IRNS Ironstone Group Inc (CE)

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB

(Mark One)

þ		ANNUAL REPORT UNDER SECTION 13 OR 15(d ) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-12346

IRONSTONE GROUP, INC.

(Name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		95-2829956 (IRS Employer Identification No.)

Pier 1, Bay 3, San Francisco, California 94111
( Address of principal executive offices, including zip code)

(415) 551-3260
( Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:
None

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.01 par value

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 o

Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes þ No o

The Registrant’s revenues for the fiscal year ended December 31, 2007 were $0.

The approximate aggregate market value of voting stock held by non-affiliates of the Registrant was $392,662 as of December 31, 2007 based on the closing bid price on December 31, 2007. Shares of voting stock held by each officer and director and by each person who owns 5% or more of the outstanding voting stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive.

Check whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes þ No o

As of March 27, 2008, 742,108 shares of Common Stock, $0.01 par value, were outstanding.

Transitional Small Business Disclosure Format: Yes o No þ

 

 

TABLE OF CONTENTS

				Page
PART I:
Item 1.		Description of Business		3
Item 2.		Description of Property		3
Item 3.		Legal Proceedings		3
Item 4.		Submission of Matters to a Vote of Security Holders		3
PART II:
Item 5.		Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities		4
Item 6.		Management’s Discussion and Analysis or Plan of Operation		4-5
Item 7.		Financial Statements		5
Item 8.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		5
Item 8A(T)		Controls and Procedures		6
Item 8B.		Other Information		6
PART III:
Item 9.		Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act		7
Item 10.		Executive Compensation		8-9
Item 11.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		10
Item 12.		Certain Relationships and Related Transactions, and Director Independence
Item 13.		Exhibits		11
Item 14.		Principal Accountant Fees and Services		11
SIGNATURES				12
EXHIBIT 21.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

PART I

ITEM 1. DESCRIPTION OF BUSINESS

BACKGROUND

Ironstone Group, Inc, (“Ironstone”) a Delaware corporation, was incorporated in 1972. Since 1986, a majority of Ironstone’s outstanding shares has been owned by Hambrecht & Quist Group, a San Francisco-based investment banking and venture capital firm, and its affiliates (collectively “H&Q”). In September 2003, Ironstone repurchased all of these shares. Such repurchased shares are currently being held as treasury stock. The Hambrecht 1980 Revocable Trust presently owns over 50% of Ironstone’s outstanding voting shares.

BUSINESS STRATEGY

Currently, the Company is reviewing options and new business opportunities. At December 31, 2007, the Company had $34,320 in marketable securities , $6,140 in cash, an investment in Salon Media Group, Inc. valued at $1,476,752 and tax loss carry-forwards at its disposal .

There can be no assurance that the Company will acquire businesses, form additional alliances, or expand its existing services. Failure to expand the scope of services provided by the Company may have an adverse effect on the Company’s results of operations.

EMPLOYEES

As of December 31, 2007, the Company had one part-time employee. This employee received no compensation and is not subject to a collective bargaining agreement.

ITEM 2. DESCRIPTION OF PROPERTY

The Company’s principal executive offices are located at Pier 1, Bay 3, San Francisco, California 94111 and its telephone number is (415) 551-3260.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of stockholders during 2007.

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

Information regarding the recent trading activity of the Company‘s Common Stock is reported on the OTC Bulletin Board and the Company is not aware of any recent material trading activity in shares of its Common Stock. As of December 31, 2007, there were approximately 800 holders of record of the Company’s Common Stock. The Company has not paid cash dividends on its Common Stock since its inception and does not intend to pay cash dividends on its Common Stock in the foreseeable future.

ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

While the Company continues to evaluate business opportunities, its sole source of revenue is from the sale of marketable securities. Management has classified these marketable securities, in accordance with Statement of Financial Accounting Standards “SFAS” No. 115, as available for sale. These securities are recorded at fair market value, and any unrealized gains and losses are reported as a separate component of shareholders’ equity. For marketable securities for which there is an other-than-temporary impairment, an impairment loss is recognized as a realized loss.

Ironstone’s primary expenses are generated from maintaining regulatory reporting compliance, such as quarterly review and annual audit of the financial statements, seeking legal counsel when appropriate, and consulting fees.

