UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2007
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o
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number 0-12346
IRONSTONE GROUP, INC.
(Name of Registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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95-2829956
(IRS Employer Identification No.)
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539 Bryant St., San Francisco, California 94107
(
Address of principal executive offices, including zip code)
(415) 551-3260
(
Registrant’s telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since last report)
Check 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
þ
No
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act) Yes
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No
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As of September 30, 2007, 742,108 shares of Common Stock, $0.01 par value, were outstanding.
Transitional Small Business Disclosure Format: Yes
o
No
þ
IRONSTONE GROUP, INC. AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
IRONSTONE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited)
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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2007
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2006
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2007
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2006
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Costs and expenses:
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Legal and other professional fees
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$
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11,820
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$
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(50
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$
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57,504
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$
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53,485
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State filing fee
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18
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279
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5,689
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11,135
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Miscellaneous expenses
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532
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93
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635
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207
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Total costs and expenses
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12,370
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322
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63,828
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64,827
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Loss from operations
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(12,370
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(322
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(63,828
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(64,827
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)
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Other income (expense):
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Interest expense, net
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(5,590
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(3,225
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(15,156
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(8,688
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)
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Net loss
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$
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(17,960
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$
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(3,547
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$
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(78,984
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$
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(73,515
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COMPREHENSIVE INCOME (LOSS), NET OF TAX:
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Net loss
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$
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(17,960
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$
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(3,547
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$
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(78,984
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$
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(73,515
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)
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Unrealized holding gain (loss) arising during the period
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321,610
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(1,849,840
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(483,454
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(5,023,015
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Comprehensive income (loss)
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$
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303,650
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$
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(1,853,387
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$
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(562,438
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$
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(5,096,530
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Basic and diluted loss per share:
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Net loss per share
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$
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(0.02
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$
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(0.00
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$
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(0.11
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$
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(0.10
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Weighted average shares
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742,108
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742,108
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742,108
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742,108
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
IRONSTONE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2007
(unaudited)
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ASSETS:
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Current assets:
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Cash
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$
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3,730
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Marketable securities available for sale, at fair value
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35,100
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Salon Media Group, Inc. common stock, at fair value
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135,949
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Salon Media Group, Inc. Series C Preferred stock, at fair value
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1,433,100
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Total assets
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$
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1,607,879
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current liabilities:
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Line of credit borrowings
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$
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287,175
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Accounts payable
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20,671
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Total liabilities
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307,846
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Shareholders’ equity:
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Preferred stock, $0.01 par value, 5,000,000 shares authorized of which there are no issued and outstanding shares
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—
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Common stock, $0.01 par value, 25,000,000 shares authorized of which 1,487,644 shares are issued
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14,878
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Additional paid-in capital
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21,170,385
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Accumulated deficit
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(20,264,775
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Accumulated other comprehensive income
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901,420
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1,821,908
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Less: Treasury Stock, 745,536 shares, at cost
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(521,875
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Total shareholders’ equity
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1,300,033
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Total liabilities and shareholders’ equity
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$
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1,607,879
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
IRONSTONE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Nine Months Ended
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September 30,
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2007
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2006
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$
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(78,984
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$
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(73,515
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Adjustments to reconcile net loss to net cash used in
operating activities:
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Changes in operating assets and liabilities:
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Accounts payable
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(8,655
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(7,323
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Net cash used in operating activities
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(87,639
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(80,838
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Net proceeds from line of credit
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89,000
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77,400
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Net cash provided by financing activities
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89,000
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77,400
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Net increase (decrease) in cash
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1,361
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(3,438
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Cash at beginning of period
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2,369
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3,629
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Cash at end of period
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$
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3,730
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$
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191
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Supplemental disclosure of cash flow information -
cash paid during the period for interest
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$
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15,169
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$
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8,700
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2006
(UNAUDITED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activities
Ironstone Group, Inc. and subsidiaries have no operations but are seeking appropriate business
combination opportunities.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of
Ironstone Group, Inc. and its subsidiaries, AcadiEnergy, Inc., Belt Perry Associates, Inc., DeMoss
Corporation, and TaxNet, Inc., (collectively the “Company”). All significant intercompany accounts
and transactions have been eliminated in consolidation.
