U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: December 31, 1997
Commission File Number: 0-23208
IRON HOLDINGS CORP.
(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 December 31, 1997, was 6,687,000
shares.
Page One of Twenty Pages
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the six month periods
ended December 31, 1997 and 1996 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. In
connection with, and because it desires to take advantage of, the
"safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, the Company cautions readers regarding certain
forward looking statements in the following discussion and
elsewhere in this report and in any other statement made by, or on
the behalf of the Company, whether or not in future filings with
the Securities and Exchange Commission. Forward looking statements
are statements not based on historical information and which relate
to future operations, strategies, financial results or other
developments. Forward looking statements are necessarily based
upon estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and
contingencies, many of which are beyond the Company's control and
many of which, with respect to future business decisions, are
subject to change. These uncertainties and contingencies can
affect actual results and could cause actual results to differ
materially from those expressed in any forward looking statements
made by, or on behalf of, the Company. The Company disclaims any
obligation to update forward looking statements.
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
2
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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 and sold five (5) two-family homes.
The following information is intended to highlight
developments in the Company's operations to present the results of
operations of the Company and its subsidiaries, 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 December 31, 1997.
Results of Operations
Comparison of Results of Operations for the Six Month Period
Ended December 31, 1997 and 1996.
During the six month period ended December 31, 1996, the
Company generated revenues of $1,058,884, compared to the Company's
revenues for the six month period ended December 31, 1997, of
$3,175,691, an increase of $2,116,807 (200%). Of the aggregate
revenues generated by the Company during the six month period ended
December 31, 1997, $2,850,691 were from construction projects, with
the balance ($325,000) derived from the sale of the last of the
Company's five original residential homes. This significant
increase in revenues can best be explained by the fact that the
Company's operating subsidiary, IECM generated its revenues during
the period ended December 31, 1996 only from contracting jobs,
while the Company's revenues were derived from both construction
revenue and the sales of developed residential real estate.
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 December
31, 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 $415,697 at December 31, 1996, compared
to $3,251,909 at December 31, 1997, an increase of $2,836,212
(682%), due primarily to construction costs associated with the
Company's bid construction work ($2,915,822), as well as costs
applicable to the residential home sold ($336,087). Costs of the
Company's bid construction work exceeded gross revenues during the
six month period ended December 31, 1997 by $65,131 (approximately
2% of gross revenues) because projects were under bid and
management believes that the Company should have done a better job
of managing the costs associated with the contracts in progress.
An additional factor was inclement weather (rain) which affected
the number of work days which the Company could perform on these
projects. During the six month period ended December 31, 1996, the
percentage of costs relevant to construction represented
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<PAGE>
approximately 83% of gross revenues. Management cannot
definitively estimate when, or if, costs of revenues will decrease
sufficiently to allow the Company to begin to have any opportunity
to generate profits from operations. As a result, management is
considering revising the Company's business plan in order to
undertake other businesses which will allow the Company to generate
profits in the future. As of the date of this report, no
definitive new business plan has been adopted in this regard, but
it is the intention of management to finalize such a new plan in
the next thirty days. Applicable thereto, the Company entered into
an agreement with CRT Corporation, a Nevada corporation, wherein
the Company considered changing its principal business by acquiring
a new business and "rolling out" the Company's current operations.
See "Part II, Item 5. Other Information", below herein. However,
as of the date of this report, management is not optimistic as to
the success of this proposed transaction due, among other things,
to the dispute between the Company and one of its creditors
concerning an alleged default by the Company on a promissory note
in the principal amount of approximately $1.1 million. See
"Liquidity and Capital Resources" below.
Operating expenses remained relatively constant in the six
month period ended December 31, 1997 compared to the similar period
in 1996. Six month operating expenses for the period ended
December 31, 1996 were $343,762, compared to $335,205 at December
31, 1997, an increase of $8,557 (2%). As a result, the Company had
a net loss of the six month period ended December 31, 1997
(including deferred income tax expense), of ($631,276)
(approximately $.10 per share) as compared to a net loss for the
same period in 1996, of $(42,022), (a loss of $.01 per share)
inclusive of income tax benefits.
