As filed with the Securities and Exchange Commission on June 11, 2003.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
----------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- ---------
Commission File No. 0-33353
HARP & EAGLE, LTD.
(Exact name of small business issuer as specified in its charter)
Wisconsin 39-1980178
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1234 North Astor Street
Milwaukee, Wisconsin 53202
(Address of principal executive offices) (Zip Code)
(414) 272-5273
(Issuer's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
----------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of March 31, 2003, 718,166 shares of the small business issuer's common
stock, par value $0.0001 per share, were outstanding.
Transitional Small Business Disclosure Format (Check One) Yes [ ] No [X]
================================================================================
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2
HARP & EAGLE, LTD.
AND SUBSIDIARIES
Milwaukee, Wisconsin
CONSOLIDATED BALANCE SHEETS
(Unaudited) December 31,
March 31, 2003 2002
-------------- ------------
ASSETS
Current assets
Cash and cash equivalents $ 208,635 $ 198,697
Accounts receivable 25,544 6,376
Due from related party 38,671 38,671
Inventory 11,908 12,227
Prepaid expenses 59,821 61,147
---------- ----------
Total current assets 344,579 317,118
---------- ----------
Property and equipment
Land 272,733 266,195
Buildings and improvements 1,376,220 1,335,825
Furniture, fixtures, and equipment 447,195 432,938
Construction in progress 132,500 30,000
---------- ----------
2,228,648 2,064,958
Less accumulated depreciation 280,321 254,946
---------- ----------
Net property and equipment 1,948,327 1,810,012
---------- ----------
Other assets
Goodwill, net of accumulated amortization of $3,101 at
March 31, 2003 and December 31, 2002 14,337 14,337
Amounts receivable from shareholder 19,411 19,411
Deferred tax asset 31,750 17,750
Investment in affiliated company 577,462 575,111
---------- ----------
Total other assets 642,960 626,609
---------- ----------
Total assets $2,935,866 $2,753,739
========== ==========
See notes to consolidated financial statements
3
(Unaudited) December 31,
March 31, 2003 2002
-------------- ------------
LIABILITIES
Current liabilities
Notes payable - related parties $ 5,534 $ 5,534
Notes payable - other 44,466
Current maturities of long-term debt 240,425 235,131
Accounts payable 40,222 58,212
Accrued liabilities:
Interest 20,000 19,400
Other 61,148 97,182
Customer deposits 398,400 240,802
---------- ----------
Total current liabilities 810,195 656,261
---------- ----------
Long-term debt, less current maturities 1,062,293 1,039,202
---------- ----------
Total liabilities 1,872,488 1,695,463
---------- ----------
STOCKHOLDER EQUITY
Capital stock
Common stock 72 72
Additional paid-in capital 1,242,465 1,252,549
Retained earnings (accumulated deficit) (209,846) (183,045)
Foreign currency translation adjustment 30,687 (11,300)
---------- ----------
Total stockholder equity 1,063,378 1,058,276
---------- ----------
Total liabilities and stockholder equity $2,935,866 $2,753,739
========== ==========
4
HARP & EAGLE, LTD.
AND SUBSIDIARIES
Milwaukee, Wisconsin
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31
-------------------
2003 2002
-------- --------
Sales $243,147 $251,933
Cost of sales 86,084 44,258
Operating expenses 176,077 188,242
-------- --------
Income from operations (19,014) 19,433
-------- --------
Other income (expense)
Earnings from investment in affiliate 2,351
Interest income 446 451
Interest expense (24,584) (7,365)
-------- --------
Total other income (expense) (21,787) (6,914)
-------- --------
Income before provision for income taxes (40,801) 12,519
Income tax expense (benefit) (14,000) 3,000
-------- --------
NET INCOME (LOSS) $(26,801) $ 9,519
======== ========
Net income (loss) per common share $ (0.04) $ 0.01
See notes to consolidated financial statements
5
HARP & EAGLE, LTD.
AND SUBSIDIARIES
Milwaukee, Wisconsin
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (UNAUDITED)
Retained Accumulated
Common Additional Earnings/ Other
Preferred Shares Common Paid-In (Accumulated Comprehensive
Stock Outstanding Stock Capital Deficit) Loss Total
--------- ----------- ------ ---------- ------------ ------------- ----------
Balance December 31, 2002 $ 717,766 $72 $1,252,549 $(183,045) $(11,300) $1,058,276
Stock offering costs (10,084) (10,084)
Comprehensive income:
Net income (26,801) (26,801)
Foreign currency translation adjustment 41,987 41,987
--------- ------- --- ---------- --------- -------- ----------
Total comprehensive income 15,186
----------
Balance March 31, 2003 $ 717,766 $72 $1,242,465 $(209,846) $ 30,687 $1,063,378
========= ======= === ========== ========= ======== ==========
Commonstock - par value of $.0001; 10,000,000 shares authorized, 717,766 shares
issued and outstanding at
March 31, 2003 and December 31, 2002, respectively.
