-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BjSKntBbIk5HHxChi8NykOHV0FFxw3VHyZymHIoK//cNRWYAcFRAlKA7tnJpTu9Z hG8xIxANH3UQCnGGiLlwqQ== 0000316028-00-000004.txt : 20000515 0000316028-00-000004.hdr.sgml : 20000515 ACCESSION NUMBER: 0000316028-00-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KENT FINANCIAL SERVICES INC CENTRAL INDEX KEY: 0000316028 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 751695953 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-07986 FILM NUMBER: 628809 BUSINESS ADDRESS: STREET 1: 376 MAIN ST PO BOX 74 CITY: BEDMINSTER STATE: NJ ZIP: 07921 BUSINESS PHONE: 9082340078 MAIL ADDRESS: STREET 1: 376 MAIN STREET STREET 2: P O BOX 74 CITY: BEDMINSTER STATE: NJ ZIP: 07921 FORMER COMPANY: FORMER CONFORMED NAME: TEXAS AMERICAN ENERGY CORP DATE OF NAME CHANGE: 19900815 EX-27 1 FDS --
5 This Schedule contains summary financial information extracted from the Form 10-QSB of Kent Financial Services, Inc., for the three months ended March 31, 2000 and is qualified in its entirety by reference to such financial statements. 0000316028 KENT FINANCIAL SERVICES,INC. 1000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 3,245 10,084 1,268 0 0 14,597 1,712 557 16,021 2,286 0 0 0 186 13,549 16,021 0 3,190 0 0 1,729 0 99 1,362 3 1,359 0 0 0 1,359 .72 .72
10QSB 2 FOR THE QUARTER ENDED 03/31/00 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2000 ---------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No.: 1-7986 ------ Kent Financial Services, Inc. --------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 75-1695953 - ------------------------------- --------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 376 Main Street, P.O. Box 74, Bedminster, New Jersey 07921 --------------------------------------------------------------- (Address of principal executive offices) (908) 234-0078 ---------------------------------- (Issuer's telephone number) N/A ----------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ State the number of shares outstanding of each of the issuer's classes of common stock: As of April 30, 2000, the issuer had 1,849,364 shares of its common stock, par value $.10 per share, outstanding. Transitional Small Business Disclosure Format (check one). Yes No X --- --- PART I - FINANCIAL INFORMATION - ------ --------------------- Item 1. - Financial Statements - ------ --------------------- KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED) ($000 Omitted) March 31, 2000 ----------- Assets Cash and cash equivalents $ 3,245 Securities owned 10,084 Receivable from clearing broker 1,268 Property and equipment: Land and building 1,447 Office furniture and equipment 265 -------- 1,712 Accumulated depreciation ( 557) -------- Net property and equipment 1,155 -------- Other assets 269 -------- Total assets $ 16,021 ======== Liabilities and Stockholders' Equity Liabilities: Securities sold, not yet purchased $ 236 Accounts payable and accrued expenses 1,035 Mortgage payable 697 Accrual for previously discontinued operations 318 -------- Total liabilities 2,286 -------- Contingent liabilities (Notes 4 and 5) Stockholders' equity: Preferred stock without par value, 500,000 shares authorized; none outstanding - Common stock, $.10 par value, 4,000,000 shares authorized; 1,862,264 outstanding 186 Additional paid-in capital 14,454 Accumulated deficit ( 905) -------- Total stockholders' equity 13,735 -------- Total liabilities and stockholders' equity $ 16,021 ======== See accompanying notes to consolidated financial statements. 1 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ($000 Omitted, except per share data) Three Months Ended March 31, 2000 1999 ------ ------ Revenues: Brokerage commissions $ 592 $ 499 Principal transactions: Trading 1,509 269 Investing gains 840 455 Interest, dividends and other 249 196 ------ ------ 3,190 1,419 ------ ------ Expenses: Brokerage 1,300 516 General, administrative and other 429 577 Interest 99 64 ------ ------ 1,828 1,157 ------ ------ Earnings before income taxes 1,362 262 Provision for income taxes 3 14 ------ ------ Net earnings $1,359 $ 248 ====== ====== Basic net earnings per common share $ .72 $ .12 ====== ====== Diluted net earnings per common share $ .72 $ .12 ====== ====== Weighted average number of common shares outstanding (in 000's) 1,888 1,992 ====== ====== See accompanying notes to consolidated financial statements. 2 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ($000 Omitted) Three Months Ended March 31, ---------------------- 2000 1999 ------ ------ Cash flows from operating activities: Net earnings $ 1,359 $ 248 Adjustments: Depreciation and amortization 19 12 Change in unrealized gains on securities owned ( 832) ( 46) Change in securities owned ( 723) ( 3,230) Change in receivable from clearing broker ( 328) 775 Change in accounts payable and accrued expenses ( 135) 84 Other, net 9 ( 21) ------- ------ Net cash used in operating activities ( 631) ( 2,178) ------- ------ Cash flows from investing activities- Purchase of office equipment - ( 8) ------- ------ Cash flows from financing activities: Purchase of common stock ( 165) ( 1) Payments on debt ( 2) ( 9) ------- ------ Net cash used in financing activities ( 167) ( 10) ------- ------ Net decrease in cash and cash equivalents ( 798) ( 2,196) Cash and cash equivalents at beginning of period 4,043 8,217 ------- ------ Cash and cash equivalents at end of period $ 3,245 $6,021 ======= ====== Supplemental disclosure of cash flow information: Cash paid for: Interest $ 99 $ 64 ======= ====== Taxes $ 1 $ 12 ======= ====== See accompanying notes to consolidated financial statements. 