UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 2022 |
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☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 0-12346
IRONSTONE GROUP, INC.
(Exact nameName of Registrant as specified in its charter)
Delaware | 95-2829956 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
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909 Montgomery Street, San Francisco, California 94133
(Address of principal executive offices, including zip code)
(415) 551-8600
(Registrant’s telephone number, including area code)
NONESecurities registered under Section 12(b) of the Exchange Act:
(Former name, former address and former fiscal year,None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.01 par value
Indicate by check mark if changed since last report)the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No☒
Indicate by check mark whether the registrantRegistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]☒No☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website,Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X]☒ No [ ]☐
Indicate by check mark whether the registrantRegistrant is a large accelerated filer, an accelerated filer a non-accelerated filer. or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company”as defined in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐ Non- accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☐
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X]☐No☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
As of November 13th, 2015,May 15, 2022 2,191,689 shares of Common Stock, $0.01 par value, were outstanding.
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PART I - FINANCIAL INFORMATION
| Item 1. | ||
3 | ||
4 | ||
| 2021 | 5 | |
| Notes to | 6 - 14 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 - 15 |
| Item 3. | ||
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| Item 4. | 15 - 16 | |
| Item 1. | 17 | |
| Item 1A. | 17 | |
| Item 2. | 17 | |
| Item 3. | 17 | |
| Item 4. | 17 | |
| Item 5. | 17 | |
| Item 6. | 17 | |
| Signatures | 18 | |
Exhibit Index
PartPART I. FINANCIAL INFORMATION
ITEM I -– FINANCIAL INFORMATIONSTATEMENTS
Item 1. Financial Statements
IRONSTONE |
(unaudited) | ||||||||
September 30, 2015 | December 31, 2014 (1) | |||||||
ASSETS: | ||||||||
Cash | $ | 6,798 | $ | 25,817 | ||||
Investments: | ||||||||
Marketable securities | - | 51,400 | ||||||
Marketable securities - related party | 260,887 | 260,887 | ||||||
Non-marketable securities | 2,697,358 | 2,674,677 | ||||||
Total assets | $ | 2,965,043 | $ | 3,012,781 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY: | ||||||||
Line of credit borrowings | $ | 350,000 | $ | 350,000 | ||||
Accounts payable and accrued expenses | 29,306 | 12,089 | ||||||
Interest payable - related party | 34,775 | 24,225 | ||||||
Note payable, net of discount | 1,292,666 | 1,208,416 | ||||||
Note payable - related party | 182,000 | 182,000 | ||||||
Total liabilities | 1,888,747 | 1,776,730 | ||||||
Stockholders' equity | ||||||||
Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding | - | - | ||||||
Common stock, $0.01 par value, 25,000,000 shares authorized, of which 2,937,225 shares are issued and outstanding as of September 30, 2015 and December 31, 2014 | 29,372 | 29,372 | ||||||
Additional paid-in capital | 21,839,083 | 21,819,668 | ||||||
Accumulated deficit | (22,032,515 | ) | (21,839,094 | ) | ||||
Accumulated other comprehensive income | 1,762,930 | 1,748,679 | ||||||
| 1,598,870 | 1,758,625 | |||||||
Less: Treasury Stock, 745,536 shares, at cost | (522,574 | ) | (522,574 | ) | ||||
Total stockholders' equity | 1,076,296 | 1,236,051 | ||||||
Total liabilities and stockholders' equity | $ | 2,965,043 | $ | 3,012,781 | ||||
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The accompanying notes are an integral part of these condensed consolidated financial statements
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Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Operating expenses: | ||||||||||||||||
Professional fees | $ | 9,115 | $ | 20,550 | $ | 43,612 | $ | 59,268 | ||||||||
State filing fee and tax | 306 | (2,970 | ) | 13,503 | 5,270 | |||||||||||
General and administrative expenses | 9,881 | 9,761 | 28,573 | 30,418 | ||||||||||||
Total operating expenses | 19,302 | 27,341 | 85,688 | 94,956 | ||||||||||||
Loss from operations | (19,302 | ) | (27,341 | ) | (85,688 | ) | (94,956 | ) | ||||||||
Other expense: | ||||||||||||||||
Interest expense and other, net | (27,923 | ) | (31,083 | ) | (97,183 | ) | (90,419 | ) | ||||||||
Interest expense to related party | (3,555 | ) | (3,555 | ) | (10,550 | ) | (10,550 | ) | ||||||||
Net loss | $ | (50,780 | ) | $ | (61,979 | ) | $ | (193,421 | ) | $ | (195,925 | ) | ||||
COMPREHENSIVE INCOME (LOSS), NET OF TAX: | ||||||||||||||||
Net loss | $ | (50,780 | ) | $ | (61,979 | ) | $ | (193,421 | ) | $ | (195,925 | ) | ||||
Unrealized holding gain (loss) arising during the period | 3,132 | 1,034,356 | 14,251 | 466,915 | ||||||||||||
Comprehensive income (loss) | $ | (47,648 | ) | $ | 972,377 | $ | (179,170 | ) | $ | 270,990 | ||||||
Basic and diluted loss per share | ||||||||||||||||
Net loss per share | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.09 | ) | $ | (0.09 | ) | ||||
Weighted average shares outstanding | 2,191,689 | 2,191,689 | 2,191,689 | 2,189,282 | ||||||||||||
March 31, 2022 | December 31, 2021 | |||||||
ASSETS: | ||||||||
Cash | $ | 8,655 | $ | 30,717 | ||||
Investments: | ||||||||
Marketable securities | 511,888 | 604,318 | ||||||
Non-marketable securities | 4,960,344 | 4,960,344 | ||||||
Total assets | $ | 5,480,887 | $ | 5,595,379 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY: | ||||||||
Accounts payable and accrued expenses | $ | 27,857 | $ | 34,202 | ||||
Line of credit borrowings | 348,843 | 348,843 | ||||||
Interest payable line of credit | 1,259 | 1,259 | ||||||
Note payable | 2,386,950 | 2,329,510 | ||||||
Note payable - related party | 624,313 | 624,313 | ||||||
Interest payable - related party | 193,643 | 181,905 | ||||||
Deferred income tax payable | 318,306 | 318,306 | ||||||
Total liabilities | 3,901,171 | 3,838,338 | ||||||
Stockholders' equity | ||||||||
Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding | 0 | 0 | ||||||
Common stock, $0.01 par value, 25,000,000 shares authorized, of which 2,937,225 shares are issued and outstanding as of March 31, 2022 and December 31, 2021 | 29,372 | 29,372 | ||||||
