<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, 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)
550 15TH STREET, FLOOR 2, SAN FRANCISCO, CA 94103
(Address of principal executive offices, including zip code)
(415) 551-8603
(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 March 31, 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: 9 INDEX TO EXHIBITS AT PAGE: N/A
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IRONSTONE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated statements of operations and comprehensive gain (loss)
for the three months ended March 31, 2000 and 1999 ...................................... 3
Condensed consolidated balance sheet at March 31, 2000 ................................... 4
Condensed consolidated statements of cash flows for the three months ended
March 31, 2000 and 1999 ................................................................. 5
Notes to condensed consolidated financial statements ..................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .... 8
SIGNATURES ........................................................................................ 9
</TABLE>
2
<PAGE> 3
IRONSTONE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE GAIN (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Interest and other income $ 250 3,001
----------- -----------
Total revenues 250 3,001
----------- -----------
Costs and expenses:
Salaries and wages, payroll taxes and benefits 21,548 22,032
Legal and Other Professional fees 22,459 44,161
Rent expense 2,558 22,858
Office expense 1,157 1,124
Interest expense 282 2,870
Travel and entertainment - 3,630
----------- -----------
Total costs and expenses 48,004 96,675
----------- -----------
Loss before income taxes (47,754) (93,674)
Income tax provision - -
----------- -----------
Net loss $ (47,754) $ (93,674)
=========== ===========
COMPREHENSIVE GAIN (LOSS), NET OF TAX:
Net loss $ (47,754) $ (93,674)
Unrealized holding gain (loss) arising during the year 467,387 (362,987)
----------- -----------
Comprehensive gain (loss) $ 419,633 $ (456,661)
=========== ===========
Earnings per share:
Basic:
Net loss per share $ (0.03) $ (0.06)
=========== ===========
Weighted average shares 1,487,870 1,487,870
=========== ===========
Diluted:
Net loss per share $ (0.03) $ (0.06)
=========== ===========
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 BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Current assets:
Cash $ 27,681
Marketable securities available for sale, at fair value 1,509,767
Prepaid expenses 2,941
------------
Total current assets 1,540,389
Total assets $ 1,540,389
============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 20,936
Margin loan 33,263
Deferred Revenue 102,000
Other current liabilities 6,508
------------
Total current liabilities 162,707
------------
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 (20,264,826)
Accumulated other comprehensive gain 457,244
------------
Total shareholders' equity 1,377,682
------------
Total liabilities and shareholders' equity 1,540,389
============
</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,
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (47,754) $ (93,674)
Adjustments to reconcile net loss to net cash
used in operating activities:
Changes in assets and liabilities:
Accounts receivable -- 16,107
Other current assets -- (8,292)
Accounts payable 12,249 1,410
Margin loan payable (168,320) --
Other current liabilities 32,239 2,870
--------- ---------
Net cash used in operating activities (171,586) (81,579)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities available for sale -- (166,345)
--------- ---------
Net cash used in investing activities -- (166,345)
--------- ---------
Net decrease in cash (171,586) (247,924)
Cash at beginning of period 199,267 578,772
--------- ---------
Cash at end of period $ 27,681 $ 330,848
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE> 6
IRONSTONE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and 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. During 1998 the Company closed
its Arizona, Northern California, and Southern California operations and ceased
operations relating to its property tax consulting business as of September 30,
1998, which represented substantially all the operations of the Company for
1998. 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 March 31, 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.
Reclassifications
Certain 1999 amounts have been reclassified to conform to the 2000 presentation.
6
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IRONSTONE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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>
<CAPTION>
Income Per Share
(Loss) Shares Amount
------ ------ ------
<S> <C> <C> <C>
For the three months ended March 31, 2000:
BASIC EPS
Income available to common stockholders ($ 47,754) 1,487,870 ($0.03)
EFFECT OF DILUTIVE SECURITIES
None
---------------- ----------------- ----------------
DILUTED EPS
Income available to common stockholders
plus assumed conversions ($ 47,754) 1,487,870 ($0.03)
================ ================= ================
For the three months ended March 31, 1999:
BASIC EPS
Income available to common stockholders ($ 93,674) 1,487,870 ($0.06)
EFFECT OF DILUTIVE SECURITIES
None
---------------- ----------------- ----------------
DILUTED EPS
Income available to common stockholders
plus assumed conversions ($ 93,674) 1,487,870 ($0.06)
================ ================= ================
</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. MARGIN LOAN
The Company has entered into a margin loan agreement ("Margin Loan") with WR
Hambrecht and Co., LLC, a major shareholder of the Company, pledging all
marketable securities as collateral for the Margin Loan. The Margin Loan bears
interest at WR Hambrecht and Co., LLC's margin loan rate, which for the period
from January 1, 1999 through March 31, 2000 ranged between 9.531% and 7.25%
per annum (9.531% at March 31, 2000). At March 31, 2000, the Company owed
$33,263 on the Margin Loan.
7
<PAGE> 8
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 month period ended March 31, 2000 decreased $2,751 or
91.7%, as compared to the same period in 1999. This decline in interest income
is primarily due to a decrease in cash balances due to the payment of the margin
loan.
Costs and expenses for the three month period ended March 31, 2000 decreased
$48,671 or 50.3% as compared to the same period in 1999. Legal and professional
fees declined $21,702 or 49.1% due to lower audit costs, and rent expenses
declined $29,300 or 88.8% due to the termination of existing leases.
Liquidity And Capital Resources
Net cash used by operating activities for the three month period ended March 31,
2000 was $171,586. Cash decreased for the three month period ended March 31,
2000 by $171,586 primarily due to the $168,320 payment of the margin loan. The
Company's working capital increased by $419,633 during the three month period
ended March 31, 2000. The increase in working capital is primarily due to the
unrealized gain of marketable securities held for sale totaling $467,387 during
the three month period ended March 31, 2000. Management believes that its
current level of cash and marketable securities will be adequate to meet its
operating needs during 2000 and beyond.
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.
8
<PAGE> 9
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: May 15, 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Robert W. Rembowski Chief Executive Officer, May 15, 2000
- ----------------------- Chief Financial Officer and
Robert W. Rembowski Secretary
(Principal Executive Officer and
Principal Financial Officer)
/s/ Edmund H. Shea, Jr. Director May 15, 2000
- ----------------------
Edmund H. Shea, Jr.
</TABLE>
***
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 27,681
<SECURITIES> 1,509,767
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,540,389
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,540,389
<CURRENT-LIABILITIES> 162,707
<BONDS> 0
0
0
<COMMON> 14,879
<OTHER-SE> 1,362,802
<TOTAL-LIABILITY-AND-EQUITY> 1,540,389
<SALES> 0
<TOTAL-REVENUES> 250
<CGS> 0
<TOTAL-COSTS> 48,004
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 282
<INCOME-PRETAX> (47,754)
<INCOME-TAX> 0
<INCOME-CONTINUING> (47,754)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (47,754)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
