<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 March
31, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,990
<SECURITIES> 5,894
<RECEIVABLES> 683
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,567
<PP&E> 1,656
<DEPRECIATION> 386
<TOTAL-ASSETS> 14,992
<CURRENT-LIABILITIES> 1,536
<BONDS> 0
0
0
<COMMON> 104
<OTHER-SE> 12,812
<TOTAL-LIABILITY-AND-EQUITY> 14,992
<SALES> 0
<TOTAL-REVENUES> 505
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,031
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52
<INCOME-PRETAX> (578)
<INCOME-TAX> (47)
<INCOME-CONTINUING> (531)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (531)
<EPS-PRIMARY> (.51)
<EPS-DILUTED> (.51)
</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, 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 April 30, 1997, the issuer had 1,029,853 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)
<CAPTION>
March 31,
1997
----------
<S> <C>
Cash and cash equivalents $ 6,990
U.S. Treasury securities 146
Securities owned 5,748
Receivable from clearing broker 683
Property and equipment:
Land and building 1,440
Office furniture and equipment 216
-------
1,656
Accumulated depreciation ( 386)
-------
Net property and equipment 1,270
-------
Other assets 155
-------
Total assets $14,992
=======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(UNAUDITED)
($000 Omitted)
<CAPTION>
March 31,
1997
----------
<S> <C>
Liabilities:
Accounts payable $ 135
Accrued expenses 948
Long-term debt 540
Accrual for discontinued operations 453
-------
Total liabilities 2,076
-------
Contingent liabilities -
Stockholders' equity:
Preferred stock without par value, 500,000
shares authorized; none outstanding -
Common stock, $.10 par value, 4,000,000
shares authorized; 1,041,860 outstanding 104
Additional paid-in capital 15,398
Accumulated deficit ( 2,586)
-------
Total stockholders' equity 12,916
-------
Total liabilities and stockholders' equity $14,992
=======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($000 Omitted, except per share data)
<CAPTION>
Three Months Ended
March 31,
------------------------
1997 1996
------ -----
<S> <C> <C>
Revenues:
Brokerage commissions and fees $ 423 $ 946
Principal transactions:
Trading 365 703
Investing gains (losses) ( 481) 520
Interest, dividends and other 198 379
------ ------
505 2,548
------ ------
Expenses:
Brokerage 526 1,113
General, administrative and other 505 801
Interest 52 124
------ ------
1,083 2,038
------ ------
Earnings (loss) before income taxes ( 578) 510
Provision (benefit) for income taxes ( 47) 115
------ ------
Net earnings (loss) ($ 531) $ 395
====== ======
Net earnings (loss) per common share ($ .51) $ .38
====== ======
Weighted average number of common
shares outstanding (in 000's) 1,043 1,051
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($000 Omitted)
<CAPTION>
Three Months Ended
March 31,
------------------------
1997 1996
------ -----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) ($ 531) $ 395
Adjustments:
Depreciation and amortization 8 97
Change in unrealized (gains)
losses on securities owned 606 ( 348)
Change in securities owned
and U.S. Treasury securities 1,140 ( 141)
Change in receivable from
clearing broker ( 901) ( 65)
Change in accounts payable and
accrued expenses ( 122) ( 179)
Change in income taxes payable ( 225) 100
Other, net ( 33) 12
------ ------
Net cash used in operating
activities ( 58) ( 129)
------ ------
Cash flows from investing activities:
Purchase of property and equipment ( 7) ( 2)
Other ( 10) 20
------ ------
Net cash provided by
(used in) investing activities ( 17) 18
------ ------
Cash flows from financing activities:
Purchase of common stock ( 36) ( 16)
Payments on debt ( 8) ( 7)
Other - ( 13)
------ ------
Net cash used in financing
activities ( 44) ( 36)
------ ------
Net decrease in cash and cash
equivalents ( 119) ( 147)
Cash and cash equivalents at
beginning of period 7,109 8,259
------ ------
Cash and cash equivalents at end of
period $6,990 $8,112
====== ======
Supplemental disclosure of cash flow information:
Cash paid for:
Interest expense $ 52 $ 124
====== ======
Taxes $ 190 $ 1
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 1997
and for the quarters ended March 31, 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 results of operations for the quarters ended March 31, 1997 and 1996
are not necessarily indicative of the results to be expected for the entire
fiscal 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.
