SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ ] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
[x] Transitional Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from January 1, 1997 to June 30, 1997
Commission File No. 0-23208
IRON HOLDING CORP.
(Name of small business issuer in its charter)
Nevada 84-1251553
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
88-90 103rd Ave.
Ozone Park, N.Y. 11417
(718) 323-4537
(Address, including zip code and telephone number, including area
code, of registrant's executive offices)
Securities registered under Section 12(b) of the Exchange Act:
none
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock
(Title of class)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. X
Issuer's revenues for its most recent fiscal year: $ 3,722,546 (six
month period)
(Continued on Following Page)
<PAGE>
State the aggregate market value of the voting stock held by non-
affiliates, computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of
a specified date within the past 60 days: As of September 29, 1997:
$6,000,000.
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: As of
September 25, 1997 there were 6,000,000 shares of the Company's
common stock issued and outstanding.
Documents Incorporated by Reference: Form 8-K dated June 2, 1997
and Form 8-K dated July 21, 1997, each of which is incorporated
into this Form 10-KSB by reference thereto.
This Form 10-KSB consists of forty pages.
Exhibit Index is Located at Page 39.
2
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TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
IRON HOLDINGS CORP.
PAGE
Facing Page
Index
PART I
Item 1. Description of Business..................... 4
Item 2. Description of Property..................... 8
Item 3. Legal Proceedings........................... 8
Item 4. Submission of Matters to a Vote of
Security Holders........................ 8
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters......... 9
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 9
Item 7. Financial Statements........................ 12
Item 8. Changes in and Disagreements With
Accountants on Accounting
and Financial Disclosure................ 32
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act....... 32
Item 10. Executive Compensation...................... 34
Item 11. Security Ownership of Certain Beneficial
Owners and Management................... 36
Item 12. Certain Relationships and Related
Transactions............................ 36
PART IV
Item 13. Exhibits and Reports of Form 8-K............ 37
SIGNATURES............................................. 38
EXHIBIT INDEX ......................................... 39
3
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
History
Iron Holdings Corp. (the "Company" or "Company") was
incorporated under the laws of the State of Nevada on May 13, 1988,
under the name Comstock Tailings Company, Incorporated, for the
purpose of engaging in the acquisition and development of minerals,
metals and other natural resource products and the related
operations applicable to such activities. Until September 1993 and
other than issuing shares to its original shareholders, the Company
never commenced activities relating to its original business
purpose. In September 1993, the Board of Directors of the Company
elected to change the Company's principal business purpose to a
"shell" corporation engaged in seeking out and acquiring another
business entity or opportunity. Applicable thereto, the Company
filed a registration statement on Form 10-SB with the Securities
and Exchange Commission on or about January 12, 1994, which
registration statement became effective in August 1994.
Relevant thereto, on or about March 31, 1997, the Company
successfully consummated a merger with Iron Holdings Corp. ("Old
IHC"), a New York corporation. The terms of the transaction
involved the Company issuing an aggregate of 4,500,000 shares of
its "restricted" common stock to the former shareholders of Old IHC
in exchange for all of the issued and outstanding stock of Old IHC.
Old IHC did not survive the transaction. The Company also changed
its name to its present name. As a result of this transaction,
current management of the Company assumed their respective
positions, replacing all of former management. See "Part III, Item
9, Directors, Executive Officers, Promoters and Control Persons."
Upon assuming their positions, current management did elect to
change the Company's fiscal year from December 31, to June 30, in
order to establish continuity between Old IHC and the Company's
financial reporting requirements.
Old IHC was incorporated on October 3, 1996 in the State of
New York. Effective January 1997, it acquired all of the shares of
Iron Eagle Contracting and Mechanical, Inc. It operated all of its
business through this subsidiary, which business is construction
contracting engaged in pipe work including gas and water mains as
well as steel installation, primarily in the New York City
metropolitan area. As a result of the reorganization described
above herein, Old IHC ceased to exist following the merger.
Business
The Company is now a holding company for three wholly owned
subsidiary companies, including Iron Eagle Contracting and
Mechanical, Inc., a New York corporation ("IECM"), which was
4
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acquired in January 1997. IECM is engaged in the development and
construction of projects in the New York Metropolitan area and is
presently involved in various real estate projects and utility and
mechanical projects with the New York City Department of
Transportation ("NYCDOT"), the New York City Department of
Environmental Protection ("NYCDEP"), the New York State Office of
General Services ("NYSOGS"), Nassau County, and other city, county
and local municipalities in the New York area, ranging in scope
from basic water main installations to the replacement of sludge
cake belts to the reconstruction of sluice gate operators and
telemetry systems to construction of pre-engineered buildings and
remodeling of existing buildings.
In addition to continuing to submit competitive bids on
NYCDOT, NYCDEP, New York City Department of Parks and Recreation,
and New York and New Jersey Port Authority contracts as well as
other projects in the New York area on a sub-contract basis, the
Company intends to purchase and invest in commercial real estate in
the New York area.
The Company will continue to bid on NYCDOT, NYCDEP, New York
City Department of Parks and Recreation, and New York and New
Jersey Port Authority contracts as well as bid on jobs as a
subcontractor in specific fields.
During the 12 month period preceding the date of this report,
the Company has successfully undertaken three major construction
projects, including (i) an approximate $1.5 million project
undertaken with the New York Parks Dept. renovating Baisley Park in
Jamaica, Queens, which project is anticipated to be completed on or
about October 31, 1997; (ii) an approximate $1.7 million project
with the New York City Dept. of Environmental Protection ("DEP"),
where the Company is revamping and resurfacing streets in Bayside,
Queens, N.Y. anticipated to be completed October 31, 1997; and
(iii) Bethpage Fire Academy, where the Company built a fire house
training center for a price of $434,000.
The Company has also been awarded bids to complete the Ward
Island, N.Y. sewer treatment plant, a $389,000 project which
commenced in September 1997. Additionally, the Company was awarded
a $1.1 contract by the DEP to install a sluice gate in the existing
sewer treatment facility in order to regulate the flow of sewer
treatment through the system. It is anticipated that this project
will commence on or about November 1, 1997.
The Company has two additional wholly owned subsidiary
companies, L.W. Plaza Realty Corp. and Tahoe Realty Corp., each a
New York corporation and neither of which is presently active. It
is anticipated that these corporations will be engaged in real
estate acquisition, development and management activities, as
described hereinbelow.
5
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As stated above, the Company intends to purchase real estate.
In September 1997, Tahoe Realty Corp. ("Tahoe"), entered into a
contract to purchase vacant land in Queens, N.Y. consisting of
approximately two acres. The purchase price is $400,000 and
closing is anticipated to occur in late October or the beginning of
November 1997. Upon closing of the purchase, it is the intention
of the Company to build, rent and manage a 45 unit apartment
complex on this property. As of the date of this report,
management is attempting to secure financing for the construction
of this project, but the Company has not received any commitment
therefor; however it is anticipated that such a commitment will be
obtained prior to the proposed closing date. Construction of these
rental income properties are anticipated to commence in March 1998.
No assurances can be provided that this transaction will be
consummated, or that the Company will obtain the necessary
construction financing necessary to construct the apartment
complex. Further, if the complex is so completed, there can be no
assurances that the project will be profitable.
In August 1997, the Company also executed a contract to
purchase the Lindenwood Shopping Center located in Lindenwood,
Queens. This contract was subsequently extended on September 29,
1997. The proposed purchase price is Eight Million Dollars
($8,000,000) and the Company has tendered escrow funds of $400,000
pursuant to the terms of the relevant contract. The balance of the
closing price is scheduled to be tendered on or about December 31,
1997. Relevant thereto, as of the date of this report the Company
has received a verbal commitment to provide funding of $6 million
from Holiday, Fenoglio & Monte, a leading NY based financial
institution, to allow the Company to consummate this acquisition.
