SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Filed pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 1997, file # 33-38119-C
KENSINGTON INTERNATIONAL HOLDING CORPORATION
formerly known as
THE KENSINGTON COMPANY , INC.
(Exact name of registrant as specified in charter)
Minnesota 41-1619632
(State or other jurisdiction (IRS Employer ID Number)
of organization)
Interchange Tower, Suite 654, 600 S. Hwy 169, Minneapolis, MN 55426
(address of principal executive offices)
Registrant's telephone number is (612) 546-2075
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No par value
- -------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months, and (2) has registrant been subject to
such filing requirements for the past 90 days.
Yes xNo__
The number of shares outstanding of each class of the registrant's common
stock as of December 31, 1997 was 3,187,450 shares.
The estimated market value on December 31, 1997 of the voting stock held by
non-affiliates of the registrant was $796,615 based upon recent private
transactions at $.25 per share. Currently there is a public market on the
Bulletin Board on the Minneapolis Local over the Counter Market with a call
sign of "KNSC".
Exhibit Index on the Sequential page 15
DOCUMENTS INCORPORATED BY REFERENCE: SEE EXHIBIT INDEX
<PAGE>Description of Business
THE KENSINGTON COMPANY, INC. was formed in 1988, initially for the purpose of
developing oil and gas properties in Kentucky. It is a reporting public
corporation quoted on the "pink and white sheets" as well as the bulletin
board, and its call sign is "KNSC". At present the Company has approximately
300 shareholders. Kensington owns 100% of two operating companies, namely,
Ives Design, Inc., a Minnesota corporation, and American Gas Corporation, a
Nevada corporation. Kensington also owns three non-operating "shell"
corporations, namely, I-Med Software,Inc., Interchange Medical ,Inc. both
Minnesota corporations and Kensington American Gas Drilling #1, a Minnesota
LLC. Additionally, the Company owns a minority limited interest in an oil and
gas partnership. During 1995, the Minnesota Secretary of State requested that
the Company charge its name because it was too similar to another company's
name. The name change was approved by Kensingtons' shareholders during 1996
and the name was changed to "Kensington International Holding Corporation"
during 1997.
The Kensington Company, as stated above, is comprised of:
A. IVES DESIGN, INC.
In April 1992, the Company acquired 100% of IVES DESIGN, INC. ("Ives"), a
manufacturer of store display fixtures. The primary components of such
fixtures are wood and laminate but many fixtures incorporate acrylic, glass
and or metal. The company provides a broad spectrum of services to its
customers including design, manufacturing, delivery and installation. Fixtures
are sold to a wide variety of customers ranging from retail and grocery stores
to private companies and churches. Several customers are members of the
Fortune 1000. Sales are obtained through direct sales contact as well as
referrals. The raw material used in production is widely available and
procured from a number of sources depending on pricing and vendor stock. As of
December 31, 1997 Ives employed 24 full time employees.
Significant markets, customers and suppliers
Ives
While the loss of the largest customer would have an adverse effect on
the Company such an event is unlikely since they have continued to utilize the
Company more and more. Through expanded sales efforts the Company has reduced
the sales to its largest customer as a percent of total sales to 84% in 1997.
The Company presently has no contractual commitments with any customers but
works against purchase orders for its sales.
Page 1
The Company believes that the number of potential suppliers of the
materials utilized by Ives in fashioning its products are sufficient that the
loss by Ives of any one or a number of its present suppliers would not have a
material adverse effect on Ives' business.
Ives' products are not seasonal products and are sold throughout the
year.
Regulation of the store fixture industry
There are federal and state regulations governing the Ives operation to
the extent of Environmental Protection Agency and OSHA rules that apply to
disposal of waste from painting and sealing of product. Ives has a program in
effect for both situations.
Competition within the store fixture industry
Ives does have a number of competitors and bids most of its projects.
Notwithstanding, sales have continued to increase and management believes that
the Company is competitive with respect to both price and quality of its
products.
B. AMERICAN GAS CORPORATION and other gas operations
In 1992 the Company purchased limited and general partnership interests
in gas wells in Texas, Arkansas and Oklahoma as well as 100% ownership of
American Gas Corporation's gas wells and pipelines in Kentucky.