Preferred stock - 2,000,000 shares authorized, no shares have been issued.
See notes to consolidated financial statements
6
HARP & EAGLE, LTD.
AND SUBSIDIARIES
Milwaukee, Wisconsin
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 1
---------------------
2003 2002
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (26,801) $ 9,519
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Earnings from investment in affiliate (2,351)
Amortization of goodwill 218
Depreciation 25,375 16,044
Deferred tax expense (benefit) (14,000) 3,000
Changes in assets and liabilities:
Accounts receivable (19,168) (1,338)
Inventory 319 678
Prepaid expenses 1,326 (31,981)
Accounts payable (17,990) (66,982)
Accrued liabilities (35,434) (20,293)
Customer deposits 157,598 149,928
--------- --------
Net cash provided by operating activities 68,874 58,793
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (103,782)
Decrease in amounts receivable to related parties (16,619)
--------- --------
Net cash used in investing activities (103,782) (16,619)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party debt 44,466
Retirement of long-term debt (51,954) (18,655)
Proceeds from long-term debt 51,290
Costs of issuing stock (10,084) (6,500)
--------- --------
Net cash provided by (used in) financing activities 33,718 (25,155)
--------- --------
Effect of exchange rate changes on cash 11,128 (3,337)
--------- --------
Net increase in cash and cash equivalents 9,938 13,682
Cash and cash equivalents - beginning 198,697 105,383
--------- --------
Cash and cash equivalents - ending $ 208,635 $119,065
========= ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 23,984 $ 5,425
See notes to consolidated financial statements
7
HARP & EAGLE, LTD.
AND SUBSIDIARIES
Milwaukee, Wisconsin
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
In management's opinion, the financial information, which is unaudited,
reflects all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the financial information as of and
for the three month periods ended March 31, 2003 and 2002, in conformity
with accounting principles generally accepted in the United States of
America. The financial statements include the accounts of Harp & Eagle,
Ltd. (the company), which was formed in 1999 under the laws of the state of
Wisconsin for the purpose of acquiring all of the issued and outstanding
common stock of Castledaly Acquisition Corporation (Castledaly). In 2000,
the company acquired approximately 63% of the outstanding common stock of
Castledaly in a series of transactions. The acquisition of Castledaly has
been accounted for in a manner similar to a pooling of interest since it
was acquired from a company under joint control and common management. In
2001, the company acquired the remaining 37% ownership interest of
Castledaly. Castledaly owns 100% of its subsidiary, Castledaly Manor
Limited (Manor), which owns and operates an Irish manor house inn located
in the village of Castledaly, Ireland. Operating results for the three
month period ended March 31, 2003, are not necessarily indicative of the
results that may be expected for future periods.
The business of the company, accounting policies followed, and other
information are contained in the notes to the consolidated financial
statements for the company as of and for the years ended December 31, 2002
and 2001, filed as part of the company's annual report on Form 10-KSB.
These consolidated financial statements should be read in conjunction with
the annual consolidated financial statements.
NOTE 2 - EARNINGS PER SHARE
Earnings per share has been computed based on the weighted average shares
outstanding for the period below:
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Basic income per common share:
Income available to common stockholders:
Three months ended March 31, 2003 $(26,801) 717,766 $(0.04)
Three months ended March 31, 2002 $ 9,519 649,661 $ 0.01
8
HARP & EAGLE, LTD.
AND SUBSIDIARIES
Milwaukee, Wisconsin
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - EARNINGS PER SHARE (continued)
During December 2000, the company granted options to purchase approximately
33,332 shares of common stock to four individuals, all of whom are
officers, directors and/or employees of the company. These options were
granted pursuant to a plan adopted by the board of directors. All of these
options are exercisable for a period of ten years, at the price of $3.00
per share; however such options will not become fully vested and
exercisable until July 1, 2007. The exercise price of these options was
determined by the company to reflect the fair value of the common stock as
of December 31, 2000. These options have been cancelled.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
You should read the following commentary in conjunction with the financial
statements and related notes contained elsewhere in this report.