However, there can be no assurances that the Company will receive
the financing necessary to close this acquisition, or that this
acquisition will close.
The Lindenwood property is improved with a one and partial
two-story, free standing, retail neighborhood center. The
neighborhood center contains a gross building area of 56,560 square
feet and a net rentable area of 55,720 square feet and was
constructed circa 1961. The improvements are situated on
approximately 138,000 square feet of R-5 (CI-2 Commercial) zoned
land located in the Howard Beach area of Queens, New York. The
Lindenwood Shopping Center's current use as a retail neighborhood
center is the preferred use for the property. This conclusion is
based on the historical and current economic trends and what
management believes is the demand for retail space in the Howard
Beach area, as well as the conformity of the property to
neighborhood buildings. The property does not have any natural,
cultural, recreational or scientific use.
In 1996, Old IHC acquired undeveloped land in Ozone Park,
Queens, New York, where it constructed five two-family homes. The
cost of the land acquisition was $320,000. As of the date of this
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report, the Company has sold all five of these homes, one for
$330,000, one for $320,000 and three for $325,000 each. The fifth
home was sold subsequent to the fiscal year ended June 30, 1997,
and the proceeds derived from this sale are not reflected in the
financial statements included herein. The total cost to the
Company for both the land and materials necessary to complete
construction of all five homes was approximately $1,200,000.
Effective April 21, 1997, the Company issued options to
purchase an aggregate of 2,800,000 shares of its common stock in
favor of Anchor Capital Management, Ltd. ("Anchor"), a corporation
organized under the laws of the Turks & Caicos Islands, with its
principal place of business located at Suite D18, Market Place,
Providenciales, Turks and Caicos Islands, B.W.I. The Company has
relied upon the exemption from registration provided under
Regulation S, as promulgated under the Securities Act of 1933, as
amended, in issuing said options, as well as in expectation of
Anchor exercising all or any portion of its options.
In consideration for the issuance of the stock options
referenced above, the Company received consideration totalling
$28,000 (US). The exercise price of each option was established at
$1.50 per share, which was arrived at through arms length
negotiations between the Company and Anchor, as the Company's
common stock was not trading as of the date the option was issued.
As of the date of this report, Anchor has exercised options to
purchase 687,000 shares of the Company's common stock pursuant to
the agreements, providing the Company with a net aggregate of
$1,030,500 in proceeds from the exercise of the options. The
remaining options are set to expire on October 21, 1997.
Management is unaware of Anchor's intention to exercise any
additional options granted to it.
Employees
The Company presently has five (5) employees, including its
President and Secretary, Anthony Gurino, its Vice President and
Treasurer, Angelo Gurino, and its Assistant Secretary, Dennis
Sommeso. See "Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a) of the Exchange
Act." The Company also employs two administrative assistants.
Further, the Company employs additional persons on an "as needed"
basis, depending upon the number of projects in which the Company
is involved. Many of these persons are retained on a contractor
basis. Management believes that its relationship with its
employees is satisfactory. No employee is a member of any union.
Competition
The Company competes with publicly and privately held
companies in the utility and mechanical construction business and
in the development of commercial real estate projects. There are
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numerous other entities engaged in these types of business
endeavors who have greater resources, both financial and otherwise,
than the resources presently available to the Company.
Trademarks
The Company does not utilize any trademarks or patent rights
in its business.
Government Regulations
The Company is subject to certain governmental regulations
relating to obtaining construction permits for its construction
activities. To date, management believes that the Company is in
full compliance with all applicable regulations. The Company is
not subject to any other extraordinary governmental regulations.
ITEM 2. DESCRIPTION OF PROPERTY
Facilities. The Company presently leases approximately 1,000
square feet of executive office space at 88-09 103rd Avenue, Ozone
Park, New York. This space also includes a 4,000 square foot yard
for equipment and other storage, at an aggregate cost of $750 per
month pursuant to a month-to-month verbal lease. It is anticipated
that the Company's present premises will be adequate to meet the
Company's needs for the foreseeable future. The Company's telephone
number is (718) 323-4537 and facsimile number is (718) 323-6932.
Other Property. The Company has a contract to purchase vacant
land in Queens, N.Y., where it intends to construct, rent and
manage a 45 unit apartment complex. As of the date of this report,
this contract has not closed and there can be no assurances that it
will close in the future. See "Item 1. DESCRIPTION OF BUSINESS"
for a more detailed description of this proposed transaction, as
well as other potential acquisitions which the Company may
undertake in the future. The Company owns no other property.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings which are pending or
have been threatened against the Company of which management is
aware.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In March 1997, the shareholders of the Company approved the
merger between the Company and Old IHC, by unanimous consent. They
also authorized an amendment to the Articles of Incorporation of
the Company changing the name of the Company to "Iron Holdings
Corp." and authorized the filing of a further amendment to the
Articles of Incorporation to authorize 25,000,000 shares of
Preferred Stock, par value $.01 per share.
8
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
(a) Market Information. The Company's common stock was
approved for trading on the OTC Bulletin Board operated by the
National Association of Securities Dealers on June 26, 1997. Prior
to that date none of the Company's securities were traded. The
initial price of the Company's common stock at June 26, 1997 was
$1.00 bid, $1.50 asked. As of September 29, 1997, the Company's
common stock was trading at $3.94 bid, $4.06 asked.
(b) Holders. There are 14 holders of the Company's Common
Stock, not including those persons who held their stock in "street
name."
(c) Dividends. The Company has not paid any dividends on its
Common Stock since its inception. The Company does not foresee that
the Company will have the ability to pay a dividend on its Common
Stock in the fiscal year ended June 30, 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the Financial Statements and notes thereto included herein.
Overview
Iron Holdings Corp. f/k/a Comstock Tailings Company,
Incorporated, (the "Company"), was incorporated under the laws of
the State of Nevada on May 13, 1988. On March 31, 1997, pursuant
to the terms of an Agreement and Plan of Reorganization, the
Company acquired all of the issued and outstanding securities of
Iron Holdings Corp., a New York corporation, including its wholly
owned subsidiary company, Iron Eagle Contracting & Mechanical, Inc.
("IECM"), in exchange for 4,500,000 "restricted" common shares of
the Company. As a result, the Company was the surviving entity,
with one wholly owned subsidiary company, IECM, which is the sole
operating company as of the date of this report. As part of the
terms of the aforesaid transaction, the Company amended its
Articles of Incorporation, changing its name to its present name.
IECM is a construction contractor engaged in pipe work,
including gas and water mains, as well as steel installation,
primarily for city and state infrastructure construction. IECM
commenced operations in January 1996 and spent most of fiscal year
1996 bidding on potential jobs. It has also purchased and
developed a tract of real estate in Ozone Park, New York, on which
it has built five (5) two-family homes, four of which were sold
prior to June 30, 1997.
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The following information is intended to highlight
developments in the Company's operations to present the results of
operations of the Company and its one active subsidiary, to
identify key trends affecting the Company's businesses and to
identify other factors affecting the Company's consolidated results
of operations for the six month period ended June 30, 1997. Only
six months of operations are presented
Results of Operations
Comparison of Results of Operations for the period December 7,
1995 (inception) through June 30, 1996 of IECM, the Company's
predecessor, to the six month period commencing January 1, 1997 and
ended June 30, 1997 of the Company.
The Company's predecessor company, IECM, was incorporated on
December 7, 1995, but did not commence operations until January,
1996. During the six month period ended June 30, 1996, IECM
generated revenues of $384,500, compared to the Company's revenues
for the six month period ended June 30, 1997, of $3,722,546, an
increase of $3,338,046 (968%). Of the aggregate revenues generated
by the Company during the six month period ended June 30, 1997,
$2,405,096 were from construction projects, with the balance
($1,317,450) derived from the sale of four of the Company's five
original residential homes. This significant increase in revenues
can best be explained by the fact that IECM generated its revenues
during the period ended June 30, 1996 only from contracting jobs,
while the Company's revenues were derived from both construction
revenue and the sales of developed residential real estate. See
Item 1, "Business" for a more detailed description of the Company's
residential home development. Further, it should be noted that
IECM was in the development stage immediately subsequent to its
inception, which required the Company to go out and obtain bids for
construction jobs and then thereafter, complete each job. During
the period ended June 30, 1997, the Company had already been in
existence for a period of time, had jobs lined up to complete and
had further developed a reputation within its industry, which
allowed management to generate additional revenues.
