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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
Form 10-SB
General Form for Registration of Securities of
Small Business Issuers
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
IR Operating Corporation
(Name of Small Business Issuer in its charter)
DELAWARE 11-2165149
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
112 Main Street, Webster, MA 01570
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (888) 444-4762
Securities to be registered under Section 12(g) of the Act:
Title of each class Name of each exchange on which
to be so registered Each class is to be registered
Common Stock, par value $0.001 Nasdaq OTC Bulletin Board
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PART I
Item 1. Description of Business.
(a) Business Development.
The Company was originally named Atlantic Medical Corporation which was
the surviving corporation of a Delaware statutory merger with Rusco Development
Corporation, a New York corporation, in January 1972 and the surviving
corporation of the acquisition of Fox Group Enterprises, Inc. a Delaware
corporation ("Fox Group") which took place on March 29, 1999. After the
acquisition of Fox Group Enterprises, Inc. the corporation was named I-ROCK
Industries, Inc. In April 1999 the Company changed its name to IR Operating
Corporation.
The Company generally has been inactive. The Company plans to seek and
acquire suitable business opportunities or technologies within the recycling
field. At present no such opportunities have been identified. The cash
requirements for this search are minimal and it is not anticipated that
additional funds will be needed until such time an acquisition occurs. The
Company will not require any employees until a suitable business has been
acquired.
The Company is currently not required to deliver an annual report to
security holders, however a copy of the Company's most recent annual report,
which includes audited financial statements will be provided to any shareholder
requesting such material, in writing, to the Secretary of the Company. The
Company currently does not file reports with Securities and Exchange Commission.
(b) Business of Issuer.
Since its acquisition of Fox Group, the Company has conducted no
business operations except for organizational activities. Prior to the
acquisition of Fox Group, the Issuer was an inactive company. It has no material
assets, no business, no sales or revenue. The Issuer was seeking a merger
partner that could bring in substantial assets to the corporation. The Issuer
acquired Fox Group on March 29, 1999. Fox Group at the time of the acquisition
had signed letters of intent to acquire the technology, the patent and certain
assets that were for producing plastic pallets and other plastic profile shapes,
from recycled material, using a process known as the I-ROCK Process. On April
30, 1999, the Issuer allowed the letters of intent for the I-ROCK Process to
expire because the technology will require additional development before it can
be commercialized. The Corporation is currently looking for other business
opportunities and technologies. To make acquisitions the Issuer may need to
raise additional capital that will be used to acquire the technology and to
operate the Issuer during the start up phase.
It is anticipated that the Company's CEO and directors will receive
reasonable salaries for services as executive officers at such time as the
Company commences business operations. (See Part I,
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Item 6. "Executive Compensation.") These individuals will devote such time and
effort as may be necessary to participate in the day-to-day management of the
Company. (See Part I, Item 5. "Directors, Executive Officers, Promoters and
Control Persons - Executive Officers and Directors.") The Company proposes to
acquire recycling technologies that will utilize low cost raw material to make
products.
No Operating History, Revenues or Earnings. As of the date hereof, the
Company has no operations and no recent operating revenues or earnings. Since
the acquisition of Fox Group, most of the time and resources of IR's management
have been spent in reorganizing the Company, obtaining interim financing and
developing a business plan. The Company's success is dependent upon its locating
suitable business opportunities and/or technologies and obtaining additional
financing for intended operations from placement of its equity or debt or from
third party funding sources. There is no assurance that IR will be able to
locate a suitable business opportunity or obtain additional debt or equity
financing from any source. The Company, during the development stage of its
operations, can be expected to sustain substantial operating expenses without
generating any operating revenues or the operating revenues generated can be
expected to be insufficient to cover expenses. Thus, for the foreseeable future,
unless the Company attains profitable operations, which is not anticipated, the
Company's financial statements will show an increasing net operating loss. (See
Part I, Item 1. "Description of Business.")
Minimal Assets, Working Capital and Net Worth. As of June 30, 1999, the
Company had total assets of $68,231 consisting principally of purchased patents
and trademarks. As a result of its minimal assets and reported losses, as of
June 30, 1999, the Company has negative net worth. Further, IR had a working
capital deficit of approximately $233,000 at June 30, 1999. There can be no
assurance that the Company's financial condition will improve. The Company is
expected to continue to have minimal working capital or a working capital
deficit as a result of its lack of revenues. Since the acquisition of Fox Group
the Company has been financed through loans from Murray Fox, President & CEO,
for which the Company has issued promissory notes in the amount of $218,000. The
Company at the time of the acquisition of Fox Group issued 1,762,230 shares of
the Company's Common Stock to fourteen individuals in consideration for the
acquisition. Also the shareholders of Fox Group received 7,441,700 shares of
common stock. Of the shares that were issued for the acquisition of Fox Group,
Murray Fox, the CEO, received 3,906,892 shares, Anthony Conte, Vice President
received 1,901,354 shares, David Katz, Secretary, received 893,004 shares and
740,450 shares were issued to other shareholders of Fox Group.
