Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the year ended December 31, 2010
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF
1934
From the transition period ___________ to ____________.
Commission File Number 0-22965
IRON EAGLE GROUP, INC.
(formerly Pinnacle Resources, Inc.)
(Exact name of small business issuer as specified in its charter)
Delaware 27-1922514
------------------------------ --------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
61 West 62nd Street, Suite 23F, New York, NY 10023
---------------------------------------------------
(Address of principal executive offices)
(800) 481-4445
(Issuer's telephone number)
448 West 37th Street, Suite 9G, New York, NY 10018
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common
Stock, $.00001 par value
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [x]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act
Yes [ ] No [x]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (section 232.406 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes [ ] No [ ]
2
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act 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 [ ].
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.
Large Accelerated Filer [ ] Accelerated Filer [ ]
Non-Accelerated Filer [ ] Smaller Reporting Company [X]
Indicate by a check mark whether the company is a shell company (as
defined by Rule 12b-2 of the Exchange Act): Yes [ ] No [ X]
As of March 28, 2011, there were 11,750,485 shares of common stock of
the issuer outstanding.
The aggregate market value of voting stock held by non-affiliates on
March 28, 2011 was approximately $4,196,581.
No documents are incorporated into the text by reference.
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Iron Eagle Group, Inc.
Form 10-K
For the Year Ended December 31, 2010
Table of Contents
PART I
Item 1 Business 4
Item 1A Risk Factors 9
Item 1B Unresolved Staff Comments 9
Item 2 Properties 9
Item 3 Legal Proceedings 9
Item 4 (Removed and Reserved) 9
PART II
Item 5 Market for Company's Common Equity, Related
Stockholder Matters, Issuer Purchases Of Equity Securities 10
Item 6 Selected Financial Data 12
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 7A Quantitative and Qualitative Disclosures about
Market Risk 16
Item 8 Financial Statements and Supplementary Data 16
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures 47
Item 9A Controls and Procedures 47
Item 9B Other Information 48
PART III
Item 10 Directors and Executive Officers and Corporate
Governance 49
Item 11 Executive Compensation 52
Item 12 Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters 55
Item 13 Certain Relationships and Related Transactions
and Director Independence 56
Item 14 Principal Accounting Fees and Services 58
PART IV
Item 15 Exhibits, Financial Statement Schedules 59
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PART I
ITEM 1. BUSINESS
General
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The registrant was incorporated pursuant the laws of Wyoming in January
1995 under the name of Pinnacle Resources, Inc. In March 2010, we re-
domiciled in Delaware and changed our name to Iron Eagle Group, Inc.
The registrant has discontinued all domestic mining and exploration
activities. All foreign mining and exploration activities were
discontinued as of April 2009.
The registrant entered into a share exchange agreement to acquire 100%
of the outstanding common stock of Iron Eagle Group, a Nevada
corporation. On August 18, 2010, the registrant issued 9,337,296 shares
of common stock in exchange for a 100% equity interest in Iron Eagle
Nevada. As a result of the share exchange, Iron Eagle Nevada became the
wholly owned subsidiary of the registrant. The shareholders of Iron
Eagle Nevada owned a majority of the voting stock of the registrant.
Therefore, the transaction was regarded as a reverse merger whereby Iron
Eagle Nevada was considered to be the accounting acquirer as its
shareholders retained control of the registrant after the exchange,
although the registrant is the legal parent company. The share exchange
was treated as a recapitalization of the registrant. As such, Iron
Eagle Nevada and its historical financial statements is the continuing
entity for financial reporting purposes. The financial statements have
been prepared as if the registrant had always been the reporting company
and then on the share exchange date, reorganized its capital stock. At
the time of the exchange transaction, the registrant had assets of
approximately $830,065 and equity of approximately $49,967 and Iron
Eagle Nevada had assets of approximately $10,000 with a deficit of
approximately $382,707.
Operations
----------
The registrant provides construction and contracting services in both
the infrastructure and government markets. The registrant's management
consists of business leaders in construction, government contracting,
defense, finance, operations, and business development. According to
www.recovery.org, the purpose of the $787 billion federal recovery
package is to jump-start the economy to create and save jobs and over
$100 billion has been allocated to improve the nation's infrastructure.
Management has a strategic plan to capitalize on the $100 billion market
opportunity in infrastructure construction created by the Federal
government's stimulus package as in addition to the billions of federal
funds that have been approved to be spent at the state level for
projects throughout the United States. There can be no assurance that
the registrant will not encounter problems as it attempts to implement
its business plan.
The registrant develops a comprehensive project budget using what it
believes is a proven cost estimating system. Projects are divided into
phases and line items indicating separate labor, equipment, material,
subcontractor and overhead cost estimates. As a project progresses, the
registrant's project managers are responsible for planning, scheduling
and overseeing operations and reviewing project costs compared to the
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estimates. These costs are tracked on a monthly basis. The
registrant's costs have been and may in the future be impacted by lower
than expected labor productivity and higher than expected material
costs.
Since January 2010, the registrant has targeted construction companies
that have track records of positive earnings and cash flow for
acquisition and possible joint ventures. The registrant has analyzed
over 500 construction companies, held discussions with hundreds of them
to find the right acquisition target or joint venture partner. As
discussed below, the registrant's first construction acquisition
occurred in January 2011. The registrant is currently in preliminary
acquisition discussions with several construction companies.
The current economy has severely hampered our ability to obtain funds to
close on identified acquisitions. The construction market continues to
remain weak. We are uncertain what potential acquisitions will be
available to us in the near future, or whether, if they are available,
we will be able to obtain debt or equity financing necessary to take
advantage of these opportunities.
Aegis Capital Investment Banking Agreement
------------------------------------------
The registrant has retained Aegis Capital Corp., a middle market
investment bank, to raise $25 million for acquisitions and working
capital. The actual size of the common equity offering will depend on
the needs of the registrant and economic and market conditions. There
are many risks with the proposed offering and there is no guarantee to
the timing or that it will be successful. The term of the engagement is
one year starting on August 31, 2010. Aegis shall be compensated as
follows: i) an underwriting discount of seven percent (7%) of the amount
raised in the public offering and ii) warrants to purchase that
aggregate number of shares as would be equal to four percent (4%) of the
total number of shares sold pursuant to the public offering.
The registrant shall make best efforts to have the common shares
approved for quotation on the AMEX or NASDAQ exchange by the closing of
equity raise. Post-offering, the registrant shall maintain an active
investor relations program and use a transfer agent that is mutually
agreeable to Aegis and the registrant. A non-refundable engagement fee
in the amount of sixty thousand dollars ($60,000) was paid at the
signing of the agreement comprising of $30,000 in cash and $30,000 in
public restricted equity of the registrant.
Delta Mechanical Contractors, LLC
---------------------------------
Subsequent to the registrant's December year end, on January 21, 2011,
the registrant acquired all of the member interests in Sycamore
Enterprises, LLC from the sole member, Bruce A. Bookbinder. Sycamore
Enterprises, LLC is 100% holder of all of the membership interests of
Delta Mechanical, a mechanical contractor.
Delta Mechanical is a regional subcontractor providing commercial and
industrial installation of plumbing, heating, ventilation and air
conditioning and fire protection services in the regions of Rhode
Island, Southeastern Massachusetts and Eastern Connecticut.
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The aggregate purchase price to be paid by the registrant for the
purchased membership interests consists of
(i) a $9,000,000 buyer note (secured by Delta Mechanical)
(ii) future contingency payment(s), based on the registrant's results
for the years ended December 31, 2011, 2012, 2013 and 2014, not to
exceed $250,000 per year or $1,000,000 in aggregate, and
(iii) a four year employment contract with the president and chief
financial officer of Delta Mechanical.
The registrant secured its obligations to Mr. Bookbinder by pledging to
Mr. Bookbinder and granting to Mr. Bookbinder a 100% security interest
in the membership interest in Sycamore Enterprises LLC together with the
other collateral until the buyer note is repaid.
Market
Delta Mechanical competes for business primarily in the regions of Rhode
Island, Southeastern Massachusetts and Eastern Connecticut. However,
Delta Mechanical has performed work outside of that area in the past.
Employees
As of March 28, 2011, Delta Mechanical had approximately 96 employees,
consisting of approximately 27 full-time office and project support
employees and approximately 69 field employees, who are union workers.
The number of field union workers employed varies at any given time,
depending on the number and types of ongoing projects and the scope of
projects under contract. Delta Mechanical hires union labor for
specific work assignments and can reduce the number of union workers
hired at will with no penalty.
Delta Mechanical pays benefits to union employees through payments to
trust funds established by the unions. Delta Mechanical's obligation is
to pay a percentage of the wages of union workers to these trust funds.
Delta Mechanical is not liable for under funding of these union plans.
Delta Mechanical provides its full-time office employees, not subject to
collective bargaining agreements, with medical insurance benefits and a
discretionary matching 401(k) plan.
Dependence Upon Customers
At any given time, a material portion of Delta Mechanical's contract
revenue may be generated from a single customer through one large
contract or various contracts. The registrant's customer base can vary
each year based on the nature and scope of the projects undertaken in
that year.
For the year ended December 31, 2010, the top five customers with Delta
Mechanical were Gilbane Building Company, Dimeo Construction Company, HV
Collins Company, Bacon Construction Company, and AF Lusi Construction
Co.
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Competition
We believe that the construction services business is highly fragmented
and our competition includes national, regional and local companies
across the United States. Many of our competitors have greater
financial and personnel resources. In view of its extremely limited
resources, Delta Mechanical expects to continue to be at a significant
competitive disadvantage compared to our competitors.
On public works projects, Delta Mechanical competes by submitting a
sealed bid to the public entity. The project is typically awarded to
the lowest responsible bidder. On private projects, Delta Mechanical
and its competitors negotiate with the developer, or its construction
manager, on the costs of the work required.
The mechanical contracting market is highly competitive. There are many
larger regional and national companies with resources greater than those
of the registrant. However, some of these large competitors are
unfamiliar with the states in which the registrant operates. On private
and institutional projects, Delta Mechanical believes it competes
favorably with such companies because of the reputation of Delta
Mechanical and the registrant's management team, and their knowledge of
the local labor force and its ability to value engineer projects. There
are also many smaller contractors and subcontractors who may also
compete for work. The registrant believes there are barriers to entry
for smaller competitors, including bonding requirements, and
relationships with subcontractors, suppliers and unions. Some of Delta
Mechanical's competitors include Arden Engineers and Constructors, Aero
Mechanical, and NB Kenney and Company.
Backlog
Delta Mechanical had a backlog of anticipated revenue from the
uncompleted portions of awarded contracts totaling approximately
$39,500,000 as of December 31, 2010, compared to approximately
$42,400,000 as of December 31, 2009. The backlog as of February 28,
2011 was $33,500,000. Subsequent to February 28, 2011, Delta Mechanical
has received letters of intent for an additional $9,000,000 of work.
This includes the recently awarded VA Hospital Bldg #3, upgrading fire-
protection services in several buildings at the University of Rhode
Island.
A portion of the registrant's anticipated revenue in any year is not
reflected in its backlog at the start of the year because some projects
are awarded and performed in the same year. Delta Mechanical believes
that approximately $4,700,000 of the existing backlog at December 31,
2010, is not reasonably expected to be completed during the 2011 fiscal
year. The schedule for each project is different and subject to change
due to circumstances outside the control of Delta Mechanical.
Accordingly, it is not reasonable to assume that the performance of
backlog will be evenly distributed throughout a year. Delta Mechanical
believes that its backlog is firm, notwithstanding provisions contained
in the contracts which allow customers to modify or cancel the contracts
at any time, subject to certain conditions, including reimbursement of
costs incurred in connection with the contracts and the possible payment
of cancellation fees. Delta Mechanical is actively seeking new
contracts to add to its backlog.
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Surety Bonds
As is customary and required in the industry, the registrant is often
requested to provide a surety bond. Delta Mechanical's ability to
obtain bonding, and the amount of bonding required, is solely at the
discretion of the surety and is primarily based upon the registrant's
net worth, working capital, the number and size of projects under
construction and the surety's relationship with management. The larger
the project and/or the number of projects under contract, the greater
the requirements are for net worth and working capital. Delta
Mechanical generally pays a fee to the bonding company of an amount
approximately one percent of the amount of the contract to be performed.
Since inception, Delta Mechanical has neither been denied any request
for payment or performance bonds, nor has a bonding company been
required to make a payment on any bonds issued for the registrant.
Federal, State, and Local Regulations
-------------------------------------
The construction industry is subject to various governmental regulations
from local, state and federal authorities, such as the Occupational
Safety and Health Administration and environmental agencies. The
registrant and its subsidiary are also governed by state and federal
requirements regarding the handling and disposal of lead paint, but the
financial impact of complying with such requirements cannot be predicted
at this time because it varies from project to project. The registrant
and its subsidiary must also comply with regulations as to the use and
disposal of solvents and hazardous wastes which compliance is a normal
part of its operations. The registrant and its subsidiary also works
with duly licensed asbestos abatement companies.