RESULTS OF OPERATIONS

Year ended December 31, 2007

Costs and expenses for 2007 totaled $78,482 , a decrease of $ 22,288 or 22.1% as compared to 2006. The decrease was primarily due to a decrease in professional fees of $19,085 and a decrease in state filing fees of $4,011. Interest expense for 2007 totaled $20,071, an increase of $6,476 or 47.6% as compared to 2006. The increase was due to an increase in the line of credit borrowings compared to 2006.

Year ended December 31, 2006

Costs and expenses for 2006 totaled $100,770, an increase of $6,757 or 7% as compared to 2005. The increase was primarily due to a decrease in state filing fees of $31,325 , offset by an increase in legal and professional fees of $38,151. Interest expense for 2006 totaled $13,612, an increase of $9,899 or 266% as compared to 2005. The increase was due to an increase in the line of credit borrowings compared to 2005.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities for the year ended December 31, 2007 was $105,229. Working capital at December 31, 2007 was $1,187,387, a decrease of $675,084 from 2006. The decrease is primarily due to the valuation of Salon Media Group, Inc. Series C Preferred, at fair value conversion price.

Cash increased by $3,771 from $2,369 at the end of 2006 to $6,140 at the end of 2007 . The increase is due to draws taken on the line of credit. The Company has a line of credit agreement with First Republic Bank which it will use to meet its cash needs over the next 12 months (see Note 4 to Consolidated Financial Statements). On March 24, 2008 the Board of Directors authorized William R. Hambrecht to lend to the Company $100,000.

The Company may obtain additional equity or working capital through additional bank borrowings and public or private sales of equity securities and exercises of outstanding stock options. There can be no assurance, however, that such additional financing will be available on terms favorable to the Company, or at all.

While the Company explores new business opportunities, the primary capital resource of the Company is 843 shares of Series C Preferred Stock of Salon Media Group, Inc. (“Salon”). These shares were converted on December 31, 2003 from 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 shares or 7.4% of Salon’s common stock outstanding as of December 31, 2007. The investment in Salon is valued at the converted common stock value of $1.60 per share, or $1,348,800 at December 31, 2007.

In conjunction with making the investment in Salon, the Company received warrants to purchase common stock in Salon. In 2006, the Company exercised its warrants to purchase a total of 79,970 shares of common stock of Salon. The investment in common shares of Salon is valued at $1.60 per share, or $127,952 at December 31, 2007.

The investment of Salon is classified as available for sale and, therefore, a related unrealized loss of $576,531 has been included in comprehensive loss in 2007.

As of March 24, 2008, Salon’s common stock was trading at $1.80 per share. There can be no assurance that a market will continue to exist for either the Series C Preferred Stock or the common stock of Salon.

ITEM 7. FINANCIAL STATEMENTS

The financial statements required to be filed herewith begin on page F-1.

ITEM 8.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 8A(T). CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to the Company is made known to the officers who certify the financial statements and to other members of senior management and the Board of Directors.

We conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation our chief executive officer and chief financial officer have concluded that, as of December 31, 2007, our disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting for the three-months ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Controls over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

All internal controls over financial reporting, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention or overriding of controls. Therefore, even effective internal control over financial reporting can provide only reasonable, and not absolute, assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of internal controls over financial reporting may vary over time.

Our management, including our chief executive officer and chief financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making its assessment of internal control over financial reporting, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on our evaluation, management concluded that, as of December 31, 2007, our internal control over financial reporting was not effective based on those criteria because of the existence of the following material weaknesses.

	1)		The Company does not have an adequate number of independent board members nor therefore an independent audit committee.
	2)		Our limited number of employees results in the Company’s inability to have a sufficient segregation of duties within its accounting and financial reporting activities.

These absences constitute material weaknesses in the Company’s corporate governance structure.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

ITEM 8B.		OTHER INFORMATION

None.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

DIRECTORS

Name		Age				Director Since
Edmund H. Shea, Jr.			76				1993
William R. Hambrecht			72				2003
Robert H. Hambrecht			41				2003

Edmund H. Shea, Jr. has served as director of the Company since October 1993. He is a co-founder of J. F. Shea Co., Inc., a diversified construction, land development and venture capital investment company, and has served as its Executive Vice President and a director since 1954. He holds a B. S. degree from Massachusetts Institute of Technology.

William R. Hambrecht is the Chairman and Co-Chief Executive Officer of WR Hambrecht + Co which he founded in January 1998. He was co-founder of Hambrecht & Quist in 1968 where he held various executive management positions until he resigned in December 1997. He holds a B.S. degree from Princeton University.

