
and December 31, 2010 89
Consolidated Statements of Operations for the Three Months
ended March 31, 2011 and 2010 91
Consolidated Statements of Cash Flows for the Three Months
ended March 31, 2011 and 2010 92
Notes to Consolidated Financial Statements 94
Report of Independent Registered Public Accounting Firm 121
Consolidated Balance Sheets 122
Consolidated Statements of Operations 123
Consolidated Statement of Changes in Stockholders' Equity 124
Consolidated Statements of Cash Flows 125
Notes to the Consolidated Financial Statements 126
89
IRON EAGLE GROUP, INC.
Consolidated Balance Sheets
March 31, 2011 and December 31, 2010
(Unaudited) (Audited)
March 31, December 31,
2011 2010
--------- -----------
ASSETS
Current Assets
Cash $ 2,684,139 $ 976
Contracts Receivable, net of allowance
of $150,000 and $ 0 14,017,527 0
Costs & Estimated Earnings in Excess of
Billings on Uncompleted Contracts 501,203 0
Deposits 132,950 0
Other Prepaid Assets 908,731 617,563
Prepaid Tax Deposits 298,966 0
----------- -----------
Total Current Assets 18,543,516 618,539
Fixed Assets, Net of Accumulated
Depreciation of $784,640 and $15,714 278,688 2,150
Goodwill 4,727,150 0
Non-Compete 271,644 0
----------- -----------
TOTAL ASSETS $23,820,998 $ 620,689
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable - Related Parties $ 479,439 $ 479,439
Accounts Payable 10,047,370 78,409
Advances From Officer 65,599 289,758
Accrued Liabilities 945,007 795,936
Notes Payable - Related Party 1,079,148 18,773
Capital Lease 2,344 2,344
Accrued Distributions - Taxes 24,340 0
Common Stock to be Issued 42,155 42,155
Billings in Excess of Cost & Estimated
Earnings on Uncompleted Contracts 2,408,276 0
Note Payable - Purchase of Delta 8,757,463 0
Notes Payable - Current Portion 11,377 0
Line of Credit 50,000 50,000
----------- -----------
Total Current Liabilities 23,912,518 1,756,814
----------- -----------
Long-Term Liabilities
Note Payable - Long-Term 3,802 0
Earn-Out 828,108 0
----------- -----------
TOTAL LIABILITIES 24,744,428 1,756,814
90
Stockholders' Equity
Preferred Stock ($.00001 par value,
20,000,000 shares authorized, 0 and 0
shares 0 0
issued and outstanding)
Common Stock ($.00001 par value,
875,000,000 shares authorized, 11,750,485
and 1,000 shares issued and outstanding) 118 116
Additional Paid in Capital 503,584 79,851
Accumulated Deficit (1,427,132) (1,216,092)
----------- -----------
Total Stockholders' Equity (923,430) (1,136,125)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $23,820,998 $ 620,689
=========== ===========
The accompanying notes are an integral
part of these financial statements.
91
IRON EAGLE GROUP, INC.
Consolidated Statements of Operations
For the Three Months Ended March 31, 2011 and 2010
(Unaudited)
Three Months Three Months
Ended Ended
March 31, 2011 March 31, 2010
----------- -----------
REVENUES $12,247,566 $ 0
COST OF REVENUE 11,411,943 0
----------- -----------
GROSS MARGIN 835,623 0
OPERATING EXPENSES
General and Administrative Expenses 269,578 172
Depreciation 53,059 0
Amortization of Non-Compete Agreements 28,356 0
Compensation Expense 329,563 50,000
Professional Fees 258,883 0
Professional Fees to Related Parties 0 60,000
----------- -----------
TOTAL OPERATING EXPENSES 939,439 110,172
----------- -----------
NET OPERATING INCOME (LOSS) (103,816) (110,172)
OTHER INCOME (EXPENSE)
Interest Expense (107,224) (782)
----------- -----------
NET INCOME (LOSS) BEFORE INCOME TAXES (211,040) (110,954)
Provision for Income Taxes (Expense)
Benefit 0 0
----------- -----------
NET INCOME (LOSS) $ (211,040) $ (110,954)
=========== ===========
Earnings per Share, basic and diluted $ (0.02) $ (110.95)
=========== ===========
Weighted Average Shares Outstanding,
basic and diluted 11,640,795 1,000
=========== ===========
The accompanying notes are an integral
part of these financial statements.
92
IRON EAGLE GROUP, INC.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2011 and 2010
(Unaudited)
Three Months Three Months
Ended Ended
March 31, 2011 March 31, 2010
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $ (211,040) $ (110,954)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation & Amortization Expense 81,415 0
Stock Issued for Services 423,735 0
Increase in Goodwill (4,727,150) 0
Increase in Non-Compete (300,000) 0
Increase in Contracts Receivable (14,017,527) 0
Increase in Costs & Estimated Earnings
in Excess of Billings (501,203) 0
(Increase) in Deposits (132,950) 0
(Increase) in Other Prepaid Assets (291,168) 0
(Increase) in Prepaid Tax Deposits (298,966) 0
Increase in Accounts Payable-Related Party 0 71,143
Increase (Decrease) in Accounts Payable 9,968,961 (10,971)
Increase in Advances from Officer (224,159) 0
Increase in Accrued Liabilities 149,071 50,000
Increase in Capital Lease 0 0
Accrued Distributions - Taxes 24,340 0
Increase in Billings in Excess of Cost
& Estimated Earnings 2,408,276 0
Increase in Earn Out 828,108 0
----------- -----------
Net Cash (Used) by Operating Activities (6,820,257) (782)
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed Assets Acquired in the Purchase
of Delta (329,597) 0
Cash Paid for Acquisition of Delta 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Note Payable - Purchase of Delta 8,757,463 0
Increase in Note Payable - Related Party 1,060,375 782
Increase in Note Payable 15,179 0
----------- -----------
Net Cash Provided by Financing
Activities 9,833,017 782
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,683,163 0
93
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 976 0
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 2,684,139 $ 0
=========== ===========
SUPPLEMENTAL NON-CASH DISCLOSURES:
Stock Issued for Services $ 423,735 $ 0
=========== ===========
Cash Paid for Interest Expense $ 0 $ 0
=========== ===========
Cash Paid for Income Taxes $ 0 $ 0
=========== ===========
The accompanying notes are an integral
part of these financial statements.
94
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 1 - Nature of Activities, History and Organization
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. As of April 2009, the
Company has discontinued all mining and exploration activities.
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. Iron Eagle 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. There can be no
assurance that the Company will not encounter problems as it attempts
to implement its business plan.
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"). 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 (1,867,459 post-reverse split) 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. 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.
95
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 1 - Nature of Activities, History and Organization (Continued)
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.
As a result of the recapitalization, the Company changed its fiscal
year from June 30th to December 31st, to conform to the merged entity.
Unaudited Interim Financial Statements:
The accompanying unaudited interim financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States and applicable Securities and Exchange Commission
("SEC") regulations for interim financial information. These financial
statements are unaudited and, in the opinion of management, include all
adjustments (consisting of normal recurring accruals) necessary to
present fairly the balance sheets, statements of operations and
statements of cash flows for the periods presented in accordance with
accounting principles generally accepted in the United States. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant
to SEC rules and regulations. It is presumed that users of this interim
financial information have read or have access to the audited financial
statements and footnote disclosure for the preceding calendar year
contained in the Form 10K, for the year ended December 31, 2010.
Operating results for the interim periods presented are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2011.
Operating Cycle:
The Company's work is performed primarily under lump sum contracts.
The duration of each project varies; however, completion typically
occurs within one year.
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.
96
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 1 - Nature of Activities, History and Organization (Continued)
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.
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 August 18, 2010, the date of the
reverse merger) and Sycamore Enterprises, LLC and its wholly owned
subsidiary, Delta Mechanical Contractors, LLC (as of January 21, 2011,
the date of the acquisition). All intercompany transactions have been
eliminated.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at
the date of the consolidated financial statements. Estimates also
affect the reported amount of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those
estimates.
97
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 1 - Nature of Activities, History and Organization (Continued)
Revenue and Cost Recognition - Construction Contracts:
Revenues from construction contracts are recognized on the percentage
of completion method, measured by the percentage of costs incurred to
date to estimated total costs for each contract. This method is used
because management considered expended costs to be the best available
measure of progress on these contracts. Revenues from time and
materials contracts are recognized on the basis of costs incurred
during the period plus the fee earned, measured by the cost-to-cost
method. Because of inherent uncertainties in estimating costs, it is
at least reasonably possible that the estimates used will change within
the near-term.