Cyclical Nature of Business Activities
--------------------------------------
Our business is vulnerable to the cyclical nature of the markets in
which our customers operate and is dependent upon the timing and funding
of new contracts. Delta Mechanical's services are performed primarily
under lump sum contracts. The duration of each project varies, however,
completion typically occurs within one year.
Other Matters
-------------
The registrant does not own any patents or patent rights. The
registrant's business is not subject to large seasonal variations. The
registrant did not expend funds for research and development during 2010
and 2009 and anticipates no research and development expenses in 2011.
Available Information
---------------------
Our website is www.ironeaglegroup.com. Our periodic reports and all
amendments to those reports required to be filed or furnished pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934
are available free of charge through our website. This Form 10-K is
being posted our website concurrently with its filing with the
Securities and Exchange Commission. We will continue to post our
periodic reports on Form 10-Q and our current reports on Form 8-K and
any amendments to those documents to our website as soon as reasonably
practicable after
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those reports are filed with or furnished to the Securities and Exchange
Commission. Material contained on our website is not incorporated by
reference into this Report on Form 10-K.
ITEM 1A. RISK FACTORS
Not applicable for a small reporting company.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our operations are conducted in leased properties. The following table
lists the facilities:
Approximate Monthly Expiration
Location Square Feet Rent Date
----------------- ----------- -------- --------------
Corporate Headquarters 800 $2,100 Month-to-month
61 West 62nd Street
Suite 23F
New York, NY 10023
Additional Facilities:
9600 E. Arapahoe Road 5,000 $3,000 December 20111
Suite 260
Englewood, CO 80112
Our corporate headquarters are located inside a facility leased by Belle
Haven Capital, LLC, which is owned by Jason Shapiro, who is an officer,
director, and significant shareholder of the registrant.
In general, our facilities are sufficient to meet our present needs.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. (REMOVED AND RESERVED)
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
a) Market Information. The registrant's common stock is listed on the
OTCQB over-the-counter market under the symbol IEAG.OTCQB. As of March
28, 2011, there was a limited market for our common stock.
The following table sets forth the range of high and low bid quotations
for our common stock for each quarter. The range has been revised to
reflect the 40 for 1 reverse stock split that occurred on July 13, 2010.
The quotations represent inter-dealer prices without retail markup,
markdown or commission, and may not necessarily represent actual
transactions.
2010
----
Quarter Ended: High Bid Low Bid
------------- -------- --------
December 31, 2010 $ 1.05 $ 0.30
September 30, 2010 7.20 0.30
June 30, 2010 9.60 0.80
March 31, 2010 3.20 0.40
2009
----
Quarter Ended: High Bid Low Bid
------------- -------- --------
December 31, 2009 $ 1.60 $ 0.40
September 30, 2009 1.60 0.40
June 30, 2009 4.80 2.00
March 31, 2009 3.20 1.20
b) At March 28, 2011, there were approximately 161 holders of record of
the registrant's common stock.
c) Holders of the registrant's common stock are entitled to receive
dividends. The payment and amount of future dividends is at the
discretion of our board of directors. No dividends have ever been
paid, and the registrant does not anticipate that dividends will be paid
on its common stock in the foreseeable future.
d) No securities are authorized for issuance by the registrant under
equity compensation plans.
e) Performance graph. Not applicable.
f) Sale of unregistered securities.
During the year ended December 31, 2010, the registrant issued common
stock as follows:
On January 8, 2010, 9,337,296 common shares were issued to the former
shareholders of Iron Eagle Group, Inc., a Nevada Corporation in
connection with a business combination. These shares were held in
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escrow until August 18, 2010. In exchange, the Iron Eagle Nevada
shareholders surrendered all of their issued and outstanding Iron Eagle
Nevada one-class common stock.
On February 23, 2010, the registrant entered into a services agreement
with a non-affiliated website development firm. In satisfaction for the
agreement, the registrant agreed to issue 5,000 shares of the
registrant's common stock at a share price of $1.20.
On May 1, 2010, the registrant entered into a services agreement with
Gary Smolen for investor relations services. In satisfaction for the
agreement, the registrant agreed to issue 200,000 shares of the
registrant's common stock at a share price of $1.20.
On May 4, 2010, the registrant entered into a director's agreement with
Gary Giulietti to become a member of the registrant's board. In
connection with the agreement, the registrant issued 41,667 shares of
the registrant's common stock at a share price of $1.20.
On May 4, 2010, the registrant entered into a one year consulting
agreement with CCG, an investor relations firm. In satisfaction for the
agreement, the registrant issued 108,750 shares of the registrant's
common stock at a per share price of $1.20 and a 5 year warrant to
purchase up to 108,750 shares with an exercise price of $0.033 per
share. The shares issued vested immediately. The fair value of the
warrant was $126,107. The registrant has received three months of
services under this agreement, and the remaining services are currently
on hold pending the registrant's decision to resume services. The
portion of services that have not been utilized are recorded as a
prepaid expense as of December 31, 2010.
On June 5, 2010, the registrant entered into a three year consulting
agreement with Steven Antebi to help the registrant obtain financing and
related services. The value of the services to be received is $400,000.
In satisfaction for the agreement, the registrant issued 1,000,000
shares of the registrant's common stock, resulting in a per share price
of $.40. The portion of services that have not been utilized are
recorded as a prepaid expense as of December 31, 2010.
On July 16, 2010, the board of directors appointed Joseph Antonini as a
director and granted him 38,462 shares of stock, valued at $1.30 a
share, which vested immediately.
On August 31, 2010, the registrant entered into a non-exclusive
agreement with Aegis Capital Corp., an investment bank, to act as their
underwriter with respect to a forthcoming public offering. In connection
with this agreement the registrant issued 28,572 shares of stock, valued
at $1.05 a share, which vested immediately.
All of these issuances were made to sophisticated investors pursuant to
an exemption from registration under Section 4(2) of the Securities Act
of 1933.
ITEM 5(b) Use of Proceeds.
Not applicable.
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ITEM 5(c) Purchase of Equity Securities by the Issuer and Affiliated
Purchasers
None.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable for a smaller reporting company.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The financial and business analysis below provides information we
believe is relevant to an assessment and understanding of our financial
position, results of operations and cash flows. This financial and
business analysis should be read in conjunction with the financial
statements and related notes included in this form 10-K.
Trends and Uncertainties
------------------------
The current global economic and financial crisis has severely hampered
our ability to obtain additional funds with which to seek additional
natural resources, construction contracts or other types of business
opportunities. We are uncertain what potential business ventures will
be available to us in the near future, or whether, if they are
available, we will be able to obtain debt or equity financing necessary
to take advantage of those opportunities.
Going Concern
-------------
The registrant has an accumulated deficit through December 31, 2010
totaling $1,216,092 and recurring losses and negative cash flows from
operations. Because of these conditions, the registrant will require
additional working capital to develop its business operations.
The registrant's success will depend on its ability to raise money
through debt and the sale of stock to meet its cash flow requirements.
The ability to execute its strategic plan is contingent upon raising the
necessary cash to
1) pursue and close acquisitions;
2) sustain limited operations; and,
3) meet current obligations.
The current economy has severely hampered the registrant's ability to
raise funds to close on identified acquisitions. The construction
market continues to remain weak. The registrant is uncertain what
potential acquisitions will be available to us in the near future, or
whether, if they are available, if they will be able to raise funds
necessary to take advantage of these opportunities. Management believes
that the efforts it has made to promote its business will continue for
the foreseeable future. These conditions raise substantial doubt about
the registrant's ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability
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and classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should the
registrant be unable to continue as a going concern.
Results of Operations
---------------------
Year ended December 31, 2010
Total operating expenses for the year ended December 31, 2010 were
$942,255.
Compensation and professional fees for the year ended December 31, 2010
were $823,836. This is the result of the addition of new management
team. All compensation expense related to the registrant's officers
has been accrued and not paid as of December 31, 2010.
Our general and administrative expenses were $118,419 for the year ended
December 31, 2010. This is due to financing, media relations, and travel
expenses.
We generated no revenue and recorded no bad debt expense during the year
ended December 31, 2010.
For the year ended December 31, 2010, other expense was $2,865 due
mostly to interest expense.
Income tax expense (benefit) during the year ended December 31, 2010 was
$0.
Net loss for the year ended December 31, 2010 totaled $945,120.
For the period November 9, 2009 through December 31, 2009
Total operating expenses for the period November 9, 2009 (Inception)
through December 31, 2009 were $270,972.
Compensation and professional fees for the period November 9, 2009
(Inception) through December 31, 2009 were $270,972. All compensation
expense related to the Company's officers has been accrued and not paid
as of December 31, 2009.
We generated no revenue and recorded no bad debt expense during the
period November 9, 2009 (Inception) through December 31, 2009.
Other income (expense) was $0 during the period November 9, 2009
(Inception) through December 31, 2009.
Income tax expense (benefit) during the period November 9, 2009
(Inception) through December 31, 2009 was $0.
Net loss for the period November 9, 2009 through December 31, 2009
totaled $270,972.
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Liquidity and Capital Resources
-------------------------------
For the year ended December 31, 2010, we relied on loans from management
and key shareholders. Our cash position increased from $0 at December
31, 2009 to $976 at December 31, 2010, primarily due to cash used
provided by our management and key shareholders.
For the year ended December 31, 2010, cash flows from operations
activities were $(96,156) due to expenses related to compensation,
legal, audit, and other general working purposes.
For the period November 9, 2009 (Inception) through December 31, 2009,
cash flows from operations activities were $(96,157) due to expenses
related to compensation, legal, audit, and other general working
purposes.
For the year ended December 31, 2010, cash flows from investing
activities were $(2,834) due to net fixed assets acquired in the reverse
merger between the registrant and Iron Eagle Nevada.
For the period November 9, 2009 (Inception) through December 31, 2009,
cash flows from investing activities were $(2,834) due to net fixed
assets acquired in the reverse merger between the registrant and Iron
Eagle Nevada.
For the year ended December 31, 2010, cash flows from financing
activities were $99,966 due to the line of credit assumed in the reverse
merger between the registrant and Iron Eagle Nevada and the
recapitalization of the registrant during the time period.
For the period November 9, 2009 through December 31, 2010, cash flows
from financing activities were $$99,967 due to the line of credit
assumed in the reverse merger between the registrant and Iron Eagle
Nevada and the recapitalization of the registrant during the time
period.
We have no current sources of cash and we will not be able to continue
in existence if further cash resources are not obtained.
Off-Balance Sheet Arrangements
------------------------------
The registrant has no off-balance sheet arrangements.
Critical Accounting Policies
----------------------------
The registrant's management selects accounting principles generally
accepted in the United States of America and adopts methods for their
application. The application of accounting principles requires the
estimating, matching and timing of revenue and expense. The accounting
policies used conform to generally accepted accounting principles which
have been consistently applied in the preparation of these financial
statements.
The financial statements and notes are representations of the
registrant's management which is responsible for their integrity and
objectivity. Management further acknowledges that it is solely
responsible for adopting sound accounting practices, establishing and
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maintaining a system of internal accounting control and preventing and
detecting fraud. The registrant's system of internal accounting control
is designed to assure, among other items, that
1) recorded transactions are valid;
2) valid transactions are recorded; and
3) transactions are recorded in the proper period in a timely manner to
produce financial statements which present fairly the financial
condition, results of operations and cash flows of the registrant for
the respective periods being presented.
Recent Pronouncements
---------------------
Recently Adopted Accounting Guidance
On January 1, 2010, the registrant adopted Accounting Standard
Update2009-16, "Transfers and Servicing (Topic 860): Accounting for
Transfers of Financial Assets." This ASU is intended to improve the
information provided in financial statements concerning transfers of
financial assets, including the effects of transfers on financial
position, financial performance and cash flows, and any continuing
involvement of the transferor with the transferred financial assets. The
registrant does not have a program to transfer financial assets;
therefore, this ASU had no impact on the registrant's consolidated
financial statements.
On January 1, 2010, the registrant adopted ASU 2009-17, "Consolidations
(Topic 810): Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities," which amended the consolidation
guidance applicable to variable interest entities and required
additional disclosures concerning an enterprise's continuing involvement
with variable interest entities. The registrant does not have variable
interest entities; therefore, this ASU had no impact on the registrant's
consolidated financial statements.
On January 1, 2010, the registrant adopted ASU 2010-06, "Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about
Fair Value Measurements," which added disclosure requirements about
transfers in and out of Levels 1 and 2 and separate disclosures about
activity relating to Level 3 measurements and clarifies existing
disclosure requirements related to the level of disaggregation and input
and valuation techniques. The adoption of this guidance did not have a
material impact on the registrant's consolidated financial statements or
the related disclosures.