Need for Additional Capital: Going Concern Qualification Expressed by
Auditor. While the Company is looking for business opportunities and/or
technologies the ongoing expenses will be minimal. However, to grow the Company
will need to raise additional equity and/or debt financing. IR's independent
certified public accountant has expressed this as a "going concern"
qualification. The Company does not anticipate the receipt of operating revenues
until management successfully implements its business plan, which is not
assured. Further, IR may incur significant unanticipated expenditures which
deplete its capital at a more rapid rate because of, among other things, the
current state of its business, its limited personnel and other
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resources. Because of these and other factors, management is presently
unable to predict what additional costs might be incurred by the Company. IR has
no identified sources of funds, and there can be no assurance that resources
will be available to the Company when needed.
Dependence on Management. The possible success of the Company is
expected to be largely dependent on the continued services of Murray Fox. Murray
Fox, Anthony Conte and David Katz are expected to devote only such time and
effort to the business and affairs of the Company as may be necessary to perform
their responsibilities as executive officers of IR. The loss of the services of
Murray Fox would adversely affect the conduct of the Company's business and its
prospects for the future. The Company presently holds no key-man life insurance
on the life of Murray Fox, and has an employment agreement with Murray Fox.
Ability to Grow Dependent on Acquisitions. The Company expects to grow
through acquiring other business opportunities and/or technologies. There is no
assurance that the Company will be able to locate suitable business
opportunities or technologies or that the Company will be able to acquire any
business or technology that has been identified.
Absence of Public Market for Shares. The Company's shares of Common
Stock are registered with the U.S. Securities and Exchange Commission under the
Act. There is no active public market for the shares of Common Stock and no
assurance that one will develop.
Potential Sale of Restricted Shares. Of its outstanding shares, the
Company has issued 7,441,700 shares of common stock to persons affiliated with
Fox Group pursuant to an exemption from registration provided by Rule 4(2) and
Regulation D promulgated under Section 3(b) of the Act. These shares are
"restricted securities." Rule 144 of the Act provides, in essence, that holders
of restricted securities, for a period of one year after the acquisition thereof
from the Company or an affiliate of the Company, may, every three months, sell
to a market maker or in ordinary brokerage transactions an amount equal to one
percent of the Company's then outstanding securities. Non-affiliates of the
Company who hold restricted securities for a period of two years may sell their
securities without regard to volume limitations or other restrictions. Resales
of the free trading shares of Common Stock by "affiliates, control persons
and/or underwriters" of IR, as those terms are defined in the Act, will be
subject to the volume limitations, described in paragraph (e) of Rule 144. Any
transfer or resale of the shares of IR's Common Stock will be subject, in
addition to the Federal securities laws, to the "blue sky" laws of each state in
which such transfer or resale occurs. A total of 7,441,700 shares of the
Company's Common Stock will be available for resale under Rule 144 commencing on
March 30, 2000. Sales of shares of Common Stock under Rule 144 may have a
depressive effect on the market price of the Company's Common Stock, should a
public market develop for such stock. Such sales also might impede future
financing by the Company. (See Part III, Item 11. "Security Ownership of Certain
Beneficial Owners and Management.")
No Dividends. While payments of dividends on the Common Stock rests
with the discretion of the Board of Directors, there can be no assurance that
dividends can or will ever
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be paid. Payment of dividends is contingent upon, among other things, future
earnings, if any, and the financial condition of the Company, capital
requirements, general business conditions and other factors which cannot now be
predicted. It is highly unlikely that cash dividends on the Common Stock will be
paid by the Company in the foreseeable future.
No Cumulative Voting. The election of directors and other questions
will be decided by a majority vote. Since cumulative voting is not permitted,
investors who purchase shares of the Company's Common Stock may not have the
power to elect even a single director and, as a practical matter, the current
management will continue to effectively control the Company.
Control by Present Shareholders. The present shareholders of the
Company's Common Stock will, by virtue of their percentage share ownership and
the lack of cumulative voting, be able to elect the entire Board of Directors,
establish the Company's policies and generally direct its affairs. Accordingly,
persons investing in the Company's Common Stock will have no significant voice
in Company management, and cannot be assured of ever having representation on
the Board of Directors. (See Part III, Item 11. "Security Ownership of Certain
Beneficial Owners and Management.")
