Attached files
file | filename |
---|---|
EX-31.2 - CERTIFICATION - Gepco, Ltd. | ex31-2.htm |
EX-99.1 - PRESS RELEASE - Gepco, Ltd. | ex99-1.htm |
EX-32.1 - CERTIFICATION - Gepco, Ltd. | ex32-1.htm |
EX-10.6 - LETTER OF INTENT - Gepco, Ltd. | ex10-6.htm |
EX-31.1 - CERTIFICATION - Gepco, Ltd. | ex31-1.htm |
EX-32.2 - CERTIFICATION - Gepco, Ltd. | ex32-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q/A
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
Quarterly Period Ended June 30,
2010
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
Transition Period
From to
Commission
File Number: 000-53559
Kensington
Leasing, Ltd.
(Name of
small business issuer specified in its charter)
Nevada
|
80-0214025
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
1005
S. Center St.
|
||
Redlands,
CA
|
92373
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
(909) 708-4303
|
||
(Registrant’s
telephone number including area code)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days: Yes x No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every interactive data file required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that registrant was required to submit and
post such files). Yes o No x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x
Indicate
by check mark whether the registrant is a large accelerated filer, anon
–accelerated filer, or a smaller reporting company. See definitions
of large accelerated filer, accelerated filer and smaller reporting company in
Section 12b-2 of the Exchange Act.
Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer | o | Smaller reporting company | x |
As
of August 27, 2010, the issuer had 7,888,000 shares of common stock
outstanding.
Transitional
Small Business Disclosure
Format: Yes x No o
1
PART
I – FINANCIAL INFORMATION
Item
1. Financial Statements
The
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial reporting and
pursuant to the rules and regulations of the Securities and Exchange Commission
(“Commission”). While these statements reflect all normal recurring adjustments
which are, in the opinion of management, necessary for fair presentation of the
results of the interim period, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the financial statements
and footnotes thereto, which are included in the Company’s Annual Report on Form
10-K, as amended, previously filed with the Commission.
2
Kensington
Leasing, Ltd.
(A
Development Stage Company)
Consolidated
Balance Sheets
ASSETS
|
June
30, 2010
(Unaudited)
|
December
31, 2009
(Audited)
|
||||||
Cash
|
$ | 191,632 | $ | — | ||||
Notes
receivable
|
47,421 | — | ||||||
Inventory
|
39,656 | — | ||||||
Investments
|
376,135 | — | ||||||
Prepaid
expenses
|
10,045 | — | ||||||
Total
Current Assets
|
664,890 | — | ||||||
Fixed
asset, net
|
36,744 | — | ||||||
Intangible
assets
|
231,858 | 5,000 | ||||||
Total
Non-Current Assets
|
268,602 | 5,000 | ||||||
TOTAL
ASSETS
|
933,492 | 5,000 | ||||||
LIABILITIES
AND STOCKHOLDER'S EQUITY
|
||||||||
Liabilities
|
||||||||
Accounts
payable
|
91,878 | — | ||||||
Notes
payable
|
38,263 | 14,250 | ||||||
Accrued
interest
|
327 | 327 | ||||||
Due
to related parties
|
222,338 | 5,000 | ||||||
Total
Liabilities
|
352,806 | 19,577 | ||||||
Stockholders'
Equity
|
||||||||
Common
stock, $.001 par value, 100,000,000 shares authorized, 7,888,000 and
1,313,000 shares issued and outstanding respectively
|
7,888 | 1,313 | ||||||
Paid
in capital
|
535,937 | 16,512 | ||||||
Other
comprehensive income
|
100,105 | — | ||||||
Net
income accumulated during development stage
|
(63,244 | ) | (32,402 | ) | ||||
Total
Stockholders Equity
|
580,686 | (14,577 | ) | |||||
TOTAL
LIABILITIES AND STOCKHOLDERS EQUITY
|
$ | 933,492 | $ | 5,000 |
See notes
to financial statements
3
Kensington
Leasing, Ltd.
(A
Development Stage Company)
Unaudited
Consolidated Statements of Operations
For
the three
months
ended
June
30, 2010
|
For
the six
months
ended
June
30, 2010
|
From
June 27,
2008
(Inception)
to
June 30, 2010
|
||||||||||
Income
|
$ | 4,071 | $ | 4,071 | $ | 4,071 | ||||||
Operating
expenses
|
||||||||||||
General
and administrative
|
54,600 | 56,576 | 58,621 | |||||||||
Legal
and accounting
|
67,523 | 93,338 | 123,368 | |||||||||
Total
expenses
|
122,123 | 149,913 | 181,988 | |||||||||
Ordinary
income (loss)
|
(118,051 | ) | (145,842 | ) | (177,917 | ) | ||||||
Other
income (loss)
|
115,000 | 115,000 | 114,673 | |||||||||
Net
income (loss)
|
$ | (3,051 | ) | $ | (30,842 | ) | $ | (63,244 | ) | |||
Loss
per share
|
$ | (0.00 | ) | $ | (0.02 | ) | $ | (0.06 | ) | |||
Weighted
average common shares
|
1,379,667 | 1,379,667 | 1,129,258 | |||||||||
Statements
of Comprehensive Income
|
||||||||||||
For
the three
months
ended
June
30, 2010
|
For
the six
months
ended
June
30, 2010
|
From June 27,2008 (Inceptionto June 30, 2010 ) | ||||||||||
Net
income
|
$ | (3,051.49 | ) | $ | (30,842.18 | ) | $ | (63,244.18 | ) | |||
Unrealized
gains on available-for-sale securities
|
100,105 | 100,105 | 100,105 | |||||||||
Total
comprehensive income
|
$ | 97,054 | $ | 69,263 | $ | 36,861 |
See notes
to financial statements
4
Kensington
Leasing, Ltd.
