CRITICAL ACCOUNTING POLICIES

While the Company continues to evaluate business opportunities, its sole source of revenue is from the sale of marketable and non-marketable securities. Management has classified these securities as available for sale in accordance with ASC Topic 320, "Investments - Debt and Equity Securities." These securities are recorded at fair value, and any unrealized gains and losses are reported as other comprehensive income. For securities for which there is an other-than-temporary impairment, an impairment loss is recognized as a realized loss.

Ironstone Property's primary expenses are generated from maintaining regulatory reporting compliance, such as quarterly review and annual audit of the financial statements, seeking legal counsel when appropriate, and consulting fees.





Fair Value Measurements

The accounting principles general accepted in the United States of America ("GAAP") defines fair value, establishes a framework that the Company uses to measure fair value and provides for certain disclosures about the fair value measurements included in the Company's financial statements. Refer to Note 2 in the Notes to Financial Statements for these disclosures. Fair value is defined by GAAP 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 willing market participants on the measurement date.


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In determining fair value, the Company uses various valuation approaches. GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company's management. Unobservable inputs are inputs that reflect management's assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs 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.

The availability of observable inputs can vary from product to product and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the management in determining fair value is greatest for instruments categorized in Level 3.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company's own assumptions are set to reflect those that the Company believes market participants would use in pricing the asset or liability at the measurement date.





RESULTS OF OPERATIONS

Years ended December 31, 2021 and December 31, 2020

Operating expenses for 2021 totaled $523,401, an increase of $221,743 or 74% as compared to 2020. The increase was primarily due to increases in professional fees of $33,571 and stock compensation expense of $167,018. Interest expense for fiscal year 2021 totaled $246,812, an increase of $9,046 or 4% as compared to fiscal year 2020, which is attributed to an increase in the Company's notes payable.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $90,459 and $0 for the years ended December 31, 2021 and 2020, respectively. The increase over fiscal year 2020 is attributed to restarting operations and an increase in cash used to pay accounts payable and accrued expenses. Net cash used in investing activities was $178,824 and $0 for the years ended December 31, 2021 and 2020, respectively. The increase is due to an investment made in non-marketable securities by the Company in fiscal year 2021. Net cash provided by financing activities was $300,000 and $0 for the years ended December 31, 2021 and 2020, respectively.


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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 payable monthly at 7.75%. The line is guaranteed by William R. Hambrecht, Chief Executive Officer and Director. The line of credit is due on demand and is secured by all of the Company's business assets. At December 31, 2021, the outstanding balance under the line was $348,843.

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. The note payable carried a principal balance of $182,000 as of December 31, 2021 and December 31, 2020 with additional accrued interest of $122,960 and $108,855 respectively. The loan maturity has been extended to December 31, 2025.

A loan was made to Ironstone Properties, Inc. by William R. Hambrecht resulting from William R. Hambrecht paying the interest on the Bank Letter of Credit from the time period January 2016 through March 2021. The loan from William R. Hambrecht interest rate is 7.75%. The loan balances at December 31, 2021 and December 31, 2020 were $142,313 and $135,625 respectively. Accrued interest at December 31, 2021 was $44,265 and December 31, 2020 was $30,437. Maturity of the note is March 31, 2026.

On March 10, 2021 William R. Hambrecht loaned Ironstone Properties, Inc. $300,000 at 6.0% interest rate with a March 11, 2026 maturity. Interest payable at December 31, 2021 was $14,680.

Additionally, the Company has a note payable due to an unrelated party of $1,292,666 as of December 31, 2021 and pay-in-kind interest of $1,036,844 as of December 31, 2021, for a total amount due of $2,329,510.

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 $4,781,521 and $2,574,665 for the years ended December 31, 2021 and 2020, respectively, For the year ended December 31, 2021, the Company recorded an unrealized gain of $2,206,855 on the investment. 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. The investment fair value is based on using a Best-fit valuation for TangoMe Inc. as determined by the MESE big data analysis system and SPAC inquiries for TangoMe, Inc. These are the primary significant unobservable inputs used in the fair value measurement of the Company's investment.

During fiscal year 2014 the Company purchased 37,000 shares of Arcimoto, Inc. series A-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 2017, prior to the initial public offering, there was a two for one stock split, increasing the shares held to 74,000. On October 2, 2015 the Ironstone Group, Inc. was granted 2,500 Arcimoto options, 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 $2.0605 strike price per share. On September 17, 2017, Arcimoto listed on Nasdaq. The closing price on December 31, 2021 $13.23 per share, resulting in a stock holdings valuation of $575,720 and in-the-money options valuation of $28,598. On December 31, 2021 the closing price was $7.78 per share, a common stock valuation of $575,720 resulting in a loss for the quarter ended December 31, 2021 of $270,100, and options in-the-money valuation of $28,598, resulting in a loss of $18,250 for the quarter ended December 31, 2021.

Additionally, the Company purchased 11,233 common shares of the private company Buoy Health, Inc. on March 17, 2021 at $15.92 per share. The total value of the investment was $178,824 at December 31, 2021.


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