Quarterly Report (10-q)

 

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 quarterly period ended September 30, 2015
☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 0-12346

 

IRONSTONE GROUP, INC.

(Exact name of Registrant as specified in its charter)

                                            

Delaware	95-2829956
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

                                       

909 Montgomery Street, San Francisco, California 94133

(Address of principal executive offices, including zip code)

 

[phone]

(Registrant’s telephone number, including area code)

 

NONE

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]    No [ ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 registrant 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” in Rule 12b-2 of the Exchange Act.

 

 

	Large accelerated filer [ ]	Accelerated filer [ ]
	Non- accelerated filer [ ]	Smaller reporting company [X]

                                         

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [  ]    No [X]

 

As of November 13th, 2015, 2,191,689 shares of Common Stock, $0.01 par value, were outstanding.

 

 

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TABLE OF CONTENTS

 

 

 

 

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014	3
Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2015 and 2014.	4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014	5
Notes to Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3. Quantitative and Qualitative Disclosures About Market Risk	17
Item 4. Controls and Procedures	17
PART II—OTHER INFORMATION
Item 1. Legal Proceedings	18
Item 1A. Risk Factors	18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3. Defaults Upon Senior Securities	18
Item 4. Mine Safety Disclosures	18
Item 5. Other Information	18
Item 6. Exhibits	18
Signatures	19
Exhibit Index

                                                      

 

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Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

 

IRONSTONE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		(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

 

(1) Derived from the Company's audited consolidated financial statements

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 

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IRONSTONE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

 

		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

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 

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IRONSTONE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(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 in operating 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

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 

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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., (“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, the results of its operations for the three and nine month periods ended September 30, 2015 and September 30, 2014 and its cash flows for the nine month periods ended September 30, 2015 and September 30, 2014. 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-K for the fiscal year ended December 31, 2014.

 

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 and December 31, 2014 is 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.

 

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 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.

 

 

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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 US 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 Company 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, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are from the year 2010 forward for Federal and from the year 2009 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 four 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.

 

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 because of the net loss for the periods presented.

 

 

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IRONSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Recent Accounting Pronouncements

 

In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 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 2014-15 is effective for the annual period ending after December 15, 2016. The Company continues to evaluate the impact that the adoption of ASU 2014-15 will have on the Company’s consolidated financial statements.

 

In February 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update (ASU) 2015-02, Comprehensive Income (Topic 810) – Amendments to the Consolidation Analysis, which requires an entity to evaluate whether they should consolidate certain legal entities. The amendments in this Update are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and for interim periods within fiscal years beginning after December 15, 2017. The Company is reviewing the applicability of this amendment.

 

2. FAIR VALUE MEASUREMENTS

 

Fair value is defined under the Financial Accounting Standards Board (“FASB”) Accounting Standards Board (“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 first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

 

     Level 1–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.

 

     Level 2–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.

 

     Level 3–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.

 

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.

 

 

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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 and December 31, 2014 by the fair value hierarchy:

 

														Balance as of
														September 30,
		Level 1				Level 2				Level 3				2015
Investments:
Publicly traded common stock		$	260,887			$	-			$	-			$	260,887
Private company preferred stock			-				-				2,697,358				2,697,358
Total		$	260,887			$	-			$	2,697,358			$	2,958,245

 

 

 

														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

 

 

The following tables presents the Company’s investments measured at fair value using significant unobservable inputs (Level 3), including the valuation technique and unobservable inputs used to measure the fair value of those financial instruments:

 

  

		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

 

 

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IRONSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (UNAUDITED)

 

2. FAIR VALUE MEASUREMENTS (concluded)

 

The following table presents additional information about Level 3 assets measured at fair value on a recurring basis. 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

 

		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

 

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 the year ended December 31, 2014, the Company recorded an unrealized gain of $572,747, bringing the total value of the investment in TangoMe, Inc. to $2,574,666 as of December 31, 2014. There was no change in value as of September 30, 2015, with the valuation remaining at $2,574,666. The fair value is based on similar securities sold to certain related and unrelated third parties. The use of a recent round of financing for TangoMe, Inc. is the primary significant unobservable input used in the fair value measurement of the Company’s investment.  Significant increases (decreases) in any subsequent rounds of financing would result in a significantly higher (lower) fair value measurement.

 

Salon Media Group, Inc.

  

The Company owns 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 $260,887, as of September 30, 2015 and December 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.

 

 

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IRONSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (UNAUDITED)

 

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-1 preferred stock for $100,011. During March 2015, Arcimoto, Inc. had a round of financing at a share valuation 23% higher than the Company’s cost, resulting in an unrealized gain of $22,682 and bringing the total investment value of Arcimoto as of March 31, 2015 to $122,693. The fair value as of March 31, 2015, was based on this recent financing, which is a third party transaction and is 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 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.

 

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 company has non-marketable investments 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 related to Ironstone Group, Inc.

 

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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 gross amount payable under the agreement as of September 30, 2015 and December 31, 2014 were $1,319,620 and $1,243,708, 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 has a maturity date of December 31, 2015. The note payable carried a principal balance of $182,000 as of September 30, 2015 and December 31, 2014 with additional accrued interest of $34,775 and $24,255 respectively.

 

The scheduled maturities of notes payable outstanding as of September 30, 2015 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

 

  

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 and December 31, 2014, 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. 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 and December 31, 2014, the outstanding balance under the line was $350,000. The total recorded interest expense on this note for the three months ended September 30, 2015 and September 30, 2014 was $6,911 and $6,837 respectively. Total recorded interest expense on this note for the nine months ended September 30, 2015 and September 30, 2014 was $20,288.

 

 

12

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IRONSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(UNAUDITED)

 

 

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 the treasury shares are held by the Company.

