SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 24, 2003
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Kingdom Ventures, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State of Other Jurisdiction of Incorporation)
000-32273 88-0419183
(Commission File Number) (IRS Employer Identification No.)
1045 Stephanie Way
Minden, Nevada 89423
(Address of Principal Executive Offices) (Zip Code)
(775) 267-2242
(Registrant's Telephone Number, Including Area Code)
Item 2. Acquisition or Disposition of Assets.
On June 24, 2003, Kingdom Ventures, Inc., through its majority owned
subsidiary Kingdom Communications Group, Inc., signed a definitive agreement
under which it acquired all of the assets of Christian Speakers & Artists
Agency, Inc., the largest booking agency for Christian speakers and artists in
the United States. The purchase prices consists of $90,000 cash and the transfer
of 200,000 shares of Kingdom Ventures, Inc. common stock and warrants to
purchase 350,000 shares of Kingdom Ventures, Inc. common stock for $1.00 per
share. Closing of the transaction is expected to occur on or before June 30,
2003.
Item 7. Exhibits.
The following Financial Statements for Christian Speakers & Artists,
Inc. are filed as pages F-1 through F-10 with this report. The unaudited pro
forma balance sheet and income statement of Kingdom Ventures, Inc. is filed as
pages F-11 through F-12 with this report.
The following documents are filed as exhibits to this report.
2.1 Asset Purchase Agreement dated June 24, 2003, between Christian
Speakers & Artists, Inc., a Nevada corporation and wholly owned
subsidiary of Kingdom Communications Group, Inc. and Christian Speakers
& Artists, Inc., a Delaware corporation and wholly owned subsidiary of
RegalWorks, Inc.*
99.1 Press release date June 24, 2003.*
* Filed with original Report on Form 8-K on June 25, 2003.
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 hereto duly authorized.
Kingdom Ventures, Inc.
Date: August 21, 2003 By: /s/ Gene Jackson
----------------------------------
Gene Jackson, President and Chief
Executive Officer
EXHIBIT INDEX
2.1 Asset Purchase Agreement dated June 24, 2003, between Christian
Speakers & Artists, Inc., a Nevada corporation and wholly owned
subsidiary of Kingdom Communications Group, Inc. and Christian Speakers
& Artists, Inc., a Delaware corporation and wholly owned subsidiary of
RegalWorks, Inc.*
99.1 Press release date June 24, 2003.*
* Filed with original Report on Form 8-K on June 25, 2003.
TABLE OF CONTENTS
Page
Number
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Report of Independent Auditors F-1
Audited Financial Statements:
Balance Sheets F-2
Statements of Operations F-3
Statements of Changes in Stockholders' Deficit F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
Wrinkle, Gardner & Company, P.C.
Certified Public Accountants
PO Box 1707
Friendswood, Texas 77549
(281) 992-2200
Report of Independent Auditors
Board of Directors
Christian Speakers & Artists Agency, Inc.
Brentwood, Tennessee
We have audited the accompanying balance sheets of Christian Speakers & Artists
Agency, Inc. (a Tennessee corporation) as of May 31, 2003 and August 31, 2002,
and the related statements of operations, changes in stockholders' deficit, and
cash flows for the nine months and year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with U. S. generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Christian Speakers & Artists
Agency, Inc. as of May 31, 2003 and August 31, 2002, and the results of its
operations and its cash flows for the nine months and year then ended in
conformity with U. S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 6 to the
financial statements, conditions exist which raise substantial doubt about the
company's ability to continue as a going concern unless it is able to generate
sufficient cash flows to meet its obligations and sustain its operations. Those
conditions raise substantial doubt about its ability to continue as a going
concern. Management's plans regarding those matters are also described in Note
6. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Wrinkle, Gardner & Company, P. C.
Friendswood, Texas
July 31, 2003
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CHRISTIAN SPEAKERS & ARTISTS AGENCY, INC.
BALANCE SHEETS
May 31 August 31
2003 2002
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 0 $ 19,316
Accounts receivable, trade (no allowance for bad debts) 15,385 6,004
----------- -----------
Total current assets 15,385 25,320
PROPERTY AND EQUIPMENT, at cost
Office furniture and fixtures 26,479 30,745
Computer equipment 15,541 7,812
Leasehold improvements 2,993 2,993
Less: Accumulated depreciation (17,026) (11,050)
----------- -----------
27,987 30,500
OTHER ASSETS 22,993 22,993
----------- -----------
Total assets $ 66,365 $ 78,813
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 280,813 43,677
Deferred revenue 295,735 441,383
----------- -----------
Total current liabilities 576,548 485,060
STOCKHOLDERS' DEFICIT
Additional paid in capital 617,746 617,746
Accumulated deficit (1,127,929) (1,023,993)
----------- -----------
Total stockholders' deficit (510,183) (406,247)
----------- -----------
Total liabilities and stockholders' deficit $ 66,365 $ 78,813
=========== ===========
See accompanying summary of accounting policies and notes financial statements.
