U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: March 31, 1997
Commission File Number: 0-23208
IRON HOLDINGS CORP.
f/k/a COMSTOCK TAILINGS COMPANY, INCORPORATED
(Exact name of small business issuer as specified in its charter)
Nevada 84-1251553
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
88-09 103rd Ave.
Ozone Park, New York 11417
(Address of principal executive office) (Zip Code)
(718) 323-4537
(Issuer's Telephone Number)
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes X
No .
The number of shares of the registrant's only class of common stock
issued and outstanding, as of March 31, 1997, was 5,000,000 shares.
Page One of Fourteen Pages
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the three month period
ended March 31, 1997 are attached hereto.
ITEM 2. 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. It
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
during the three month period ended March 31, 1997.
The following information is intended to highlight
developments in the Company's operations to present the results of
operations of the Company and its 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 three month period ended March 31, 1997.
Results of Operations
Comparison of Results of Operations for the three month period
ended March 31, 1997 and 1996.
During the three month period ended March 31, 1997, the
Company generated revenues of $2,520,706, compared to revenues of
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$48,750 for the similar period in 1996, an increase of $2,471,996
(517%). The increase in revenues is as a result of the Company's
concluding a number of sewer and gas main projects, which it had
bid for during 1996, as well as the sale of four (4) of the five
residential homes which the Company built. In 1996, the Company
acquired undeveloped land in Ozone Park, Queens, New York, where it
constructed five two-family homes. The cost of the acquisition was
$320,000. The Company sold each of the four homes for $325,000
each. The total cost to the Company for both the land and
materials necessary to complete construction was approximately
$1,250,000.
In the three month period ended March 31, 1997, costs of
revenues was $2,123,480, compared to $39,002 for the similar period
in 1996, an increase of $2,084,478 (544%). These costs included
general and administrative expenses, as well as equipment and
supplies necessary to allow the Company to complete construction of
the aforesaid residential homes and complete the sewer and gas main
projects discussed hereinabove. As a result, the Company generated
net income of $110,047 for the three month period ended March 31,
1997, compared to a net loss of ($59,661) for the three month
period ended March 31, 1996. As indicated above herein, the
Company's business did not commence generating any material
revenues during 1996.
Liquidity and Capital Resources
Relating to the Company's assets and liabilities, cash
increased from $195,668 at March 31, 1996, to $437,327 at march 31,
1997, as a result of successful operations.
At March 31, 1997, the Company was obligated to pay
outstanding short term loans of $594,106, including $117,485 to a
related party, the Company's President, Anthony E. Gurino. This
unsecured loan is due upon demand, without interest. Management
believes that the officer is amenable to keeping the relevant note
in place for the short term.
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 March 31, 1997, the Company had
$150,000 of borrowings against this loan.
At March 31, 1997, the Company had a 6% note payable for
$300,000 to an unaffiliated individual. The note is secured by a
3
<PAGE>
two family home that the Company has developed and is due June 1,
1997.
Outstanding long term notes aggregating $1,334,001 are also
owed to unaffiliated parties, including a note payable bearing
interest at the prime rate, plus 1%. Principal is payable in five
equal consecutive installments commencing January 1998 and ending
January 2002. The note is secured by all of the issued and
outstanding shares of Iron Eagle Contracting and Mechanical, Inc.,
the wholly owned subsidiary of the Company, as well as 150,000
shares of post-recapitalization common stock of the Company. The
Company is current on all note payments.
The Company's securities are currently not liquid. There is
currently no market for the Company's securities; however, the
Company has recently filed an application to list its securities on
the OTC Bulletin Board and is presently engaged in responding to
various comments and concerns expressed by the NASD relevant
thereto. While no assurances can be provided, management believes
that the Company's common stock will begin trading on the Bulletin
Board in the very near future.
Trends
In addition to its present businesses, management also intends
to purchase and manage shopping centers in the New York City
metropolitan area. Relevant thereto, the Company has had
significant discussions to acquire the Lindenwood Shopping Center
in Queens, N.Y. While there is no definitive agreement, the
parties have agreed in principle to allow the Company to purchase
this shopping center for a purchase price of $8,000,000, including
a $400,000 down payment upon execution of the applicable contract,
with the balance due at closing. In order to finance this
acquisition, the Company has undertaken negotiations with Lehman
Brothers Holdings, Inc., New York ("Lehman") wherein Lehman has
agreed in principle to provide $6,000,000 in financing,
representing 75% of the purchase price, to the Company. While no
assurances can be provided, management expects that a written
commitment for this financing will be executed by the end of May,
1997. However, in order for the Company to successfully consummate
this acquisition, it will be necessary for the Company to seek out
additional equity or subordinated debt capital. As of the date of
this report and relevant thereto, the Company has had discussions
with various investors who have agreed to provide such equity
capital to the Company. However, the specific terms of this equity
injection have not been reached and there can be no assurances that
such an agreement will be reached with these parties, or any other
parties in the future. Failure of the Company to obtain this
equity capital will cause the Company to defer their plans to
expand as described herein.
4
<PAGE>
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.