Cost of revenues was $308,553 at June 30, 1996, compared to
$3,427,570 at June 30, 1997, an increase of $3,389,017 (1110%), due
in part costs applicable to the four residential homes sold
($917,766). However, costs of revenues applicable to the
construction jobs ($2,509,804) exceeded the aggregate revenues
generated by the Company from these projects because of low profit
margins on the construction contracts obtained through competitive
bid. These profits were further reduced because of unforeseen
start-up costs necessitated by the significant ramp-up in
construction activity.
Operating expenses for the six month period ended June 30,
1996 were $237,190, compared to $289,404 at June 30, 1997, an
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increase of $52,214 (22%), primarily due to increased salaries for
officers and office employees. As a result, the Company had a net
loss for the six month period ended June 30, 1997, of $(40,642) as
compared to a net loss for the six months ended June 30, 1996, of
$(167,932), inclusive of income tax liabilities.
Liquidity and Capital Resources
Relating to the Company's assets and liabilities, cash
decreased from $195,668 at June 30, 1996, to $164,977 at June 30,
1997, as a result of cash used in investing activities partially
offset by cash provided by financing activities.
The Company has several outstanding notes to unaffiliated
parties. The Company has two notes collateralized by equipment,
with an interest rate of approximately 10% per annum. These notes
have monthly payments aggregating approximately $2,500 and are due
April 1998 and June 1999, respectively.
In addition, the Company has a loan agreement which provides
for up to $600,000 of financing for working capital and asset
acquisition. The 12% note payable is secured by substantially all
of the assets of the Company. At June 30, 1997, the Company had
$75,000 of borrowings against this loan.
At June 30, 1997, the Company had a 6% demand note payable for
$300,000 to an unaffiliated individual. The note was secured by a
two family home that the Company developed. As of the date of this
report, the Company has paid off this loan.
Outstanding long term notes aggregating $1,312,500 are also
owed to unaffiliated parties, including a note payable which arose
from the acquisition of Old IHC's acquisition of IECM, which bears
interest at the prime rate, plus 1%. Principal is payable in five
equal consecutive installments commencing January 1998 and ending
January 2002. See "Item 1. DESCRIPTION OF BUSINESS - History." In
the event the Company completes a public or private offering of its
securities during the principal term of this note, it is obligated
to prepay the lesser of $500,000 or the remaining balance. Upon
completion of a second offering, all balances would become due. As
a result of the private financing undertaken by the Company
described in Item 1, above herein, the Company reached an agreement
with the holder of this note, wherein the Company paid $212,500
towards the principal balance of this note. In addition, all
interest accrued to date under the obligation was paid in full.
The holder of the note has indicated a willingness not to call the
remaining balance of $287,500 that would have been due upon
completion of the Company's initial private securities offering,
pending completion of a final financing plan. The note is secured
by all of the issued and outstanding shares of IECM, a wholly owned
subsidiary of the Company, as well as 150,000 shares of post-
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recapitalization common stock of the Company. The Company is
current on all note payments.
Trends
Management of the Company intends to continue to seek bids for
city and state sewer and gas main construction contracting work,
as well as seek out opportunities in the home building industry.
Additionally, management also intends to seek out acquisition
opportunities of shopping centers and property management, as
discussed hereinabove under "Liquidity and Capital Resources."
However, in order to do so, it will be necessary for the Company to
raise additional capital, either debt or equity, in order to
successfully acquire these additional assets. Management has had
preliminary discussions with various investment bankers concerning
this issue, but as of the date of this report no commitments to
raise additional funds have been provided to the Company. While
management is optimistic of the Company's ability to expand as
discussed, there can be no assurances that the Company will expand
as described herein in the future, as there can be no assurances
that the Company will be successful in obtaining the necessary
financing with which to effect this expansion.
Additionally, relevant to the Company's real estate
development activities, management anticipates that the Company's
revenues and earnings will experience various "peaks and valleys"
as a result of project development costs. During the period when
construction begins on a project the Company will incur significant
costs applicable to such construction, without receiving any
revenues to offset these costs until such time as the project is
completed and revenues from the sale of interests in these projects
occur, of which there can be no assurance.
Inflation
Although the operations of the Company are influenced by
general economic conditions, the Company does not believe that
inflation had a material effect on the results of operations during
the six month period ended June 30, 1997.
ITEM 7. FINANCIAL STATEMENTS
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IRON HOLDINGS CORP.
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report F-2
Consolidated balance sheet as of June 30, 1997 F-3 - F-4
Consolidated statements of operations for the six-month period
ended June 30, 1997, and for the period October 3, 1996
(date of incorporation) through December 31, 1996, and of
its predecessor, Iron Eagle Contracting and Mechanical, Inc.
for the period December 7, 1995 (date of incorporation)
through October 2, 1996 F-5
Consolidated statements of stockholders' equity (deficit) for the
six-month period ended June 30, 1997, and for the period October 3,
1996 (date of incorporation) through December 31, 1996, and of its
predecessor, Iron Eagle Contracting and Mechanical, Inc. for the
period December 7, 1995 (date of incorporation) through October 2,
1996 F-6
Consolidated statements of cash flows for the six-month period ended
June 30, 1997, and for the period October 3, 1996 (date of
incorporation) through December 31, 1996, and of its predecessor,
Iron Eagle Contracting and Mechanical, Inc., for the period
December 7, 1995 (date of incorporation) through October 2, 1996 F-7 - F-8
Notes to consolidated financial statements F-9 - F-19
F-1
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INDEPENDENT AUDITORS' REPORT
The Board of Directors
Iron Holdings Corp. and subsidiaries
Ozone Park, New York
We have audited the accompanying consolidated balance sheet of Iron Holdings
Corp. and subsidiaries as of June 30, 1997, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
six-month period ended June 30, 1997, and for the period October 3, 1996 (date
of incorporation) through December 31, 1996. We have also audited the
statements of operations, stockholders' equity (deficit) and cash flows of
its predecessor, Iron Eagle Contracting and Mechanical, Inc., for the period
December 7, 1995 (date of incorporation) through October 2, 1996. 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 in accordance with generally accepted auditing
standards. 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 consolidated financial position of Iron Holdings
Corp. and subsidiaries as of June 30, 1997, and the results of its consolidated
operations and its consolidated cash flows for the six-month period ended
June 30, 1997, and for the period October 3, 1996 (date of incorporation)
through December 31, 1996, and the operations and cash flows of its predecessor,
Iron Eagle Contracting and Mechanical, Inc., for the period December 7, 1995
(date of incorporation) through October 2, 1996, in conformity with
generally accepted accounting principles.
HORTON & COMPANY, L.L.C.