Comparison of Results of Operations for the three month period
ended December 31, 1997 and 1996.
In the three month period ended December 31, 1997, the
Company's business suffered a significant negative turn, primarily
as a result of costs of construction projects exceeding gross
revenues. While gross revenues increased by $397,552 from $462,153
in the three month period ended December 31, 1996 to $859,705 for
the similar period in 1997, an increase of 46.2%, all of the
Company's revenues were derived from construction projects, as
opposed to the combination of revenues derived from both
construction projects and the sale of residential homes. All of
the homes previously built by the Company had been sold prior to
this three month period. Previously, the Company had been able to
offset losses incurred from the Company's construction projects
with profits generated from the sale of these homes. This
significant increase in revenues from construction projects can be
explained by the fact that IECM, the principal operating subsidiary
of the Company, was in the development stage immediately subsequent
to its inception, which required it to go out and obtain bids for
4
<PAGE>
construction jobs and then thereafter, complete each job. During
the period ended December 31, 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 $415,697 at December 31, 1996, compared
to $1,256,763 at December 31, 1997, an increase of $841,066 (169%),
all of which was applicable to construction work costs. Costs of
the Company's bid construction work exceeded gross revenues during
the three month period ended December 31, 1997 by $397,058. Total
costs of revenues exceeded gross revenues during this period in
1997 by approximately 146% because projects were under bid and
management believes that the Company should have done a better job
of managing the costs associated with the contracts in progress.
An additional factor was inclement weather (rain) which affected
the number of work days which the Company could perform on these
projects. During the three month period ended December 31, 1996,
the percentage of costs relevant to construction represented
approximately 90% of gross revenues.
Operating expenses remained relatively constant during the
relevant three month period, as such expenses in the three month
period ended December 31, 1996 were $162,420, compared to $166,456
at December 31, 1997, an increase of $4,036 (2.5%). Management
continued its practice of not taking any salaries during this
period. As a result, the Company had a net loss for the three
month period ended December 31, 1997, of ($680,166) (approximately
$.10 per share) as compared to a net loss for the same period in
1996, of $(38,856), ($.009 per share) inclusive of income tax
liabilities.
Liquidity and Capital Resources
Relating to the Company's assets and liabilities, during the
six month period ended December 31, 1997, cash increased from
$164,977 at June 30, 1997, to $283,679 at December 31, 1997, as a
result of proceeds received by the Company from the sale of the
final residential home discussed above.
Outstanding long term notes aggregating $1.131,439 are also
owed to unaffiliated parties, including a $1.1 million note payable
which arose from the acquisition of Old IHC's acquisition of IECM,
which bears interest at the prime rate, plus 1%. The original terms
were that principal was payable in five equal consecutive
installments commencing January 1998 and ending January 2002. 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 to
date, the Company reached an agreement with the holder of this
5
<PAGE>
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
agreed at that time 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 300,000 shares of post-recapitalization common
stock of the Company. In January 1998, the Company received a
notice of default from this creditor, wherein the creditor alleged
a default in the Company's obligations under this note due to non-
payment of interest due in January 1998. As of the date of this
report, management is meeting with this creditor to discuss the
situation but a definitive agreement between the parties has not
been reached.
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. The Company also has three
short term notes outstanding to unaffiliated parties. The first is
a demand note bearing interest at 6% per annum, which had a
principal balance of $300,000 as of June 30, 1997. The Company
reduced the principal balance by $215,000 to $85,000 during the
three month period ended December 31, 1997. The second note is
also a demand note bearing interest at 12% per annum, which had a
principal balance of $50,000 as of June 30, 1997. During the
quarter, the Company borrowed an additional $50,000, resulting in
a principal balance of $100,000 as of December 31, 1997. The third
note is a demand note, which had an original principal balance of
$450,000. The Company reduced the principal balance to $75,000 as
of December 31, 1997. This note bears no interest.