(A
Development Stage Company)
Unaudited
Consolidated Statements of Cash Flows
For
the six
months
ended
June
30, 2010
|
From
June 27,
2008
(Inception)
to
June 30, 2010
|
|||||||
Net
income/(loss)
|
$ | (30,842 | ) | $ | (63,244 | ) | ||
Non-cash
transactions to reconcile cash used in operations
|
||||||||
Depreciation
|
$ | 679 | $ | 679 | ||||
Common
stock issued for asset and intangibles
|
575 | 575 | ||||||
Unrealized
gain on stock held for sale
|
100,105 | 100,105 | ||||||
APIC
on Allianex transaction
|
45,425 | 45,425 | ||||||
Cash
used in operations
|
||||||||
Notes
receivable
|
(47,421 | ) | (47,421 | ) | ||||
Inventory
|
(39,656 | ) | (39,656 | ) | ||||
Accounts
payable
|
91,878 | 91,878 | ||||||
Prepaid
expenses
|
(10,045 | ) | (10,045 | ) | ||||
Total
cash from operations
|
110,698 | 78,296 | ||||||
Cash
flows from investing activities
|
||||||||
Investments
|
(376,135 | ) | (376,135 | ) | ||||
Purchases
of property and equipment
|
(37,423 | ) | (37,423 | ) | ||||
Purchases
of intangibles
|
(226,858 | ) | (226,858 | ) | ||||
Total
cash used in investing activites
|
(640,417 | ) | (640,417 | ) | ||||
Cash
from financing activities
|
||||||||
Stock
offering
|
480,000 | 492,825 | ||||||
Notes
payable
|
24,013 | 24,013 | ||||||
Accrued
interest
|
327 | |||||||
Loans
from related parties
|
217,338 | 236,588 | ||||||
Total
cash from financing activities
|
721,351 | 753,753 | ||||||
INCREASE
IN CASH
|
191,632 | 191,632 | ||||||
BEGINNING
CASH
|
— | — | ||||||
ENDING
CASH
|
$ | 191,632 | $ | 191,632 |
See notes
to financial statements
5
Kensington
Leasing, Ltd.
(a
development stage company)
Notes
to Consolidated Financial Statements
For
the period ended June 30, 2010
NOTE 1: HISTORY OF
OPERATIONS
Kensington
Leasing, Ltd. was incorporated on June 27, 2008 in the State of Nevada. On
June 4, 2010, the Company and its newly formed subsidiary Allianex Corp.
completed the purchase of substantially all of the assets of Allianex, LLC,
pursuant to an Asset Purchase Agreement, dated May 14, 2010. The
Asset Purchase Agreement was described in greater detail in our
Current Report on Form 8-K filed May 20, 2010.
The
purchase price for the assets was $75,000 in cash, 575,000 shares of Kensington
common stock and our assumption of Allianex, LLC’s trade payables. In
addition, we agreed to pay Allianex, LLC 25% of the earnings before interest,
taxes, depreciation and amortization (EBITDA), of the newly formed Allianex
Corp. from July 1, 2010 through June 30, 2013, payable quarterly but calculated
on a cumulative basis. The earn out payments will be made 25% in cash
and 75% in Kensington common stock valued at the market price of the common
stock on the last day of the quarter, provided that we may elect to pay in cash
instead of common stock if the market price is less than $2.00 per share and
Allianex, LLC may elect to receive cash instead of common stock if the market
price is greater than $4.00 per share. Subsequent to this purchase we
have evaluated the estimated future earnings of Allianex Corp. and for the next
three years and have determined that we are not anticipating making any earn out
payments. We will re-evaluate this determination
quarterly.
Our
primary business after the Allianex acquisition is the production, marketing and
distribution of a retail line of prepaid stored value cards for the purchase of
technology support and security services for electronic devices. In
addition to the Allianex acquisition, we currently intend to expand and
diversify our business with the acquisition of other technology companies, as
well as continuing to pursue our initial business plan of leasing specialized
computer equipment and providing support services for
professionals.
NOTE 2: CONTINUED
EXISTENCE
The
Company has not generated any significant revenue during the period ended June
30, 2010 and has funded its operations primarily through the issuance of equity.
Accordingly, the Company’s ability to accomplish its business strategy and to
ultimately achieve profitable operations is dependent upon its ability to obtain
additional debt or equity financing.
These
conditions raise substantial doubt about the Company’s ability to continue as a
going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.
The
Company, as described above, is in the business of the production, marketing and
distribution of a retail line of prepaid stored value cards for the purchase of
technology support and security services for electronic devices and leasing
specialized equipment. There can be no assurance that the Company will be
successful in its endeavors.
NOTE 3: SIGNIFICANT ACCOUNTING
POLICIES
Basis of
Presentation.
The
accompanying consolidated financial statements include the accounts of
Kensington Leasing, Ltd. and its 100% wholly owned subsidiary
Allianex Corp. All intercompany balances and transactions have been
eliminated in consolidation. The accompanying financial statements
have been prepared in conformity with accounting principles generally accepted
in the United States of America.
6
Revenue
Recognition.