Forward-Looking Statements
Certain information in this report, including the following discussion, may
include forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
We intend the disclosure in these sections and throughout this report to be
covered by the safe harbor provisions for forward-looking statements. All
statements regarding our expected financial position and operating results,
business strategy, financing plans, and the outcome of any contingencies are
forward-looking statements. These statements can sometimes be identified by our
use of words such as "may", "believe", "plan", "will", "anticipate", "estimate",
"expect", "intend", and other phrases of similar meaning. Known and unknown
risks, uncertainties and other factors could cause the actual results to differ
materially from those contemplated by the statements. Forward-looking
information is based on various factors and was derived using numerous
assumptions.
Background
Our Castledaly Manor inn and restaurant facility, located on 37 acres
outside of Athlone, in County Westmeath, Ireland, is housed in a renovated manor
house and stable blocks which were originally constructed as a working estate in
the early 18th Century. During 1997, a group of Wisconsin investors organized
Castledaly Acquisition Corporation which purchased one-half of the outstanding
"ordinary shares" of Castledaly Manor, Ltd., an Irish limited company; an Irish
entrepreneur owned the balance. Castledaly Manor, Ltd. owns 100% of the equity
in Castledaly Manor. An Irish limited company, which is comparable to a typical
business corporation in the United States, provides limited liability to its
shareholders; its equity shares, which are comparable to common stock, are
referred to as "ordinary shares."
During 1999, Castledaly Acquisition Corporation acquired 100% ownership of
Castledaly Manor, Ltd. During 2000 and 2001, Harp & Eagle acquired all of the
outstanding common stock of Castledaly Acquisition Corporation, thereby becoming
the sole owner of Castledaly Manor. Originally, Castledaly Manor had 11 rooms
available for rent. Early in 2001, our renovation of the stable blocks behind
the manor house added an additional 12 guest rooms; with these additional rooms,
the inn now has 23 guest rooms available for rent. We opened the new rooms for
occupancy in April 2001.
Results of Operations
Gross Revenue and Cost of Sales
Sales decreased in the first quarter of 2003 over the comparable period of
2002, from $251,933 to $243,147, a decrease of $8,786, or 3.5%, while our cost
of sales increased from $44,258 for the first quarter of 2002 to $86,084 for the
first quarter of 2003, an increase of $41,826, or 94.5%. We believe that our
decreased sales were principally due to the worldwide general decline in tourism
and travel-related activities in the wake of the September 11 terrorist attacks,
which continued through the first quarter of 2003, compounded by the situation
in Iraq. The growth in our cost of sales was the result of generally anticipated
increases in our overhead and maintenance expenses at Castledaly Manor,
including amounts expended for wages and payroll taxes, food and beverages,
linen and laundry, utilities, grounds maintenance and other supplies. These
expense increases were exacerbated by the continuing decline in value of the
dollar against the euro during 2002 and the first quarter of 2003. The expenses
which comprise our cost of sales are paid in euros, but translated to and
recorded in dollars for financial statement purposes. With respect to our Irish
operations during 2002 and the first quarter of 2003, approximately 60% and 22%
of our expense increases for such periods, respectively, as compared to the
prior year, resulted from our being required to expend considerably more dollars
to purchase the euros necessary to pay the cost of operating and maintaining
Castledaly Manor. While we believe that our post-September 11 operating results
have surpassed those of most of our competitors, we nonetheless reported
decreased sales as a result of the industry downturn, with resultant reductions
in our operating and net income levels.
10
For the three months ended March 31, 2003, we received approximately 56% of
our revenue from sales of airline tickets; 33% from room rentals; and 11% from
food and beverage sales. We expect this pattern of sales to continue for the
balance of 2003.
Operating Expenses
Our efforts to develop and introduce more effective cost controls and
efficiencies into our operations resulted in a decrease in operating expenses of
$12,165, or 6.5%, from $188,242 in the first quarter of 2002 to $176,077 in the
comparable period of 2003. This somewhat offset the $41,826 increase in cost of
sales for the first quarter of 2003 as compared to the same period during 2002.
However, due to decreased sales coupled with increased cost of sales, our income
from operations decreased from $19,433 for the first quarter of 2002 to
$(19,014) for the first quarter of 2003, down $38,447, or 197.8%.
In general, 62% of our operating expenses are incurred to purchase airline
tickets; 27% are incurred in connection with room rentals; 9% are incurred to
support food and beverage sales; and 2% are incurred for other miscellaneous
general purposes. Our revenue from airline tickets usually approximates our cost
for those tickets.
Other Expenses and Net Income
Late in December 2002, we increased our debt in order to acquire additional
shares of County Clare, Ltd. (which owns and operates the County Clare Irish
inn, restaurant and pub in Milwaukee, Wisconsin, as discussed below, resulting
in increased interest expense, from $7,365 for the first quarter of 2002 to
$24,584 for the comparable quarter of 2003, an increase of $17,219, or 233.8%.