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 $125,000. At March 31, 1997, Winston had net capital, as defined, of
approximately $672,000 which was $547,000 in excess of the required minimum.
<PAGE>
3. Securities Owned
----------------
Securities owned consist of the following ($000's omitted):
<TABLE>
<CAPTION>
Non-
Marketable, at Marketable, at
Market Value Fair Value Total
---------------- ---------------- -------
<S> <C> <C> <C>
Equity
securities:
AVF $3,735 $1,748 $5,483
Winston 66 - 66
Other 108 - 108
Mutual funds 91 - 91
------ ------ ------
Total $4,000 $1,748 $5,748
====== ====== ======
</TABLE>
The estimated fair value of non-marketable 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 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 $6,990,000, U.S. Treasury securities with an original maturity
greater than 90 days of $146,000 and securities owned (at fair value) of
$5,748,000 at March 31, 1997. For additional information on securities owned,
see Note 3 of Notes to Consolidated Financial Statements. The Company believes
that its financial resources are sufficient for future operations.
Net cash used in operations for the quarters ended March 31, 1997, and
March 31, 1996 was approximately $58,000 and $129,000 respectively. In the first
quarter of 1997, a net change in securities owned generated cash flows of
$1,140,000. The cash inflow generated from the change in securities owned was
offset by a change in the receivable from the clearing broker and the payment of
accounts payable, accrued expenses, and income taxes. The net loss of $531,000
for the first quarter of 1997 did not utilize cash flows as net unrealized
investing losses were the major components of the net loss. In the comparable
quarter of 1996, net income was $395,000, but net unrealized gains on securities
owned of $348,000, a component of net income, did not generate cash inflows. The
net changes in securities owned and receivable from the clearing broker resulted
in a cash outflow of $206,000.
Material Changes in Results of Operations
- -----------------------------------------
The Company had a net loss of $531,000, or $.51 per share, for the three
months ended March 31, 1997, compared to net income of $395,000, or $.38 per
share, for the comparable period in 1996.
Total brokerage income (consisting of brokerage commissions, fees and
principal trading transactions) for the three months ended March 31, 1997
decreased by approximately $861,000, or 52%, to $788,000 from $1,649,000 in the
comparable 1996 period. Brokerage expenses (including all fixed and variable
expenses) decreased by $587,000, or 53%, from $1,113,000 in the quarter ended
March 31, 1996, to $526,000 in the quarter ended March 31, 1997. Net brokerage
income of $262,000 for the three months ended March 31, 1997 reflected a
$274,000 decrease from $536,000 for the same period in 1996. The decrease in
brokerage revenue and expenses was due to the closing of the New York office of
T. R. Winston & Company, Inc. ("Winston") on March 31, 1996. For additional
information on Winston, see Note 2 of Notes to Consolidated Financial
Statements.
<PAGE>
Net investing gains (losses) were ($481,000) and $520,000 for the three
months ended March 31, 1997 and 1996, respectively. For the three months ended
March 31, 1997, net realized gains were $125,000 and net unrealized losses were
$606,000. For the comparable period in 1996, net investing gains were composed
of realized gains of $172,000 and unrealized gains of $348,000. The change in
net investing gains (losses) was due principally to a decline in the valuation
of selected securities owned in the first quarter of 1997.
Interest, dividend and other income was $198,000 and $379,000 for the three
months ended March 31, 1997, and 1996 respectively. The decrease was due to
lower interest income, which was the result of lower investable balances of the
Company's cash equivalents and lower customer balances at the clearing broker.
General and administrative expenses were $505,000 and $801,000 for the
three months ended March 31, 1997 and 1996, respectively. The decrease from the
first quarter of 1996 to the first quarter of 1997 was the result of decreased
costs related to the closing of Winston's New York office. The principal
reductions in general and administrative expenses were lower personnel expenses
of $89,000 (due to a lower headcount) and lower occupancy and depreciation
expenses of $164,000. Other general and administrative expenses (including
postage, supplies and office services) decreased by $43,000.
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 6. - Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) Exhibits
(27). Financial Data Schedule for the three months ended
March 31, 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 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 5, 1997 By: /s/ John W. Galuchie, Jr.
-----------------------------
John W. Galuchie, Jr.
Vice President
