UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
of the
SECURITIES EXCHANGE ACT OF 1934
Date of Event Requiring Report: October 17, 2001
Wichita Development Corporation
---------------------------------
(Exact Name of Registrant as Specified on its Charter)
0-29383 88-0356200
----------------- ------------------------
(Commission File Number) (IRS Employer Identification Number)
NEVADA
(State or Other Jurisdiction of Incorporation or Organization)
268 West 400 South, Suite 300
Salt Lake City, Utah 84101
----------------------------
(Address of Principal Executive Offices)
(801) 575-8073
----------------
(Registrant's Telephone Number, Including Area Code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 17, 2001, the Company entered into a Stock Purchase Agreement with
Axia Group, Inc. wherein the Company agreed to purchase from Axia Group, Inc., a
Nevada corporation, approximately 85.6% of the issued and outstanding shares of
Kearns Development Corporation ("Kearns"), a Nevada corporation which owns real
estate consisting of a fully rented office building located in Salt Lake County,
Utah. The Company received 18,100,000 shares of Kearns common stock in exchange
for 80,000,000 shares of the Company's common stock. See Exhibit A.
Kearns owns an office building located in Salt Lake County, Utah. The Kearns
building is a 11,709 square foot, single story office building located in a
south western suburb of Salt Lake City, Utah. The property is considered class
"B" space The occupancy rate is currently 100%. The building is rented at an
average of approximately $11.44 a square foot by the current tenants. As of June
1, 2001 Kearns had three leases in place. The first lease is with the Deseret
Mutual Benefit Administrators, an insurance provider that occupies approximately
4,000 square feet (34%) of the building. The lease currently provides for
monthly payments of $3,425 a month with annual increases of four percent
(4%).The Deseret lease expires on September 30, 2003. The second lease is with
the State of Utah Court Administrator, a probation oversight office that
occupies approximately 3,500 square feet (30%) of the building. The lease is
paid on an annual basis that currently equates to a monthly rate of $3,743. The
State of Utah lease expires on September 30, 2003. The third lease is with the
Salt Lake Community Action Program which occupies approximately 3,920 square
feet (33.5%) of the building. The lease is for a term of three years beginning
on June 1, 2001 and ending on May 31, 2004, with the monthly rents for 2001 set
at $3,335, 2002 at $3,468 and 2003 at $3,607.
On November 1, 1999, Kearns entered into a three year lease agreement, with an
option to purchase, on an identical single story office building at the same
location as the building presently owned by Kearns. The terms of this lease and
option agreement entitle Kearns to lease this second building for a three year
period with the option to purchase though October 31, 2002. The purchase price
for the second building is $650,000 if closed before October 1, 2002.
Wichita made the acquisition as part of its ongoing business plan to increase
ownership of commercial properties.
ITEM 5. OTHER EVENTS
On October 1, 2001, Mel S. Martin and Edward T. Wells accepted appointment as
directors of the Company. On October 5, 2001, Jim Dendy accepted appointment as
a director of the Company. On October 12, 2001, the Board of Directors appointed
Edward T. Wells to serve as CEO of the Company and Mel S. Martin to serve as
Corporate Secretary.
Page -2-
ITEM 7. Financial Statements and Exhibits
The following exhibits are included as part of this report:
EXHIBIT PAGE
NO. NO. DESCRIPTION
1 3 Stock Purchase Agreement dated October 17, 2001
2 7 Year-end December 31, 2000, audited financial statements for Kearns
Development Corporation, September 30, 2001 Interim financial
statements for Kearns Development Corporation and Pro forma
financial statements, combining the Company with Kearns Development
Corporation as required.
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.
Dated: December 3, 2001
Wichita Development Corporation
By: /s/ Edward T. Wells
--------------------
Edward T. Wells, CEO
Page -3-
STOCK PURCHASE AGREEMENT
BETWEEN
WICHITA DEVELOPMENT CORPORATION
AND
AXIA GROUP, INC.
Page -4-
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Purchase and Sale.............................................................2
Purchase Price................................................................2
Warranties and Representations of Axia........................................2
Warranties and Representations of Wichita.....................................4
Term..........................................................................5
Conditions Precedent to Closing...............................................5
Termination...................................................................5
Miscellaneous Provisions......................................................6
Closing.......................................................................6
Governing Law.................................................................6
Counterparts..................................................................6
Page -1-
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") agreementated October 17,
2001, by, between and among WICHITA DEVELOPMENT CORPORATION, a Nevada
Corporation ("Wichita"), and AXIA GROUP, INC., a Nevada corporation, ("AXIA").