It is anticipated that the Company's fifth residential home will
sell during the next three month period following the date of this
report. Additionally, management also intends to seek out
acquisition opportunities of shopping centers and property
management, as discussed hereinabove under "Liquidity and Capital
Resources". Relevant thereto, it is expected that the Company will
form another wholly owned subsidiary under which to operate these
businesses. However, 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 in which to effect
this expansion.
Inflation
Although the operations of the Company are influenced by
general economic conditions, the Company does not believe that
inflation had a material affect on the results of operations during
the three month period ended March 31, 1997.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None
ITEM 2. CHANGES IN SECURITIES - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
Effective March 31, 1997, all of the Company's shareholders
executed a unanimous consent authorizing the merger of the Company
with Iron Holdings Corp. a New York corporation. No proxy was
disseminated to the Company's shareholders and no solicitation by
any of the Company's management was utilized to obtain these
consents.
ITEM 5. OTHER INFORMATION - NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits
EX-27 Financial Data Schedule
5
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(b) Reports on Form 8-K
On or about March 24, 1997, the Company filed a report on Form
8-K with the Securities and Exchange Commission, advising that the
Company had entered into a letter of intent with Iron Holdings
Corp. ("IHC"), a privately held New York corporation, whereby the
Company has agreed in principle to acquire all of the issued and
outstanding shares of IHC, in exchange for issuance by the Company
of previously unissued "restricted" common stock. IHC is a holding
company for a wholly owned subsidiary company which is engaged in
the business of acquisition and development of real estate
holdings.
The relevant terms of the transaction required the Company to
issue to the IHC shareholders an aggregate of 4,500,000
"restricted" common shares, representing 90% of the Company's then
outstanding common stock, in exchange for all of the issued and
outstanding shares of IHC. This transaction closed on March 31,
1997.
Subsequent Event
On or about April 15, 1997, the Company filed a report on Form
8-K, advising that the Company acquired all of the issued and
outstanding securities of Iron Holdings Corp., ("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 IHC in exchange for all of the
issued and outstanding stock of IHC. IHC did not survive the
transaction. The Company also changed its name to "Iron Holdings
Corp."
Pursuant to the terms of the Agreement the Company's officers
and directors, Joel Feinberg, Suzanne Maisch and Paul Abbondante,
resigned their respective positions in the Company and the
following persons were appointed as new officers and/or directors
of the Company:
NAME OFFICE
Anthony E. Gurino Chief Executive Officer,
President and Corporate
Secretary, Director
Angelo Gurino Vice President, Treasurer
and Director
Dennis Sommeso Assistant Secretary
and Director
Johanna Stanziale Director
6
<PAGE>
Additionally, the report also advised of the following: (i) Kish,
Leake & Associates, P.C., the Registrant's independent accountant
for the Registrant's two most recent fiscal years, resigned and
were replaced with the accounting firm of Horton & Co., L.L.C.,
independent public accountants to audit the Registrant's fiscal
year ended December 31, 1997, as well as future financial
statements, to replace the firm of Kish, Leake & Associates, P.C.;
and (ii) included the audited financial statements of Iron Holdings
Corp. the New York corporation which merged with the Company as
described hereinabove. The balance of the disclosure included in
both the Form 8-K dated March 24, 1997 and April 15, 1997 are
hereby incorporated by referenced thereto.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the
Securities and Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
IRON HOLDINGS CORP., f/k/a
COMSTOCK TAILINGS COMPANY, INCORPORATED
(Registrant)
Dated: May 20, 1997 By:/s/ Anthony E. Gurino
Anthony E. Gurino, President
8
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<TABLE>
IRON HOLDINGS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
<CAPTION>
March 31, 1997
<S> <C>
Current asset:
Cash $ 437,327
Contract receivables 861,769
Real estate under development 255,550
Costs and estimated earnings in excess
of billings on uncompleted contracts 287,653
Deferred tax asset 15,688
-------------
Total current assets 1,857,987
-------------
Property and equipment, net of
accumulated depreciation 245,597
-------------
Other assets:
Goodwill 229,098
Restrictive covenant 230,000
Other deferred charges 77,068
-------------
536,166
-------------
$ 2,639,750
=============
Current liabilities:
Notes payable $ 450,000
Current portion of long-term debt 26,621
Officers' loan payable 117,485
Accounts payable and accrued expenses 558,108
Billing in excess of costs and estimated
earnings on uncompleted contracts 79,922
------------
Total current liabilities 1,232,136
------------
Long-term debt, net of current portion 1,334,001
------------
Stockholders' equity:
Common stock, par value $.001 per share
500,000,000 shares authorized
5,000,000 shares issued and outstanding 5,000
Retained earnings 68,613
------------
73,613
------------
$ 2,639,750
============
</TABLE>
9
<PAGE>
<TABLE>
IRON HOLDINGS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS AND ACCUMULATED DEFICIT
Three months ended March 31, 1997 and 1996
<CAPTION>
Three months ended Three months ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Contract revenues earned $ 2,520,706 $ 48,750
Cost of revenues 2,123,480 39,002
-------------- --------------