2
CHRISTIAN SPEAKERS & ARTISTS AGENCY, INC.
STATEMENTS OF OPERATIONS
Nine months Year
Ended Ended
May 31, 2003 August 31, 2002
----------- -----------
Revenue $ 1,860,033 $ 2,359,622
Cost of goods sold 1,525,486 1,898,268
----------- -----------
334,547 461,354
Operating expenses:
General and administrative 432,507 674,682
Write down of goodwill 0 646,353
Depreciation and amortization expense 5,976 10,545
----------- -----------
Total operating expenses 438,483 1,331,580
----------- -----------
Net income (loss) $ (103,936) $ (870,226)
=========== ===========
See accompanying summary of accounting policies and notes financial statements.
3
CHRISTIAN SPEAKERS & ARTISTS AGENCY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Paid-in Accumulated
Capital Deficit Total
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Balance, August 31, 2001 $ 617,746 $ (153,767) $ 463,979
Net loss for year ended August 31, 2002 -- (870,226) (870,226)
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Balance, August 31, 2002 617,746 (1,023,993) (406,247)
Net loss for nine months ended May 31, 2003 -- (103,936) (103,936)
----------------------------------------------
Balance, May 31, 2003 $ 617,746 $(1,127,929) $ (510,183)
==============================================
See accompanying summary of accounting policies and notes financial statements.
4
CHRISTIAN SPEAKERS & ARTISTS AGENCY, INC.
STATEMENTS OF CASH FLOWS
Nine months Year
Ended Ended
May 31, 2003 August 31, 2002
------------ ---------------
OPERATING ACTIVITIES
Net income (loss) $(103,936) $(870,226)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities:
Depreciation and amortization 5,976 10,545
Write down of goodwill 0 646,353
Provision for bad debts 0 57,286
Changes in operating assets and liabilities:
Accounts receivable (9,381) (21,329)
Prepaid expenses 0 58,500
Accounts payable and accrued liabilities 237,136 6,481
Deferred revenue (145,648) (17,554)
--------- ---------
Net cash (used in) operating activities (15,853) (129,944)
INVESTING ACTIVITIES
Capital expenditures (3,463) (21,702)
--------- ---------
Net cash (used in) investing activities (3,463) (21,702)
FINANCING ACTIVITIES
Related parties 0 (45,291)
--------- ---------
Net cash (used in) financing activities 0 (45,291)
--------- ---------
(Decrease) in cash and cash equivalents (19,316) (196,937)
Cash and cash equivalents at beginning of period 19,316 216,253
--------- ---------
Cash and cash equivalents at end of period $ 0 $ 19,316
========= =========
See accompanying summary of accounting policies and notes financial statements.
5
CHRISTIAN SPEAKERS & ARTISTS AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 2003 and August 31, 2002
1. BUSINESS AND CONSOLIDATION
Christian Speakers & Artists Agency, Inc. (CSA), a Tennessee corporation, is a
booking agency for Christian speakers and artists in the United States. CSA also
operates a website (www.christianspeakers.com).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with U. S. generally
accepted accounting principles requires management to make estimates that affect
the reported amounts of assets, liabilities, sales, and expenses. Actual results
could differ from the estimates used.
Cash Flow Information
For cash flow purposes, cash includes cash equivalents such as time deposits,
certificates of deposit, short-term investments and all highly liquid
instruments with original maturities of three months or less.
Fair Value of Financial Instruments
The carrying amounts of the Company's accounts receivable and accounts payable
approximate their fair values due to the short-term maturities of these
instruments.
Allowance for Doubtful Accounts
Management has determined that no allowance for doubtful accounts is necessary
as of May 31, 2003 or August 31, 2002.
Property and Equipment
Property and equipment are presented at cost. Depreciation is computed at rates
sufficient to amortize the cost of the assets over their estimated useful lives,
typically three to seven years, using the straight-line method.