Possible Adverse Effect of Penny Stock Regulations on Liquidity of
Common Stock in any Secondary Market. In the event a market develops in the
Company's shares, of which there can be no assurance, the Common Stock is
expected to come within the meaning of the term "penny stock" under 17 CFR
240.3a51-1 because such shares are issued by a small company; are low-priced
(under five dollars); and are not traded on NASDAQ or on a national stock
exchange. The Securities and Exchange Commission has established risk disclosure
requirements for broker-dealers participating in penny stock transactions as
part of a system of disclosure and regulatory oversight for the operation of the
penny stock market. Rule 15g-9 under the Securities Exchange Act of 1934, as
amended, obligates a broker-dealer to satisfy special sales practice
requirements, including a requirement that it make an individualized written
suitability determination of the purchaser and receive the purchaser's written
consent prior to the transaction. Further, the Securities Enforcement Remedies
and Penny Stock Reform Act of 1990 require a broker-dealer, prior to a
transaction in a penny stock, to deliver a standardized risk disclosure
instrument that provides information about penny stocks and the risks in the
penny stock market. Additionally, the customer must be provided by the
broker-dealer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and the salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. For so long as the Company's Common Stock is considered
penny stock, the penny stock regulations can be expected to have an adverse
effect on the liquidity of the Common Stock in the secondary market, if any,
which develops.
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Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operations
Since 1981, the Company has conducted no business operations except for
organizational activities and looking for a merger partner. For the period from
the acquisition of Fox Group (March 29, 1999) through June 30, 1999, the Company
had no income from operations and operating expenses aggregating $467,769. The
Company is actively working to find suitable business opportunities and/or
technologies. The Company is concentrating its efforts in the recycling and
environmental business segments.
The Company may have to raise additional funds from outside investors
to fund any business opportunities it may locate. Management intends to explore
all available alternatives for debt and/or equity financing, including but not
limited to private and public securities offerings. Even before an acquisition
the Company expects that the cash on hand will not be sufficient to meet its
operating needs for the next 12 months and will have to obtain further loans
from stockholders. Accordingly, management expects that it will be necessary for
IR to raise additional funds when IR is ready to make an acquisition.
In addition, at least initially, the Company intends to operate out of
an office provided by Murray Fox. Thus, it is not anticipated that IR will lease
or purchase office space or computer equipment in the foreseeable future. IR may
in the future establish its own facilities and/or acquire computer equipment if
the necessary capital becomes available; however, the Company's financial
condition does not permit management to consider the acquisition of office space
or equipment at this time.
Financial Condition, Capital Resources and Liquidity
At June 30, 1999, the Company had assets totaling $68,231 and accrued
expenses of $23,130 attributable to accrued legal expenses, organization
expenses and professional fees. Since the Company's acquisition of Fox Group in
March 1999, it has received $218,000 in cash in the form of loans from Murray
Fox which are represented by promissory notes issued by the Company.
IR's working capital is presently minimal and there can be no assurance
that the Company's financial condition will improve. The Company is expected to
continue to have minimal working capital or a working capital deficit as a
result of its lack of revenues. The ability of the Company to continue as a
going concern is dependent upon its ability to acquire a viable business or
technology.
Net Operating Losses
The Company incurred a net operating loss of $467,769 during the period
January 10, 1999 through June 30, 1999, and had a stockholders' deficiency of
$172,899 at June 30, 1999.
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Year 2000 Compliance
The Company is currently in the process of evaluating its information
technology for Year 2000 compliance. The Company does not expect that the cost
to modify its information technology infrastructure to be Year 2000 compliant
will be material to its financial condition or results of operations. The
Company does not anticipate any material disruption in its operations as a
result of any failure by the Company to be in compliance.
Forward-Looking Statements
This Form 10-SB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included or incorporated by reference in
this Form 10-SB which address activities, events or developments which the
Company expects or anticipates will or may occur in the future, including such
things as future capital expenditures (including the amount and nature thereof),
business strategy, expansion and growth of the Company's business and
operations, and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the Company in
light of its experience and its perception of historical trends, current
conditions and expected future developments as well as other factors it believes
are appropriate in the circumstances. However, whether actual results or
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-SB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
Item 3. Description of Property:
The Company's executive offices are located at 112 Main Street,
Webster, MA, 01570. Its telephone number is (888) 444-4762. The Company pays no
rent for this space. The Company owns no real or personal property.
Item 4. Security Ownership of Certain Beneficial Owners and Managers
The following table sets forth information as of June 30, 1999,
regarding the ownership of the Company's Common Stock by each shareholder known
by the Company to be the beneficial owner of more than five per cent of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each
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of the shareholders has sole voting and investment power with respect to the
shares of Common Stock beneficially owned.
