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 September 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 September 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
SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 12,241 $ 965
Accounts receivable 176,379 234,374
Inventories 173,798 88,033
Other current assets 44,915 18,731
----------- -----------
Total current assets 407,333 342,103
----------- -----------
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 329,822 368,229
Notes receivable - related parties 74,536 170,140
----------- -----------
Total other assets 1,658,617 1,967,647
----------- -----------
$ 2,065,950 $ 2,309,750
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable - $ 49,247 $ 11,500
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 397,158 281,905
Accrued payroll & related taxes 79,274 102,538
Accrued interest 25,830 15,169
Accrued Expenses 91,085 56,950
Intercompany 0 0
----------- -----------
Total current liabilities 1,096,785 821,787
Long-term debt, net of current portion 543,450 705,304
Obligations under capital leases, net of current portion 45,017 81,564
Minority interest in consolidated Subsidiaries 13,332 0
----------- -----------
Total liabilities 1,698,584 1,608,655
STOCKHOLDERS' EQUITY
Common stock 3,660,377 3,863,008
Additional paid-in capital 0 0
Accumulated deficit (3,040,591) (2,844,943)
Stock subscriptions receivable (252,420) (316,970)
----------- -----------
Total stockholders' equity 367,366 701,095
----------- -----------
$ 2,065,950 $ 2,309,750
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
<S> <C> <C>
REVENUES:
Product sales $ 457,149 $ 620,234
Distributions from oil and gas partnerships 0 0
Oil and gas sales 513 2,794
----------- -----------
Total revenues 457,662 623,028
----------- -----------
COST OF SALES:
Cost of products sold 294,136 408,382
Oil and gas costs 0 0
----------- -----------
Total cost of sales 294,136 408,382
----------- -----------
Gross profit 163,526 214,646
----------- -----------
OPERATING EXPENSES 157,397 176,124
----------- -----------
INCOME (LOSS) FROM OPERATIONS 6,129 38,522
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (26,350) (26,851)
Litigation settlement 0 0
Minority Interest in Earnings of Consolidated Oil & Gas Ptsp (322) 0
Miscellaneous income 0 0
----------- -----------
Total other income (expense) (26,672) (26,851)
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (20,221) 11,671
Provision for income taxes (benefit) 0 0
----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM (20,221) 11,671
Extinguishment of debt, net of income taxes of $0 0 0
----------- -----------
NET INCOME (LOSS) (20,221) 11,671
ACCUMULATED DEFICIT, BEGINNING (2,879,598) 0
----------- -----------
ACCUMULATED DEFICIT, ENDING ($2,899,819) $ 0
=========== ===========
Earnings Per Share ($ 0.01) $ 0.00
WEIGHTED NUMBER OF SHARES OUTSTANDING 3,029,159 3,083,120
</TABLE>
<TABLE>
<CAPTION>
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996, 1995
(UNAUDITED)
1996 1995
<S> <C> <C>
REVENUES:
Product sales $ 1,512,968 $ 1,849,491
Distributions from oil and gas partnerships 18,376 17,831
Oil and gas sales 0 5,483
----------- -----------
Total revenues $ 1,531,344 $ 1,872,805
----------- -----------
COST OF SALES:
Cost of products sold 1,019,542 1,246,965
Oil and gas costs 200 19,127
----------- -----------
Total cost of sales $ 1,019,742 $ 1,266,092
----------- -----------
Gross profit $ 511,602 $ 606,713
----------- -----------
OPERATING EXPENSES $ 523,111 $ 647,175
----------- -----------
INCOME (LOSS) FROM OPERATIONS ($ 11,509) ($ 40,462)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income - related parties 0 0
Interest expense (131,328) (120,104)
Interest expense - related parties 0 0
Litigation settlement 0 0
Miscellaneous income 0 0
Total other income (expense) ($ 131,328) ($ 120,104)
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM ($ 142,837) ($ 160,566)
Provision for income taxes (benefit) 0 0
----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM ($ 142,837) ($ 160,566)
Extinguishment of debt, net of income taxes of $0 0 0
----------- -----------
NET INCOME (LOSS) ($ 142,837) ($ 160,566)
=========== ===========
NET LOSS PER SHARE ($ 0.05) ($ 0.05)
WEIGHTED NUMBER OF SHARES OUTSTANDING 2,999,722 3,083,120
</TABLE>
<TABLE>
<CAPTION>
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED SEPTEMBER 30, 1996 & 1995
(UNAUDITED)
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 20,221) $ 11,671