Accounting Guidance Issued But Not Adopted as of December 31, 2010
In October 2009, the FASB issued ASU 2009-13, "Revenue Recognition
(Topic 605): Multiple-Deliverable Revenue Arrangements - a consensus of
the FASB Emerging Issues Task Force," which amends the criteria for when
to evaluate individual delivered items in a multiple deliverable
arrangement and how to allocate consideration received. This ASU is
effective for fiscal years beginning on or after June 15, 2010, which is
January 1, 2011 for the registrant. The registrant is currently
evaluating the impact of adopting the guidance.
Management has reviewed these new standards and believes they had or
will have no material impact on the financial statements of the
registrant
16
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm 17
Consolidated Balance Sheets 18
Consolidated Statements of Operations 19
Consolidated Statement of Changes in Stockholders' Equity 20
Consolidated Statements of Cash Flows 21
Notes to the Consolidated Financial Statements 23
17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Management of
Iron Eagle Group, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Iron
Eagle Group, Inc. (a development stage enterprise) as of December 31,
2010 and 2009 and the related consolidated statements of operations,
stockholders' equity and cash flows for the year ended December 31,
2010, for the period from November 9, 2009 (Inception) through December
31, 2009 and for the period November 9, 2009 (Inception) through
December 31, 2010. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
We were not engaged to examine management's assertion about the
effectiveness of Iron Eagle Group, Inc.'s internal control over
financial reporting as of and for the years ended December 31, 2010 and
2009 and, accordingly, we do not express an opinion thereon.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Iron Eagle
Group, Inc. as of December 31, 2010 and 2009 and the results of its
operations and cash flows for the year ended December 31, 2010, for the
period from November 9, 2009 (Inception) through December 31, 2009, and
for the period November 9, 2009 (Inception) through December 31, 2010,
in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 11
to the financial statements, the Company has suffered significant losses
and will require additional capital to develop its business until the
Company either (1) achieves a level of revenues adequate to generate
sufficient cash flows from operations; or (2) obtains additional
financing necessary to support its working capital requirements. These
conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these
matters are also described in Note 11. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
The Hall Group, CPAs
Dallas, Texas
March 17, 2011
18
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Consolidated Balance Sheets
December 31, 2010 and December 31, 2009
---------------------------------------
December 31, December 31,
2010 2009
------------ ------------
ASSETS
Current Assets
Cash $ 976 $ -
Other Assets 6,000 -
Prepaid Expenses 611,563 -
-------- --------
Total Current Assets 618,539 -
Other Assets
Note Receivable - 10,000
Fixed Assets, Net of Accumulated
Depreciation of $15,714 and $0 2,150 -
-------- --------
TOTAL ASSETS $620,689 $ 10,000
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable - Related Parties $ 479,439 $ 215,000
Accounts Payable 78,409 10,971
Advances From Officer 289,758 -
Accrued Liabilities 795,936 40,000
Note Payable - Related Party 18,773 15,000
Capital Lease 2,344 -
Common Stock to be Issued 42,155 -
Line of Credit 50,000 -
---------- ----------
Total Current Liabilities 1,756,814 280,971
---------- ----------
TOTAL LIABILITIES 1,756,814 280,971
Stockholders' Equity
Preferred Stock ($.00001 par value,
20,000,000 shares authorized, 0 and 0
shares issued and outstanding) - -
Common Stock ($.00001 par value,
875,000,000 shares authorized,
11,571,706 and 1,000 shares
issued and outstanding) 116 1
Additional Paid-in Capital 79,851 -
Accumulated Deficit (1,216,092) (270,972)
---------- ----------
Total Stockholders' Equity (1,136,125) (270,971)
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 620,689 $ 10,000
========== ==========
See accompanying notes to financial statements.
19
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Consolidated Statements of Operations
For the Year Ended December 31, 2010,
For the Period November 9, 2009 (Inception)
through December 31, 2009 and Cumulative Since Inception
Year November 9, 2009 Cumulative
Ended through Since Inception
December 31, 2010 December 31, 2009 (November 9, 2009)
----------------- ----------------- ----------------
REVENUES $ - $ - $ -
OPERATING EXPENSES
Shares Issued for Services 30,000 - 30,000
General and Administrative
Expenses 118,419 - 118,419
Compensation Expense 506,319 40,000 546,319
Professional Fees 129,117 15,972 145,089
Professional Fees to
Related Parties 158,400 215,000 373,400
---------- -------- -----------
TOTAL OPERATING EXPENSES 942,255 270,972 1,213,227
---------- -------- -----------
NET OPERATING INCOME (LOSS) (942,255) (270,972) (1,213,227)
OTHER INCOME (EXPENSE) (2,865) - (2,865)
---------- -------- -----------
NET INCOME (LOSS) BEFORE
INCOME TAXES (945,120) (270,972) (1,216,092)
Provision for Income Taxes
(Expense) Benefit - - -
---------- -------- -----------
NET INCOME (LOSS) $ (945,120) (270,972) $(1,216,092)
========== ======== ===========
Earnings (Loss) per Share,
basic and diluted $ (0.22) $(271.00)
========== ========
Weighted Average Shares
Outstanding, basic and
diluted 4,277,132 1,000
========= =====
See accompanying notes to financial statements.
20
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Consolidated Statement of Changes in Stockholders' Equity
For the Period November 9, 2009 (Inception) Through December 31, 2010
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings Total
---------- ---- ------- --------- -----------
Balance at November 9, 2009 - $ - $ - $ - $ -
Capital Contribution on
November 9, 2009 1,000 1 - - 1
Net Income (Loss) - - - (270,972) (270,972)
----------- ---- ------- ----------- -----------
Balance at December 31, 2009 1,000 $ 1 - $ (270,972) $ (270,971)
=========== ==== ======= =========== ===========
Share Exchange (1,000) (1) - - (1)
Recapitalization 11,543,134 115 49,852 - 49,967
Shares Issued for Services 28,572 1 29,999 - 30,000
Net Loss - - - (945,120) (945,120)
----------- ---- ------- ----------- -----------
Balance at December 31, 2010 $11,571,706 $116 $79,851 $(1,216,092) $(1,136,125)
=========== ==== ======= =========== ===========
See accompanying notes to financial statements.
21
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
For the Year Ended December 31, 2010,
For the Period November 9, 2009 through
December 31, 2009 and Cumulative Since Inception
Year November 9, Cumulative
Ended 2009 through Since Inception
December 31, December 31, (November 9,
2010 2009 2009
----------- ------------ ---------------
CASH FLOWS FROM OPERATINGS ACTIVITIES
Net (Loss) $(945,120) $(270,972) $(1,216,092)
Adjustments to reconcile
net income to net cash
provided by operating activities:
Stock Issued for Services 30,000 - 30,000
Depreciation Expense 684 - 684
(Increase) in Other Assets (6,000) - (6,000)
(Increase) in Prepaid Expenses (611,563) - (611,563)
(Increase) Decrease in Note Receivable 10,000 (10,000) -
Increase in Accounts Payable -
Related Party 264,439 215,000 479,439
Increase in Accounts Payable 67,438 10,971 78,409
Increase in Advances from Officer 289,758 - 289,758
Increase in Note Payable -
Related Party 3,773 15,000 18,773
Increase in Capital Lease 2,344 - 2,344
Increase in Stock to be Issued 42,155 - 42,155
Increase in Accrued Liabilities 755,936 40,000 795,936
--------- --------- ----------
Net Cash (Used) by Operating Activities (96,156) (1) (96,157)
CASH FLOWS FROM INVESTING ACTIVITIES
Net Fixed Assets Acquired in
Reverse Merger (2,834) - (2,834)
CASH FLOWS FROM FINANCING ACTIVITIES
Line of Credit Assumed in Reverse Merger 50,000 - 50,000
Recapitalization of Company 49,967 - 49,967
Contributed Capital (1) 1 -
--------- --------- ----------
Net Cash Provided by
Financing Activities 99,966 1 99,967
--------- --------- ----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 976 - 976
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD - - -
--------- --------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 976 $ - $ 976
========= ========= ==========
22
SUPPPLEMENTAL NON-CASH DISCLOSURES:
Stock Issued
for Services $ 30,000 $ $ 30,000
========= ========= ===========
Cash Paid for
Interest Expense - - -
========= ========= ===========
Net Fixed Assets Acquired
in Reverse Merger 2,834 - 2,834
========= ========= ===========
Line of Credit Assumed
in Reverse Merger 50,000 - 50,000
========= ========= ===========
Recapitalization of
Company 49,967 - 49,967
========= ========= ===========
See accompanying notes to financial statements.
23
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities, History and Organization:
Iron Eagle Group, Inc. (formerly Pinnacle Resources, Inc.) ("Iron Eagle"
or the "Company") was incorporated under the laws of Wyoming in January
1995. In March 2010, the Company re-domiciled in Delaware and changed
its name to Iron Eagle Group, Inc. The Company has discontinued all
domestic mining and exploration activities. All foreign mining and
exploration activities were discontinued as of April 2009.
Iron Eagle provides construction and contracting services in both the
commercial and government markets. Iron Eagle's management consists of
business leaders in construction, government contracting, defense,
finance, operations, and business development. Management has a
strategic plan to capitalize on the $100 billion market opportunity in
infrastructure construction created by the Federal government's stimulus
package in addition to the billions of federal funds that have been
approved to be spent at the state level for projects throughout the
United States. There can be no assurance that the Company will not
encounter problems as it attempts to implement its business plan.
The Company is in the development stage and presents its financial
statements in accordance with Accounting Standards Codification ("ASC")
915 "Development Stage Entities" (formerly Statement of Financial
Accounting Standard ("SFAS") No. 7, "Accounting and Reporting by
Development Stage Enterprises"). As of December 31, 2010, the Company
had three full-time employees, owned minimal fixed assets and did not
generate revenue.
On January 21, 2011, Iron Eagle Group, Inc. acquired all of the members'
interests in Sycamore Enterprises, LLC, through the Principal Owner's
(Bruce A. Bookbinder) membership interests (100%). Sycamore
Enterprises, LLC is 100% holder of all of the membership interests of
Delta Mechanical Contractors, LLC, a mechanical contractor ("Delta").
The Company is currently engaged in the identification and ongoing
negotiations for the acquisition of construction related entities.
Iron Eagle entered into a share exchange agreement to acquire 100% of
the outstanding common stock of Iron Eagle Group (a Nevada corporation)
("Iron Eagle Nevada"). On August 18, 2010, Iron Eagle issued 9,337,296
shares of common stock in exchange for a 100% equity interest in Iron
Eagle Nevada. As a result of the share exchange, Iron Eagle Nevada
became the wholly owned subsidiary of Iron Eagle. The shareholders of
Iron Eagle Nevada owned a majority of the voting stock of Iron Eagle.
Therefore, the transaction was regarded as a reverse merger whereby Iron
Eagle Nevada was considered to be the accounting acquirer as its
shareholders retained control of Iron Eagle after the exchange, although
Iron Eagle is the legal parent company. The share exchange was treated
as a recapitalization of Iron Eagle.
24
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(continued)9
As such, Iron Eagle Nevada (and its historical financial statements) is
the continuing entity for financial reporting purposes. The financial
statements have been prepared as if Iron Eagle had always been the
reporting company and then on the share exchange date, reorganized its
capital stock. At the time of the exchange transaction, Iron Eagle had
assets of approximately $830,065 and equity of approximately $49,967 and
Iron Eagle Nevada had assets of approximately $10,000 with a deficit of
approximately $382,707.
The exchange agreement has been treated as a recapitalization and not a
business combination and therefore, no proforma information is
presented.
Nature of Activities, History and Organization (Continued):
As a result of the recapitalization, the Company changed its fiscal year
from June 30th to December 31st, to conform to the merged entity.
Significant Accounting Policies:
The Company's management selects accounting principles generally
accepted in the United States of America and adopts methods for their
application. The application of accounting principles requires the
estimating, matching and timing of revenue and expense. The accounting
policies used conform to generally accepted accounting principles which
have been consistently applied in the preparation of these financial
statements.
The financial statements and notes are representations of the Company's
management which is responsible for their integrity and objectivity.
Management further acknowledges that it is solely responsible for
adopting sound accounting practices, establishing and maintaining a
system of internal accounting control and preventing and detecting
fraud. The Company's system of internal accounting control is designed
to assure, among other items, that 1) recorded transactions are
valid; 2) valid transactions are recorded; and 3) transactions are
recorded in the proper period in a timely manner to produce financial
statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods
being presented.
25
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
FASB Accounting Standards Codification:
In June 2009, the Financial Accounting Standards Board ("FASB") issued
new guidance concerning the organization of authoritative guidance under
U.S. Generally Accepted Accounting Principles ("GAAP"). This new
guidance created the FASB Accounting Standards Codification ("ASC")("the
Codification"). The Codification has become the source of authoritative
U.S. GAAP recognized by the FASB to be applied by nongovernmental
entities. The Codification became effective for the Company as of
September 15, 2009, the required date of adoption. As the Codification
is not intended to change or alter existing U.S. GAAP, it did not have
any impact on the Company's financial statements.
