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, 1999
Commission File Number #33-38119-C
KENSINGTON INTERNATIONAL HOLDING CORPORATION
(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 3,334,084 of common stock, no par value.
Page 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 on 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 risk 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 of Form 10-QSB.
Part I. Financial Information
Quarter Ended June 30, 1999
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.
Page 2
Item 1. Financial Statements
The balance sheet of Kensington International Holding Corporation (the
"Company") as of the Quarter stated above, and the related statement of income
and changes in financial position and note 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 $1,153k. This represents a $219k (23%)
increase over revenue for the same period for 1998.Gross profits totaled $345k
as compare to $312k for the pervious year. Net income rose 80% to $74k as
compared to a $41k net income for the same period in 1998. Increase labor
costs and higher material costs were the main contributors to a lower than
expected gross profit. By controlling and reducing G&A expense the Company was
able to increase the net income. The current backlog of customer PO's as of
the end of the quarter continues to be strong, totaling approximately $300k.
In addition, there is a significant amount of work for which the Company has
not yet received PO's but has been verbally committed to the Company. We are
continuing to explore options such as forming strategic alliances with other
manufacturers or acquisitions of companies offering similar or complimentary
products in order to grow revenues and profits.
Inventory Makeup: 6/30/99 12/31/98
Raw Materials $98,343 $113,343
WIP 23,531 7,531
Finished Goods 46,572 74,969
Total $168,446 $195,843
Liquidity and Capital Resources
For the quarter, the Company had a net income from operations of $102k.
This allowed the Company to meet its debt obligations. The Company also has
access to a $200k line of credit. At this time there are no borrowings against
the line.
During the period stated, a director converted approximately $25k of debt owed
him to Company 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.
Page 3
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
Other Information
During the second quarter a former subsidiary of the Company, Powersource
Corp.(AKA: American Gas Corporation), was approved for trading by the NASD and
opened at $5.37 and went to $9.06 per share before closing at $5.00 per share
on June 30, 1999 on very little volume. Kensington retains a direct and an
indirect ownership in Powersource Corp. of approximately 9.5%. Powersource
Corp. is licensed by the State of California and by the Federal Energy
Regulatory Commission as a power marketing entity located in Los Angeles,
California.
On June 26, 1999 the Company signed an agreement with Mail Call, Inc. of
Miramar, Florida, in which the Company agreed to acquire up to 50.05% of Mail
Call, Inc. The Company has paid for and acquired 18% of Mail Call, Inc. as of
the date of this filing.
Mail Call's technology allows people to read their E-mail over the telephone
and respond to their E-mail by voice even if they do not own a computer. Mail
Call users may also fax a message to a designated fax machine from the phone
or send a text message.
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.
KENSINGTON INTERNATIONAL HOLDING CORPORATION
Mark Haggerty
Mark Haggerty
Chief Executive Officer
Jeff Etten
Jeff Etten, C.F.O.
Dated: July 29_, 1999
Minneapolis, Minnesota
Page 4
KENSINGTON INTERNATIONAL HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
6/30/99 12/31/98
ASSETS
Current assets:
Cash $305,839 $72,220
Accounts receivable 337,752 563,823
Inventories 168,446 195,843
Other current assets 53,715 22,208
Total current assets 865,752 854,094
Other assets:
Investment in oil and gas properties, net 66,620 67,927
Investment in Oil & Gas partnerships 9,999 9,999
Property and equipment, net 268,970 295,659
Loan Fees, Net 31,050 32,667
Notes receivable - related parties 13,625 16,625
Total other assets 390,264 422,877
$1,256,016 $1,276,971
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of Credit $0 $35,000
Note payable - related parties 96,277 124,715
Current portion of long-term debt 25,252 31,252
Current portion of obligations under capital
leases 11,909 16,614
Accounts payable 286,411 283,365
Accrued Expenses 235,514 273,889
Total current liabilities 655,363 764,835
Long-term debt, net of current portion 775,615 815,614
