<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
quarter ended March 31, 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> 3-mos
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,242
<SECURITIES> 6,572
<RECEIVABLES> 1,147
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,306
<PP&E> 2,085
<DEPRECIATION> 511
<TOTAL-ASSETS> 14,306
<CURRENT-LIABILITIES> 2,137
<BONDS> 603
<COMMON> 107
0
0
<OTHER-SE> 11,459
<TOTAL-LIABILITY-AND-EQUITY> 14,306
<SALES> 0
<TOTAL-REVENUES> 3,008
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,516
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 492
<INCOME-TAX> 73
<INCOME-CONTINUING> 419
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 419
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</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: March 31, 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 April 30, 1995, the issuer had 1,064,682 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>
March 31,
1995
---------
<S> <C>
Cash and cash equivalents ............................. $ 3,242
U.S. Treasury securities, at cost,
which approximates market ........................... 1,354
Marketable securities ................................. 6,572
Net receivable from clearing agent .................... 1,147
Property and equipment:
Land and building .................................. 1,440
Leasehold improvements ............................. 228
Office furniture and equipment ..................... 417
-------
2,085
Accumulated depreciation ...........................( 511)
-------
Net property and equipment ......................... 1,574
-------
Other assets .......................................... 417
-------
Total assets ................................... $14,306
=======
</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>
March 31,
1995
---------
<S> <C>
Liabilities:
Accounts payable ............................................... $ 117
Accrued expenses ............................................... 1,458
Long-term debt ................................................. 603
Accrual for discontinued operations ............................ 562
-------
Total liabilities .......................................... 2,740
-------
Stockholders' equity:
Preferred stock without par value, 500,000
shares authorized; none issued ............................... -
Common stock, $.10 par value, 4,000,000
shares authorized; 1,070,728 issued
and outstanding .............................................. 107
Additional paid-in capital ..................................... 15,607
Accumulated deficit ............................................ ( 4,148)
-------
Total stockholders' equity ................................. 11,566
-------
Total liabilities and stockholders' equity ................. $14,306
=======
</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
March 31,
------------------
1995 1994
------ ------
<S> <C> <C>
Revenues:
Brokerage commissions and fees ......................... $ 956 $1,162
Net broker-dealer inventory gains ...................... 1,134 1,304
Net investing gains .................................... 645 338
Interest, dividends and other .......................... 273 187
------ ------
......................................................... 3,008 2,991
------ ------
Expenses:
Brokerage ............................................. 1,432 1,574
General, administrative and other ..................... 1,004 1,048
Interest .............................................. 80 24
------ ------
2,516 2,646
------ ------
Earnings before income taxes ............................. 492 345
Provision for income taxes ............................... 73 34
------ ------
Net earnings ............................................. $ 419 $ 311
====== ======
Net earnings per common share ............................ $ .39 $ .28
====== ======
Weighted average number of common
shares outstanding (in 000's) .......................... 1,076 1,104
====== ======
</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>
Three Months Ended
March 31,
------------------
1995 1994
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ............................................ $ 419 $ 311
Adjustments:
Depreciation and amortization ......................... 41 31
Unrealized gains on marketable
securities .......................................... ( 232) ( 92)
Change in marketable securities
and U.S. Treasury securities ........................ 85 ( 1,052)
Change in net receivable from
clearing agent ...................................... ( 868) 677
Change in interest receivable ......................... 14 ( 10)
Change in accounts payable and
accrued expenses .................................... 58 ( 43)
Change in accrued income taxes ........................ 68 30
Other, net ............................................ 58 79
------ ------
Net cash used in operating
activities .......................................... ( 357) ( 69)
------ ------
Cash flows from investing activities:
Additional investment in former
majority-owned subsidiary .............................. - ( 46)
Purchase of fixed assets ................................ ( 23) ( 4)
------ ------
Net cash used in investing
activities .......................................... ( 23) ( 50)
------ ------
Cash flows from financing activities:
Purchase of common stock ................................ ( 12) -
Payments on debt ........................................ ( 151) ( 6)
Redemption of debentures ................................ ( 6) ( 4)
------ ------
Net cash used in financing
activities .......................................... ( 169) ( 10)
------ ------
Net decrease in cash and cash
equivalents .............................................. ( 549) ( 129)
Cash and cash equivalents at
beginning of period ...................................... 3,791 7,824
------ ------
Cash and cash equivalents at end of
period ................................................... $3,242 $7,695
====== ======
</TABLE>
See accompanying notes to consolidated
financial statements.