Basis of Presentation and Principles of Consolidation:
The Company prepares its financial statements on the accrual basis of
accounting. The Company is consolidated with its wholly owned
subsidiary, Iron Eagle Nevada, as of the date of August 18, 2010, the
date of the reverse merger. All intercompany transactions have been
eliminated.
Significant Accounting Policies (Continued):
Income Taxes:
The Company has adopted ASC 740-10 "Income Taxes" (formerly SFAS No.
109, "Accounting for Income Taxes"), which requires the use of the
liability method in computation of income tax expense and the current
and deferred income tax payable (deferred tax liability) or benefit
(deferred tax asset). Valuation allowances will be established when
necessary to reduce deferred tax assets to the amount expected to be
realized.
Earnings per Share:
Earnings per share (basic) is calculated by dividing the net income
(loss) by the weighted average number of common shares outstanding for
the period covered.
The inclusion of the Company's warrants, which are considered common
stock equivalents as of December 31, 2010, in the earnings (loss) per
share computation has not been included because the results would be
anti-dilutive under the treasury stock method, as the Company incurred a
net loss in the periods presented.
Comprehensive Income (Loss):
ASC 220 "Comprehensive Income" (formerly SFAS No. 130, "Reporting
Comprehensive Income" (SFAS No. 130")), establishes standards for
reporting and display of comprehensive income and its components in a
26
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
full set of general-purpose financial statements. For the years ended
December 31, 2010 and 2009, the Company had no items of other
comprehensive income. Therefore, net loss equals comprehensive loss
for the years ended December 31, 2010 and 2009.
Prepaid Expenses:
Prepaid expenses are recognized for services that the Company has paid
in advance. The value of the services to be rendered are amortized on
a straight line basis each month over the term of the contract service
period.
Fixed Assets:
Fixed assets are recorded at historical cost. Equipment is depreciated
on a straight-line basis over its estimated useful life (generally 5 to
7 years). Leasehold improvements are amortized over the shorter of the
estimated useful life or lease term. Capital Leases are amortized over
the life of the lease. Maintenance and repairs are expensed as
incurred. Expenditures for major renewals and betterments, which extend
the useful lives of existing equipment, are capitalized and depreciated.
Upon retirement or disposition of property and equipment, the cost and
related accumulated depreciation are removed from the accounts and any
resulting gain or loss is recognized in the statement of operations.
The Company reviews long-lived assets, including property and equipment,
for impairment whenever events or changes in business circumstances
indicate that the carrying amount of the assets may not be fully
recoverable. If impairment is indicated, the carrying value of the asset
is reduced to fair value.
Share Based Payments:
The Company accounts for share based payments using a fair value based
method whereby compensation cost is measured at the grant date based on
the value of the services received and is recognized over the service
period. The Company uses the Black-Scholes pricing model to calculate
the fair value of options and warrants issued. In calculating this fair
value, there are certain assumptions used such as the expected life of
the option, risk-free interest rate, dividend yield, volatility and
forfeiture rate. The use of a different estimate for any one of these
components could have a material impact on the amount of calculated
compensation expense.
27
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
(continued)
Recent Accounting Pronouncements:
The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position or cash flow. See Note 10 for a
discussion of new accounting pronouncements.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Fair Value of Financial Instruments:
In accordance with the reporting requirements of ASC 820 "Fair Value
Measurement and Disclosure" (formerly SFAS No. 157, "Disclosures About
Fair Value of Financial Instruments"), the Company calculates the fair
value of its assets and liabilities which qualify as financial
instruments under this statement and includes this additional
information in the notes to the financial statements when the fair value
is different than the carrying value of those financial instruments. As
of December 31, 2010 and 2009 the Company did not have any financial
instruments other than cash and cash equivalents.
NOTE 2 - PREPAID EXPENSES
The Company has entered into contracts for investor relations and
consulting services to assist in the financing and purchasing of
construction related entities. All services were prepaid with Company
shares and warrants that vested immediately. The value of the services
to be rendered are amortized on a straight line basis each month over
the terms of the contract service periods. The services remaining to be
provided as of December 31, 2010 are reflected as a prepaid expense.
The gross prepaid expense as of December 31, 2010 is $827,860. The net
prepaid expense as of December 31, 2010 is $611,563, reflecting
amortization for the year ended December 31, 2010 was $216,297. There
were no amounts prepaid as of December 31, 2009.
28
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 3 - FIXED ASSETS
Fixed assets at December 31, 2010 and 2009 consist of the following:
December 31, December 31,
2010 2009
------- -------
Office Equipment and Capital Leases $14,655 $ -
Furniture 3,209 -
------- -------
Subtotal 17,864 -
Accumulated Depreciation (15,714) -
------- -------
Total $ 2,150 $ -
======= =======
Fixed assets are stated at cost less accumulated depreciation. Major
renewals and improvements are capitalized; minor replacements,
maintenance and repairs are charged to current operations. Depreciation
is computed by applying the straight-line method over the estimated
useful lives which are generally five to seven years.
In August 2008, Iron Eagle entered into a lease agreement for a copier
for 39 months which is classified as a capital lease. Depreciation and
amortization expense for the years ended December 31, 2010 and 2009 was
$684 and $0, respectively.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company entered into an agreement on November 15, 2009 with Belle
Haven Partners, LLC ("Belle Haven") to assist Iron Eagle Nevada with
business development planning, raising additional capital, and accessing
the public markets. One of Belle Haven's principals is also on Iron
Eagle's management team, and the entities have common ownership. Iron
Eagle Nevada agreed to pay Belle Haven $20,000 per month starting
September 1, 2009, as well as to reimburse them for all out-of-pocket
expenses. The Company also leases its New York, New York facility under
a rental agreement that has a one-year lease starting September 1, 2010
for $2,100 a month with Belle Haven. As of December 31, 2010 and 2009,
the Company had accrued $453,000 and $213,000, respectively in amounts
due to Belle Haven.
29
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
On December 31, 2009, the Company entered in two note agreements with
the Jason Shapiro, the Company's current Chief Executive Officer, for a
total of $15,000. These notes, which bear a 10% interest rate, were
originally due on June 30, 2010, and have been extended until June 30,
2011. The Company also owes its current Chief Executive Officer
$271,259 as of December 31, 2010 and $2,000 as of December 31, 2009 for
operating expenses, which, in general include professional fees for
audit, legal and investor relations.
NOTE 5 - ACCRUED COMPENSATION
The Company has entered into employment agreements with the Company's
management team, as outlined in Note 9. As of December 31, 2010, no
cash compensation has been paid, and the Company has accrued amounts
pursuant to these agreements.
NOTE 6 - LINE OF CREDIT
The Company has a $50,000 line of credit with a major U.S. financial
institution. The current balance is $50,000 plus accrued interest of
$469 and carries an interest rate of 6.25%.
NOTE 7 - EQUITY
In December 2009, Iron Eagle Nevada (pre-merger) issued 1,000 shares
pursuant to the "Founder's Agreement" dated December 1, 2009. Three of
the founders contributed intellectual capital in exchange for 81.639% of
the shares. As no specific intangible assets were identified, the sales
were valued at par. 18.36% of the shares were issued in change for
200,000 shares of The Saint James Company. The fair value of the shares
obtained, based upon level 3 fair value inputs was $0. The shares are
restricted as to their transferability.
The Company entered into a share exchange agreement to acquire 100% of
the outstanding common stock of Iron Eagle Group, (a Nevada corporation)
("Iron Eagle Nevada"). On August 18, 2010, Iron Eagle issued 9,337,296
shares of common stock in exchange for a 100% equity interest in Iron
Eagle Nevada. As a result of the share exchange, Iron Eagle Nevada
became the wholly owned subsidiary of Iron Eagle. As a result, the
shareholders of Iron Eagle Nevada owned a majority of the voting stock
of Iron Eagle. The transaction was regarded as a reverse merger whereby
Iron Eagle Nevada was considered to be the accounting acquirer as its
shareholders retained control of Iron Eagle after the exchange, although
Iron Eagle is the legal parent company. The share exchange was treated
as a recapitalization of Iron Eagle. As such, Iron Eagle Nevada (and
its historical financial statements) is the continuing entity for
financial reporting purposes. The financial statements have been
prepared as if Iron Eagle had always been the reporting company and then
on the share exchange date, reorganized its capital stock. At the time
of the exchange transaction, Iron Eagle had assets of approximately
30
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 7 - EQUITY (Continued)
$830,065 and equity of approximately $49,967 and Iron Eagle Nevada had
assets of approximately $10,000 with a deficit of approximately
$382,707.
In March, 2010, the Company re-domiciled from Wyoming to Delaware. Also
at this time, the par value of its preferred shares was changed from
$.01 to $.00001. It also changed its total authorized preferred shares
from 2,000,000 to 20,000,000. No preferred shares are issued or
outstanding as of December 31, 2010 and 2009, respectively.
Stock Issued for Services:
On May 1, 2010, the Company entered into a one year consulting agreement
with an individual for investor relations services. In satisfaction of
the agreement, the Company issued 200,000 shares of the Company's common
stock at a per share price of $1.20. The portion of services that have
not been utilized are recorded as a prepaid expense as of December 31,
2010.
On May 4, 2010, the Company entered into a consulting agreement with a
website development firm. In satisfaction for the agreement, the
Company issued 5,000 shares of the Company's common stock at a per share
price of $1.20.
On May 4, 2010, the Board appointed Gary Giulietti as a Director and
granted him 41,667 shares of the Company's common stock at a per share
price of $1.20, which vested immediately.
On May 4, 2010, the Company entered into a one year consulting agreement
with an investor relations firm. In satisfaction for the agreement, the
Company issued 108,750 shares of the Company's common stock at a per
share price of $1.20 and a 5 year warrant to purchase up to 108,750
shares with an exercise price of $1.32 per share. The shares issued
vested immediately. The fair value of the warrant was $124,703. The
Company has received three months of services under this agreement, and
the remaining services are currently on hold pending the Company's
decision to resume services. The portion of services that have not been
utilized are recorded as a prepaid expense as of December 31, 2010.
On June 5, 2010, the Company entered into a three year consulting
agreement with an individual to help the Company obtain financing and
related services. The value of the services to be received is $400,000
a year. In satisfaction for the agreement, the Company issued 1,000,000
shares of the Company's common stock, resulting in a per share price of
$.40. The portion of services that have not been utilized are recorded
as a prepaid expense as of December 31, 2010.
On July 16, 2010 the Board appointed Joseph Antonini as a Director and
granted him 38,462 shares of stock, valued at $1.30 a share, which
vested immediately.
31
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 7- EQUITY (Continued)
On August 31, 2010 the Company entered into a non-exclusive agreement
with Aegis Capital Corp., an investment bank, to act as their
underwriter with respect to a forthcoming public offering. In connection
with this agreement the company issued 28,572 shares of stock, valued at
$1.05 a share, which vested immediately.
Other than the plans mentioned under Subsequent Events (Note 13) and the
compensation plans of Michael Bovalino and Eric Hoffman, there are no
other stock option or other equity based compensation plans. As of
December 31, 2010, the Company has accrued $42,155 in shares to be
issued to Mr. Bovalino and Mr. Hoffman pursuant to these compensation
agreements.
Warrants:
As described above, on May 4, 2010, the Company entered into a one year
consulting agreement with an investor relations firm. In satisfaction
of the agreement, the Company issued 108,750 shares of the Company's
common stock at a per share price of $1.20 and a 5 year warrant to
purchase up to 108,750 shares with an exercise price of $1.32 per share.
The fair value of the warrant was $124,703. The fair value of the
warrant was determined using the Black Scholes option pricing model with
the following assumptions:
Risk free interest rate 2.57%
Volatility 333%
Dividend 0
Weighted average expected life 5 years
The following schedule summarizes the Company's warrant activity since
inception through December 31, 2010:
Weighted Weighted
Average Average Aggregate
Exercise Remaining Intrinsic
Warrants Price Term Value
------- ------ -------- -------
Outstanding at
November 9, 2009 0 $ 0 $ 0 $ 0
Warrants granted
during 2010 108,750 1.32 4.02 0
Warrants exercised 0 0 0 0
Warrants expired 0 0 0 0
------- ------ ------ ------
Outstanding at
December 31, 2010 108,750 $ 1.32 $ 4.02 $ 0
======= ====== ====== ======
32
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 8 - INCOME TAXES
The Company has adopted ASC 740-10 "Income Taxes" (formerly SFAS No.
109, "Accounting for Income Taxes"), which requires the use of the
liability method in computation of income tax expense and the current
and deferred income tax payable (deferred tax liability) or benefit
(deferred tax asset). Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
realized.
