IRONSTONE PROPERTIES, INC. - Quarter Report: 2012 March (Form 10-Q)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Exact name of Registrant as specified in its charter)

 

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

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.

 

 

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets at March 31, 2012 and December 31, 2011	3
Condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2012 and 2011	4
Condensed consolidated statements of cash flows for the three months ended March 31, 2012 and 2011	5
Notes to condensed consolidated financial statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Quantitative and Qualitative Disclosures About Market Risk	12
Item 4T. Controls and Procedures	13
PART II—OTHER INFORMATION
Item 6. Exhibits	14
Signatures	15
Exhibit 31.1	16
Exhibit 31.2	17
Exhibit 32.1	18
Exhibit 32.2	19

                                                                                                                                                       

 

 

 

 

 

 

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although Ironstone believes that the following disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments considered necessary for a fair and comparable presentation have been included and are of a normal recurring nature. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2011.

 

Basic earnings (loss) per share (“EPS”) excludes dilution and is computed by dividing net income (loss) applicable to common stockholders 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.

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.

March 31, 2012

 

	Level 1		Quoted prices in active markets for identical assets or liabilities.
	Level 2		Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
	Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

The Company owns 78,000 shares of Flexi International Software stock and accounts for this investment as an available-for-sale security on its balance sheet. The investment in common shares of Flexi is valued at $.09 and $.10 per share, or $7,020 and $7,800 at March 31, 2012 and December 31, 2011, respectively. For the three months ended March 31, 2012, the Company recorded a related unrealized loss of $780.

The inputs to the Black-Scholes model were as follows:  Stock price at March 31, 2012 of $.30; Exercise price of $.000005; Expected term of 10 years; Risk-free interest rate of 4.84%; Dividend rate of 0; Volatility of 60%. All 187,296 warrants were issued and outstanding at March 31, 2012.

On March 30, 2012 the Company paid the loan and interest due William R. Hambrecht in the amount of $339,257 through the issuance of 1,130,856 common shares at a price of $.30 per share.

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. Interest is payable monthly at 7.75% at March 31, 2012. The line is guaranteed by William R. Hambrecht, Chief Executive Officer, Director and Robert H. Hambrecht, Secretary, Director. The line of credit is due on demand and is secured by all of the Company’s business assets. At March 31, 2012, the outstanding balance under the line was $350,000.The total recorded interest expense on this note for the three months ended March 31, 2012 and 2011 was $6,763 and $6,688 (this amount was also paid during each respective period).

 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The Company owns 78,000 shares of Flexi International Software stock and accounts for this investment as an available-for-sale security on its balance sheet. The investment in common shares of Flexi is valued at $.09 and $.10 per share, or $7,020 and $7,800 at March 31, 2012 and December 31, 2011, respectively. For the three months ended March 31, 2012, the Company recorded a related unrealized loss of $780.

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.

 

 

 

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.

 

 

 

 

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

 

Signature		Title		Date
/s/ William R. Hambrecht		Director, Chief Executive Officer		May 21, 2012
William R. Hambrecht		(Principal Executive Officer)
/s/ Quock Q. Fong		Chief Financial Officer		May 21, 2012
Quock Q. Fong
/s/ Robert H. Hambrecht		Director, Secretary		May 21, 2012
Robert H. Hambrecht
/s/ Denis T. Rice		Director		May 21, 2012
Denis T. Rice

 

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