(a) Security ownership of certain beneficial owners;
<TABLE>
<CAPTION>
(1) (2) (3) (4)
--- --- --- ---
Title of Class Name and Address Amount and Percent of Class
-------------- ---------------- ---------- ----------------
of Beneficial Nature of
------------- ---------
Owner Beneficial Owner
----- ----------------
<S> <C> <C> <C>
Common Stock, par Murray Fox (1)(2)(3) 3,906,892 43.8%
value $0.001 112 Main Street
Webster, MA 01570
Anthony Conte (1)(2)(3) 1,901,354 21.4%
9 Suncrest Drive
Dix Hills, NY 11746
David Katz (1)(2)(3) 893,004 10.0%
54 Tarn Drive
Morris Plains, NJ
07950
(b) Security ownership of management
(1) (2) (3) (4)
--- --- --- ---
Title of Class Name and Address Amount and Percent of Class
-------------- ---------------- ---------- ----------------
of Beneficial Nature of
------------- ---------
Owner Beneficial Owner
----- ----------------
Common Stock, par Murray Fox 3,906,892 43.8%
value $0.001 112 Main Street
Webster, MA 01570
Anthony Conte 1,901,354 21.4%
9 Suncrest Drive
Dix Hills, NY 11746
David Katz 893,004 10.0%
54 Tarn Drive
Morris Plains, NJ
07950
Total 6,701,250 75.3%
</TABLE>
(1) Based upon 8,900,000 shares of the Company's Common Stock issued and
outstanding as of June 30, 1999.
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(2) Executive officer of the Company.
(3) Member of the Board of Directors of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons
Murray J. Fox - Director, President and Chief Executive Officer
Mr. Fox has been in the recycling business in excess of twenty years. He founded
Recycling Enterprises, Inc., a glass recycler in the 1970's. Mr. Fox was also a
co-founder of REI Distributors, Inc. in 1981 and became the largest glass
recycler in the state of New Jersey. REI merged with Pure Tech International,
Inc., a plastics recycler, in 1991. The newly combined business continued under
the Pure Tech name and became one of the largest plastic recycler in the United
States. In 1995 Pure Tech merged with Ozite Corporation and thus became a
diversified manufacturer of plastic materials and products as well as continuing
in the recycling field. Mr. Fox remained a director and officer of the newly
named PureTec Corporation until it was sold and privatized in 1998. Anthony
Conte - Director and Vice President
Mr. Conte was President of Pure Tech Plastics from 1992-1998 and in that
capacity was responsible for all facets of the business. This included five
plastics recycling facilities in the Northeastern United States as well as the
building of several plants in the Far East that were licensed from Pure Tech.
From 1989 to 1991, Mr. Conte worked as an independent consultant to Pure Tech
International. From 1977 to 1988, Mr. Conte founded and was COO of Alcon
Enterprises, an independent supplier of services and part to the food and
beverage industries. Mr. Conte is currently Chairman of Ecoboard Holdings, Inc.
David Katz, Director, Secretary and Consultant
Mr. Katz served the President and COO of PureTec Corporation from
1988-1998 when the company was sold to a private buyer. Prior to joining PureTec
he was a consultant to the food and beverage packing industry. From 1982-1987 he
was Vice President and Director of Operations for Taylor Wine Company a
subsidiary of The Coca-Cola Company. Prior to that he was US Director of
Packaging for the Coca-Cola Company in Atlanta, Georgia and was responsible for
coordinating the introduction of PET bottles to the U.S. soft drink industry.
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Executive Officers and Directors
Set forth below are the names, ages, positions with the Company and
business experiences of the executive officers and directors of the Company.
Name Age Position(s) with Company
----- --- ---------------------------
Murray Fox 76 President, Chief Executive
Officer & Director
Anthony Conte 45 Vice President and Director
David Katz 59 Secretary and Director
The above-named persons became directors of the Company in March 1999 and may be
deemed to be "promoters" and "parents" of the Company, as those terms are
defined under the Rules and Regulations promulgated under the Act.
All directors hold office until the next annual meeting of the
Company's shareholders and until their successors have been elected and qualify.
Officers serve at the pleasure of the Board of Directors. Murray Fox, Anthony
Conte and David Katz will devote such time and effort to the business and
affairs of the Company as may be necessary to perform their responsibilities as
executive officers and/or directors of the Company.
Aside from the above-named officers and directors, there are no other
persons whose activities will be material to the operations of the Company at
this time.
