Business Context and Reporting Period
This Form 8-K was filed by Fortress International Group, Inc. on December 6, 2007, reporting events occurring on November 30, 2007. The filing details the completion of an acquisition of Rubicon Integration, LLC, a provider of consulting, owner representation, and equipment integration services for mission-critical facilities.
Key Financial Metrics and Transaction Details
The acquisition consideration for 100% of Rubicon's membership interests consists of the following components:
- Cash: $4,500,000, subject to adjustments within 60 days of closing.
- Equity: 200,000 shares of Fortress International Group, Inc. common stock, held in escrow.
- Promissory Notes: Two unsecured notes with maximum values of $1,500,000 and $2,000,000 (totaling $3,500,000 potential), accruing interest at 6% annually. Payment is contingent on achieving operational and financial targets for December 2007 and the calendar year 2008.
- Earn-outs: Additional contingent amounts based on Rubicon's earnings targets for calendar years 2008 and 2009.
The filing does not provide specific revenue, profit, cash flow, margin, debt, or liquidity metrics for the combined entity or the acquired business at this time.
Material Changes
The primary material change is the expansion of Fortress International Group, Inc.'s operations through the acquisition of Rubicon Integration, LLC. The company has also entered into employment agreements with three key Rubicon employees: James Embley, William Pirrone, and Eric Holzworth.
Outlook, Risks, and Unusual Items
Future Filings: Financial statements of the acquired business and pro forma financial information are not included in this report; they are scheduled to be filed within 71 days of the report date.
Contingencies: A significant portion of the purchase price ($3,500,000 in notes plus earn-outs) is contingent upon Rubicon meeting specific operational, financial, and earnings targets in 2007, 2008, and 2009.
Regulatory Exemption: The issuance of 200,000 shares of common stock was exempt from registration under Section 4(2) of the Securities Act of 1933.
Investor Verification Checklist
- Verify the final cash consideration amount after the 60-day adjustment period.
- Monitor the achievement of operational and financial targets required to trigger payments on the $3,500,000 in promissory notes.
- Review the upcoming financial statements of Rubicon Integration, LLC to be filed within 71 days.
- Assess the impact of the earn-out structure on future earnings per share and cash flow obligations for 2008 and 2009.