<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 June 30, 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 June 30,
1996 was 1,487,870.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
TOTAL NUMBER OF PAGES: 11 INDEX TO EXHIBITS AT PAGE: N/A
<PAGE> 2
IRONSTONE GROUP, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial statements (unaudited) Page
<S> <C>
Condensed consolidated statements of operations for the three and six months
ended June 30, 1996 and 1995................................................. 3
Condensed consolidated balance sheet at June 30, 1996......................... 5
Condensed consolidated statements of cash flows for the six months
ended June 30, 1996 and 1995................................................. 6
Notes to condensed consolidated financial statements.......................... 7
Item 2. Management's discussion and analysis of financial condition
and results of operations...................................................... 8
PART II - OTHER INFORMATION
Item 1. Legal proceedings....................................................... 9
</TABLE>
2
<PAGE> 3
IRONSTONE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------------------
1996 1995
---- ----
<S> <C> <C>
Revenues:
Consulting fees $ 1,119,769 $ 2,300,661
Subscription fees 4,875 5,958
Interest and other income 10,733 41,948
----------- -----------
Total revenues 1,135,377 2,348,567
----------- -----------
Costs and expenses:
Salaries and wages, payroll taxes and benefits 1,058,481 1,048,137
Depreciation 25,958 26,180
Amortization 22,876 96,057
Bad debt expense 67,333 132,972
Rent expense 97,696 98,289
Professional fees 115,768 60,184
Advertising and promotion 19,175 84,978
Office expense 43,326 57,328
Referral and split fees 15,481 64,787
Travel and entertainment 45,871 34,806
Research expense 21,379 23,851
Communications 14,350 19,875
Interest expense 31,123 23,057
Other operating expenses 32,166 40,366
Non-operating expenses -- 120,467
----------- -----------
Total costs and expenses 1,610,983 1,931,334
----------- -----------
Income (loss) before income taxes and
minority interest (475,606) 417,233
Income taxes 3,300 --
Minority interest (35,339) 119,019
----------- -----------
Net income (loss) $ (443,567) $ 298,214
=========== ===========
Net income (loss) per common and common equivalent share:
Net income (loss) per share $ (0.30) $ 0.20
=========== ===========
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 STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------
1996 1995
---- ----
<S> <C> <C>
Revenues:
Consulting fees $ 2,539,800 $ 3,372,056
Subscription fees 9,750 12,908
Interest and other income 17,220 99,629
----------- -----------
Total revenues 2,566,770 3,484,593
----------- -----------
Costs and expenses:
Salaries and wages, payroll taxes and benefits 2,077,538 2,251,671
Depreciation 52,112 49,590
Amortization 45,752 188,081
Bad debt expense 152,652 213,273
Rent expense 207,960 204,222
Professional fees 181,352 178,313
Advertising and promotion 55,920 148,847
Office expense 101,584 118,594
Referral and split fees 45,268 110,749
Travel and entertainment 89,339 76,693
Research expense 47,757 47,475
Communications 35,656 38,167
Interest expense 56,532 47,729
Other operating expenses 87,349 58,204
Non-operating expenses -- 200,676
----------- -----------
Total costs and expenses 3,236,771 3,932,284
----------- -----------
Loss before income taxes and
minority interest (670,001) (447,691)
Income taxes 3,300 --
Minority interest (52,820) 19,777
----------- -----------
Net loss $ (620,481) $ (467,468)
=========== ===========
Net loss per common and common equivalent share:
Net loss per share $ (0.42) $ (0.32)
=========== ===========
Average shares outstanding 1,487,870 1,487,870
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
IRONSTONE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Current assets:
Cash $ 654,001
Marketable securities available for sale 1,184,400
Accounts receivable, net of allowance for doubtful
accounts of $663,020 2,693,860
Prepaid expenses 92,160
------------
Total current assets 4,624,421
------------
Property and equipment 212,930
Costs in excess of net assets of acquired businesses-net 207,948
Other assets 10,554
------------
Total assets $ 5,055,853
============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 189,873
Accrued interest payable 17,171
Accrued compensation 443,460
Customer deposits 100,497
Line of credit 350,000
Due to officer 200,000
Minority interest in consolidated subsidiaries 180,459
Capitalized lease obligations-current portion 47,150
Notes payable-current portion 467,045
Other current liabilities 225,407
------------
Total current liabilities 2,221,062
------------
Capitalized lease obligations-net of current portion 39,536
Notes payable-net of current portion 296,364
------------
Total non-current liabilities 335,900
------------
Minority interest in consolidated subsidiaries 75,751
------------
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 (19,060,347)
Unrealized holding gain on marketable securities
available for sale 298,223
------------
Total shareholders' equity 2,423,140
------------
Total liabilities and shareholders' equity $ 5,055,853
============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
IRONSTONE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (620,481) $ (467,468)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 52,112 49,590
Amortization 45,752 188,081
Undistributed minority interest (52,820) 19,777
Changes in assets and liabilities:
Accounts receivable 1,181,276 (778,129)
Other current assets (41,951) 59,382
Other assets 2,688 (56,318)
Accounts payable 29,535 43,241
Accrued compensation (135) 104,627
Other current liabilities (154,688) (466,945)
----------- -----------
Net cash provided (used) by operating activities 441,288 (1,304,162)
----------- -----------
INVESTING ACTIVITIES:
Collection of other receivable -- 788,632
Purchase of marketable securities (227,316) --
Purchase of property and equipment (19,670) (102,079)
----------- -----------
Net cash provided (used) by investing activities (246,986) 686,553
----------- -----------
FINANCING ACTIVITIES:
Purchase of minority interest (50,000) --
Borrowings from line of credit 225,000 --
Payments on capitalized lease obligations (21,685) (14,738)
Payments on notes payable (447,774) (552,000)
----------- -----------
Net cash used by financing activities (294,459) (566,738)
----------- -----------
Net decrease in cash (100,157) (1,184,347)
Cash at beginning of period 754,158 1,599,613
----------- -----------
Cash at end of period $ 654,001 $ 415,266
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE> 7
IRONSTONE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 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.
