<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This Schedule contains summary financial information extracted
from the Form 10-QSB of Kent Financial Services, Inc. for the
six months ended June 30, 1995 and is qualified in its entirety
by reference to such financial statements ($000 omitted, except
per share data).
</LEGEND>
<CIK> 0000316028
<NAME> KENT FINANCIAL SERVICES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,910
<SECURITIES> 5,453
<RECEIVABLES> 1,752
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,048
<PP&E> 2,086
<DEPRECIATION> 553
<TOTAL-ASSETS> 15,048
<CURRENT-LIABILITIES> 2,973
<BONDS> 0
<COMMON> 106
0
0
<OTHER-SE> 11,969
<TOTAL-LIABILITY-AND-EQUITY> 15,048
<SALES> 0
<TOTAL-REVENUES> 6,248
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,162
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,086
<INCOME-TAX> 134
<INCOME-CONTINUING> 952
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 952
<EPS-PRIMARY> .89
<EPS-DILUTED> 0
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No.: 1-7986
Kent Financial Services, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 75-1695953
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
376 Main Street, P.O. Box 74, Bedminster, New Jersey 07921
(Address of principal executive offices)
(908) 234-0078
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No _____
State the number of shares outstanding of each of the issuer's classes of
common stock: As of July 31, 1995, the issuer had 1,064,510 shares of its common
stock, par value $.10 per share, outstanding.
Transitional Small Business Disclosure Format (check one).
Yes _____ No X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
(UNAUDITED)
($000 Omitted)
<TABLE>
<CAPTION>
June 30,
1995
---------
<S> <C>
Cash and cash equivalents ............................. $ 5,910
U.S. Treasury securities, at cost,
which approximates market ........................... 386
Marketable securities ................................. 5,067
Net receivable from clearing agent .................... 1,752
Property and equipment:
Land and building .................................. 1,440
Leasehold improvements ............................. 228
Office furniture and equipment ..................... 418
-------
2,086
Accumulated depreciation ...........................( 553)
-------
Net property and equipment ......................... 1,533
-------
Other assets .......................................... 400
-------
Total assets ................................... $15,048
=======
</TABLE>
See accompanying notes to consolidated financial
statements.
<PAGE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(UNAUDITED)
($000 Omitted)
<TABLE>
<CAPTION>
June 30,
1995
---------
<S> <C>
Liabilities:
Accounts payable ............................................... $ 94
Accrued expenses ............................................... 1,727
Long-term debt ................................................. 595
Accrual for discontinued operations ............................ 557
-------
Total liabilities .......................................... 2,973
-------
Stockholders' equity:
Preferred stock without par value, 500,000
shares authorized; none issued ............................... -
Common stock, $.10 par value, 4,000,000
shares authorized; 1,064,510 issued
and outstanding .............................................. 106
Additional paid-in capital ..................................... 15,584
Accumulated deficit ............................................ ( 3,615)
-------
Total stockholders' equity ................................. 12,075
-------
Total liabilities and stockholders' equity ................. $15,048
=======
</TABLE>
See accompanying notes to consolidated financial
statements.
<PAGE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($000 Omitted, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------
1995 1994
------ ------
<S> <C> <C>
Revenues:
Brokerage commissions and fees ......................... $ 964 $ 848
Net broker-dealer inventory gains ...................... 1,226 921
Net investing gains (losses)............................ 744 ( 286)
Interest, dividends and other .......................... 306 237
------ ------
3,240 1,720
------ ------
Expenses:
Brokerage ............................................. 1,440 1,248
General, administrative and other ..................... 1,114 965
Interest .............................................. 92 37
------ ------
2,646 2,250
------ ------
Earnings (loss) before income taxes ...................... 594 ( 530)
Provision (credit) for income taxes ...................... 61 ( 37)
------ ------
Net earnings (loss)....................................... $ 533 ($ 493)
====== ======
Net earning (loss) per common share ...................... $ .50 ($ .45)
====== ======
Weighted average number of common
shares outstanding (in 000's) .......................... 1,065 1,102
====== ======
</TABLE>
See accompanying notes to consolidated financial
statements.
<PAGE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($000 Omitted, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
1995 1994
------ ------
<S> <C> <C>
Revenues:
Brokerage commissions and fees ......................... $1,920 $2,010
Net broker-dealer inventory gains ...................... 2,360 2,225
Net investing gains .................................... 1,389 52
Interest, dividends and other .......................... 579 424
------ ------
6,248 4,711
------ ------
Expenses:
Brokerage ............................................. 2,872 2,822
General, administrative and other ..................... 2,118 2,013
Interest .............................................. 172 61
------ ------
5,162 4,896
------ ------
Earnings (loss) before income taxes ...................... 1,086 ( 185)
Provision (credit) for income taxes ...................... 134 ( 3)
------ ------
Net earnings (loss)....................................... $ 952 ($ 182)
====== ======
Net earnings (loss) per common share ..................... $ .89 ($ .17)
====== ======
Weighted average number of common
shares outstanding (in 000's) .......................... 1,070 1,102
====== ======
</TABLE>
See accompanying notes to consolidated financial
statements.