Wayne, New Jersey
August 11, 1997, except for Note 12, as to which
the date is September 26, 1997
F-2
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<TABLE>
IRON HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 1997
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 164,977
Contract receivables 1,075,425
Costs and estimated earnings in excess of billings on
uncompleted contracts 262,204
Real estate under contract 274,138
Prepaid expenses and other assets 88,264
Deferred tax asset 25,000
-----------
Total current assets 1,890,008
-----------
Property and equipment, at cost:
Construction and transportation equipment 310,210
Office furniture and equipment 34,794
-----------
345,004
Less accumulated depreciation 86,488
-----------
258,516
-----------
Other assets:
Intangibles 573,482
Security deposits 12,505
Deferred income taxes 121,255
-----------
707,242
-----------
$ 2,855,766
===========
<FN>
See notes to consolidated financial statements
</TABLE>
F-3
15
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<TABLE>
IRON HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 1997
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C>
Current liabilities:
Notes payable $ 425,000
Current portion of long-term debt from business combination 262,500
Current portion of long-term debt 25,032
Accounts payable and accrued expenses 989,983
Deposits 73,000
Billings in excess of costs and estimated earnings on
uncompleted contracts 11,453
Officer's loan payable 66,500
----------
Total current liabilities 1,853,468
Long-term debt from business combination, net of current portion 1,050,000
Long-term debt, net of current portion 17,864
----------
2,921,332
----------
Stockholders' deficit:
Common stock, par value $ .001 per share
500,000,000 shares authorized
5,000,000 shares issued and outstanding 5,000
Additional paid-in capital 28,000
Accumulated deficit ( 98,566)
----------
( 65,566)
----------
$2,855,766
==========
<FN>
See notes to consolidated financial statements
</TABLE>
F-4
16
<PAGE>
<TABLE>
IRON HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Predecessor
Six-month October 3, 1996 December 7, 1995
period ended through through
June 30, 1997 December 31, 1996 October 2, 1996
------------- ----------------- ----------------
<S> <C> <C> <C>
Revenues:
Construction revenues earned $2,405,096 $ 462,153 $ 981,230
Sales of developed real estate 1,317,450 - -
---------- ---------- ---------
3,722,546 462,153 981,230
---------- ---------- ---------
Cost of revenues:
Construction costs 2,509,804 415,697 781,059
Costs of developed real estate 917,766 - -
---------- ---------- ---------
3,427,570 415,697 781,059
---------- ---------- ---------
Gross profit 294,976 46,456 200,171
Operating expenses 289,404 162,420 414,182
---------- ---------- ---------
Income (loss) from operations 5,572 (115,964) (214,011)
Interest expense (57,769) (31,360) (8,365)
---------- ---------- ---------
Loss before income taxes (52,197) (147,324) (222,376)
Deferred income tax benefit 11,555 89,400 45,300
---------- ---------- ---------
Net loss $ (40,642) $ (57,924) $(177,076)
=========== ========== =========
Loss per share $ (.009) $ (.013) $ (.039)
=========== ========== ==========
<FN>
See notes to consolidated financial statements
</TABLE>
F-5
17
<PAGE>
<TABLE>
IRON HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the six-month period ended June 30, 1997, and for the period
October 3, 1996 (date of incorporation) through December 31, 1996, and
of its predecessor, Iron Eagle Contracting and Mechanical, Inc. for the period
December 7, 1995 (date of incorporation) through October 2, 1996
<CAPTION>
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit
--------- ------ ---------- ----------
<S> <C> <C> <C> <C>
Common stock issued at inception, as
restated for reverse acquisition
accounting 4,500,000 $4,500 $1,245,500 $ -
Net loss for the period December 7, 1995
through October 2, 1996 - - - (177,076)
--------- ------ ---------- ----------
Balances, October 2, 1996 4,500,000 4,500 1,245,500 (177,076)
Recapitalization for purchase business
combination, October 3, 1996 - - (1,245,500) 177,076
Net loss for the period October 3, 1996
through December 31, 1996 - - - (57,924)
--------- ------ ---------- ----------
Balances, December 31, 1996 4,500,000 4,500 - (57,924)
Common stock issued
in reverse acquisition 500,000 500 - -
Stock options exercised - - 28,000 -
Net loss for the period January 1, 1997
through June 30, 1997 - - - (40,642)
--------- ------ ---------- ----------
Balances, June 30, 1997 5,000,000 $5,000 $ 28,000 $ (98,566)
========= ====== ========== ==========
<FN>
See notes to consolidated financial statements
</TABLE>
F-6
18
<PAGE>
<TABLE>
IRON HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Predecessor
Six-month October 3, 1996 December 7, 1995
period ended through through
June 30, 1997 December 31, 1996 October 2, 1996
------------- ----------------- ----------------
<S> <C> <C> <C>
Net loss $ (40,642) $ (57,924) $ (177,076)
---------- ------------ --------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization 38,489 18,905 55,856
Depreciation 32,437 15,762 38,289
Changes in assets and liabilities, net of
effects of business combination:
Decrease (increase) in contract
receivables (480,859) 64,051 (601,976)
Decrease (increase) in costs and
estimated earnings in excess of
billings on uncompleted contracts (57,913) (204,291) -
Decrease (increase) in real estate
under contract 657,180 (374,492) (556,826)
Decrease (increase) in prepaid
expenses and other assets (49,997) - (65,997)
Decrease (increase) in deferred
tax asset (11,555) (89,400) (45,300)
Decrease (increase) in security deposits (6,905) (4,400) 26,300
Increase (decrease) in accounts
payable and accrued expenses 418,873 242,775 293,334
Increase (decrease) in billings
in excess of costs and estimated
earnings on uncompleted contracts 11,453 - -
Increase (decrease) in deposits 73,000 - -
---------- ------------ --------------
Total adjustments 624,203 (331,090) (856,320)
---------- ------------ --------------
Net cash provided by (used in)
operating activities 583,561 (389,014) (1,033,396)
---------- ------------ --------------
Cash flow from investing activities:
Capital expenditures (29,762) - (81,747)
Intangible expenditures (51,730) - -
---------- ------------ --------------
Net cash used in investing activities (81,492) - (81,747)
---------- ------------ --------------
Cash flows from financing activities:
Principal payments under loan agreements (11,479) (6,099) (11,108)
Principal payments on notes payable (550,000) - -
Proceeds from notes payable 117,200 407,800 -
Proceeds from loan agreement - - 432,892
Capital contribution from parent company - 3,500 750,000
Proceeds from issuance of stock options 28,000 - -
Advances from officer 63,000 - -
---------- ------------ --------------
Net cash provided by (used in)
financing activities (353,279) 405,201 1,171,784
---------- ------------ --------------
Net increase in cash and cash equivalents 148,790 16,187 56,641
Cash and cash equivalents, beginning
of period 16,187 - -
---------- ------------ --------------
Cash and cash equivalents, end of period $ 164,977 $ 16,187 $ 56,641
========== ============ ==============
<FN>
See notes to consolidated financial statements
</TABLE>
F-7
19
<PAGE>
IRON HOLDINGS CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended June 30, 1997, and for the period
October 3, 1996 (date of incorporation) through December 31, 1996,
and of its predecessor, Iron Eagle Contracting and Mechanical, Inc.,
for the period December 7, 1995 (date of incorporation) through October 2, 1996
1. Summary of significant accounting policies
This summary of significant accounting policies of Iron Holdings Corp.
and subsidiaries (the "Company") is presented to assist in understanding
the financial statements. The consolidated financial statements and
notes are representations of the Company's management, which is
responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Use of estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of consolidated financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Basis of presentation
On March 31, 1997, pursuant to the terms of a plan of merger, Comstock
Tailings Company, Incorporated ("Comstock") acquired all of the
outstanding common stock of Iron Holdings Corp. ("Old IHC") and its
wholly-owned subsidiary, Iron Eagle Contracting & Mechanical, Inc. ("Iron
Eagle"), in exchange for 4,500,000 unregistered shares of Comstock's
common stock. As a result of the transaction, the former shareholders of
Old IHC received shares representing an aggregate of 90% of Comstock's
outstanding common stock, resulting in a change in control of Comstock.
As a result of the merger, Comstock was the surviving entity, Old IHC (a
holding company) ceased to exist and Iron Eagle (the operating company)
became the wholly-owned subsidiary of Comstock. Simultaneously
therewith, Comstock amended its articles of incorporation to reflect a
change in Comstock's name to Iron Holdings Corp. ("IHC"). References to
the "Company" refer to IHC together with the predecessor companies, Old
IHC and Iron Eagle.