Due principally to our reduced sales, coupled with our increased cost of
sales, as discussed above, our pre-tax income for the first quarter decreased by
$53,320, or 425.9%, from 2002 to 2003. Although somewhat offset by a decrease in
our provision for income taxes of $11,000, or 366.7%, from $3,000 for the first
quarter of 2002 to $(14,000) for the first quarter of 2003, our net income
nevertheless decreased by $36,320, or 381.6%, from $9,519 for the first quarter
of 2002 to $(26,801) for the comparable period of 2003.
Changes in Assets and Liabilities
From December 31, 2002 to March 31, 2003, our total liabilities increased
$177,025, or 10.4%, due principally to an increase in customer deposits from
$240,802 at December 31, 2002 to $398,400 at March 31, 2003, an increase of
$157,598, or 65.4%. We believe that such increase in customer deposits was due
to factors described above, including our greater capacity at Castledaly Manor,
the increase in our room and tour charges and the tendancy of tour patrons to
postpone travel following the September 11 terrorist attack.
Financial Condition
Liquidity; Commitments for Capital Resources; and Sources of Funds
Our principal source of liquidity from operations has been cash earnings
from rental of hotel rooms, and food and liquor sales. Our Castledaly Manor
facility has earned revenues primarily from U.S. residents who purchase our
weekly round-trip travel package. Under this program, two persons fly from
Chicago to Dublin, where they are met by our bus and taken to Castledaly Manor.
They stay at Castledaly Manor for a week, from Wednesday to Wednesday, and fly
back to Chicago.
Beginning in 2002, the trip was extended to run from Wednesday through
Thursday of the following week, which is producing increased food and liquor
sales. Reservations are usually made months in advance, and we generally have
experienced a backlog. A few room nights are sold to walk-in local customers in
Ireland. We also receive revenues from food and beverage sales to local
residents who are welcome to patronize our facilities, including rentals for
private parties. We anticipate that revenues generated by room rentals and food
and drink sales will continue to satisfy our operating cash requirements in the
future, as they do currently and have since 1999.
11
We have placed somewhat greater emphasis on marketing to Irish, British and
other European residents, and for a time we ran reduced-rate trips from the
United States until international air travel began to return to more normal
levels following the September 2001 terrorist events. We have raised our rates
as occupancy appeared to be returning to desired levels. However, further
pricing adjustments may be necessary to promote sales.
We have experienced working capital deficits since early 2001, due
principally to our initial startup costs and subsequent renovation and
improvement of Castledaly Manor. Our working capital deficit increased by
$126,473, or 37.3%, from $339,143 at December 31, 2002 to $465,616 at March 31,
2003. We anticipate repayment of approximately $486,000 of current obligations
with proceeds of our ongoing initial public offering, which would further reduce
our working capital deficit. We achieved positive earnings in 2001 and 2002,
and, in the estimation of management, we will in 2003 and subsequently continue
to be able to generate sufficient cash from operations to meet our obligations
as they become due.
To provide additional liquidity, we have obtained a revolving term loan
credit facility from a U.S. commercial bank, under which we may borrow up to a
maximum principal amount of $350,000, with interest at the rate of 5.9% per
annum. Pursuant to the current agreement, the lending commitment terminates
December 1, 2005, and any loan balance outstanding shall be paid on that date;
however, we have not experienced difficulty in renewing and extending previous
credit agreements and anticipate that the current agreement will be extended on
acceptable terms. Amounts outstanding under such credit facility are guaranteed
by County Clare, Ltd., a related party, and by a stockholder of Harp & Eagle. As
of March 31, 2003, approximately $328,229 was outstanding under this credit
facility. We also borrowed $235,165 from Ulster Bank, Ireland, as desribed
below, to finance our purchase of 16,260 additional shares of County Clare, Ltd,
We intend to reduce such indebtedness with proceeds of our ongoing initial
public offering.
While we have no specific source of or provision for long-term liquidity,
management is confident that we will be able to extend the credit facility
described above beyond its scheduled termination as of December 1, 2005.
A major use of proceeds will be to repay bank debt that we incurred in
connection with the acquisition and improvement of Castledaly Manor. Repayment
of these loans will reduce our future interest expenses. However, we also intend
to purchase, construct, and operate one or more other hotels in the United
States, as well as one in Northern Ireland, to the extent that investment
capital and new loans permit. Any new borrowings will increase our future
interest charges.