WHEREAS, Axia owns in excess of 90% of the issued and outstanding
common stock of Kearns Development Corporation ("Kearns"), a Nevada corporation,
which owns real property located in Salt Lake County, Utah; and
WHEREAS, Axia desires to sell and Wichita desires to purchase Eighteen
Million One Hundred Thousand (18,100,000) shares of common stock, representing
an interest in excess of eighty percent (80%) of the issued and outstanding
shares of Kearns in exchange for the transfer of a total of Eighty Million
(80,000,000) shares of the common stock of Wichita to Axia;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereby agree as
follows:
I. Purchase and Sale. Axia hereby agrees to sell, transfer, assign and convey
to Wichita and Wichita hereby agrees to purchase and acquire from Axia,
Eighteen Million One Hundred Thousand (18,100,000) shares of the common
voting stock of Kearns Development Corporation, a Nevada corporation.
II. Purchase Price. The aggregate purchase price to be paid by Wichita for the
Eighteen Million One Hundred Thousand shares of stock of Kearns Eighty
Million (80,000,000) shares of common stock in Wichita.
III. Warranties and Representations of Axia. In order to induce Wichita to enter
into the Agreement and to complete the transaction contemplated hereby,
Axia warrants and represents to Wichita that:
A. Organization and Standing. Axia is a corporation duly organized,
validly existing and in good standing under the laws of the State
of its incorporation, is qualified to do business as a foreign
corporation in every other state or jurisdiction in which it
operates to the extent required by the laws of such states and
jurisdictions, and has full Power and authority to carry on its
business as now conducted and to own and operate its assets,
properties and business.
B. Ownership of the Shares. As of the Date hereof, Axia is the
sole owner of the Eighteen Million One Hundred Thousand Shares
being purchased by Wichita pursuant to this Agreement, free
and clear of all liens, encumbrances and restrictions, other
then those imposed due to the fact the shares have not been
registered with the
Page -2-
Securities and Exchange Commission and carry a Rule 144
legend.
C. Taxes. Axia has filed all federal, state and local income or
other tax returns and reports that it is required to file with
all governmental agencies, wherever situate, and has paid or
accrued for payment all taxes as shown on such returns, such that
a failure to file, pay or accrue will not have a material adverse
effect on Axia or the shares of Kearns stock which are the
subject of this Agreement .
D. Pending Actions. There are no material legal actions, lawsuits,
proceedings or investigations, either administrative or judicial,
pending or to the knowledge of Axia threatened, against or
affecting Kearns Development Corporation and/or the Kearns
Shares. Axia is not in violation of any material law, ordinance
or regulation of any kind whatever, including, but not limited to
the Securities Act of 1933, (the "33 Act"), the Securities
Exchange Act of 1934, as amended (the "34 Act") the Rules and
Regulations of the U.S. Securities and Exchange Commission
("SEC"), or the Securities Laws and Regulations of any state.
E. Governmental Regulation. The completion of the transactions
contemplated by the Agreement will not, in and of themselves,
violate any governmental law, rule or regulation which would in
any way affect or jeopardize the validity of this Agreement.
F. Ownership of Assets. Axia has good, marketable title, without any
liens or encumbrances of any nature whatever, to the Kearns
shares which are the subject of this Agreement
G. No Misleading Statements or Omissions. Neither the Agreement nor
any financial statement, exhibit, schedule or document attached
hereto, contains any materially misleading statement, or omits
any fact or statement necessary to make the other statements or
facts therein set forth not materially misleading.
H. Validity of the Agreement. All corporate action and other
proceedings required to be taken by Axia in order to enter into
and to carry out the Agreement have been duly and properly taken.
No additional corporate or other action on the part of Axia is
required in connection with this Agreement, or the transaction
contemplated herein. The Agreement has been duly executed by
Axia, and constitutes the valid and binding obligation of Axia,
except to the extent limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws relating to
or affecting generally the enforcement of creditors rights. The
execution and delivery of the Agreement and the carrying out of
its purposes will not result in the breach of any of the terms or
conditions of, or constitute a default under or violate Axia's
Certificate of Incorporation or document of undertaking, oral or
written, to which Axia is a party or is bound or may be affected,
nor will such execution, delivery and carrying out violate any
order, writ, injunction, decree, law, rule or regulation of any
Page -3-
court, regulatory agency or other governmental body; and the
business now conducted by Axia can continue to be so conducted
after completion of the transaction contemplated hereby.
I. Enforceability of the Agreement. When duly executed and
delivered, the Agreement and the Exhibits hereto which are
incorporated herein and made a part hereof are legal, valid, and
enforceable by Wichita according to their terms, except to the
extent limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws relating to or affecting
generally the enforcement of creditors rights and that at the
time of such execution and delivery, Wichita will have acquired
title in and to the Kearns shares free and clear of all claims,
liens and encumbrances.