During 1994 and 1995 most of American Gas' operations were shut down
because the Company could not find good operators. Subsequent testing by
Tauren Exploration concluded it was not feasible to extract the gas in the
eastern Kentucky fields. Therefore Kensington has written off virtually all
the assets associated with its eastern Kentucky fields as of December 31,
1996. The Company continues to receive revenues on a regular schedule from its
interests in Texas, Arkansas and Oklahoma oil & gas wells.
Regulation of oil and gas
As regards American Gas, the oil and gas industry is extensively
regulated by federal, state and local authorities but these regulations should
not impact the company since the company has ceased its direct operations.
Competition within the Oil and Gas industry
Competition in the oil and gas business is intense but this should not
affect the company due to its operational shutdown.
Company Direction:
Ives Design Inc.
It is management's intention to continue to expand Ives through sales
to new customers, expanding sales to existing customers by providing high
levels of service and quality and through acquisitions.
Page 2
American Gas Corporation
With the analysis performed by Tauren Exploration it has become evident
that the assets of American Gas have become seriously impaired. The Company
therefore, has substantially reduced the carrying value of such assets and
will seek to dispose of them. A limited value is expected to be received for
these assets.
I-Med Software & Interchange Medical
Management has been attempting to activate these companies in the energy,
medical and communications fields.
Kensington American Gas Drilling #1
This is an inactive entity.
New Opportunities
It is also management's intention to continue to obtain equity interests
in other corporations in return for the Company's management expertise.
Management is of the opinion that it can obtain a 1% to 10% equity interest in
these new companies with little or no capital investment as was concluded in
the past.
The company also has an equity interest in Netgates which owns a portion of
the Ocean Manor Resort in Ft. Lauderdale, Florida. The companyalso has an
interest in Maxwell Rand Holdings and Netcast Radio Networks, Inc.
Item 2. Description of Property
At present, the Company's principal office is located at 600 S. Highway
169, Suite 654, Interchange Tower, Minneapolis, Minnesota, 55426, occupying
approximately 700 square feet and utilized entirely for executive offices. The
lease was entered into in March 1997. The space is rented under a written
lease which provides for payment of rent at a monthly rate of $1,324 and runs
through March 2000.
As a result of its acquisition of Ives, the Company owns two buildings.
One building has 25,500 square feet, located at 1333 Constance Boulevard, Ham
Lake, Minnesota. Approximately 2,500 square feet are utilized for offices and
23,000 square feet for manufacturing. There is also a 7,200 square foot
storage building.
Item 3: Legal Proceedings
There are no legal proceedings that the management is aware of at this time.
Item 4: Submission of matters to a vote of Security Holders
None
PART II
Market for Registrant's Common Equity and Related Stock-holder matters.
Page 3
Item 5: Market for the Common Equity and Related Stockholder Matters
During 1997 the stock was quoted at a low of $.03 to a high of $.43. On
December 31, 1997 the stock was quoted at a bid of $.062 with an asking price
of $.25. Since the Company is not NASDAQ qualified, these prices are inter
dealer prices and may not reflect actual value or transactions.
(a) Market Information
The Registrant's securities are traded on the Bulletin Board as "KNSC".
(b) Holders
At December 31, 1997 there were approximately 300 shareholders of record
including people who held stock in "street name".
(c) Dividends
The registrant has not paid dividends on its common stock and does not expect
to in the foreseeable future.
Item 6: Management's Discussion and Analysis of Operations
Selected Financial Information:
1997 1996
Total Revenue $3,151,241 $2,591,259
Cost of Sales 2,008,436 1,699,218
Gross Profit $1,142,805 $892,041
Operating Expense 951,316 814,848
Inc (Loss) from Operations $191,489 $77,193
Other Income (Expense) (155,103) ( 130,591)
Provision for Income Tax
Extraordinary Item (1,025,916)
Net Income (Loss) $ 40,386 $(1,079,314)
As noted above, the Company produced a net income from Operations of $191k in
1997 as compared to $77k in 1996. The increase in gross profit is explained
further under the Ives Design discussion. 1997's net income of $40k compares
favorably to 1996's loss of $1,079k, which included a one time writeoff for
the impairment of the gas assets of $1.02k. The company was able to obtain a
mortgage for its Ives Design property toward the end of 1997. These proceeds
were used to pay off a portion of the long term debt due from Kensington. This
accounts for the decrease in current debt from 1996 to 1997. Still of concern
is a significant portion of long term debt which becomes due in the first part
of 1998. The company is continuing to negotiate an extension to this debt, but
there are no guarantees this effort will be successful.