Intangible Assets
Intangible assets represent the excess of cost over the fair value of tangible
net assets acquired. Intangible assets arising from acquisitions initiated on or
prior to June 30, 2001 were amortized using the straight-line method. Intangible
assets arising from acquisitions initiated after June 30, 2001 are not
amortized. See New Accounting Standards for further discussion. CSA reviews
intangible assets to evaluate whether events or changes have occurred that would
suggest an impairment of carrying value. CSA assesses the recoverability of
these intangibles by determining whether the amortization of these intangibles
over their remaining lives can be recovered through undiscounted future net cash
flows of the acquired operations. The amount of impairment, if any, is measured
by the amount in which the carrying amounts exceed the projected discounted
future operating cash flows. As of May 31, 2003 and August 31, 2002, cost of
intangible assets was $28,680 and accumulated amortization was $11,880. Net
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Advertising and Marketing Expenses
CSA expenses advertising and marketing costs as they are incurred. Advertising
and marketing expenses for the periods ended May 31, 2003 and August 31, 2002
were $11,078 and $48,512, respectively.
Income Taxes
The Company follows the liability method for deferred income taxes as required
by the provisions of SFAS No. 109, "Accounting for Income Taxes."
Segment and Geographic Information
CSA operates in one principal business segment across domestic markets.
International sales have been insignificant throughout the history of the
Company. There were no transfers between geographic areas. Substantially all of
the domestic operating results and identifiable assets are in the United States.
Concentrations of Credit Risk
As of May 31, 2003 and August 31, 2002, there were no customers that represented
a significant percentage of sales or accounts receivable. Concentrations with
respect to trade receivables are generally limited due to the Company's large
number of customers and their geographic and economic dispersion. Financial
instruments that potentially subject the Company to credit risks consist
primarily of cash accounts on deposit with banks which, at times, may exceed
federally insured limits. The Company believes it is not exposed to any
significant credit risk related to cash or accounts receivable.
Impairment of Long-lived Assets
The Company reviews the carrying values of its long-lived and identifiable
intangible assets for possible impairment, at least annually, or whenever events
or changes in circumstances indicate that the carrying amount of assets may not
be recoverable.
New Accounting Standards
Effective June 1, 2001, the Company adopted the SEC's Staff Accounting Bulletin
No. 101, "Revenue Recognition in Financial Statements," ("SAB 101"). SAB 101
provides guidance related to revenue recognition.
In July 2001, the FASB issued Statement of Financial Accounting Standards No.
141, "Business Combinations," and Statement of Financial Accounting Standards
No. 142, "Goodwill and Other
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Intangible Assets." SFAS 141 requires that the purchase method of accounting be
used for all future business combinations and specifies criteria that intangible
assets acquired in a business combination must meet to be recognized and
reported apart from goodwill. SFAS No. 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead tested
for impairment at least annually in accordance with the provisions of SFAS No.
142. SFAS No. 142 will also require that intangible assets with estimable useful
lives be amortized over their respective estimated useful lives, and reviewed
for impairment in accordance with SFAS No. 121. The Company has adopted the
provisions of SFAS 141 and SFAS 142 as of July 1, 2001. Management has completed
its assessment of the impact of SFAS 142 an
In July 2001, the FASB issued Statement of Financial Accounting Standards No.
143 ("SFAS 143") "Accounting for Asset Retirement Obligations" that records the
fair value of the liability for closure and removal costs associated with the
legal obligations upon retirement or removal of any tangible long-lived assets.
The initial recognition of the liability will be capitalized as part of the
asset cost and depreciated over its estimated useful life. SFAS 143 was adopted
effective January 1, 2003. The adoption of SFAS 143 had no material impact on
the financial position, results of operations or cash flows of CSA.
In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144 ("SFAS 144") "Accounting for the Impairment or Disposal of Long-Lived
Assets" that supersedes Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment or Disposal of Long-Lived Assets to Be Disposed
Of." The adoption of SFAS 144 did not have a material effect on the financial
position, results of operations or cash flows of CSA.
Revenue Recognition
CSA recognizes speaker and artist revenue when the speech or event occurs.
Deposits received prior to the speech or event taking place are recorded as
deferred revenue.
3. OPERATING LEASES
CSA leases office space under an operating lease, which expires June 30, 2006.
Rent expense for the periods ended May 31, 2003 and August 31, 2002 was $62,351
and $42,000, respectively.
The following is a schedule of future minimum lease payments under this
operating lease:
2003 $ 7,586
2004 45,672
2005 46,582
2006 39,451
-----------------
$ 139,291
=================
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4. FEDERAL INCOME TAXES
There has been no provision for U.S. federal, state, or foreign income taxes for
any period because CSA has incurred losses in all periods and for all
jurisdictions.