Robert H. Hambrecht was a founding partner of W.R. Hambrecht + Co., an investment banking firm, founded in January 1998, and is presently a Managing Director.  From 1996 through January 1998, Mr. Hambrecht was Vice President of H&Q Venture Partners, a venture capital firm.  From 1994 to 1996, Mr. Hambrecht was employed by Unterberg Harris, an investment banking firm.  Mr. Hambrecht earned a master’s degree in public administration from Columbia University in 1993.  Mr. Hambrecht also serves on the Board of Directors of four privately-held companies and one public company.

EXECUTIVE OFFICERS

The following table sets forth the names, ages and positions of the Company’s executive officers as of December 31, 2007. A summary of the background and experience of each of these individuals is set forth after the table.

Name		Age		Position
Robert H. Hambrecht		41		Chief Executive Officer and Secretary
Quock Q. Fong		73		Chief Financial Officer

On March 24, 2008 Mr. Robert H. Hambrecht resigned from this position as Chief Executive Officer, while retaining the role as Secretary. Also on March 24, 2008, the Board appointed Mr. William R. Hambrecht as Chief Executive Officer.

Code of Ethics

The Company has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all of the Company’s employees (including its executive officers) and directors. The Company shall provide to any person without charge, upon request, a copy of the Code. Any such request must be made in writing to the Company, c/o William R. Hambrecht,
Pier 1, Bay 3 San Francisco, CA 94111.

ITEM 10. EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

Each non-employee director of the Company is entitled to receive a fee for each meeting attended in person (plus $500 for each committee meeting attended by committee members on a day other than a Board meeting date). The members of the Board of Directors are also eligible for reimbursement for their expenses incurred in connection with attendance at Board meetings in accordance with Company policy.

Outside directors may also receive stock option grants under the Company’s 1993 Non-Employee Directors’ Stock Option Plan (the “Directors’ Plan”). Only non-employee directors of the Company or an affiliate of such directors (as defined in the Internal Revenue Code of 1986, as amended from time to time, hereinafter the “Code”) are eligible to receive options under the Directors’ Plan. Options granted under the Directors’ Plan are not intended to qualify as incentive stock options under the Code.

Options under the Directors’ Plan have a ten-year term; however, each option will terminate prior to the expiration date if the optionee’s service as a non-employee director, or, subsequently, as an employee, of the Company terminates. The exercise price of each option under the Directors’ Plan must be equal to the fair market value of the Common Stock on the date of grant. All options issued pursuant to the Directors’ Plan vest at a rate of 1/36 per month for 36 months following the date of the grant of the option, or in the event the grant was delayed pending compliance by the Company with certain securities law requirements, the date from which the grant was delayed.

COMPENSATION OF EXECUTIVE OFFICERS

SUMMARY OF COMPENSATION

The following table shows that, for the fiscal year ended December 31, 2007, no compensation was awarded or paid to, or earned by, the Company’s Chief Executive Officer or the Company’s Chief Financial Officer.

																			NON-				OTHER
																			EQUITY				COMPEN
NAME AND PRINCIPAL							SALARY								OPTION				INCENTIVE				SATION
POSITION			YEAR				($)				BONUS				AWARDS				PLAN				($)				TOTAL
Robert H. Hambrecht			2007				—				—				—				—				—				—
Chief Executive Officer and Secretary
Quock Q. Fong			2007				—				—				—				—				—				—
Chief Financial Officer

STOCK OPTION GRANTS AND EXERCISES

The 1994 Equity Incentive Plan (the “Plan”) provides for the grant of (i) both incentive and non-statutory stock options and (ii) rights to purchase restricted stock, together “Stock Awards”, to the Company’s directors, officers and employees. Directors who are not salaried employees of or consultants to the Company or to any affiliate of the Company are not eligible to participate in the Plan. As of December 31, 2007, options to purchase a total of 2,800 shares were outstanding under the Plan, no shares had been purchased pursuant to the Plan and 331,680 shares remained available for future issuance there under.

The Plan is administered by the Board of Directors of the Company. The Board has the power to construe and interpret the Plan and, subject to the provisions of the Plan, to determine the number of persons to whom and the dates on which Stock Awards will be granted, the number of shares that may be exercised, the type or types of such Stock Awards to be granted, the exercise price of such Stock Award when appropriate and other terms of the Stock Award.