<PAGE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($000 Omitted)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------
1995 1994
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)...................................... $ 952 ($ 182)
Adjustments:
Depreciation and amortization ......................... 82 75
Unrealized losses (gains) on marketable
securities .......................................... ( 233) 93
Change in marketable securities
and U.S. Treasury securities ........................ 2,558 ( 910)
Change in net receivable from
clearing agent ...................................... ( 1,494) 153
Change in interest receivable ......................... 24 ( 12)
Change in accounts payable and
accrued expenses .................................... 335 ( 207)
Change in accrued income taxes ........................ 84 ( 32)
Other, net ............................................ 117 148
------ ------
Net cash provided by (used in) operating
activities .......................................... 2,425 ( 874)
------ ------
Cash flows from investing activities:
Additional investment in former
majority-owned subsidiary .............................. - ( 46)
Purchase of equipment ................................... ( 23) ( 16)
Other, net .............................................. ( 54) -
------ ------
Net cash used in investing
activities .......................................... ( 77) ( 62)
------ ------
Cash flows from financing activities:
Purchase of common stock ................................ ( 52) ( 1)
Payments on debt ........................................ ( 159) ( 8)
Redemption of debentures ................................ ( 18) ( 33)
------ ------
Net cash used in financing
activities .......................................... ( 229) ( 42)
------ ------
Net increase (decrease) in cash and cash
equivalents .............................................. 2,119 ( 978)
Cash and cash equivalents at
beginning of period ...................................... 3,791 7,824
------ ------
Cash and cash equivalents at end of
period ................................................... $5,910 $6,846
====== ======
</TABLE>
See accompanying notes to consolidated financial
statements.
<PAGE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
(Unaudited)
1. Financial Condition and Operating Results
-----------------------------------------
The accompanying unaudited consolidated financial statements of Kent
Financial Services, Inc. and subsidiaries (the "Company") as of June 30, 1995
and for the three and six month periods ended June 30, 1995 and 1994 reflect all
material adjustments consisting of only normal recurring adjustments which, in
the opinion of management, are necessary for a fair presentation of results for
the interim periods. Certain information and footnote disclosures required under
generally accepted accounting principles have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. These consolidated financial statements should be read
in conjunction with the year-end consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1994 as filed with the Securities and Exchange Commission.
The results of operations for the three and six months ended June 30,
1995 and 1994 are not necessarily indicative of the results to be expected for
the entire year or for any other period.
Certain reclassifications have been made in the 1994 consolidated financial
statements to conform to the current presentation. Such reclassifications had no
effect on stockholders' equity or the results of operations.
2. Business
--------
The Company's business is comprised principally of the operation of T. R.
Winston & Company, Inc. ("Winston"), a wholly-owned subsidiary, and the
management of Asset Value Fund Limited Partnership, an investment partnership.
Winston is a licensed securities broker-dealer and is a member of the National
Association of Securities Dealers, Inc., the Pacific Stock Exchange, Inc. and
the Securities Investor Protection Corporation. All safekeeping, cashiering, and
customer account maintenance activities are provided by an unrelated
broker-dealer under a clearing agreement.
Pursuant to the net capital provisions of Rule 15c3-1 of the Securities
Exchange Act of 1934, Winston is required to maintain a minimum net capital, as
defined, of $190,000. At June 30, 1995, Winston had net capital, as defined, of
$1,060,688, which was $870,688 in excess of the required minimum.
<PAGE>
3. Marketable Securities
---------------------
The following is a summary of marketable securities owned at June 30, 1995
(in $000):
<TABLE>
<S> <C>
Marketable equity
securities ............................... $4,915
Mutual funds ............................... 152
------
Aggregate market ........................... $5,067
======
Aggregate cost ............................. $5,255
Gross unrealized loss ...................... $ 353
Gross unrealized gain ...................... $ 165
</TABLE>
4. Income Taxes
------------
An examination of the Company's consolidated federal income tax returns for
the years 1988 through 1991 was completed by the Internal Revenue Service
("IRS") in 1994. In the written examination report dated January 10, 1994, which
was enclosed with a thirty-day letter dated January 13, 1994, the IRS has
proposed tax deficiencies and penalties for the years under audit of
approximately $8.2 million. The accrued interest to date on these proposed
amounts would be approximately $5.7 million. The proposed deficiencies,
penalties and accrued interest would eliminate the utilization of net operating
loss and capital loss carryforwards by the Company in 1995 and 1994. The Company
has retained tax counsel and intends to continue to vigorously contest the
proposed adjustments. The Company filed a written protest of the IRS examination
report with the Appeals Office within the IRS on March 18, 1994. After the
protest was filed, the Appeals Office sent the case back to the Examining Agent
for a further review of certain of the issues involved. On January 30, 1995, a
request was made by the Company to move the case back to the IRS Appeals Office.