Marketable Securities
Marketable securities have been classified by management as available for sale in accordance with
Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt
and Equity Securities” (“SFAS No. 115”). In accordance with SFAS No. 115, marketable securities
are recorded at fair value and any unrealized gains or losses are excluded from earnings and
reported as a separate component of shareholders’ equity until realized. The fair value of the
Company’s marketable securities and investments at September 30, 2007 is based on quoted market
prices. For the purpose of computing realized gains and losses, cost is identified on a specific
identification basis. For marketable securities for which there is an other-than-temporary
impairment, an impairment loss is recognized as a realized loss.
Unaudited Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of America for
interim financial information. Accordingly, they do not include all of the information and notes
required by accounting principles generally accepted in the United States of America for complete
financial statements. In the opinion of management, all adjustments and reclassifications
considered necessary for a fair and comparable presentation have been included and are of a normal
recurring nature. The accompanying condensed consolidated financial statements should be read in
conjunction with the Company’s most recent Annual Report on Form 10-KSB for the year ended December
31, 2006.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
6
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2006
(UNAUDITED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)
Earnings <Loss> per Share
Basic earnings (loss) per share (“EPS”) excludes dilution and is computed by dividing net income
(loss) applicable to common shareholders by the weighted average number of common shares actually
outstanding during the period. Diluted EPS reflects the potential dilution from potentially
dilutive securities, except where inclusion of such potentially dilutive securities would have an
anti-dilutive effect, using the average stock price during the period in the computation.
Options to purchase 2,800 shares of the Company’s common stock were outstanding during the
nine-month period ended September 30, 2007, but were not included in the computation of diluted EPS
as their effect would be anti-dilutive. Options to purchase 6,000 shares of the Company’s common
stock were outstanding during the nine-month period ended September 30, 2006, but were not included
in the computation of diluted EPS as their effect would be anti-dilutive.
Income Taxes
In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No 48,
“Accounting for Uncertainty in Income Taxes — an interpretation of FASB No 109 (“FIN 48”), that is
effective January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109,
“Accounting for Income Taxes,” and prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. Any penalties or interest
that the Company will incur shall be recorded to income tax expense in the accompanying condensed
consolidated statements of operations. Management performed an evaluation of income taxes and
believes the adoption of FIN 48 has no material impact on the Company’s consolidated results of
operations, financial position, or cash flows.
7
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 2007 and 2006
(UNAUDITED)
2. INVESTMENT IN SALON MEDIA GROUP, INC.
The Company owns 843 shares of Series C Preferred Stock of Salon Media Group, Inc. (“Salon”).
These shares resulted from the December 31, 2003 conversion of Convertible Promissory Notes
purchased by the Company and are convertible to common stock at any time. The Series C Preferred
Stock is convertible into common stock of Salon at the conversion rate determined by dividing the
Series C Preferred Stock per share price of $800 by the Series C Conversion Price of $0.80, or at
the rate of one share of Series C Preferred Stock to 1,000 shares of common stock. If converted,
the Company’s shares of Series C Preferred Stock represent 843,000 common shares of Salon, or 8.9%
of Salon’s common stock outstanding as of September 30, 2007. The investment in Salon is valued at
the converted common stock value of $1.70 per share, or $1,433,100 at September 30, 2007.
Additionally, in 2006 the Company received a total of 79,970 shares of common stock of Salon from
the exercise of warrants. The investment in common shares of Salon is valued at $1.70 per share, or
$135,949 at September 30, 2007.
3. LINE OF CREDIT ARRANGEMENT
The Company has a line of credit arrangement with First Republic Bank (the “lender”) with a
borrowing limit of $350,000 with interest based upon the lender’s prime rate. Interest is payable
monthly at 7.75% at September 30, 2007. The line is guaranteed by Robert H. Hambrecht, Chief
Executive Officer, and William R. Hambrecht, Board Director. The line of credit is due September
2008
.
At September 30, 2007, the outstanding balance under the line was $287,175.
8
Item 2. Management’s Discussion and Analysis or Plan of Operation
Special Note Regarding Forward-Looking Statements
Certain of the statements in this document that are not historical facts, including, without
limitation, statements of future expectations, projections of financial condition and results of
operations, statements of future economic performance and other forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, are subject to known and
unknown risks, uncertainties and other factors which may cause the actual results, performance or
achievements of the Company to differ materially from those contemplated in such forward-looking
statements. In addition to the specific matters referred to herein, important factors which may
cause actual results to differ from those contemplated in such forward-looking statements include
(i) the results of the Company’s efforts to implement its business strategy; (ii) actions of the
Company’s competitors and the Company’s ability to respond to such actions; (iii) changes in
governmental regulation, tax rates and similar matters; and (iv) other risks detailed in the
Company’s other filings with the Commission.