Contract costs include all direct subcontractors, material, labor
costs, benefits, licenses and fees, insurance and payroll taxes, and
those indirect costs related to contract performance such as small
tools and other indirect costs. Selling, general and administrative
costs are changed to expense as incurred. Provisions for estimated
losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions, and
estimated profitability, including those arising from contract penalty
provisions and final contract settlements may result in revisions to
costs and revenues and recognized in the period in which the revisions
are determined. Profit incentives are included in revenues when their
realization is reasonably assured. An amount equal to contract costs
attributable to claims is included in revenues when realization is
probably and the amount can be reasonably estimated.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts" represents revenues to be recognized in excess
of amounts billed. The liability, "Billings in excess of costs and
estimated earnings on uncompleted contracts," represents billings in
excess of revenues recognized.
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.
98
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 1 - Nature of Activities, History and Organization (Continued)
The inclusion of the Company's warrants, which are considered common
stock equivalents as of March 31, 2011 and 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.
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 three months
ended March 31, 2011 and 2010, the Company had no items of other
comprehensive income. Therefore, net loss equals comprehensive loss
for the three months ended March 31, 2011 and 2010.
Cash and Cash Equivalents:
The Company considers its holdings to be cash equivalents if the
instruments mature within 90 days from the date of acquisition and have
no penalty for early withdrawal. The Company has a potential
concentration of credit risk in that it maintains deposits with a
financial institution in excess of amounts insured by the Federal
Deposit Insurance Corporation (FDIC). The maximum deposit insurance
amount is $250,000, which is applied per depositor, per insured
depository institution for each account ownership category.
Contracts Receivable:
The Company provides an allowance for doubtful accounts equal to
estimated bad debt losses. The estimated losses are based on
historical collection experience, together with a review of the current
status of the existing receivables. Normal contracts receivable are
due 30 days after the issuance of the invoice. Contract retentions are
due 30 days after the completion of the project and acceptance by the
owner.
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.
99
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 1 - Nature of Activities, History and Organization (Continued)
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 of
the life of the lease. Maintenance and repairs which do not improve or
extend the lives of the respective assets, 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 statements 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 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.
Advertising:
Advertising costs are expensed as incurred. Advertising expense for
the three months ended March 31, 2011 and 2010 was $ 0 and $ 0.
Reclassification:
Certain account balances have been reclassified to enhance financial
statement comparability.
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 14 for a
discussion of new accounting pronouncements.
100
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 1 - Nature of Activities, History and Organization (Continued)
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 March 31, 2011 and December 31, 2010 the Company
did not have any financial instruments other than cash and cash
equivalents.
NOTE 2 - CONTRACT RECEIVABLES
The Company's contract receivables as of March 31, 2011 and December
31, 2010 are as follows:
March 31, 2011 December 31, 2010
-------------- -----------------
Contracts Receivable - Billed & Due $ 9,302,883 $ 0
Contracts Receivable- Retainage 4,864,644 0
Less: Allowance for Doubtful Accounts (150,000) 0
----------- ------
Total $14,017,527 $ 0
=========== ======
NOTE 3 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
The Company's Costs and estimated earnings on uncompleted contracts as
of March 31, 2011 and December 31, 2010 are as follows:
March 31, 2011 December 31, 2010
-------------- -----------------
Costs Incurred on Uncompleted
Contracts $ 75,298,191 $ 0
Estimated Earnings 5,613,756 0
------------ ------------
80,911,947 0
Less Billings to Date (82,819,020) 0
------------ ------------
Total $ (1,907,073) $ 0
============ ============
101
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 3 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
(Continued)
The following amounts are included in the accompanying consolidated
balance sheets under the following captions:
March 31, 2011 December 31, 2010
-------------- -----------------
Costs and estimated earnings in
excess of billings on uncompleted
contracts $ 501,203 $ 0
Billings in excess of costs and
estimated earnings on uncompleted
contracts (2,408,276) 0
----------- ------------
Total $(1,907,073) $ 0
=========== ============
NOTE 4 - 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 March 31, 2011 and December 31, 2010 are reflected as
a prepaid asset. The gross prepaid expense as of March 31, 2011 and
December 31, 2010 is $1,288,054 and $827,860. The net prepaid expense
as of March 31, 2011 and December 31, 2010 is $908,731 and $617,563,
reflecting amortization for the three months ended March 31, 2011 of
$169,026 and the year ended December 31, 2010 was $216,297. There were
no amounts prepaid as of March 31, 2010.
NOTE 5 - FIXED ASSETS
Fixed assets at March 31, 2011 and December 31, 2010 consist of the
following:
March 31, December 31,
2011 2010
------- -------
Office Equipment and Furniture $ 172,146 $17,864
Tools and Equipment 324,861 0
Computer Equipment 157,317 0
Vehicles 387,119 0
Leasehold Improvements 21,885 0
--------- -------
Subtotal 1,063,328 17,864
Accumulated Depreciation (784,640) (15,714)
--------- -------
Total $ 278,688 $ 2,150
========= =======2
101
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 5 - FIXED ASSETS (Continued)
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.
Depreciation expense for the three months ended March 31, 2011 and 2010
was $53,059 and $0, respectively.
NOTE 6-INTANGIBLE ASSETS & EARN OUT RELATED TO THE ACQUISITION OF DELTA
The aggregate purchase price to be paid by the Company for the
purchased membership interests consists of:
(I) $9,000,000 buyer note (secured by Delta Mechanical),
(ii) future contingency payment(s), based on Iron Eagle'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.
The Company has recorded goodwill of $4,727,150 which represents the
purchase price of Delta over the net assets identified less liabilities
assumed.
As part of the purchase of Delta Mechanical, the Company also executed
a two year non-compete with the Seller, which the Company and that both
parties mutually agreed that the $300,000 was a reasonable and fair
value of the non-compete.
The identifiable intangible assets are being amortized over their
respective useful lives of the non-compete agreement, which is two
years. During the three months ended March 31, 2011, the Company
recorded amortization expense of $28,356 related to the non-compete
agreement.
Goodwill is tested for impairment on an annual basis and between annual
tests if events or circumstances indicate that an impairment loss may
have occurred, and written down when impaired. The Company will
perform our annual impairment tests during the fourth quarter of each
year using the opening balance sheet as of the first day of the fourth
quarter, with any resulting impairment recorded in the fourth quarter
of the fiscal year.
103
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 6 - INTANGIBLE ASSETS & EARN OUT RELATED TO THE ACQUISITION OF
DELTA (Continued)
The Company evaluates long-lived assets and amortizable intangible
assets whenever events or changes in business circumstances or our
planned use of assets indicate that their carrying amounts may not be
fully recoverable or that their useful lives are no longer appropriate.
Reviews are performed to determine whether the carrying values of
assets are impaired based on comparison to the undiscounted expected
future cash flows identifiable to such long-lived and amortizable
intangible assets. If the comparison indicates that impairment exists,
the impaired asset is written down to its fair value.
During the three months ended March 31, 2011, the Company noted no
indications of impairment or triggering events to cause a review of
goodwill for potential impairment and will conduct its annual goodwill
testing during the fourth quarter of 2011. There was no goodwill at
December 31, 2010.
NOTE 7 - 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. As discussed in Note 13, Belle Haven agreed to
waive their compensation earned by them during the first quarter of
2011. The compensation expense to Belle Haven began to accrue again as
of April 1, 2011.
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 March 31, 2011 and December 31,
2010, the Company had accrued $479,439 and $479,439, respectively in
amounts due to Belle Haven.
On December 31, 2009, the Company entered into two note agreements with
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 Jason Shapiro, its current Chief Executive
Officer, $45,952 as of March 31, 2011 and $271,259 as of December 31,
2010 for operating expenses, which, in general include professional
fees for audit, legal and investor relations.
104
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 7 - RELATED PARTY TRANSACTIONS (Continued)
On March 8, 2011, the Company entered into note agreements with two
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 Iron Eagle
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%.
NOTE 8 - ACCRUED COMPENSATION
The Company has entered into employment agreements with the Company's
management team, as outlined in Note 13. As of March 31, 2011 and
December 31, 2010, no cash compensation has been paid, and the Company
has accrued amounts pursuant to these agreements.
NOTE 9 - 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 10 - DEBT ISSUANCES
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 Iron Eagle receiving at least $100,000 of
funding.
On March 8, 2011, the Company has entered into note agreements with the
Company's CEO Chairman of the Board and the Company's Executive Vice
President for a total of $60,000, as outlined in Note 7.
On March 17, 2011, the Company converted $250,000 of the "Advances from
Officer" from the Company's CEO into a note agreement, as outlined in
Note 7.
On January 21, 2011, as part of the purchase price of Delta Mechanical,
the Company issued a buyer note of $ 9,000,000 to Bruce A. Bookbinder
("Buyer Note"). The Buyer Note is secured by the Company's membership
interest in Sycamore Enterprises LLC, Delta Mechanical's parent. The
due date for the Buyer Note is June 2, 2011.