Family Relationships
There are no family relationships between or among the executive
officers and directors of the Company.
Item 6. Executive Compensation:
The Company, in consideration for various services performed for the
Company, has signed an employment agreement with Murray Fox. Murray Fox is to
receive annual compensation in the amount of $100,000 per year. However, at
present no cash payments are being made to Murray Fox and the salary due is
being accrued on the books of the Company. Except for the above-described
compensation, it is not anticipated that any executive officer of the Company
will receive any cash or non-cash compensation for his or her services in all
capacities to the Company until such time as the Company commences business
operations. At such time as IR commences operations, it is expected that the
Board of Directors will approve the payment of salaries in a reasonable amount
to each of its officers for their services in the positions. At such time, the
Board of Directors may, in its discretion, approve the payment of additional
cash or non-cash compensation to the foregoing for their services to the
Company.
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The Company does not presently provide officers with pension, stock
appreciation rights, long-term incentive or other plans but has the intention of
implementing such plans in the future.
Compensation of Directors
The Company has no standard arrangements for compensating the directors
of the Company for their attendance at meetings of the Board of Directors.
Item 7. Certain Relationships and Related Transactions:
Escrow Agreement - As part of the acquisition of Fox Group the
shareholders of Fox Group signed an Escrow Agreement with Reva Enterprises, Inc.
and John B. Lowy, P. C., who are shareholders of the Company which calls for the
former Fox Group shareholders to return on pro-rata basis 750,000 shares of
common stock that was issued to them at the time of the acquisition if the
Company does not achieve a tangible net worth of at least $4,000,000 within six
months of the date of the acquisition (March 29,1999).
Fox Group Shareholder Agreement - The shareholders of Fox Group at the
time of the acquisition of Fox Group signed an agreement that calls for the
return of 3,867,204 shares to the Company to be used for the acquisition of
I-ROCK technology and/or company. The shares are to be returned at the time of
the I-ROCK acquisition or on the six month anniversary date of the Fox Group
acquisition, whichever comes first.
Since the Company's acquisition of Fox Group in March 1999, it has
received $218,000 in cash in the form of loans from Murray Fox which are
represented by promissory notes issued by the Company. The promissory notes bear
interest at 5.5% per annum, with a default interest rate of 18% per annum.
See "Item 1. Description of Business" regarding transactions between
the Company and its current directors in connection with the acquisition of Fox
Group.
Item 8. Description of Securities.
Common Stock, par value $0.001, 50,000,000 shares authorized, 8,900,000
shares issued at July 30, 1999.
The Company has authorized 50,000,000 shares, par value $0.001, of
common stock. The common stock has one vote per share, with no cumulative
voting. There are no pre-emptive rights, no conversion rights, no preferences,
no redemption provisions, no sinking fund provisions or any liability for
further calls or assessments. There are no stated liquidation rights other than
those that may exist under Delaware law. Dividends may be declared and paid out
of any funds available therefor, as often, in such amounts, and at such times as
the board of directors may determine. No other dividend rights exist. The board
has not declared any
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dividend to date, and presently does not intend to declare any dividend in the
future. The rights of shareholders cannot be changed without a majority vote of
the outstanding shares of the Company, except that a quorum consists of a
majority of the outstanding shares, and a majority of the quorum may change the
rights of the shareholders. The board of directors currently controls
approximately 75% of the outstanding shares of the company and therefore can
effectively control any vote of shareholders. See "Item 1: Description of
Business - Potential Sale of Restricted Shares" for information about shares of
Common Stock which may become saleable in the future.
Preferred Stock, par value $0.001, 5,000,000 shares authorized, none issued at
July 30, 1999
The Company has authorized 5,000,000 shares, par value $0.001 of
preferred stock. Shares of preferred stock may be issued in such classes or
series, and may have such voting powers, full or limited, or no voting powers,
and such designations, preferences and relative, participating, optional or
other special rights and qualifications, or restrictions thereof, shall be
stated and expressed in the Articles of Incorporation or of any amendment
thereto, or in the resolution or resolutions providing for the issue of such
stock adopted by the Board of Directors pursuant to the authority which is
expressly vested in it by the provisions thereof.
Transfer Agent
The transfer agent and address for the Company:
Jersey Transfer and Trust Co.
201 Bloomfield Avenue
Verona, NJ 07044
973-239-2712
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
(a) Market Information.
The Company's common stock is traded on the Nasdaq Bullet Board system
under the trading symbol IROC. The following table shows the high and low sales
price which are available for each quarter within the last two complete fiscal
years as well as the subsequent interim quarters. These prices represent
interdealer prices, without retail mark-up, mark-down or commission, and may not
represent actual transactions.
