SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities exchange Act of 1934
For Quarter Ending June 30, 1996
Commission File Number #33-38119-C
THE KENSINGTON COMPANY, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1610632
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation)
Suite 1950 Interchange Tower, 600 S. Hy. 169, Minneapolis, Minnesota 55426
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (612) 546-2075
Indicate by Check mark whether the registration (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or of such shorter period that the
registrant was required to file such reports), and 92) has been subject to such
filing requirements for the past 90 days.
Yes __*__ No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Weighted Number of Shares are 2,999,722 of common
stock no par value.
Part I. Financial Information
Quarter Ended June 30, 1996
GENERAL
The following financial information is submitted in response to the
requirements of Form 10-QSB and does not purport to be financial statements
prepared in accordance with generally accepted accounting principles. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted, although the Company believes the disclosures that are
made are adequate to make the information presented not misleading. Further, in
the opinion of the management, the interim financial statements reflect fairly
the financial position and results of operations for the period indicated.
The results of operations for the quarter ended as stated above are not
necessarily indicative of results to be expected for the entire fiscal year
ending December 31st.
Item 1. Financial Statements
The balance sheet of The Kensington Company, Inc. (the "Company") as of
the Quarter stated above, and the related statement of income and statement of
cash flows are incorporated herein by reference to the Company's quarterly
report.
<TABLE>
<CAPTION>
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 12,419 $ 17,739
Accounts receivable 107,773 183,342
Inventories 140,613 115,033
Other current assets 7,415 10,040
----------- -----------
Total current assets 268,220 326,154
----------- -----------
OTHER ASSETS:
Investment in oil and gas properties, net 1,206,278 1,290,278
Investment in oil and gas partnerships 47,981 139,000
Investment in Ives 0
Investment in KEC partnerships 0
Property and equipment, net 337,754 359,194
Notes receivable - related parties 30,625 185,330
----------- -----------
Total other assets 1,622,638 1,973,802
----------- -----------
$ 1,890,858 $ 2,299,956
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable - $ 9,200 $ 12,500
Note payable - related parties 334,333 275,391
Current portion of long-term debt 93,310 54,791
Current portion of obligations under capital leases 26,548 23,543
Accounts payable 249,177 287,553
Accrued payroll & related taxes 84,102 105,384
Accrued interest 29,397 15,169
Accrued Expenses 75,148 56,950
Intercompany 0 0
----------- -----------
Total current liabilities 901,215 831,281
Long-term debt, net of current portion 578,619 705,686
Obligations under capital leases, net of current portion 55,017 81,564
Minority interest in consolidated Subsidiaries 13,332 0
----------- -----------
Total liabilities 1,548,183 1,618,531
STOCKHOLDERS' EQUITY
Common stock 3,660,377 3,863,008
Additional paid-in capital 0 0
Accumulated deficit (3,020,370) (2,856,612)
Stock subscriptions receivable (297,332) (324,971)
----------- -----------
Total stockholders' equity 342,675 681,425
----------- -----------
$ 1,890,858 $ 2,299,956
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
<S> <C> <C>
REVENUES:
Product sales $ 404,238 $ 637,866
Distributions from oil and gas partnerships 4,875 7,731
Oil and gas sales 445 0
----------- -----------
Total revenues 409,558 645,597
----------- -----------
COST OF SALES:
Cost of products sold 316,569 440,570
Oil and gas costs 0 1,090
----------- -----------
Total cost of sales 316,569 441,660
----------- -----------
Gross profit 92,989 203,937
----------- -----------
OPERATING EXPENSES 175,970 217,574
----------- -----------
INCOME (LOSS) FROM OPERATIONS (82,981) (13,637)
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (58,858) (51,190)
Litigation settlement 0 0
Minority Interest in Earnings of Consolidated Oil & Gas Ptsp (322) 0