105
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 10 - DEBT ISSUANCES (Continued)
Unless extended, there is a possibility that the Mr. Bookbinder may
exercise his right to the collateral and thus the Company may lose its
entire equity investment in Delta. This would have a significant
adverse effect of the Company and its operations. The Company's
management team is in good relations with Bruce Bookbinder and is in
discussions about extending the due date of the Buyer Note.
NOTE 11 - EQUITY
In December 2009, Iron Eagle Nevada 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 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 terms 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 March 31, 2011 and December 31, 2010, respectively.
106
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 11 - EQUITY (Continued)
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 March 31, 2011 and 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 March
31, 2011 and 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 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 March 31, 2011 and
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 selling
agent 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.
107
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 11 - EQUITY (Continued)
On January 21, 2011, the board of directors ratified its media
relations agreement dated December 7, 2010 between Iron Eagle 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, Iron Eagle 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.
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.
108
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 11 - EQUITY (Continued)
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.
On March 13, 2011, the Company granted 47,729 shares of stock to Gary
Giulietti, as compensation for his services as a director of the
Company from the time period of May 4, 2010, the date Mr. Giulietti
joined the board of directors, to March 31, 2011. These shares were
valued at $0.95 a share.
On March 13, 2011, the Company granted 37,203 shares of stock to JEA
Energy LLC, a firm 100% owned by Joseph Antonini, as compensation for
his services as a director of the Company from the time period of July
16, 2010, the date Mr. Antonini joined the board of directors, to March
31, 2011. These shares were valued at $0.95 a share.
On May 5, 2011, pursuant to a Board of Directors authorization, the
Company granted 5,000 common shares to Solar Flash Partners, LLC, a
firm 100% owned by attorney Ron Levy as consideration for Mr. Levy's
legal services. These shares were valued at $0.85 per common share.
There are no other stock option or other equity based compensation
plans. As of March 31, 2011 and December 31, 2010, the Company has
accrued $42,155 and $42,155 in shares to be issued to Mr. Bovalino and
Mr. Hoffman pursuant to these compensation agreements.
Purchase of Marketable Securities
On March 15, 2011, the Company purchased 250,000 common shares of Iron
Eagle 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.
109
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 11 - EQUITY (Continued)
Warrants:
As described above, 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 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
As described above, on March 1, 2011, the Company entered into a one
year consulting agreement with RJ Falkner & Company, Inc. ("Falkner").
As part of the agreement, the Company issued Falkner a three-year
option to purchase 85,000 shares of the Company's common stock, at an
exercise price of $1.01 a share. The fair value of the warrant was
$75,219. The fair value of the warrant was determined using the Black
Scholes option pricing model with the following assumptions:
Risk free interest rate 1.15%
Volatility 177%
Dividend 0
Weighted average expected life 3 years
110
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 11 - EQUITY (Continued)
The following schedule summarizes the Company's warrant activity since
inception through March 31, 2011:
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 $ 2.75 0
Warrants exercised 0 0 0 0
Warrants expired 0 0 0 0
------- -------- ------- -------
Outstanding at
December 31, 2010 108,750 $ 1.32 2.75 0
======= ======== ======= =======
Warrants granted
during Q1 2011 85,000 $ 1.01 $ 3.00 0
Warrants exercised 0 0 0 0
Warrants expired 0 0 0 0
------- -------- ------- -------
Outstanding at
March 31, 2011 193,750 $ 1.18 2.86 0
======= ======== ======= =======
NOTE 12 - 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 March 31, 2011 and December 31, 2010, are as follows:
111
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 12 - INCOME TAXES (Continued)
Deferred Tax Asset Related to:
March 31, 2011 December 31, 2010
-------------- -----------------
Prior Year $ 304,023 $ 67,743
Tax Benefit for Current Year 52,760 236,280
--------- ---------
Total Deferred Tax Asset 356,783 304,023
Less: Valuation Allowance (356,783) (304,023)
--------- ---------
Net Deferred Tax Asset $ 0 $ 0
========= =========
The net deferred tax asset generated by the loss carryforward has been
fully reserved. The cumulative net operating loss carry-forward is
approximately $1,427,132 and $1,216,092 at March 31, 2011 and December
31, 2010, and will expire in the years 2029 through 2031.
The realization of deferred tax benefits is contingent upon future
earnings and is fully reserved at March 31, 2011 and December 31, 2010.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
Employment Agreements:
On May 19, 2011, the executive management team, the board of directors,
Belle Haven Partners, and former officers Glen Gamble and Robert
Hildebrand agreed to waive their compensation for the three months
ended March 31, 2011 for an aggregate amount of $615,250. The
compensation expense of these parties, as outlined in the agreements
below, began to accrue again as of April 1, 2011.
Shapiro Employment Agreement
Mr. Shapiro was hired as Iron Eagle'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 Iron Eagle, 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.
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, Iron Eagle 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.
112
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)
The employment agreement provides for an initial annual base salary of
$225,000 in cash and 5,000 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, Iron Eagle 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 Iron Eagle as well
as a signing bonus of $71,000 in cash and 71,000 shares in Iron Eagle.
The agreement also provides for an initial annual incentive of $50,000
in cash and 75,000 shares in Iron Eagle. Mr. Sabio's compensation,
signing bonus, and other benefits will accrue until Iron Eagle 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, Iron Eagle 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 Iron Eagle as well
as a signing bonus of $130,000 in cash and 130,000 shares in Iron
Eagle. The agreement also provides for an annual incentive of 100% of
his base salary payable. Mr. Sabio's fee, signing bonus, and other
benefits will accrue until Iron Eagle raises the necessary capital to
fund its first acquisition or acquisitions and the raise is at least
$10,000,000.
Bovalino Employment Agreement
Mr. Bovalino was hired as Iron Eagle's chief executive officer in April
2010. In connection with his employment, Iron Eagle entered into a 30
month employment agreement on April 26, 2010. 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 Iron
Eagle for Cause or Employee's voluntary termination without Good
Reason, Employee will receive a) three (3) months of Base Salary if
such termination occurred within one (1) year of the signing of this
Agreement or b) nine (9) months of Base Salary if such termination
occurred over one (1) year from the signing of this Agreement. On
September 13, 2010, Iron Eagle amended the employment agreement with
Mr. Bovalino.
113
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)
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.
Hoffman Employment Agreement
Mr. Hoffman was hired as Iron Eagle's chief financial officer in May
2010. In connection with his employment, Iron Eagle entered into a 24
month employment agreement on May 4, 2010. The employment agreement
provides 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, Iron Eagle 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.
Former Officers and Directors Resignations
Glen R. Gamble resigned from Iron Eagle effective August 18, 2010. In
connection with his resignation and to ensure a smooth transition, Iron
Eagle agreed to pay Mr. Gamble $8,000 per month in connection with
consulting services to be provided until such time Iron Eagle no longer
requires Mr. Gamble's services. Robert Hildebrand resigned from Iron
Eagle effective August 18, 2010. In connection with his resignation
and to ensure a smooth transition, Iron Eagle agreed to pay Mr.
Hildebrand $8,000 per month for consulting services to be provided
until such time Iron Eagle no longer requires Mr. Hildebrand's
services.
Michael Bovalino resigned from Iron Eagle effective November 23, 2010.
Eric Hoffman resigned from Iron Eagle effective November 23, 2010.
Director Compensation
Independent directors receive an initial stock award of $50,000 for
joining Iron Eagle'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.
114
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)
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:
Year Amount
---- -------
2011 $50,878
2012 -
2013 -
2014 and beyond -
-------
Total $50,878
=======
Additionally, the Company leases two warehouse facilities as a tenant
at will with monthly payments of $2,000 and $950, respectively.
Loss Contingencies
Certain conditions may exist as of the date the combined 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.
115
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)
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.
NOTE 14 - 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.
116
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 14 - RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
The adoption of this guidance did not have a material impact on the
Company's consolidated financial statements or the related disclosures.
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
was January 1, 2011 for the Company. 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 March 31, 2011
In December 2010, the FASB amended its existing guidance for goodwill
and other intangible assets. This authoritative guidance modifies Step
1 of the goodwill impairment test for reporting units with zero or
negative carrying amounts. For those reporting units, an entity is
required to perform Step 2 of the goodwill impairment test if there are
qualitative factors indicating that it is more likely than not that a
goodwill impairment exists. The qualitative factors are consistent with
the existing guidance which requires goodwill of a reporting unit to be
tested for impairment between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair
value of a reporting unit below its carrying amount. This authoritative
guidance becomes effective for the Company in 2012. The implementation
of this authoritative guidance is not expected to have a material
impact on our consolidated financial position, results of operations
and cash flows.
Management has reviewed these new standards and believes they had or
will have no material impact on the financial statements of the
Company.
NOTE 15 - 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:
117
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS AND LIABILITIES
(Continued)
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.
As of March 31, 2011 and 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.
