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, 1998
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 654 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 3,163,340 of common
stock no par value.
- -1-
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this discussion which are not historical facts may be considered
"forward looking statements" within the meaning of Section 21E of the
Securities Act of 1934, as amended, including projected sales based upon
orders, estimated cost savings and savings that may be generated from
restructuring. The words "believe", "expect", "anticipate", "estimate", and
similar expressions identify forward looking statements. Any forward looking
statement involves risks and uncertainties that could cause actual events or
results to differ, perhaps materially, from the events described in the
forward looking statements. Readers are cautioned not to place undue reliance
on these forward looking statements. The Company undertakes no obligation to
publicly update or revise any forward looking statement, whether as a result
of new information, future events or otherwise. The risks associated with the
Company's forward looking statements include, but are not limited to, risks
associated with the Company's history of losses and uncertain profitability,
reliance on a large customer, risks associated with competition, general
economic conditions, reliance on key management and production people, future
capital needs, dilution, effects of outstanding notes and convertible
debentures, limited public market, low stock price, and lack of liquidity.
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements, related notes and other information
included in this quarterly report on Form 10-QSB.
Part I. Financial Information
Quarter Ended September 30, 1998
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.
- -2-
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 changes in
financial position thereto are incorporated herein by reference to the
Company's quarterly report.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
For the quarter, revenues totaled $739k. This represents a 22% increase over
revenue for the same period for 1997. Gross profits totaled $270k as compared
to $204k for the previous year. Net income for the quarter totaled $25k, as
compared to a $67k loss for the same period in 1997. Year to date revenues for
1998 are up 15% over those of 1997. Net income for year to date 1998 is $96k
as compared to a loss of $1k for 1997. Revenues continue to be strong from
existing customers, which seems to parallel the economy. We have also
continued to expand sales to new customers. The backlog of customer PO's as of
the end of the quarter is approximately $1.1M. Therefore we expect the 4th
quarter to exceed 1997 level.
Liquidity and Capital Resources
For the quarter, the Company had a net income from operations of $53k.
The company has been able to meet its debt obligations and has restructured or
repaid the remaining debentures which had come
due.
During the period stated the Registrant did not sell to directors,
management and others, any common stock.
Inflation
The rate of inflation has had a great impact on the Company's results of
operations and is expected to have a continued impact on continuing operations
due to the increase in wood product costs and the fact that we have to bid
most of our projects and we can not pass all of the cost increases to our
customers.
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
- -3-
Item 5. Other Information -
During the third quarter of 1998, the sale and transfer of the corporate shell
and some of the assets of American Gas Corporation was completed. This
transaction was started in March, 1998, but was not completed until July,
1998. During 1996, $1.02 million dollars of American Gas Corporation's assets
were written down leaving only $173 in assets on the books of American Gas
Corporation. This write down was mentioned in the Company's 10-KSB, Item 6,
for both 1996 and 1997. American Gas Corporation is now known as PowerSource
Corp. and is registered as an Electric Service Provider by the State of
California, a Renewable Energy Provider, and as a Wholesale Electric Power and
Energy Transactions Marketer and Public Utility Company by the Federal Energy
Regulatory Commission. The Company will retain just under 10% ownership of
PowerSource Corp. and has options and preferred stock to purchase
approximately five percent more of PowerSource (there may be dilution). In
addition, PowerSource is expected to pay the Company $3,000 a month for five
years as a consultant.
The Kensington Company, Inc. has also been using the name "Kensington
International Holding Corporation" The Minnesota Secretary of State's office
has informed the Company that the state made a mistake when it allowed the
Company to change it's name from Select Gas, Inc. to the "The Kensington
Company, Inc." and it has requested that the Company change its name to
Kensington International Holding Corporation.
Item 6. Exhibits and Reports on Form 8-K and the October 18, 1995
S-8 filing as described in Item 2 herein.
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.
Mark Haggerty
Mark Haggerty
Chief Executive Officer
Jeff Etten
Jeff Etten, C.F.O.