The cumulative tax effect at the expected tax rate of 25% of significant
items comprising the Company's net deferred tax amounts as of December
31, 2010 and 2009, respectively are as follows:
Deferred Tax Asset Related to:
December 31, December 31,
2010 2009
--------- ---------
Prior Year $ 67,743) $ 0
Tax Benefit for Current Year 236,280 67,743
Total Deferred 304,023 67,743
--------- ---------
Less: Valuation Allowance (304,023) (67,743)
--------- ---------
Net Deferred Tax Asset $ 0 $ 0
The net deferred tax asset generated by the loss carryforward has been
fully reserved. The cumulative net operating loss carry-forward is
approximately $1,216,092 at December 31, 2010, and will expire in the
years 2029 and 2030.
The realization of deferred tax benefits is contingent upon future
earnings and has been fully reserved at December 31, 2010 and 2009,
respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Employment Agreements:
On November 5, 2009, the Company entered into a three-year employment
agreement with Jason Shapiro, the Company's current Chief Financial
Officer, Acting Chief Executive Officer and Director on the Company's
Board. The agreement provides a salary of $200,000 per year and
reasonable and customary terms related to vacation, holidays and travel.
The agreement provides for a cash bonus of up to 200% of his base salary
based upon reaching certain objectives of the Company and at the sole
discretion of the board. The agreement may be terminated by the Company
or employee with three months advance written notice. This employment
agreement was amended with the amendment becoming effective January 1,
2011.
33
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
On May 4, 2010, the Company hired Eric J. Hoffman as the Chief Financial
Officer and entered into a 24 month employment agreement. The
employment agreement provided for an annual base salary of $225,000,
payable as $125,000 in cash and $100,000 in stock awards. The agreement
also provides for an annual incentive of 100% of his base salary payable
in a ratio consistent with his base salary. On September 13, 2010, the
Company amended the employment agreement with Mr. Hoffman. The
amendments changed the allocation between cash and stock payments for
base and bonus compensation, but had no impact on total compensation.
Mr. Hoffman's cash based salary increased to $165,000 and stock based
salary decreased to $60,000. The allocation of the annual incentive
payment between cash and stock changed to $125,000 and $100,000,
respectively. On November 23, 2010, the Company accepted Mr. Hoffman's
resignation. The Company has accrued all compensation due to Mr.
Hoffman. As of December 31, 2010, no cash payments have been made and
no stock has been issued.
On April 26, 2010, the Company hired Michael J. Bovalino as the Chief
Executive Officer and entered into a 30 month employment agreement.
The employment agreement provides for an annual base salary of $300,000,
payable as $175,000 in cash and $125,000 in stock awards. The agreement
also provides for an annual incentive of 100% of his base salary. Upon
termination by the registrant for cause or employee's voluntary
termination without good reason, Employee will receive a) three months
of base salary if such termination occurred within one year of the
signing of his employment agreement or b) nine months of base salary if
such termination occurred over one year from the signing of his
employment agreement. On September 13, 2010, the Company amended the
employment agreement with Mr. Bovalino.
The amendment changed the allocation between cash and stock payments for
base and bonus compensation, but had no impact on total compensation.
Mr. Bovalino's cash based salary increased to $215,000 and stock based
salary decreased to $85,000. The allocation of the annual incentive
payment between cash and stock changed to $175,000 and $125,000,
respectively. On November 23, 2010, the Company accepted Mr.
Bovalino's resignation. The Company has accrued all compensation due to
Mr. Bovalino. As of December 31, 2010, no cash payments have been made
and no stock has been issued.
Belle Haven Agreement:
The Company entered into an agreement on November 15, 2009 with Belle
Haven Partners, LLC ("Belle Haven") to assist Iron Eagle Nevada with
business development planning, raising additional capital, and accessing
the public markets. One of Belle Haven's employees is also on Iron
Eagle's management team, and the entities have common ownership. Iron
Eagle Nevada agreed to pay Belle Haven $20,000 per month starting
September 1, 2009, as well as to reimburse them for all out-of-pocket
expenses.
34
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
Facilities Leases:
The Company leases office space and equipment under noncancelable
operating leases with terms of three years. The Company occupies its
Englewood, Colorado facility under a rental agreement that has a lease
term that was to expire in December 2008. On October 1, 2008, the
Company entered into an agreement to extend the lease for an additional
36 months ending December 2011 at a rate of $2,885 a month. The Company
also leases its New York, New York facility under a rental agreement
that has a one year lease starting September 1, 2010 for $2,100 a month
with Belle Haven Capital, LLC, a company of which Jason Shapiro (CEO),
is a principal. The following is a schedule of future minimum rentals
under the leases for the years ending December 31:
Year Amount
---- -------
2011 $50,878
2012 0
2013 0
2014 and beyond 0
-------
Total $50,878
At times, the Company has subleased space in its Colorado facility to
two tenants. Sublease income for the years ended December 31, 2010 and
2009 was $0, and $2,000, respectively. All sublease income is treated
as a reduction in rent expense.
Loss Contingencies:
Certain conditions may exist as of the date the consolidated financial
statements are issued, which may result in a loss to the Company, but
which will only be resolved when one or more future events occur or fail
to occur. The Company's management and its legal counsel assess such
contingent liabilities, and as such, assessment inherently involves an
exercise of judgment. In assessing loss contingencies related to legal
proceedings that are pending against the Company or unasserted claims
that may result in such proceedings, the Company's legal counsel
evaluates the perceived merits of any legal proceedings or unasserted
claims as well as the perceived merits of the amount of relief sought or
expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a
material loss has been incurred and the amount of the liability can be
estimated, then the estimated liability would be accrued in the
Company's combined financial statements. If the assessment indicates
that a potentially material loss contingency is not probable but is
reasonably possible, or is probable but cannot be estimated, then the
nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material, would be disclosed.
35
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
Loss contingencies considered remote are generally not disclosed unless
they involve guarantees, in which case the guarantees would be
disclosed.
NOTE 10 - RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Guidance:
On January 1, 2010, the Company adopted Accounting Standard Update
("ASU") 2009-16, "Transfers and Servicing (Topic 860): Accounting for
Transfers of Financial Assets." This ASU is intended to improve the
information provided in financial statements concerning transfers of
financial assets, including the effects of transfers on financial
position, financial performance and cash flows, and any continuing
involvement of the transferor with the transferred financial assets. The
Company does not have a program to transfer financial assets; therefore,
this ASU had no impact on the Company's consolidated financial
statements.
On January 1, 2010, the Company adopted ASU 2009-17, "Consolidations
(Topic 810): Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities," which amended the consolidation
guidance applicable to variable interest entities and required
additional disclosures concerning an enterprise's continuing involvement
with variable interest entities. The Company does not have variable
interest entities; therefore, this ASU had no impact on the Company's
consolidated financial statements.
On January 1, 2010, the Company adopted ASU 2010-06, "Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about
Fair Value Measurements," which added disclosure requirements about
transfers in and out of Levels 1 and 2 and separate disclosures about
activity relating to Level 3 measurements and clarifies existing
disclosure requirements related to the level of disaggregation and input
and valuation techniques. The adoption of this guidance did not have a
material impact on the Company's consolidated financial statements or
the related disclosures.
Accounting Guidance Issued But Not Adopted as of December 31, 2010:
In October 2009, the FASB issued ASU 2009-13, "Revenue Recognition
(Topic 605): Multiple-Deliverable Revenue Arrangements - a consensus of
the FASB Emerging Issues Task Force," which amends the criteria for when
to evaluate individual delivered items in a multiple deliverable
arrangement and how to allocate consideration received. This ASU is
effective for fiscal years beginning on or after June 15, 2010, which is
January 1, 2011 for the Company. The Company is currently evaluating
the impact of adopting the guidance.
36
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 10 - RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
Management has reviewed these new standards and believes they had or
will have no material impact on the financial statements of the Company.
NOTE 11 - FINANCIAL CONDITION AND GOING CONCERN
The Company has an accumulated deficit through December 31, 2010
totaling $1,216,092 and recurring losses and negative cash flows from
operations. Because of these conditions, the Company will require
additional working capital to develop its business operations.
The Company's success will depend on its ability to raise money through
debt and the sale of stock to meet its cash flow requirements. The
ability to execute its strategic plan is contingent upon raising the
necessary cash to 1) pursue and close acquisitions; 2) sustain limited
operations; and, 3) meet current obligations. The current economy has
severely hampered the Company's ability to raise funds to close on
identified acquisitions. The construction market continues to remain
weak. The Company is uncertain what potential acquisitions will be
available to us in the near future, or whether, if they are available,
if they will be able to raise funds necessary to take advantage of these
opportunities. Management believes that the efforts it has made to
promote its business will continue for the foreseeable future. These
conditions raise substantial doubt about Iron Eagle Group, Inc.'s
ability to continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should Iron Eagle
Group, Inc. be unable to continue as a going concern.
NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS AND LIABILITIES
The Company has adopted fair value guidance and utilized the market
approach to measure fair value of financial assets. The market approach
uses prices and other relevant information generated by market
transactions involving identical or comparable assets. The standard
describes a fair value hierarchy based on three levels of inputs, of
which the first two are considered observable and the last unobservable,
that may be used to measure fair value which are the following:
Level 1: Quoted prices (unadjusted) in active markets that are
accessible at the measurement date for assets or liabilities. The fair
value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted
on active markets, but corroborated by market data.
37
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS AND LIABILITIES
(Continued)
Level 3: Unobservable inputs are used when little or no market
Data is available. The fair value hierarchy gives the lowest
priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques
that maximize the use of observable inputs and minimize the use of
unobservable inputs to the extent possible.
As of December 31, 2010, the Company's financial assets and liabilities
are measured at fair value using Level 3 inputs, with the exception of
cash, which was valued using Level 1 inputs. There were no financial
assets or liabilities as of December 31, 2009.
Fair Value Measurement at
December 31, 2010 Using:
------------------------------------
Quoted
Prices In
Active
Markets Significant
For Other Significant
Identical Observable Unobservable
December Assets Inputs Inputs
(31, 2010)(Level 1)(Level 2) (Level 3)
------- ------ ------- -------
Assets:
Cash and Cash Equivalents $ 976 $976 $ - $ -
------- ---- ---- -------
976 976 - -
------- ---- ---- -------
Liabilities:
Capital Lease 2,344 - - 2,344
Line of Credit 50,000 - - 50,000
------- ---- ---- -------
$52,344 $ - $ - $52,344
======= ==== ==== =======
38
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS AND LIABILITIES
(Continued)
Fair Value Measurement at
December 31, 2010 Using:
------------------------------------
Quoted
Prices In
Active
Markets Significant
For Other Significant
Identical Observable Unobservable
December Assets Inputs Inputs
(31, 2010)(Level 1)(Level 2) (Level 3)
------- ------ ------- -------
Assets:
Cash and Cash Equivalents $ - $ - $ - $ -
------- ---- ---- -------
- - - -
------- ---- ---- -------
Liabilities:
Capital Lease - - - -
Line of Credit - - - -
------- ---- ---- -------
$ - $ - $ - $ -
======= ==== ==== =======
NOTE 13 - SUBSEQUENT EVENTS
In May 2009, the FASB issued ASC 855-10, "Subsequent Events", (formerly
SFAS No. 165, "Subsequent Events," which establishes general standards
for accounting for and disclosure of events that occur after the balance
sheet date but before the financial statements are issued or are
available to be issued. The pronouncement requires the disclosure
through the date on which an entity has evaluated subsequent events and
the basis for that date, whether that date represents the date the
financial statements were issued or were available to be issued.
In February 2010, the FASB issued Accounting Standards Update 2010-09,
"Amendments to Certain Recognition and Disclosure Requirements", which
amended ASC 855 and which requires issuers of financial statements to
evaluate subsequent events through the date on which the financial
statements are issued. FASB 2010-09 defines the term "SEC Filer" and
eliminates the requirement that an SEC filer disclose the date through
which subsequent events have been evaluated.
This change was made to alleviate potential conflicts between ASC 855-10
and the reporting requirements of the SEC. FASB 2010-09 is effective
immediately, but is not expected to have a material effect on the
Company's financial statements.
39
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 13 - SUBSEQUENT EVENTS (Continued)
In conjunction with the preparation of these financial statements, an
evaluation of subsequent events was performed and the following items
were noted:
Acquisition:
On January 21, 2011, Iron Eagle Group, Inc. acquired all of the members'
interests in Sycamore Enterprises, LLC, through Bruce A. Bookbinder's
membership interests (100%). Sycamore Enterprises, LLC is 100% holder
of all of the membership interests of Delta Mechanical Contractors, LLC,
a mechanical contractor ("Delta").
Delta is a regional subcontractor providing commercial and industrial
installation of plumbing, heating, ventilation and air conditioning and
fire protection services in the regions of Rhode Island, Southeastern
Massachusetts and Eastern Connecticut.