Ives Design Inc.
1997 was a year of continued growth for the company. Sales grew approximately
22% from 1996 to 1997. With the addition to the sales
Page 4
force Ives was able to reduce the percent of sales made to its largest
customer by approximately 2%. Sales were constant throughout 1997 as compared
to 1996 which had a much lower second quarter sales total. This slow down was
due to a change at the company's largest customer regarding how purchase
orders were released. The change caused PO's to be held which impacted
production. The addition of the mortgage in 1997 caused an increase in
interest expense for the year. Overall net income as a percent of sales increase
d from 10% to 11.1% in 1997. This increase was due mainly to revenues being
more consistent which allowed the company to control overtime.
American Gas Corporation
As was mentioned earlier, the company took a $1.02M writedown on the assets of
American Gas in 1996. This writedown was a direct result of Tauren
Explorations' additional testing and analysis on the Rosewood field which
concluded it was not economically feasible to extract the gas reserves in that
field.
Item 7: Financial Statements
The Consolidated financial statements of the Company are included herin
following the signatures, beginning at page F-1.
Item 8: Changes and Disagreements with Accountants on Accounting
and Financial Disclosures
None
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons
MANAGEMENT
The executive officers and Directors of the Company are as follows:
Name Age Position
Keith A. Witter 50 Director
Mark Haggerty 50 Chief Executive
Officer & Director
Keith Bernhardt 76 Director
Dr. Graeme Wallace 56 Director
Holly Callen Hamilton 49 V. P. & Secretary
Mike Nakonechny 70 Chairman
Jeff Etten 41 Chief Financial
Officer
Directors are elected for an indefinite term not to exceed five years,
expiring at the annual shareholders' meeting next held after
Page 5
their election and until their successors are elected and qualified. Officers
are appointed by the Board of Directors and serve at its discretion.
Keith A. Witter has been a Director of the Company since May 1, 1993. From
January 1992 to April 1993, Mr. Witter served as President and Chief Operating
Officer of the Company. He received a B.A. in business administration and
economics in 1969 from Gustavus Adolphus College, and in 1973 obtained a JD
degree from the University of Minnesota Law School. Since 1984, Mr. Witter
has served as President and owner of Askar Corporation, a securities
broker-dealer with 85 representatives in five states. He also is the
President of F.F.P. Investment Advisors, Inc., a financial planning firm, a
position he has held since 1984. Mr. Witter has been involved in the oil and
gas business having served as President of Kensington Energy Corporation from
June 1992 until December 31, 1992.
Mike Nakonechny lives in Pennsylvania and is an Electrical Engineer. He has
been a Director since October 15, 1994. Mr. Nakonechny is on the Boards of
Mentor Corporation of Minneapolis and Silicon Technology Corporation and his
own company, NAK Associates Corp. He founded and was Chairman of Tranducer
Systems, Inc. a public company in Pennsylvania.
Mark Haggerty became an employee of Kensington on May 1, 1993 and became
C.E.O.-C.O.O on September 9, 1993. Mr. Haggerty is a graduate of the
University of Minnesota Law School and is a practicing attorney. From 1974 to
1985 he served as a prosecutor in Anoka County, Minnesota. From 1971 to 1985
Mr. Haggerty was employed as an attorney with the Minneapolis law firm of
Smith, Juster, Feikema, Malmon and Haskvitz and was its youngest shareholder,
officer and director. In 1985 Mr. Haggerty was employed as a Senior Vice
President at Miller and Schroeder Financial, Inc., Minneapolis, where he
remained until 1987 when he formed Haggerty & Associates, Inc. During the
past eighteen years Mr. Haggerty has structured and closed more than 150
taxable and non-taxable financing and marketing programs both in the United
States and Europe. Mr. Haggerty is also a Registered Securities
Representative. He serves on the Board of Directors of Maxwell Rand Holdings,
Ives Design, Inc., American Gas Corp and Haggerty and Associates, Inc.