Revenue
is recognized net of indirect taxes, rebates and trade discounts and consists
primarily of the sale of products, and services rendered.
Revenue
is recognized in accordance with Codification Topic No. 605-10-S99 “Revenue
Recognition” (ASC 605-10-S99) when the following criteria are met:
·
|
evidence
of an arrangement exists;
|
·
|
delivery
has occurred or services have been rendered and the significant risks and
rewards of ownership have been transferred to the
purchaser;
|
·
|
transaction
costs can be reliably measured;
|
·
|
the
selling price is fixed or determinable;
and
|
·
|
collectability
is reasonably assured.
|
Stock Based
Compensation.
Shares of
the Company’s common stock may be issued for services. These issuances are
valued at the fair market value of the services provided and the number of
shares issued is determined based upon what the price of the common stock is on
the date of each respective transaction.
Estimates.
The
presentation 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 disclosures 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 these estimates.
Fair Value of Financial
Instruments.
The
carrying amounts for the Company’s cash, investments, accounts payable, accrued
liabilities and current portion of long term debt approximate fair value due to
the short-term maturity of these instruments.
Other Comprehensive
Income.
We follow
Accounting Standards Codification Topic No. 220, "Comprehensive Income" (ASC
220). This statement establishes standards for reporting comprehensive income
and its components in financial statements. Comprehensive income, as defined,
includes all changes in equity (net assets) during a period from transactions
and other events and circumstances from non-owner sources. Examples of items to
be included in comprehensive income, which are excluded from net income, include
unrealized gains and losses on available-for-sale securities.
Income
Taxes.
Accounting
Standards Codification Topic No. 740 “Income Taxes” (ASC 740) requires the asset
and liability method of accounting be used for income taxes. Under the asset and
liability method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.
Earnings (Loss) Per
Share.
Per
Accounting Standards Codification Topic 260 “Earnings Per Share” (ASC 260),
basic EPS is determined using net income divided by the weighted average shares
outstanding during the period. Diluted EPS is computed by dividing net income by
the weighted average shares outstanding, assuming all dilutive potential common
shares were issued.
Basic EPS
is determined using net income divided by the weighted average shares
outstanding during the period. Diluted EPS is computed by dividing net income by
the weighted average shares outstanding, assuming all dilutive potential common
shares were issued.
7
NOTE
4: ALLIANEX ACQUISITION
In June
of 2010 we issued 575,000 restricted shares of our common stock to Sumercom, LLC
(formerly Allianex LLC) at a third party valuation of $.08 per share and $75,000
in cash for a total consideration paid of $121,000. The assets we
acquired from Allianex included principally: fixed assets (recorded at net book
value of $37,423); intangible assets consisting of contracts and relationships
with a network of retail aggregator partners, affinity groups and direct selling
companies, and a call center; as well as a worldwide license to use, exploit,
market, sell and distribute certain software products to the purchasers of
prepaid cards (recorded at a value of $183,577) and liabilities assumed
consisting of accounts payable of $100,000.
NOTE
5: INVESTMENTS
Investments
consist of funds invested in the stock market as well as private purchases of
publicly traded companies’ stock. Investments held in brokerage
accounts are valued at the ending value in the brokerage account at June 30,
2010. Private purchases are valued at the fair market value of the
stock at June 30, 2010. Investment values are stated at fair value
with unrealized gains or losses recorded as other comprehensive income or
expense accordingly.
NOTE
6: FIXED ASSETS
The
Company acquired fixed assets with a net book value of $37,423 when it acquired
the assets of Allianex, LLC in June 2010. The assets will be
amortized over their remaining useful lives averaging 55
months. Depreciation expense for the three and six months ended June
30, 2010 was $679.
NOTE 7: INTANGIBLES
The
domain name sendaprayer.com is deemed to have an indefinite life and no
amortization has been recorded. The asset was received as a gift and
was recorded at the cost paid by the giftor which was deemed to be fair
value.
In
accordance with Accounting Standards Codification Topic 350-20 "Intangibles -
Goodwill and Other" (ASC 350-20) intangible assets that have finite lives are
amortized over the period during which the asset is expected to contribute
directly or indirectly to future cash flows of the entity (useful lives). The
amortization method should reflect the pattern in which the asset's economic
benefits are consumed by the entity. If the pattern cannot be determined, the
straight-line method is used. The identified intangible assets recorded in
connection with the Allianex asset acquisition will be amortized over their
estimated useful lives of five years. Since the intangible assets had
not been put in service as of June 30, 2010 no amortization has been
recorded. Amortization will begin on July 1,
2010.
NOTE 8: RELATED PARTY
TRANSACTIONS
On June
27, 2008, 20,000 shares of common stock were issued to Officer/Director
Angelique de Maison, pursuant to Section 4(2) of the Securities Act of 1933, in
exchange for setup costs and the Company’s business plan.
On
November 29, 2009, Angelique de Maison gifted the URL, sendaprayer.com to the
Company. This asset has been recorded at the cost incurred by Ms. de
Maison.
During
the year ended December 31, 2009 Ms. de Maison loaned the Company a total of
$14,250 for operating expenses at an interest rate of 10% per year. The
outstanding balance was $763 at June 30, 2010. Ms. de Maison also
loaned the Company a total of $5,000 for start-up costs at zero
interest. The outstanding balance was $0 at June 30,
2010.
