SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Filed pursuant to Section 12, 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
January 31, 2000
KENSINGTON INTERNATIONAL HOLDING CORPORATION
(Exact name of registrant as specified in charter)
MINNESOTA 33-38119-C 41-1619632
- --------- ---------- ----------
(State of (Commission (I.R.S. Employer
organization) File Number) Identification
Number)
Suite 654 - Interchange Tower
600 South Highway 169
Minneapolis, Minnesota 55426
- ----------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 546-2075
--------------
Item 1. Change in Control of Registrant.
Amendment No.1 to current report on form8-K/A is filed for the purpose
of filing the financial statements of Mail Call, Inc.(Mail Call) required by
item 7(a) and the proforma financial information required by item 7(b).
Item 7. Financial Statements, Proforma Financial Information and Exhibits.
a) Financial Statements of Business acquired.
b) Proforma Financial Information.
c) Memorandum of Understanding dated June 26, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Kensington International Holding Corporation
(Registrant)
by /s/ Mark Haggerty
---------------------------------
Mark Haggerty, C.E.O.-C.O.O.
Dated: Minneapolis, Minnesota
February 8, 2000,
MAIL CALL, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants F-1
Financial Statements:
Balance Sheets F-2
Statements of Operations F-3
Statements of Stockholders' Equity (Deficit) F-4
Statements of Cash Flows F-5
Notes to Financial Statements F6- F-7
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mail Call, Inc.:
We have audited the accompanying balance sheets of Mail Call, Inc. (a
development stage company) as of December 31, 1998 and 1997, and the related
statements of operations, stockholders' equity (deficit) and cash flows for
the year ended December 31, 1998 and for the period from June 18, 1997
(inception) through December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mail Call, Inc. (a
development stage company) as of December 31, 1998 and 1997, and the results
of its operations and its cash flows for the year ended December 31, 1998 and
for the period from June 18, 1997 (inception) through December 31, 1997, in
conformity with generally accepted accounting principles.
LUND KOEHLER COX & ARKEMA, LLP
Minneapolis, Minnesota
January 5, 2000
F-1
MAIL CALL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
1998 1997
-------- --------
ASSETS
CURRENT ASSETS:
Cash $ 199 $ 5,988
Prepaid expenses 39 559
-------- --------
Total current assets 238 6,547
-------- --------
FURNITURE AND EQUIPMENT, AT COST 37,575 34,077
Less: accumulated depreciation and amortization (11,663) (880)
-------- --------
Total furniture and equipment, net 25,912 33,197
-------- --------
OTHER ASSETS:
Deposits 1,574 3,522
Intangible, net 5,323 0
-------- --------
Total other assets 6,897 3,522
-------- --------
$ 33,047 $ 43,266
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Line of credit - bank $ 80,000 $ 35,000
Accounts payable 4,599 34
-------- --------
Total current liabilities 84,599 35,034
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, no par value, 2,500 shares authorized,
1,125 and 295 shares issued and outstanding 43,310 18,055
Deficit accumulated during the development stage (94,862) (9,823)
-------- --------
Total stockholders' equity (deficit) (51,552) 8,232
-------- --------
$ 33,047 $ 43,266
======== ========
See accompanying notes to financial statements.
F-2
MAIL CALL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD
FROM JUNE 18, 1997 (INCEPTION) THROUGH DECEMBER 31, 1997
1998 1997
---------- ---------
REVENUES $ 5,020 $ 0
OPERATING EXPENSES 84,637 9,756
---------- ---------
LOSS FROM OPERATIONS (79,617) (9,756)
---------- ---------
OTHER INCOME (EXPENSE):
Interest income 19 7
Interest expense (5,441) (74)
---------- ---------
Total other income (expense) (5,422) (67)
---------- ---------
NET LOSS $ (85,039) $ (9,823)
========== =========
BASIC AND DILUTED LOSS PER COMMON SHARE $ (194.15) $ (34.47)
========== =========
SHARES USED IN COMPUTING BASIC AND DILUTED LOSS PER SHARE 438 285
========== =========
See accompanying notes to financial statements.