The maximum term of options under the Plan is typically ten years; however, in the event that an optionee’s service to the Company terminates, that optionee’s options will expire 90 days after the optionee’s service to the Company terminates. Option grants under the Plan typically vest over a five-year period at the rate of 1/10 on the date six months after the date of grant and 1/60 per month thereafter. The exercise price of non-statutory options may not be less than 85% of the fair market value of the Common Stock subject to the option on the date of grant; the exercise price of incentive options may not be less than 100% of the fair market value of the Common Stock subject to the option on the date of the grant.

No options or rights to purchase restricted stock were granted to the Company’s executive officer during the fiscal year ended December 31, 2007.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding the ownership of the Company’s Common Stock as of December 31, 2007 by: (i) each director and nominee for director; (ii) all officers and directors of the Company as a group; and (iii) all those known by the Company to be beneficial owners of more than five percent of its Common Stock.

BENEFICIAL OWNERSHIP (1)

		NUMBER OF SHARES				PERCENT
BENEFICIAL OWNER		OF COMMON STOCK				TOTAL (2)
William R. Hambrecht			432,604				58.3
539 Bryant Street San Francisco, CA 94107
Edmund H. Shea, Jr. and related entities			113,173				15.2
655 Brea Canyon Road Walnut, CA 91789
All executive officers and directors as a group (2 persons)			545,777				73.5

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Commencing February 11, 2003, the Company executed a series of convertible promissory notes with Salon Media Group that converted to 843 shares of Series C Preferred Stock on December 30, 2003.  In April 2003 Salon announced the appointment of Elizabeth Hambrecht as its Chief Financial Officer, Treasurer and Secretary.  In October 2003 she was appointed President of Salon Media Group and in February 2004 she was appointed Chief Executive Officer. Ms. Hambrecht is the daughter of William R. Hambrecht and the sister of Robert H. Hambrecht.

ITEM 13. EXHIBITS

Exhibit
Number		Description
21.1		Subsidiaries of Ironstone Group, Inc.
31.1		Section 302 — Principal Executive Officer Certification
31.2		Section 302 — Principal Financial Officer Certification
32.1		Section 1350 — Certification — Chief Executive Officer
32.2		Section 1350 — Certification — Chief Financial Officer

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table shows the aggregate amounts of audit fees and audit-related fees that the principal accountant billed in each of the last two fiscal years. There were no tax fees or other fees paid to the accountant in the last two fiscal years.

		2007				2006
Audit — Fees		$	56,500			$	49,690

Since the Board of Directors does not have an audit committee, the principal auditor is engaged by the Chief Executive Officer and the Chief Financial Officer on behalf of the Company’s Board of Directors.

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-KSB to be signed on its behalf by the undersigned, thereunto duly authorized.

		IRONSTONE GROUP, INC.
		a Delaware corporation

Date: March 27, 2008		By:		/s/ William R. Hambrecht
						William R. Hambrecht
						Chief Executive Officer
Date: March 27, 2008		By:		/s/ Quock Q. Fong
						Quock Q. Fong
						Chief Financial Officer

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.

Signature		Title		Date
/s/ William R. Hambrecht		Director, Chief Executive Officer, ( Principal Executive Officer)		March 27, 2008
/s/ Quock Q. Fong   Quock Q. Fong		Chief Financial Officer, ( Principal Financial Officer)		March 27, 2008
/s/ Edmund H. Shea, Jr.   Edmund H. Shea, Jr.		Director		March 27, 2008
/s/ Robert H. Hambrecht   Robert H. Hambrecht		Director, and Secretary		March 27, 2008

IRONSTONE GROUP, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated balance sheet at December 31, 2007		F-3
Consolidated statements of operations and comprehensive (loss) for the years ended December 31, 2007 and 2006		F-4
Consolidated statements of shareholders’ equity for the years ended December 31, 2007 and 2006		F-5
Consolidated statements of cash flows for the years ended December 31, 2007 and 2006		F-6
Notes to consolidated financial statements		F-7 to F-11

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Ironstone Group, Inc.