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Quarter Ended High Low
March 31, 1997 * *
June 30, 1997 2-3/4 1/2
September 30, 1997 1-1/8 1-1/8
December 31, 1997 1-1/8 1-1/8
March 31, 1998 18 2-1/4
June 30, 1998 2-1/4 2-1/4
September 30, 1998 9 2-1/4
December 31, 1998 7-7/8 6-3/4
March 31, 1999 7-1/32 29/128
June 30, 1999 5 1/4
* Not available.
(b) Holders.
As of June 30, 1999, the Company had approximately 330 shareholders of
record of its outstanding shares of Common Stock.
(c) Dividends.
The Company has never paid or declared any dividends on its Common
Stock and does not anticipate paying cash dividends in the foreseeable future.
Item 2. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 3. Changes in and Disagreements with Accountants
The Board of Directors of the Company have appointed Holtz Rubenstein &
Co., LLP ("HR") as auditors for the Company. Ralph S. Inocencio CPA, had been
the outside accountant for the Company through March 29, 1999. During the year
ended December 31, 1998 and the three months ended March 29, 1999, there were no
disagreements between IR and Ralph S. Inocencio on any matter of accounting
principles and practices, financial statement disclosure, or audit scope and
procedure, which disagreement, if not resolved to the satisfaction of Mr.
Inocencio, would have caused him to make reference to the subject matter of the
disagreement in connection with his report.
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Item 4. Recent Sales of Unregistered Securities
On March 29, 1999, 7,441,700 shares of common stock were issued to the
shareholders of Fox Group Enterprises, Inc. in connection with acquisition of
Fox Group by the Company.
On March 29, 1999, the Company issued 1,0762,230 shares of stock to
fourteen (14) individuals in consideration for consulting work performed in
connection with the acquisition of Fox Group. The Company claimed the exemption
from registration in connection with each of the offerings provided under
Section 4(2) of the Act and Rule 504 of Regulation D promulgated thereunder.
PART F/S
The Financial Statements of IR, and Notes to Financial Statements together with
the Independent Auditor's Report of Holtz Rubenstein and Co., LLP required by
this Item 13 commence on page F-1 hereof.
IR Operating Corporation
(A Development Stage Enterprise)
Financial Statements
Period January 10, 1999 (inception) through March 31, 1999
and the three months ended June 30, 1999
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report ............................................. F-2
Balance Sheets ........................................................... F-3
Statements of Operations ................................................. F-4
Statement of Changes in Stockholders' Equity ............................. F-5
Statements of Cash Flows ................................................. F-6
Notes to Financial Statements ....................................... F-7 - F-9
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Independent Auditors' Report
Board of Directors and Stockholders
IR Operating Corporation
We have audited the accompanying balance sheet of IR Operating Corporation (a
development stage company) as of March 31, 1999, and the related statements of
operations and cash flows for the period January 10, 1999 (inception) through
March 31, 1999. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides 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 IR Operating Corporation as of
March 31, 1999, and the results of its operations and its cash flows for the
period January 10, 1999 (inception) through March 31, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that IR
Operating Corporation will continue as a going concern. As discussed in Note 1
to the financial statements, IR Operating Corporation has suffered a loss in the
current period and has negative working capital. These factors raise substantial
doubt regarding its ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 1. The financial
statements do not include adjustments that might result from the outcome of this
uncertainty.