The Company believes that the ultimate resolution of the issues involved in the
audit will likely result in a substantial reduction or, possibly, an elimination
of the tax deficiencies, penalties and interest at issue in the audit. The
Company is unable to estimate the reduction of the tax deficiencies, penalties,
and interest and the actual loss resulting from the examination, if any.
5. Net Earnings Per Common Share
-----------------------------
Net earnings per common share is based on the weighted average number of
shares outstanding adjusted for the assumed conversion of shares issuable upon
exercise of stock options where appropriate.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
---------------------------------------------------------
Liquidity and Capital Resources
-------------------------------
Kent Financial Services, Inc. (the "Company") had consolidated cash and
cash equivalents (U.S. Treasury bills with an original maturity of ninety days
or less) of $5.9 million, U.S. Treasury securities with an original maturity of
over ninety days of $.4 million, and marketable securities (at fair value) of
$5.1 million at June 30, 1995. Net cash provided by operations for the six
months ended June 30, 1995 was approximately $2.4 million, compared to net cash
used in operations of $.9 million for the six months ended June 30, 1994. Cash
flow from operations increased principally from the results of operations and
the net changes in the balances of marketable securities, U.S. Treasury
securities and the net receivable from the Company's clearing broker-dealer. Net
cash used in financing activities of $.2 million for the six months ended June
30, 1995 was principally comprised of a $146,000 payment reducing the mortgage
loan collateralized by the Company's headquarters facility pursuant to a
mortgage refinancing in February 1994.
The overall level of cash and cash equivalents decreased from $6.8 million
at June 30, 1994, to $5.9 million at June 30, 1995. This decrease was
principally due to the purchase of U.S. Treasury securities with maturities
greater than ninety days of $.4 million and the effect of the distribution of
American Metals Service, Inc. ("AMTS") common stock to the stockholders of the
Company of $1.8 million. AMTS was formerly a majority-owned subsidiary of the
Company. The balance sheet, results of operations, and net cash flows of AMTS
had been included in the consolidated financial statements of the Company until
December 15, 1994, the date of the distribution. The Company believes that its
liquidity is sufficient for future operations.
Material Changes in Results of Operations
-----------------------------------------
The Company had net income of $533,000, or $.50 per share, for the three
months ended June 30, 1995 compared to a net loss of $493,000, or $.45 per
share, for the comparable period in 1994. For the six months ended June 30,
1995, net income was $952,000, or $.89 per share, compared to a net loss of
$182,000, or $.17 per share, for the comparable period in the prior year.
<PAGE>
Net investing gains were $.7 million and $1.4 million for the three and six
months ended June 30, 1995, respectively, compared to net investing losses of
$.3 million and net investing gains of $52,000 for the comparable periods in
1994. For the six months ended June 30, 1995, realized gains accounted for $1.2
million of net investing gains while unrealized gains were $.2 million. The
increase in net investing gains from the three and six months ended June 30,
1994 to the comparable periods in 1995 reflected general market conditions and
variations in investment portfolio composition.
Interest, dividend and other income was $.3 million and $.6 million for the
three and six months ended June 30, 1995, respectively, compared to $.2 million
and $.4 million for the comparable periods in the prior year. The overall rise
for each of the respective periods was the result of higher yields on the
Company's cash, cash equivalents and U.S. Treasury securities.
General and administrative expenses were $1.1 million and $2.1 million for
the three and six months ended June 30, 1995, respectively, compared to $1.0
million and $2.0 million for the comparable three and six month periods in 1994.
The $.1 million increase for each of the periods in 1995 was the direct result
of increased administrative costs related to the operations of T. R. Winston &
Co., Inc.'s New York office.
Interest expense increased during the three and six month periods in 1995
from the comparable periods in 1994 by approximately $55,000 and $111,000,
respectively. The increases were due to higher prevailing interest rates on the
average balance outstanding to the Company's clearing broker.
The provision for income taxes of $61,000 and $134,000 for the three and
six months ended June 30, 1995 is composed of a provision for federal
alternative minimum tax and state income taxes. While the Company is in a net
operating loss and capital loss carryforward position for federal income tax
purposes, the IRS has proposed adjustments to the Company's consolidated federal
income tax returns for the years 1988 through 1991 that could result in the
elimination of the utilization of these carryforwards in 1995 and 1994. See Note
4 of Notes to Consolidated Financial Statements for additional information.
<PAGE>
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
------- --------------------------------
(a) Exhibits
--------
27. Financial Data Schedule for the six months ended June
30, 1995.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter for which this
report is being filed.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
KENT FINANCIAL SERVICES, INC.
Dated: August 11, 1995 By: /s/ Mark L. Koscinski
-----------------------------
Mark L. Koscinski
Vice President and
Chief Accounting Officer