Haggerty has been a Director since October 15, 1994. Mr. Haggerty is also a
Commissioner with the Hennepin County Parks.
Keith Bernhardt has served as a Director since September 1992. From 1983 to
present Mr. Bernhardt has been semi-retired but engaged in the sale of
machinery used to change hot-rolled steel into cold-rolled steel for use in
the automobile industry. Mr. Bernhardt was one of the founders of American
Gas. Mr. Bernhardt graduated from Purdue University in 1942 with a degree in
mechanical engineering. He is a certified Retired Professional Engineer,
licensed with the State of Connecticut.
Page 6
Dr. Graeme Wallace has been a Director of the Company since April 1992.
Commencing in 1985 he was the Co-Founder and Managing Partner of Wallace Bond
& Partners Inc., a Canadian based firm in Toronto offering human resource
consulting services. In April 1993 Dr. Wallace sold his interests in Wallace
Bond & Partners, Inc. and founded Wallace and Partners, Inc, also located in
Toronto. Dr. Wallace earned both his B.A. and M.Sc. degrees from Monash
University, Melbourne, Australia, in 1967 and 1970 respectively. He obtained
a Ph.D. in psychology from McGill University, Montreal, Canada in 1972.
Holly Callen Hamilton is Director of Development for Women's Athletics at the
University of Minnesota. Ms. Callen has been President of Callen & Associates.
Inc. for a number of years.
Jeff Etten is a C.P.A. and a member of the Minnesota Society of Certified
Public Accountants. Mr. Etten was formerly the C.F.O. of Heritage Computer.
Mr. Etten received his BS degree in Accounting from the University of
Wisconsin-Eau Claire.
Key Personnel
Dennis Krause is the President and a Director of Ives Design, Inc. and is in
charge of production.
Item 11: Executive Compensation
(a) Remuneration
Compensation Pursuant to Agreements
In May 1993 the Company entered into an employment agreement with Mark
Haggerty to serve as Senior Vice-President. Mr. Haggerty has been and will
continue to act as corporate counsel. Mr. Haggerty's salary is $65,000 per
year and his law firm, Haggerty & Associates, Inc. is retained at an
additional $12,000 per year. The agreement with Mr. Haggerty allows him to
retain a limited number of clients while employed with the Company since his
contract only requires him to work 80% of his time for the Company. Mr.
Haggerty also receives an automobile allowance; is reimbursed expenses
incurred on company business; receives four weeks paid vacation per year as
well as medical insurance and life insurance through Ives Design, Inc. On
September 9, 1993 the Board of Directors requested that Mr. Haggerty become
the C.E.O.- C.O.O of Kensington and the Chairman and C.E.O. of Ives Design,
Inc. Mr. Haggerty has waived a number of his benefits and a significant
portion of his salary and benefits continue to accrue.
Mr. Etten receives salary of $50,000 a year for acting as C.F.O. Mr. Etten
also receives vacation and expenses reimbursement. A portion of Mr. Etten's
salary has been accrued.
The directors receive no pay and only get reimbursed for expenses. All of the
directors have deferred reimbursement of expenses in order to make sure that
production workers are paid first.