IV. Warranties and Representations of Wichita. In order to induce Axia to enter
into the Agreement and to complete the transaction contemplated hereby,
Wichita warrants and represents to Axia that:
A. Organization and Standing. Wichita is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Nevada, is qualified to do business as a foreign
corporation in every other state in which it operates to the
extent required by the laws of such states, and has full power
and authority to carry on its business as now conducted and to
own and operate its assets, properties and business.
B. No Misleading Statements or Omissions. Neither the Agreement
nor any financial statement, exhibit, schedule or document
attached hereto or presented to Axia in connection herewith
contains any materially misleading statement, or omits any
fact or statement necessary to make the other statements of
facts therein set forth not materially misleading.
C. Validity of the Agreement. All corporate action and proceedings
required to be taken by Wichita in order to enter into and to
carry out the Agreement have been duly and properly taken. The
Agreement has been duly executed by Wichita, and constitutes a
valid and binding obligation of Wichita. The execution and
delivery of the Agreement and the carrying out of its purposes
will not result in the breach of any of the terms or conditions
of, or constitute a default under or violate, Wichita's
Certificate of Incorporation or By-Laws, or any agreement, lease,
mortgage, bond, indenture, license or other document or
undertaking, oral or written, to which Wichita is a party or is
bound or may be affected, nor will such execution, delivery and
carrying out violate any order, writ, injunction, decree, law,
rule or regulation of any court regulatory agency or other
governmental body.
D. Enforceability of the Agreement. When duly executed and
delivered, the Agreement and the Exhibits hereto which are
incorporated herein and made a part hereof are legal, valid, and
enforceable by Wichita according to their terms, and that at the
time
Page -4-
of such execution and delivery, Wichita will have acquired good,
marketable title in and to the Kearns shares acquired herein,
free and clear of all liens and encumbrances.
V. Term. All representations, warranties, covenants and agreements made herein
and in the exhibits attached hereto shall survive the execution and
delivery of the Agreement and payment pursuant thereto.
VI. Conditions Precedent to Closing.
A. The obligations of Wichita under the Agreement shall be and are
subject to fulfillment, prior to or at the Closing of each of the
following conditions:
1. That Axia and its management representations and
warranties contained herein shall be true and correct
at the time of closing date as if such representations
and warranties were made at such time;
2. That Axia and its management shall have performed or
complied with all agreements, terms and conditions
required by the Agreement to be performed or complied
with by them prior to or at the time of Closing;
B. The obligations of Axia under the Agreement shall be and are
subject to fulfillment, prior to, at the Closing or subsequent to
the Closing of each of the following conditions:
1. That Wichita's representations and warranties contained
herein shall be true and correct at the time of Closing
as if such representations and warranties were made at
such time; and
2. That Wichita shall have performed or complied with all
agreements, terms and conditions required by the
Agreement to be performed or complied with by it prior
to or at the time of Closing.
VII. Termination. The Agreement may be terminated at any time before or; at
Closing, by:
A. The mutual agreement of the parties;
B. Any party if:
1. Any provision of the Agreement applicable to a party
shall be materially untrue or fail to be accomplished.
2. Any legal proceeding shall have been instituted or
shall be imminently threatening to delay, restrain or
prevent the consummation of the Agreement.
Page -5-
Upon termination of the Agreement for any reason, in accordance with the terms
and conditions set forth in this paragraph, each said party shall bear all costs
and expenses as each party has incurred and no party shall be liable to the
other.
VIII. Miscellaneous Provisions. This Agreement is the entire agreement
between the parties in respect of the subject matter hereof, and there
are no other agreements, written or oral, nor may the Agreement be
modified except in writing and executed by all of the parties hereto.
The failure to insist upon strict compliance with any of the terms,
covenants or conditions of the Agreement shall not be deemed a waiver
or relinquishment of such right or Power at any other time or times.
IX. Closing. The Closing of the transactions contemplated by the Agreement
("Closing") shall take place at 1:00 P.M. on October 18,2001. The Closing
shall occur at such place as the parties hereto shall agree upon. At the
Closing, all of the documents and items referred to herein shall be
exchanged.
X. Governing Law. The Agreement shall be governed by and construed in
accordance with the internal laws of the State of Nevada.
XI. Counterparts. The Agreement may be executed in duplicate facsimile
counterparts, each of which shall be deemed an original and together shall
constitute one and the same binding Agreement, with one counterpart being
delivered to each party hereto.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
as of the date and year above first written.
Wichita Development Corporation
By: /s/ Edward T. Wells
------------------------------------------
Edward T. Wells
Its: CEO
Axia Group, Inc.
By: /s/Richard D. Surber
------------------------------------------
Richard D. Surber
Its: President
Page -6-
Exhibit 2
KEARNS DEVELOPMENT CORPORATION
(formerly known as CyberStudio, Inc.)