F-3
MAIL CALL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM JUNE 18, 1997 (INCEPTION) THROUGH DECEMBER 31, 1998
Deficit
Accumulated
Common Stock during the
----------------------- Development
Shares Amount Stage Total
-------- -------- ------- -------
BALANCE - JUNE 18, 1997 (INCEPTION) - $ - $ - $ 0
Issuance of common stock 295 18,055 - 18,055
Net loss - - (9,823) (9,823)
-------- -------- -------- --------
BALANCE - DECEMBER 31, 1997 295 18,055 (9,823) 8,232
Issuance of common stock 830 25,255 - 25,255
Net loss - - (85,039) (85,039)
-------- -------- -------- --------
BALANCE - DECEMBER 31, 1998 1,125 $ 43,310 $(94,862) $(51,552)
======== ======== ======== ========
See accompanying notes to financial statements.
F-4
MAIL CALL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD
FROM JUNE 18, 1997 (INCEPTION) THROUGH DECEMBER 31, 1997
1998 1997
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (85,039) $ (9,823)
Adjustments to reconcile net loss to
cash flows from operating activities:
Depreciation and amortization 10,783 880
Changes in operating assets and liabilities:
Prepaid expenses 520 (559)
Deposits 1,948 (3,522)
Accounts payable 4,565 34
----------- ----------
Cash flows from operating activities (67,223) (12,990)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture and equipment (3,498) (34,077)
Purchases of intangible asset (5,323) 0
----------- ----------
Cash flows from investing activities (8,821) (34,077)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in line of credit - bank 45,000 35,000
Proceeds from issuance of common stock 25,255 18,055
----------- ----------
Cash flows from financing activities 70,255 53,055
----------- ----------
INCREASE (DECREASE) IN CASH (5,789) 5,988
CASH, BEGINNING OF PERIOD 5,988 0
----------- ----------
CASH, END OF YEAR $ 199 $ 5,988
=========== ==========
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash paid for interest $ 5,441 $ 74
See accompanying notes to financial statements.
F-5
MAIL CALL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Mail Call, Inc., Inc. (the Company) was incorporated in
Florida on June 18, 1997. The Company is in the development stage and has yet
to generate any significant revenues. The Company engages in electronic mail
retrieval service via telephone. Its principal customers are expected to be
located worldwide.
DEPRECIATION - Furniture and equipment are recorded at cost. Depreciation is
provided for using the straight-line method over periods of five years for
furniture and equipment and three years for computer software. Maintenance,
repairs and minor renewals are expensed when incurred.
AMORTIZATION - Intangible assets consists of a trademark and will be
amortized using the straight-line method over a period of 15 years.
INCOME TAXES - The Company, with the consent of its stockholders, has elected
under the Internal Revenue Code to be an S corporation. In lieu of corporate
income taxes, the stockholders of an S corporation are taxed on their
proportionate share of the Company's taxable loss. Therefore, no provision or
liability for federal or state income taxes has been included in the
financial statements.
EARNINGS PER COMMON SHARE - The Company has adopted Statement of Financial
Accounting Standards No. 128 "Earnings Per Share" (Statement 128). Statement
128 requires disclosures of basic loss per share (EPS) and diluted EPS. Basic
EPS is computed by dividing net loss by the weighted average number of shares
of common stock outstanding during the period. Diluted EPS is computed by
dividing net loss by the weighted average common shares outstanding and
dilutive common equivalent shares assumed to be outstanding during each
period. Dilutive common stock equivalents have not been included in the
computations of diluted EPS because their inclusion would be antidilutive.
Antidilutive common equivalent shares issuable based on future exercise of
stock options and warrants could potentially dilute EPS in future years.
MANAGEMENT'S USE OF ESTIMATES - 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts for all financial
instruments approximates fair value. The carrying amounts for cash and
accounts payable approximate fair value because of the short maturity of
these instruments. The fair value of debt approximates the current rates at
which the Company could borrow funds with similar remaining maturities.
F-6
MAIL CALL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998 AND 1997
(2) LINE OF CREDIT - BANK
The Company had a $100,000 revolving line of credit with City National Bank
of Florida that expired and was paid off in August 1999. Borrowings under the
revolving line of credit bore interest at 1% over the bank's reference rate
(8.75% at December 31, 1998) and was secured by substantially all of the
assets of the Company and the personal guarantee of two of the Company's
stockholders. Outstanding borrowings were $80,000 and $35,000 at December 31,
1998 and 1997.