Fair Value Measurement at
March 31, 2011 Using:
----------------------------------------
Quoted
Prices In
Active
Markets Significant
For Other Significant
March 31,IdenticalObservableUnobservable
2011 (Level 1) (Level 2) (Level 3)
---------- ---------- ------- ----------
Assets:
Cash and cash equivalents $2,684,139 $2,684,139 $ - $ -
---------- ---------- ------- ----------
Liabilities $2,684,139 $2,684,139 $ - $ -
---------- ---------- ------- ----------
Note Payable - Seller's Note $8,757,463 $ - $ - $8,757,463
Capital Lease 2,344 - - 2,344
Line of Credit 50,000 - - 50,000
---------- ---------- ------- ----------
$8,809,807 $ - $ - $8,809,807
---------- ---------- ------- ----------
118
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS AND LIABILITIES
(Continued)
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
------- ------ ------ -------
Fair Value Measurement at December 31, 2010 Using:
--------------------------------------------------
Quoted Prices
NOTE 16 - 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.
119
IRON EAGLE GROUP, INC.
Notes to the Consolidated Financial Statements
As of March 31, 2011
(Unaudited)
NOTE 16 - 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:
On May 5, 2011, pursuant to a Board of Directors authorization, the
Company granted 5,000 common shares to Solar Flash Partners, LLC, a
firm 100% owned by attorney Ron Levy as consideration for Mr. Levy's
legal services. These shares were valued at $0.85 per common share.
On May 19, 2011, the executive management team, the board of directors,
Belle Haven Partners, and former officers Glen Gamble and Robert
Hildebrand agreed to waive their compensation for the three months
ended March 31, 2011 for an aggregate amount of $615,250. The
compensation expense of these parties, as outlined in Note 13, began to
accrue again as of April 1, 2011.
No other reportable subsequent events were noted.
120
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 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
121
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.
122
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.
123
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.
124
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
========= ========= ==========
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.
125
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
DMC 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.
126
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.
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.
127
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.
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.
128
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 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.
129
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)
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.
130
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.
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.
131
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
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 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.
132
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)
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 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 selling
agent 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.
133
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)
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
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.
134
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 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
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.
135
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)
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 us for cause or employee's voluntary
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.
136
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)
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:
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.
137
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.
138
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.
139
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
======= ==== ==== =======
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 $ - $ - $ - $ -
------- ---- ---- -------
- - - -
------- ---- ---- -------
140
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)
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.
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 DMC 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.
141
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)
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 Statement of
Operations 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 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 Statement of Operations 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.
142
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)
December 31, 2010
(Unaudited)
---------------------------
Delta
Iron Eagle(a) Mechanical(b) Adjustments(c) Pro Forma
------------- ------------- -------------- ---------
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
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
143
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)
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
Allocation of Purchase Price
----------------------------
Equity of DMC Contractors $ 4,897,480
Non-compete 300,000
Customer Contracts -
Goodwill 4,615,841
-----------
Total Allocation $ 9,813,321
(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.
144
IRON EAGLE GROUP, INC.
Pro Forma Consolidated Statement of Operations
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
========= ===========
145
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 Statement of
Operations for the year ended December 31, 2010
(b) Scheduled from Delta's unaudited Statement of Operations 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 we 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, we 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.
146
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 we receiving at least $100,000 of funding.
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 we 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%.
147
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)
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.
148
SYCAMORE ENTERPRISES, LLC
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
September 30, 2010 AND 2009
149
SYCAMORE ENTERPRISES, LLC
AND SUBSIDIARIES
Table of Contents
Page
Report of Independent Registered Public Accounting Firm 150
Consolidated Balance Sheets
September 30, 2010 and 2009 151
Consolidated Statements of Income
For the years ended September 30, 2010 and 2009 153
Consolidated Statements of Changes in Equity
For the years ended September 30, 2010 and 2009 154
Consolidated Statements of Cash Flows
For the years ended September 30, 2010 and 2009 155
Notes to the Consolidated Financial Statements
September 30, 2010 and 2009 157
150
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Member
Sycamore Enterprises, LLC and Subsidiaries
Warwick, Rhode Island
We have audited the accompanying consolidated balance sheets of
Sycamore Enterprises, LLC ("the Company") as of September 30, 2010 and
2009, and the related consolidated statements of income, changes in
equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Sycamore
Enterprises, LLC as of September 30, 2010 and 2009 and the results of
its operations and cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of
America.
The Hall Group, CPAs
Dallas, Texas
August 2, 2011
151
SYCAMORE ENTERPRISES, LLC
Consolidated Balance Sheets
September 30, 2010 and 2009
Assets
2010 2009
---- ----
Current Assets:
Cash and Cash Equivalents $ 3,186,002 $ 7,439,029
Contracts Receivable, Net of Allowance
of $150,000 and $150,000 11,109,466 16,783,107
Costs and Estimated Earnings in Excess
of Billings on Uncompleted Contracts 472,446 248,238
Deposits 133,950 134,450
Subchapter S Deposit 86,364 103,982
Prepaid Expenses and Other Current Assets 73,935 79,756
----------- -----------
Total Current Assets 15,062,163 24,788,562
Property and Equipment:
Building 803,163 803,163
Land 211,931 211,931
Motor Vehicles 387,120 527,661
Machinery and Equipment 324,861 318,441
Computer Equipment 157,317 152,249
Office Equipment 154,283 195,289
Leasehold Improvements 21,885 20,072
----------- -----------
2,060,560 2,228,806
Less Accumulated Depreciation &
Amortization (782,478) (863,588)
----------- -----------
Net Property and Equipment 1,278,082 1,365,218
Other Assets:
Subchapter S Deposit, less current
portion 209,888 295,796
----------- -----------
Total Assets $16,550,133 $26,449,576
=========== ===========
The accompanying notes are an integral part
of the financial statements.
152
SYCAMORE ENTERPRISES, LLC
Consolidated Balance Sheets (Continued)
September 30, 2010 and 2009
Liabilities and Equity
2010 2009
---- ----
Current Liabilities:
Current Maturities of Long-Term Debt $ 109,551 $ 170,837
Accounts Payable 5,605,946 9,929,815
Billings in Excess of Costs and Estimated
Earnings on Uncompleted Contracts 3,048,913 4,683,674
Accrued Expenses:
Payroll 390,905 587,420
Distributions 299,478 34,751
Other 433,267 199,123
----------- -----------
Total Current Liabilities 9,888,060 15,605,620
Long-Term Liabilities:
Long-Term Debt, Less Current Maturities 570,564 768,191
Due to Member 1,000,000 1,000,000
----------- -----------
Total Long-Term Liabilities 1,570,564 1,768,191
----------- -----------
Total Liabilities 11,458,624 17,373,811
Equity:
Delta Mechanical Contractors, LLC
Member's Equity 4,757,084 8,847,596
Non-Controlling Interest 334,425 228,169
----------- -----------
Total Equity 5,091,509 9,075,765
----------- -----------
Total Liabilities and Equity $16,550,133 $26,449,576
=========== ===========
The accompanying notes are an integral part
of the financial statements.
153
SYCAMORE ENTERPRISES, LLC
Consolidated Statements of Income
For the Years Ended September 30, 2010 and 2009
September 30, September 30,
2010 2009
------------ ------------
Revenues:
Contract Revenues Earned $43,003,070 $68,687,661
Cost of Revenues Earned 37,775,348 62,145,617
----------- -----------
Gross Profit 5,227,722 6,542,044
Operating Expenses:
Depreciation and Amortization 176,368 213,444
Selling, General and Administrative 3,188,795 2,989,455
----------- -----------
Total Operating Expenses 3,365,163 3,202,899
Net Operating Income 1,862,559 3,339,145
Other Income (Expense)
Interest Income 15,412 67,358
Interest Expense (104,924) (124,617)
Loss on Sale of Equipment (18,911) 0
Other Income (Expense) (786) 48,294
----------- -----------
Total Other Income (Expense) (109,209) (8,965)
Net Income $ 1,753,350 $ 3,330,180
Less: Net Income Attributable to
Non-Controlling Interest (106,256) (95,666)
----------- -----------
Net Income Attributable to Delta
Mechanical Contractors, LLC $ 1,647,094 $ 3,234,514
=========== ===========
The accompanying notes are an integral part
of the financial statements.
154
SYCAMORE ENTERPRISES, LLC
Consolidated Statements of Changes in Equity
For the Years Ended September 30, 2010 and 2009
Delta
Mechanical Non-
Contractors, Controlling
LLC Member Interest Total Equity
----------- ----------- ------------
Balances as of September 30, 2008 $ 8,715,247 $ 132,503 $ 8,847,750
Net Income 3,234,514 95,666 3,330,180
Distributions (3,102,165) 0 (3,102,165)
----------- --------- -----------
Balances as of September 30, 2009 8,847,596 228,169 9,075,765
Net Income 1,647,094 106,256 1,753,350
Distributions (5,737,606) 0 (5,737,606)
----------- --------- -----------
Balances as of September 30, 2010 $ 4,757,084 $ 334,425 $ 5,091,509
=========== ========= ===========
The accompanying notes are an integral part
of the financial statements.