FINANCIAL STATEMENTS
December 31, 2000
[WITH INDEPENDENT AUDITORS' REPORT]
F-7
KEARNS DEVELOPMENT CORPORATION
(formerly known as CyberStudio, Inc.)
Table of Contents
Page
Independent Auditors' Report . . . . . . . . . . . . . . . . . . .. F-1
Balance Sheet - December 31, 2000 . . . . . . . . . . . . . . . . . F-2 & 3
Statements of Stockholders' Equity for the years ended
December 31, 2000 and 1999 . . . . . . . . . . . . . . . . . . . . .. F- 4
Statements of Operations for the years ended December 31, 2000
and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . F- 5
Statements of Cash Flows for the years ended December 31,
2000 and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F- 6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . F-7 through
10
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Kearns Development Corporation (formerly known as CyberStudio, Inc.)
Salt Lake City, Utah
We have audited the accompanying balance sheet of Kearns Development Corporation
(formerly known as CyberStudio, Inc.) as of December 31, 2000, and the related
statements of stockholders' equity, operations, and cash flows for the years
ended December 31, 2000 and 1999. 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 audit 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 audit provides 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 Kearns Development Corporation
(formerly known as CyberStudio, Inc.) as of December 31, 2000, and the results
of operations and cash flows for the years ended December 31, 2000 and 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company's history of operating
losses raises substantial doubt about its ability to continue as a going
concern. Management's plans in those matters are described in note 6. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Mantyla McReynolds
------------------------
Mantyla McReynolds
May 24, 2001
Salt Lake City, Utah
F-1
KEARNS DEVELOPMENT CORPORATION
(formerly known as CyberStudio, Inc.)
Balance Sheet
December 31, 2000
December 31,
2000
------------------
ASSETS
Current Assets
Cash $ 26,764
Total Current Assets 26,764
Fixed Assets
Property and equipment, net - Notes 1 & 4 598,438
Land 100,000
------------------
Total Fixed Assets 698,438
Other Assets
Deposits 5,000
Total Other Assets 5,000
TOTAL ASSETS $ 730,202
==================
See accompanying notes to financial statements
F-2
KEARNS DEVELOPMENT CORPORATION
(formerly known as CyberStudio, Inc.)
Balance Sheet
(continued)
December 31, 2000
December 31,
2000
-------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts payable $ 1,556
Accrued liabilities 754
Unearned rent 33,693
Payable to parent - Note 2 133,925
Current portion long-term debt - Note 5 625,000
Total Current Liabilities 794,928
------------------
Long-Term Liabilities
Mortgage payable - Note 5 625,000
Less current portion (625,000)
Total Long-Term Liabilities 0
TOTAL LIABILITIES 794,928
STOCKHOLDERS' EQUITY
Preferred stock - 5,000,000 shares authorized at $0.001 par, none issued
and outstanding 0 Common stock - 20,000,000 shares authorized at $0.001
par; 1,154
1,153,900 shares issued and outstanding
Paid in capital 9,900
Retained earnings (75,780)
TOTAL STOCKHOLDERS' EQUITY (64,726)
------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 730,202
==================
See accompanying notes to financial statements
F-3
KEARNS DEVELOPMENT CORPORATION
(formerly known as CyberStudio, Inc.)
Statements of Stockholders' Equity
for the years ended
December 31, 2000 and 1999
Additional Total
Number of Common Paid-in Retained Stockholders'
Shares Stock Capital Earnings Equity
---------------- --------------- --------------- --------------- -----------------
Balance, December 31, 1998 1,000,000 $ 1,000 $ 0 $ (30,942) $ (29,942)
Issued stock for cash 100,000 100 9,900 10,000
Net income (loss) for 1999 16,604 16,604
Balance, December 31, 1999 1,100,000 1,100 9,900 (14,338) (3,338)
Issued stock for debt 53,900 54 54
Net income (loss) for 2000 (61,442) (61,442)
Balance, December 31, 2000 1,153,900 $ 1,154 $ 9,900 $ (75,780) $ (64,726)
================ =============== =============== =============== =================
See accompanying notes to financial statements
F-4
KEARNS DEVELOPMENT CORPORATION
(formerly known as CyberStudio, Inc.)
Statements of Operations
for the years ended December 31, 2000 and 1999
Year Year
ended ended
December 31, December 31,
2000 1999
---------------------- ----------------------
Revenue
Lease revenues $ 83,301 $ 77,987
Total revenue 83,301 77,987
General and administrative expenses 144,784 61,383
---------------------- ----------------------
Net income (loss) from rental operations (61,483) 16,604
Other income (expense)
Interest income (expense) 41 0
Total other income (expense) 41 0
---------------------- ----------------------
Net income (loss) $ (61,442) $ 16,604
====================== ======================
Net income (loss) per common share $ (0.06) $ 0.02
====================== ======================
Weighted average shares outstanding 1,113,696 1,075,068
====================== ======================
See accompanying notes to financial statements
F-5
KEARNS DEVELOPMENT CORPORATION
(formerly known as CyberStudio, Inc.)