Page 7
Compensation Pursuant to Plans
Stock Options
The Company has adopted an incentive stock option plan which authorizes a
maximum of 750,000 shares that may be issued pursuant to the Plan. The Board
of Directors may grant options to key individuals at their discretion. The
exercise price for options issued pursuant to the Plan may not be less than
85% of the fair market value of the Company's common stock on the date of
grant of option. Any option granted must be exercised within ten years of its
grant. The shares issued upon exercise of the options granted pursuant to the
Plan have no registration rights unless specifically authorized by the Board
of Directors. On May 1, 1993 the Board of Directors authorized issuance of
211,000 options to purchase a like amount of shares at a price of $2.625 per
share, for a period of three years from the date of issuance, to certain
directors, officers, employees, and former employees of the Company and this
grant was extended to January 1, 1997. On March 17, 1995 the Company's board
authorized the issuance of options at $.32 for a period of five years. The bid
on March 17 was $.125 and the asking price was $.375. The 10,000 options
authorized to the employees of Ives Design, Inc. on May 1, 1993 was withdrawn
and the Board on March 17, 1995 authorized 50,000 options to the 20 employees
of Ives Design, Inc. at $.32 for five years bringing the total of authorized
options to 251,000. In addition each director, the CFO and the corporate
secretary were authorized to receive 50,000 options each at $.32 for five
years provided Mark Haggerty surrendered 75,000 of his warrants, and each of
the other four directors, the CFO and the Secretary agreed to surrender 50,000
warrants issued on February 14, 1995 which they agreed to do. This brought the
number of authorized options up to 601,000. The Board authorized the exchange
of 29,700 options in return for 29,700 warrants bringing the total number of
authorized options outstanding to 581,872 out of 750,000.
With the exchange of options for warrants detailed above the reduction in
warrants was 304,700. The authorization of options and reduction in warrants
were stated in the S-8 filed in October 1995 and again in the PROXY STATEMENT
mailed to all of the shareholders by the Transfer Agent on December 20,
1995.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of December 31, 1995
regarding ownership of the Company's common stock by (i) the only persons
known by the Company to own beneficially more than five percent (5%) thereof;
(ii) the directors individually, and (iii) all officers and directors as a
group. All persons listed have sole voting and investment power with respect
to their shares unless otherwise indicated.
Page 8
NAME Shares Percentage
Dennis Krause 226,722 7%
7733 Quincy St.
Spring Lake Park,
Minnesota 55432
Keith Bernhardt 161,104 5%
107 Cliffmore Rd
W. Hartford, CT
06107
Bernard M.S. Kegan 170,525 6%
1805 Eagle Ridge Dr.
#10 West Court
Mendota Heights,
Minnesota 55118
G. Wallace 162,500 5%
151 Yonge St.
Toronto, Canada
<PAGE>All Officers, key 650,420 21%
persons & directors as a
Group, eight persons (1) (2)
(1) Includes shares issued to the Joan Witter Trust and the Witter Family
Trust wherein Keith A. Witter, the Company's Chairman, surrendered his control
and right to vote.
(2) Does not include Bernard M.S. Kegan.
Item 13. Certain Relationships and Related Transactions.
CERTAIN TRANSACTIONS
In connection with the Company's 1992 acquisition of American Gas, the
Company assumed certain obligations of American Gas. Among these obligations
was the issuance of the Company's securities (as described more fully below)
to creditors and investors who participated in a series of oil and gas
drilling partnerships promoted by Liberty National Corporation ("Liberty"), a
defunct corporation whose assets American Gas acquired in a sale approved by
the Superior Court of the State of California, Orange County. These conditions
were changed by Court Order of May 3, 1994 where the 634 Liberty National
investors are to receive 125,000 shares and 1,000,000 Class A Liberty Warrants
as described herein. These Class A Liberty Warrants are subject to redemption
at the sole option of the Company at any time commencing three months after
their issuance, at a redemption price of $.001 per Class A Liberty Warrant.
The Company shall give thirty days' written notice to all holders of the
Liberty Warrants of such redemption, during which time the holder shall have
the right to exercise such Warrant. Upon notice of redemption to the warrant
holders and the warrant holders failure to exercise their right of conversion,
the
Page 9
Company shall, upon surrender and delivery of the warrant certificates to the
Company or its transfer agent, pay the warrant holder a sum equal to the $.001
redemption price per warrant times the number of warrants surrendered. At the
date of drafting this 10-KSB, no Liberty Warrants have been either issued or
exercised. In connection with the conversion of certain debts and obligations,
the Company issued Class B Investor Warrants to purchase an aggregate of
538,933 shares of common stock. These Class B Investor Warrants are
exercisable at any time through January 1, 1997 (extended by Board action from
November 1995). Approximately 7% (39,424 warrants) were issued for services
rendered: and 93% ( 499,509 warrants) were issued in connection with the
private placement of the Company's securities. As of the date of this 10-KSB,
no Class B Investor Warrants have been exercised pending an order by both the
California and Kentucky courts authorizing Kensington to do so.