Additional paid-in capital | 21,839,083 | 21,839,083 | ||||||
Additional paid-in capital - stock options | 273,363 | 212,506 | ||||||
Accumulated deficit | (21,564,277 | ) | (22,498,875 | ) | ||||
Accumulated other comprehensive Income | 1,524,748 | 2,697,529 | ||||||
| 2,102,289 | 2,279,615 | |||||||
Less: Treasury Stock, 745,536 shares, at cost | (522,574 | ) | (522,574 | ) | ||||
Total stockholders' equity | 1,579,715 | 1,757,041 | ||||||
Total liabilities and stockholders' equity | $ | 5,480,887 | $ | 5,595,379 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements
IRONSTONE |
CONDENSED CONSOLIDATED STATEMENTS OF |
(unaudited) |
Nine Months Ended | ||||||||
September 30 | ||||||||
2015 | 2014 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (193,421 | ) | $ | (195,925 | ) | ||
Adjustments to reconcile net loss to net cash used inoperating activities: | ||||||||
Realized loss on marketable securities | 1,405 | - | ||||||
Accretion of discount on notes payable | 8,340 | 8,340 | ||||||
Stock-based compensation expense | 19,415 | 21,533 | ||||||
Pay-in-kind interest added to principal | 75,910 | 70,133 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts payable and accrued expenses | 17,217 | (8,879 | ) | |||||
Interest payable - related party | 10,550 | 10,550 | ||||||
Net cash used in operating activities | (60,584 | ) | (94,248 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of non-marketable securities | - | (100,012 | ) | |||||
Proceeds from sale of marketable securities | 41,565 | - | ||||||
Net cash provided by (used in) financing activities | 41,565 | (100,012 | ) | |||||
Net decrease in cash | (19,019 | ) | (194,260 | ) | ||||
Cash at beginning of period | 25,817 | 242,443 | ||||||
Cash at end of period | $ | 6,798 | $ | 48,183 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period for interest | $ | 20,362 | $ | 20,362 | ||||
Supplemental noncash investing and financing activities: | ||||||||
Advances for future common stock share purchase | $ | - | $ | 230,000 | ||||
| Reversal of previously unrecognized loss on marketable securities | $ | 8,340 | $ | 0 | ||||
Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
Operating expenses: | ||||||||
Compensation - stock options | $ | 60,857 | $ | 0 | ||||
Professional fees | 6,719 | 2,608 | ||||||
General and administrative expenses | 2,925 | (39 | ) | |||||
State and local taxes | (592 | ) | 7,349 | |||||
Total operating expenses | 69,909 | 9,918 | ||||||
Loss from operations | (69,909 | ) | (9,918 | ) | ||||
Other expense: | ||||||||
Interest expense | (64,106 | ) | (61,637 | ) | ||||
Interest expense to related party | (11,737 | ) | (7,842 | ) | ||||
Net operating loss | $ | (145,752 | ) | $ | (79,398 | ) | ||
COMPREHENSIVE PROFIT (LOSS), NET OF TAX: | ||||||||
Net operating loss | $ | (145,752 | ) | $ | (79,398 | ) | ||
Unrealized holding loss arising during the period | (92,430 | ) | 0 | |||||
Deferred income tax | 0 | 0 | ||||||
Comprehensive profit (loss) after income taxes | $ | (238,182 | ) | $ | (79,398 | ) | ||
Basic gain (loss) per share | ||||||||
Net operating loss per share | $ | (0.07 | ) | $ | (0.04 | ) | ||
Net comprehensive profit per share | $ | (0.11 | ) | $ | (0.04 | ) | ||
Shares outstanding | 2,191,689 | 2,191,689 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
IRONSTONE PROPERTIES, INC. AND SUBSIDIARIES |
(unaudited) |
Three Months Ended | ||||||||
March 31 | ||||||||
2022 | 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net lncome (loss) | $ | (145,752 | ) | $ | (79,398 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Changes in operating assets and liabilities: | ||||||||
Accounts payable and accrued expenses | (6,344 | ) | 5,858 | |||||
Interest payable | 57,440 | 54,949 | ||||||
Interest payable - related party | 11,737 | 7,842 | ||||||
Net cash used in operating activities | (82,919 | ) | (10,749 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of notes payable | 0 | 306,688 | ||||||
Paid in capital stock options | 60,857 | 0 | ||||||
Prior period adjustment accrued expenses | 0 | 0 | ||||||
Net cash provided by financing activities | 60,857 | 306,688 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Investment in non-marketable securities | 0 | (178,824 | ) | |||||
Net cash provided (used) by financing activities | 0 | (178,824 | ) | |||||
Net increase (decrease) in cash | (22,062 | ) | 117,115 | |||||
Cash at beginning of period | 30,717 | (39 | ) | |||||
Cash at end of period | $ | 8,655 | $ | 117,076 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period for state franchise taxes | $ | 1,095 | $ | 0 | ||||
Cash paid during the period for interest | $ | 6,666 | $ | 6,843 | ||||
Supplemental noncash investing and financing activities: | ||||||||
Officer and director common stock options issued | $ | 60,857 | $ | 0 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(UNAUDITED)
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. Ironstone Group, Inc.,Inc, (“Ironstone” or the “Company”) is a Delaware corporation, that was incorporated in 1972.
Principles of Consolidation
The accompanying unaudited condensed 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.
Basis of Presentation
The unaudited condensed consolidated financial statements included herein have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, normally included in financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Company as of September 30, 2015, March 31, 2022 and December 31, 2021, the results of its operations for the three and nine month periods ended September 30, 2015 March 31, 2022 and September 30, 2014 March 31, 2021 and its cash flows for the ninethree month periods ended September 30, 2015 March 31, 2022 and September 30, 2014. March 31, 2021. The results of operations for the periods presented are not necessarily indicative of those that may be expected for the full year. The condensed consolidated financial statements presented herein have been prepared by management, without audit by independent auditors who do not express an opinion thereon and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. The December 31, 2014 condensed consolidated balance sheet data was derived from audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 but does not include all disclosures required for annual periods.