Changes in Assets and Liabilities
In December 2002, we borrowed $235,165 from Ulster Bank, Ireland, payable
in monthly installments of $10,483 and due December 23, 2003, at the Irish prime
rate less 0.2% (5.625% at March 31, 2003), to finance our purchase of an
additional 16,260 shares of common stock of County Clare, Ltd. As a result of
this purchase, we increased our ownership of County Clare, Ltd. to 19%. We also
hold options to purchase an additional 16,500 shares of County Clare common
stock at the price of $1.00 per share. Exercise of these options would increase
to approximately 30% our ownership interest in County Clare. We expect to
exercise such options during the second quarter of 2003. Increased debt,
principally representing the additional monies borrowed to finance our
above-described purchase of additional County Clare common stock, and customer
deposits, collected in connection with our Irish tours, represented a
significant portion of our increased total liabilities, which grew $177,025, or
10.4%, from $1,695,463 on December 31, 2002 to $1,872,488 on March 31, 2003.
Inflation and Other Factors That May Affect Future Results.
We have not been affected by inflation in the past, and do not expect
inflation to have a significant effect on operations in the foreseeable future.
12
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
See Schedule A, attached.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
- ------ ----------------------------------------------------------------------
99.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-k
No reports on Form 8-K were filed during the quarter for which this
report is filed.
SIGNATURES
Pursuant to the requirements 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.
HARP & EAGLE, LTD.
Dated: June 11, 2003 By: /s/ CARY JAMES O'DWANNY
----------------------------
Cary James O'Dwanny,
President and Treasurer
(Principal Executive Officer
and
Principal Finanacial Officer)
13
CERTIFICATIONS
I, Cary James O'Dwanny, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Harp & Eagle,
Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: June 11, 2003
/S/ CARY JAMES O'DWANNY
---------------------------------------
Cary James O'Dwanny,
President (Chief Executive Officer)
and Treasurer (Chief Financial Officer)
14
SCHEDULE A
HARP & EAGLE, LTD.
FORM 10-QSB
For the Quarterly Period Ended March 31, 2003
Pursuant to Securities Act Rule 463, the following information (as
identified in paragraphs (f)(2) through (f)(4) of Regulation S-B Item 701) is
provided concerning the initial public offering ("Offering") of its common
stock, par value $0.0001 per share ("Common Stock"), conducted by Harp & Eagle,
Ltd. ("Company"), pursuant to a registration statement on Form SB-2 under the
Securities Act of 1933 (File No. 333-55088), which initially became effective as
of December 11, 2001:
(f)(2) through (f)(4)(i): The Offering commenced as of December 11, 2001,
and remained ongoing as of March 31, 2003.
(f)(4)(ii): As of March 31, 2003, the Offering was being self-underwritten
by the Company.
(f)(4)(iii) through (f)(4)(iv): 1,000,000 shares of Common Stock were
registered on Form SB-2, all of which are included in the Offering; all
such shares were registered for the account of the Company; the aggregate
price of the Common Stock registered (calculated at $6.00 per share, the
initial public offering price) was $6,000,000; during the period from
December 11, 2001 through March 31, 2003, 68,505 shares were sold in the
Offering.
(f)(4)(v): From December 11, 2001 through March 31, 2003, the Company
incurred the following expenses in connection with the Offering:
Underwriting commissions $ 32,882
Underwriters' expense allowances 8,221
Other expenses 139,545*
--------
Total expenses $168,742*
========
* Estimate
Approximately $44,500 of the above expenses consisted of fees and expense
reimbursements paid to Kranitz & Philipp, counsel to the Company. Richard
A. Kranitz, a partner in Kranitz & Philipp, is the Secretary and a director
of the Company. Apart from the foregoing, none of the above expenses were
paid, directly or indirectly, to directors or officers of the Company, or
to their affiliates, or to persons owning ten percent or more of any class
of equity securities of the Company, or to affiliates of the Company.
(f)(4)(vi) through (f)(4)(vii): After deducting the total expenses reported
above, net proceeds of the Offering received by the Company from December
11, 2001 through March 31, 2003 were $239,888. Of such net proceeds,
$145,700 was applied to debt reduction (including $45,700 to affiliates of
the Company), $80,000 was applied to the purchase and development of real
estate, and the balance was held in Company accounts pending application.
Apart from the $45,700 applied to repay indebtedness to affiliates, no net
proceeds were paid, directly or indirectly, to directors or officers of the
Company, or to their affiliates, or to persons owning ten percent or more
of any class of equity securities of the Company, or to affiliates of the
Company.
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- ----------------------------------------------------------------------
99.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
Exhibit Index