8
On March
31, 2010, the Company entered into a Securities Purchase Agreement, whereby it
issued 6,000,000 shares of its common stock to officer and director Angelique de
Maison, in a transaction not involving a public offering, in reliance on the
exemption from registration contained in Section 4(2) of the Securities Act of
1933. The shares were sold to Ms. de Maison at the price of $0.08 per
share, for a total of $480,000 in cash. There was no underwriter involved.
The Securities Purchase Agreement gives Ms. de Maison demand registration
rights requiring the Company to file a registration statement to register the
common stock under the Securities Act of 1933 upon 60 days notice to the Company
and piggyback registration rights in the event the Company effects a public
offering of its common stock for cash with respect to all shares of common stock
that she owns (including the shares acquired under the Agreement).
In
addition, under the Agreement, Ms. de Maison agreed to purchase from us, subject
to certain conditions, upon our demand at any time on or prior to June 30, 2011,
a note in the amount $520,000. The note would be unsecured, would not
be convertible, would bear interest at the rate of 10% per annum, payable
quarterly, and would be due and payable on June 30, 2012. There
was no underwriter involved.
NOTE 9: STOCK OFFERING
In
January through February 2009, 12,825 shares of common stock (513,000 shares as
split) were offered to investors pursuant to the company’s Regulation D, Rule
504 small corporate offering registered in the State of Illinois.
On April
9, 2010, the Company entered into an Option Purchase Agreement with Merrimen
Investments, Inc. pursuant to which the Company concurrently sold to Merrimen
for $200,000 an option to purchase up to 24,000,000 shares of our common
stock. The option has an exercise price of $0.08 per share, expires
on April 8, 2011, and may be exercised on or after October 1,
2010. Under the Option Purchase Agreement, Merrimen received demand
registration rights and piggyback registration rights with respect to the shares
it may acquire upon exercise of the option.
NOTE 10: FORWARD SPLIT
Effective
May 1, 2009 the Company effected a 40-1 forward split of its common share
capital.
NOTE
11: NEW ACCOUNTING PRONOUNCEMENTS
In 2009,
the FASB issued Statement 165, “Subsequent Events” (“SFAS 165”) [ASC 855], which
defines the period after the balance sheet date that subsequent events should be
evaluated and provides guidance in determining if the event should be reflected
in the current financial statements. Statement 165 also requires disclosure
regarding the date through which subsequent events have been evaluated. The
Company adopted the provisions of Statement 165 as of December 31, 2009. The
Company has evaluated subsequent events through the time this Form 10-Q was
filed with the Securities and Exchange Commission. Events that
occurred subsequent to June 30, 2010 that require disclosure or recognition in
these financial statements are included it Note 12: SUBSEQUENT
EVENTS.
In June
2009, the FASB issued SFAS No. 166, “Accounting For Transfers of Financial
Assets -- An Amendment Of FASB Statement No. 140” ("SFAS 166") [ASC860], which
requires entities to provide more information regarding sales of securitized
financial assets and similar transactions, particularly if the entity has
continuing exposure to the risks related to transferred financial assets. SFAS
166 eliminates the concept of a "qualifying special-purpose entity", changes the
requirements for derecognizing financial assets and requires additional
disclosures. SFAS 166 is effective for fiscal years beginning after November 15,
2009. The Company has not completed its assessment of the impact SFAS 166 will
have on its financial condition, results of operations or cash
flows.
9
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)” ("SFAS 167") [ASC 810-10], which modifies how a company determines when
an entity that is insufficiently capitalized or is not controlled through voting
(or similar rights) should be consolidated. SFAS 167 clarifies that the
determination of whether a company is required to consolidate an entity is based
on, among other things, an entity's purpose and design and a company's ability
to direct the activities of the entity that most significantly impact the
entity's economic performance. SFAS 167 requires an ongoing reassessment of
whether a company is the primary beneficiary of a variable interest entity. SFAS
167 also requires additional disclosures about a company's involvement in
variable interest entities and any significant changes in risk exposure due to
that involvement. SFAS 167 is effective for fiscal years beginning after
November 15, 2009. The Company has not completed its assessment of the impact
SFAS 167 will have on its financial condition, results of operations or cash
flows.
In
June 2009, the FASB issued Accounting Standards Update (“ASU”)
No. 2009-01, Topic 105 — Generally Accepted Accounting Principles —
amendments based on Statement of Financial Accounting Standards No. 168,
The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles. This Accounting Standards Update includes
Statement 168 in its entirety, including the accounting standards update
instructions contained in Appendix B of the Statement. The Codification
does not change current U.S. GAAP, but is intended to simplify user access to
all authoritative U.S. GAAP by providing all the authoritative literature
related to a particular topic in one place. The Codification is effective for
interim and annual periods ending after December 15, 2009, and as of the
effective date, all existing accounting standard documents will be superseded.
The Codification is effective for us in the second quarter of fiscal 2010, and
accordingly, our Form 10-K for the year ended December 31, 2009 and all
subsequent public filings will reference the Codification as the sole source of
authoritative literature.