There have been no significant changes in the Company’s significant accounting policies from those were disclosed in its Annual Report on Form 10-K10-K for the fiscal year ended December 31, 2014.2021.
Going Concern
These financial statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. Ironstone Group has incurred losses and negative cash flows from operations over the last ten years. The Company has operated in the past principally with the assistance of loans from private institutions and related party individuals. The on-going accrual of unpaid interest on external and related party debt, excluding the LOC, continues to increase the financial risk to the Company as a going concern. Conversion of a material portion of the outstanding debt to equity will help alleviate such financial pressure. The financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Marketable and Non-Marketable Securities
Marketable and non-marketable securities have been classified by management as available for sale in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 320, marketable securities are recorded at fair value and any unrealized gains and losses are excluded from earnings and reported as a separate component of stockholders’ equity until realized. The fair value of the Company’s marketable securities and investments at September 30, 2015 March 31, 2022 and December 31, 2014 is2021 are 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, and related adjustments are not made for recovery in value. The Company has not realized any such impairment losses to date.
Securities determined to be non-marketable by the Company do not have readily determinable fair values. The Company estimates the fair value of these instruments using various pricing models and the information available to the Company Company.
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
that it deems most relevant. Among the factors considered by the Company in determining the fair value of financial instruments are discounted anticipated cash flows, the cost, terms and liquidity of the instrument, the financial condition, operating results and credit ratings of the issuer or underlying company, the quoted market price of publicly traded securities with similar duration and yield, the Black-Scholes Options Valuation methodology adjusted for active market, the share price of recent round of financings by an outsider, and other considerations on a case-by-case basis and other factors generally pertinent to the valuation of financial instruments.
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates
The preparation of financial statements in conformity with USU.S. GAAP 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. Significant estimates made in the financial statements relate to the valuation of the Company’s non-marketable investments. 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. As of September 30, 2015 and December 2014, a full valuation allowance has been recorded to offset loss carryforwards as, in management’s opinion, there is uncertainty as to whether or not the company will be able to generate taxable income in the future.
The CompanyIronstone follows the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Company to determine whether a tax position of Ironstone is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant taxing authority. The Company has determined that there is no effect on the financial statements from this authoritative guidance.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state, local, and foreign jurisdictions, where applicable. As of September 30, 2015, March 31, 2022, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations areis from the year 20102018 forward for Federal and from the year 20092017 forward for California (with limited exceptions).
During the nine months ended September 30, 2015 and 2014, the Company did not recognize any interest or penalties related to income taxes in its consolidated statement of operations.
Stock-Based Compensation
Ironstone recognizes the fair value of stock options granted on a straight-line basis over the requisite service period of the option grant, which is the standard vesting term of fourthree years.
The full impact of stock-based compensation in the future is dependent upon, among other things, the total number of stock options granted, the fair value of the stock options at the time of grant and the tax benefit that Ironstone may or may not receive from stock-based expenses. Additionally, stock-based compensation requires the use of an option-pricing model to determine the fair value of stock option awards. This determination of fair value is affected by Ironstone’s stock price as well
as assumptions regarding a number of highly complex and subjective variables. These variables include but are not limited to Ironstone’s expected stock price volatility over the term of the awards.
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)
Basic and Diluted Loss per Share
Basic 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 dilution from potentially dilutive securities, except where inclusion of such potentially dilutive securities would have an anti-dilutive effect, using the average stock price during the period in the computation and because of the net loss for the periods presented.
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
Recent Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-15,2014-15, ““Disclosure of Uncertainties about an Entity’sEntity’s Ability to Continue as a Going Concern”Concern” (“ASU 2014-15”2014-15”). ASU 2014-152014-15 introduces an explicit requirement for management to assess and provide certain disclosures if there is substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-152014-15 is effective for the annual period ending after December 15, 2016. The Company continues to evaluate the impact that the adoption ofhas adopted ASU 2014-15 will have on the Company’s consolidated financial statements.2014-15.
In February 2015, August 2018, the FinancialFASB issued Accounting Standards Board ("FASB"Update (“ASU”) issued Accounting Standard Update (ASU) 2015-02, Comprehensive Income2018-13, “Fair Value Measurement (Topic 810)820): Disclosure Framework – AmendmentsChanges to the Consolidation Analysis, which requires an entity to evaluate whether they should consolidateDisclosure Requirements for Fair Value Measurement”. ASU 2018-13 removes certain legaldisclosures, modifies others and introduces additional disclosure requirements for entities. The amendments in this Update are effective for public business entitiesASU 2018-13 for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. For2019. Amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all other entities, the amendments in this Update areperiods presented upon their effective for fiscal years beginning after December 15, 2016, and for interim periods within fiscal years beginning after December 15, 2017.date. The Company is reviewingadopted the applicability of this amendment.new standard on January 1, 2020. The adoption did not have a material impact on the Company’s financial statements.
2. FAIR VALUE MEASUREMENTS
Fair value is defined under the Financial Accounting Standards Board (“FASB”) Accounting Standards Board (“ASC”) FASB ASC 820, “Fair Value Measurement and Disclosures”. ASC 820 defines fair value, establishes a framework for measuring fair value under U.S. GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 describes a fair value hierarchy based on three levels of inputs of which the firsttwo are considered observable and the last unobservable, that may be used to measure fair value as follows:
Level1–Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since
valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
Level2–Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level3–Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level of input that is significant to the fair value measurement.
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(UNAUDITED)
2. FAIR VALUE MEASUREMENTS (continued)
The Company’s assets and liabilities that are measured at fair value on a non-recurring basis include cash, accounts payable, accrued expenses, and interest payable given their short-term nature. Furthermore, the fair value of the Company’s notes payable are initially measured at fair value given that they are estimated based on current rates that would be available for debt of similar terms.