3 KENT FINANCIAL SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 AND 1999 (UNAUDITED) 1. Basis of Presentation --------------------- The accompanying unaudited consolidated financial statements of Kent Financial Services, Inc. and subsidiaries (the "Company") as of March 31, 2000 and for the three month periods ended March 31, 2000 and 1999 reflect all material adjustments consisting of only normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. Certain information and footnote disclosures required under generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year-ended December 31, 1999, as filed with the Securities and Exchange Commission. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On May 7, 1999, T. R. Winston Capital, Inc., ("Wincap") a previously consolidated subsidiary of the Company, issued stock to an unrelated third party, resulting in a change of control. The financial statements presented prior to that date include the accounts of Wincap which was consolidated into the Company. Subsequently, the Company accounts for Wincap using the equity method to reflect its new ownership percentage. The results of operations for the three month periods ended March 31, 2000 and 1999 are not necessarily indicative of the results to be expected for the entire year or for any other period. 4 2. Business -------- The Company's business is comprised principally of the operation of T. R. Winston & Company, Inc. ("Winston"), a wholly-owned subsidiary. Winston is a licensed securities broker-dealer and is a member of the National Association of Securities Dealers, Inc. and the Securities Investor Protection Corporation. All safekeeping, cashiering, and customer account maintenance activities are provided by an unrelated broker-dealer pursuant to a clearing agreement. Pursuant to the net capital provisions of Rule 15c3-1 of the Securities Exchange Act of 1934, Winston is required to maintain minimum net capital. At March 31, 2000, Winston had net capital, as defined, of approximately $1.1 million, which was approximately $1.0 million in excess of the required minimum. The Company also invests through its wholly-owned subsidiary, Asset Value Fund Limited Partnership ("AVF"). AVF primarily invests in a limited number of portfolio companies, the securities of which are considered undervalued by AVF's management. As of March 31, 2000, AVF held 14 equity investments, of which four consisted of owning more than 5% of the investee's outstanding capital stock. AVF owns more than 38% of Cortech, Inc., a company supervising the exploitation of its technology by third parties and also seeking a new business; 26% of General Devices, Inc., a non-operating company seeking a new business; 16% of Gish Biomedical, Inc., a manufacturer of medical devices; and 6% of Golf Rounds.com, Inc., an internet content provider. 3. Securities owned and securities sold, not yet purchased ------------------------------------------------------- Securities owned consist of proprietary trading positions held for resale to customers and portfolio positions held for capital appreciation some of which are valued at fair value. The fair values of the portfolio positions generally are based on listed market prices. If listed market prices are not indicative of fair value or if liquidating the Company's positions would reasonably be expected to impact market prices, fair value is determined based on other relevant factors. Among the factors considered by management in determining fair value of the portfolio positions are the financial condition, asset composition and operating results of the issuer, the long term business potential of the issuer and other factors generally pertinent to the valuation of investments. The fair value of these investments are subject to a high degree of volatility and may be susceptible to significant fluctuation in the near term. Securities owned and securities sold, not yet purchased as of March 31, 2000, consist of the following (in 000's): 5 Sold, Not Yet Owned Purchased ----- --------- Marketable equity securities: Portfolio positions of greater than 5% of outstanding common stock: Cortech, Inc. $ 5,355 $ - Gish Biomedical, Inc. 1,262 - Golf Rounds.com, Inc. 455 - General Devices, Inc. 51 - All other portfolio positions 2,775 236 Held for resale to customers 147 - Mutual funds 39 - ------- ------ Fair value $10,084 $ 236 ======= ====== Securities owned which are not valued at listed market prices at March 31, 2000 amounted to $7,072,000. 4. Income taxes ------------ The components of income tax expense are as follows: ($000 Omitted) Three Months Ended March 31, ----------------------------- 2000 1999 ------ ------ Federal-Current $ - $ - State-Current 3 14 Deferred - - ---- ---- Total $ 3 $ 14 ==== ==== 6 Total income tax expense for the three months ended March 31, 2000 and 1999 are different from the amounts computed by multiplying total earnings before income taxes by the statutory Federal income tax rate of 34%. The reasons for these differences and the related tax effects are: ($000 Omitted) Three Months Ended March 31, -------------------- 2000 1999 ------ ------ Income tax expense computed at statutory rates on total earnings before income taxes $ 463 $ 89 Increase (decrease) in tax from: Valuation allowance on net operating loss carryforward ( 463) ( 89) State income tax, net of Federal benefit 3 14 ----- ----- Total tax expense $ 3 $ 14 ===== ===== 5. Contingent liabilities ---------------------- From time to time in the normal course of business Winston could be named as a respondent in various arbitration matters. In January 2000 and May 2000 Winston settled the two open arbitrations which were open at December 31, 1999. These settlements did not have any material adverse effect on the consolidated financial statements of the Company. Currently there are no pending arbitrations. 