NOTE
12: SEGMENT INFORMATION
On May
20, 2010, we entered into an Asset Purchase Agreement with Allianex, LLC and on
June 4, 2010 the purchase was completed. In connection with the
acquisition, Allianex, LLC transferred substantially all of its assets and
liabilities to our newly formed subsidiary Allianex Corp. We have
historically been involved in a single industry, leasing, however, with this new
subsidiary, we also became involved in the production, marketing and
distribution of a retail line of prepaid stored value cards for the purchase of
technology support and security services for electronic
devices. Therefore as of June 4, 2010 our products and operations are
managed in two segments; the leasing segment and the prepaid card
segment. A segment is determined primarily by the method in which it
delivers its products and services. Selected information about our
two operating segments for the six months ended June 30, 2010 is as
follows:
Revenue
|
Cost
of
Goods
Sold
|
Gross
Profit
|
Operating
Expenses
|
Operating
Income
(Loss)
|
||||||||||||||||
Leasing
|
$ | 4,071 | $ | — | $ | 4,071 | $ | 22,720 | $ | (18,649 | ) | |||||||||
Prepaid
Cards
|
— | — | — | 16,179 | (16,179 | ) | ||||||||||||||
Total
operating segments
|
4,071 | — | 4,071 | 38,899 | (34,828 | ) | ||||||||||||||
Corporate/eliminations
|
111,014 | (111,014 | ) | |||||||||||||||||
Total
consolidated
|
$ | 4,071 | $ | — | $ | 4,071 | $ | 149,913 | $ | (145,842 | ) |
Management
reviews the Company’s assets on a consolidated basis because it is not
meaningful to allocate assets to the various segments. Management
evaluates segment performance based on revenues and operating
income. The Company does not allocate income taxes or charges
determined to be non-recurring in nature.
Both the
leasing segment and the prepaid card segment primarily operate in the United
States.
NOTE
13: SUBSEQUENT EVENTS
On August
17, 2010 the Company signed a letter of intent with Wealth Makers, Ltd. to
acquire 100% of their outstanding shares in a stock transaction. The
closing of the transaction is subject to a number of conditions, and is
anticipated to occur in late September or early October.
WealthMakers,
a privately held Wyoming corporation, is a web-based predictive research
technology company that connects to automated trading platforms for stocks,
indexes, bonds, options, commodities and currencies and can trade in up to 80
markets around the world in a single universal account provided by a leading
online broker.
10
Item
2: Management’s Discussion and Analysis or Plan of
Operation
The
following discussion of our financial condition and results of operations should
be read in conjunction with the financial statements and related notes to the
financial statements included elsewhere in this filing as well as with
Management’s Discussion and Analysis or Plan of Operation contained in the
Company’s Annual Report on Form 10-K for the period ended December 31, 2009 and
the Company’s Current Report on Form 8-K filed on June 10, 2010, as amended both
filed with the Securities and Exchange Commission.
Forward
Looking Statements
This
discussion and the accompanying financial statements (including the notes
thereto) may contain “forward-looking statements” that relate to future events
or our future financial performance, which are made pursuant to the safe harbor
provisions of the Securities Exchange act of 1934, as amended. The forward
looking statements are based on the Company’s current expectations and beliefs
concerning future developments and their potential effects on the Company. These
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance
or achievements expressed or implied by these forward-looking statements. These
risks and other factors include, among others, those contained in the Company’s
Annual Report on Form 10-K for the period ended December 31, 2009 and the
Company’s Current Report on Form 8-K filed on June 10, 2010, as
amended. For a more detailed discussion of risks and uncertainties,
see the Company’s public filings made with the Securities and Exchange
Commission. The Company undertakes no obligation to publicly update any
forward-looking statements.
No
Comparable Information
There is
no comparable historic financial information for the current quarter ended June
30, 2010 and the quarter ended June 30, 2009. As previously
disclosed, on May 20, 2010, we entered into an Asset Purchase Agreement with
Allianex, LLC and on June 4, 2010 the purchase was completed. In
connection with the acquisition, Allianex, LLC transferred substantially all of
its assets and liabilities to our newly formed subsidiary Allianex
Corp. We have historically been involved in a single industry,
leasing, however, with this new subsidiary, we also became involved in the
production, marketing and distribution of a retail line of prepaid stored value
cards for the purchase of technology support and security services for
electronic devices. In light of these changes, we do not
believe that the historic financial information of the Company enhances the
reader’s ability to assess the material changes in financial condition and
results of operations as compared to the previous fiscal
year. Further discussion of the historic financial information of
Allianex, LLC is included in our Current Report on Form 8-K filed on June 10,
2010, as amended. Therefore, the Company has included a discussion of
its plan of operations.
Plan
of Operations
Kensington
Leasing, Ltd. (“The Company”) initially planned to specialize in leasing
equipment to a select clientele. The Company has chosen to support the legal,
medical and real estate professional with high quality computer hardware and
software so they can forget about shopping, understanding and buying the latest
version of computer peripherals and concentrate on their
business. The Company plans to keep its future customers abreast of
the latest changes and support them with their hardware and software needs. The
Company will also perform training and on-site maintenance through its hardware
and software affiliates. In short, The Company takes the hardware burden from
these professionals and supports them with one stop shopping and support for all
their electronic and computer equipment.
Because
it has taken longer than anticipated to launch the Company’s leasing business,
the Company elected to investigate additional lines of business while continuing
to follow the current business plan. One such line of business is
online greeting and gift cards. Another line of business is online
prepaid computer and digital support services.
11
On June
4, 2010, the Company and its newly formed subsidiary Allianex Corp. completed
the purchase of substantially all of the assets of Allianex, LLC (a provider of
prepaid computer and digital support services), pursuant to an Asset Purchase
Agreement, dated May 14, 2010. This transaction was described in
greater detail in our Current Report on Form 8-K filed June 10, 2010 as
amended.