F-8
20
<PAGE>
1. Summary of significant accounting policies (continued)
Basis of presentation (continued)
The acquisition of Iron Eagle has been accounted for as a reverse
acquisition. Under the accounting rules for a reverse acquisition, Iron
Eagle is considered the acquiring entity. As a result, historical
financial information for periods prior to the date of the transaction
are those of Iron Eagle or of Old IHC and Iron Eagle, its wholly-owned
subsidiary. However, the capital structure of Iron Eagle has been
retroactively restated to reflect the number of shares received by Old
IHC shareholders in the acquisition and the Company's par value. Under
purchase method accounting, balances and results of operation of IHC will
be included in the accompanying consolidated financial statements from
the date of the transaction, March 31, 1997. The Company recorded the
assets and liabilities (excluding intangibles) at their historical cost
bases which was deemed to approximate fair market value. The reverse
acquisition is treated as a non-cash transaction except to the extent of
cash acquired, since all consideration given was in the form of stock.
Proforma results of operations (assuming the business combination had
been effected on January 1, 1997) are not represented because IHC was
inactive for the quarter ended March 31, 1997. As a result, proforma
results of operations for the quarter ended March 31, 1997, would be no
different than the historical statement of operations presented herewith.
Effective October 3, 1996, Old IHC acquired Iron Eagle Contracting and
Mechanical, Inc. ("Iron Eagle") in a business combination accounted for
as a purchase. The results of operations of Iron Eagle is included in
the accompanying consolidated financial statements since the date of
acquisition. The total cost of the acquisition was $1,312,500, which
exceeded the fair value of the net assets of Iron Eagle by $239,576.
The excess is being amortized on the straight-line method over ten years.
As the predecessor company, the results of operations of Iron Eagle have
also been presented for the period prior to its acquisition by Old IHC.
The following information is the statement of operations of Iron Eagle
Contracting and Mechanical, Inc. (the predecessor) for the six-month
period ended June 30, 1996:
Construction revenues earned $ 384,500
Construction costs 308,553
---------
Gross profit 75,947
Operating expenses 233,252
---------
Loss from operations (157,305)
Interest expense 6,689
---------
Net loss $(163,994)
=========
F-9
21
<PAGE>
1. Summary of significant accounting policies (continued)
Principles of consolidation
The accompanying consolidated financial statements include the accounts
of Iron Holdings Corp. ("IHC") for the six-month period ended June 30,
1997, and for the period October 3, 1996 (date of incorporation) through
December 31, 1996, and of its wholly-owned subsidiary, Iron Eagle
Contracting and Mechanical, Inc. ("Iron Eagle"), for the six-month
period ended June 30, 1997, the period October 3, 1996 through December
31, 1996, and the period December 7, 1995 (date of incorporation)
through October 2, 1996. Intercompany transactions and balances have
been eliminated in consolidation.
History and business activity
IHC was originally incorporated as Comstock Tailings Company
Incorporated on May 13, 1988, under the laws of the State of Nevada.
The name was changed to Iron Holdings Corp. concurrent with the business
combination described above. Prior to such business combination, IHC
had not engaged in any operations or generated any revenue.
Old IHC was incorporated in the State of New York on October 3, 1996.
Effective October 3, 1996, it acquired all the shares of Iron Eagle in a
business combination described above. Iron Eagle Contracting and
Mechanical, Inc. was incorporated on December 7, 1995, and began
operations on December 29, 1995.
Old IHC was a holding company which had no operations and conducted
business solely through its wholly-owned construction subsidiary, Iron
Eagle Contracting and Mechanical, Inc. Old IHC ceased to exist as a
result of its merger with Comstock.
Iron Eagle is a construction contractor engaged in pipe work including
gas and water mains as well as steel installation. The subsidiary
operates in the New York City metropolitan area. The Company has also
developed a tract of real estate in Ozone Park, New York, on which it
built five two-family homes. Four of these homes were sold during the
six-month period ended June 30, 1997.
On February 18, 1997, Iron Holdings Corp. incorporated a wholly-owned
subsidiary, LW Plaza Realty Corp. The subsidiary is inactive and has
not engaged in any operations or generated any revenue.
Construction revenue and cost recognition
Revenue from construction contracts is recognized on the percentage-of-
completion method measured by the percentage of costs incurred to date
to estimated total costs for each contract.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs, and depreciation costs. 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 income 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 reliably estimated.
General and administrative costs are charged to expense as incurred.
F-10
22
<PAGE>
1. Summary of significant accounting policies (continued)
Construction revenue and cost recognition (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 amounts billed
in excess of revenues earned.
Cash equivalents
Cash equivalents include money market accounts and any highly-liquid
debt instruments purchased with an original maturity of three months or
less.
Fair value of financial instruments
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 107, "Disclosure about Fair
Value of Financial Instruments". The carrying value of all financial
instruments, including long-term and short-term debt, cash and temporary
cash investments, approximates their fair value at year end.
Concentration of credit risk and major contracts
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of cash and contract
receivables.
At June 30, 1997, the Company had cash balances with a bank which were
$61,415 in excess of the $100,000 limit insured by the Federal Deposit
Insurance Corporation. In addition, there is off-balance sheet risk to
the extent of outstanding checks. The Company has not experienced any
losses in such accounts and believes it is not exposed to any
significant credit risk on cash.
The Company's policies generally do not require collateral to support
contract receivables. At June 30, 1997, two contract receivables
represent approximately 52% and 28% of the Company's contract
receivables. For the six-month period ended June 30, 1997, the Company
derived revenues from four contracts that individually represented
approximately 50%,17%,16% and 11% of total contract revenues. For the
period October 3, 1996 through December 31, 1996, the Company derived
revenues from four contracts that individually represented approximately
32%, 19%, 16% and 11% of total contract revenues. For the period
December 7, 1995 through October 2, 1996, the Company derived all of its
revenues from two contracts.
An officer of Iron Holdings Corp. is also an officer of another company
which has awarded contracts to Iron Eagle. Revenue derived from such
contracts awarded to Iron Eagle were $287,315 and $433,000 for the
period October 3, 1996 through December 31, 1996, and the period
December 7, 1995 through October 2, 1996, respectively.
F-11
23
<PAGE>
1. Summary of significant accounting policies (continued)
Real estate under contract
Iron Eagle developed a tract of real estate in Ozone Park, New York, on
which it built five two-family homes. Construction was completed in
January 1997. Four of the five homes were sold during the six-month
period ended June 30, 1997. Proceeds from the sale of homes was
$1,317,450 with total costs of $917,766 resulting in a gross profit of
$399,684. The final home is under contract of sale for $329,000 with
the closing scheduled for August 1997.
Property and equipment
Property and equipment are carried at cost. Depreciation of property
and equipment is provided on the straight-line method over the following
estimated useful lives:
Years
-----
Construction and transportation equipment 5
Office furniture and equipment 5
Total depreciation expense was $32,437, $15,762 and $38,289 for the
six-month period ended June 30, 1997, the period October 3, 1996 through
December 31, 1996, and the period December 7, 1995 through October 2,
1996, respectively.
Maintenance, repairs and renewals which neither materially add to the
value of the equipment nor appreciably prolong its life are charged to
expense as incurred. Gains or losses on dispositions of equipment are
included in income.
Accounting standards changes
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS
121") which is effective for fiscal years beginning after December 15,
1995. The Company has adopted SFAS 121 for the fiscal year beginning
July 1, 1996. However, its adoption has not had any material impact on
the Company's consolidated financial position. SFAS 121 provides
additional guidance on when long-lived assets should be reviewed for
possible impairment, how impairment losses should be measured and when
such losses should be recognized. In addition to long-lived assets,
SFAS 121 amended the accounting standards for valuing real estate assets
to the lower of cost or fair value less cost to sell (for certain assets
the lower of cost or fair value) from the lower of cost or net
realizable values.