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. FAIR VALUE MEASUREMENTS (continued)
The following tables provide information about the Company’s financial instruments measured at fair value on a recurring basis at September 30, 2015 as of March 31, 2022 and December 31, 2014 2021 by the fair value hierarchy:
Balance as of | Balance as of | |||||||||||||||||||||||||||||||
September 30, | March 31, | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | 2015 | Level 1 | Level 2 | Level 3 | 2022 | |||||||||||||||||||||||||
Investments: | ||||||||||||||||||||||||||||||||
Publicly traded common stock | $ | 260,887 | $ | - | $ | - | $ | 260,887 | $ | 489,140 | $ | - | $ | - | $ | 489,140 | ||||||||||||||||
Publicly traded options | 22,748 | 22,748 | ||||||||||||||||||||||||||||||
Private company common stock | - | - | 178,824 | 178,824 | ||||||||||||||||||||||||||||
Private company preferred stock | - | - | 2,697,358 | 2,697,358 | - | - | 4,781,520 | 4,781,520 | ||||||||||||||||||||||||
Total | $ | 260,887 | $ | - | $ | 2,697,358 | $ | 2,958,245 | $ | 511,888 | $ | - | $ | 4,960,344 | $ | 5,472,232 | ||||||||||||||||
Balance as of | ||||||||||||||||
December 31, | ||||||||||||||||
Level 1 | Level 2 | Level 3 | 2014 | |||||||||||||
Investments: | ||||||||||||||||
Publicly traded common stock | $ | 312,287 | $ | - | $ | - | $ | 312,287 | ||||||||
Private company preferred stock | - | - | 2,674,677 | 2,674,677 | ||||||||||||
Total | $ | 312,287 | $ | - | $ | 2,674,677 | $ | 2,986,964 | ||||||||
Balance as of | ||||||||||||||||
December 31, | ||||||||||||||||
Level 1 | Level 2 | Level 3 | 2021 | |||||||||||||
Investments: | ||||||||||||||||
Publicly traded common stock | $ | 575,720 | $ | - | $ | - | $ | 575,720 | ||||||||
Publicly traded options | 28,598 | 28,598 | ||||||||||||||
Private company common stock | - | - | 178,824 | 178,824 | ||||||||||||
Private company preferred stock | - | - | 4,781,520 | 4,781,520 | ||||||||||||
Total | $ | 604,318 | $ | - | $ | 4,960,344 | $ | 5,564,662 | ||||||||
The following tables presents the Company’s investments measured at fair value using significant unobservable inputs (Level 3)3), including the valuation technique and unobservable inputs used to measure the fair value of those financial instruments:
Fair Value as of | |||||||
March 31, 2022 | Valuation Technique | Unobservable Inputs | |||||
Private Company Common Stock | $ | 178,824 | Purchase price 3-10-2021 | Acquisition cost | |||
Private Company Preferred Stock | $ | 4,781,520 | company valuation average range $1.2bn to $5.0bn, best fit $2.6bn | Big data technology "MESE" system, and | |||
SPAC inqueries | |||||||
Fair Value as of | |||||||
September 30, | |||||||
2015 | Valuation Technicque | Observable Inputs | |||||
Private company preferred stock | $ | 2,574,666 | Market approach | Third party transaction | |||
Private company preferred stock | $ | 122,692 | A recent round of financing | Third party transaction | |||
Fair Value as of | |||||||
December 31, | |||||||
2014 | Valuation Technicque | Observable Inputs | |||||
Private company preferred stock | $ | 2,574,666 | Market approach | Third party transaction | |||
Private company preferred stock | $ | 100,011 | A recent round of financing | Third party transaction | |||
Fair Value as of | |||||||
December 31, 2021 | Valuation Technique | Unobservable Inputs | |||||
Private Company Common Stock | $ | 178,824 | Purchase price 3-10-2021 | Acquisition cost | |||
Private Company Preferred Stock | $ | 4,781,520 | company valuation average range $1.2bn to $5.0bn, best fit $2.6bn | Big data technology "MESE" system, and | |||
SPAC inqueries | |||||||
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS– (Continued)
(UNAUDITED)
2. FAIR VALUE MEASUREMENTS (concluded)
The following table presents additional information about Level 3 assets measured at fair value on a recurring basis.basis for three months ended March 31, 2022 and twelve months ended 2021. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, unrealized gains or (losses) during the period for assets and liabilities within the Level 3 category presented in the tables below may include changes in fair value during the period that were attributable to both observable and unobservable inputs.
Nine Months Ended | ||||
September 30, 2015 | ||||
Balance as of December 31, 2014 | $ | 2,674,677 | ||
Unrealized gain on investments | 22,681 | |||
Balance as of September 30, 2015 | $ | 2,697,358 | ||
Three Months Ended | ||||
March 31, 2022 | ||||
Balance as of December 31, 2021 | $ | 4,960,344 | ||
Unrealized gain on investments | 0 | |||
Purchase of investment | 0 | |||
Balance as of March 31, 2022 | $ | 4,960,344 | ||
Twelve Months Ended | ||||
December 31, 2021 | ||||
Balance as of December 31, 2020 | $ | 2,574,665 | ||
Unrealized gain on investments | 2,206,855 | |||
Purchase of investment | 178,824 | |||
Balance as of December 31, 2021 | $ | 4,960,344 | ||
Nine Months Ended | ||||
September 30, 2014 | ||||
Balance as of December 31, 2013 | $ | 2,001,919 | ||
Purchases of investments | 100,012 | |||
| Unrealized gain on investments | 572,746 | |||
Balance as of September 30, 2014 | $ | 2,674,677 | ||
3. INVESTMENTS
3. INVESTMENTS
TangoMe, Inc.