Gross profit 397,226 9,748
Operating expenses 179,710 69,409
-------------- --------------
Income (loss) before
income taxes 217,516 (59,661)
-------------- --------------
Income taxes:
Current 2,235 --
Deferred 107,812 --
-------------- --------------
110,047 --
-------------- --------------
Net income (loss) 107,469 (59,661)
Accumulated deficit,
beginning of period (38,856) (3,983)
-------------- --------------
Retained earnings
(accumulated deficit),
end of period $ 68,613 (63,644)
============== ==============
Earnings (loss) per share $ 0.015 $ (1.014)
============== ==============
Weighted average
shares outstanding 4,500,000 4,500,000
============== ==============
</TABLE>
10
<PAGE>
<TABLE>
IRON HOLDINGS CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended March 31, 1997 and 1996
<CAPTION>
Three months Three months
ended ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 107,469 $ (59,661)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 15,594 9,806
Amortization 18,905 5,981
Changes in assets and liabilities:
Decrease (increase) in
contract receivables (267,203) (48,750)
Decrease (increase) in real
estate under development 675,768 353,446
Decrease (increase) in
prepaid expenses 65,767 (63,325)
Decrease (increase) in costs and
estimated earnings in excess
of billings on uncompleted
contracts (83,362) --
Decrease (increase) in deferred
income taxes 107,812 --
Decrease (increase) in deposits (34,705) 15,000
Increase (decrease) in accounts
payable and accrued expenses 52,266 92,931
Increase (decrease) in billings
in excess of costs and
estimated earnings on
uncompleted contracts 79,922 --
-------------- -------------
Net cash provided by (used in)
operating activities 738,233 (401,464)
-------------- -------------
Cash flows from investing activities:
Capital expenditures -- (7,754)
-------------- -------------
Net cash provided by (used in)
investment activities -- (7,754)
-------------- -------------
11
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Cash flows from financing activities:
Deferred financing costs (20,525) --
Capital contribution -- 250,000
Advances from (repayments to) officers 120,985 (15,000)
Proceeds from loan agreements 38,700 98,309
Principal payments under loan
agreements (456,253) --
-------------- -------------
Net cash provided by (used in)
financing activities (317,093) 333,309
-------------- -------------
Net increase (decrease) in cash 421,140 (75,909)
Cash, beginning of period 16,187 339,312
-------------- -------------
Cash, end of period $ 437,327 $ 263,403
============== =============
</TABLE>
12
<PAGE>
IRON HOLDINGS CORP. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three-month period ended March 31,1997
1. Unaudited Interim Financial Statements
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-QSB and do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments, consisting only of normal recurring
adjustments considered necessary for a fair presentation, have been
included. Operating results for any quarter are not necessarily
indicative of the results for any other quarter or for the full year.
2. Basis of Presentation
Business combination
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.
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
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 operations 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 basis 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 presented 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.
13
<PAGE>
2. Basis of Presentation (continued)
Principles of consolidation
The accompanying consolidated financial statements include the accounts of
Old IHC and Iron Eagle for the quarter ended March 31, 1997 and of IHC
effective with the date of the merger, March 31, 1997. Significant
intercompany transactions and balances have been eliminated in
consolidation.
Earnings per share
Earnings per share have been computed based on the weighted average number
of common shares outstanding. For the three-month period prior to the
reverse acquisition discussed in the business combination section of Note
2 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).
3. 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
in Note 2. Prior to such business combination, IHC had not engaged in any
operations or generated any revenue.
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 (Note 2).
Iron Eagle is a construction contractor engaged in pipe work including gas
and water mains as well as steel installation. Iron Eagle has also
developed a tract of real estate in Ozone Park, New York, on which it has
built five two-family homes. Four of those homes were sold during the
quarter ended March 31, 1997.
4. Commitments & Contingencies
Purchase of shopping center
The Company is negotiating the purchase of a shopping center located in
Queens, New York and designated as the "Lindenwood Shopping Center".
Although the Company has not executed a Contract of Sale with the owner of
such shopping center, it has agreed in principal to 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. To date, the Company has not
received a commitment to finance the acquisition.
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FILED WITH FORM 10-QSB FOR THE
QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 437,327
<SECURITIES> 0
<RECEIVABLES> 1,149,422
<ALLOWANCES> 0
<INVENTORY> 255,550
<CURRENT-ASSETS> 1,857,987
<PP&E> 315,242
<DEPRECIATION> 69,645
<TOTAL-ASSETS> 2,639,750
<CURRENT-LIABILITIES> 1,232,136
<BONDS> 1,334,001
0
0
<COMMON> 5,000
<OTHER-SE> 68,613
<TOTAL-LIABILITY-AND-EQUITY> 2,639,750
<SALES> 2,520,706
<TOTAL-REVENUES> 2,520,706
<CGS> 2,123,480
<TOTAL-COSTS> 2,123,480
<OTHER-EXPENSES> 179,710
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 217,516
<INCOME-TAX> 110,047
<INCOME-CONTINUING> 107,469
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107,469
<EPS-PRIMARY> .015
<EPS-DILUTED> 0
</TABLE>