The aggregate purchase price to be paid by Buyer for the purchased
membership interests consists of (i) a $9,000,000 buyer note (secured by
Delta) and (ii) future contingency payment(s), based on the Company's
results for the years ended December 31, 2011, 2012, 2013 and 2014, not
to exceed $250,000 per year or $1,000,000 in aggregate, and (iii) a four
year employment contract with the President and Chief Financial Officer
of Delta.
The Company has agreed to secure its obligations to Mr. Bookbinder by
pledging to Mr. Bookbinder and granting to Mr. Bookbinder a 100%
security interest in the membership interest in Sycamore Enterprises,
LLC together with the other Collateral until the buyer note is repaid.
The Company filed a Form 8-K on February 4, 2011 with details of the
acquisition. The Company will consolidate Delta and the combined
results will be reflected in the Company's March 31, 2011 Form 10-Q.
The following proforma information reflects the acquisition of Delta by
Iron Eagle. The Unaudited Proforma Consolidated Balance Sheet as of
December 31, 2010 and Unaudited Proforma Consolidated Income Statement
for the year ended December 31, 2010 have been prepared to reflect the
acquisition and the adjustments described in the accompanying notes.
The historical financial statements for Iron Eagle are presented from
audited financial statements as of and for the year ended December 31,
2010. The historical unaudited financial statements for Delta are
prepared as of and for the year ended December 31, 2010. The Unaudited
Proforma Consolidated Balance Sheet is prepared as of the acquisition
occurred on December 31, 2010.
The Unaudited Proforma Consolidated Income Statement was prepared
assuming the acquisition occurred on January 1, 2010. The proforma
financial information is unaudited and not necessarily indicative of the
actual financial position of the Company as of December 31, 2010 or what
40
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
ITEM 13 - SUBSEQUENT EVENTS (Continued)
the actual results would have been assuming the acquisition had been
consummated at the beginning of the periods presented, nor does it
purport to represent the future financial position and results of
operations for future periods.
IRON EAGLE GROUP, INC. FINANCIALS
Pro Forma Consolidated Balance Sheet
December 31, 2010
(Unaudited)
December 31, 2010
---------------------------
Delta
Iron Eagle(a) Mechanical(b) Adjustments(c) Pro Forma
------------- ------------- -------------- ---------
(Unaudited)
ASSETS
Current Assets
Cash $ 976 $ 2,168,186 $ - $ 2,169,162
Contracts Receivable, Net - 15,571,073 - 15,571,073
Costs and Estimated
Earnings in Excess
of Billings - 701,615 - 701,615
Deposits - 133,950 - 133,950
Other Prepaid Assets 611,563 330,379 - 941,942
Other Assets 6,000 - - 6,000
---------- ----------- ---------- -----------
Total Current Assets $ 618,539 $18,905,203 - $19,523,742
Fixed Assets, Net of
Accumulated Depreciation $ 2,150 $ 303,067 - $ 305,217
Goodwill - - 4,615,841 4,615,841
Non-Compete - - 300,000 300,000
---------- ----------- ---------- -----------
TOTAL ASSETS $ 620,689 $19,208,270 $4,915,841 $24,744,800
========== =========== ---======= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable -
Related Parties $ 479,439 $ 0 - $479,439
Accounts Payable 78,409 10,051,160 - 10,129,569
Advances From Officer 289,758 - - 289,758
Other Accrued Liabilities 795,936 233,708 - 1,029,644
Note Payable - Related Party 18,773 750,000 - 768,773
Billings in Excess of Costs
and Estimated Earnings - 2,646,431 - 2,646,431
Current Maturities -
Note Payable - 3,460 - 3,460
41
Accrued Distribution -
Taxes - 621,478 - 621,478
Capital Lease 2,344 - - 2,344
Seller's Note - - 9,000,000 9,000,000
Shares to be Issued 42,155 - - 42,155
Line of Credit 50,000 - - 50,000
---------- ----------- ---------- -----------
Total Current Liabilities $1,756,814 $14,306,237 $9,000,000 $25,063,051
---------- ----------- ---------- -----------
Note Payable - Long Term,
Less Current - 4,553 - 4,553
Earn-out - - 813,321 813,321
---------- ----------- ---------- -----------
TOTAL LIABILITIES $1,756,814 $14,310,790 $9,813,321 $25,880,925
Stockholders' Equity
Preferred Stock (0 and 0
shares issued and outstanding) - - - -
Common Stock (11,571,706 and
1,000 shares issued and
outstanding) 116 - - 116
Additional Paid in Capital 79,851 - - 79,851
Accumulated Deficit (1,216,092) 4,897,480 (4,897,480) (1,216,092)
---------- ----------- ---------- -----------
Total Stockholders' Equity (1,136,125) 4,897,480 (4,897,480) (1,136,125)
---------- ----------- ---------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 620,689 $19,208,270 4,915,841 $24,744,800
========== =========== ========== ===========
Consideration:
Seller's Note 9,000,000
Earnout - over 4 years 813,321 Present Value of
----------- Earnout
Total Purchase Price $ 9,813,321
Allocation of Purchase Price
----------------------------
Equity of Delta Mechanical Contractors $ 4,897,480
Non-compete 300,000
Customer Contracts -
Goodwill 4,615,841
-----------
Total Allocation $ 9,813,321
42
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 13 - SUBSEQUENT EVENTS (Continued)
(a) Scheduled from Iron Eagle's audited consolidated balance sheet as of
December 31, 2010
(b) Scheduled from Delta's unaudited balance sheet as of December 31,
2010
(c) Adjustments made to allocate the purchase price of Delta. With the
acquisition of Delta, the Company received $18,905,203 in current assets
and $303,067 of fixed assets, which were depreciated and approximated
fair value. The Company assumed current liabilities of $14,306,237
and a $4,553 long term note payable. The former Delta members have a
four year earn-out that has been recorded at the net present value of
the future cash flows. Specifically identified intangibles include
$300,000 for non-compete agreements with the former owner and goodwill
of $4,802,520.
43
IRON EAGLE GROUP, INC. FINANCIALS
Pro Forma Consolidated Income Statement
For the Year Ended December 31, 2010
Year Ended December 31, 2010
----------------------------
Delta
Iron Eagle(a) Mechanical(b) Adjustments Pro Forma
--------- ----------- --------- -----------
REVENUES $ - $47,274,347 $ - $47,274,347
COST OF SALES - 41,848,069 41,848,069
--------- ---------- -------- -----------
GROSS PROFIT - 5,426,278 5,426,278
OPERATING EXPENSES
Shares Issued for
Services 30,000 - - 30,000
Operating Expenses 118,419 1,247,499 - 1,365,918
Compensation Expense 506,319 1,541,703 - 2,048,022
Professional Fees 129,117 681,666 - 810,783
Professional Fees to
Related Parties 158,400 - - 158,400
--------- ---------- -------- -----------
TOTAL OPERATING EXPENSES 942,255 3,470,868 - 4,413,123
--------- ---------- -------- -----------
NET OPERATING
INCOME (LOSS) (942,255) 1,955,410 - 1,013,155
OTHER INCOME (EXPENSE) (2,865) (85,771) - (88,636)
--------- ---------- -------- -----------
NET INCOME (LOSS) BEFORE
INCOME TAXES (945,120) 1,869,639 - 924,519
Provision for Income
Taxes (Expense)
Benefit - - - -
--------- ---------- -------- -----------
NET INCOME (LOSS) $(945,120) $1,869,639 $ - $ 924,519
========= ========== ======== ===========
EARNINGS PER SHARE
Earnings per Share,
basic and diluted $ (0.22) $ 0.22
========= ===========
Weighted Average Shares
Outstanding,
basic and diluted 4,277,132 4,277,132
========= ===========
44
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 13 - SUBSEQUENT EVENTS (Continued)
(a) Scheduled from Iron Eagle's audited consolidated income statement
for the year ended December 31, 2010
(b) Scheduled from Delta's unaudited income statement for the year
December 31, 2010
Shares Issued for Services:
On January 21, 2011, the board of directors ratified its media relations
agreement dated December 7, 2010 between the registrant and Market
Update Network Corp. ("MUNC") Pursuant to the agreement, the Company
granted MUNC 15,759 common shares valued at $0.95 per common share.
On February 4, 2011, the registrant executed a consulting agreement with
IPX Capital, LLC ("IPX"). Pursuant to the agreement, the Company granted
IPX 125,000 common shares valued at $0.80 per common share, which vested
immediately. A success fee of $100,000 in cash will be due upon
raising up to $40,000,000, plus an additional 1% of any capital raised
in excess of $40,000,000. An additional 125,000 shares will be earned
and vest upon the completion of raising the necessary capital to find
the Company's first acquisition.
On March 1, 2011, the Company entered into an investor relations
consulting agreement with Alliance Advisors, LLC. Pursuant to the 15
month agreement, the Company will issue 120,000 restricted shares over
the term of the agreement, including 40,000 to be issued within the
first 30 days of the agreement. In March 2011, the Company issued 40,000
shares of common stock, valued at $1.01 a share, which vested
immediately. The agreement also provides for cash fees beginning on the
fourth month of service. The fees range from $5,000 a month to $8,500
a month, with the escalations occurring upon closing of a financing
transaction of $10 million or more and upon a successful listing on the
American Stock Exchange of NASDAQ.
On March 1, 2011, the Company entered into a 12 month consulting
agreement with Hayden IR to provide corporate investor and public
relations services. Pursuant to the agreement, the Company will issue
75,000 shares of common stock within 30 days of engagement. In March
2011, the Company issued the 75,000 shares, valued at $1.01 a share,
which vested immediately. The agreement provides for no monthly cash
fee for the first six months of service. In months seven through
twelve, assuming a funding event of $10 million or more occurs, the fees
will be $7,000 per month. If the Company does not raise enough money to
pay the fee, an additional 75,000 shares of restricted common stock will
be issued to Hayden IR within 30 days following the sixth month of
engagement.
45
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 13 - SUBSEQUENT EVENTS (Continued)
On March 1, 2011, the Company entered into a consulting agreement with
RJ Falkner & Company, Inc. ("Falkner") to prepare and distribute
"Research Profile" reports to over 9,500 investment professionals on a
recurring basis, follow-up with investment professionals and investors
on a continuing basis, and respond to inquiries from brokers, money
managers and investors. The Company will pay Falkner a monthly retainer
fee of $5,000 payable in restricted shares of common stock, payable each
month in advance, calculated on the average closing price of the
Company's stock during the prior 20 market trading days, which was 7,693
shares at $1.30 a share for the first two months of service. In
addition, the Company issued Falkner a three-year option to purchase
85,000 shares of the Company's common stock, at an exercise price that
is equivalent to the last trade price of the Company's common stock on
the date prior to the start date of the consulting agreement, which was
$1.01 a share.
On March 1, 2011, the Company entered into a media production and
placement services agreement with NewsUSA ("NUSA") to provide national
media exposure for the Company. NUSA will provide the Company with
$500,000 of media credit to be used in the placement of print and radio
features obtained by NUSA on behalf of the Company. Pursuant to the
agreement, the Company was to issue $125,000 of restricted common shares
valued at the 30 day weighted average price as of the effective day of
the agreement. In March 2011, pursuant to this agreement, the Company
issued 96,154 shares of stock, valued at $1.30 a share, which vested
immediately. For every release after the first media release, for each
$25,000 of media credit utilized, the Company shall debit the guaranteed
media credit by $22,500 and pay the remaining $2,500 in cash.
Debt Issuance
On March 8, 2011, the Company entered into a note agreement with
Alliance Advisors for $7,500 as consideration for receipt of cash by the
Company. This note has an interest rate of 12% and is due upon the
earlier of June 8, 2011 or the registrant receiving at least $100,000 of
funding.
46
IRON EAGLE GROUP, INC.
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
As of December 31, 2010 and 2009
NOTE 13 - SUBSEQUENT EVENTS (Continued)
On March 8, 2011, the Company entered into note agreements with 2
related parties (the Company's Chairman of the Board and the Company's
Executive Vice President) for receipt of $60,000 cash for working
capital purposes. These notes have similar terms and bear an interest
rate of 10% and are due in full upon the earlier of the registrant
receiving at least $75,000 of funding or 90 days of issuance with
renewable 30 day periods, at the holder's sole discretion.
On March 17, 2011, the Company converted $250,000 of the "Advances from
Officer" from the Company's CEO into a note agreement. The note bears
an interest rate of 10% and is due December 15, 2011. Should the note
not be repaid in it's entirely by December 15, 2011, it will be
considered to be in default and the interest rate shall increase to 15%.
Purchase of Marketable Securities:
On March 15, 2011, the Company purchased 250,000 common shares of the
registrant from Galileo Partners, LLC for $100. Galileo Partners is an
investment firm where Steven Antebi, a non-affiliate, is the president
and chief executive officer.