On March 30, 2012, the Company purchased 468,121 shares of Series A Preferred stock from related party William R. Hambrecht at $2.14 per share, resulting in a total investment of $1,000,000.For$1,000,000. During 2021 the year ended valuation was updated using the “MESE” valuation system with the available data from TangoMe, Inc., resulting in a “Best-fit” company valuation of $2.6bn, translating to a valuation of $4,781,521 as of December 31, 2014, the Company recorded an unrealized2021. This represents a gain of $572,747, bringing$2,206,856 for the total value of the investment in TangoMe, Inc. to $2,574,666 as of twelve months ended December 31, 2014. There was no change in value as of September 30, 2015, with the valuation remaining at $2,574,666. 2021. The investment fair value is based on similar securities sold to certain related and unrelated third parties. The use ofusing a recent round of financingBest-fit valuation for TangoMe Inc. isas determined by the MESE big data analysis system and SPAC inquiries for TangoMe, Inc. These are the primary significant unobservable inputinputs used in the fair value measurement of the Company’s investment. Significant increases (decreases)There was no change in any subsequent rounds of financing would result in a significantly higher (lower) fair value measurement.valuation during the three months ended March 31, 2022, with the valuation remaining at $4,781,521.
Salon Media Group,Buoy Health, Inc.
TheOn March 17, 2021 the Company owns 2,006,827 shares of Common Stock of Salon Media Group, Inc (“Salon”) common stock. The investment inpurchased 11,233 common shares of Salon is valuedthe private company Buoy Health, Inc. at $0.13$15.92 per share, or $260,887, asshare. The total value of September 30, 2015 and Decemberthe investment was $178,824 on March 31, 2014. The Company recorded no gain or loss for the three months ended September 30, 2015 and an unrealized gain of $461,570 for the three months ended September 30, 2014. For the nine months ended September 30, 2015, there was no change in fair value. For the nine months ended September 30, 2014, the Company recorded an unrealized loss of $120,411.
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)2022.
3. INVESTMENTS (concluded)
FlexiInternational Software, Inc.
On September 14, 2015 the Company sold its 78,000 shares of Flexi International Software stock for $0.235 per share, total proceeds of $18,330 resulting in a realized gain of $1,950. The sale was made to improve the Company’s liquidity. The investment in common shares of FlexiInternational was valued at $0.21 as of June 30, 2015 and $0.15 as of December 31, 2014.For the three months ended September 30, 2014 the Company recorded a related unrealized loss of $5,460. For the nine months ended September 30, 2014 the Company recorded a related unrealized gain of $780
Truett-Hurst, Inc.
The company owned 3,000 shares of Truett-Hurst common stock as of June 30, 2015. During the third quarter of 2015 (July 1 through September 30) the Company sold 3,000 shares for a realized loss of $4,271. The sale was executed to provide the Company with liquidity. The 3,000 shares was valued at $2.28 per share or $6,840 at June 30, 2015. The original 10,000 share investment that was carried at December 31, 2014, was valued at $3.97 per share, or $39,700 for the year ended December 31, 2014. For the three and nine months ended September 30, 2014 the Company recorded related unrealized gains of $5,500 and $13,800, respectively.
Arcimoto, Inc.
During fiscal year 2014 the Company purchased 37,000 shares of Arcimoto, Inc. series A-1A-1 preferred stock for $100,011. The A-1 preferred stock was converted to common stock during 2017 prior to Arcimoto filing for its initial public offering. During March2017, prior to the initial public offering, there was a 2 for one stock split, increasing the shares held to 74,000. On October 2, 2015 the Ironstone Group, Inc. was granted 2,500 Arcimoto Inc. hadoptions, strike price $4.121 per share, expiration October 2, 2025. Following the two for one stock split, the options held increased to 5,000 with a round of financing at a$2.0605 strike price per share. On September 17, 2017, Arcimoto listed on Nasdaq. The closing price on December 31, 2021 $7.78 per share, valuation 23% higher than the Company’s cost, resulting in an unrealized gaina stock holdings valuation of $22,682$575,720 and bringing the total investment valuein-the-money options valuation of Arcimoto as of $28,598. On March 31, 2015 to $122,693. The fair value as2022 the closing price was $6.11 per share, a common stock valuation of $489,140 resulting in a loss for the quarter ended March 31, 2015, was based on this recent financing, which is2022 of $86,580, and options in-the-money valuation of $22,748, resulting in a third party transaction and isloss of $5,850 for the primary significant unobservable input used in the fair value measurement of the Company's investment in Acrimoto, Inc. The fair value as of September 30, 2015 remains unchanged at $122,693 as there was no observable change in valuation input since quarter ended March 31, 2015. Significant increases (decreases) in any subsequent transactions would result in a significantly higher (lower) fair value measurement. For the year ended December 31, 2014, the Company had valued this investment at its cost.2022.
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(UNAUDITED)
4. RELATED PARTY TRANSACTIONS
Mr. William R Hambrecht, Chief Executive Officer, is a minority shareholder in Salon Media Group.
Ms. Elizabeth Hambrecht, Director, is currently the interim Chief Financial Officer of Salon Media Group, Inc. Ms. Hambrecht formerly served as former President and Chief Executive Officer of Salon Media Group, Inc. Ms. Hambrecht is also the sister of a member of the Board of Directors, and is the daughter of the Chief Executive Officer.
On December 31, 2014 the Company combined all the various notes payable, which were issued at various times to Mr. William R. Hambrecht, to one note for $182,000 at 7.75% interest, with a December 31, 2015 maturity. The note balance on March 31, 2022 and December 31, 2021 was $182,000. Accrued interest at March 31, 2022 and December 31, 2021 was $126,438 and $122,960 respectively.
The company has non-marketable investmentsFrom the time period January 2016 through March 2021, the interest on the Letter of Credit was paid by William R. Hambrecht, resulting in TangoMe, Inc., and Arcimoto, Inc. The valuation of these investments as of September 30, 2015 has been calculated based on prices obtained from third party transactions with the aforementioned companies. These third party transactions have been inclusive of entities relateda loan to Ironstone Group Inc.
5. NOTE PAYABLEfrom William R. Hambrecht. The loan interest rate is 7.75%. The loan balances at March 31, 2022 were $142,313. Accrued interest at March 31, 2022 was $47,854 and December 31, 2021 was $44,266. Maturity of the note is March 31, 2026.
On March 10, 2021 William R. Hambrecht loaned Ironstone Group, Inc. $300,000 at 6% interest rate with a March 11, 2026 maturity. The loan balance on March 31, 2022 and December 31, 2021 was $300,000. Accrued interest as of March 31, 2022 and December 31, 2021 was $19,351 and $14,680 respectively.