DESCRIPTION OF SECURITIES
Common Stock
The Company has authorized 50,000,000 shares of stock, no par value.
40,000,000 shares have been designated as common stock and 10,000,000 as
unclassified. Each holder of common stock has one vote per share on all
matters voted upon by the shareholders. Such voting rights are non-cumulative
so that the shareholders holding more than 50% of the outstanding shares of
common stock are able to elect all members of the Board of Directors. There
are pre-emptive rights or other rights of subscription. Each share of
common stock is entitled to participate equally in dividends if and when
declared by the Board of Directors of the Company out of the funds legally
available and is entitled to participate equally in the distribution of assets
in the event of liquidation. All shares, when issued and fully paid, are
non-assessable and are not subject to redemption or conversion and have no
conversion rights.
The value of a share has been arbitrarily determined. The offering price
bears no relationship to assets, earnings, book value or any other commonly
used criteria for valuation.
Warrants
Between March 1994 and December 31, 1995 the Company issued a total of
651,950 Class A Warrants to individuals for services rendered. These warrants
allow the individual to purchase one share of common stock at a price of
between $.50 and $3.00 per share. These warrants have various expiration dates
between February 1999 and September 2000.
During the year ended December 31, 1992 and the period ended June 30,
1993, the Company authorized the issuance of warrants (the "Class B Investor
Warrants") to purchase an aggregate of 538,933 shares of common stock to
certain investors in consideration for the conversion of debt and obligations,
for services rendered and in private transactions. The Class B Investor
Warrants were issued, subject to the terms and conditions of certain Warrant
Agreements.
Page 10
The following description of the Class B Investor Warrants is not complete and
is qualified in all respects by the Warrant Agreement which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
Each Class B Investor Warrant entitles the holder thereof to purchase one
share of common stock at any time on or before January 1, 1997 for $3.00. Each
Class B Investor Warrant contains anti-dilution provisions upon certain
events, and is not subject to redemption. All Class B Investor Warrants not
exercised will expire at 5:00 P.M. Mid-West time on January 1, 1997. Holders
of Class B Investor Warrants will not, as such, have any of the rights of
shareholders of the Company.
On September 11, 1992, the Company authorized the issuance of an
aggregate of 800,000 warrants to the creditors/investors of Liberty (the
"Class A Liberty Warrants"). The Class A Liberty Warrants were issued in
connection with the sale of certain of Liberty's assets to the Company through
and by virtue of the Company's acquisition of American Gas. These Liberty
Warrants are issued subject to the terms and conditions of certain Warrant
Agreements. The foregoing description of the Liberty Warrants is not complete
and is qualified in all respects by the Liberty Warrant Agreement which is
filed as an exhibit to the Registration Statement of which this Prospectus is
a part.
Each Class A Liberty Warrant entitles the holder thereof to purchase one
share of the Company's common stock and one Class C Liberty Warrant at any
time on or before six months from the date this Registration Statement is
declared effective, for $2.50. Each Liberty Warrant contains anti-dilution
provisions. At any time commencing three months from their issuance upon 30
days' written notice, the Company may redeem all, but not less than all,
unexercised Class A Liberty Warrants for $.001 per warrant. Holders of Class
A Liberty Warrants will not, as such, have any of the rights of shareholders
of the Company. These Class A warrants were increased by California Court
Order on May 3, 1994 from 800,000 to 1,000,000. All of the other terms and
conditions remain the same.
The Class C Liberty Warrants are issuable upon conversion of the Class A
Liberty Warrants, and entitle the holder thereof to purchase one share of the
Company's common stock for $7.00 per share, at any time on or before three
years from issuance thereof. The Class C Liberty Warrants contain
anti-dilution provisions, are not subject to redemption by the company. and do
not, as such, confer upon the holder thereof any of the rights of shareholders
of the company.