We have audited the accompanying consolidated balance sheet of Ironstone Group, Inc. and Subsidiaries as of December 31, 2007, and the related consolidated statements of operations and comprehensive loss, shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ironstone Group, Inc. and Subsidiaries as of December 31, 2007, and their results of operations and cash flows for each of the two years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

/s/ J.H. Cohn LLP

San Diego, California
March 27, 2008

IRONSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

December 31, 2007

ASSETS:
Current assets:
Cash		$	6,140
Marketable securities available for sale, at fair value			34,320
Salon Media Group, Inc. common stock, at fair value			127,952
Salon Media Group, Inc. Series C Preferred, at fair value			1,348,800
Total assets		$	1,517,212
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Line of credit borrowings		$	307,175
Accounts payable			22,650
Total liabilities			329,825
Shareholders’ equity:
Preferred stock,$0.01 par value, 5,000,000 shares authorized of which there are no issued and outstanding shares
Common stock,$0.01 par value, 25,000,000 shares authorized of which 1,487,644 shares are issued			14,878
Additional paid-in capital			21,170,385
Accumulated deficit			(20,284,343	)
Accumulated other comprehensive income			808,342
			1,709,262
Less: Treasury Stock, 745,536 shares, at cost			(521,875	)
Total shareholders’ equity			1,187,387
Total liabilities and shareholders’ equity		$	1,517,212

The accompanying notes are an integral part of these consolidated financial statements.

IRONSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)

Years Ended December 31, 2007 and 2006

		2007				2006
Costs and expenses:
Legal and other professional fees		$	69,475			$	88,560
State filing fee			7,899				11,910
Miscellaneous expenses			1,108				300
Total costs and expenses			78,482				100,770
Loss from operations			(78,482	)			(100,770	)
Other income (expense):
Interest expense, net of $18 in 2007 and $17 in 2006			(20,071	)			(13,595	)
Net (loss)		$	(98,553	)		$	(114,365	)
COMPREHENSIVE (LOSS), NET OF TAX:
Net (loss)		$	(98,553	)		$	(114,365	)
Unrealized holding (loss) arising during the year			(576,531	)			(4,430,104	)
Comprehensive (loss)		$	(675,084	)		$	(4,544,469	)
Basic and diluted loss per share:
Net loss per share		$	(0.13	)		$	(0.15	)
Weighted average shares			742,108				742,108

The accompanying notes are an integral part of these consolidated financial statements.

IRONSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Years Ended December 31, 2007 and 2006

																		Accumulated
										Additional								Other
		Common Stock								Paid-In				Accumulated				Comprehensive				Treasury Stock
		Shares				Amount				Capital				Deficit				Income (Loss)				Shares				Amount				Total
Balances, January 1, 2006			1,487,644			$	14,878			$	21,170,385			$	(20,071,425	)		$	5,814,977				745,536			$	(521,875	)		$	6,406,940
Other comprehensive loss																			(4,430,104	)											(4,430,104	)
Net (loss)															(114,365	)															(114,365	)
Balances, December 31, 2006			1,487,644				14,878				21,170,385				(20,185,790	)			1,384,873				745,536				(521,875	)			1,862,471
Other comprehensive loss																			(576,531	)											(576,531	)
Net (loss)															(98,553	)															(98,553	)
Balances, December 31, 2007			1,487,644			$	14,878			$	21,170,385			$	(20,284,343	)		$	808,342				745,536			$	(521,875	)		$	1,187,387

The accompanying notes are an integral part of these consolidated financial statements.

IRONSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2007 and 2006

		2007				2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)		$	(98,553	)		$	(114,365	)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Accounts payable			(6,676	)			3,313
Net cash used in operating activities			(105,229	)			(111,052	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from line of credit			109,000				109,792
Net cash provided by financing activities			109,000				109,792
Net increase (decrease) in cash			3,771				(1,260	)
Cash at beginning of year			2,369				3,629
Cash at end of year		$	6,140			$	2,369
Supplemental disclosure of cash flow information
Cash paid during the year for interest		$	20,089			$	13,612

The accompanying notes are an integral part of these consolidated financial statements.

IRONSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2007 and 2006

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 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 and 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 December 31, 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.

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.

Income Taxes

The Company and its wholly owned subsidiaries file a consolidated federal income tax return. Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred income taxes. Deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future. Deferred income taxes are also recognized for net operating loss carryforwards that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“FAS 109”). This interpretation 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 of tax benefits, classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure, and transition. The Company adopted FIN 48 effective January 1, 2007. In accordance with FIN 48, the Company has decided to classify interest and penalties as a component of tax expense. The adoption of FIN 48 had no material effect on the Company.

IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2007 and 2006

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 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 and 6,000 shares of the Company’s common stock were outstanding during 2007 and 2006 respectively, but since there was a net loss for 2007 and 2006, they were not included in the computation of diluted EPS as their effect would be anti-dilutive .

Stock Based Compensation

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123R (revised 2004), “Share-Based Payment” (“SFAS 123R”). In annual periods beginning after June 15, 2005, as amended by the Securities and Exchange Commission, SFAS 123R would eliminate the ability to account for equity-based compensation using the intrinsic value-based method under Accounting Principles Board (“APB”) Opinion No. 25. SFAS 123R requires companies to calculate equity-based compensation expense for stock compensation awards based on the fair value of the equity instrument at the time of the grant.

Under SFAS 123R, companies were allowed to select from two alternative methods: the Modified Prospective Application, which allows for the adoption of 123R without restatement of prior interim periods in the year of adoption; and the Modified Retrospective Application which allows companies to restate prior financial statements. The Company adopted SFAS 123R beginning in the first quarter of the fiscal year 2006 using the Modified Prospective method and did not restate prior periods for the adoption of SFAS 123R.

The Company has not offered any equity-based compensation to any of its employees or officers for the year ended December 31, 2007. Additionally, all outstanding options are fully vested, and therefore, the adoption of SFAS 123R has no effect on the Company during that period.

Recent Accounting Pronouncements

In September 2006, the FASB issued No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 provides a definition of fair value and establishes a framework to make the measurement of fair value in accounting principles generally accepted in the United States of America more consistent and comparable. SFAS 157 also expands the required disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. SFAS 157 is effective for the Company on January 1, 2008. Management is currently evaluating the impact that SFAS 157 may have on the Company’s consolidated financial statements.

In February 2007, the FASB issued No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. SFAS 159 is effective for the Company on January 1, 2008 and is not expected to have a material effect on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) will significantly change the accounting for and reporting of business combination transactions in consolidated financial statements. SFAS 141(R) is effective for the first annual reporting period beginning on or after December 15, 2008. Thus, the Company is required to adopt SFAS 141(R) on January 1, 2009. Earlier adoption is prohibited. We do not expect the adoption of SFAS 141(R) will have a material impact on the Company’s consolidated results of operations or financial position.

IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2007 and 2006

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 7.4% of Salon’s common stock outstanding as of December 31, 2007. The investment in Series C Preferred Stock of Salon is valued at the converted common stock value of $1.60 per share, or $1,348,800 at December 31, 2007.

Additionally, in conjunction with making the investment in Salon, the Company received warrants to purchase common stock in Salon. In 2006, the Company exercised its warrants to purchase a total of 79,970 shares of common stock of Salon. The investment in common shares of Salon is valued at $1.60 per share, or $127,952 at December 31, 2007 .

3. RELATED PARTY TRANSACTIONS

A Director and a former President and Chief Executive Officer of Salon is the daughter of a member of the Board of Directors and the sister of the Chief Executive Officer.

4. 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 December 31, 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 December 31, 2007, the outstanding balance under the line was $307,175.

IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2007 and 2006

5. INCOME TAXES

SFAS No. 109, “Accounting for Income Taxes” requires the recognition of deferred tax assets and liabilities for the expected future consequences of events that have been recognized in the financial statements or tax returns. Deferred income taxes reflect the net tax effects of (i) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and (ii) operating loss and tax credit carryforwards. The tax effects of significant items comprising the Company’s deferred income taxes at December 31, 2007 and 2006 are as follows:

		2007				2006
Deferred tax assets:
Operating loss carryforward		$	421,000			$	9,160,000
Less valuation allowance			(154,000	)			(8,663,000	)
Deferred tax assets — net			267,000				497,000
Deferred tax liability — unrealized gain on marketable securities			(267,000	)			(497,000	)
Deferred income taxes — net		$	—			$	—

The reasons for the difference between the amount computed by applying the statutory federal income tax rate to losses before income tax benefit and the actual income tax benefit for the years ended December 31, 2007 and 2006 are as follows:

		2007				2006
Expected income tax benefit		$	34,000			$	39,000
State income tax benefit, net of federal tax			4,000				7,000
Total before valuation allowance			(38,000	)			(46,000	)
Change in valuation allowance			38,000				46,000
Income tax benefit		$	—			$	—

The overall decrease in valuation allowance for the year ended December 31, 2007 of $8,509,000 includes a decrease in the valuation allowance of $2,033,000 due to the expiration of net operating loss carryforwards, a decrease in the valuation allowance of $6,744,000 due to the elimination of deferred tax assets related to limitations on the use of the net operating losses, and an increase in the valuation allowance of $230,000 due to change in the deferred tax liability related to unrealized gains on marketable securities, which affects other comprehensive income.