5. NOTE PAYABLE
On March 31, 2012, the Company received $1,000,000 from a third party and issued a related promissory note. The note carries an 8% interest rate, per annum, and has a maturity date of March 31, 2017. Interest accrues on the balance and converts to separate notes payable on a quarterly basis. The total amounts due under this agreement, including the notes related to accrued interest, are due in full at the end of the term. The note is secured by all of the assets of the Company through an accompanying security agreement. If the Company defaults on the note or security agreement, interest would accrue at 10% per annum. The company was unable to meet its payment obligation by the prescribed deadline, therefore the interest rate stepped up to 10% and interest has been accrued using at the stepped up rate starting April 1, 2017. The gross amountamounts payable under the agreement as of September 30, 2015 March 31, 2022 and December 31, 2014 2021 were $1,319,620$2,386,950 and $1,243,708,$2,329,510 respectively.
In connection with the note agreement, the Company also issued warrants to this third party to purchase 187,296 shares of the Company’s common stock, for total consideration of $1. The warrants were separately valued using the Black-Scholes model, and it was determined the fair value of the warrants at March 31, 2012 was $56,188. This amount has been recorded as a discount on the $1,000,000 note payable and will be amortized over the 5 year term of the note. As of September 30, 2015 and December 31, 2014, the unamortized discount was $26,954 and $35,294, respectively. On May 21, 2014, the warrant for 187,296 shares was exercised and shares were issued.
Furthermore, the Company has a note payable agreement with a related party, William R. Hambrecht. This note carries a 7.75% interest rate per annum and hashad a maturity date of December 31, 2015. The note payable carried a principal balance of $182,000 as of September 30, 2015 March 31, 2022 and December 31, 2014 2021 with additional accrued interest of $34,775$126,438 and $24,255$122,960 respectively. The loan maturity has been extended to December 31, 2025.
A loan was made to Ironstone Group by William R. Hambrecht resulting from William R. Hambrecht paying the interest on the Bank Letter of Credit. The loan from William R. Hambrecht interest rate is 7.75%. The loan balance at March 31, 2022 and December 31, 2021 was $142,313. Accrued interest at March 31, 2022 was $47,854 and December 31, 2021 was $44,266. Maturity of the note is March 31, 2026.
On March 10, 2021 William R. Hambrecht loaned Ironstone Group, Inc. $300,000 at 6.0% interest rate with a March 11, 2026 maturity. The loan balance on March 31, 2022 and December 31, 2021 was $300,000. Interest payable at March 31, 2022 was $19,351 and December 31, 2021 was $14,680.
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(UNAUDITED)
The scheduled maturities of notes and LOC payable outstanding as of September 30, 2015 March 31, 2022 are as follows:
2015 | 2016 | 2017 | Total | |||||||||||||
Notes Payable | $ | - | $ | - | $ | 1,319,620 | $ | 1,319,620 | ||||||||
Notes Payable - related party | 182,000 | - | - | $ | 182,000 | |||||||||||
Total | $ | 182,000 | $ | - | $ | 1,319,620 | $ | 1,501,620 | ||||||||
2025 | 2026 | pending | Total | |||||||||||||
Notes payable | $ | 0 | $ | 0 | $ | 2,386,950 | $ | 2,386,950 | ||||||||
Letter of Credit | 0 | 0 | 348,843 | 348,843 | ||||||||||||
Notes payable - related party | 182,000 | 442,313 | 0 | 624,313 | ||||||||||||
Total | $ | 182,000 | $ | 442,313 | $ | 2,735,793 | $ | 3,360,106 | ||||||||
6. 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 plus 4.5% and is payable monthly. At September 30, 2015 March 31, 2022 and December 31, 2014, 2021, interest was being paid at a rate of 7.75%. The line is guaranteed by both William R. Hambrecht, Director and Chief Executive Officer, and Robert H. Hambrecht, Director.Hambrecht. The line of credit expired during September 2014 and is due on demand and is secured by all of the Company’s business assets. As of September 30, 2015 March 31, 2022 and December 31, 2014, 2021, the outstanding balance under the line was $350,000.$348,843. The total recorded interest expense on this note for the three monthsquarter ended September 30, 2015 March 31, 2022 and September 30, 2014 quarter ended December 31, 2021 was $6,911$6,666 and $6,837$6,843 respectively. Total recorded interest expense on this note for the nine months ended September 30, 2015 and September 30, 2014 was $20,288.
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(UNAUDITED)7. STOCKHOLDERS’ EQUITY
7. STOCKHOLDERS’ EQUITY
Common Stock
On January 2, 2014, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with new investors and existing investors (each, a “Share Purchaser” and, collectively, the “Share Purchasers”), pursuant to which, the Company issued and sold to such Share Purchasers 131,429 shares of the Company’s Common Stock, representing approximately 7% of Ironstone’s outstanding equity securities on the date of purchase, for an aggregate purchase price of $230,000.
On May 1, 2014, a third party exercised warrants for 187,296 shares of the Company’s Common Stock. As of September 30, 2014, the Company issued 187,296 shares from the warrant exercise to the third party.
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. During the year ended December 31, 2008, the Company paid $699 for fractional Treasury shares. As of September 30, 2015 March 31, 2022 and December 31, 2021, the treasury shares are held by the Company.
Preferred Stock
The Company is authorized to issue up to five million5000000 shares of preferred stock without further shareholder approval; the rights, preferences and privileges of which would be determined at the time of issuance. NoNaN shares have been issued as of September 30, 2015 March 31, 2022 and December 31, 2014.2021.
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(UNAUDITED)
Stock-Based Compensation
For the nine monthsquarter ended September 30, 2015 and September 30, 2014, March 31, 2022 the Company recorded stock-based compensation expense of $19,413$60,857, and $21,533, respectively. As of September 30, 2015, Ironstone had an aggregate of $44,713 of stock-based compensation remaining to be expensed over the remaining requisite service period of the underlying options, which is expected to be over a weighted average period of 1.75 years. Ironstone currently expects this stock-based compensation balance to be expensed as follows: $6,471 during the remaining quarter of fiscal year 2015; $25,884 during fiscal year 2016 and $12,358 during fiscal year 2017.NaN for March 31, 2021.