Compensation Agreements:
Effective as of January 1, 2011, the Board ratified compensation
agreements for Joseph LoCurto, Jed Sabio, and Jason Shapiro.
No other reportable subsequent events were noted.
47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
------------------------------------------------
Under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, we
conducted an evaluation of our disclosure controls and procedures, as
such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated
under the Securities Exchange Act of 1934, as amended, as of December
31, 2010. We do not have sufficient segregation of duties within
accounting functions, which is a basic internal control. Due to our
size and nature, segregation of all conflicting duties may not always be
possible and may not be economically feasible. However, to the extent
possible, the initiation of transactions, the custody of assets and the
recording of transactions should be performed by separate individuals.
Based on this evaluation, our chief executive officer and chief
principal financial officers have concluded such controls and procedures
to be not effective as of December 31, 2010 to ensure that information
required to be disclosed by the issuer in the reports that it files or
submits under the Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms
and to ensure that information required to be disclosed by an issuer in
the reports that it files or submits under the Act is accumulated and
communicated to the issuer's management, including its principal
executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding
required disclosure.
Management's Annual Report on Internal Control over Financial Reporting
-----------------------------------------------------------------------
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting. Our internal control over
financial reporting is the process designed by and under the supervision
of our chief executive officer and chief financial officer, or the
persons performing similar functions, to provide reasonable assurance
regarding the reliability of our financial reporting and the preparation
of our financial statements for external reporting in accordance with
accounting principles generally accepted in the United States of
America. These officers have evaluated the effectiveness of our
internal control over financial reporting using the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission
in Internal Control over Financial Reporting - Guidance for Smaller
Public Companies.
Our chief executive officer and chief financial officer have assessed
the effectiveness of our internal control over financial reporting as of
December 31, 2010, and concluded that it was not effective.
This annual report does not include an attestation report of the
registrant's registered public accounting firm regarding internal
control over financial reporting. Management's report was not subject
to attestation by the registrant's registered public accounting firm
48
pursuant to rules of the Securities and Exchange Commission that permit
the registrant to provide only management's report in this annual
report.
Evaluation of Changes in Internal Control over Financial Reporting
------------------------------------------------------------------
Our chief executive officer and chief financial officer have evaluated
changes in our internal controls over financial reporting that occurred
during the year ended December 31, 2010. Based on that evaluation, our
chief executive officer and chief financial officer, or those persons
performing similar functions, did not identify any change in our
internal control over financial reporting that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting.
Important Considerations
------------------------
The effectiveness of our disclosure controls and procedures and our
internal control over financial reporting is subject to various inherent
limitations, including cost limitations, judgments used in decision
making, assumptions about the likelihood of future events, the soundness
of our systems, the possibility of human error, and the risk of fraud.
Moreover, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate
because of changes in conditions and the risk that the degree of
compliance with policies or procedures may deteriorate over time.
Because of these limitations, there can be no assurance that any system
of disclosure controls and procedures or internal control over financial
reporting will be successful in preventing all errors or fraud or in
making all material information known in a timely manner to the
appropriate levels of management.
ITEM 9B. OTHER INFORMATION
None.
49
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officer and Directors
-------------------------------
All holders of common stock have the right to vote for directors.
The board of directors has primary responsibility for adopting and
reviewing implementation of the business plan of the registrant,
supervising the development of the business plan, and review of the
officers' performance of specific business functions.
A director shall be elected by the shareholders to serve until the next
annual meeting of shareholders or until his or her death, or resignation
and his or her successor is elected.
The following table sets forth, as of March 28, 2011, with respect to
the individuals serving in the capacities indicated:
Name Position Terms
----------------------- ---------------------------- -------------
Joseph M. LoCurto, age 63 Director and Chairman of the November 2010
Board of Directors to present
Jason M. Shapiro, age 33 Chief Executive Officer, November 2009
Chief Financial Officer, to present
and Director
Jed M. Sabio, age 50 Executive Vice President November 2010
of Business Development to present
Joseph E. Antonini,age 69 Director July 2010
to present
Gary J. Giulietti, age 59 Director May 2010
to present
Jason M. Shapiro
----------------
Mr. Shapiro was the chief executive officer and sole director of Iron
Eagle Group, a Nevada corporation from its inception on November 9, 2009
to January 8, 2010 when it was acquired pursuant to the Share Exchange
Agreement described herein. From 2007-2009, Mr. Shapiro was the vice
president of Macquarie Capital Funds, a private equity group where he
was responsible for asset management and investments. In the summer and
fall of 2006, Mr. Shapiro was a legal intern for Honorable Rosemary
Gambardella, a former Chief Judge on the United States Bankruptcy Court
for the District of New Jersey. From 1999-2004, Mr. Shapiro was an
associate director of UBS Investment Bank, a global healthcare
investment banking firm.
Mr. Shapiro earned his MBA degree from the University of Pennsylvania's
The Wharton School in 2009. Mr. Shapiro earned a JD degree from the
Seton Hall University School of Law in 2007. Mr. Shapiro earned a MS
degree in accountancy from Zicklin School of Business' Baruch College in
50
2006, where he graduated as valedictorian. Mr. Shapiro earned a BS
degree in computer science from Rutgers College in 1998 where he
graduated in three years and was the class valedictorian.
Mr. Shapiro has earned the following certifications:
- Certified Public Accountant
- Chartered Financial Analyst
- Certified Insolvency and Restructuring Advisor
- Certification in Distressed Business Valuation
- Certified Fraud Examiner
- Certified in Financial Forensics
- Project Management Professional
- Risk Management Professional
- Certified Lean Six Sigma Black Belt
Joseph M. LoCurto
-----------------
Mr. LoCurto draws upon his four decades of mergers and acquisition
leadership in the construction field. Mr. LoCurto has served as a
founder, chief executive officer, chief operating officer and president
of regional, national, and international construction management
companies, ranging from $20 million to in excess of $1.8 billion in
annual revenues. Prior to joining Iron Eagle, Mr. LoCurto was at WDF
Inc. and its parent company Greenstar, Inc., which he joined in 2007 as
president and chief operating officer of WDF and became chief executive
officer and president of WDF and chief operating officer of Green star
in 2009. Previously, Mr. LoCurto led divisions of the multinational
construction giant Skanska where he was president and a member of the
board of Slattery Skanksa, chief executive officer of Gottlieb Skanksa,
and president/chief executive officer of Atlantic Skanksa until 2006.
Prior to joining Skanska, Mr. LoCurto held various positions at Gottlieb
Heavy Industries and NAB Construction.
His notable projects include City Water Tunnel Number 3, the
Rehabilitation of Yankee Stadium, rehabilitation of FDR Drive,
rehabilitation of the Brooklyn and Williamsburg Bridges, the 43 story
Channel club on 86th and York Ave, rehabilitation of the Statue of
Liberty, 500 MW Poletti Power Plant, Jacob Javits Convention Center,
Newtown Creek WPCP, rehabilitation of Roosevelt Avenue subway station,
the World Trade Center. His accomplishments in the areas of heavy
public works include projects for the MTA's New York City Transit, the
New York City Department of Environmental Protection, the New York City
Department of Transportation, the Dormitory Authority of the State of
New York, the New York City Department of Design and Construction, the
New York City School Construction Authority, New York Power Authority,
Con Edison, KeySpan, and the New York State and City Department of
Transportation.
Mr. LoCurto has been an active member in the industry. He is past
president of the Subcontractors Trade Association, a member of the
American Society of Mechanical Engineers for over thirty years and a
member of MOLES. Throughout his career, he has focused on employing
safe practices, surrounding himself with qualified, knowledgeable people
and creating profitable joint venture partnerships. Mr. LoCurto holds
both electrical and mechanical engineering degrees.
51
Jed M. Sabio
------------
Mr. Sabio serves as executive vice president, business development for
the registrant. Mr. Sabio is a financial professional with over 24
years of progressively responsible analytic and managerial positions.
For the past 21 years, Mr. Sabio has worked for National Grid and its
predecessor companies (KeySpan Energy Corporation and The Brooklyn Union
Gas Company), the last two years as a full-time consultant. His most
recent positions at National Grid included Director of Mergers and
Acquisitions and Director of Finance. In his capacity as director of
merger and acquisitions, he led project valuation, coordination of
extensive due diligence on all proposed investments, mergers,
acquisitions, divestitures, joint ventures, start-up ventures and other
related investments of the corporation and its subsidiaries. Mr. Sabio
has negotiated deal structure and remuneration, and he has provided
financial counsel through deal completion. As National Grid exited the
energy services sector, Mr. Sabio was charged with de-consolidating and
divesting of the nearly thirty companies that comprised the business
unit. Mr. Sabio earned an MBA in finance from St. John's University in
1988 and a BA in Psychology from Queens College in 1985.
Joseph E. Antonini
------------------
Mr. Antonini is the former Chairman, President and CEO of Kmart
Corporation. At Kmart, Mr. Antonini began as a management trainee, at
the then S.S. Kresge Company in 1964 and worked his way up to Chairman
of the Board of Directors of the giant retail chain in 1987. He is
credited with leading Kmart into a new era by launching store renewal
programs of unparalleled scope in retail history. They included
expansion of the retailer's specialty store concepts, along with
introduction of the Kmart Super Center, both contributors to setting new
sales and profit records. Mr. Antonini worked with Kmart until 1995.
From 1995 to present, Mr. Antonini has been the chairman of the board of
directors of AWG Ltd., a producer and seller of wine.
In the past, Mr. Antonini has been awarded key positions that include
Chairman of the National Retail Federation and the National Minority
Supplier Development Council. He served on the Board of Directors of:
- Polaroid Corporation, a manufacturer and seller of consumer camera
products, from 2003-2005,
- Chrysler Corporation, a car manufacturer, from 1989-1995,
- Shell Oil Company, a company engaged in oil exploration, reefing
and chemical products, from 1988-1998; and
- NBD Bank (ultimately acquired and merged into Bank One and then
JPMorgan Chase) from 1987-1989.
He is also a recipient of the Horatio Alger Award. Mr. Antonini earned
a Bachelor of Science degree in business administration from West
Virginia University in 1964. In 1992, he was recognized by West
Virginia University as its most distinguished alumni.
52
Gary J. Giulietti
-----------------
Since 2000, Mr. Giulietti has been president of the northeast operations
and a member of the executive committee of Lockton Companies, LLC, an
independently owned commercial insurance brokerage firm. From 1980 to
2000, Mr. Giulietti was vice chairman, worldwide construction for
Willis, a construction/surety broker, where he oversaw and managed a
worldwide construction insurance practice consisting of domestic offices
and 140 international offices. He also assisted in large and mid-cap
construction companies in providing their insurance needs as they took
their businesses public. Mr. Giulietti earned a Bachelor of Arts degree
in Business and Political Science from St. Michael's College in 1973.
Non-Qualified and Incentive Stock Option Plans
----------------------------------------------
The registrant does not currently have any stock option plans.
Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
To the registrant's knowledge, based solely on a review of the copies of
these reports furnished to it, our officers, directors and 10% control
persons have not yet complied with applicable Section 16(a) filing
requirements during the year ended December 31, 2010. The officers,
directors and 10% control persons have represented that the required
reports will be filed on or before April 15, 2011.
Code of Ethics Policy
---------------------
We have not yet adopted a code of ethics that applies to our principal
executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
Corporate Governance
---------------------
We have not yet adopted our corporate governance policies and
procedures. Corporate governance policies and procedures are being
drafted and will be adopted upon completion.
ITEM 11. EXECUTIVE COMPENSATION
The following sets forth, for the last three years, with respect to the
individuals serving as our executive officers:
Stock Option All Other
Name Year Salary Awards Awards Compensation Total
---------------------- ---- -------- ------- --- --------- ------------
Joseph M. LoCurto (1) 2010 n/a n/a n/a n/a n/a
Chairman 2009 n/a n/a n/a n/a n/a
2008 n/a n/a n/a n/a n/a
Jason M. Shapiro 2010 $200,000 - - - $200,000 (2)
Chief Executive Officer, 2009 40,000 40,000 (2)
Chief Financial Officer 2008 n/a n/a n/a n/a n/a
53
Jed M. Sabio (1) 2010 n/a n/a n/a n/a n/a
Executive Vice President 2009 n/a n/a n/a n/a n/a
of Business Development 2008 n/a n/a n/a n/a n/a
Michael J. Bovalino 2010 $119,134 $47,099 - - $166,233 (2)
Chief Executive Officer 2009 n/a n/a n/a n/a n/a
(Former) 2008 n/a n/a n/a n/a n/a
Eric J. Hoffman 2010 $87,812 $31,932 - - $119,743 (2)
Chief Financial Officer 2009 n/a n/a n/a n/a n/a
(Former) 2008 n/a n/a n/a n/a n/a
Glen R. Gamble 2010 $96,000 - - - $ 96,000
Chairman & President 2009 96,000 - - - 96,000
(Former) 2008 96,000 - - - 96,000
Robert A. Hildebrand 2010 $96,000 - - - $ 96,000
Secretary & Chief 2009 96,000 - - 70,000 (3) 166,000
Financial Officer 2008 96,000 - - 65,000 (3) 161,000
(Former)
(1) Mr. LoCurto and Mr. Sabio's compensation agreements started on
January 1, 2011.