(3) COMMITMENTS AND CONTINGENCIES
OPERATING LEASES - The Company leases space for its office under a lease
expiring November 2000. Base monthly rent ranges from $675 to $713. In
addition, the Company is required to pay its prorata share of operating
expenses. The Company also leases certain equipment under a lease expiring
October 2000. Base rent is $376 a month. Rent expense was $14,181 and $716
for the years ended December 31, 1998 and 1997.
Future minimum rental payments are as follows for the years ending December 31:
1999 $ 12,650
2000 11,598
---------
Total $ 24,248
=========
(4) SUBSQUENT EVENTS
REVOCATION OF S CORPORATION STATUS - On June 26, 1999, the Company revoked
its S corporation status with the Internal Revenue Service.
SALE OF COMMON STOCK - During 1999, the Company sold 715 shares of its common
stock to Kensington International Holding Corporation (Kensington) and
received proceeds of approximately $1,000,000. In addition, the Company
issued 27 shares of common stock to a third-party for services rendered in
brokering the deal. In addition to their investment of $1,000,000, Kensington
advanced the Company funds to repay certain payables and debt and has agreed
to advance the Company additional monies for operations. The proceeds from
the investment will be used for further development of the Company's products.
F-7
The following proforma unaudited consolidated statements of operations
reflect the pro forma consolidated results of operations of Kensington
International Holding Corporation for the year ended December 31, 1998 and
the nine months ended September 30, 1999 and those of Mail Call, Inc. for the
year ended December 31, 1998 and the nine months ended September 30, 1999,
after giving effect to the June 26, 1999 Memorandum of Understanding (MOU)
between Kensington International Holding Corporation and Mail Call, Inc.
under the assumptions set forth in the accompanying notes. The proforma
unaudited balance sheet combines the September 30, 1999 historical
consolidated balance sheet of Kensington International Holding Corporation
with the September 30, 1999 historical condensed balance sheet of Mail Call,
Inc. after giving effect to the MOU, under the assumptions set forth in the
accompanying notes. The pro forma unaudited consolidated financial statements
should be read in conjunction with the accompanying explanatory notes, the
memorandum of understanding dated June 26, 1999, the historical financial
statements and related notes of Kensington International Holding Corporation
previously filed and the financial statements of Mail Call, Inc. appearing
elsewhere in this filing.
The periods presented conform to the fiscal year of the Registrant.
PROFORMA UNAUDITED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
PROFORMA PROFORMA
KENSINGTON MAIL CALL ADJUSTMENTS CONSOLIDATED
----------- ----------- ----------- -----------
ASSETS
CURRENT ASSETS:
Cash $ 118,365 $ 4,973 $ 1,135,135 $ 1,258,473
Accounts receivable 507,449 259 0 507,708
Inventories 174,446 0 0 174,446
Other current assets 46,368 1,669 0 48,037
----------- ----------- ----------- -----------
Total current assets 846,628 6,901 1,135,135 1,988,664
----------- ----------- ----------- -----------
OTHER ASSETS:
Property and equipment, net 262,911 16,979 0 279,890
Investment in oil and gas properties, net 9,999 0 0 9,999
Investment in unconsolidated oil and gas partnership 66,620 0 0 66,620
Investment in unconsolidated corporation 164,616 0 (164,616) 0
Notes receivable - related parties, net 12,125 0 0 12,125
Intangibles, net 30,150 5,323 0 35,473
----------- ----------- ----------- -----------
Total other assets 546,421 22,302 (164,616) 404,107
----------- ----------- ----------- -----------
$ 1,393,049 $ 29,203 $ 970,519 $ 2,392,771
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable - related parties $ 92,260 $ 0 $ 0 $ 92,260
Current portion of long-term debt 36,221 0 0 36,221
Current portion of capital lease obligations 9,900 0 0 9,900
Accounts payable 272,583 2,985 0 275,568
Accrued expenses 228,783 22,800 0 251,583
----------- ----------- ----------- -----------
