<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 three months ended June 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000316028
<NAME> KENT FINANCIAL SERVICES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 8,369
<SECURITIES> 4,746
<RECEIVABLES> 270
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,385
<PP&E> 1,656
<DEPRECIATION> 400
<TOTAL-ASSETS> 14,793
<CURRENT-LIABILITIES> 1,569
<BONDS> 0
0
0
<COMMON> 103
<OTHER-SE> 12,588
<TOTAL-LIABILITY-AND-EQUITY> 14,793
<SALES> 0
<TOTAL-REVENUES> 1,406
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,017
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 125
<INCOME-PRETAX> (736)
<INCOME-TAX> (65)
<INCOME-CONTINUING> (671)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (671)
<EPS-PRIMARY> (.65)
<EPS-DILUTED> (.65)
</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, 1997
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, 1997, the issuer had 1,025,570 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
<TABLE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
(UNAUDITED)
($000 Omitted)
June 30,
1997
----------
<S> <C>
Cash and cash equivalents $ 8,369
U.S. Treasury securities, at cost,
which approximates market 136
Securities owned 4,610
Net receivable from clearing agent 270
Property and equipment:
Land and building 1,440
Office furniture and equipment 216
-------
1,656
Accumulated depreciation ( 400)
-------
Net property and equipment 1,256
-------
Other assets 152
-------
Total assets $14,793
=======
</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>
June 30,
1997
----------
<S> <C>
Liabilities:
Accounts payable $ 144
Accrued expenses 972
Long-term debt 533
Accrual for discontinued operations 453
-------
Total liabilities 2,102
-------
Stockholders' equity:
Preferred stock without par value, 500,000 -
shares authorized; none issued
Common stock, $.10 par value, 4,000,000
shares authorized; 1,029,820 outstanding 103
Additional paid-in capital 15,314
Accumulated deficit ( 2,726)
-------
Total stockholders' equity 12,691
-------
Total liabilities and stockholders' equity $14,793
=======
</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>
Three Months Ended
June 30,
------------------------
1997 1996
------ ------
<S> <C> <C>
Revenues:
Brokerage commissions and fees $ 350 $ 969
Principal transactions:
Trading 420 561
Investing gains (losses) ( 91) 532
Interest, dividends and other 222 403
------ ------
901 2,465
------ ------
Expenses:
Brokerage 530 1,083
General, administrative and other 456 691
Interest 73 23
------ ------
1,059 1,797
------ ------
Earnings (loss) before income taxes ( 158) 668
Provision (benefit) for income taxes ( 18) 171
------ ------
Net earnings (loss) ($ 140) $ 497
====== ======
Net earnings (loss) per common share ($ .14) $ .47
====== ======
Weighted average number of common
shares outstanding (in 000's) 1,031 1,050
====== ======
</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>
Six Months Ended
June 30,
------------------------
1997 1996
------ ------
<S> <C> <C>
Revenues:
Brokerage commissions and fees $ 773 $1,915
Principal transactions:
Trading 785 1,264
Investing gains (losses) ( 572) 1,052
Interest, dividends and other 420 782
------ ------
1,406 5,013
------ ------
Expenses:
Brokerage 1,056 2,195
General, administrative and other 961 1,492
Interest 125 147
------ ------
2,142 3,834
------ ------
Earnings (loss) before income taxes ( 736) 1,179
Provision (benefit) for income taxes ( 65) 286
------ ------
Net earnings (loss) ($ 671) $ 893
====== ======
Net earnings (loss) per common share ($ .65) $ .85
====== ======
Weighted average number of common
shares outstanding (in 000's) 1,037 1,051
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($000 Omitted)
<TABLE>
Six Months Ended
June 30,
------------------------
1997 1996
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) ($ 671) $ 893
Adjustments:
Depreciation and amortization 30 96
Unrealized (gains) losses on
securities owned 586 ( 730)
Change in securities owned
and U.S. Treasury securities 2,307 ( 803)
Change in net receivable from
clearing broker-dealer ( 462) 116
Change in accounts payable and
accrued expenses ( 342) 44
Other, net ( 35) 20
------ ------
Net cash provided by (used in)
operating activities 1,413 ( 364)
------ ------
Cash flows from investing activities:
Sale (purchase) of equipment, net ( 16) 34
Other, net - 78
------ ------
Net cash provided by
(used in) investing activities ( 16) 112
------ ------
Cash flows from financing activities:
Purchase of common stock ( 121) ( 17)
Payments on debt ( 16) ( 8)
Other - ( 12)
------ ------
Net cash used in financing
activities ( 137) ( 37)
------ ------
Net increase (decrease) in cash and
cash equivalents 1,260 ( 289)
Cash and cash equivalents at
beginning of period 7,109 8,259
------ ------
Cash and cash equivalents at end of
period $8,369 $7,970
====== ======
Supplemental disclosure of cash flow information:
Cash paid for:
Interest expense $ 125 $ 147
====== ======
Taxes $ 142 $ 1
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(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, 1997
and for the three and six month periods ended June 30, 1997 and 1996 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, 1996 as filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The results of operations for the three and six month periods ended June
30, 1997 and 1996 are not necessarily indicative of the results to be expected
for the entire year or for any other period.
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 ("AVF"), an investment
partnership whose primary purpose is to make large investments in a limited
number of portfolio companies whose securities are considered undervalued by the
partnership's management. Winston is a licensed securities broker-dealer and is
a member of the National Association of Securities Dealers, 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.