Deferred income taxes reflect the net tax affects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
deferred tax assets are as follows:
Deferred tax assets:
Net operating loss carryforwards $ 1,127,929
Valuation allowance for deferred tax assets (1,127,929)
-----------------
Net deferred tax assets $ 0
=================
9
Realization of deferred tax assets is dependent upon future earnings, if any,
the timing and amount of which are uncertain. Accordingly, the net deferred tax
assets have been fully offset by a valuation allowance. CSA had net operating
loss carryforwards for federal income tax purposes of approximately $1,023,993
as of August 31, 2002. These carryforwards if not utilized to offset taxable
income begin to expire in 2014. Utilization of the net operating loss may be
subject to substantial annual limitation due to the ownership change limitations
provided by the Internal Revenue Code and similar state provisions. The annual
limitation could result in the expiration of the net operating loss before
utilization.
5. DEFERRED REVENUE
Deferred Revenue represents cash receipts prior to the balance sheet date for
speeches or events scheduled to occur subsequent to the balance sheet date. CSA
typically requires a deposit to be paid upon the event being booked and a
contract being executed. As of May 31, 2003, in addition to deferred revenue
which will be reflected in the statement of operations in the next year, CSA has
rendered invoices to customers and received bills from vendors totaling $511,655
and $571,737, respectively, that will be recognized in the statement of
operations in the next year.
6. GOING CONCERN
These statements are presented on the basis that CSA is a going concern. Going
concern contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business over a reasonable length of time.
The Company has incurred net losses of $1,127,929 from inception to May 31,
2003.
Management plans to fund upcoming operations through advances from its parent
company, Kingdom Ventures, Inc. Management anticipates CSA will be profitable
within three months. Should CSA need additional financing, management intends to
raise the additional capital through public and/or private equity and/or debt
financing.
10
KINGDOM VENTURES, INC. (FORMERLY LEGENDS OF THE FAITH, INC.)
UNAUDITED PRO FORMA BALANCE SHEET
January 31, 2003
Christian
Kingdom Speakers & Pro Pro
Ventures, Inc. Artists Forma Forma
per 10KSB Agency, Inc. Adjustments Total
-------------------------------------------------------
ASSETS
Current assets $ 320,836 $ 0 $ (90,000)$ 230,836
Property and equipment, net 126,235 30,146 156,381
Other assets 506,386 22,993 370,000 899,379
-------------------------------------------------------
Total assets $ 953,457 $ 53,139 $ 280,000 $ 1,286,596
=======================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 963,568 $ 228,687 $ $ 1,192,255
Minority interest 22,323 (25,718) (3,395)
Stockholders' equity (32,434) (149,830) 280,000 97,736
-------------------------------------------------------
Total liabilities and stockholders' equity $ 953,457 $ 53,139 $ 280,000 $ 1,286,596
=======================================================
Pro forma adjustments reflect cash paid in acquisition, goodwill recorded, and
issuance of common stock as if transaction had occurred January 31, 2003 and
includes all material adjustments considered necessary by management for
presentation in accordance with generally accepted accounting principles.
11
KINGDOM VENTURES, INC. (FORMERLY LEGENDS OF THE FAITH, INC.)
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the year ended January 31, 2003
Christian
Kingdom Speakers & Pro Pro
Ventures, Inc. Artists Forma Forma
per 10KSB Agency, Inc. Adjustments Total
------------------------------------------------------------------
Revenues $ 3,194,813 $ 2,418,959 $ $ 5,613,772
Expenses 3,384,880 2,618,026 6,002,906
------------------------------------------------------------------
Loss from operations (190,067) (199,067) (389,134)
Other income (expense) (581,090) (662,334) (1,243,424)
------------------------------------------------------------------
Net income (loss) before minority interest (771,157) (861,401) (1,632,558)
Minority interest (22,323) 301,490 279,167
------------------------------------------------------------------
Net income (loss) $ (793,480) $ (559,911)$ 0 $ (1,353,391)
==================================================================
Net income (loss) per share -
basic and diluted $ (0.08) $ (0.13)
=============== =================
Weighted average common shares, basic and diluted 10,394,986 10,594,986
The unaudited pro forma statement of operations for the year ended January 31,
2003 reflects the acquisition by Kingdom Ventures, Inc. of Christian Speakers &
Artists Agency, Inc. on June 23, 2003 as if it had occurred on February 1, 2002.
The unaudited pro forma statement of operations presented above should be read
along with the consolidated financial statements filed on Form 10K-SB as of and
for the year ended January 31, 2003 of Kingdom Ventures, Inc.
The pro forma financial data do not purport to represent what Kingdom Ventures,
Inc.'s consolidated financial position or results of operations would actually
have been if such transaction in fact had occurred on February 1, 2002 and are
not necessarily representative of Kingdom Ventures, Inc.'s consolidated
financial position or results of operations for any future period. Since the
acquired entity was not under common control of management prior to its
acquisition by Kingdom Ventures, Inc., the historical consolidated results may
not be comparable to, or indicative of, future performance.
12