Statements of Cash Flows
for the years ended
December 31, 2000 and 1999
Year Year
ended ended
December 31, December 31,
Cash Flows from Operating Activities: 2000 1999
- -------------------------------------
------------------ ------------------
Net Income (loss) $ (61,442) $ 16,604
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,134 0
Decrease (increase) in deposits 0 (5,000)
Increase (decrease) in accounts payable 1,556 0
Increase (decrease) in accrued liabilities (7,077) 1,118
------------------ ------------------
Net Cash Provided by/(Used for) in Operating Activities (64,829) 12,722
Cash Flows from Investing Activities:
Sale (purchase) of fixed assets (684,000) (16,572)
------------------ ------------------
Net Cash Provided by/(Used for) Investing Activities (684,000) (16,572)
Cash Flows from Financing Activities:
- ------------------------------------
Principal advance on mortgage 625,000 0
Net advances from parent 150,526 (9,601)
Issued stock for cash 0 10,000
Issued stock for debt 54 0
------------------ ------------------
Net Cash Provided by/(Used for) Financing Activities 775,580 399
Net Increase(decrease) in Cash 26,751 (3,451)
Beginning Cash Balance 13 3,464
------------------ ------------------
Ending Cash Balance $ 26,764 $ 13
================== ==================
Supplemental Disclosure Information:
Cash paid during the year for interest $ 0 $ 0
Cash paid during the year for income taxes $ 0 $ 0
See accompanying notes to financial statements
F-6
KEARNS DEVELOPMENT CORPORATION
(formerly known as Cyber Studio, Inc.)
Notes to the Financial Statements
For the Year Ended December 31, 2000
NOTE 1 Summary of Significant Accounting Policies
------------------------------------------
Nature of Operations
The Company incorporated under the laws of the State of Nevada on
February 15, 1996 as CyberStudio, Inc. At December 31, 2000 the Company
was a majority owned subsidiary of AXIA Group, Inc. (AXIA), a publicly
traded company headquartered in Salt Lake City, Utah. On April 4, 2001
the Company changed its name to Kearns Development Corporation. During
1999 and 2000 the Company leased and sublet two commercial properties
in Kearns, Utah, and on November 29, 2000, purchased one of the
buildings from the lessor, an unrelated party.
Statement of Cash Flows
Cash is comprised of cash on hand or on deposit in banks. The Company
had $26,764 and $13 at December 31, 2000 and 1999.
Deferred Income Taxes
In February 1992, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 109,
"Accounting For Income Taxes," which is effective for fiscal years
beginning after December 15, 1992. SFAS No. 109 requires the asset and
liability method of accounting for income taxes. The asset and
liability method requires that the current or deferred tax consequences
of all events recognized in the financial statements are measured by
applying the provisions of enacted tax laws to determine the amount of
taxes payable or refundable currently or in future years. The Company
has adopted SFAS No. 109 for financial reporting purposes. See Note 3
below.
Depreciation
The Company's property and equipment is depreciated using the
straight-line method over the useful lives shown below for financial
reporting purposes and amounted to $2,134 and $0 for the years ended
December 31, 2000 and 1999.
Asset Useful life
- -------------------------------------------- -----------------
Equipment and fixtures 5 to 7 years
Buildings and improvements 25 to 39 years
Net Income Per Common Share
Net income per common share is based on the weighted average number of
shares outstanding during the period.
F-7
KEARNS DEVELOPMENT CORPORATION
(formerly known as Cyber Studio, Inc.)
Notes to the Financial Statements
For the Year Ended December 31, 2000
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.
Revenue Recognition
Rental revenues are recorded in the period in which they are earned in
accordance with rental agreements and lease contracts.
Impairment of Long-Lived Assets
The Company recognizes impairment losses as the difference between
historical cost and fair value of the asset less costs to sell when
management determines that events and circumstances indicate a need to
assess impairment and when that assessment indicates that historical
cost materially exceeds fair value less costs to sell.
NOTE 2 Related Party Transactions
The Company's parent advances cash to supplement working capital. At
December 31, 2000, the Company had a payable to AXIA in the amount of
$133,925 bearing no interest and payable on demand.
NOTE 3 Accounting for Income Taxes
For the years ended December 31, 2000 and 1999, no provision for income
taxes has been recorded due to operating loss carryforwards totaling
approximately $75,000 that may be offset against future taxable income.
The Company files its federal income tax returns as part of the AXIA
consolidated group. AXIA has unused operating loss carryforwards of its
own, consequently no tax benefit from the Company's current period loss
was realized by AXIA. The Company's net operating loss carryforwards
begin to expire in 2017. Management of the Company believes there is a
50% or greater chance that the carryforwards will expire unused.