6. Pending Sale of Investment in T.R. Winston Capital, Inc. -------------------------------------------------------- In January 2000, Wincap stockholders signed a letter of intent with Direct Capital Markets.com, Inc., ("DCM") to sell all outstanding shares in exchange for 75,000 unregistered, non-marketable shares of DCM's Series C Convertible Preferred Stock. In April 2000,Wincap's stockholders negotiated a definitive agreement for the sale. The sale is contingent upon regulatory approval. 7 Item 2. Management's Discussion and Analysis of Financial - ------ Condition and Results of Operations ------------------------------------------------- Liquidity and Capital Resources - ------------------------------- Kent Financial Services, Inc. (the "Company") had cash and cash equivalents (U.S. Treasury bills with an original maturity of ninety days or less) of $3.2 million and securities owned of $10.1 million at March 31, 2000. Substantially all securities are owned by AVF. Securities carried at fair value of $7,072,000 were valued based on managements estimates. These securities are subject to a high degree of volatility and may be susceptible to significant fluctuation in the near term. The remainder of the securities owned are valued at quoted market prices. Net cash used in operations was $631,000 in the three months ended March 31, 2000 compared to net cash used in operations of $2.2 million in the comparable period of 1999. Net cash used in operations for the three months ended March 31, 2000 decreased from the comparable period in 1999 principally from the change in securities owned and the change in the receivable from clearing broker. The increase in net income in the first quarter of 2000 compared to the first quarter of 1999 was offset by the change in unrealized gains on securities owned over the same periods. Unrealized gains on securities owned are included in the results of operations but do not generate cash flows from operations. Net cash used in financing activities of $167,000 and $10,000 in the three month periods ended March 31, 2000 and 1999, respectively, was comprised of the purchase of Company common stock, which was subsequently retired, and payments on the mortgage loan collateralized by the Company's headquarters building. In February 2000 the Company announced that it would purchase up to 200,000 shares of the Company's common stock at prices deemed favorable from time to time in the open market or in privately negotiated transactions subject to market conditions, the Company's financial position and other considerations. The Company believes that its liquidity is sufficient for future operations. Results of Operations - --------------------- The Company had net income of $1,359,000, or $.72 basic and diluted earnings per share, for the three months ended March 31, 2000 compared to net income of $248,000 or $.12 basic and diluted earnings per share, for the comparable quarter in 1999. 8 Total brokerage income (consisting of brokerage commissions, fees and trading gains) for the three months ended March 31, 2000 was $2,101,000, an increase of $1,333,000, or 174%, from approximately $768,000 in the comparable 1999 period. Brokerage expenses (including all fixed and variable expenses) increased by $784,000, or 152%, from $516,000 in the quarter ended March 31, 1999, to $1,300,000 for the three months ended March 31, 2000. Net brokerage income was $801,000 for the three months ended March 31, 2000 and $252,000 for the same period in 1999, an increase of $549,000 or 218%. The increase in brokerage commission income, principal trading gains and total brokerage expense for the quarter ended March 31, 2000 compared to the comparable quarter of 1999 was due to increased activity by the brokers employed at T. R. Winston & Company, Inc., which was consistent with increased activity in the equity markets in general. Net investing gains were $840,000 for the three months ended March 31, 2000, compared to net investing gains of $455,000 for the comparable period in 1999. The increase in net investing gains from the three month period ended March 31, 2000 to the comparable period in 1999 reflected the appreciation in investment valuation of portfolio positions and the increased level of investment activity. Interest, dividend and other income was $249,000 for the three months ended March 31, 2000, compared to $196,000 for the three months ended March 31, 1999. This increase was a result of dividend income offset by a decrease in interest received due to lower invested balances of the Company's cash equivalents. General, administrative and other expenses were $429,000 and $577,000 for the quarters ended March 31, 2000 and 1999, respectively, a decrease of $148,000 or 26%. This decrease is principally due to a reduction in personnel expense and a reduction in bonus expense accrual. 9 PART II - OTHER INFORMATION - ------- ----------------- Item 6. - Exhibits and Reports on Form 8-K - ------ -------------------------------- (a) Exhibits -------- (27). Financial Data Schedule for the three months ended March 31, 2000. (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the quarter for which this report is being filed. 10 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KENT FINANCIAL SERVICES, INC. Dated: May 12, 2000 By: /s/ John W. Galuchie, Jr. ------------------------- John W. Galuchie, Jr. Executive Vice President -----END PRIVACY-ENHANCED MESSAGE-----