Stock Option Plans
The Company has adopted a 2013is currently revising its existing Equity Incentive Plan (“Plan”) and 187,296Plan. As of March 31, 2022, 345,000 shares were available for grant under the Plan. The Planplan provides for incentive stock options to be granted at times and prices determined by the Company’s Board of Directors. The stock options are to be granted to directors, officers and employees of the Company, as well as certain consultants and other persons providing services to the Company.
70,000 stock options were granted on January 30, 2013. The fair value of these options granted under the Plan were estimated using the Black-Scholes model with the following price and assumptions: Stock Price $0.20, Exercise Price $0.20, Time to Maturity 6.33 years, Risk-free Interest Rate 0.4%, Annualized Volatility 121%.
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. STOCKHOLDERS’ EQUITY (continued)
An additional 100,000 stock options were granted on August 20, 2013. The fair value of these options granted under the Plan were estimated using the Black-Scholes model with following price and assumptions: Stock Price $1.20, Exercise Price $1.20, Time to Maturity 4.0 years, Risk-free Interest Rate 1.0%, Annualized Volatility 93%.
Earnings (Loss) Per Share
Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income(loss)income (loss) for the period by the weighted average number of common and dilutive potential common shares outstanding during the period, if dilutive. Potentially dilutive common equivalent shares are composed of the incremental common shares issuable upon the exercise of stock options. The following is the computations of the basic and diluted net income per share and the anti-dilutive common stock equivalents excluded from the computations for the periods presented:
Quarters Ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Numerator: | ||||||||
Net Operating Loss | $ | (145,752 | ) | $ | (79,398 | ) | ||
Denominator: | ||||||||
Weighted average shares outstanding - basic | 2,191,689 | 2,191,689 | ||||||
Effect of dilutive potential shares | 345,000 | 170,000 | ||||||
Shares outstanding - diluted | 2,536,689 | 2,361,689 | ||||||
Net loss per share - basic | $ | (0.07 | ) | $ | (0.04 | ) | ||
Net loss per share - diluted | $ | (0.06 | ) | $ | (0.03 | ) | ||
Quarters Ended | ||||||||
March 31, 2022 | March 31, 2021 | |||||||
Numerator: | ||||||||
Net Comprehensive Earnings after income taxes | $ | (238,182 | ) | $ | (79,398 | ) | ||
Denominator: | ||||||||
Weighted average shares outstanding - basic | 2,191,689 | 2,191,689 | ||||||
Effect of dilutive potential shares | 345,000 | 170,000 | ||||||
Shares outstanding - diluted | 2,536,689 | 2,361,689 | ||||||
Net gain (loss) per share - basic | $ | (0.11 | ) | $ | (0.04 | ) | ||
Net gain (loss) per share - diluted | $ | (0.09 | ) | $ | (0.03 | ) | ||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | September 30 | September 30 | September 30 | |||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Numerator: | ||||||||||||||||
Net Loss | $ | (50,780 | ) | $ | (61,979 | ) | $ | (193,421 | ) | $ | (195,925 | ) | ||||
Denominator: | ||||||||||||||||
Weighted average shares outstanding - basic | 2,191,689 | 2,191,689 | 2,191,689 | 2,189,282 | ||||||||||||
Effect of dilutive potential shares | - | - | - | - | ||||||||||||
Weighted average shares outstanding - diluted | 2,191,689 | 2,191,689 | 2,191,689 | 2,189,282 | ||||||||||||
Net loss per share - basic | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.09 | ) | $ | (0.09 | ) | ||||
Net loss per share - diluted | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.09 | ) | $ | (0.09 | ) | ||||
Anti-dilutive stock options and awards not included in the net loss per share calculation | 170,000 | 170,000 | 170,000 | 170,000 | ||||||||||||
IRONSTONE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(UNAUDITED)
8. MANAGEMENT’S MANAGEMENT’S PLANS
As reflected in the accompanying financial statements, the Company has net losses and has a negative cash flow from operations. The attainment of profitable operations is dependent upon future events, including liquidity events in privately held investments in excess of purchase price, and or the profitable sale of publicly traded investments. If necessary, to provide liquidity, the Company may seek to sell additional debt or equity securities, or enter into new credit facilities.convert existing privately held debt to equity, providing the debt holders are agreeable to the terms and share conversion price. The Company cannot make assurances that it will be able to complete any financing, liquidity, or liquiditydebt conversion transaction, that such financing, liquidity, or liquiditydebt conversion transaction will be adequate for the Company’s needs, or that a financing, liquidity or liquiditydebt conversion transaction will be completed in a timely manner. Furthermore, the Company may seek to sell its remaining marketable securities to meet its operating needs. However, the fair value of these marketable securities fluctuate, trade volume is limited,fluctuates and may not be adequate for the Company’s needs. Management also believes it will be able to renewThe Company has extended its line of credit payment terms with the lender with similar terms to the recently expired line of credit. If the line of credit is not renewed, management may liquidate securities to satisfy its obligations.
ITEM 2. MANAGEMENT’SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS
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 SEC
USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES
The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets and related disclosure. On an ongoing basis, we evaluate our estimates, including those related to non-marketable securities. We base our estimates on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets that are not readily apparent from other sources. Actual results may differ from these estimates due to actual outcomes being different from those on which we based our assumptions. These estimates and judgments are reviewed by management on an ongoing basis and by our board of directors at the end of each quarter prior to the public release of our financial results.
As of the date of the filing of this quarterly report, we believe there have been no material changes to our critical accounting policies and estimates during the three months ended September 30, 2015March 31, 2022 compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 20142021 as filed with the SEC. Additional information about these critical accounting policies may be found in the "Management's Discussion & Analysis of Financial Condition and Results of Operations" section included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.2021.
RESULTS OF OPERATIONS
Three and nine months ended September 30, 2015March 31, 2022 and March 31, 2021
For theOperating expenses for three month period ending September 30, 2015, operating expenses decreased $8,039months ended March 31, 2022 totaled $145,752, an increase of $66,354 or 29% 83.6%as compared to the same period in fiscal year 2014. Thisthree months ended March 31, 2021. The increase was primarily due to a decreasean increase in stock option expense of $60,857 and professional fees.