 

Preferred Stock

 

The Company is authorized to issue up to five million shares of preferred stock without further shareholder approval; the rights, preferences and privileges of which would be determined at the time of issuance. No shares have been issued as of September 30, 2015 and December 31, 2014.

 

Stock-Based Compensation

 

For the nine months ended September 30, 2015 and September 30, 2014, the Company recorded stock-based compensation expense of $19,413 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.

 

Stock Option Plans

 

The Company has adopted a 2013 Equity Incentive Plan (“Plan”) and 187,296 shares were available for grant under the Plan. The Plan 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%.

 

 

13

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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) 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:

 

 

		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

 

 

8. MANAGEMENT’S PLANS

 

As reflected in the accompanying financial statements, the Company has net losses and has a negative cash flow from operations. If necessary, the Company may seek to sell additional debt or equity securities, or enter into new credit facilities. The Company cannot make assurances that it will be able to complete any financing or liquidity transaction, that such financing or liquidity transaction will be adequate for the Company’s needs, or that a financing or liquidity 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, and may not be adequate for the Company’s needs. Management also believes it will be able to renew its line of credit 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.

 

 

14

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ITEM 2. MANAGEMENT’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, 2015 compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 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.

 

RESULTS OF OPERATIONS

 

Three and nine months ended September 30, 2015

 

For the three month period ending September 30, 2015, operating expenses decreased $8,039 or 29% as compared to the same period in fiscal year 2014. This was primarily due to a decrease in professional fees.

 

For the nine-month period ended September 30, 2015, operating expenses decreased $9,268 or 10% as compared to the same period in fiscal year 2014. This was primarily due to a decrease in professional fees partially offset by an increase in state and local taxes.

 

 

15

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LIQUIDITY AND CAPITAL RESOURCES

 

Net cash used in operating activities was $60,584 and $94,248 for the nine months ended September 30, 2015 and 2014, 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. It is secured by all of the Company’s business assets. At September 30, 2015, the outstanding balance under the line was $350,000.

 

At September 30, 2015, the outstanding balance the Company borrowed from related party Mr. William R. Hambrecht was $182,000 with interest at 7.75% per annum. This note matures in December, 2015. Furthermore, as of September 30, 2015 the Company had notes payable to the third party totaling $1,319,620. These notes mature in March, 2017.

  

The Company may obtain additional equity or working capital through additional bank borrowings and public or private sales of equity securities and exercises of outstanding stock options. 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 March 30, 2012 purchase of 468,121 shares of non-marketable investment TangoMe, Inc. The investment in TangoMe, Inc. shares is valued at $2,574,666 for the nine months ended September 30, 2015 and year ended December 31, 2014, respectively. Given that the investment in TangoMe, Inc. does 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, 2015 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.

 

 

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, 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.

 

 

16

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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 senior 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 of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2015, our disclosure controls and procedures are not effective.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal controls over financial reporting for the three-months ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Management’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. 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—Integrated Framework. Based on our evaluation, management concluded that, as of September 30, 2015, our internal control over financial reporting was not effective based on those criteria because of the existence of the following material weaknesses.

 

1)

The Company does not have an adequate number of independent board members nor therefore an independent audit committee.

 

2)

Our limited number of employees results in the Company’s inability to have a sufficient segregation of duties within its accounting and financial reporting activities.

 

 

These absences constitute material weaknesses in the Company’s corporate governance structure.

 

 

17

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PART II – OTHER INFORMATION

 

 

PART II - Other Information

 

ITEM 1 – LEGAL PROCEEDINGS

 

None.

 

ITEM 1a – RISK FACTORS

 

The Company’s main assets are investments in non-marketable securities of TangoMe, Inc., and marketable securities of Salon Media Group, 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

 

None

 

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4 – MINE SAFTY DISCLOSURES

 

None.

 

 

 

ITEM 5 – OTHER INFORMATION

 

None.

 

ITEM 6 - EXHIBITS

31.1

Section 302 – Principal Executive Officer Certification

31.2

Section 302 – Principal Financial Officer Certification

32.1

Section 1350 – Certification – Chief Executive Officer

32.2

Section 1350 – Certification – Chief Financial Officer

 

 

 

101.INS XBRL Instance

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation

101.DEF XBRL Taxonomy Extension Definition

101.LAB XBRL Taxonomy Extension Labels

101.PRE XBRL Taxonomy Extension Presentation

 

 

18

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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-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

	IRONSTONE GROUP, INC.
	a Delaware corporation
Date: November 13, 2015	By:	/s/ William R. Hambrecht
		William R. Hambrecht
		Chief Executive Officer

 

 

 

19

Exhibit 31.1

   

CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

 

I, William R. Hambrecht, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Ironstone Group Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

 

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: November 13, 2015
		/s/ William R. Hambrecht
		William R. Hambrecht
		Chief Executive Officer

 

Exhibit 31.2

  

CERTIFICATION OF PRINCIPAL EXECUTIVE AND FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

 

I, Eugene Yates, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Ironstone Group Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

 

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: November 13, 2015
		/s/ Eugene Yates
		Eugene Yates
		Chief Financial Officer

 

Exhibit 32.1

 

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

 

        In connection with the Quarterly Report of Ironstone Group, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William R.. Hambrecht, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

        (1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

        (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 13, 2015

 

       

 

/s/  William R. Hambrecht
William R. Hambrecht

Chief Executive Officer

Exhibit 32.2

  

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

  

 

        In connection with the Quarterly Report of Ironstone Group, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Eugene Yates, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

        (1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

        (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

  

Date: November 13, 2015

 

       
 /s/  Eugene Yates
 Eugene Yates

 Chief Financial Officer