Consequently, the deferred tax benefit has been offset by a valuation
allowance in the same amount. The deferred tax benefit and offsetting
valuation allowance is as follows:
December 31,
2000
- ------------------------------------------- -------------------
Prior NOL at 39% tax rate $ 5,592
Current NOL at 39% tax rate 23,962
F-8
KEARNS DEVELOPMENT CORPORATION
(formerly known as Cyber Studio, Inc.)
Notes to the Financial Statements
For the Year Ended December 31, 2000
December 31,
-------------------
Total deferred tax benefit 29,554
Valuation allowance (29,554)
Income tax provision $ 0
===================
NOTE 4 Property and Equipment
Property and equipment consist of the following:
December December
31, 2000 31, 1999
------------------ ------------------
Building $584,000 $ 0
Leasehold improvements 16,572 16,572
Accumulated depreciation (2,134) 0
$ 598,438 $ 16,572
================== ==================
NOTE 5 Debt
The Company's long-term debt consists of a bank financed mortgage note
bearing interest at 10.75% with monthly payments of $6,013, maturing on
December 2, 2001. The note is secured by substantially all of the
Company's property and is personally guaranteed by the Company's
president. Balance due at December 31, 2000 is $625,000. The following
is a summary of principal maturities of long-term debt during the next
five years:
2001 $ 625,000
2002 0
2003 0
2004 0
2005 0
thereafter 0
$ 625,000
==================
NOTE 6 Going Concern
The accompanying financial statements have been prepared assuming that
the company will continue as a going concern. The Company has a history
of operating at a loss and is dependent
F-9
Kearns Development Corporation
(formerly known as Cyber Studio, Inc.)
Notes to the financial Statements
for the Year Ended December 31, 2000
upon financing to continue operations. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. Management plans to obtain long term debt andequity
financing for the property. The Company's parent plans to finance the
operating deficit until such financing is obtained.
NOTE 7 Description of Leasing Arrangements
The Company leases commercial space to its tenants primarily under
noncancelable operating leases that expire at various dates in each
year through 2003. The lease agreements typically provide for a
specific monthly payment plus reimbursement of certain operating costs.
Tenant alterations are paid for by the company; an amortization of such
costs over three to five years is added to the tenants monthly rent
over the three to five year period. The following is a summary of
future rental income under noncancelable operating leases:
2001 $ 84,827
2002 87,106
2003 67,749
2004 0
2005 0
Total due within five years $ 239,682
==================
The Company leases a commercial building from a third party under a
noncancelable operating lease that expires in October 2002. The lease
agreement provides for monthly payments of $2,000 plus a percentage
based on occupancy. The Company has an option to purchase the building
prior to the expiration of the lease at a predetermined price. The
following is a summary of future rent expense under the noncancelable
operating lease:
2001 $ 24,000
2002 20,000
2003 0
2004 0
2005 0
Total payable within five years $ 44,000
==================
F-10
Kearns Development Corporation
Interim Financial Statements
For the nine months ended
September 30, 2001
QF-1
Kearns Development Corporation
Unaudited Condensed Balance Sheet
September 30, 2001
September 30, 2001
------------------
ASSETS
Current Assets
Cash $ 4,011
------------------
Total Current Assets 4,011
Fixed Assets
Property and equipment, net 585,619
Land 100,000
------------------
Total Fixed Assets 685,619
Other Assets
Deposits 5,000
------------------
Total Other Assets 5,000
TOTAL ASSETS $ 694,630
==================
QF-2
Kearns Development Corporation
Unaudited Condensed Balance Sheet
(continued)
September 30, 2001
September 30, 2001
---------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Current Liabilities
Accounts payable $ 330
Accrued property taxes 6,032
Unearned rent 44,925
Payable to parent 121,393
Current portion long-term debt 9,342
---------------------------
Total Current Liabilities 182,022
Long Term Debt, net of current portion 609,222
---------------------------
TOTAL LIABILITIES 791,244
STOCKHOLDER'S EQUITY
Capital stock - 50,000,000 shares authorized at $0.001 par; 20,315
20,315,390 shares issued and outstanding
Additional paid-in-capital 10,939
Retained earnings (deficit) (127,868)
TOTAL STOCKHOLDER'S EQUITY (96,614)
---------------------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 694,630
===========================
QF-3
Kearns Development Corporation
Unaudited Statements of Operations
for the three and nine months ended
September 30, 2001 and 2000
Three months ended Nine Months ended
September 30, September 30,
2001 2000 2001 2000
---------------- --------------- -------------- -------------
Rental revenues $ 37,375 $ 9,882 $ 87,458 $ 44,230
