<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] 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 small business issuer as specified in its charter)
DELAWARE 95-2829956
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
ONE BUSH STREET, SUITE 1100, SAN FRANCISCO, CA 94104
(Address of principal executive offices, including zip code)
(415) 576-3537
(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 to be filed by
Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
The number of shares of the registrant's common stock outstanding as of March
31, 1996 was 1,487,870.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
TOTAL NUMBER OF PAGES: 9 INDEX TO EXHIBITS AT PAGE: N/A
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IRONSTONE GROUP, INC.
INDEX
PART I- FINANCIAL INFORMATION
Item 1. Financial statements (unaudited) Page
Condensed consolidated statements of operations for the three months
ended March 31, 1996 and 1995.......................................... 3
Condensed consolidated balance sheet at March 31, 1996.................. 4
Condensed consolidated statements of cash flows for the three months
ended March 31, 1996 and 1995.......................................... 5
Notes to condensed consolidated financial statements.................... 6
Item 2. Management's discussion and analysis of financial condition
and results of operations................................................ 7
PART II - OTHER INFORMATION
Item 1. Legal proceedings................................................. 8
2
<PAGE> 3
IRONSTONE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1996 1995
---- ----
<S> <C> <C>
Revenues:
Consulting fees $ 1,420,031 $1,071,395
Subscription fees 4,875 6,950
Interest and other income 6,487 57,681
----------- ----------
Total revenues 1,431,393 1,136,026
----------- ----------
Costs and expenses:
Salaries and wages, payroll taxes and benefits 1,019,057 1,203,534
Amortization 22,876 92,024
Depreciation 26,154 23,410
Bad debt expense 85,319 80,301
Rent expense 110,264 105,933
Professional fees 65,584 118,129
Advertising and promotion 36,745 63,869
Office expense 58,258 61,266
Referral and split fees 29,787 45,962
Travel and entertainment 43,468 41,887
Research expense 26,378 23,624
Interest expense 25,409 24,672
Communications 21,306 18,292
Other operating expenses 55,183 17,838
Non-operating expenses - 80,209
----------- ----------
Total costs and expenses 1,625,788 2,000,950
----------- ----------
Loss before minority interest (194,395) (864,924)
Minority interest (17,481) (99,242)
------------ -----------
Net loss $ (176,914) $ (765,682)
============ ===========
Net loss per common and common equivalent share:
Net loss per share $ (0.12) $ (0.52)
============ ===========
Average shares outstanding 1,487,870 1,487,870
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
3
<PAGE> 4
IRONSTONE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Current assets:
Cash $ 475,890
Marketable securities available for sale 888,300
Accounts receivable, net of allowance for doubtful
accounts of $661,702 3,790,011
Prepaid expenses 59,327
------------
Total current assets 5,213,528
------------
Property and equipment 231,017
Costs in excess of net assets of acquired businesses-net 232,528
Other assets 13,242
------------
Total assets $ 5,690,315
============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 209,867
Accrued interest payable 6,399
Accrued compensation 455,308
Customer deposits 102,912
Line of credit 350,000
Due to officer-current portion 472,061
Capitalized lease obligations-current portion 45,861
Notes payable-current portion 508,945
Income taxes payable 2,450
Other current liabilities 189,556
------------
Total current liabilities 2,343,359
------------
Due to officer-net of current portion 50,000
Capitalized lease obligations-net of current portion 51,818
Notes payable-net of current portion 331,278
------------
Total non-current liabilities 433,096
------------
Minority interest in consolidated subsidiaries 343,253
------------
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 1,487,870 shares are
issued and outstanding 14,879
Additional paid in capital 21,170,385
Accumulated deficit (18,616,780)
Unrealized holding gain on marketable securities
available for sale 2,123
------------
Total shareholders' equity 2,570,607
------------
Total liabilities and shareholders' equity $ 5,690,315
============
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
4
<PAGE> 5
IRONSTONE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (176,914) $ (765,682)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 26,154 23,410
Amortization 22,876 92,023
Undistributed minority interest (17,481) (99,242)
Changes in assets and liabilities:
Accounts receivable 85,125 282,116
Other current assets (9,118) 18,968
Other assets -- (55,448)
Accounts payable 49,529 64,442
Accrued compensation 11,713 119,056
Other current liabilities 125,616 (191,095)
----------- -----------
Net cash provided (used) by operating activities 117,500 (511,452)
----------- -----------
INVESTING ACTIVITIES:
Collection of other receivable -- 788,632
Purchase of marketable securities (227,316) --
Purchase of property and equipment (11,800) (6,441)
----------- -----------
Net cash used by investing activities (239,116) 782,191
----------- -----------
FINANCING ACTIVITIES:
Borrowings from line of credit 225,000 --
Payments on capitalized lease obligations (10,692) (7,263)
Payments on notes payable (370,960) (500,000)
----------- -----------
Net cash used by financing activities (156,652) (507,263)
----------- -----------
Net decrease in cash (278,268) (236,524)
Cash at beginning of period 754,158 1,599,613
----------- -----------
Cash at end of period $ 475,890 $ 1,363,089
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated financial statements.