Obligations under capital leases, net of
current portion 5,912 5,912
Total liabilities 1,436,890 1,586,361
STOCKHOLDERS' EQUITY
Common stock 3,621,587 3,596,883
Additional paid-in capital 0 0
Accumulated deficit (3,632,909) (3,736,721)
Stock subscriptions receivable (169,552) (169,552)
Total stockholders' equity (180,874) (309,390)
$1,256,016 $1,276,971
KENSINGTON INTERNATIONAL HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1999 1998
Revenues:
Product sales $1,153,123 $933,764
Oil and gas sales 0 0
Total revenues 1,153,123 933,764
Cost of sales:
Cost of products sold 807,980 621,740
Oil and gas costs 0 0
Total cost of sales 807,980 621,740
Gross profit 345,143 312,024
Operating expenses 243,569 253,604
Income (loss) from operations 101,574 58,420
Other income (expense):
Interest expense (28,610) (17,402)
Miscellaneous income 914 0
Total other income (expense) (27,696) (17,402)
Income (loss) before income taxes and
extraordinary item 73,878 41,018
Provision for income taxes (benefit) 0 0
Income before extraordinary item 73,878 41,018
Extinguishment of debt, net of income taxes
of $0 0 0
Net income (loss) 73,878 41,018
Earnings Per Share $0.02 $0.01
WEIGHTED NUMBER OF SHARES OUTSTANDING 3,334,084 3,163,340
KENSINGTON INTERNATIONAL HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1999 1998
Cash flows from operating activities:
Net income (loss) $73,878 $70,966
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Depreciation, depletion and amortization 34,289 41,130
Changes in operating assets and liabilities:
Accounts receivable 146,347 158,451
Inventories 65,000 (12,440)
Other current assets (22,346) 27,690
Other assets 0 9,913
Accounts payable 14,545 (42,950)
Other current liabilities 1,921 68,391
Cash flows from operating activities 313,634 321,151
Cash flows from investing activities:
Decrease in notes receivable - related
parties 1,000 500
Purchase of property and equipment 513 28,494
Sale of Stock 24,704 7500
Cash flows from investing activities 25,191 (20,494)
Cash flows from financing activities:
Increase (decrease) in Line of Credit 0 (148,099)
Increase (decrease) in notes payable -
related parties (31,903) (30,562)
Proceeds short, long-term debt 0 38,891
Payments on long-term debt 45,400 34,451
Payments on obligations under capital leases 4,113 12,526
Cash flows from financing activities $81,416 ($186,747)
Increase (decrease) in cash $257,409 $113,910
Cash, beginning 48,430 10,185
Cash, ending $305,839 $124,095
KENSINGTON INTERNATIONAL HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1999 1998
Revenues:
Product sales $2,015,016 $1,830,823
Oil and gas sales 0 186
Total revenues 2,015,016 1,831,009
Cost of sales:
Cost of products sold 1,367,178 1,208,973
Oil and gas costs 0 0
Total cost of sales 1,367,178 1,208,973
Gross profit 647,838 622,036
Operating expenses 482,345 483,238
Income (loss) from operations 165,493 138,798
Other income (expense):
Interest expense (77,127) (67,832)
Miscellaneous income 914 0
Total other income (expense) (76,213) (67,832)
Income (loss) before income taxes and
extraordinary item 89,280 70,966
Provision for income taxes (benefit) 0 0
Income before extraordinary item 89,280 70,966
Extinguishment of debt, net of income
taxes of $0 0 0
Net income (loss) 89,280 70,966
Earnings Per Share $0.03 $0.02
WEIGHTED NUMBER OF SHARES OUTSTANDING 3,264,084 3,163,340
KENSINGTON INTERNATIONAL HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
1999 1998
Cash flows from operating activities:
Net income (loss) $89,280 $70,966
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Depreciation, depletion and amortization 49,712 41,130
Changes in operating assets and liabilities:
Accounts receivable 226,071 158,451
Inventories 27,397 (12,440)
Other current assets (31,507) 27,690
Other assets 0 9,913
Accounts payable 3,046 (42,950)
Other current liabilities (38,375) 68,391
Cash flows from operating activities 325,624 321,151
Cash flows from investing activities:
Decrease in notes receivable - related
parties 3,000 500
Purchase of property and equipment 2,101 28,494
Sale of Stock 24,704 7500
Cash flows from investing activities 25,603 (20,494)
Cash flows from financing activities:
Increase (decrease) in Line of Credit (35,000) (148,099)
Increase (decrease) in notes payable - related
parties (34,287) (30,562)
Proceeds short, long-term debt 0 38,891
Payments on long-term debt 44,800 34,451
Payments on obligations under capital leases 3,521 12,526
Cash flows from financing activities $117,608 ($186,747)
Increase (decrease) in cash $233,619 $113,910
Cash, beginning 72,220 10,185
Cash, ending $305,839 $124,095
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