General and administrative expenses 23,265 32,837 94,796 73,523
---------------- --------------- -------------- -------------
Income (loss) from operations 14,110 (22,955) (7,338) (29,293)
Interest expense 11,299 - 44,782 -
---------------- --------------- -------------- -------------
Income (loss) before income taxes 2,811 (22,955) (52,120) (29,293)
Provision for income taxes 0 0 0 0
---------------- --------------- -------------- -------------
Net income (loss) $ 2,811 $ (22,955) $ (52,120) $ (29,293)
================ =============== ============== =============
Net income (loss) per common share,
basic and diluted $ 0.00 $ (0.02) $ 0.00 $ (0.03)
================ =============== ============== =============
Weighted average shares outstanding 20,315,000 1,100,000 13,429,000 1,100,000
================ =============== ============== =============
QF-4
Kearns Development Corporation
Unaudited Statements of Cash Flows
for the nine months ended
September 30, 2001 and 2000
Nine months Nine months
Cash Flows from Operating Activities: ended ended
- -------------------------------------
September 30, September 30, 2000
2001
---------------------- -----------------------
Net Income (loss) $ (52,120) $ (29,292)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 12,819 639
Issued common stock for services 20,200 54
Decrease (increase) in prepaid expenses 0 (5,000)
Increase (decrease) in unearned rent 11,232 30,342
Increase (decrease) in accounts payable (1,226) 0
Increase (decrease) in accrued liabilities 5,278 (3,990)
---------------------- -----------------------
Net Cash Provided by/(Used for) in Operating (3,817) (7,247)
Activities
Cash Flows from Investing Activities:
Sale (purchase) of fixed assets 0 0
---------------------- -----------------------
Net Cash Provided by/(Used for) Investing Activities 0 0
Cash Flows from Financing Activities:
- ------------------------------------
Increase (reduction) in long term debt (6,436) 0
Net advances from (payments to) parent (12,500) 14,458
---------------------- -----------------------
Net Cash Provided by/(used for) Financing Activities (18,936) 14,458
Net Increase (decrease) in Cash (22,753) 7,211
Beginning Cash Balance 26,764 13
---------------------- -----------------------
Ending Cash Balance $ 4,011 $ 7,224
====================== =======================
Supplemental Disclosure Information:
Cash paid during the year for interest $ 44,782 $ 0
Cash paid during the year for income taxes $ 0 $ 0
QF-5
Proforma Financial Statements
Wichita Development Corporation
and
Kearns Development Corporation
for the year ended December 31, 2000
and
for the nine months ended September 31, 2001
QF-6
Description of the transaction
On October 17, 2001, Wichita Development Corporation ("Company") entered into a
stock purchase agreement wherein it obtained a majority control of Kearns
Development Corporation ("Kearns") from Axia Group, Inc. ("Axia"). The Company
purchased 18,100,000 shares of restricted common stock of Kearns from Axia in
exchange for the issuance of 80,000,000 shares of restricted common stock of the
Company to Axia. The effect of the transaction is that the Company became an
85.6% owner of Kearns and at the same time became an 80%+ owned subsidiary of
Axia.
The pro-forma financial statements attached herein illustrate the effects of
this transaction at the most recent fiscal yearend and also the most recent
interim financial period. The notes to the adjustments are an integral part of
these pro-forma financial statements and should be read in conjunction with the
statements.
PF-1
Proforma Balance Sheet
September 30, 2001
Wichita Kearns Proforma
Development Development Adjustments Combined
------------------ ------------------ ------------------ ---- ---------------
ASSETS
Current Assets
Cash $ 188,280 $ 4,011 $ 192,291
Prepaid expenses 1,030 - 1,030
Notes receivable 146,724 - 146,724
Marketable securities 53,973 - 53,973
------------------ ------------------ ------------------ ---- ---------------
Total Current Assets 390,007 4,011 394,018
Fixed Assets
Property and equipment, net 473,726 585,619 1,059,345
Land 100,000 100,000 200,000
------------------ ------------------ ------------------ ---- ---------------
Total Fixed Assets 573,726 585,619 1,159,345
Other Assets
Deposits - 5,000 5,000
Other investments, restricted securities 481,519 - 481,519
------------------ ------------------ ------------------ ---- ---------------
Total Other Assets 481,519 5,000 486,519
------------------ ------------------ ------------------ ---- ---------------
TOTAL ASSETS $ 1,445,252 $ 694,630 $ 2,139,882
= =========
================== ================== ================== ==== ===============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Accounts payable $ 2,353 $ 330 $ 2,683
Accrued liabilities - 6,032 6,032
Unearned rent - 44,925 44,925
Payable to parent - 121,393 121,393
Income taxes payable 27,259 - 27,259
Current portion of long term debt 2,337 9,342 11,679