<PAGE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 1995
and for the three months ended March 31, 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 months ended March 31, 1995 and
1994 are not necessarily indicative of the results to be expected for the entire
fiscal year or for any other period.
Certain reclassifications have been made in the 1994 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 $172,000. At March 31, 1995, Winston had net capital, as defined, of
approximately $799,000 which was $627,000 in excess of the required minimum.
<PAGE>
3. MARKETABLE SECURITIES
The following is a summary of marketable securities owned at March 31, 1995
(in $000):
<TABLE>
<CAPTION>
Marketable
Securities
----------
<S> <C>
Marketable equity
securities ............................... $6,432
Mutual funds ............................... 140
------
Aggregate market ........................... $6,572
======
Aggregate cost ............................. $6,761
Gross unrealized loss ...................... $ 493
Gross unrealized gain ...................... $ 304
</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 $5.2 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 OPERATIONS
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 $3.2 million, U.S. Treasury securities with an original maturity of
over ninety days of $1.4 million, and marketable securities (at fair value) of
$6.6 million at March 31, 1995. Net cash used in operations in the first quarter
of 1995 was approximately $357,000, compared to $69,000 in the first quarter of
1994. The decrease in cash flow from operations resulted principally from
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 $169,000 in the first quarter of 1995 was 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 $7.7 million
at March 31, 1994, to $3.2 million at March 31, 1995. This decrease was
principally due to the purchase of U.S. Treasury securities with maturities
greater than ninety days of $1.4 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 in the first quarter of 1995 of $419,000, or
$.39 per share, as compared to net income of $311,000, or $.28 per share in the
first quarter of 1994.
Total brokerage income was $2.1 million in the first quarter of 1995, a
decrease of $.4 million, or 15.2%, from $2.5 million in the comparable period of
1994. Brokerage expenses (including all fixed and variable expenses) decreased
by $.1 million, or 9.0%, from $1.5 million in the first quarter of 1994 to $1.4
million in the first quarter of 1995. The net brokerage income of $.7 million in
1995 represented a decrease of $.2 million, or 26.2%, from the $.9 million
recorded in the first quarter of 1994.
Net investing gains were $.6 million in the first quarter of 1995 compared
to $.3 million in the first quarter of 1994. In 1995, realized gains accounted
for $.4 million of net investing gains while unrealized gains were $.2 million.
The increase in net investing gains from the first quarter of 1994 to the
comparable 1995 period reflected general market conditions and variations in
investment portfolio composition.
<PAGE>
Interest, dividend and other income was $.3 million in the first quarter of
1995, an increase of $.1 million from the $.2 million recorded in the comparable
period in 1994. This increase was the result of higher yields on the Company's
cash, cash equivalents, and U.S. Treasury securities.
General and administrative expenses of $1.0 million in the first quarter of
1995 were consistent with first quarter 1994 levels. The decrease of $44,000
during the quarter ended March 31, 1995 from the comparable period in 1994 was
the direct result of reductions in personnel expenses.
Interest expense increased by approximately $60,000 during the first
quarter of 1995 compared to the same period of fiscal 1994. The increase was due
to an increase in prevailing interest rates on the average balance outstanding
to the Company's clearing broker supporting higher average levels of investments
in marketable securities in 1995.
The provision for income taxes of $73,000 was 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
(b) 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 Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KENT FINANCIAL SERVICES, INC.
Dated: May 10, 1995 By: /s/ Mark L. Koscinski
-----------------------------
Mark L. Koscinski
Vice President and
Chief Accounting Officer