Section 382 of the Internal Revenue Code of 1986, as amended, imposes an annual limitation on the availability of net operating loss carryforwards to offset taxable income when an ownership change occurs. Due to the redemption of shares of common stock in 2003, the Company underwent such an “ownership change.” Therefore, the Company’s use of losses incurred through the date of the “ownership change” will be limited to approximately $49,000 per year. As a result of this limitation, the deferred assets related to the net operating loss carryforwards were reduced by $6,744,000.

In the opinion of management, based on the uncertainty that the Company will be able to generate taxable income in the future, the realization of the loss carryforwards is not likely and, accordingly, a valuation allowance has been recorded to offset such amount in its entirety.

IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2007 and 2006

5. INCOME TAXES (concluded)

The Company is subject to taxation in the U.S. and the state of California. All tax years are subject to examination by the U.S. and California tax authorities due to the carryforward of unutilized net operating losses. The adoption of FIN 48 did not materially impact the Company’s financial condition, results of operations or cash flows. The Company had no accrual for interest or penalties on the balance sheet at December 31, 2007, and has not recognized any interest or penalties for the years ended December 31, 2007 or 2006.

6. SHAREHOLDERS’ EQUITY

Treasury Stock — On September 15, 2003, the Board of Directors authorized the Company to purchase 745,536 shares of Company common stock at $0.70 per share for an aggregate purchase price of $521,875. The repurchase represented 50.11% of the issued and outstanding shares of the Company. As of December 31, 2007, the treasury shares are held by the Company.

Preferred Stock — The Company is authorized to issue up to five million shares of preferred stock without further shareholder approval; the rights, preferences and privileges of which would be determined at the time of issuance. No shares have been issued.

Stock Option Plans — The Company has adopted a 1989 Equity Incentive Plan, a 1993 Non-Employee Directors’ Stock Option Plan and a 1994 Equity Incentive Plan (collectively, the “Plans”). In March 1994, the 1989 Equity Incentive Plan was amended to reduce the number of shares reserved there under and the Board of Directors determined that no further grants would be made under this plan. As of December 31, 2007 and 2006, 331,680 shares were available for grant under the Plans. The Plans provide for incentive stock options to be granted at times and prices determined by the Company’s Board of Directors, to be granted at not less than 100% of the fair value of the Company’s common stock on the date of grant. Options are generally subject to a three or four-year vesting schedule. Options issued under the Plans expire at the earlier of the end of the exercise period of no more than ten years from the date of grant or 90 days following the grantee’s end of service to the Company.

During 2007 and 2006 no options were granted, exercised or forfeited.

A summary of the status of the options issued under the Plan for the years ended December 31, 2007 and 2006 is presented below:

										Weighted
						Weighted				Average
						Average				Remaining				Aggregate
						Exercise Price				Contractual				Intrinsic
		Shares				per Share				Life				Value
Outstanding at January 1, 2006 and January 1, 2007			6,000			$	.88			.54 years
Expired			(3,200	)		$	.50
Outstanding at December 31, 2007			2,800			$	1.31			.01 years				$	1,925
Exercisable at December 31, 2007			2,800			$	1.31			.01 years				$	1,925

At December 31, 2007, there is no unrecognized employee compensation relating to options that is expected to be recognized in future periods.

7. SUBSEQUENT EVENTS

On March 24, 2008 the Board of Directors authorized William R. Hambrecht to lend the Company $100,000.

On March 24, 2008 Mr. Robert H. Hambrecht resigned from the position as Chief Executive Officer and the Board of Directors appointed William R. Hambrecht as Chief Executive Officer.

Ironstone (CE) (USOTC:IRNS)
Gráfica de Acción Histórica
De Dic 2024 a Ene 2025

Ironstone (CE) (USOTC:IRNS)
Gráfica de Acción Histórica
De Ene 2024 a Ene 2025