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| KNTH.PK > SEC Filings for KNTH.PK > Form 10-Q on 31-Jul-2009 | All Recent SEC Filings |
31-Jul-2009
Quarterly Report
The following discussion and analysis should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008 as well as the Company's financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Statements in this report relating to future plans, projections, events or conditions are forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those described. The Company expressly disclaims any obligation or undertaking to update these statements in the future.
Business Activities
Our current business plan is to serve as a vehicle for the acquisition of or merger or consolidation with another company (a ''target business''). We intend to use our available working capital, capital stock, debt or a combination of these to effect a business combination with a target business which we believe has significant growth potential. The business combination may be with a financially stable, mature company or a company that is in its early stages of development or growth, which could include companies seeking to obtain capital and to improve their financial stability. We will not restrict our search to any particular industry. Rather, we may investigate businesses of essentially any kind or nature and participate in any type of business that may, in our management's opinion, meet our business objectives as described in this report. We emphasize that the description in this report of our business objectives is extremely general and is not meant to restrict the discretion of our management to search for and enter into potential business opportunities. We have not chosen the particular business in which we will engage and have not conducted any market studies with respect to any business or industry for you to evaluate the possible merits or risks of the target business or the particular industry in which we may ultimately operate. To the extent we enter into a business combination with a financially unstable company or an entity in its early stage of development or growth, including entities without established records of sales or earnings, we will become subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, to the extent that we effect a business combination with an entity in an industry characterized by a high level of risk, we will become subject to the currently unascertainable risks of that industry. An extremely high level of risk frequently characterizes certain industries that experience rapid growth. In addition, although we will endeavor to evaluate the risks inherent in a particular industry or target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
Additionally, Kent International has developed a niche social networking website, www.ChinaUSPals.com, designed to promote cultural exchange between the citizens of the United States and those of the People's Republic of China. Membership to the site is free, thus, any potential revenues will be derived from advertisements placed on the site by third parties. The site provides users with access to other users' personal profiles and enables the user to send messages to other registered users of similar interests in order to develop lasting friendships or simply attain a pen pal. ChinaUSPals.com also features user generated discussion forums and blogs as well as user submitted videos and pictures. The site was redesigned in preparation for the 2008 Olympics and re-launched on August 6, 2008. Since then, site membership has grown to over 4,900 members from the approximately 150 members prior to the redesign.
While we are encouraged by the membership and traffic growth since the redesign, we cannot be certain that the growth rate will continue or that existing members will continue using the site. We also face the risk that our website will not be viewable in China or will be deliberately blocked by the government of the People's Republic of China. Internet usage and content are heavily regulated in China and compliance with these laws and regulations may cause us to change or limit our business practices in a manner adverse to our business.
The Company does not expect that these activities will generate any significant revenues for an indefinite period as these efforts are in their early stages. As a result, these programs may produce significant losses until such time as meaningful revenues are achieved.
Results of Operations
Kent International had a net loss of $86,292, or $.03 basic and fully diluted loss per share, for the quarter ended June 30, 2009, compared to a net loss of $22,741, or $0.01 basic and fully diluted loss per share, for the quarter ended June 30, 2008. Kent International had a net loss of $192,879, or $.06 basic and fully diluted loss per share, for the six months ended June 30, 2009 compared to a net loss of $52,386, or $0.02 basic and fully diluted loss per share, for the same period of 2008. The increases in net losses were a result of decreases in interest revenue on short-term investments and cash on deposit.
Revenues
Interest revenue decreased to $4,692 for the three months ended June 30, 2009, from $77,279 for the three months ended June 30, 2008. For the six months ended June 30, 2009, interest revenue decreased to $10,455 from $160,795 for the six months ended June 30, 2008. A decrease in the yield on short-term investments and cash equivalents from 3.2% to 0.2% was the primary reason for the decreases.
Expenses
General and administrative expenses were $90,984 and $203,334 in the three and six months ended June 30, 2009 compared to $100,135 and $213,296 in the three and six months ended June 30, 2008, decreases of $9,151 and $9,962, respectively. These decreases were the result of net immaterial decreases in general and administrative expense categories.
Liquidity and Capital Resources
At June 30, 2009, the Company had cash and cash equivalents of $10,188,726. Cash and cash equivalents consist of cash held in banks and brokerage firms as well as U.S. Treasury Bills with original maturities of three months. Working capital at June 30, 2009 was approximately $10.167 million. Management believes its cash, cash equivalents and short-term investments are sufficient for its operations for at least the next twelve months and for the costs of seeking an acquisition of or starting an operating business.
Net cash of $191,321 was used in operations for the six months ended June 30, 2009, an increase of $148,890 from the $42,431 used in operations for the six months ended June 30, 2008. Net cash used in operations for the periods was the result of the net losses for the periods coupled with the changes in operating assets and liabilities. The increase in net cash used for operations was primarily the result of the decrease in interest revenue.
Net cash of $10,089,167 was provided by investing activities during the six months ended June 30, 2009 by the sales and maturities of short-term investments. Net cash of $46,993 was provided by investing activities during the six months ended June 30, 2008 by the sales and maturities of short-term investments offset by the purchase of short-term investments.
There were no cash flows from financing activities reported during the six month periods ending June 30, 2009 and 2008.
Factors That May Affect Future Results
Future earnings of the Company are dependent on interest rates earned on the Company's invested balances and expenses incurred. Kent International expects to incur significant expenses in connection with its objective of redeploying its assets into an operating business and with the operation of the website.
Other Disclosures - Related Party Transactions
A monthly management fee of $21,000 is paid to Kent Financial Services, Inc. ("Kent"), a Nevada corporation, for management services. These services include, among other things, periodic and other filings with the Securities and Exchange Commission, evaluating merger and acquisition proposals, internal accounting and shareholder relations. This arrangement may be terminated at will by either party. Kent was the beneficial owner of approximately 53.44% of the Company's outstanding common stock at June 30, 2009. Paul O. Koether, Chairman of the Company is also the Chairman of Kent and the beneficial owner of or authorized proxy for approximately 59.54% of Kent's outstanding common stock. Bryan P. Healey, Chief Financial Officer and Director of the Company is also the Chief Financial Officer and Director of Kent as well as the son-in-law of Paul O. Koether.
Contractual Obligations
The Company has no material contractual obligations.
Other Disclosures
None
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
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