Allianex
Business
Allianex
is a development stage company that is developing a retail line of stored value
cards for the purchase of technology support and security services for
electronic devices. Since its inception as Allianex LLC in 2004,
Allianex’s operations have primarily consisted of establishing alliances with
service providers, establishing relationships with distribution channels, and
producing the software integration systems necessary to facilitate retail sale
of the prepaid cards, for example the PIN activation system.
Through
our Allianex Corp. subsidiary, we provide our global distribution sales channels
the ability to effectively market a turnkey package of computer and digital
support services and software, including live expert PC or Mac assistance, and a
suite of security and optimization products. Our clients can offer
consumers the right access to these essential computer protection
services.
Our
clients and markets include a roster of the top retail store aggregators, direct
selling companies, affinity groups, agents, and national
associations.
Our
business is based on a nexus of contracts by which we retain a supply of
technology support and security services and then distribute such services by
means of prepaid cards through retail store aggregators.
The
retail channel works as follows: A transaction occurs when a customer
purchases a prepaid/gift card from a retailer who has contracted with one of our
retail aggregator clients to provide the prepaid/gift cards in their retail
location. Upon purchase, the card is “enabled” and the customer is
given a PIN number. The customer then goes to our activation website
and registers the PIN number to activate the card. Upon registration,
our service providers are notified that the card has been activated, and the
customer will, depending on the services purchased, either be directed to our
one of our contractual service call center partners or directed to an online
location where they can upload the appropriate performance improvement or
security enhancement software from one of our contractual software
partners. Our service and support providers will then provide the
customer with the services they purchased through the card.
Each
participant in the transaction receives compensation for their role in the
transaction. Our aggregators are entitled to a percentage of
our sales, a percentage of which is in turn paid by the aggregators to the
retailers, and our service providers receive a fee or percentage for each
service they provide to our end user customers. For example, if a
customer purchases a “$25 One-Time Live Expert Tech Repair” card, the aggregator
will retain a certain percentage of the sale for distributing the card, our
service provider will receive a percentage for providing the services, and we
retain the remainder.
Once we
have the infrastructure in place to more fully utilize our distribution
relationships, we anticipate that a full range of our support products and
services will become available through merchandising displays at stores ranging
from small “mom and pop” shops to the nation’s largest chain
stores. Our retail aggregator partners are some of the largest retail
aggregators operating in the prepaid/gift card industry. We intend to
offer our global distribution sales channels the ability to effectively market a
turnkey package of up-to-date and high caliber computer and digital support
services and software at affordable rates, including our “Live: 24 Hour” expert
PC or Mac assistance and a suite of security and optimization
products. Given the need for affordable and reliable PC technical
assistance, we offer a solution to the millions of people using computers and
peripheral digital devices such as printers, cameras, mp3 players, and mobile
phones.
Allianex
Products. Our prepaid cards
are offered in a variety of amounts and forms, including offerings for registry
cleaner software, identity protection software, a suite of software
applications, one time repair support or unlimited technical support services
for a specified time period. Our product offerings are currently sold
at a price range from $25 to $50 per card, and we anticipate soon offering
prepaid cards with loading value of up to $500. We intend to expand
our service offerings to include other support services.
12
Allianex Technology
Support. Some of the
biggest threats to the average personal computer user involve cyber crime and
identity theft, spyware, viruses, user error, and overall poor
performance. Poor performance grows organically over time as remnants
from web activity, like viruses, spyware, and pop-ups, and installed/uninstalled
programs interfere with proper usage.
Our
prepaid cards offer solutions to these problems by giving our end user customers
access to technical support services and/or performance improvement and security
enhancement software. We provide exclusively remote technical
resolution services to those who use our products – we do not have any physical
location where customers need to bring their electronic devices and we do not
send any technicians to our customers’ locations.
Our
support services are designed to help customers with a wide range of technical
support issues that may be affecting their desktop or laptop PCs through around
the clock access to our live tech-on-call services or through our online
software offerings. We currently have contractual relationships with
suppliers of live operator technical support and providers of registry cleaner,
anti-spyware, and complete security and optimization software
suites. We sell these services to the end user customers that
purchase our prepaid cards. In exchange for these services, each
service provider is entitled to either a percentage, an amount, or a per usage
fee from each prepaid card related to the services they provide. As
the brand becomes further established, we intend to expand our technology
partners and thereby expand our product offerings.
Allianex Distribution
Network. Our current plan
is to primarily focus on revenue associated with distribution through physical
retail locations like self service kiosks and in-store retail prepaid and gift
card racks. The retail prepaid card industry has hundreds of issuers
offering prepaid cards and thousands of in-store retail
locations. Between the suppliers and retail sellers are a small
number of “aggregators” – value add companies that transactionally connect those
issuing the prepaid cards with those who ultimately sell them to
consumers.
We have
contractual relationships with two leading aggregators through which we hope to
distribute our prepaid card on a retail basis. In exchange for
distributing our product through their retail networks, we offer these
aggregators a percentage of the purchase price for each card
sold. Our retail aggregator partners distribute retail prepaid gift
cards in stores throughout the US, Mexico, Canada, UK and other locations around
the world. Our retail aggregators have access to retail locations
like grocery stores, pharmacies, convenience stores, travel centers and
more. Though the prepaid card is not currently offered in all of our
aggregator’s locations, we anticipate offering our product through many more of
these locations in the near future based on the aforementioned contractual
relationships.