Miscellaneous income 0 0
----------- -----------
Total other income (expense) (59,180) (51,190)
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (141,839) (64,827)
Provision for income taxes (benefit) 0 0
----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM (141,839) (64,827)
Extinguishment of debt, net of income taxes of $0 0 0
----------- -----------
NET INCOME (LOSS) (141,839) (64,827)
ACCUMULATED DEFICIT, BEGINNING (2,879,598) (2,804,818)
----------- -----------
ACCUMULATED DEFICIT, ENDING ($3,021,437) ($2,856,612)
=========== ===========
Earnings Per Share ($ 0.05) ($ 0.02)
</TABLE>
<TABLE>
<CAPTION>
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED JUNE 30, 1996 & 1995
(UNAUDITED)
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($141,839) ($ 64,824)
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Depreciation, depletion and amortization 16,085 12,167
Expenses paid by issuance of debt 0 0
Interest income on stock subscriptions 0 0
Extinguishment of debt 0 (1,000)
Changes in operating assets and liabilities:
Accounts receivable 182,595 (21,810)
Inventories (10,000) (26,442)
Other current assets 31,188 13,471
Other assets 0 0
Accounts payable (23,990) (62,979)
Other current liabilities 7,259 13,086
--------- ---------
Cash flows from operating activities 61,298 (138,331)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Unconsolidated Gas & Oil Partnerships 4,875 0
Decrease in notes receivable - related parties 1,500 2,949
Purchase of property and equipment (1,364) (3,865)
Sale of Stock 11,215
--------- ---------
Cash flows from investing activities 16,226 (916)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable - related parties (11,623) 0
Proceeds short, long-term debt (37,598) 10,500
Payments on long-term debt (22,305) 88,514
Payments on obligations under capital leases (3,000) 0
--------- ---------
Cash flows from financing activities ($ 74,526) $ 99,014
--------- ---------
INCREASE (DECREASE) IN CASH $ 2,998 ($ 40,233)
CASH, BEGINNING 9,421 57,972
--------- ---------
CASH, ENDING $ 12,419 $ 17,739
========= =========
</TABLE>
<TABLE>
<CAPTION>
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996, 1995
(UNAUDITED)
1996 1995
<S> <C> <C>
REVENUES:
Product sales $ 1,055,819 $ 1,229,257
Distributions from oil and gas partnerships 8,387 17,831
Oil and gas sales 0 4,500
----------- -----------
Total revenues $ 1,064,206 $ 1,251,588
----------- -----------
COST OF SALES:
Cost of products sold 725,406 838,583
Oil and gas costs 200 2,645
----------- -----------
Total cost of sales $ 725,606 $ 841,228
----------- -----------
Gross profit $ 338,600 $ 410,360
----------- -----------
OPERATING EXPENSES $ 356,237 $ 497,904
----------- -----------
INCOME (LOSS) FROM OPERATIONS ($ 17,637) ($ 87,544)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income - related parties 0 0
Interest expense (104,979) (84,693)
Interest expense - related parties 0 0
Litigation settlement 0 0
Miscellaneous income 0 0
----------- -----------
Total other income (expense) ($ 104,979) ($ 84,693)
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM ($ 122,616) ($ 172,237)
Provision for income taxes (benefit) 0 0
----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM ($ 122,616) ($ 172,237)
Extinguishment of debt, net of income taxes of $0 0 0
----------- -----------
NET INCOME (LOSS) ($ 122,616) ($ 172,237)
=========== ===========
NET LOSS PER SHARE ($ 0.04) ($ 0.06)
WEIGHTED NUMBER OF SHARES OUTSTANDING 2,945,894 2,970,284
</TABLE>
<TABLE>
<CAPTION>
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996, 1995
(UNAUDITED)
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($122,616) ($172,234)
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Depreciation, depletion and amortization 26,914 20,017
Expenses paid by issuance of debt 0 0
Interest income on stock subscriptions 0 0
Extinguishment of debt 0 (2,500)
Changes in operating assets and liabilities:
Accounts receivable 94,445 (66,672)
Inventories (4,501) (4,000)
Other current assets 5,661 13,717
Other assets 0 0
Accounts payable 26,361 (74,269)
Other current liabilities 3,226 9,679
--------- ---------
Cash flows from operating activities $ 29,490 ($276,262)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Unconsolidated Gas & Oil Partnerships 6,366