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
June 10, 1999
F-2
<PAGE>
IR OPERATING CORPORATION
------------------------
(A Development Stage Company)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
March 31, June 30,
ASSETS 1999 1999
------ ------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSET:
Cash $ - $ 8,451
PATENTS AND TRADEMARKS - 59,780
------------ ------------
$ - $ 68,231
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 24,062 $ 23,130
Loan payable - stockholder (Note 3) 73,000 218,000
------------ ------------
Total current liabilities 97,062 241,130
------------ ------------
COMMITMENT (Note 8)
STOCKHOLDERS' DEFICIENCY: (Note 5)
Common stock, par value $.001 per share;
authorized 50,000,000 shares, issued and
outstanding 8,900,000 shares 8,900 8,900
Preferred stock, par value $.001; authorized
5,000,000 shares; 0 issued and outstanding - -
Additional paid-in capital 285,970 285,970
Deficit accumulated during the development stage (391,932) (467,769)
------------ ------------
(97,062) (172,899)
------------ ------------
$ - $ 68,231
============ ============
</TABLE>
See notes to financial statements
F-3
<PAGE>
IR OPERATING CORPORATION
------------------------
(A Development Stage Company)
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
January 10, 1999 Cumulative
(Inception) Three Months During
Through, Ended Development
March 31, 1999 June 30, 1999 Stage
----------------- --------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
EXPENSES:
Organization and merger costs (Note 4) $ 288,000 $ 56,534 $ 344,534
Loss on aborted acquisition (Note 6) 103,856 18,258 122,114
General and administrative 76 1,045 1,121
------------ ----------- ------------
NET LOSS $ (391,932) $ (75,837) $ (467,769)
============ =========== ============
NET LOSS PER SHARE (Note 5) $(.05) $(.01) $ (.06)
===== ===== ============
WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON
STOCK OUTSTANDING 7,678,674 8,900,000 8,328,619
========= ========= =========
</TABLE>
See notes to financial statements
F-4
<PAGE>
IR OPERATING CORPORATION
------------------------
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
---------------------------------
(Notes 4 and 5)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
50,000,000 Shares 5,000,000 Shares
Common Stock $.001 Par Value $.01 Par Value
---------------------- ---------------------- -------------------
Par Par Par
Shares Value Shares Value Shares Value
--------- ----------- ----------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 10, 1999 - $ - - $ - - $ -
Common stock issued for cash 1,000 300,000 - - - -
Common stock shares issued for
acquisition of Fox Group
Enterprises, Inc. (1,000) (300,000) 7,837,770 7,838 - -
Common stock issued to consultants - - 1,062,230 1,062 - -
Net loss - - - - - -
-------- ----------- ----------- -------- ---------- ----
BALANCE, March 31, 1999 - - 8,900,000 8,900 - -
Net loss (unaudited) - - - - - -
-------- ----------- ----------- -------- ---------- ----
BALANCE, June 30, 1999
(unaudited) - $ - 8,900,000 $ 8,900 - $ -
======== =========== =========== ======== ========== ====
<CAPTION>
Deficit
Accumulated
Additional During the
Paid-in Development
Capital Stage Total
-------- ---------- ---------
BALANCE, January 10, 1999 $ - $ - $ -
Common stock issued for cash - - 300,000
Common stock shares issued for
acquisition of Fox Group
Enterprises, Inc. 269,032 - (23,130)
Common stock issued to consultants 16,938 - 18,000
Net loss - (391,932) (391,932)
----------- ------------ -----------
BALANCE, March 31, 1999 285,970 (391,932) (97,062)
Net loss (unaudited) - (75,837) (75,837)
----------- ------------ -----------
BALANCE, June 30, 1999
(unaudited) $ 285,970 $ (467,769) $(172,899)
=========== =========== =========
</TABLE>
See notes to financial statements
F-5
<PAGE>
IR OPERATING CORPORATION
------------------------
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
January 10, 1999 Cumulative
(Inception) Three Months During
Through, Ended Development
March 31, 1999 June 30, 1999 Stage
--------------- ----------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (391,932) $ (75,837) $ (467,769)
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss incurred in merger transaction 200,000 - 200,000
Non-cash compensation 18,000 - 18,000
Changes in operating assets and liabilities:
Increase in liabilities:
Accounts payable and accrued
expenses 932 (932) -
----------- ---------- -----------
Net cash used in operating activities (173,000) (76,769) (249,769)
----------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in business acquisition (200,000) - (200,000)
Acquisition of intangible assets - (59,780) (59,780)
----------- ---------- -----------
Net cash used in investing activities (200,000) (59,780) (259,780)
----------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan payable - stockholder 73,000 145,000 218,000
Proceeds from issuance of common stock 300,000 - 300,000
----------- ---------- -----------
Net cash provided by financing activities 373,000 145,000 518,000
----------- ---------- -----------
Net increase in cash and cash equivalents - 8,451 8,451
Cash and cash equivalents at beginning of period - - -
----------- ---------- -----------
Cash and cash equivalents at end of period $ - $ 8,451 $ 8,451
=========== ========== ===========
</TABLE>
See notes to financial statements
F-6
<PAGE>
IR OPERATING CORPORATION
------------------------
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
PERIOD JANUARY 10, 1999 (INCEPTION) THROUGH
-------------------------------------------
MARCH 31, 1999 AND THREE MONTHS ENDED JUNE 30, 1999
---------------------------------------------------
(Information with respect to the three months ended June 30, 1999 is unaudited)
1. Nature of Operations:
---------------------
IR Operating Corporation's (the "Company") financial statements for
the period ended March 31, 1999 have been prepared on a going concern basis
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. The Company incurred a net
loss of approximately $392,000 for the period January 10, 1999 (inception)
through March 31, 1999. This is due to the fact that the Company has been in the
development stage since inception. Management's plans regarding improving the
results of future operations and liquidity include acquisitions and mergers.