155
SYCAMORE ENTERPRISES, LLC
Consolidated Statements of Cash Flows
For the Years Ended September 30, 2010 and 2009
2010 2009
---- ----
Cash flows from operating activities
Net income $ 1,753,350 $ 3,330,180
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 176,368 213,444
Loss on sale of property and equipment 18,911 0
Increase (decrease) in cash resulting
from a change in:
Contracts receivable, net 5,673,641 2,797,227
Costs and estimated earnings in excess
of billings on uncompleted contracts (224,208) (120,829)
Prepaid expenses and other current
assets 5,821 (41,978)
Accounts payable (4,323,869) (172,845)
Billings in excess of costs and
estimated earnings on uncompleted
contracts (1,634,761) 133,236
Accrued expenses 37,629 (125,801)
----------- -----------
Net cash provided by operating
activities 1,482,882 6,012,634
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (199,156) (33,373)
Proceeds from sale of property and
equipment 91,013 0
Deposits refunded 104,026 194,290
----------- -----------
Net cash provided by (used in)
investing activities (4,117) 160,917
----------- -----------
Cash flows from financing activities:
Distributions to member (5,472,879) (3,123,433)
Principal payments on long-term debt (258,913) (166,888)
----------- -----------
Net cash (used in) financing
activities (5,731,792) (3,290,321)
----------- -----------
Net increase (decrease) in cash and
cash equivalents (4,253,027) 2,883,230
Cash and cash equivalents at the
beginning of the year 7,439,029 4,555,799
----------- -----------
Cash and cash equivalents at the end of
the year $ 3,186,002 $ 7,439,029
=========== ===========
156
Supplemental cash flow disclosures:
Cash paid during the year for
Interest $ 104,924 $ 124,617
=========== ===========
The accompanying notes are an integral part
of the financial statements.
157
SYCAMORE ENTERPRISES, LLC
Notes to Consolidated Financial Statements
September 30, 2010 and 2009
Note 1 - Operations
-------------------
Sycamore Enterprises, LLC (herein referred to as "the Company" or
"Sycamore") is a holding company whose only asset is its investment in
Delta Mechanical Contractors, LLC ("Delta").
Delta is a wholly owned subsidiary of the holding company Sycamore.
Delta is a subcontractor providing commercial and industrial
installations of plumbing, HVAC, and fire protection systems throughout
the New England region. Sycamore and Delta are collectively referred
to as "the Companies".
The consolidated financial statements include the accounts of Sycamore
Enterprises, LLC and its wholly owned subsidiary Delta Mechanical
Contractors, LLC. The Company has consolidated its Variable Interest
Entity ("VIE"), 44 Wilclar, LLC which is not owned by the parent, but
is wholly owned by the Company's sole member. 44 Wilclar, LLC ("44
Wilclar") is a real estate entity that was formed in 2007 to acquire
and renovate a facility for the Company in Rhode Island. Refer to Note
16 - Variable Interest Entities for additional information. Upon
consolidation, all significant intercompany transactions were
eliminated.
On January 21, 2011, Iron Eagle Group ("Iron Eagle"), a publically
traded company, acquired Sycamore by the issuance of an $8.7 million
note bearing 5% interest, which is due September 2, 2011. This note is
secured by a pledge of 100% of the equity of Delta and Sycamore. 44
Wilclar was excluded from the acquisition. See Note 20 - Subsequent
Events for additional information regarding the acquisition.
Note 2 - Significant Accounting Policies
----------------------------------------
A summary of the significant accounting policies followed by the
Companies in the preparation of the accompanying consolidated financial
statements is set forth below:
Operating Cycle - The Companies' work is performed primarily under
lump-sum contracts. The duration of each project varies; however,
completion typically occurs within one (1) year.
Amended Codification - Effective for the year ended September 30, 2010,
the Company retroactively adopted the amended presentation and
disclosure provisions of accounting for non-controlling interests in
consolidated financial statements. In accordance with these amended
provisions of consolidation, the term "minority interest" is now
referred to as "non-controlling interest" and is reported as a separate
component of equity apart from parent company equity on the face of the
balance sheet. Consolidated net income is adjusted to include the net
income attributed to the non-controlling interest, with separate
disclosure of net income attributable to the parent and non-controlling
interest on the face of the consolidated statement of operations or
comprehensive operations. The financial statements as of and for the
years ended September 30, 2010 and 2009 have been restated to reflect
these changes.
158
SYCAMORE ENTERPRISES, LLC
Notes to Consolidated Financial Statements
September 30, 2010 and 2009
Note 2 - Significant Accounting Policies - (Continued)
-----------------------------------------------------
Estimates - The preparation of consolidated financial statements in
accordance with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements. Estimates also affect the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue and Cost Recognition - Construction Contracts - Revenues from
construction contracts are recognized on the percentage-of-completion
method, measured by the percentage of costs incurred to date to
estimated total costs for each contract. This method is used because
management considers expended costs to be the best available measure of
progress on these contracts. Revenues from time and materials
contracts are recognized on the basis of costs incurred during the
period plus the fee earned, measured by the cost-to-cost method.
Because of inherent uncertainties in estimating costs, it is at least
reasonably possible that the estimates used will change within the
near-term.
Contract costs include all direct subcontractors, material, labor
costs, benefits, licenses and fees, insurance, and payroll taxes, and
those indirect costs related to contract performance such as small
tools and other indirect costs. Selling, general and administrative
costs are charged to expense as incurred. Provisions for estimated
losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions, and
estimated profitability, including those arising from contract penalty
provisions and final contract settlements may result in revisions to
costs and revenues and are recognized in the period in which the
revisions are determined. Profit incentives are included in revenues
when their realization is reasonably assured. An amount equal to
contract costs attributable to claims is included in revenues when
realization is probable and the amount can be reasonably estimated.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of
amounts billed. The liability, "Billings in excess of costs and
estimated earnings on uncompleted contracts," represents billings in
excess of revenues recognized.
Contracts Receivable - The Company provides an allowance for doubtful
accounts equal to estimated bad debt losses. The estimated losses are
based on historical collection experience together with a review of the
current status of the existing receivables. Normal contracts
receivable are due thirty (30) days after the issuance of the invoice.
Contract retentions are due thirty (30) days after the completion of
the project and acceptance by the owner.
159
SYCAMORE ENTERPRISES, LLC
Notes to Consolidated Financial Statements
September 30, 2010 and 2009
Note 2 - Significant Accounting Policies - (Continued)
-----------------------------------------------------
Property and Equipment - All property and equipment are stated at cost.
Major renewals, additions, and betterments are charged to the property
accounts while replacements, maintenance and repairs which do not
improve or extend the lives of the respective assets are expensed in
the year incurred.
Depreciation - Depreciation is computed using the straight-line method
over the estimated useful lives of the related assets as follows:
Assets Life in Years
------ -------------
Building 39
Motor vehicles 5
Machinery and equipment 5
Computer equipment 5
Office equipment 5
Leasehold improvements Life of lease
Income Taxes - The Companies are limited liability companies and have
elected to be taxed as S-Corporations under applicable Internal Revenue
Service code provisions. As such corporate income, losses and credits
are passed through to their member. The Companies accrue distributions
to the member to reflect a portion of the increase in the personal
income tax liabilities related to the corporate income included on the
individual's income tax returns.
During the year ended September 30, 2010, the Company adopted
accounting principles relating to the disclosure of uncertain income
tax positions. The related pronouncements changed the manner in which
the Company recognizes, presents, and discloses uncertain tax positions
within their financial statements. Accordingly, the Company may
recognize tax benefits only in the event that a position is more likely
than not to be sustained upon examination by the applicable taxing
authority. There was no impact on the September 30, 2010 consolidated
financial statements of the Company as a result of the adoption of
accounting for uncertain income tax positions. Tax years from 2007
through the current year remain open for examination by federal and
state tax authorities.
Advertising - Advertising costs are expensed as incurred. Advertising
expense for the years ended September 30, 2010 and 2009 were $1,488 and
$595, respectively.
Reclassification of Prior Year's Balances - Certain account balances as
of September 30, 2009 have been reclassified to enhance financial
statement comparability.
160
SYCAMORE ENTERPRISES, LLC
Notes to Consolidated Financial Statements
September 30, 2010 and 2009
Note 3 - Cash and Cash Equivalents
----------------------------------
The Company considers its holdings to be cash equivalents if the
instruments mature within ninety (90) days from the date of acquisition
and have no penalty for early withdrawal. The Company has a potential
concentration of credit risk in that it maintains deposits with a
financial institution's in excess of amounts insured by the Federal
Deposit Insurance Corporation (FDIC). The maximum deposit insurance
amount is $250,000, which is applied per depositor, per insured
depository institution for each account ownership category. As of
September 30, 2010, the Company had $3,263,766 in excess of FDIC
limits.