In August 1997, the Company 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 tendered a non-refundable deposit 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.
Prior to the proposed closing date, management recognized that the
Company did not have sufficient cash available to allow it to close
this acquisition. In response, management met with various parties
in order to attempt to raise the necessary cash, or alternatively,
generate interest in the property in order to allow the transaction
to close by having these non-affiliated parties acquire the
shopping center for their own account and allow the Company to
recover its deposit. When management entered into the contract,
they had a verbal commitment from investment bankers to raise up to
$2 million in additional equity capital. Unfortunately, these
6
<PAGE>
investment bankers advised the Company of their inability to
successfully raise this capital subsequent to execution of the
applicable contract. The transaction was closed by the Company
assigning its rights under the applicable contract to a third party
in exchange for receipt by the Company of a promissory note in the
principal amount of $400,000, the amount originally deposited by
the Company with the initial owners. The Company did not retain
any interest in the shopping center.
In September 1997, Tahoe Realty Corp. ("Tahoe"), a wholly
owned subsidiary of the Company, entered into a contract to
purchase vacant land in Queens, N.Y. consisting of approximately
two acres for $400,000. In December 1997, Tahoe advised the seller
that is was cancelling this contract and would not be purchasing
this property. As of the date of this report, the Company is
awaiting the return of its $20,000 refundable deposit.
Trends
The Company's principal revenues to date have been from its
bid construction business. However, as a result of unanticipated
increased costs, the construction costs associated with these
construction projects has far exceeded management's expectation,
resulting in significant losses to the Company from operations. It
is unlikely that this situation will change in the future. If it
does not change, it is unlikely that the Company could continue to
operate without the protection afforded by US bankruptcy laws. As
a result, management has elected to revise the current business
plan of the Company, to expand into other businesses which
management believes will allow the Company to generate profits in
the future. As of the date of this report, while various
discussions and ideas have been undertaken, no definitive new
business plan has been adopted. Initially, the Company reported
that it was considering undertaking a share exchange with CRT
Corporation and "rollout" the current business of the Company, in
order to protect the investment of its shareholders in the Company.
As of the date of this report, it is not anticipated that this
proposed transaction between the Company and CRT Corporation will
close, primarily because of the alleged default on a $1.1 million
promissory note by the Company with one of its creditors, described
above under "Liquidity and Capital Resources". There can be no
assurances that, even if a new business plan is adopted, that the
operations of the Company will generate profits in the near future,
or at all.
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.
7
<PAGE>
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 -
NONE
ITEM 5. OTHER INFORMATION - NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
On or about December 31, 1997, the Company filed a Form 8-K
with the SEC advising of the proposed share exchange with CRT
Corporation and the simultaneous "rollout" of the Company's present
subsidiary companies. The contents of this 8-K are incorporated
herein as if set forth.
8
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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.
(Registrant)
Dated: February 19, 1998 By:/s/ Anthony E. Gurino
---------------------------
Anthony E. Gurino, President
9
<PAGE>
IRON HOLDINGS CORP.