Results of Operations
Comparison of 2007 to 2006
Costs and expenses for the three-month period ended September 30, 2007 increased $12,048 or 3,742%
compared to the same period in 2006. This was primarily due to a reversal in the 3
rd
quarter of 2006 for the review and audit fees accrued in the 2
nd
quarter of 2006. For
the nine-month period ended September 30, 2007, costs and expenses decreased $999 or 1.5% compared
to the same period in 2006. This was primarily due to an increase in professional fees of $4,019
and a decrease in state taxes of $5,446.
Liquidity and Capital Resources
Cash increased by $1,361 from $2,369 at December 31, 2006 to $3,730 at September 30, 2007. Net
cash used in operating activities for the nine-month period ended September 30, 2007 was $87,639,
primarily due to payment of operating expenses. Cash provided by the line of credit for the period
was $89,000. At September 30, 2007, the outstanding balance under the line was $287,175. See Note
3 of Notes to Condensed Consolidated Financial Statements for more information.
The Company’s total investment in Salon Media Group, Inc. preferred and common stock increased by
$313,810 from $1,255,239 at June 30, 2007 to $1,569,049 at September 30, 2007, due to a $0.34 per
share price increase in Salon Media Group common stock. See Note 2 of Notes to Condensed
Consolidated Financial Statements for more information.
The Company may make an investment in other companies or obtain additional equity or working
capital through bank borrowings and public or private sale of equity securities. There can be no
assurance, however, that such additional financing will be available on terms favorable to the
Company, or at all.
Trends and Uncertainties
Termination of Historical Business Lines
Since winding down the Company’s traditional lines of business, Management and the Board of
Directors have been seeking appropriate business combination opportunities for the Company. In the
alternative, management and the Board are looking for an investment opportunity for the Company to
invest some or all of its remaining liquid assets. Otherwise, the Company’s cash assets are
invested in corporate securities and demand deposit accounts. If the Company does not find an
operating entity to combine with, and if its assets are not invested in certain types of securities
(primarily government securities), it may be deemed to be an investment company under the terms of
the Investment Company Act of 1940, as amended.
9
Item 3. Controls and Procedures
As of September 30, 2007, the Company carried out an evaluation, under the supervision and with the
participation of the Company’s management, including the Company’s Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the Company’s
disclosure controls and procedures pursuant to Rule 13a-14 of the Securities and Exchange Act of
1934 (the “exchange Act”). Based upon that evaluation, the Company’s principal executive and
financial officer concluded that as of September 30, 2007, the Company’s disclosure controls and
procedures were not effective.
The Company does not have an adequate number of independent board members nor an independent audit
committee. In addition, the lack of employees results in the Company’s inability to have a
sufficient segregation of duties within its accounting and financial activities. These absences
constitute material weaknesses in the Company corporate governance structure and internal controls.
There were no changes in the Company’s controls and procedures during the quarter ended September
30, 2007.
PART II – OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits
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31.1
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Section 302 – Principal Executive Officer Certification
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31.2
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Section 302 – Principal Financial Officer Certification
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32.1
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Section 1350 – Certification – Chief Executive Officer
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32.2
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Section 1350 – Certification – Chief Financial Officer
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10
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 on Form 10-QSB to be signed on its behalf by the
undersigned, thereunto duly authorized.
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IRONSTONE GROUP, INC.
a Delaware corporation
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Date: November 14, 2007
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By:
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/s/ Robert H. Hambrecht
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Robert H. Hambrecht
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Chief Executive Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.
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Signature
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Title
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Date
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|
|
|
/s/ Robert H. Hambrecht
Robert H. Hambrecht
|
|
Director, Chief Executive Officer,
and Secretary
(
Principal Executive Officer)
|
|
November 14, 2007
|
|
|
|
|
|
|
/s/ Quock Q. Fong
Quock Q. Fong
|
|
Chief Financial Officer
|
|
November 14, 2007
|
|
|
|
|
|
|
/s/ Edmund H. Shea, Jr.
Edmund H. Shea, Jr.
|
|
Director
|
|
November 14, 2007
|
|
|
|
|
|
|
/s/ William R. Hambrecht
William R. Hambrecht
|
|
Director
|
|
November 14, 2007
|
11
Ironstone (CE) (USOTC:IRNS)
Gráfica de Acción Histórica
De May 2024 a Jun 2024
Ironstone (CE) (USOTC:IRNS)
Gráfica de Acción Histórica
De Jun 2023 a Jun 2024
