<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 September 30, 2000
[ ] 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 95-2829956
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
539 BRYANT STREET, SAN FRANCISCO, CA 94107
(Address of principal executive offices, including zip code)
(707) 537-9447
(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 [X] No [ ]
As of September 30, 2000, 1,487,870 shares of Common Stock, $0.01 par value,
were outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
TOTAL NUMBER OF PAGES: 10 INDEX TO EXHIBITS AT PAGE: N/A
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IRONSTONE GROUP, INC.
INDEX
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PAGE
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated statements of operations and comprehensive loss
for the three and nine months ended September 30, 2000 and 1999........................................ 3
Condensed consolidated statements of operations and comprehensive loss
for the nine months ended September 30, 2000 and 1999.................................................. 4
Condensed consolidated balance sheet at September 30, 2000 ............................................. 5
Condensed consolidated statements of cash flows for the nine months ended
September 30, 2000 and 1999............................................................................ 6
Notes to condensed consolidated financial statements.................................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 9
SIGNATURES...................................................................................................... 10
</TABLE>
2
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IRONSTONE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
2000 1999
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Revenues:
Interest and other income $ 110 $ 1,875
Consulting fees - 1,782
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Total revenues 110 3,657
----------- -----------
Costs and expenses:
Salaries and wages, payroll taxes and benefits 12,906 23,030
Legal and other professional fees 3,340 18,902
Rent expense 520 1,445
Office expense 725 334
Interest expense 1,663 3,187
Travel and entertainment - 72
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Total costs and expenses 19,154 46,970
----------- -----------
Loss before income taxes (19,044) (43,313)
Income tax provision - (2,400)
----------- -----------
Net loss $ (19,044) $ (45,713)
=========== ===========
COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Net loss $ (19,044) $ (45,713)
Unrealized holding gain (loss) arising during the period 253,357 (852,975)
----------- -----------
Comprehensive income (loss) $ 234,313 $ (898,688)
=========== ===========
Earnings per share:
Basic:
Net loss per share $ (0.01) $ (0.03)
=========== ===========
Weighted average shares 1,487,870 1,487,870
=========== ===========
Diluted:
Net loss per share $ (0.01) $ (0.03)
=========== ===========
Weighted average shares and assumed conversions 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 AND COMPREHENSIVE LOSS
(UNAUDITED)
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<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
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Revenues:
Interest and other income $ 369 $ 7,106
Consulting fees - 1,782
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Total revenues 369 8,888
----------- -----------
Costs and expenses:
Salaries and wages, payroll taxes and benefits 53,141 65,092
Legal and Other Professional fees 40,518 76,307
Rent expense 4,811 45,077
Office expense 2,820 2,615
Interest expense 3,044 9,011
Travel and entertainment - 4,719
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Total costs and expenses 104,334 202,821
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Loss before income taxes (103,965) (193,933)
Income tax provision (800) (6,740)
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Net loss $ (104,765) $ (200,673)
=========== ===========
COMPREHENSIVE LOSS, NET OF TAX:
Net loss $ (104,765) $ (200,673)
Unrealized holding loss arising during the period (165,139) (1,438,470)
----------- -----------
Comprehensive loss $ (269,904) $(1,639,143)
=========== ===========
Earnings per share:
Basic:
Net loss per share $ (0.07) $ (0.13)
=========== ===========
Weighted average shares 1,487,870 1,487,870
=========== ===========
Diluted:
Net loss per share $ (0.07) $ (0.13)
=========== ===========
Weighted average shares and assumed conversions 1,487,870 1,487,870
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
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IRONSTONE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
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ASSETS:
Current assets:
Cash $ 3,756
Marketable securities available for sale, at fair value 877,240
Prepaid expenses 2,941
------------
Total current assets 883,937
------------
Total assets $ 883,937
============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 12,934
Loan payable 75,420
Deferred Revenue 102,000
Other current liabilities 5,440
------------
Total current liabilities 195,794
------------
Shareholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized of
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 (20,321,839)
Accumulated other comprehensive loss (175,282)
------------
Total shareholders' equity 688,143
------------
Total liabilities and shareholders' equity $ 883,937
============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
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IRONSTONE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(104,765) $(200,673)
Adjustments to reconcile net loss to net cash
used in operating activities:
Changes in assets and liabilities:
Accounts receivable - 26,870
Accounts payable 4,247 (13,643)
Margin loan payable (169,501) -
Loan Payable 75,420 -
Other current liabilities (912) 8,200
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Net cash used in operating activities (195,511) (179,246)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities available for sale - (166,345)
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Net cash used in investing activities - (166,345)
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Net decrease in cash (195,511) (345,591)
Cash at beginning of period 199,267 578,772
--------- ---------
Cash at end of period $ 3,756 $ 233,181
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
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IRONSTONE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activities
Ironstone Group, Inc. (the "Company") significant business activities included
reducing, for a fee, ad valorem taxes assessed to owners of real and personal
property, generally in the Arizona and California markets. In January 1998, the
Company's Board of Directors approved a plan for the Company to divest itself of
the Belt Perry property and tax services group. As of December 31, 1998 the
Company ceased operations relating to its property tax consulting business. The
Company is actively seeking appropriate business combination opportunities. In
the alternative, the Company is looking for an investment opportunity for some
or all of its remaining liquid assets.