------------------ ------------------ ------------------ ---- ---------------
Total Current Liabilities 31,949 182,022 213,971
------------------ ------------------ ------------------ ---- ---------------
Long term debt 273,926 618,564 892,490
Less current portion (2,337) (9,342) (11,679)
------------------ ------------------ ------------------ ---- ---------------
Total Long Term Debt 271,589 609,222 880,811
------------------ ------------------ ------------------ ---- ---------------
Total Liabilities 303,538 791,244 1,094,782
------------------ ------------------ ------------------ ---- ---------------
STOCKHOLDERS' EQUITY
Common stock - 200,000,000 shares
authorized at $0.001 par; 24,321,646 (20,315) a
shares and 104,321,646 proforma shares 24,322 20,315 80,000 b 104,322
issued and outstanding
20,315 a
Paid in capital 771,885 10,939 (80,000) b 575,271
(127,868) c
Retained earnings 345,507 (127,868) 127,868 c 345,507
------------------ ------------------ ------------------ ---- ---------------
TOTAL STOCKHOLDERS' EQUITY 1,141,714 (96,614) 1,045,100
------------------ ------------------ ------------------ ---- ---------------
TOTAL LIABILITIES AND $ 1,445,252 $ 694,630 $ 2,139,882
================== ================== ================== ==== ===============
STOCKHOLDERS' EQUITY
PF-2
Proforma Statement of Operations
Nine months ended September 30, 2001
Wichita Kearns Proforma
Development Development Adjustments Combined
---------------- ----------------- ---------------- ----------------
Rental revenues $ 251,146 $ 87,458 $ 338,604
General and administrative expenses 232,760 94,796 327,556
---------------- ----------------- ---------------- ----------------
Net income (loss) from rental operations 18,386 (7,338) 11,048
---------------- ----------------- ---------------- ----------------
Other income (expense)
Interest income (expense) (4,537) (44,782) (49,319)
Gain (loss) on sale of securities (3,991) - (3,991)
Unrealized gain (loss) on securities (39,333) - (39,333)
---------------- ----------------- ---------------- ----------------
Total other income (expense) (47,861) (44,782) (92,643)
---------------- ----------------- ---------------- ----------------
Income (loss) before taxes (29,475) (52,120) (81,595)
Benefit from income taxes 11,163 - 11,163
---------------- ----------------- ---------------- ----------------
Net income (loss) $ (18,312) $ (52,120) $ (70,432)
================ ================= ================ ================
Net income (loss) per share, basic and diluted 0.00 0.00 0.00
Weighted average shares outstanding 23,400,000 13,429,000 102,957,000
PF-3
Proforma Statement of Operations
for the year ended December 31, 2000
Wichita Kearns Proforma
Development Development Adjustments Combined
---------------- ----------------- ---------------- --------------
Rental revenues $ 107,434 $ 83,301 $ 190,735
General and administrative expenses 106,067 144,784 250,851
---------------- ----------------- ---------------- --------------
Net income (loss) from rental operations 1,367 (61,483) (60,116)
---------------- ----------------- ---------------- --------------
Other income (expense)
Interest income 3,817 41 3,858
Gain (loss) on sale of securities (4,570) - (4,570)
Unrealized gain (loss) on securities (45,574) - (45,574)
---------------- ----------------- ---------------- --------------
Total other income (expense) (46,327) 41 (46,286)
---------------- ----------------- ---------------- --------------
Income (loss) before tax and extraordinary items (44,960) (61,442) (106,402)
Benefit from income taxes 8,434 - 8,434
---------------- ----------------- ---------------- --------------
Net income (loss) from operations (36,526) (61,442) (97,968)
---------------- ----------------- ---------------- --------------
Extraordinary Items
Gain on settlement of debt - net of tax 437,006 - 437,006
Bad debt loss - net of tax (30,655) - (30,655)
---------------- ----------------- ---------------- --------------
Total extraordinary gain (loss) - net of tax 406,351 - 406,351
---------------- ----------------- ---------------- --------------
Net income (loss) $ 369,825 $ (61,442) $ 308,383
================ ================= ================ ==============
Net income (loss) per share, basic and diluted 0.04 (0.06) 0.00
Weighted average shares outstanding 8,009,000 1,114,000 88,010,000
PF-4
Wichita Development Corporation
Notes to Proforma Financial Statements
Note a. Adjustment to eliminate the common stock portion of equity for
Kearns Development Corporation and reflect the adjustment as a
change to paid-in-capital for Wichita Development Corporation.
Note b. Adjustment to reflect the issuance of 80,000,000 shares of
restricted common stock to Axia Group, Inc. pursuant to the stock
purchase agreement in which Wichita Development Corp. acquired
Kearns Development Corporation.
Note c. Adjustment to eliminate the accumulated losses of Kearns
Development and reflect them as a change to paid-in-capital for
Wichita Development Corporation.
PF-5