Allianex Customer Service
Infrastructure. Since
August 2009, AdMax Media, Inc. (“AdMax”) has provided us with back-office
support services to coordinate the execution of our product
offerings. AdMax provides activation services, and will provide
payment processing and call center support for the prepaid cards. We
have yet to enter into a formal agreement regarding these services.
Allianex
Marketing. Because the products will be co-located with other,
similar products in “card malls” at the retail establishments, the primary
marketing to the end user customer will be via point-of-sale cooperative
advertising with the retailers. A branded site with e-commerce
support will also be developed to serve as an Internet presence. Our
primary marketing efforts will be to secure co-marketing efforts with the retail
establishments and to increase the number of retail establishments carrying the
products, which we intend to pursue through attendance at trade shows and
advertising in the trade press.
Allianex
Strategy. Our strategy is to continue to grow our
business by increasing our customer base, continually offering new products and
services, scaling our current marketing channels, adding new marketing channels
and forming new strategic alliances.
As part
of our growth strategy, we intend to add to our current product lines technology
related services other than technology support and security for personal
computers. This includes products to provide technical support for
“gamers” or those in the video game community, and modular cards that will allow
consumers to modify their plan to include other services and which provide the
option of being recharged to allow the customer to regain these services without
having to buy another card.
13
In
addition to our own product lines, we intend to expand our business through
taking advantage of co-marketing opportunities. Since the prepaid
card leads to a web-based product, the consumer can be exposed to a variety or
other compelling purchase options when they use the prepaid card support
solutions. To take advantage of these up-sell opportunities, we
intend to expand our online product offerings to extend to compatible sales
options through the purchase, activation, and use processes.
We also
intend to expand geographically. While we primarily operate in the
United States, we are currently in the process of developing partnerships in the
UK and Mexico. To make this possible, we are currently working to
develop appropriate products incorporating Spanish language options and other
vernacular translations.
Allianex Intellectual
Property. We currently have a worldwide non-exclusive license
to use, exploit, market, sell and distribute certain software products to the
purchasers of our prepaid cards. This includes registry cleaner,
anti-spyware, complete security and optimization software suites. Our
license agreement expires 2011, but automatically renews for successive two year
terms unless otherwise terminated. The licensor of this software is
entitled a fee for each program that is accessed through our prepaid
cards.
Other
than as discussed above, we do not own or license any patents, registered
trademarks, franchises, concessions, royalty agreements or labor
contracts.
Critical
Accounting Estimates and Policies
The
discussion and analysis of our financial condition and plan of operations is
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenue and expenses, and
related disclosure of contingent assets and liabilities. On an on-going basis,
we evaluate our estimates including, among others, those affecting revenue, the
allowance for doubtful accounts, the saleability of inventory and the useful
lives of tangible and intangible assets. The discussion below is intended as a
brief discussion of some of the judgments and uncertainties that can impact the
application of these policies and the specific dollar amounts reported on our
financial statements. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances, the results of which form our basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions, or if management made different judgments or utilized
different estimates. Many of our estimates or judgments are based on anticipated
future events or performance, and as such are forward-looking in nature, and are
subject to many risks and uncertainties, including those discussed below and
elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2009
and in our Current Report on Form 8-K filed on June 10, 2010 as amended. We do
not undertake any obligation to update or revise this discussion to reflect any
future events or circumstances.
We have
identified below some of our accounting policies that we consider critical to
our business operations and the understanding of our results of operations. This
is not a complete list of all of our accounting policies, and there may be other
accounting policies that are significant to us. For a detailed discussion on the
application of these and our other accounting policies, see note 1 to the
financial statements for the period ended June 30, 2010, included in this Form
10-Q.
Revenue
Recognition
Service
revenues are recognized at the time the services are
performed. Revenues to date primarily represent testing of Allianex’s
concept. During the test period, the contracted service provider
charged customer credit cards, collected amounts due from customers, and
remitted net commissions to Allianex based upon the contracted wholesale price
in the contract. Once the testing phase is complete, Allianex plans
to collect gross amounts due from customers using its own merchant processing
accounts, record revenues as gross sales, and remit amounts to service providers
based upon contract provisions.
14
Cash
Equivalents
Cash
equivalents include all highly liquid debt instruments with original maturities
of three months or less which are not securing any corporate
obligations.
Stock
Based Compensation
Shares of
the Company’s common stock may be issued for services. These issuances are
valued at the fair market value of the services provided and the number of
shares issued is determined based upon what the price of the common stock is on
the date of each respective transaction.
Estimates
The
presentation 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 disclosures 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 these estimates.
Advertising
Costs
Advertising
costs are expensed as incurred. There were no advertising expenses for the
period ended June 30, 2010.
Income
Taxes
Accounting
Standards Codification Topic No. 740 “Income Taxes” (ASC 740) requires the asset
and liability method of accounting be used for income taxes. Under the asset and
liability method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Earnings
(Loss) Per Share
Per
Accounting Standards Codification Topic 260 “Earnings Per Share” (ASC 260),
basic EPS is determined using net income divided by the weighted average shares
outstanding during the period. Diluted EPS is computed by dividing net income by
the weighted average shares outstanding, assuming all dilutive potential common
shares were issued.
Basic EPS
is determined using net income divided by the weighted average shares
outstanding during the period. Diluted EPS is computed by dividing net income by
the weighted average shares outstanding, assuming all dilutive potential common
shares were issued.
