SPECIAL NOTE ON FORWARD LOOKING STATEMENTS
Certain statements in this document that are not historical facts including, but not limited to, statements about future expectations, projections of financial and operating results, statements about 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 that could cause actual results, performance or achievements of the company to differ materially from those anticipated in such forward-looking statements. Important factors that could cause actual results to differ from those anticipated in such forward-looking statements include, in addition to the specific matters mentioned herein, (i) the results of the company’s efforts to implement its business strategy; (ii) the actions of the Company’s competitors and the Company’s ability to respond to such actions; (iii) changes in government regulations, tax rates and similar matters; and (iv) other risks set out in the company’s other filings with the SEC
USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES
The preparation of consolidated financial statements in accordance with US GAAP requires us to make estimates and judgments that affect the assets reported and the information related to them. We continuously evaluate our estimates, also with regard to non-marketable securities. We base our estimates on various assumptions that are believed to be reasonable under the given circumstances and the results of which form the basis for assessments of the carrying amount of assets that are not readily apparent from other sources. Actual results may differ from these estimates, as actual results differ from those on which our assumptions are based. 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.
At the time of filing this quarterly report, we believe that our critical accounting policies and estimates for the three quarters ended June 30, 2021, compared to those in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as at deposited with the SEC. For more information about these critical accounting principles, see the “Management Discussion and Analysis of Financial Condition and Results of Operations” section in our Annual Report on Form 10-K for the year ended December 31, 2014.
RESULTS OF THE OPERATIONS
Three months to June 30, 2021 and June 30, 2020
Operating expenses for the three months ended June 30, 2021 were $ 54,579, an increase of $ 51,329, or 1,579.3%, compared to the three months ended June 30, 2020. The increase was $ 42,600. $ 8,729 in executive and director compensation related to the stock option plan; and an increase in professional fees of $ 8,729. Other expenses for the three months ended June 30, 2021 were $ 75,663, an increase of $ 10,882, or 16.8%, compared to $ 64,781 for the three months ended June 30, 2020. This increase was due to higher accrued interest.
LIQUIDITY AND CAPITAL RESOURCES
Net operating cash outflow was $ 239,911 and $ 277,386 for the six months ended June 30, 2021 and 2020, respectively. The company has a line of credit with First Republic Bank with a credit limit of $ 350,000 with interest based on the lender’s policy rate plus 4.5%. The interest is currently payable monthly at 7.75%. Leadership is guaranteed by William R. Hambrecht, Chief Executive Officer, Director. The credit line is due daily and is secured by the entire business assets of the company. As of March 31, 2021, the outstanding balance under this line was $ 350,000.
As of June 30, 2021, the outstanding balance the Company borrowed from a related party, Mr. William R. Hambrecht, was $ 324,313 at an interest rate of 7.75% per annum and $ 300,000 at 6.0% per annum. As of March 31, 2021, the total amount of debt payable to the third party was $ 2,216,372.
Table of Contents IRONSTONE GROUP, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (continued) (UNAUDITED)
The Company may obtain additional equity or working capital through additional bank loans, the conversion of debt into common stock, and the public or private sale of equity securities. The company may also raise additional funds from Mr. William R. Hambrecht. However, there can be no assurance that such additional funding will be available on terms favorable to the Company or at all.
As the company explores new business opportunities, the company’s primary source of capital relates to Arcimoto’s 74,000 shares valued at $ 1,272,060 and Arcimoto options that are $ 75,648 in the money for the three months ended June 30, 2021 . The 468,121 shares of non-marketable investment TangoMe, Inc. is also a primary capital resource. The investment in TangoMe, Inc. stock is valued at $ 2,574,666 for the three months ended June 30, 2021. Because the investment in TangoMe, Inc. does not have an easily determinable fair value, the company makes significant judgments in estimating fair value using various pricing models and the information available to the company that it deems most relevant.
Trends and uncertainties
Termination of historic businesses
Since the dissolution of the company’s traditional businesses, the management and board of directors have sought suitable business opportunities for the company. The Company’s cash is invested in corporate securities and sight deposit accounts. If the Company cannot find an operational entity to merge with, and if its assets are not invested in certain types of securities (primarily government securities), it may be considered an investment company for the purposes of the Investment Company Act of 1940, as amended Version.
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