Dated: November 02, 1998
Minneapolis, Minnesota
- -4-
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1997 AND 1998
(UNAUDITED)
1997 1998
ASSETS
Current assets:
Cash $106,683 $17,210
Accounts receivable 214,159 318,963
Inventories ` 208,370 254,366
Other current assets 86,418 40,407
Total current assets 615,630 630,946
Other assets:
Investment in oil and gas properties, net 85,043 0
Investment in oil and gas partnerships 44,832 29,175
Investment in Ives 0
Investment in KEC partnerships 0
Property and equipment, net 299,516 386635
Loan Fees, Net 23,972
Notes receivable - related parties 24,125 18,125
Total other assets 453,516 457,907
$1,069,146 $1,088,853
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Line of Credit $53,857 $0
Note payable - related parties 299,041 196259
Current portion of long-term debt 375,633 33160
Current portion of obligations under
capital leases 13,341 24340
Accounts payable 264,490 273770
Accrued payroll & related taxes 125,360 152087
Accrued interest 29,412 38940
Accrued Expenses 20,255 20021
Intercompany 0 0
Total current liabilities 1,181,389 738,577
Long-term debt, net of current portion 442,849 759010
Obligations under capital leases, net
of current portion 10,000 10000
Minority interest in consolidated
Subsidiaries 11,239 0
Total liabilities 1,645,477 1,507,587
STOCKHOLDERS' EQUITY
Common stock 3692923 3671883
Additional paid-in capital 0 0
Accumulated deficit -3971922 -3842065
Stock subscriptions receivable (297,332) (248,552)
Total stockholders' equity (576,331) (418,734)
$1,069,146 $1,088,853
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND 1998
(UNAUDITED)
1997 1998
Revenues:
Product sales $604,618 $738,884
Oil and gas sales 513 0
Total revenues 605,131 738,884
Cost of sales:
Cost of products sold 400991 468615
Oil and gas costs 0 0
Total cost of sales 400,991 468,615
Gross profit 204,140 270,269
Operating expenses 232,140 216,883
Income (loss) from operations (28,000) 53,386
Other income (expense):
Interest expense -38693 -38668
Minority interest in earnings of
Consolidated Oil & Gas Ptsp (322)
Miscellaneous income 0 10,000
Total other income (expense) (39,015) (28,668)
Income (loss) before income taxes and
extraordinary item (67,015) 24,718
Provision for income taxes (benefit) 0 0
Income before extraordinary item (67,015) 24,718
Extinguishment of debt, net of income
taxes of $0 0 0
Net income (loss) (67,015) 24,718
Earnings Per Share ($0.02) $0.01
WEIGHTED NUMBER OF SHARES OUTSTANDING 3,021,450 3,163,340
THE KENSINGTON COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED SEPTEMBER 30, 1997 & 1998
(UNAUDITED)
1997 1998
Cash flows from operating
activities:
Net income (loss) ($67,015) $24,718
Adjustments to reconcile net income (loss)
to cash flows from operating
activities:
Depreciation, depletion and amortization 12286 14365
Changes in operating assets and
liabilities:
Accounts receivable -28234 -2643
Inventories -27229 -52000
Other current assets -83991 -23463
Other assets 3472 4500
Accounts payable -16598 5738
Other current liabilities 18,761 (46,650)
Cash flows from operating activities (188,548) (75,435)
Cash flows from investing
activities:
Decrease in notes receivable - related
parties 661 2500
Purchase of property and equipment 667 4649
Sale of Stock 0 0
Cash flows from investing activities (6) (2,149)
Cash flows from financing
activities:
Increase (decrease) in Line of Credit 0 0
Increase (decrease) in notes payable -
related parties 20485 -11396
Proceeds short, long-term debt 365000 0
Payments on long-term debt -106921 16905
Payments on obligations under capital leases (3,600) 1,000
Cash flows from financing activities $274,964 ($29,301)
Increase (decrease) in cash $86,422 ($106,885)
Cash, beginning 20,261 124,095
Cash, ending $106,683 $17,210
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