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U.S. 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 March 31, 2000
Commission File Number #33-38119-C
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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, 600 SOUTH HIGHWAY 169, MINNEAPOLIS, MN 55426
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, (612) 546-2075
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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 X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Outstanding shares are 8,527,230 of common stock no par value.
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
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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 MARCH 31, 2000
GENERAL
The following consolidated financial information is submitted in
response to the requirements of Form 10-QSB and is 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 management,
the interim consolidated 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. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet of Kensington International Holding Corporation
(the "Company") as of the quarter ended March 31, 2000 and the related
consolidated statements of operations and cash flows thereto are incorporated
herein by reference to the Company's quarterly report.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Highlights:
1999 2000 Increase
----- ----
<S> <C> <C> <C>
in 000's
Revenue $861 $1,098 27.5%
Gross Profit $303 $355 17.5%
Net Income (Loss) $ 15 ($154) (1126.6)%
Earning (loss) per share 0.00 (.02)
</TABLE>
OPERATIONS
The Company is comprised of three wholly owned subsidiaries: Ives Design, Inc.
(Ives), Bluegrass Management and Operating Company (Bluegrass) and Kensington
American Gas Drilling #1,LLC (Drilling #1); and three majority owned
corporations: Mail Call, Inc. (Mail Call), I-Med Software, Inc. (I-Med) and
Interchange Medical, Inc. (Interchange).
Ives was acquired in April 1992. Ives manufactures custom display fixtures and
millwork throughout the United States. Ives also supplies installation services
to its' customers.
Mail Call was formed in June 1997 and Kensington acquired interests in 1999 with
an additional equity purchase in February 2000. Mail Call is in the development
stage and has yet to generate significant revenues. Mail Call is engaged in
electronic mail retrieval via telephone. Its principal customers are expected to
be located worldwide.
Bluegrass was formerly the wholly-owned subsidiary of American Gas Corporation
(American). During 1998, American was sold and the ownership of Bluegrass was
transferred to the Company. Bluegrass is currently inactive.
Drilling #1, I-Med and Interchange are inactive.
Although revenues were up from the first quarter of 1999, increased
operating expenses, due primarily to the increased ownership in Mail Call caused
the loss for the quarter. Revenues from Ives Design Inc. continued to be strong
but Mail Call revenues lagged behind expectations. The reintroduction of Mail
Call's products has been pushed back to May 2000, which will have a negative
impact on the second quarter revenues and losses. The loss incurred during the
quarter included a one-time payment to the former owner of Mail Call of $200k
plus additional sales and marketing expenses of approximately $65k. In February
the Company increased its' ownership in Mail Call to 84.8% by purchasing the
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stock from one of the founders. Goodwill in the amount of $746k was recorded as
part of this transaction. The Company will amortize goodwill over seven years.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter, the Company completed the private placement of
stock started in September 1999. Under terms of the private placement 718,750
additional shares of restricted common stock were purchased in 2000. During the
quarter, debenture holders converted debt totaling $100k into 100,000 shares of
restricted common stock. In addition 935,794 options and warrants were
exercised, for restricted common stock, by directors, officers, employees and
former employees. During the quarter accrued expenses and debt totaling $58,689
was converted to 533,536 shares of restricted common stock.
INFLATION
The rate of inflation can have a significant impact on the Company's
operations because of increase in wood product costs. The Company bids most
projects and 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
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K and the October 18, 1995 S-8 filing as
described in Item 2 herein.
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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
/s/ Mark Haggerty
---------------------------------
Mark Haggerty
Chief Executive Officer
/s/ Jeff Etten
---------------------------------
Jeff Etten, C.F.O.