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
---------
Consolidated balance sheets as of
December 31 1997,and June 30, 1997 F-2 - F-3
Consolidated statements of operations and
accumulated deficit for the six-month period
ended December 31, 1997, and for the six-month
period ended December 31, 1996, including its
predecessor, Iron Eagle Contracting and
Mechanical, Inc. for the three-month periods
ended December 31, 1997 and 1996 F-4
Consolidated statements of cash flows for the
six-month period ended December 31, 1997, and
for the six-month period ended December 31, 1996,
including its predecessor, Iron Eagle Contracting
and Mechanical, Inc. F-5
Notes to consolidated financial statements F-6 - F-9
F-1
10
<PAGE>
<TABLE>
IRON HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
(unaudited)
December 31, June 30,
1997 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 283,679 $ 164,977
Contract receivables 1,341,947 1,075,425
Officers' loan receivable 15,500 -
Costs and estimated earnings in
excess of billings on
uncompleted contracts 505,288 262,204
Real estate under development - 274,138
Prepaid expenses and other assets 17,734 88,264
Current portion of note receivable 43,102 -
Deferred income taxes - 25,000
----------- -----------
Total current assets 2,207,250 1,890,008
----------- -----------
Property and equipment, at cost:
Construction and transportation
equipment 302,709 310,210
Office furniture and equipment 34,794 34,794
----------- -----------
337,503 345,004
Less accumulated depreciation 117,587 86,488
----------- -----------
219,916 258,516
----------- -----------
Other assets:
Note receivable, net of current
portion 356,898 -
Intangibles 457,651 573,482
Deposits 32,505 12,505
Deferred income taxes, net
of current portion - 121,255
----------- -----------
847,054 707,242
----------- -----------
$ 3,274,220 $ 2,855,766
=========== ===========
<FN>
See notes to consolidated financial statements
</TABLE>
F-2
11
<PAGE>
<TABLE>
IRON HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<CAPTION>
(unaudited)
December 31, June 30,
1997 1997
----------- -----------
<S> <C> <C>
Current liabilities:
Notes payable $ 260,000 $ 425,000
Current portion of long-term debt
from business combination 1,100,000 262,500
Current portion of long-term debt 22,956 25,032
Accounts payable and accrued expenses 1,557,931 989,983
Deposits 22,244 73,000
Billings in excess of costs and
estimated earnings on
uncompleted contracts - 11,453
Officer's loan payable - 66,500
----------- -----------
Total current liabilities 2,963,131 1,853,468
----------- -----------
Long-term debt from business
combination, net of current portion - 1,050,000
Long-term debt, net of current portion 8,483 17,864
----------- -----------
8,483 1,067,864
----------- -----------
Stockholders' equity (deficit):
Common stock, par value $ .001 per
share, 500,000,000 shares
authorized, 6,687,000 shares issued
and outstanding at December 31,
1997 6,687 -
5,000,000 shares issued and
outstanding at June 30, 1996 - 5,000
Additional paid-in capital 1,025,761 28,000
Accumulated deficit (729,842) (98,566)
----------- -----------
302,606 (65,566)
----------- -----------
$ 3,274,220 $ 2,855,766
=========== ===========
<FN>
See notes to consolidated financial statements
</TABLE>
F-3
12
<PAGE>
<TABLE>
IRON HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
(Unaudited)
<CAPTION>
Six-month period ended Three-month period ended
December 31, December 31,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Construction revenues earned $2,850,691 $1,058,884 $ 859,705 $ 462,153
Sales of developed real estate 325,000 - - -
---------- ---------- ---------- ----------
3,175,691 1,058,884 859,705 462,153
---------- ---------- ---------- ----------
Cost of revenues:
Construction costs 2,915,822 877,864 1,234,001 415,697
Costs of developed real estate 336,087 - 22,762 -
---------- ---------- ---------- ----------
3,251,909 877,864 1,256,763 415,697
---------- ---------- ---------- ----------
Gross profit (loss) (76,218) 181,020 (397,058) 46,456
Operating expenses 335,205 343,762 166,456 162,420
---------- ---------- ---------- ----------
Loss from operations (411,423) (162,742) (563,514) (115,964)
Interest expense 73,598 2,769 40,646 1,092
---------- ---------- ---------- ----------
Loss before income taxes (485,021) (165,511) (604,160) (117,056)
Deferred income taxes (benefit) 146,255 (123,500) 76,006 (78,200)
---------- ---------- ---------- ----------
Net loss (631,276) (42,011) (680,166) (38,856)
Accumulated deficit,
beginning of period (98,566) (167,932) (49,676) -
---------- ---------- ---------- ----------