<PAGE>
Pursuant to the net capital provisions of Rule 15c3-1 of the Securities
Exchange Act of 1934, Winston is required to maintain minimum net capital, as
defined, of $121,000. At June 30, 1997, Winston had net capital, as defined, of
approximately $681,000 which was $560,000 in excess of the required minimum.
3. Securities Owned
----------------
Securities owned consist of the following ($000's omitted):
<TABLE>
<CAPTION>
Market Value Fair Value Total
---------------- ---------------- -------
<S> <C> <C> <C>
Equity
securities:
AVF $1,621 $2,732 $4,353
Winston 94 - 94
Other 75 - 75
Mutual funds 88 - 88
------ ------ ------
Total $1,878 $2,732 $4,610
====== ====== ======
</TABLE>
The estimated fair value of securities owned has been determined in good
faith under consistently applied principles by the management of the Company,
using available market information and other valuation considerations.
Considerable judgment is required to develop the estimates of fair value, thus,
the estimates provided herein are not necessarily indicative of the amounts that
could be realized in a current market exchange.
4. Net Earnings (Loss) Per Common Share
------------------------------------
Net earnings (loss) 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 $8.4 million, U.S. Treasury securities with an original maturity of
over ninety days of $136,000, and securities owned of $4.6 million at June 30,
1997. See Note 3 of Notes to Consolidated Financial Statements for additional
information on the valuation of securities owned. Net cash provided by
operations was $1.4 million in the six months ended June 30, 1997 compared to a
net use of cash by operations of $364,000 in the comparable period of 1996. Cash
flow from operations increased principally from the change in securities owned
and U.S. Treasury securities less the change in the net receivable from the
clearing broker, accounts payable and all other accrued expenses. Net cash used
in financing activities of $137,000 for the six months ended June 30, 1997 was
principally comprised of the purchase of Company common stock, which was
subsequently retired. The Company believes that its liquidity is sufficient for
future operations.
Material Changes in Results of Operations
- -----------------------------------------
The Company had a net loss of $140,000, or $.14 per share, for the three
months ended June 30, 1997 compared to net income of $497,000 or $.47 per share,
for the comparable quarter in 1996. For the six months ended June 30, 1997, the
net loss was $671,000, or $.65 per share, compared to net income of $893,000, or
$.85 per share, for the comparable period in the prior year.
Total brokerage income (consisting of brokerage commissions, fees and
trading gains) for the three months ended June 30, 1997 was $770,000, a decrease
of approximately $760,000, or 49.7%, from $1.5 million in the comparable 1996
period. Total brokerage income was $1.6 million for the six months ended June
30, 1997, a decrease of $1.6 million or 51% from $3.2 million for the six month
period ended June 30, 1996. Brokerage expenses (including all fixed and variable
expenses) decreased by $553,000, or 51.1%, from $1.1 million in the quarter
ended June 30, 1996, to $530,000 for the three months ended June 30, 1997. For
the six months ended June 30, 1997, brokerage expenses were $1.1 million
compared to $2.2 million for the comparable period in the prior year, a decrease
of $1.1 million or 51.9%. Net brokerage income of $240,000 for the three months
ended June 30, 1997 decreased from $447,000 from the same period in 1996, a
decrease of $207,000 or 46.3%. For the six month period ended June 30, 1997, net
brokerage income was $502,000, compared to $984,000 for the six months ended
June 30, 1996, a decrease of $482,000, or 49%.
<PAGE>
The decrease in total brokerage income, total brokerage expense and net
brokerage income was attributable to the closing of the New York office of T. R.
Winston & Company, Inc. ("Winston") on March 31, 1996 and a decrease in the
total number of brokers employed at Winston during 1997.
Investing losses were $91,000 and $572,000 for the three and six months
ended June 30, 1997, respectively, compared to gains of $532,000 and $1.1
million, respectively for the comparable periods in 1996. Substantially all of
the investing losses in 1997 were unrealized. The decrease in net investing
gains from the three and six month periods ended June 30, 1996 to the comparable
periods in 1997 reflected the decline in the valuation of selected securities
owned in 1997. See Note 3 of Notes of Consolidated Financial Statements for
additional information on the valuation of securities owned.
Interest, dividend and other income was $222,000 and $420,000 for the three
and six months ended June 30, 1997, respectively, compared to $403,000 and
$782,000 for the comparable periods in the prior year. Interest, dividend and
other income decreased in the Second Quarter 1997 compared to the Second Quarter
1996 due principally to the sale of Winston's Pacific Stock Exchange seat in the
Second Quarter 1996, which resulted in a gain of $100,000 and lower interest
income resulting from lower customer balances at the clearing broker dealer.
General and administrative expenses were $456,000 and $691,000 for the
quarters ended June 30, 1997 and 1996, respectively, a decrease of $235,000 or
34%. For the six month periods ended June 30, 1997 and 1996, general and
administrative expenses were $1.0 million and $1.5 million respectively, a
decrease of $531,000 or 35.6%. The decreases for each of the periods in 1997
compared to the same periods in 1996 were the result of lower administrative
costs related to the closing of Winston's New York office, as well as lower
overall transaction volume.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which will be effective for the Company
beginning January 1, 1998. SFAS No. 131 redefines how operating segments are
determined and requires expanded quantitative and qualitative disclosures
relating to a company's operating segments. The Company has not yet completed
its analysis of which operating segments it will report on. The Company does not
believe the adoption of SFAS No. 131 will have a material impact on current
disclosures.
<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, 1997.
(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 14, 1997 By: /s/ Mark Koscinski
-----------------------------
Mark Koscinski
Vice President and
Principal Accounting Officer