Total current liabilities 639,747 25,785 0 665,532
LONG-TERM DEBT, NET OF CURRENT PORTION 799,739 0 0 799,739
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 5,912 0 0 5,912
MINORITY INTEREST IN SUBSIDIARY 0 0 494,548 494,548
----------- ----------- ----------- -----------
Total liabilities 1,445,398 25,785 494,548 1,965,731
----------- ----------- ----------- -----------
STOCKHOLDERS' DEFICIT:
Common stock 3,667,478 183,165 951,970 4,802,613
Stock subscriptions receivable (127,594) 0 0 (127,594)
Accumulated deficit (3,592,233) (179,747) (475,999) (4,247,979)
----------- ----------- ----------- -----------
Total stockholders' deficit (52,349) 3,418 475,971 427,040
----------- ----------- ----------- -----------
$ 1,393,049 $ 29,203 $ 970,519 $ 2,392,771
=========== =========== =========== ===========
PROFORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
PROFORMA PROFORMA
KENSINGTON MAIL CALL ADJUSTMENTS CONSOLIDATED
-------------- ------------ ----------------- ---------------
REVENUES $ 2,834,900 $ 25,014 $ 2,859,914
COST OF SALES 1,895,245 0 1,895,245
-------------- ------------ ---------------
GROSS PROFIT 939,655 25,014 964,669
OPERATING EXPENSES 721,351 104,629 825,980
-------------- ------------ ---------------
INCOME FROM OPERATIONS 218,304 (79,615) 138,689
OTHER INCOME (EXPENSE) (99,352) (5,270) (104,622)
-------------- ------------ ---------------
INCOME BEFORE INCOME TAXES 118,952 (84,885) 34,067
PROVISION FOR INCOME TAXES 0 0 0
-------------- ------------ ---------------
NET INCOME $ 118,952 $ (84,885) $ 34,067
============== ============ ===============
BASIC AND DILUTED EARNINGS PER
COMMON SHARE $ 0.03 $ (70.50) $ 0.01
============== ============ ===============
SHARES USED IN COMPUTING BASIC AND
DILUTED EARNINGS PER COMMON SHARE 3,557,115 1,204 4,812,365
============== ============ ===============
PROFORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
PROFORMA PROFORMA
KENSINGTON MAIL CALL ADJUSTMENTS CONSOLIDATED
---------------- -------------- ----------------- -------------------------
REVENUES $ 3,934,579 $ 5,020 $ 3,939,599
COST OF SALES 2,652,620 0 2,652,620
---------------- -------------- -------------------------
GROSS PROFIT 1,281,959 5,020 1,286,979
OPERATING EXPENSES 975,204 84,637 1,059,841
LOSS ON IMPAIRMENT OF OIL AND GAS
INVESTMENT 19,154 0 19,154
---------------- -------------- -------------------------
INCOME FROM OPERATIONS 287,601 (79,617) 207,984
OTHER INCOME (EXPENSE) (86,573) (5,422) (91,995)
---------------- -------------- -------------------------
INCOME BEFORE INCOME TAXES 201,028 (85,039) 115,989
PROVISION FOR INCOME TAXES 0 0 0
---------------- -------------- -------------------------
NET INCOME $ 201,028 $ (85,039) $ 115,989
================ ============== =========================
BASIC AND DILUTED EARNINGS PER
COMMON SHARE $ 0.06 $ (194.15) $ 0.03
================ ============== =========================
SHARES USED IN COMPUTING BASIC AND
DILUTED EARNINGS PER COMMON SHARE 3,234,084 438 4,489,333
================ ============== =========================
Notes to Financial Statements
On July 8, 1999 the Company paid $25,000 to a principal stockholder of Mail
Call, Inc. for approximately 32.2% of the outstanding common stock of Mail
Call, Inc. On June 26, 1999 the Company entered into a memorandum of
understanding with Mail Call, Inc. to purchase additional shares to increase
their ownership to 51.2% of the outstanding common stock. Between July and
September 1999 the Company advanced monies to Mail Call for operations and
debt repayment that have been treated as additional capital contributions.
During October and November 1999 the Company sold 1,255,250 shares of its
common stock in private placements and received net proceeds of $1,135,135.
The Company used $1,000,000 of these proceeds to purchase the additional
shares of Mail Call, Inc., increasing their total interest in Mail Call, Inc.
to 51.2%.
The proforma adjustments in the preceding proforma financial statements
reflect the above transactions as well as the elimination of the Company's
ownership interest in Mail Call, Inc. and adjustment for the minority
ownership in Mail Call, Inc.