Segment
Reporting
We have
historically been involved in a single industry, leasing, however, with the
acquisition of our new Allianex subsidiary, we also became involved in the
production, marketing and distribution of a retail line of prepaid stored value
cards for the purchase of technology support and security services for
electronic devices. Therefore as of June 4, 2010 our products and
operations are managed in two segments; the leasing segment and the prepaid card
segment.
Item
3: Quantitative and Qualitative Disclosures About Market Risk
Our
Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange
Act and, as such, is not required to provide the information required under this
Item.
15
Item
4: Controls and Procedures
As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), the Company carried out an evaluation under the
supervision and with the participation of the Company’s management, including
the Chief Executive Officer and Chief Financial Officer, of the effectiveness of
the Company’s disclosure controls and procedures as of June 30, 2010. In
designing and evaluating the Company’s disclosure controls and procedures, the
Company recognizes that there are inherent limitations to the effectiveness of
any system of disclosure controls and procedures, including the possibility of
human error and the circumvention or overriding of the controls and procedures.
Accordingly, even effective disclosure controls and procedures can only provide
reasonable assurance of achieving their desired control objectives.
Additionally, in evaluating and implementing possible controls and procedures,
the Company’s management was required to apply its reasonable judgment. Based
upon the required evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that as of June 30, 2010, sufficient disclosure controls and
procedures existed which management believes are effective to ensure that
information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission’s
rules and forms.
There was
no change in our internal control over financial reporting during the quarter
ended June 30, 2010 that has materially affected or is reasonably likely to
materially affect our internal control over financial reporting.
16
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings
In the
normal course of business, the Company is, and in the future may be, subject to
various disputes, claims, lawsuits, and administrative proceedings arising in
the ordinary course of business with respect to commercial, employment and other
matters, which could involve substantial amounts of damages. In the opinion of
management, any liability related to any such known proceedings would have a
material adverse effect on the business or financial condition of the
Company. Additionally, from time to time, we may pursue litigation
against third parties to enforce or protect our rights under our contracts,
trademarks, trade secrets and our intellectual property rights generally.
At the present time, the Company is not the subject of any lawsuits or
claims.
Item
1A. Risk Factors
Our
Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange
Act and, as such, is not required to provide the information required under this
Item.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
The
following securities were issued by Kensington Leasing, Ltd. during the quarter
ended June 30, 2010 and were not registered under the Securities
Act:
One June
4, 2010, Pursuant to the Asset Purchase Agreement, we issued to Sumercom, LLC
(formerly Allianex, LLC), a California corporation, 575,000 shares of our common
stock as partial consideration for the assets of Allianex, LLC. This
transaction was described in greater detail in our Current Report on Form 8-K
filed on June 10, 2010 as amended.
Item
3. Defaults Upon Senior Securities
None.
Item
4. (Removed and Reserved)
None.
Item
5. Other Information
On August
17, 2010 the Company signed a non-binding letter of intent with WealthMakers,
Ltd. to acquire 100% of their outstanding shares in a stock transaction in which
the Company shall issue 3,838,500 shares of its common stock in exchange for
100% of the issued and outstanding capital shares of
WealthMakers. The value of the Company’s common stock exchanged is
based on the closing price reported on the over-the-counter bulletin board as of
August 13, 2010. The closing of the transaction is subject to a
number of conditions, and is anticipated to occur in late September or early
October.
WealthMakers,
a privately held Wyoming corporation, is a web-based predictive research
technology company that connects to automated trading platforms for stocks,
indexes, bonds, options, commodities and currencies and can trade in up to 80
markets around the world in a single universal account provided by a leading
online broker.
17
Item
6. Exhibits
Exhibit
No.
|
Description
|
3.1
|
Bylaws
(incorporated by reference to the Company’s Registration Statement on Form
10, filed on January 15, 2009)
|
3.2
|
Amendment
to Bylaws (incorporated by reference to the Company’s Current Report on
Form 8-K filed on July 7, 2010)
|
10.1
|
Securities
Purchase Agreement between Kensington Leasing, Ltd. and Angelique de
Maison. (incorporated by reference to the Company’s Current Report on Form
8-K filed on April 5, 2010)
|
10.2
|
Option
Purchase Agreement dated April 9, 2010 between Kensington Leasing, Ltd.
and Merrimen Investments, Inc. (incorporated by reference to the Company’s
Current Report on Form 8-K filed on April 15, 2010)
|
10.3
|
Option
to Purchase Common Stock dated April 9, 2010 issued to Merrimen
Investments, Inc. (incorporated by reference to the Company’s Current
Report on Form 8-K filed on April 15, 2010)
|
10.4
|
Asset
Purchase Agreement, dated May 14, 2010, between Kensington Leasing, Ltd.,
Allianex Corp. and Allianex, LLC (incorporated by reference to the
Company’s Current Report on Form 8-K filed on May 20,
2010)
|
10.5
|
Employment
Agreement, dated May 14, 2010, between Allianex Corp. and Kenneth Rotman
(incorporated by reference to the Company’s Current Report on Form 8-K
filed on May 20, 2010)
|
10.6
|
Letter
of Intent dated August 17, 2010 between Kensington Leasing, Ltd. and
WealthMakers, Ltd. (incorporated herewith)
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a)
(incorporated herewith)
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a)
(incorporated herewith)
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
(incorporated herewith)
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
(incorporated herewith)
|
99.1
|
Press
Release issued August 17, 2010 (incorporated
herewith)
|
18
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.
Date:
August
23, 2010
/s/
Angelique de
Maison
Angelique
de Maison
Chief
Executive Officer
19