F-12
24
<PAGE>
1. Summary of significant accounting policies (continued)
Loss per share
Loss per share has been computed based on the weighted average number of
common shares outstanding. For the period prior to the reverse
acquisition discussed in the basis of presentation section above, the
number of common shares outstanding used in computing earnings per share
is the number of common shares received by the shareholders of Old IHC
in connection with such reverse acquisition (4,500,000 shares). For the
six-month period ended June 30, 1997, the period October 3, 1996 through
December 31, 1996, and the period December 7, 1995 through October 2,
1996, the weighted average number of shares used in the calculation was
4,751,400, 4,500,000 and 4,500,000, respectively. Primary loss per
common share does not include the effect of common stock equivalents
because the effect of such inclusion would be to reduce loss per common
share. Fully diluted loss per share amounts are not presented because
they are anti-dilutive.
2. Contract receivables
Contract receivables consist of the following:
Completed contracts $ 102,887
Contracts in progress 863,063
Retainage 109,475
----------
$1,075,425
==========
3. Intangibles
Intangibles consist of the following:
Deferred financing charges $ 15,000
Deferred offering costs 41,548
Deferred acquisition costs 20,115
Customer lists 40,627
Restrictive covenants 220,000
Organizational costs 13,083
Goodwill 223,109
----------
$ 573,482
==========
F-13
25
<PAGE>
3. Intangibles (continued)
Customer lists and restrictive covenants
Customer lists and restrictive covenants are carried at cost and are
being amortized on the straight-line method over five-year and seven-year
periods, respectively. Amortization expense of customer lists and
restrictive covenants was $25,804, $12,902 and $38,706 for the six-month
period ended June 30, 1997, for the period October 3, 1996 through
December 31, 1996, and the period December 7, 1995 through October 2,
1996, respectively. Accumulated amortization of customer lists totalled
$17,412 at June 30, 1997. Accumulated amortization of restrictive
covenants totalled $60,000 at June 30, 1997.
Organizational costs
Organizational costs are being amortized on the straight-line method
over a 60-month period. Amortization expense of organizational costs
was $706, $14 and $42 for the six-month period ended June 30, 1997, the
period October 3, 1996 through December 31, 1996, and the period
December 7, 1995 through October 2, 1996, respectively. Accumulated
amortization of organizational costs totalled $762 at June 30, 1997.
Goodwill
Goodwill represents the excess of the purchase price over the fair
market value of net assets acquired in the Iron Eagle business
combination described in Note 2. Goodwill is being amortized on the
straight-line method over a ten-year period. Amortization expense of
goodwill was $11,978 and $5,989 for the six-month period ended June 30,
1997, and the period October 3, 1996 through December 31, 1996,
respectively. Accumulated amortization of goodwill totalled $17,967 at
June 30, 1997.
4. Notes payable
Notes payable consist of the following:
Non-interest bearing note payable to a corporation under
a loan agreement which provides for up to $600,000 of
financing to be used for working capital and asset
acquisitions. The principal balance is due on October 31,
1997. The note is secured by substantially all assets of
the Company. $ 75,000
12% demand note payable to an individual, with interest
only payable monthly. The note is unsecured but is
personally guaranteed by an officer of the Company. 50,000
6% demand note payable to an individual, with interest
only payable monthly. The note is secured by one of the
two-family homes that the Company has developed. 300,000
--------
$425,000
========
F-14
26
<PAGE>
5. Long-term debt from business combination
Note payable from business combination arose from the acquisition of the
stock of Iron Eagle (Note 1). The note bears interest at the prime rate
plus 1%. Interest is payable in monthly installments beginning in
August 1997 through January 2002. Interest accrued through July 1997
shall be payable in six equal monthly installments commencing August
1997. Principal is payable in five equal consecutive annual
installments commencing January 1998 and ending January 2002.
In the event the Company completes a public or private securities
offering, it shall be obligated to prepay the lesser of $500,000 or the
then remaining unpaid amount of principal and interest. Upon completion
of a second offering, the Company shall be obligated to prepay the then
remaining unpaid amount of principal and interest.
The note is secured by all of the issued and outstanding shares of Iron
Eagle and by 150,000 shares of post-recapitalization common stock of
Iron Holdings Corp.
Maturities of long-term debt from business combination are as follows:
Year ended June 30,
------------------
1998 $ 262,500
1999 262,500
2000 262,500
2001 262,500
2002 262,500
----------
$1,312,500
==========
6. Long-term debt
Long-term debt consists of the following:
10% note payable to a bank, due April 1998, payable
in monthly installments of $1,063, including interest.
The note is secured by construction equipment. $10,155
9.92% note payable to a financing corporation, due
June 1999, payable in monthly installments of $1,455,
including interest. The note is secured by
construction equipment. 32,741
-------
42,896
Less current portion of long-term debt 25,032
-------
$17,864
=======
Maturities of long-term debt are as follows:
Year ended June 30,
------------------
1998 $25,032
1999 17,864
-------
$42,896
=======
F-15
27
<PAGE>
7. Stockholders' equity
Stock option plan
During May 1997, the Company established a non-qualified stock option
plan (the "Plan") to attract and retain qualified and competent persons
who are key employees, consultants, representatives, officers and
directors of the Company upon whose efforts and judgment the success of
the Company is largely dependent.
During May 1997, the Company awarded a total of 1,000,000 stock options
to purchase common stock at an option price of $.01 per share. All such
options vest upon execution of the consulting agreement and shall be
exercisable for one year from such date. These options were awarded to
companies which are providing public relations service and assistance in
creating a secondary market for the Company's stock. All options were
exercised in July 1997 and 1,000,000 shares of the Company's common
stock were issued.
8. Income taxes
The Company has net operating losses available for carryforward to
offset future years' taxable income. The net operating losses of
$256,386 and $165,511 expire in the years ending June 30, 2012 and 2011,
respectively.
Deferred income taxes arise from temporary differences in reporting
assets and liabilities for income tax and financial accounting purposes
primarily resulting from net operating losses. The components of the
deferred tax asset and the related tax effects of the temporary
differences are as follows:
June 30,
1997
--------
Deferred income tax asset resulting from net operating
loss carryforward $146,255
Valuation allowance -
--------
Deferred income tax asset 146,255
Less current portion 25.000
--------
$121,255
========
During the period October 3, 1996 through December 31, 1996, the Company
eliminated its deferred tax asset valuation allowance which stood at
$25,200 as of June 30, 1996. Based on estimates of future revenues and
profitability, management believes that the Company will utilize its net
operating losses to offset future taxable income prior to their
expiration dates.
F-16
28
<PAGE>
9. Supplemental cash flow information
The Company's non-cash investing and financing activities were as
follows:
During the period December 7, 1995 through October 2, 1996, the Company
purchased property and equipment totalling $81,747. These purchases
were financed as follows:
Property and equipment purchased $ 315,242
Long-term debt financing (45,145)
Equipment acquired through issuance of
stock and assumption of debt (188,350)
----------
Capital expenditures $ 81,747
==========
During the period December 7, 1995 through October 2, 1996, the
predecessor, Iron Eagle Contracting and Mechanical Inc., acquired
certain net assets in exchange for 250,000 shares of the predecessor's
common stock:
Fair value of non-cash assets acquired $876,438
Liabilities assumed 376,438
--------
Common stock issued in asset acquisition $500,000
========
During the period October 3, 1996 through December 31, 1996, Old IHC
acquired all the shares of Iron Eagle Contracting and Mechanical, Inc.
as described in Note 1, in exchange for issuance of a $1,312,500 note
payable.
During the six-month period ended June 30, 1996, Iron Holdings Corp.
acquired all the shares of Old IHC and its wholly-owned subsidiary, Iron
Eagle Contracting and Mechanical, Inc., as described in Note 1, in
exchange for 4,500,000 shares of Iron Holdings Corp. common stock.
Interest paid totalled $13,362, $1,092 and $8,645 during the six-month
period ended June 30, 1997, the period October 3, 1996 through December
31, 1996, and the period December 7, 1995 through October 2, 1996,
respectively.