Decrease in notes receivable - related parties 2,500 2,949
Purchase of property and equipment (2,735) (3,865)
Sale of Stock 11,215
--------- ---------
Cash flows from investing activities 17,346 (916)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable - related parties (9,763) 2,948
Proceeds from long-term debt (18,608) 110,500
Payments on term debt (34,273) 73,114
Payments on Obligations under Capital Leases (6,005) (5,380)
Payments received on stock subscriptions 0 0
Increase (decrease) in intercompany accounts 0 0
--------- ---------
Cash flows from financing activities ($ 68,649) $ 181,182
--------- ---------
INCREASE (DECREASE) IN CASH ($ 21,813) ($ 95,996)
CASH, BEGINNING 34,232 113,735
--------- ---------
CASH, ENDING $ 12,419 $ 17,739
========= =========
</TABLE>
Item 2. Management's Discussion and Analysis
Results of Operations
Revenues for the 2nd quarter of 1996 were significantly lower than those for the
same period in 1995. This decrease in revenue is directly attributable to lower
than anticipated order volume from a major customer. This reduction in volume
directly relates to the loss sustained for the quarter. Management has taken
steps to reduce costs in light of reduced revenues. We are still confident that
revenues will increase during the next quarter. As part of the cost cutting
measures taken, headcount at the production level was reduced by 6 employees.
These personnel may be rehired as revenues warrant.
The losses incurred for the quarter had a significant impact on cash and the
company's ability to meet cash requirements. To date the company has been able
to meet its debt obligations. Currently negotiations are underway with several
banks to refinance a portion of the company debt in order to meet the debt
obligations. However there is no guarantee that this refinancing will occur in
which case the company's ability to fund its debenture payments may be adversely
impacted. The company has approximately $24k in convertible debentures due in
the last quarter of 1996 in addition to the normal operating expenses.
The registrant has been pursuing its equity acquisition program which was
discussed in previous filings. It will be granted 15,000 shares in METROPOLITAN
HEALTH NETWORKS, INC. (less than 1%) and 133,000 shares in GLOBAL INTERMATCH,
INC. (5% ownership). Global sells prepaid debit cellular telephones. In
addition, a 10% (125,000 shares) equity interest has been acquired in MAXWELL
RAND HOLDINGS. Maxwell Rand has graphic image compression algorithms technology
that reduces the time it takes to download graphics from the internet by 40 to
400 times, depending on how much of the image resolution is lost.
Liquidity and Capital Resources
For the 2nd quarter, the Company had a net loss from operations of $83k
compared to losses from operations for the same period of the previous year of $
14k. Management is of the opinion that the Company will show an operating profit
in the 3rd quarter.
During the period stated the Registrant did not sell to directors,
management and others, any common stock except that Director Keith Witter
exercised an option on 58,875 restricted shares at $.32 each.
Inflation
The rate of inflation did not have a significant impact on operations
nor is it expected to have a material effect on operations for the remainder of
the year.
Part II. Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders -
None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K and S-8.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE KENSINGTON COMPANY, INC.
/s/ Mark Haggerty
Mark Haggerty
Chief Executive Officer
/s/ Jeff Etten
Jeff Etten, C.F.O.
Dated: August 12, 1996
Minneapolis, Minnesota
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,419
<SECURITIES> 0
<RECEIVABLES> 107,773
<ALLOWANCES> 0
<INVENTORY> 140,613
<CURRENT-ASSETS> 268,220
<PP&E> 631,030
<DEPRECIATION> 292,589
<TOTAL-ASSETS> 1,890,858
<CURRENT-LIABILITIES> 901,215
<BONDS> 633,636
0
0
<COMMON> 3,660,377
<OTHER-SE> (3,317,702)
<TOTAL-LIABILITY-AND-EQUITY> 1,890,858
<SALES> 1,064,206
<TOTAL-REVENUES> 1,064,206
<CGS> 725,606
<TOTAL-COSTS> 1,186,822
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,979
<INCOME-PRETAX> (122,616)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (122,616)
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