2. LINE OF CREDIT
In June 1996, the Company renewed its $500,000 revolving operating line of
credit. The line of credit bears interest on amounts borrowed at the lending
bank's prime rate plus 1.25% and is collateralized by BPA and BPC accounts
receivable and other business assets. At June 30, 1996, the Company had $350,000
outstanding on the line of credit. The line of credit matures and is payable in
full in June 1997.
7
<PAGE> 8
IRONSTONE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
3. PURCHASE OF MINORITY INTEREST
On May 7, 1996, BPA purchased from a minority shareholder of BPA, 182 shares of
BPA's issued and outstanding shares of common stock in exchange for $50,000
cash. The carrying value of the minority interest purchased was $51,704.
4. SUBSEQUENT EVENT
In August 1996, BPA and a minority shareholder of BPA entered into an agreement
wherein BPA agreed to purchase 700 shares of BPA's issued and outstanding shares
of common stock from the minority shareholder in exchange for $42,500 cash and a
note payable of $150,000. The note bears interest at Bank One, Arizona, NA's
prime rate with interest only payable September 1, 1996 and principal and
interest payable in three equal monthly installments beginning October 1, 1996.
The note is collateralized by BPA common stock held by the Company, and the
Company has provided a guaranty of this obligation. Minority interest
associated with this transaction has been classified as a current liability.
***
8
<PAGE> 9
IRONSTONE GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results Of Operations
Company revenues for the three and six month periods ended June 30, 1996
decreased 51.7% and 26.3% as compared to the same periods in 1995. Such
decreases were a result of lower interest income and a change in the Arizona
statutes which has delayed consideration of real property tax appeals in that
jurisdiction. California revenues for the same periods increased as compared to
the prior year.
Costs and expenses for the three and six month periods ended June 30, 1996
decreased 16.6% and 17.7% as compared to such periods in 1995. Amortization
expense declined by 76.2% and 75.7% 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). Non-operating expenses declined by 100% for both periods as the
Company focused on its core businesses. Interest expense for the six months
ended June 30, 1996 was $56,532 compared to $47,729 for the comparable period in
1995. This increase was primarily due to an increase in borrowing on the
Company's line of credit and brokerage accounts. 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 three and six month periods ended June 30, 1996 are
indicative of the results of operations in future periods.
Liquidity And Capital Resources
The Company's working capital decreased by $286,351 and $664,893 during the
three and six month periods ended June 30 1996. Cash decreased by $100,157 to
$654,001 during the six month period ended June 30, 1996. The decrease in cash
was a result of the purchase of marketable securities and payments on notes
payable to the minority shareholders of BPA. Cash increased by $178,111 during
the three month period ended June 30, 1996. This increase was due primarily to
increased collections of accounts receivable. 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.
9
<PAGE> 10
IRONSTONE GROUP, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In January 1994, as part of the 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. ("SGC") on certain promissory
notes, stocks and warrants ("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 SGC in Pittsburgh, Pennsylvania
against Ironstone and others with regard to enforcement of obligations owing
under the Notes executed by SGC and the validity of the assignment of the 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.
On June 10, 1996, a settlement agreement was entered into by SGC and various
other parties settling most but not all disputes among them. In particular, the
individual's claim against the Company for $100,000 referred to in the first
paragraph above seems to be resolved by the settlement.
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.
10
<PAGE> 11
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 August, 1996.
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)
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 654,001
<SECURITIES> 1,184,400
<RECEIVABLES> 3,356,880
<ALLOWANCES> 663,020
<INVENTORY> 0
<CURRENT-ASSETS> 4,624,421
<PP&E> 389,006
<DEPRECIATION> 176,076
<TOTAL-ASSETS> 5,055,853
<CURRENT-LIABILITIES> 2,040,603
<BONDS> 850,095
0
0
<COMMON> 14,879
<OTHER-SE> 2,664,471
<TOTAL-LIABILITY-AND-EQUITY> 5,055,853
<SALES> 0
<TOTAL-REVENUES> 2,566,770
<CGS> 0
<TOTAL-COSTS> 3,236,771
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 152,652
<INTEREST-EXPENSE> 56,532
<INCOME-PRETAX> (623,781)
<INCOME-TAX> 3,300
<INCOME-CONTINUING> (620,481)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (620,481)
<EPS-PRIMARY> (0.42)
<EPS-DILUTED> (0.42)
</TABLE>