10. Commitments
Lease agreements
Iron Eagle leases office space on a month-to-month basis. The monthly
rental amount is $750. Rent expense was $4,500, $2,250 and $10,125 for
the six-month period ended June 30, 1997, the period October 3, 1996
through December 31, 1996, and the period December 7, 1995 through
October 2, 1996, respectively.
F-17
29
<PAGE>
10. Commitments (continued)
Lease agreements
Iron Eagle leases several automobiles under operating leases expiring in
various years through 2000. The following is a schedule of future
minimum lease payments under noncancellable operating leases having
remaining terms in excess of one year as of June 30, 1997:
Year ended June 30,
-------------------
1998 $21,303
1999 20,954
2000 11,183
-------
Total minimum lease payments $53,440
=======
Employment agreements
Iron Eagle has entered into employment agreements with two of its
officers. Each agreement is for a five-year period commencing January
1996 and calls for base compensation of $75,000 with annual increases
equal to the increase in the cost of living for the New York
metropolitan area plus 1%. In addition, each individual is entitled
to a performance bonus equal to 7.5% of pre-tax profit of Iron Eagle.
These agreements were cancelled effective October 1, 1996.
Effective May 13, 1997, the Company entered into employment contracts
with two individuals who are officers, stockholders and directors.
Annual combined compensation under the contracts total $190,000 for the
fiscal year ending June 30, 1998 and gradually increase to $495,000 for
the year ending June 30, 2007.
Shopping center acquisition
The Company has negotiated the purchase of a shopping center located in
Queens, New York, and designated as the "Lindenwood Shopping Center".
The Company has executed a Contract of Sale for a purchase price of
$8,000,000 which includes a $400,000 down payment upon signing and the
balance of $7,600,000 payable at closing. During June 1997, the Company
received a commitment to finance $6,000,000 of the acquisition. The
note will bear interest at 1% basis point above the ten-year treasury
yield and will have a ten-year term with payments based on thirty-year
amortization.
The contract did not close within the time parameters provided therein
due to a dispute between the current owners and the Company relating to
the payment of certain fees due thereunder; however, management is
continuing to negotiate with the owners to acquire this property in the
near future.
Offshore securities offering
On April 21, 1997, the Company entered into an Offshore Securities
Subscription Agreement with Anchor Capital Management, Ltd. ("Anchor"),
a corporation organized under the laws of Turks and Caicos, British West
Indies. Under the terms of the agreement, Anchor paid $28,000 for the
option to purchase up to 2,800,000 shares of the Company's common stock
at $1.50 per share. The options expire October 21, 1997.
F-18
30
<PAGE>
11. Backlog
As of June 30, 1997, unearned revenue from three construction contracts
in process and three construction contracts not yet started total
$3,889,442.
12. Subsequent events
Offshore securities offering
During August 1997, pursuant to the Offshore Securities Subscription
Agreement described in Note 10, Anchor Capital Management, Ltd.
exercised options to purchase 687,000 shares of the Company's common
stock at $1.50 per share, thereby providing the Company with $1,030,500
in proceeds from the exercise of options. Management is unaware of
Anchor's intention to exercise any additional options.
In connection with the above securities offering, the Company prepaid
$212,500 of its obligation due under the terms of its long-term debt
from business combination (Note 5). In addition, all interest accrued
to-date under the obligation was paid in full. The holder of the note
has indicated a willingness not to call the remaining balance of
$287,500 that would be due upon completion of the securities offering,
pending completion of a final financing plan.
Land purchase contract
Subsequent to year end, the Company incorporated a wholly-owned
subsidiary, Tahoe Realty Corp. ("Tahoe"). In September 1997, Tahoe
entered into a contract to purchase vacant land in Queens, N.Y. for
approximately $400,000.
F-19
31
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
The Company filed a report on Form 8-K on or about April 15,
1997, advising that on March 31, 1997, Kish, Leake & Associates,
P.C., the Company's independent accountant for its two most recent
fiscal years, resigned. Effective March 31, 1997, the Company
engaged the accounting firm of Horton & Company, L.L.C.,
independent public accountants, to audit the Company's fiscal year
ended June 30, 1997, as well as future financial statements, to
replace the firm of Kish, Leake & Associates, P.C. This change in
independent accountants was approved by the Board of Directors of
the Company. The balance of the Company's previously referenced
Form 8-K is incorporated herein as if set forth.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors are elected for one-year terms or until the next
annual meeting of shareholders and until their successors are duly
elected and qualified. Officers continue in office at the pleasure
of the Board of Directors.
The Directors and Officers of the Company as of the date of
this report are as follows:
Name Age Position
_______________ ___ _____________________
Anthony E. Gurino 45 Chief Executive Officer,
President and Corporate
Secretary, Director
Angelo Gurino, Sr. 33 Vice President, Treasurer and
Director
Dennis Sommeso 45 Assistant Secretary and
Director
Ms. Johanna Stanziale resigned as a director of the Company in
September 1997. The Company's Board of Directors is presently
seeking out two additional, outside directors to be appointed to
the Company's Board of Directors.
All Directors of the Company will hold office until the next
annual meeting of the shareholders and until successors have been
elected and qualified. Officers of the Company are elected by the
Board of Directors and hold office until their death or until they
resign or are removed from office.
32
<PAGE>
Mr. Anthony E. Gurino and Angelo Gurino, Sr. are brothers.
There are no other family relationships among the officers and
directors. There is no arrangement or understanding between the
Company (or any of its directors or officers) and any other person
pursuant to which such person was or is to be selected as a
director or officer.
(b) Resumes:
Anthony E. Gurino is the President, Secretary and a Director
of the Company, positions he assumed in March 1997. Prior, from
October 1996 through March 1997, Mr. Gurino was President,
Secretary and a director of Iron Holdings Corp., a privately held
New York corporation engaged in the business of acquisition and
development of real estate holding and public construction
projects. He is also President and fifty percent owner of Ragtime
Foods of New York, Inc. d/b/a Antonio's Bakery in Ozone Park, New
York, a wholesale bakery, and Ragtime Gourmet Supermarket in Howard
Beach, New York, holding such positions since March 1979 and May
1978, respectively. Mr. Gurino attended Staten Island Community
College where he majored in Business. He devotes substantially all
of his time to the business of the Company.
Angelo Gurino, Sr. is Vice President, Treasurer and a Director
of the Company, positions he assumed in March 1997. Prior, Mr
Gurino was Vice President and a director of Iron Holdings Corp., a
New York corporation which merged with the Company in March 1997.
Mr. Gurino, along with Anthony E. Gurino, established Ragtime
Gourmet Supermarket in Howard Beach, New York, and Ragtime Foods of
New York, Inc. d/b/a Antonio's Bakery in Ozone Park, New York, and
is a fifty percent owner of such entities. Mr. Gurino attended
Queens Borough College where he majored in business. He devotes
substantially all of his time to the business of the Company.
Dennis Sommeso is the Assistant Secretary and a Director of
the Company, positions which he assumed in March 1997. Prior, from
October 1996 through March 1997, he was employed by Iron Holdings
Corp., which merged with the Company in March 1997. From 1989 to
1991, Mr. Sommeso was the Secretary of Hicksville Asphalt, an
asphalt plant located in Hicksville, N.Y., and from 1987 to 1995,
he was a Supervisor at Sommeso Welding Company, New York. Mr.
Sommeso has solicited, estimated, negotiated and managed over 100
million dollars worth of construction projects, primarily in the
heavy-highway, utilities and commercial/ residential site
development sectors, as well as specialized site projects. He
devotes approximately 75% of his time to the business of the
Company.
33
<PAGE>
ITEM 9B. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's officers, directors and person who own more than 10%
of the Company's Common Stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission.