Forfees of $4,111. Other expenses for the nine-month periodthree months ended September 30, 2015, operating expenses decreased $9,268March 31, 2022 totaled $75,843, an increase of $6,364 or 10%9.2% as compared to $69,479 for the same period in fiscal year 2014.three months ended March 31, 2021. This increase was primarily due to a decrease in professional fees partially offset by an increase in state and local taxes.higher interest expense accruals.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $60,584$82,919 including $60,857 in stock options expense, and $94,248$10,749 for the nine monthsquarters ended September 30, 2015March 31, 2022 and 2014,2021, respectively. The Company has a line of credit arrangement with First Republic Bank with a borrowing limit of $350,000 with interest based upon the lender’s prime rate plus 4.5%. Interest is currently payable monthly at 7.75%. The line is guaranteed by William R. Hambrecht, Chief Executive Officer, Director and Robert H. Hambrecht, Director. The line of credit expired September, 2014 and is due on demand. Itdemand and is secured by all of the Company’s business assets. At September 30, 2015,March 31, 2022 the outstanding balance under the line was $350,000.$348,843.
At September 30, 2015,March 31, 2022, the outstanding balancebalances the Company borrowed from related party Mr. William R. Hambrecht was $182,000totaled $624,313 with accrued interest at 7.75% per annum. This note matures in December, 2015. Furthermore, asoutstanding of September 30, 2015$193,643. As of March 31, 2022, the Company hadtotal notes payable to the third party totaling $1,319,620. These notes mature in March, 2017.was $2,386,950.
The Company may obtain additional equity or working capital through additional bank borrowings, debt conversion to common stock, and public or private sales of equity securities and exercises of outstanding stock options.securities. The Company may also borrow additional funds from Mr. William R. Hambrecht. 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 relates to the 74,000 shares held of Arcimoto valued at $489,140 for the three months ended March 30, 2012 purchase of31, 2022 and $575,7201 at December 31, 2021. The 468,121 shares of non-marketable investment TangoMe, Inc. is also a primary capital resource. The investment in TangoMe, Inc. shares is valued at $2,574,666$4,781,520 for the ninethree months ended September 30, 2015March 31, 2022 and year ended December 31, 2014,2021, respectively. GivenThe non-marketable investment in Buoy Health is valued at $178,824 for both quarters ended March 31, 2022 and December 31, 2021.Given that the investmentinvestments in TangoMe, Inc. doesand Buoy Health do not have a readily determinable fair value, the Company exerts significant judgment in estimating the fair value using various pricing models and the information available to the Company that it deems most relevant.
Another capital resource of the Company is 2,006,827 shares of Common Stock of Salon Media Group, Inc (“Salon”) common stock. The investment in common shares of Salon is valued at $0.13 per share, or $260,888, as of September 30, 2015Trends and December 31, 2014. The Company recorded no unrealized gain or loss for the three months ended September 30, 2015, and an unrealized gain of $443,117 for the three months ended September 30, 2014. For the nine months ended September 30, 2015, there was no change in fair value. For the nine months ended September 30, 2014, the Company recorded an unrealized loss of $115,612.Uncertainties
Trends and Uncertainties
Termination of Historical Business Lines
Since winding down the Company’s traditional lines of business, Management and the Board of Directors have been seeking appropriate business 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. Otherwise, theThe 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. 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 seniorOur 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 evaluated the effectiveness of our disclosure“disclosure controls and proceduresprocedures” (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) underas of March 31, 2022 in connection with the Securities Exchange Actfiling of 1934).this Annual Report on Form 10K. Based on thisthat evaluation our Chief Executive Officer and Chief Financial Officer have concluded that, asof September 30, 2015,as of March 31, 2022, in light of the material weakness described below, our disclosure controls and procedures were not effective to ensure that information we are not effective.required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in rules and forms of the SEC and is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.
Notwithstanding the material weakness, our company’s financial statements in this Form 10Q fairly present in all material respects, the financial condition, results of operations and cash flows of our company as of and for the periods presented in accordance with generally accepted accounting principles in the United States.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting for the three-monthsended September 30, 2015three-months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’sManagement’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 September 30, 2015.March 31, 2022. 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—Control—Integrated Framework. Based on our evaluation, management concluded that, as of September 30, 2015,March 31, 2022, our internal control over financial reporting was not effective based on those criteria, because of the existence of the following material weaknesses.weaknesses:
1) | The Company does not have an |
2) | Our limited number of employees |
These absences constitute material weaknesses in the Company’s corporate governance structure.
This quarterly report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting because the Company is a smaller reporting company.
PART II - Other Information
ITEM 1 – LEGAL PROCEEDINGS
LEGAL PROCEEDINGS |
None.
ITEM 1a – RISK FACTORS
RISK FACTORS |
The Company’s main assets are investments in non-marketable securities of TangoMe Inc., and Buoy Health, Inc., and marketable securities of Salon Media Group,Arcimoto Inc. There can be no assurance that a market will continue to exist for these investments.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
DEFAULTS UPON SENIOR SECURITIES |
None.
MINE SAFETY DISCLOSURES |
ITEM 4 – MINE SAFTY DISCLOSURES
Not applicable.
OTHER INFORMATION |
None.
EXHIBITS |
ITEM 5 – OTHER INFORMATION
None.
ITEM 6 - EXHIBITS
31.1 |
31.2 |
32.1 |
32.2 |
101.INS Inline XBRL Instance
101.SCH Inline XBRL Taxonomy Extension Schema
101.CAL Inline XBRL Taxonomy Extension Calculation
101.DEF Inline XBRL Taxonomy Extension Definition
101.LAB Inline XBRL Taxonomy Extension Labels
101.PRE Inline XBRL Taxonomy Extension Presentation
104 Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)
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-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
IRONSTONE GROUP, INC. | ||||
a Delaware corporation | ||||
| ||||
Date: May 17, 2022 | ||||
By: | /s/ William R. Hambrecht | |||
William R. Hambrecht | ||||
Chief Executive Officer | ||||
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