5
<PAGE> 6
IRONSTONE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles Of Consolidation And Business Activities
Ironstone Group, Inc., formerly OXOCO INC. (the "Company"), consolidates the
financial statements of its majority-owned subsidiaries, Belt Perry Associates,
Inc., an Arizona corporation ("BPA"), Belt Perry Associates, Inc., a California
corporation ("BPC"), Taxnet, Inc., an Arizona corporation ("Taxnet"), and DeMoss
Corporation, a California corporation ("DeMoss"). All significant inter-company
transactions have been eliminated in consolidation. The Company's significant
business activities include reducing, for a fee, ad valorem taxes assessed to
owners of real and personal property, generally in the Arizona and California
markets.
Adjustments
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles 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 and Form 10-KSB for
the year ended December 31, 1995.
Seasonality Of Consulting Fee Revenue
A significant portion of the Company's revenue is seasonal. Generally, a
substantial portion of BPA's revenue is recorded in the third and fourth
calendar quarters following taxing authority hearings scheduled during that
period. For this and other reasons, the results of operations for interim
periods are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996.
Reclassifications
Certain 1995 amounts have been reclassified to conform to the 1996 presentation.
***
6
<PAGE> 7
IRONSTONE GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results Of Operations
For the three months ended March 31, 1996, as a result of a 32.5% increase in
consulting fees earned by BPA and BPC, total revenues increased 26.0% as
compared to the same period of 1995.
Costs and expenses for the quarter ended March 31, 1996 decreased 18.75% as
compared to the first quarter of 1995. Salaries and wages decreased by 15.32%
due to reductions in staff, primarily in Arizona. Amortization expense declined
by 75.14% as a result of the write-down in 1995 of costs in excess of net assets
acquired (Goodwill) associated with the acquisition of BPA. (See the Company's
Form 10-KSB for the year ended December 31, 1995). Professional fees and
non-operating expenses declined 44.48% and 100% respectively, as the Company
decreased its reliance on outside professionals and focused on its core
businesses. Interest expense for the three months ended March 31, 1996 was
$25,409 compared to $24,672 for the comparable period in 1995. The increase was
primarily due to an increase in borrowing on the Company's line of credit. Due
to the seasonal nature of BPA and BPC revenues (discussed in Note 1 to the
condensed consolidated financial statements), the Company does not believe that
its results of operations for the quarter ended March 31, 1996 are indicative
of the results of operations in future quarters.
Liquidity And Capital Resources
The Company's working capital decreased by $378,542 during the three months
ended March 31, 1996. Cash decreased by $278,268 to $475,890 primarily as a
result of payments on notes payable to the minority shareholders of BPA.
However, net cash of $117,500 was generated from operations. Management believes
that its current level of cash, anticipated cash flow from operations and line
of credit will be adequate to meet its operating needs through the end of 1996.
The Company may obtain additional 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.
7
<PAGE> 8
IRONSTONE GROUP, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In January 1994, as part of Company's First Amended Plan of Reorganization ("the
Plan"), the Company settled a disputed claim with an individual for $100,000,
the payment of which was to be made to the individual from the last $100,000
owed and paid by St. George Crystal, Ltd. on the Notes. In December 1994, the
Company sold its remaining 30% undivided interest in the Notes. In February
1995, and again on May 6, 1996, the Company and the court-appointed receiver for
the Notes, received notice from the individual that, as a result of the
Company's disposition of the Notes, the $100,000 owed to such individual was
due. The Company believes that no payment is due to such individual at this time
and in the event Ironstone were to make such payment it would be indemnified. To
date, no suit has been filed against the Company of which the Company is aware.
In April 1995, litigation was commenced by St. George Crystal, Ltd. ("SGC"), in
Pittsburgh, Pennsylvania against Ironstone, and others with regard to
enforcement of obligations owing under notes executed by SGC and the validity of
the assignment of those notes by Ironstone. The case was transferred to the
United States Bankruptcy Court for the Northern District of California in San
Francisco. On March 6, 1996, the Bankruptcy Court issued an Order Dismissing
Adversary Proceeding which provided in part that "Defendant Ironstone Group,
Inc."...and "Defendant Michael Y. McGovern" hold(s) no interest in the proceeds
of the [SGC Loan Documents]," thereby confirming the validity of the assignment.
Other than legal proceedings in which BPA and BPC are involved in the ordinary
course of business, the Company is not a party to any other material legal
proceedings.
8
<PAGE> 9
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized on the 14th day of May, 1995.
IRONSTONE GROUP, INC.
By: /s/ Robert L. Miller
-----------------------------
Robert L. Miller
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Mark M. Glickman
----------------------------
Mark M. Glickman
Chief Financial Officer
(Principal Financial and Accounting Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 475,890
<SECURITIES> 888,300
<RECEIVABLES> 4,451,713
<ALLOWANCES> 661,702
<INVENTORY> 0
<CURRENT-ASSETS> 5,213,528
<PP&E> 381,136
<DEPRECIATION> 150,119
<TOTAL-ASSETS> 5,690,315
<CURRENT-LIABILITIES> 2,343,359
<BONDS> 937,902
14,879
0
<COMMON> 0
<OTHER-SE> 2,898,981
<TOTAL-LIABILITY-AND-EQUITY> 5,690,315
<SALES> 0
<TOTAL-REVENUES> 1,431,393
<CGS> 0
<TOTAL-COSTS> 1,625,788
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 85,319
<INTEREST-EXPENSE> 25,409
<INCOME-PRETAX> (176,914)
<INCOME-TAX> 0
<INCOME-CONTINUING> (176,914)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (176,914)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