Note 4 - Contract Receivables
-----------------------------
The Company's contract receivables consist of the following:
2010 2009
---- ----
Contract receivables:
Billed:
Completed contracts $ 461,550 $ 175,513
Contracts-in-progress 7,306,484 10,263,881
Retained 3,491,432 6,493,713
----------- -----------
11,259,466 16,933,107
Less allowance for doubtful accounts (150,000) (150,000)
----------- -----------
Total Contract receivables $11,109,466 $16,783,107
Generally, contracts receivable are due thirty (30) days after the
issuance of the invoice. Contract retentions are due thirty (30) days
after the completion of the project and acceptance by the owner.
The Company provides an allowance for doubtful accounts equal to
estimated bad debt losses. The estimated losses are based on
historical collection experience together with a review of the current
status of the existing receivables.
Note 5 - Costs and Estimated Earnings on Uncompleted Contracts
--------------------------------------------------------------
The Company's costs and estimated earnings on uncompleted contracts are
as follows:
2010 2009
---- ----
Costs incurred on uncompleted contracts $ 46,993,210 $ 71,308,116
Estimated earnings 3,922,270 6,187,403
------------ ------------
50,915,480 77,495,519
Less billings to date (53,491,947) (81,930,955)
------------ ------------
Net Costs and Estimated Earnings on
Uncompleted Contracts $ (2,576,467) $ (4,435,436)
============ ============
161
SYCAMORE ENTERPRISES, LLC
Notes to Consolidated Financial Statements
September 30, 2010 and 2009
Note 5 - Costs and Estimated Earnings on Uncompleted Contracts -
(Continued)
----------------------------------------------------------------
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of
amounts billed. The liability, "Billings in excess of costs and
estimated earnings on uncompleted contracts," represents billings in
excess of revenues recognized.
The components of the Costs and Estimated Earnings on Uncompleted
Contracts are included in the accompanying consolidated balance sheets
under the following captions:
2010 2009
---- ----
Costs and estimated earnings in
excess of billings on uncompleted
contracts $ 472,446 $ 248,238
Billings in excess of costs and
estimated earnings on uncompleted
contracts (3,048,913) (4,683,674)
----------- -----------
Net Costs and Estimated Earnings on
Uncompleted Contracts $(2,576,467) $(4,435,436)
=========== ===========
Note 6 - Note Payable - Line of Credit
--------------------------------------
The Companies have a $3,000,000 revolving note payable-line of credit
with a bank expiring January 31, 2011 which is secured by substantially
all business assets of the Companies. The note payable - line of
credit is subject to certain financial and reporting covenants. The
note payable-line of credit bears interest at the bank's prime rate
plus one percent (1%), with a minimum rate of four and one half percent
(4.5%). At September 30, 2010 and 2009, there was no outstanding
balance on the note payable-line of credit.
Note 7 - Accounts Payable
-------------------------
Accounts payable includes amounts due to subcontractors of $1,041,050
and $2,174,928 as of September 30, 2010 and 2009, respectively, that
have been retained pending final acceptance of subcontract work.
162
SYCAMORE ENTERPRISES, LLC
Notes to Consolidated Financial Statements
September 30, 2010 and 2009
Note 8 - Long-Term Debt
-----------------------
The following is a summary of long-term debt at September 30:
2010 2009
---- ----
Mortgage note payable, to a bank, collateralized by
the related building and land and personally
guaranteed by a member and Delta with a monthly
principal payment of $6,000 through August 2016,
plus variable interest $ 404,000 $ 476,000
Second mortgage payable, to a bank, collateralized by
the related building and land and personally
guaranteed by the member and Delta with a
monthly principal payment of $2,875 through
May 2013, plus variable interest. A balloon
payment of $175,375 is due in May 2013 267,375 301,875
Note payable, with monthly payments of $332 at an
interest rate of 12.64% through May 2013. This
note is secured by office equipment 8,740 11,430
Notes payable, with monthly payments from $766 to
$3,677 including interest at rates from 4% to 7.2%
through January 2012. The notes are secured by
motor vehicles - 149,723
--------- ---------
680,115 939,028
Less current maturities 109,551 170,837
--------- ---------
$ 570,564 $ 768,191
========= =========
Aggregate maturities of long-term debt are as follows for the years
ending September 30:
2011 $ 109,551
2012 109,960
2013 272,604
2014 72,000
2015 72,000
Thereafter 44,000
---------
$ 680,115
=========
163
SYCAMORE ENTERPRISES, LLC
Notes to Consolidated Financial Statements
September 30, 2010 and 2009
Note 9 - Income Taxes
---------------------
Effective August 1, 2005, the member elected to be treated as a
Subchapter S Corporation for income tax purposes as provided in Section
1362(a) of the Internal Revenue Code. As such, the corporate income or
loss and credits are passed through to the member and combined with his
personal income and deductions to determine taxable income on his
individual tax returns at the federal level.
The Companies' accrue distributions to the member to cover the federal
and state income taxes which must be paid by the member on his personal
income tax returns resulting from corporate taxable income included on
his individual tax returns. The total distributions accrued at
September 30, 2010 and 2009 were $299,478 and $34,751, respectively.
The Tax Reform Act of 1987 requires a corporation treated as a
Subchapter S Corporation for income tax purposes to make a refundable,
non-interest bearing deposit with the Internal Revenue Service in order
to retain a fiscal year-end as opposed to changing to a calendar year-
end. The Companies elected to retain the fiscal year of September 30
and maintained deposits with the Internal Revenue Service of $296,252
and $399,778 at September 30, 2010 and 2009, respectively. The
deposits are adjusted annually based on changes in the Companies'
taxable income. The deposits are refundable upon liquidation of the
corporation, loss of S Corporation status or conversion to a calendar
year-end.
A portion of the income from residential construction contracts is
deferred for tax purposes. The income deferred on residential
construction contracts was approximately $0 and $502,283 at September
30, 2010 and 2009, respectively.
Note 10 - Multiemployer Pension Plan
------------------------------------
The Company makes contributions to multiemployer pension plans that
cover its various union employees. Multiemployer pension costs
incurred for the years ended September 30, 2010 and 2009 were
$1,626,008 and $2,305,637, respectively. Other union fringe benefit
costs incurred were $3,252,015 and $4,611,274 for the years ended
September 30, 2010 and 2009, respectively.
The Multiemployer Pension Plan Amendments Act of 1980 amended ERISA to
establish funding requirements and obligations for employers
participating in multiemployer plans, principally related to employer
withdrawal from or termination of such plans. Separate actuarial
calculations of the Company's position are not available with respect
to the multiemployer plans.
Note 11 - Defined Contribution Plan
-----------------------------------
The Company has a defined contribution retirement plan which qualifies
under Section 401(k) of the Internal Revenue Code. Under the plan,
employees meeting certain eligibility requirements can currently elect
to defer an amount up to IRS limitations. The Company provides a
164
SYCAMORE ENTERPRISES, LLC
Notes to Consolidated Financial Statements
September 30, 2010 and 2009
Note 11 - Defined Contribution Plan - (Continued)
------------------------------------------------
matching contribution based on participants' contributions.
Contributions in the amount of $55,456 and $57,246 were made to this
plan for the years ended September 30, 2010 and 2009, respectively.
Note 12 - Concentrations
------------------------
Transactions with three (3) major customers accounted for approximately
fifty seven percent (57%) and sixty two percent (62%) of the contract
revenues of the Companies for the years ended September 30, 2010 and
2009, respectively.
Contracts receivable with these 3 major customers accounted for
approximately sixty percent (60%) and fifty four percent (54%) of
contracts receivable of the Companies at September 30, 2010 and 2009,
respectively.
Note 13 - Contingencies
-----------------------
The Company is involved in litigation with respect to certain matters
and claims arising in the ordinary course of business. It is the
opinion of management (based upon advice of legal counsel) that such
litigation and claims will be resolved without material effect to the
Company's consolidated financial statements.
Note 14 - Operating Leases
--------------------------
The Company leases a warehouse facility as a tenant at will with
monthly payments of $2,000. Rent expense under the agreement was
$24,000 during the years ended September 30, 2010 and 2009,
respectively.
The Company leases a warehouse facility as a tenant at will with
monthly payments of $950. Rent expense under the agreement was $11,400
and $9,500 during the years ended September 30, 2010 and 2009,
respectively.
The Company formerly leased an office and warehouse facility as a
tenant at will through January 2009 and October 2009, respectively.
Rent expense under these leases was $1,585 and $31,786 during the years
ended September 30, 2010 and 2009, respectively.