Accumulated deficit, end of period $ (729,842) $ (209,943) $ (729,842) $ (38,856)
========== ========== ========== ==========
Loss per share $ (.099) $ (.009) $ (.102) $ (.009)
========== ========== ========== ==========
<FN>
See notes to consolidated financial statements
</TABLE>
F-4
13
<PAGE>
<TABLE>
IRON HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six-month period ended
December 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net loss $ (631,276) $ (42,011)
----------- -----------
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization 39,167 25,832
Depreciation 33,098 31,464
Loss on sale of equipment 2,500 -
Write off of deferred charges 35,112 -
Changes in assets and liabilities:
Decrease (increase) in contract receivables (266,522) (316,066)
Decrease (increase) in costs and estimated earnings
in excess of billings on uncompleted contracts (243,084) (163,291)
Decrease (increase) in real estate under development 274,138 (542,338)
Decrease (increase) in prepaid expenses and
other assets 70,530 (23,948)
Decrease (increase) in deferred income taxes 146,255 (123,500)
Decrease (increase) in deposits (20,000) 23,100
Increase (decrease) in accounts payable
and accrued expenses 567,948 312,111
Increase (decrease) in billings in excess of
and estimated earnings on uncompleted contracts (11,453) -
Increase (decrease) in deposits (50,756) -
----------- -----------
Total adjustments 576,933 (776,636)
----------- -----------
Net cash used in operating activities (54,343) (818,647)
----------- -----------
Cash flow from investing activities:
Capital expenditures - (10,085)
Proceeds from sale of equipment 3,000 -
Deposit converted to note receivable (400,000) -
Advances made to officer (15,500) -
----------- -----------
Net cash used in investing activities (412,500) (10,085)
----------- -----------
Cash flows from financing activities:
Principal payments under loan agreements (223,955) (12,049)
Proceeds from loan agreements - 411,300
Principal payments on notes payable (315,000) -
Proceeds from notes payable 150,000 -
Capital contribution from parent company - 250,000
Proceeds from issuance of common stock 1,041,000 -
Repayment of officer loan (66,500) -
----------- -----------
Net cash provided by financing activities 585,545 649,251
----------- -----------
Net increase (decrease) in cash and cash equivalents 118,702 (179,481)
Cash and cash equivalents, beginning of period 164,977 195,668
----------- -----------
Cash and cash equivalents, end of period $ 283,679 $ 16,187
=========== ===========
<FN>
See notes to consolidated financial statements
</TABLE>
F-5
14
<PAGE>
IRON HOLDINGS CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended December 31, 1997 and the
six-month period ended December 31, 1996, including
its predecessor, Iron Eagle Contracting and Mechanical, Inc.,
for the three-month periods ended December 31, 1997 and 1996
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 the 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.
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.
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.
F-6
15
<PAGE>
1. Unaudited interim financial statements (continued)
Basis of presentation (continued)
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.
Principles of consolidation
The accompanying consolidated financial statements include the accounts
of Iron Holdings Corp. ("IHC"), and of its wholly-owned subsidiaries, Iron
Eagle Contracting and Mechanical, Inc. ("Iron Eagle"), LW Plaza Realty
Corp. and Tahoe Realty Corp., for the six-month and three-month periods
ended December 31, 1997. 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. The final home was sold during the six-
month period ended December 31, 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. However, it had
entered into a contract to purchase a shopping center as discussed in
Note 3.
During August 1997, Iron Holdings Corp. incorporated a wholly-owned
subsidiary, Tahoe Realty Corp. The subsidiary is inactive and has not
engaged in any operations or generated any revenue. However, it had
entered into a contract to purchase land as discussed in Note 3.
F-7
16
<PAGE>
1. Unaudited interim financial statements (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 periods ended December 31, 1997 and 1996, the weighted average
number of shares used in the calculation was 6,385,190 and 4,500,000,
respectively. For the three-month periods ended December 31, 1997 and
1996, the weighted average number of shares used in the calculation was
6,687,000 and 4,500,000, respectively.