Pursuant to the terms of the Class B Investor Warrant Agreement, the
Class A Liberty Warrant Agreement, and the Class C Liberty Warrant Agreement
(collectively, the "Warrants"), the Company is obligated to undertake, on a
good faith basis, to register under the Act and the applicable state
securities acts, the shares of common stock underlying the Warrants and to
keep such Warrants, at the Company's expense. In certain cases, the sale of
Page 11
securities by the Company upon the exercise of the Warrants could violate the
securities laws of the United States, certain states, or other jurisdictions.
The Company will not be required to honor the exercise of any of the Warrants
if, in the opinion of counsel to the Company, the sale of securities upon such
exercise would be unlawful.
On August 15, 1994 the company issued 75,000 Class E Warrants to certain
individual investors. These warrants allow the person to purchase one share on
the company's common stock at a price of $1.00 per share. These warrants
expire on August 15, 1998.
Convertible Debentures:
As of December 31, 1997 the company had $431k of convertible debentures
outstanding. Of this total, $176k is secured by real estate of Ives Design
Inc.
Item 14. Exhibits and Reports on Form 8-K
(A) Exhibits See "Exhibit Index" on the page
following the Financial Statements.
(B) Reports on Form 8-K None.
Page 12
SIGNATURES
Pursuant to the requirements od Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned officers and/or Directors, there unto duly
authorized.
THE KENSINGTON COMPANY, INC.
By: Mark Haggerty
Mark Haggerty, C.E.O.- C.O.O. & Director
Dated: June 1, 1998
Mike Nakonechny Chairman
By: Mike Nakonechny
Dated: 7 July, 1998
Page 13
SIGNATURES
Pursuant to the requirements od Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned officers and/or Directors, there unto duly
authorized.
THE KENSINGTON COMPANY, INC.
By: Mark Haggerty
Mark Haggerty, C.E.O.- C.O.O. & Director
Keith Bernhardt Director
By: Keith Bernhardt
Dated: 6/20, 1998
Page 14
SIGNATURES
Pursuant to the requirements od Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned officers and/or Directors, there unto duly
authorized.
THE KENSINGTON COMPANY, INC.
By: Mark Haggerty
Mark Haggerty, C.E.O.- C.O.O. & Director
Graeme WallaceDirector
By: Graeme Wallace
Dated: July 27, 1998
Page 15
SIGNATURES
Pursuant to the requirements od Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned officers and/or Directors, there unto duly
authorized.
THE KENSINGTON COMPANY, INC.
By: Mark Haggerty
Mark Haggerty, C.E.O.- C.O.O. & Director
Keith WitterDirector
By: Keith Witter
Dated: 6-21, 1998
Page 16
THE KENSINGTON COMPANY, INC.
FORM 10-KSB
YEAR ENDED DECEMBER 31, 1997
INDEX
ITEMPAGE
PART I
1. Description of Business.................................... 1
2. Description of Property.....................................3
3. Legal Proceedings...........................................3
4. Submission of matters to vote of shareholders...............4
PART II
5. Market for Common equity & related stockholder matters..... 4
6. Management's discussion & analysis of Operations............4
7. Financial statements .......................................F-1
8. Changes in and disagreements with Accountants on Accounting
and Financial Disclosure....................................5
PART III
9. Directors, Executive Officers, Promoters and Control Persons
of the Company...............................................5
10 & 11 Executive compensation..................................7
12. Security ownership of certain beneficial owners and
management............................................... 8
13. Certain relationships & related transactions................9
14. Descriptions of securities.................................10
15. Exhibits and reports on Form 8-K...........................12
16. Signatures.................................................13
Financial Statements......................................F-1
Exhibit Index
Exhibit Description
#
#3 Certificate of Incorporation *
#3.3 By-Laws of Company *
#10 Promissory notes payable ***
#10.1 Acquisition of Ives & American Gas **
#10.4 Employment agreements ***
#21.1 Form of Common Stock ***
#21.2 Form of Warrants & Debentures ***
*Filed as exhibits to Company's registration 33-38119-C to the SEC
**Filed as part of Form 8-K to SEC on 2-12-93
***Filed as an exhibit to Form 10-K filed on June 1993.
All 10-Qs, 8-ks and amendments, S-8s and 10-Ks and 10-KSBs filed since 1989
are incorporated herein by reference.