2. Summary of Significant Accounting Policies:
-------------------------------------------
a. Statement of cash flows
-----------------------
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
b. 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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
c. Organization costs
------------------
The Company expenses organization costs as incurred. Organization
costs incurred in the period January 10, 1999 (inception) through March 31, 1999
and the three months ended June 30, 1999 approximated $70,000 and $57,000,
respectively.
d. Interim financial statements
----------------------------
The unaudited financial statements reflect all adjustments (consisting
only of normal recurring accruals) which are, in the opinion of management,
necessary for a fair statement of the results for the period. The results of
operations are not necessarily indicative of the results expected for the fiscal
year.
3. Loan Payable - Stockholder:
---------------------------
On March 31, 1999, the Company issued a promissory note to a stockholder
in the amount of $73,000, together with interest accruing at the rate of 5.5%
per annum, until such time as the note is paid. The entire amount must be repaid
when the Company receives funding of $1,500,000.
F-7
<PAGE>
3. Loan Payable - Stockholder: (Cont'd)
---------------------------
In the event of default when due, or in the event of suspension of actual
business, insolvency, assignment for the benefit of creditors, adjudication of
bankruptcy, or appointment of a receiver, the unpaid principal balance shall, at
the option of the holder, become immediately due, with the amount then due
accruing interest at a rate of 18% per annum or the highest rate permitted by
law, which ever is less.
4. Merger Agreement:
-----------------
On March 29, 1999, Atlantic Medical Corporation ("Atlantic") acquired
100% of the issued and outstanding common stock of Fox Group Enterprises, Inc.
("Fox") making the Fox a wholly-owned subsidiary of Atlantic. Under the terms of
the merger agreement, the holders of Fox were issued 7,441,700 shares of the
Company's common stock. A maximum of 750,000 of the shares issued to the Fox
holders are subject to reversion to the Atlantic shareholders in the event
certain conditions are not met within 180 days after the merger. An additional
1,062,230 shares of common stock (valued at $18,000) were issued to consultants
in connection with the transaction. The pre-merger shareholders of Atlantic were
paid $200,000 by Fox.
Although in the form of a merger, the transaction is, in substance, an
acquisition of Atlantic by Fox. Atlantic and stockholders agree that all issued
and outstanding shares of common stock of Fox, equal to one hundred percent
(100%), shall be exchanged with Atlantic for approximately 84% of the common
stock of Atlantic. Stockholders represent and warrant that they will hold such
shares of Atlantic for investment purposes and not for further public
distribution. These shares will be appropriately restricted.
The excess of the consideration paid over the fair value of the net
assets received was charged to operations in the period ended March 31, 1999.
Prior to the closing of the merger agreement unanimous written consent
was received of Atlantic's directors and a majority of Atlantic's shareholders
approved Atlantic changing its name to "IR Operating Corporation".
5. Stockholders' Equity:
---------------------
a. Capitalization
--------------
Pursuant to an amendment of the Company's certificate of
incorporation, the Company has authorized shares of common stock of 50,000,000
at $.001 par value.
b. Net loss per share
------------------
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" (SFAS No. 128) requires dual presentation of basic and diluted EPS. Basic
EPS excludes dilution and is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if stock
options or convertible securities were exercised or converted into common stock.
Basic and diluted loss per share amounts were equivalent for all
periods presented.
F-8
<PAGE>
6. Loss on Aborted Acquisition:
----------------------------
During the period January 10, 1999 (inception) through March 31, 1999 and
the three months ended June 30, 1999, the Company incurred charges to operations
of approximately $104,000 and $18,000, respectively, relating to an aborted
acquisition of assets.
7. Supplementary Information - Statement of Cash Flows:
----------------------------------------------------
The Company assumed accounts payable approximating $23,100 in connection
with the merger with Atlantic.
8. Commitment:
-----------
The Company entered into an employment agreement with an officer,
commencing July 1, 1999, which provides for a minimum annual salary of $100,000.
F-9
<PAGE>
PART III
Item 1. Index to Exhibits
2(i) Articles of Incorporation the Company, as amended
2(ii) Bylaws of the Company
3(i) Escrow Agreement dated March 29, 1999 with Reva Enterprises, Inc. and
John B. Lowy, P. C.
3(ii) Fox Group Enterprises Stockholder Agreements dated March 29, 1999
15
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
IR Operating Corporation
(Registrant)
Date: August 26, 1999 By: /s/ Murray Fox
-------------------------
Murray Fox, President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date Signature Title
---- --------- -----
August 26, 1999 By: /s/ Murray Fox President and Director
-----------------------
Murray Fox
16