Dated: May 12, 2000
Minneapolis, Minnesota
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KENSINGTON INTERNATIONAL HOLDING CORP.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999 AND MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
12/31/99 3/31/00
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ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $1,026,036 $1,540,125
Accounts receivable 491,631 289,014
Inventories 286,831 252,831
Other current assets 18,215 61,203
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Total current assets $1,822,713 $2,143,173
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OTHER ASSETS:
Investment in oil and gas properties, net $65,181 $64,431
Investment in unconsolidated partnerships 40,000 75,000
Property and equipment, net 275,803 277,777
Intangibles, Net 32,371 777,970
Notes receivable - related parties 11,125 11,125
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Total other assets $424,480 $1,206,303
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$2,247,193 $3,349,476
===============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable - related parties $82,965 $2,500
Current portion of long-term debt 354,058 226,782
Current portion of obligations under capital leases 5,913 3,913
Accounts payable 278,706 228,618
Accrued Expenses 151,566 67,298
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Total current liabilities $873,208 $529,111
Long-term debt, net of current portion 448,368 448,368
Minority interests in consolidated investments 466,567 101,726
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Total liabilities $1,788,143 $1,079,205
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STOCKHOLDERS' EQUITY
Common stock $4,796,893 $6,699,126
Accumulated deficit (4,275,046) (4,428,855)
Stock subscriptions receivable (62,797) 0
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Total stockholders' equity $459,050 $2,270,271
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$2,247,193 $3,349,476
===============================================
</TABLE>
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KENSINGTON INTERNATIONAL HOLDING CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1999 AND 2000
(UNAUDITED)
<TABLE>
<CAPTION>
1999 2000
-----------------------------------------------
<S> <C> <C>
SALES:
Product sales $861,893 $1,098,683
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Total revenues $861,893 $1,098,683
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COST OF SALES:
Cost of products sold $559,198 $743,398
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Total cost of sales $559,198 $743,398
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Gross profit $302,695 $355,285
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OPERATING EXPENSES $238,776 $641,257
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INCOME (LOSS) FROM OPERATIONS $63,919 ($285,972)
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OTHER INCOME (EXPENSE):
Interest expense ($48,517) ($32,470)
Interest Income 0 44,299
Minority interest in loss of consolidated corporation 0 120,334
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Total other income (expense) ($48,517) $132,163
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INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM $15,402 ($153,809)
Provision for income taxes (benefit) 0 0
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INCOME BEFORE EXTRAORDINARY ITEM $15,402 ($153,809)
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NET INCOME (LOSS) $15,402 ($153,809)
===============================================
Earnings Per Share $0.00 ($0.02)
WEIGHTED NUMBER OF SHARES OUTSTANDING 3,234,084 6,868,480
</TABLE>
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KENSINGTON INTERNATIONAL HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 1999 & 2000
(UNAUDITED)
<TABLE>
<CAPTION>
1999 2000
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $15,402 ($153,809)
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Depreciation, depletion and amortization 15,423 23,725
Minority interests in loss of consolidated subsidiary (120,334)
Changes in operating assets and liabilities:
Accounts receivable 79,724 202,617
Inventories (37,603) 34,000
Other current assets (9,161) (42,988)
Accounts payable (11,499) (50,088)
Other current liabilities (40,296) (84,268)
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Cash flows from operating activities $11,990 ($191,145)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in notes receivable - related parties 2,000 0
Purchase of property and equipment 1,588 (15,055)
Investment in unconsolidated corporations (35,000)
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Cash flows from investing activities $412 ($50,055)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in Line of Credit ($35,000) $0
Increase (decrease) in notes payable - related parties 0 (21,276)
Payments on long-term debt (600) (27,276)
Payments on obligations under capital leases (592) (2,000)
Proceeds from issuance of commonstock, net of costs 0 624,777
Proceeds from exercise of stock options 0 118,767
Collection on stock subscriptions receivable 0 62,797
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Cash flows from financing activities ($36,192) $755,789
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INCREASE (DECREASE) IN CASH ($23,790) $514,589
CASH, BEGINNING 72,220 1,026,036
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CASH, ENDING $48,430 $1,540,125
===============================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Issuance of common stock for debt retirement 158,689
issuance of common stock for Mail Call stock 1,000,000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1540125
<SECURITIES> 0
<RECEIVABLES> 289014
<ALLOWANCES> 0
<INVENTORY> 252831
<CURRENT-ASSETS> 2143173
<PP&E> 277777
<DEPRECIATION> 0
<TOTAL-ASSETS> 3349476
<CURRENT-LIABILITIES> 529111
<BONDS> 0
0
0
<COMMON> 6699126
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3349476
<SALES> 1098683
<TOTAL-REVENUES> 1098683
<CGS> 743398
<TOTAL-COSTS> 743398
<OTHER-EXPENSES> 641257
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32470
<INCOME-PRETAX> (153809)
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<CHANGES> 0
<NET-INCOME> (153809)
<EPS-BASIC> (.02)
<EPS-DILUTED> 0
</TABLE>