2. 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.
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 expired October 21, 1997.
During August 1997, pursuant to the Offshore Securities Subscription
Agreement described above, 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.
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. In addition, $53,609 interest accrued to-date
under the obligation was paid.
F-8
17
<PAGE>
3. Commitments
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 executed a Contract of Sale for a purchase price of
$8,000,000 and tendered a non-refundable deposit of $400,000. When
management entered into the contract, they had a verbal commitment from
investment bankers to raise up to $2 million in additional equity
capital. Unfortunately, these investment bankers advised the Company
of their inability to successfully raise this capital subsequent to
execution of the applicable contract. During 1997, management recognized
that the Company did not have sufficient cash available to allow it to
close this acquisition. On December 31, 1997, in response to these
developments, management assigned the contract to an unrelated third
party. To compensate the Company for its $400,000 deposit, the purchaser
gave the Company a $400,000 note. The note is receivable in quarterly
installments of $14,367, including interest at 8%. Such payments
commence on April 8, 1998 and end on January 8, 2003 with the balance
due at that time.
Land purchase contract
In August 1997, 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 and
paid a $20,000 refundable deposit. In December 1997, Tahoe advised the
seller that the Company was cancelling the contract and would not be
purchasing the property.
4. Notice of default
In January 1998, the Company was notified by JJFN Services, Inc.
("JJFN"), the holder of the note payable from the business combination,
that JJFN considered it to be in default on its obligation for non-
payment of interest due in January 1998. Management is in the process
of re-negotiating the terms of the note in an attempt to cure the
default.
5. Proposed reverse merger and rollout
Effective December 24, 1997, the Company entered into a letter of intent
with CRT Corporation ("CRT"), a privately held Nevada corporation,
whereby the Company has agreed in principle to acquire all of the issued
and outstanding shares of CRT, in exchange for issuance by the Company
of previously unissued "restricted" common stock. Simultaneous thereto,
the Company intends to "rollout" the subsidiary companies which were
acquired as part of the merger which took place on or about March 31,
1997 with Iron Holdings Corp., a New York corporation ("Old Iron"). The
Company will cancel all of the shares previously issued to the
shareholders of Old Iron aggregating 4,500,000 shares as part of the
material terms of unwinding this transaction.
The relevant terms of the proposed CRT transaction require the Company
to issue to the CRT shareholders an aggregate of 8,748,000 "restricted"
common shares, representing 80% of the Company's then outstanding common
stock, in exchange for all of the issued and outstanding shares of CRT.
It is anticipated that this transaction will close shortly after the
filing of this report. However, there can be no assurances that either
or both of the aforesaid transactions will successfully close.
F-9
18
<PAGE>
IRON HOLDINGS CORP.
Exhibit Index to Quarterly Report on Form 10-QSB
For the Quarter Ended December 31, 1997
EXHIBITS Page No.
EX-27 Financial Data Schedule . . . . . . . . . . . . 20
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED DECEMBER 31, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 283,679
<SECURITIES> 0
<RECEIVABLES> 1,341,947
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,207,250
<PP&E> 337,503
<DEPRECIATION> 117,587
<TOTAL-ASSETS> 3,274,220
<CURRENT-LIABILITIES> 2,963,131
<BONDS> 2,971,614
0
0
<COMMON> 6,687
<OTHER-SE> 295,919
<TOTAL-LIABILITY-AND-EQUITY> 3,274,220
<SALES> 3,175,691
<TOTAL-REVENUES> 3,175,691
<CGS> 3,251,909
<TOTAL-COSTS> 3,251,909
<OTHER-EXPENSES> 335,205
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,598
<INCOME-PRETAX> (485,021)
<INCOME-TAX> 146,255
<INCOME-CONTINUING> (631,276)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (631,276)
<EPS-PRIMARY> (.099)
<EPS-DILUTED> 0
</TABLE>