Note 15 - Related Party Transactions
------------------------------------
Due to Related Parties - The Companies have an amount due to member of
$1,000,000 at September 30, 2010 and 2009, with interest at seven and
three-quarters percent (7.75%), payable monthly. The amount is no
longer subordinate to the surety and/or bank interests and the Company
can repay any of the amount due as its management deems appropriate.
During the year ended September 30, 2010 the bank and surety were made
aware of all significant distributions.
165
SYCAMORE ENTERPRISES, LLC
Notes to Consolidated Financial Statements
September 30, 2010 and 2009
Note 15 - Related Party Transactions - Continued
------------------------------------------------
Related Party Lease - Delta leases their primary operating facility as
a tenant at will from Wilclar, a consolidated VIE. Under the agreement
Delta is required to pay monthly installments of $12,500. Delta is
also responsible for the operating expenses of the building. Rent
expense was $150,000 for the years ended September 30, 2010 and 2009,
respectively, and was eliminated in consolidation.
Note 16 - Variable Interest Entity
----------------------------------
44 Wilclar, LLC (Wilclar) is a real estate entity that was formed in
2007 to acquire and renovate a facility for the Company in Rhode
Island. It is not owned by the Company but is wholly owned by Delta's
sole member. All of Wilclar's rental income is from Delta. The
"primary beneficiary" of a Variable Interest Entity ("VIE") is required
to include the VIE's assets, liabilities and operating results in its
consolidated financial statements. In general, a VIE is a corporation,
partnership, limited liability corporation, trust or any other legal
structure used to conduct activities or hold assets that either (i) has
an insufficient amount of equity to carry out its principal activities
without additional subordinated financial support; (ii) has a group of
equity owners that are unable to make significant decisions about its
activities; or (iii) has a group of equity owners that do not have an
obligation to absorb losses or the right to receive returns generated
by its operations.
The Company has determined that 44 Wilclar, LLC is a VIE for which
Delta is deemed the primary beneficiary and, accordingly, has included
it in the Company's consolidated financial statements for the years
ended September 30, 2010 and 2009.
The following is selected information for 44 Wilclar, LLC as of
September 30:
2010 2009
---- ----
The Company's variable interest in 44 Wilclar, LLC
is comprised of:
Loan guaranties $ 671,375 $ 777,875
========= =========
166
SYCAMORE ENTERPRISES, LLC
Notes to Consolidated Financial Statements
September 30, 2010 and 2009
Note 16 - Variable Interest Entity - (Continued)
-----------------------------------------------
44 Wilclar, LLC rents commercial real estate in Rhode Island
exclusively to Delta.
2010 2009
---- ----
Selected financial information from 44
Wilclar, LLC:
Assets $ 1,005,800 $ 1,006,044
Liabilities 671,375 777,875
Equity 334,425 228,169
Rental income 150,000 150,000
Net income 106,256 95,666
At September 30, 2010 and 2009, 44 Wilclar, LLC has assets with a
carrying amount of $948,485 and $969,079, respectively. These assets
are classified on the consolidated balance sheet as building and land
and were specifically collateralized by its mortgage debt outstanding.
the VIE's creditors have no further recourse against the Company,
except to the extent of the $671,375 and $777,875 guarantee by Delta
Mechanical Contractors, LLC to the VIE's mortgage creditor at September
30, 2010 and 2009, respectively.
Note 17 - Backlog (Unaudited)
----------------------------
The following schedule shows a reconciliation of backlog representing
the amount of revenues the Company expects to realize from work to be
performed on uncompleted contracts in progress at September 30, 2010
and for contractual agreements on which work has not yet begun.
Balance at September 30, 2009 $ 25,159,272
New contracts and adjustments 62,287,624
------------
87,446,896
Less contract revenues earned, 2010 43,003,070
------------
Balance at September 30, 2010 $ 44,443,826
============
167
SYCAMORE ENTERPRISES, LLC
Notes to Consolidated Financial Statements
September 30, 2010 and 2009
Note 18 - Surety Bonds
----------------------
The Companies, as a condition for entering into some of its
construction contracts, had outstanding surety bonds as of September
30, 2010 and 2009.
Note 19 - Recent Accounting Pronouncements
------------------------------------------
In January 2010, the Company adopted Accounting Standard Update 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. Iron Eagle does
not have a program to transfer financial assets; therefore, this ASU
had no impact on our consolidated financial statements.
In January 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.
On January 1, 2010, we 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 our consolidated financial statements or the related
disclosures.
Management has reviewed these new standards and believes they had or
will have no material impact on our financial statements.
Note 20 - Subsequent Events
---------------------------
On January 21, 2011, Iron Eagle Group ("Iron Eagle") acquired 100% of
the member's interest of Sycamore and Delta from Sycamore's the sole
member. The total purchase price was paid by delivery of Iron Eagle's
$9.0 million note, with interest at 5%, that was payable on or before
June 2, 2011. Under the terms of the agreement, the note was subject
to reduction on a dollar for-dollar basis if the working capital of
Sycamore and Delta as of the January 21, 2011 closing date was less
than $5.0 million.
On May 18, 2011, it was determined the working capital at closing was
$4,675,463 and the principal amount of the note was reduced to
$8,675,463 accordingly. On May 31, 2011 the note's maturity date was
extended to September 2, 2011. The note is secured by 100% of the
168
SYCAMORE ENTERPRISES, LLC
Notes to Consolidated Financial Statements
September 30, 2010 and 2009
Note 20 - Subsequent Events - (Continued)
----------------------------------------
equity of Delta, which can revert to the member if the entire note,
together with accrued interest thereon, is not paid in full by
September 2, 2011.
In addition, per the purchase agreement, in the event that Sycamore and
Delta achieve consolidated net income before interest, taxes,
depreciation and amortization, or "EBITDA," in any one or more of the
four fiscal years ending December 31, 2011 through December 31, 2014,
Iron Eagle will pay future contingent payments based on the results for
such fiscal years, not to exceed $250,000 in any one of such four
fiscal years or $1.0 million in the aggregate.
Iron Eagle also agreed to employ Sycamore's sole Member as President of
Delta for a period of four years through December 31, 2014. In
connection with the May 31, 2011 agreement to extend the maturity date
of the note to September 2, 2011, the Company agreed, following payment
of such note, to either secure a full release to the Company's sole
member from his personal indemnity liability to Berkley Regional
Insurance Company, a bonding company to Delta, or to provide an
indemnity bond or other acceptable form of indemnity to him.
The Company's $3,000,000 revolving line of credit expired on January
31, 2011 and was not renewed.
No other material subsequent events were noted.
169
Prospectus
Iron Eagle Group, Inc.
August 8, 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 selling agents and with respect to their
unsold allotments or subscriptions.
170
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.
We shall pay the expenses.
SEC Registration Fee $ 1,825.09
Printing and Engraving Expenses
Legal Fees and Expenses
Accounting Fees and Expenses
Miscellaneous
-----------
TOTAL $
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
we as provided in the foregoing provisions, or otherwise, we have 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 us of expenses incurred or paid by a
director, officer or controlling person of we 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, we 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
From January 2010 to the present, Iron Eagle issued the following
shares of common stock (adjusted to give effect to our 1-for-40 reverse
stock split that occurred on July 13, 2010 and the one-for-eight
reverse stock split that will be consummated prior to completion of the
offering of the securities included in this registration statement.
On January 8, 2010, 1,167,162 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, Iron Eagle issued 625 shares of common stock,
valued at $6,000, to pay fees to a non-affiliated website development
firm.
171
On May 1, 2010, Iron Eagle agreed to issue 25,000 shares common stock
at a share price valued at $240,000 under an investor relations
services agreement with Gary Smolen.
On May 4, 2010, Iron Eagle entered into a director's agreement with
Gary Giulietti to become a member of its board, and issued 5,208 shares
of our common stock valued at $50,000.
On May 4, 2010, Iron Eagle entered into a one year consulting agreement
with CCG, an investor relations firm. In satisfaction for the
agreement, Iron Eagle issued 13,594 shares of its common stock valued
at $130,500 and a 5 year warrant to purchase up to 13,594 additional
shares at an exercise price of $10.56 per share. The fair value of the
warrant was $124,703. We received three months of services under this
agreement. The portion of services that have not been utilized are
recorded as a prepaid expense.
On June 5, 2010, Iron Eagle entered into a three year consulting
agreement with Steven Antebi to help it obtain financing and related
services. The value of the services to be received was agreed upon to
be $400,000. In satisfaction for the agreement, Iron Eagle issued
125,000 shares of our common stock, valued at $3.20 per share. The
portion of services that have not been utilized are recorded as a
prepaid expense.
On July 16, 2010, the board of directors appointed Joseph Antonini as a
director and granted him 4,808 shares of stock, valued at $50,000,
which shares vested immediately.