Marketable Securities
Marketable securities have been classified by management as available for sale
in accordance with Statement of Financial Accounting Standard 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 at September 30, 2000 is based
on quoted market prices.
Adjustments
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States 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 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, 1999.
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.
Revenue Recognition Policy
Interest revenue is recorded based on accrual accounting.
Reclassifications
Certain 1999 amounts have been reclassified to conform to the 2000 presentation.
7
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IRONSTONE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2. EARNINGS PER SHARE - BASIC AND DILUTED
Basic EPS excludes dilution from common stock equivalents 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 common stock equivalents, except where
inclusion of such common stock equivalents would have an anti-dilutive effect,
using only the average stock price during the period in the computation.
<TABLE>
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Income Per Share
(Loss) Shares Amount
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For the nine months ended September 30, 2000:
---------------------------------------------
BASIC EPS
Income available to common stockholders ($104,765) 1,487,870 ($ 0.07)
EFFECT OF DILUTIVE SECURITIES
None
--------- --------- --------
DILUTED EPS
Income available to common stockholders
plus assumed conversions ($104,765) 1,487,870 ($ 0.07)
========= ========= ========
For the nine months ended September 30, 1999:
---------------------------------------------
BASIC EPS
Income available to common stockholders ($200,673) 1,487,870 ($ 0.13)
EFFECT OF DILUTIVE SECURITIES
None
--------- --------- --------
DILUTED EPS
Income available to common stockholders
plus assumed conversions ($200,673) 1,487,870 ($ 0.13)
========= ========= ========
</TABLE>
Options to purchase 11,175 shares of the Company's common stock were outstanding
during 2000 and 1999, but were not included in the computation of diluted EPS as
the Company incurred a net loss from operations.
3. LOAN PAYABLE
The Company has entered into an unsecured loan agreement with William R.
Hambrecht, a major shareholder of the Company. The Loan bears interest at 9.75%
per annum and is due upon demand. At September 30, 2000, the Company owed
$75,420 on the Loan.
8
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IRONSTONE GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results Of Operations
Comparison of 2000 to 1999
Revenues for the three and nine month periods ended September 30, 2000 decreased
$3,547 and $8,519 or 96.99% and 95.85% respectively, as compared to the same
periods in 1999. These declines are due to the closing of the Company's Arizona,
Northern California and Southern California operations relating to its property
tax consulting business as of September 30, 1998.
Costs and expenses for the three month period ended September 30, 2000 decreased
$27,816 or 59.22% and $98,487 or 48.56% for the nine month period ended
September 30, 2000 as compared to the same periods in 1999. Rent expenses
declined $925 or 64.01% and $40,266 or 89.33% for the three and nine month
periods ended September 30, 2000 due to the termination of existing leases.
Liquidity And Capital Resources
Net cash generated by operating activities for the three month period ended
September 30, 2000 was $2,930. Net cash used by operating activities for the
nine month periods ended September 30, 2000 was $195,511. Cash increased by
$2,930 for the three month period ended September 30, 2000. Cash decreased for
the nine month period ended September 30, 2000 by $195,511 primarily due to the
payoff of the margin loan totaling $169,501. The Company's working capital
increased by $234,312 and decreased by $269,906 during the three and nine month
periods ended September 30, 2000, respectively. The changes in working capital
is primarily due to the unrealized gain of marketable securities in the three
month period ended September 30, 2000 totaling $253,357. For the nine month
period ended September 30, 2000 the company experienced an unrealized loss of
marketable securities totaling $165,139. Management believes its current level
of marketable securities will be adequate to meet its operating needs during
2000.
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.
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.
Trends and Uncertainties
Termination of Historical Business Lines
By winding down the Belt Perry property and tax services group, the Company has
exited from its traditional lines of business. Management and the Board of
Directors are actively 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. In the interim, 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
<PAGE> 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-KSB to be
signed on its behalf by the undersigned, thereunto duly authorized.
IRONSTONE GROUP, INC.
A DELAWARE CORPORATION
Date: November 14, 2000 By: /s/ Robert W. Rembowski
------------------------
Robert W. Rembowski
Chief Executive 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.
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<CAPTION>
SIGNATURE TITLE DATE
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<S> <C> <C>
/s/ Robert W. Rembowski Chief Executive Officer, November 14, 2000
----------------------- Chief Financial Officer and
Robert W. Rembowski Secretary
(Principal Executive Officer and
Principal Financial Officer)
/s/ Edmund H. Shea, Jr. Director November 14, 2000
-----------------------
Edmund H. Shea, Jr.
</TABLE>
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