All of the aforesaid persons are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on review of the copies of such forms furnished
to the Company, the Company believes that the Form 5 annual reports
of the Company's officers, directors and holders of 10% or more of
the outstanding shares of the Company, which are required to be
filed within 45 days after the end of the Company's fiscal year,
were not timely filed, but were filed late. However, these reports
reflected no changes in the securities holdings of any person.
ITEM 10. EXECUTIVE COMPENSATION.
Remuneration
The following table reflects all forms of compensation for
services to the Company for the six month period ended June 30,
1997 of the Chief Executive Officer of the Company.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
____________________________
Annual Compensation Awards Payouts
_____________________ ____________________ _______
Securities
Other Under- All
Name Annual Restricted lying Other
and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
__________ ____ ______ _____ ______ ________ _______ _______ ______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anthony E.
Gurino 1997 $39,000 $5,000 $ 0 $ 0 $ 0 $ 0 $4,620
President &
Director(1)(2)
_________________________
<F1>
(1) The information provided herein discloses the compensation
received by Mr. Anthony Gurino for the period indicated.
However, Mr. Gurino assumed his positions with the Company in
34
<PAGE>
March 1997, as part of the reorganization of the Company with
Old IHC. The Company did not begin paying any salaries or
other compensation to Mr. Gurino until April 1997.
<F2>
(2) It is anticipated that Anthony Gurino will receive
compensation exceeding $100,000 during the fiscal year ending
June 30, 1998.
</TABLE>
The Company maintains a policy whereby the directors of the
Company may be compensated for out of pocket expenses incurred by
each of them in the performance of their relevant duties. The
Company did not reimburse ant director for out of pocket expenses
during the six month period ending June 30, 1997.
In addition to the cash compensation set forth above, the
Company reimburses each executive officer for expenses incurred on
behalf of the Company on an out of pocket basis. The Company
cannot determine, without undue expense, the exact amount of such
expense reimbursement. However, the Company believes that such
reimbursements did not exceed, in the aggregate, $10,000 during the
six month period ended June 30, 1997.
In May 1997, the Company entered into two employment
agreements with Anthony Gurino and Angelo Gurino, each of whom is
an officer, director and principal shareholder of the Company.
Annual combined compensation under these contracts total $190,000
in the fiscal year ending June 30, 1998, gradually increasing to
$495,000 in the fiscal year ending June 30, 2007. However, as of
the date of this report, Mr. Anthony Gurino has drawn approximately
75% of his salaries due pursuant to the agreement and Mr. Angelo
Gurino has not taken any balances due thereunder, but all unpaid
salaries are being accrued by the Company.
Stock Plan
Effective April 21, 1997, the Company adopted the IRON
HOLDINGS CORP. 1997 NON-QUALIFIED STOCK OPTION PLAN (the "Plan"),
which reserved an aggregate of 1,000,000 shares of the Company's
common stock for issuance thereunder. Subsequently, the Company
executed consulting agreements with 5 entities, granting each
entity options pursuant to the Plan, at an exercise price of $.01
per share. As of the date of this report, all of the options to
purchase shares reserved for issuance under the Plan have been
exercised. None of the options to purchase shares of the Company's
common stock under the Plan were issued in favor of any member of
management.
There are no other bonus or incentive plans in effect, nor are
there any understandings in place concerning additional
compensation to the Company's officers.
35
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(a) and (b) Security Ownership of Certain Beneficial Owners
and Management.
The table below lists the beneficial ownership of the
Company's voting securities by each person known by the Company to
be the beneficial owner of more than 5% of such securities, as well
as by all directors and officers of the issuer. Unless otherwise
indicated, the shareholders listed possess sole voting and
investment power with respect to the shares shown.
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent of
Class Owner Ownership Class
- -------- ------------------ ---------- ----------
Common Anthony E. Gurino 2,000,000 40.0%
86-20 164th Avenue
Queens, NY 11414
Common Angelo Gurino, Sr. 2,000,000 40.0%
164-53 85th
Howard Beach, NY 11414
Common Dennis Sommeso 490,000 9.8%
2 Bushwick Street
Melville, NY 11747
Common Johanna Stanziale(1) 10,000 *
149-35 80th Street
Howard Beach, NY 11414
Common All Officers & 4,500,000 90.0%
Directors as a Group
(4 persons)
* Less than 1%.
(1) Ms. Stanziale resigned her position as a director of the
Company in September 1997.
The balance of the Company's outstanding Common Shares are
held by 10 persons, not including those persons who hold their
shares in "street name."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Since its inception, Mr. Anthony Gurino, President and a
director of the Company, has loaned the Company an aggregate of
36
<PAGE>
$200,000. As of the date of this report, the remaining balance due
Mr. Gurino from the Company is $50,000. This loan is provided to
the Company on an interest free basis and is due upon demand. This
obligation is a verbal agreement between the Company and Mr.
Gurino.
PART IV
Item 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
EX-27 Financial Data Schedule
The following Exhibits were filed with the Securities and
Exchange Commission in the Exhibits to Form 10-SB, filed on January
11, 1994 and are incorporated by reference herein:
3.1 Certificate and Articles of Incorporation
3.2 Bylaws
The following exhibits were filed with the SEC in the Exhibits
to the Company's Form 8-K dated April 15, 1997 and are incorporated
by reference herein:
2.0 Agreement and Plan of Share Exchange between the Company
and Iron Holdings Corp.
16.0 Letter of Resignation of Registrant's independent
certified accountant, Kish, Leake & Associates, P.C.
(b) Reports on Form 8-K
The Company filed two reports on Form 8-K with the SEC
during the last fiscal quarter ending June 30, 1997, including (i)
a report dated April 15, 1997, and amendment thereto dated May 9,
1997, advising of the closing of the merger between the Company and
Old IHC; and (ii) a report dated June 2, 1997, advising of the
execution of various documents relating to the issuance of options
pursuant to the exemption from registration provided under
Regulation S, promulgated under the Securities Act of 1933, as
amended. Subsequently, the Company filed another report on Form 8-
K dated July 21, 1997, advising of the change in the Company's
fiscal year end from December 31, to June 30.
37
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on
October 9, 1997.
IRON HOLDINGS CORP.
(Registrant)
By:/s/ Anthony Gurino
---------------------------
Anthony Gurino, 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 indicated on October 9, 1997.
/s/ Anthony Gurino
- --------------------------------
Anthony Gurino, President
& Director
/s/ Angelo Gurino, Sr.
- --------------------------------
Angelo Gurino, Sr., Secretary-Treasurer
& Director
/s/ Dennis Sommeso
- --------------------------------
Dennis Sommeso, Director
38
<PAGE>
IRON HOLDINGS CORP.
Exhibit Index to Transitional Annual Report on Form 10-KSB
For the Fiscal Year Ended June 30, 1997
EXHIBITS Page No.
EX-27 Financial Data Schedule . . . . . . . . . . 40
39
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FILED WITH FORM 10-KSB FOR THE SIX
MONTHS ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 164,977
<SECURITIES> 0
<RECEIVABLES> 1,075,425
<ALLOWANCES> 0
<INVENTORY> 274,138
<CURRENT-ASSETS> 1,890,008
<PP&E> 345,004
<DEPRECIATION> 86,488
<TOTAL-ASSETS> 2,855,766
<CURRENT-LIABILITIES> 1,853,468
<BONDS> 2,921,332
0
0
<COMMON> 5,000
<OTHER-SE> (70,566)
<TOTAL-LIABILITY-AND-EQUITY> 2,855,766
<SALES> 3,722,546
<TOTAL-REVENUES> 3,722,546
<CGS> 3,427,570
<TOTAL-COSTS> 3,427,570
<OTHER-EXPENSES> 289,404
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,769
<INCOME-PRETAX> (52,197)
<INCOME-TAX> 11,555
<INCOME-CONTINUING> (40,642)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (40,642)
<EPS-PRIMARY> .009
<EPS-DILUTED> 0
</TABLE>