On August 31, 2010, Iron Eagle entered into a financing agreement with
Aegis Capital Corp., an investment bank, to act as their underwriter
with respect to this public offering. In connection with such
agreement, Iron Eagle paid Aegis Capital Corp., $30,000 in the form of
3,572 shares of common stock, valued at $8.40 a share.
On February 4, 2011, Iron Eagle entered into a six month consulting
agreement with IPX Capital, LLC ("IPX"). Pursuant to the agreement,
Iron eagle issued to IPX 15,625 shares of its common stock valued at
$6.40 per common share. Upon our completion of a financing transaction
of $10 million or more, we will issue an additional 15,625 shares and
$100,000, plus an additional 1% of any capital raised in excess of
$40,000,000.
On March 1, 2011, Iron Eagle entered into an investor relations
consulting agreement with Alliance Advisors, LLC that expires on May
31, 2012. Pursuant to the agreement, Iron Eagle agreed to issue 15,000
restricted shares over the term of the agreement, valued at $8.08 per
share. The agreement also provides for cash fees beginning on the
fourth month of the agreement, ranging from $5,000 a month to $8,500 a
month, with increases based upon our completion of a financing
transaction of $10 million or more.
172
On March 1, 2011, Iron Eagle entered into a 12 month consulting
agreement with Hayden Investor Relations to provide corporate investor
and public relations services. Pursuant to the agreement, Iron Eagle
issued 9,375 shares of common stock, valued at $8.08 a share. The
agreement provides for no monthly cash fee for the first six months of
service. In months seven through twelve, assuming a financing of $10
million or more shall have occurred, the fees will be $7,000 per month.
If the financing is less than $10 million, then no cash shall be due
and instead, we shall issue an additional 9,375 shares of Common Stock
to Hayden.
On March 1, 2011, Iron Eagle entered into a consulting agreement with
RJ Falkner & Company, Inc. 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. Iron Eagle agreed to pay Falkner a monthly fee of $5,000
payable in restricted shares of common stock, payable each month in
advance, calculated on the average closing price of the stock during
the prior 20 market trading days. In March and April Iron Eagle issued
which was 962 shares at a value of $10.40 a share. In addition, Iron
Eagle issued Falkner a three-year option to purchase 10,625 shares of
the Company's common stock, at an exercise price of $8.08 a share.
On March 1, 2011, the Company entered into a media production and
placement services agreement with NewsUSA 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 12,019 shares of stock, valued at $10.40 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.
On March 13, 2011, the Company granted 5,966 shares of stock to Gary
Giulietti, as compensation for his services as a director of the
Company from the time period of May 4, 2010, the date Mr. Giulietti
joined the board of directors, to March 31, 2011. These shares were
valued at $7.60 a share.
On March 13, 2011, the Company granted 4,650 shares of stock to JEA
Energy LLC, a firm 100% owned by Joseph Antonini, as compensation for
his services as a director of the Company from the time period of July
16, 2010, the date Mr. Antonini joined the board of directors, to March
31, 2011. These shares were valued at $7.60 a share.
On May 5, 2011, pursuant to a Board of Directors authorization, the
Company granted 625 common shares to Solar Flash Partners, LLC, a firm
100% owned by attorney Ron Levy as consideration for Mr. Levy's legal
services. These shares were valued at $6.80 per common share.
173
On May 19, 2011, certain of our executive officers, directors and
principal stockholders entered into an agreement under which such
persons and entities agreed that, upon consummation of this offering,
they would convert an aggregate of $972,374 of accrued obligations owed
by Iron Eagle to such persons as at December 31, 2010 into an aggregate
of 243,095 shares of Iron Eagle common stock, at an effective
conversion price of $4.00 per share.
In addition, on May 19, 2011 each of our three senior executive
officers and non-executive directors and other former officers agreed
to waive and relinquish all cash and stock compensation and other
payments due to them for the three months period ended March 31, 2011,
aggregating $615,250.
In July and August 2011, Iron Eagle sold to a total of 4 investors, an
aggregate of 9 units of its securities; each unit consisting of (a)
Iron Eagle's 13% $25,000 note due December 31, 2012, (b) a Series A
Warrant expiring December 31, 2012 entitling the holder to purchase
6,250 shares of common stock at an exercise price of $4.00 per share,
(c) a Series B Warrant entitling the holder to purchase an additional
6,250 shares of common stock at an exercise price of $4.00 per share,
and (d) a Series C Warrant entitling the holder to purchase an
additional 31,250 shares of common stock at an exercise price of $4.00
per share. The Series A Warrants and the Series B Warrants are
identical in all respects except that (a) the Series A Warrants may be
exercised either for cash or by canceling the Note, (b) the Series B
Warrants has certain cashless exercise features, and (c) the Series A
Warrants provide, among other rights, for full-ratchet anti-dilution
adjustments and the Series B Warrants provide for weighted-average anti
dilution adjustments for lower priced issuances of common stock. Both
the Series A Warrants and the Series B Warrants included in the units
sold are callable by Iron Eagle for $0.08 per warrant if the common
stock trades at $20.00, for ten consecutive business days after the
shares underlying the warrants are registered for resale under the
Securities Act of 1933, as amended.
On July 20, 2011, Iron Eagle granted 5,000 shares of stock valued at
$5.20 a share for a total value of $26,000 to Alliance Advisors as part
of the contract entered into in March 2011 to provide investor relation
services.
On July 20, 2011, Iron Eagle granted 1,216 shares of stock valued at
$8.24 a share for a total value of $10,000 to RJ Falkner & Company,
Inc. as part of the contract entered into with RJ Falkner & Company,
Inc. in March 2011 to provide consulting services.
On July 20, 2011, Iron Eagle granted 2,841 shares of stock for a total
value of $12,500 to Gary Giulietti, as compensation for his services as
a director of Iron Eagle from the three months ended June 30, 2011 for
a total value of $12,500.
On July 20, 2011, Iron Eagle granted 2,841 shares of stock for a total
value of $12,500 to JEA Energy LLC, a firm 100% owned by Joseph
Antonini, as compensation for his services as a director of Iron Eagle
from the three months ended June 30, 2011.
174
On July 20, 2011, Iron Eagle granted 12,500 shares of stock for a total
value of $65,000 to Joseph LoCurto, the Company's former Chairman, as a
result of loan made by Mr. LoCurto in March 2011.
On July 20, 2011, Iron Eagle granted 12,500 shares of stock for a total
value of $65,000 to Jed Sabio, the Company's Executive Vice President
of Business Development, as a result of loan made by Mr. Sabio in March
2011.
As a result of its sale of the 8 units of securities, Iron Eagle
received total proceeds of $200,000, less $20,000 paid in commissions
and related expenses to Aegis Capital, who acted as placement agent in
connection with the sale of such securities.
Iron Eagle used the proceeds of the sale of such securities to pay
accrued and unpaid professional fees, and defray certain costs of this
public offering, including fees payable to Nasdaq, printing costs,
travel expenses and fees payable to the selling agents and their
counsel.
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.
Item 16. Exhibits and Financial Statement Schedules
INDEX TO EXHIBITS
Exhibit Number and Identification of Exhibit
(1.1) Underwriter's Agreement
(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
175
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 we 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.
NewsUSA 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.
Shapiro Note Agreement incorporated by reference to Form 8-K filed on
March 28, 2011.
Accrued Compensation Waiver Agreement between the Registrant and
certain Executive officers, directors and consultants (*)
Accrued Compensation Conversion Agreement among the Registrant and
certain Executive officers, directors and consultants (*)
Subscription Agreement form of Note due December 31, 2012, Series A
Warrant and Series B Warrant (*) offered and sold by registrant in
private placement consummated in July and August 2011 (*).
(11) Statement of Computation of Per Share Earnings
This Computation appears in the Financial Statements.
176
(21) Subsidiaries of Iron Eagle Group, Inc.
(23.1) Consent of The Hall Group, CPAs re: Iron Eagle Group, Inc.
(23.2) Consent of The Hall Group, CPAs re: Sycamore Enterprises, LLC
(23.3) Consent of Jody M. Walker, Attorney
At Law, included in Exhibit 5
-------------------------------
(*) Filed with this Amendment 1 to Registration Statement.
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.
(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.
177
(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
ii. If we 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,
178
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.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, Iron
we certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form S-1 and authorized this
Amendment No.1 to Form S-1 registration statement to be signed on its
behalf by the undersigned, in the City of New York, State of New York
on the 8th day of August, 2011.
Iron Eagle Group, Inc.
/s/Jason M. Shapiro
------------------------------------
By: Jason M. Shapiro
Chief Executive Officer
/s/ Jason M. Shapiro Chief Executive Officer August 8, 2011
------------------------ Chief Financial Officer
Jason M. Shapiro Controller/Director
/s/ Joseph E. Antonini Chairman and Director August 8, 2011
------------------------
Joseph E. Antonini
/s/ Gary J. Giulietti Director August 8, 2011
------------------------
Gary J. Giulietti