(2) Mr. Bovalino, Mr. Hoffman and Mr. Shapiro' salaries and common
stock issuances were accrued and they have not received any cash or
stock payments.
(3) Mr. Hildebrand received a cash bonus of $70,000 for the year
ended December 31, 2009 and a cash bonus of $65,000 for the year ended
December 31, 2008.
Shapiro Employment Agreement
----------------------------
Mr. Shapiro was hired as the registrant's chief financial officer in
December 29, 2009 to May 4, 2010. Upon the hiring of Eric Hoffman as
chief financial officer, Mr. Shapiro's title and responsibilities
changed to Executive Vice President of Corporate Strategy. Pursuant to
the employment agreement entered into by the registrant, Mr. Shapiro
receives an annual compensation of $200,000 in cash and is eligible to
receive a cash bonus of up to 200% of base salary, at the discretion of
the board of directors.
On November 29, 2010, the board of directors appointed Jason M. Shapiro,
secretary and director, as chief executive officer and chief financial
officer. As of that date, Mr. Shapiro no longer served as executive
vice president of corporate strategy. Effective January 1, 2011, the
registrant entered into an employment agreement with Mr. Shapiro. The
term of the employment agreement is four years with an automatic renewal
on an annual basis thereafter. The employment agreement provides for an
initial annual base salary of $225,000 in cash and 75,000 shares per
year. The agreement also provides for an annual incentive of 100% of
his base salary payable.
Sabio Employment Agreement
--------------------------
Mr. Sabio was hired as executive vice president of business development
in November 2010. Effective January 1, 2011, the registrant entered
into an employment agreement with Mr. Sabio. The term of the employment
54
agreement is four years with an automatic renewal on an annual basis
thereafter. The employment agreement provides for an initial annual
base salary of $200,000 in cash and 50,000 shares in the registrant as
well as a signing bonus of $71,000 in cash and 71,000 shares in the
registrant. The agreement also provides for an initial annual incentive
of $50,000 in cash and 75,000 shares in the registrant. Mr. Sabio's
compensation, signing bonus, and other benefits will accrue until the
registrant raises the necessary capital to fund its first acquisition or
acquisitions and the raise is at least $10,000,000.
LoCurto Consulting Agreement
----------------------------
Mr. LoCurto was appointed as the chairman of the board of directors in
November 2010. Effective January 1, 2011, the registrant entered into a
consulting agreement with Mr. LoCurto. The term of the consulting
agreement is four years with an automatic renewal on an annual basis
thereafter. The consulting agreement provides for an initial annual
base fee of $250,000 in cash and 100,000 shares in the registrant as
well as a signing bonus of $130,000 in cash and 130,000 shares in the
registrant. The agreement also provides for an annual incentive of 100%
of his base salary payable. Mr. LoCurto's fee, signing bonus, and other
benefits will accrue until the registrant raises the necessary capital
to fund its first acquisition or acquisitions and the raise is at least
$10,000,000.
Former Officers and Directors Resignations
------------------------------------------
Michael Bovalino was hired as the registrant's chief executive officer
in April 26, 2010 and resigned from the registrant effective November
23, 2010. Mr. Bovalino has earned a total of compensation of $166,233
comprising $119,134 in cash and $47,099 in equity. Mr. Bovalino's
salaries and common stock issuances were accrued and he has not received
any cash or stock payments.
Eric Hoffman was hired as the registrant's chief financial officer in
May 4, 2010 and resigned from the registrant effective November 23,
2010. Mr. Hoffman has earned a total of compensation of $119,743
comprising $87,812 in cash and $31,932 in equity. Mr. Hoffman's salaries
and common stock issuances were accrued and he has not received any cash
or stock payments.
Glen R. Gamble resigned from the registrant effective August 18, 2010.
In connection with his resignation and to ensure a smooth transition,
the registrant agreed to pay Mr. Gamble $8,000 per month in connection
with consulting services to be provided until such time the registrant
no longer requires Mr. Gamble's services.
Robert Hildebrand resigned from the registrant effective August 18,
2010. In connection with his resignation and to ensure a smooth
transition, the registrant agreed to pay Mr. Hildebrand $8,000 per month
for consulting services to be provided until such time the registrant no
longer requires Mr. Hildebrand's services.
55
Director Compensation
---------------------
The following table sets forth, for the last three years, with respect
to the individuals serving as our independent directors(1):
Stock Option All Other
Name Year Cash(2) Awards Awards Compensation Total
-------------- ---- ------- ------- ----- ------- --------
Joseph Antonini 2010 $23,014 $73,014 - - $ 96,027
Director 2009 n/a n/a n/a n/a n/a
2008 n/a n/a n/a n/a n/a
Gary Giulietti 2010 $33,014 $83,014 - - $116,027
Director 2009 n/a n/a n/a n/a n/a
2008 n/a n/a n/a n/a n/a
(1) Independent directors receive an initial stock award of $50,000 for
joining the registrant's board of directors. They shall also receive
$100,000 a year in compensation that consists of $50,000 in stock awards
and $50,000 in cash. Non-independent directors do not receive any
compensation for serving on the board.
(2) The cash portion of the board compensation is currently being
accrued.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of March 21, 2011, with
respect to 1) each person who is known by us who beneficially owns more
than 5% of our common stock, 2) each director and named executive and 3)
all of our directors and officer as a group. Each named beneficial
owner has sole voting and investment power with respect to the shares
set forth opposite his name.
Percentage of
Number & Class (1) Outstanding
Name and Address of Shares Common Shares
---------------- ----------------- -------------
Jason M. Shapiro
61 West 62nd Street, Suite 23F
New York, NY 10023 2,478,741 21.09%
Joseph M. LoCurto
61 West 62nd Street, Suite 23F
New York, NY 10023 250,000 2.13%
Jed M. Sabio
61 West 62nd Street, Suite 23F
New York, NY 10023 250,000 2.13%
Joseph E. Antonini(1)
61 West 62nd Street, Suite 23F
New York, NY 10023 75,665 0.64%
56
Gary J. Giulietti
61 West 62nd Street, Suite 23F
New York, NY 10023 89,396 0.76%
All Directors & Officers
as a group (6 persons) 3,143,802 26.75%
Other 5% shareholders
Jake A. Shapiro
61 West 62nd Street, Suite 23F
New York, NY 10023 2,415,468 20.56%
Steve Gropp
1803 North Stafford Street
Arlington, VA 22207 2,478,741 21.09%
Gary E. Smolen
104 Pleasant Street
Meredith, NH 03253 1,057,164 9.00%
Nevada Irrevocable Trust(2)
3540 W. Sahara Ave.
Suite 153
Las Vegas, NV 89102 857,164 7.29%
(1) This consists of 38,462 shares in the name of Joseph E. Antonini and
24,225 shares in the name of JEA Energy LLC, a company solely owned by
Joseph E. Antonini.
(2) The trustee for the Nevada Irrevocable Trust is Mio L. Bonilla, a
non-affiliate.
Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
beneficial ownership of a security consists of sole or shared voting
power or investment power with respect to a security whether through a
contract, arrangement, understanding, relationship or otherwise.
Unless otherwise indicated, each holder above has sole voting or
investment power with respect to all shares of common stock listed as
beneficially owned by that holder.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Jason M. Shapiro, chief executive officer, chief financial officer, and
director, is a significant shareholder and the brother of Jake Shapiro,
also a significant shareholder. As of March 28, 2011, Jason Shapiro
owns 21.09% of the registrant's common stock and Jake Shapiro owns
20.56% of the registrant's common stock. Jason M. Shapiro is not
independent as such term is defined by a national securities exchange or
an inter-dealer quotation system.
57
The registrant entered into an agreement on November 15, 2009 with Belle
Haven Partners, LLC to assist Iron Eagle Nevada with business
development planning, raising additional capital, and accessing the
public markets. Jason Shapiro, one of Belle Haven's employees is also
on the registrant's management team and is 100% owned by Jake Shapiro, a
major shareholder. Iron Eagle Nevada agreed to pay Belle Haven $20,000
per month starting September 1, 2009, as well as to reimburse them for
all out-of-pocket expenses. As of December 31, 2010 and December 31,
2009, the registrant had accrued $453,000 and $213,000, respectively in
amounts due to Belle Haven for both out-of-pocket and consulting
expenses. This agreement was unanimously approved by all shareholders
of Iron Eagle Group Nevada and all the independent directors of the
registrant.
On December 31, 2009, the registrant entered in two note agreements with
Jason Shapiro, the registrant's current chief executive officer, for a
total of $15,000 as consideration for receipt of cash by the registrant.
These notes, which bear a 10% interest rate, were originally due on June
30, 2010, and have been extended until June 30, 2011.
On March 17, 2011, the registrant entered in a note agreement with Jason
Shapiro, the registrant's current chief executive officer, for $250,000
as consideration for reducing the amount owed to Jason Shapiro by
$250,000 for out-of-pocket expenses incurred by Jason Shapiro since
November 2009. This note is due December 31, 2011 and bears an interest
rate of 10% starting on April 1, 2011.
The registrant also owes its current chief executive officer $271,259 as
of December 31, 2010 and $2,000 as of December 31, 2009 for operating
expenses, which, in general include professional fees for audit, legal
and investor relations.
On March 8, 2011, the registrant entered in a note agreement with Joseph
LoCurto, the registrant's chairman, for $30,000 as consideration for
receipt of cash by the registrant. This note is due upon the registrant
receiving at least $75,000 of funding. The note will start to accrue at
interest rate of 10% starting on April 1, 2011.
On March 8, 2011, the registrant entered in a note agreement with Jed
Sabio, the registrant's executive vice president of business
development, for $30,000 as consideration for receipt of cash by the
registrant. This note is due upon the registrant receiving at least
$75,000 of funding. The note will start to accrue at interest rate of
10% starting on April 1, 2011.
The registrant also leases its New York, New York facility under a
rental agreement that has a one year lease starting September 1, 2010
for $2,100 a month with Belle Haven, a company of which Jason Shapiro,
an officer and director of the registrant, is a principal.
During the years ended December 31, 2010 and 2009, we paid affiliated
companies $11,200 and $202,500, respectively, for consulting services.
Glen Gamble, our former chairman and president, and Dutch Hildebrand,
our former chief financial officer and secretary are executives with the
affiliated companies.
58
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Audit Fees
During the years ended December 31, 2010 and 2009, we incurred audit
fees to The Hall Group CPAs and Kelly and Company of $0 and $58,226,
respectively for our current accounting entity. In addition, the
predecessor accounting entity had audit fees of $65,310 and $117,375,
respectively for the same time period. Such fees include professional
services from the audit of the financial statements included in this
Form 10-K and for services that are normally provided by the principal
accountant in connection with regulatory filings or engagements.
Tax Fees
We did not incur any tax fees for tax compliance or other tax services
from The Hall Group CPAs or Kelly and Company in 2010 or 2009.
All Other Fees
We did not incur any other fees from The Hall Group CPAs or Kelly and
Company during 2010 and 2009, respectively.
We intend to continue using The Hall Group CPAs solely for audit and
audit-related services, tax consultation and tax compliance services.
59
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a)(1) List of Financial statements included in Part II hereof
Consolidated Balance Sheets, December 31, 2010 and 2009
Consolidated Statements of Operations For the Year Ended December 31,
2010, For the Period November 9, 2009 (Inception) through December 31,
2009 and Cumulative Since Inception (November 9, 2009)
Consolidated Statement of Changes of Stockholders' Equity For the Period
November 9, 2009 Through December 31, 2010
Consolidated Statements of Cash Flows For the Year ended December 31,
2010, For the Period November 9, 2009 and Cumulative Since Inception
(November 9, 2009)
(a)(2) List of Financial Statement schedules included in Part IV hereof:
None
(a)(3) Exhibits
The following of exhibits are filed with this report:
(31) 302 certifications
(32) 906 certifications
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on
March 28, 2011
Iron Eagle Group, Inc.
/s/Jason M. Shapiro
------------------------------------
By: Jason M. Shapiro
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ Jason M. Shapiro Chief Executive Officer March 28, 2011
------------------------ Chief Financial Officer
Jason M. Shapiro Controller/Director
60
/s/ Joseph M. LoCurto Director March 28, 2011
------------------------
Joseph M. LoCurto
/s/ Gary J. Giulietti Director March 28, 2011
------------------------
Gary J. Giulietti
/s/ Joseph E. Antonini Director March 28, 2011
------------------------
Joseph E. Antonini