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Depreciation, depletion and amortization 10,467 9,133
Extinguishment of debt (1,000)
Changes in operating assets and liabilities:
Accounts receivable (68,606) (51,032)
Inventories (33,185) 27,000
Other current assets (37,500) (8,691)
Other assets 0 0
Accounts payable 147,981 (5,648)
Other current liabilities 7,542 (2,864)
--------- ---------
Cash flows from operating activities 6,478 (21,431)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Unconsolidated Gas & Oil Partnerships 0 0
Decrease in notes receivable - related parties 0 15,190
Purchase of property and equipment 2,535 (18,168)
Sale of Stock 0
Cash flows from investing activities 2,535 (2,978)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable - related parties 0 0
Proceeds short, long-term debt 40,047 17,000
Payments on long-term debt (40,568) (9,365)
Payments on obligations under capital leases (3,600) 0
--------- ---------
Cash flows from financing activities ($ 4,121) $ 7,635
--------- ---------
INCREASE (DECREASE) IN CASH ($ 178) ($ 16,774)
CASH, BEGINNING 12,419 17,739
--------- ---------
CASH, ENDING $ 12,241 $ 965
========= =========
</TABLE>
<TABLE>
<CAPTION>
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996, 1995
(UNAUDITED)
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($142,837) ($160,566)
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Depreciation, depletion and amortization 37,381 29,150
Expenses paid by issuance of debt 0 0
Interest income on stock subscriptions 0 0
Extinguishment of debt 0 (3,500)
Changes in operating assets and liabilities:
Accounts receivable 25,839 (117,704)
Inventories (37,686) 23,000
Other current assets (31,839) 5,026
Other assets 0 0
Accounts payable 174,342 (79,917)
Other current liabilities 10,768 6,815
--------- ---------
Cash flows from operating activities $ 35,968 ($297,696)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from Unconsolidated Gas & Oil Partnerships 6,366
Decrease in notes receivable - related parties 2,500 18,139
Purchase of property and equipment (5,270) (19,821)
Sale of Stock 11,215
--------- ---------
Cash flows from investing activities 14,811 (1,682)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable - related parties (9,763) 2,948
Proceeds from long-term debt 21,439 127,500
Payments on term debt (74,844) 63,749
Payments on Obligations under Capital Leases (9,602) (7,589)
Payments received on stock subscriptions 0 0
Increase (decrease) in intercompany accounts 0 0
--------- ---------
Cash flows from financing activities ($ 72,770) $ 186,608
--------- ---------
INCREASE (DECREASE) IN CASH ($ 21,991) ($112,770)
CASH, BEGINNING 34,232 113,735
--------- ---------
CASH, ENDING $ 12,241 $ 965
========= =========
</TABLE>
Item 2. Management's Discussion and Analysis
Results of Operations
Revenues for the 3nd quarter of 1996 were approximately 25% lower than those for
the same period in 1995. This decrease in revenue is directly attributable to
lower than anticipated order volume from the company's major customer. The lower
volume stems from a change in the customer's ordering process, which created a
$800k backlog of orders. These orders were received in the first part of October
with shipment in October and November. However, this reduction in volume
directly relates to the loss sustained for the quarter.
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. Negotiations are continuing 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 has been 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 3rd quarter, the Company had a net income from operations of
$6k compared to profit from operations for the same period of the previous year
of $ 39k.
During the period stated the Registrant did not sell to directors,
management and others, any common stock.
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: November 9, 1996
Minneapolis, Minnesota
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 12,241
<SECURITIES> 0
<RECEIVABLES> 176,379
<ALLOWANCES> 0
<INVENTORY> 173,798
<CURRENT-ASSETS> 407,333
<PP&E> 636,300
<DEPRECIATION> 329,970
<TOTAL-ASSETS> 2,065,950
<CURRENT-LIABILITIES> 1,096,785
<BONDS> 588,467
0
0
<COMMON> 3,660,377
<OTHER-SE> (3,293,011)
<TOTAL-LIABILITY-AND-EQUITY> 2,065,950
<SALES> 1,531,344
<TOTAL-REVENUES> 1,531,344
<CGS> 1,019,742
<TOTAL-COSTS> 1,674,181
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 131,328
<INCOME-PRETAX> (142,837)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (142,837)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