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
JUNE 30, 1997 AND 1998
(UNAUDITED)
1997 1998
ASSETS
Current assets:
Cash $20,261 $124,095
Accounts receivable 185,925 316,329
Inventories 181,141 202,366
Other current assets 2,527 16,944
Total current assets 389,854 659,734
Other assets:
Investment in oil and gas properties, net 87,854 0
Investment in oil and gas partnerships 44,832 29,175
Investment in Ives 0
Investment in KEC partnerships 0
Property and equipment, net 308,354 396,351
Loan Fees, Net 28,472
Notes receivable - related parties 24,786 20,625
Total other assets 465,826 474,623
$855,680 $1,134,357
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Line of Credit $16,548 $0
Note payable - related parties 278,556 207,655
Current portion of long-term debt 495,711 35,581
Current portion of obligations under capital
leases 17,341 25,340
Accounts payable 281,088 268,032
Accrued payroll & related taxes 102,425 155,725
Accrued interest 32,747 37,852
Accrued Expenses 21,094 64,121
Intercompany 0 0
Total current liabilities 1,245,510 794,306
Long-term debt, net of current portion 130,110 762,968
Obligations under capital leases, net of
current portion 10,000 10,000
Minority interest in consolidated
Subsidiaries 11,239 0
Total liabilities 1,396,859 1,567,274
STOCKHOLDERS' EQUITY
Common stock 3,671,816 3,671,883
Additional paid-in capital 0 0
Accumulated deficit (3,915,663) (3,856,248)
Stock subscriptions receivable (297,332) (248,552)
Total stockholders' equity (541,179) (432,917)
$855,680 $1,134,357
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(UNAUDITED)
1997 1998
Revenues:
Product sales $1,633,884 $1,830,823
Oil and gas sales 0 186
Total revenues 1,633,884 1,831,009
Cost of sales:
Cost of products sold 1,075,539 1,208,973
Oil and gas costs 0 0
Total cost of sales 1,075,539 1,208,973
Gross profit 558,345 622,036
Operating expenses 418,650 483,238
Income (loss) from operations 139,695 138,798
Other income (expense):
Interest expense (73,391) (67,832)
Miscellaneous income 0 0
Total other income (expense) (73,391) (67,832)
Income (loss) before income taxes and
extraordinary item 66,304 70,966
Provision for income taxes (benefit) 0 0
Income before extraordinary item 66,304 70,966
Extinguishment of debt, net of income
taxes of $0 0 0
Net income (loss) 66,304 70,966
Earnings Per Share $0.02 $0.02
WEIGHTED NUMBER OF SHARES OUTSTANDING 3,021,450 3,163,340
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 & 1998
(UNAUDITED)
1997 1998
Cash flows from operating activities:
Net income (loss) $9,794 $70,966
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Depreciation, depletion and amortization 13,792 41,130
Changes in operating assets and liabilities:
Accounts receivable (86,889) 158,451
Inventories 33,385 (12,440)
Other current assets (26,514) 27,690
Other assets 0 9,913
Accounts payable 1,256 (42,950)
Other current liabilities 103,448 68,391
Cash flows from operating activities 48,272 321,151
Cash flows from investing activities:
Decrease in notes receivable - related parties 0 500
Purchase of property and equipment 5,304 28,494
Sale of Stock 0 7,500
Cash flows from investing activities 5,304 (20,494)
Cash flows from financing activities:
Increase (decrease) in Line of Credit 0 (148,099)
Increase (decrease) in notes payable - related
parties (4,126) (30,562)
Proceeds short, long-term debt 0 38,891
Payments on long-term debt (9,708) 34,451
Payments on obligations under capital leases (21,677) 12,526
Cash flows from financing activities ($35,511) ($186,747)
Increase (decrease) in cash $7,457 $113,910
Cash, beginning 16,186 10,185
Cash, ending $23,643 $124,095
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<RECEIVABLES> 316,329
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