SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A1
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 31, 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 July 31, 2003, Kingdom Ventures, Inc., through its majority owned
subsidiary Kingdom Communications Group, Inc., signed a definitive agreement
under which it will acquired as of February 1, 2003, substantially all of the
assets of Blue Hill Media, Inc. relating to the operation of a card-deck mailing
system know as "Ministry Values for Growing Churches. The purchase price
consists of $450,000 in cash, stock of Kingdom Ventures, Inc. and assumption of
liabilities, and is subject to adjustment based on the value of the Kingdom
Ventures, Inc. common stock during the next 180 days. Closing of the transaction
is expected to occur on or before August 31, 2003.
ITEM 7. EXHIBITS.
The following Financial Statements for Blue Hill Media, Inc., d/b/a
Ministry Values for Growing Churches are filed as pages F-1 through F-10 with
this report.
Independent Auditors Report F-1
Balance Sheet F-2
Statement of Operations and Retained Earnings F-3
Statement of Cash Flows F-4
Notes to Financial Statements F-5
The unaudited pro forma balance sheet and income statement of Kingdom
Ventures, Inc. is filed as pages F-9 through F-10 with this report.
The following documents are filed as an Exhibit to this report.
2.1* Asset Purchase Agreement dated July 31, 2003, between Blue Hill Media,
Inc., a Virginia corporation and Kingdom Communications Group, Inc., a
Nevada corporation.
99.1* Press release date August 4, 2003.
* Filed with the Current Report on Form 8-K filed with the Securities
and Exchange Commission on August 7, 2003 and incorporated by reference
herein.
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: October 10, 2003 By: /s/ Gene Jackson
--------------------------
Gene Jackson, President and
Chief Executive Officer
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WRINKLE, GARDNER & COMPANY, P.C.
Certified Public Accountants
P. O. Box 1707
Friendswood, Texas 77549
281-992-2200
Independent Auditor's Report
----------------------------
Board of Directors and Stockholders
Blue Hill Media, Inc. DBA Ministry Values for Growing Churches
We have audited the accompanying balance sheet of Blue Hill Media, Inc. DBA
Ministry Values for Growing Churches as of July 31, 2003, and the related
statements of operations and retained earnings and cash flows for the period
from inception (December 13, 2002) to July 31, 2003. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 Blue Hill Media, Inc. DBA
Ministry Values for Growing Churches as of July 31, 2003, and the results of its
operations and its cash flows for the period from inception (December 13, 2002)
to July 31, 2003 in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statements have been prepared assuming that Blue Hill
Media, Inc. DBA Ministry Values for Growing Churches will continue as a going
concern. As discussed in Note 5 to the financial statements, when a division of
AMEN Properties, Inc., the Company suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 5. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
WRINKLE, GARDNER & COMPANY, P.C.
October 8, 2003
F-1
BLUE HILL MEDIA, INC. DBA MINISTRY VALUES FOR GROWING CHURCHES
BALANCE SHEET
JULY 31, 2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 78,327
Accounts receivable, trade (net of $6,000 allowance for bad debts) 68,483
---------------
Total current assets 146,810
PROPERTY AND EQUIPMENT, AT COST
Office furniture and fixtures 2,000
Computer equipment 10,000
Software 5,000
Less: Accumulated depreciation (2,000)
---------------
15,000
OTHER ASSETS, UNAMORTIZED 257,000
---------------
Total assets $ 418,810
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 6,574
Due to stockholder 122,437
Current portion of long-term debt 50,000
---------------
Total current liabilities 179,011
LONG-TERM DEBT, LESS CURRENT PORTION 209,646
STOCKHOLDERS' EQUITY
Retained earnings 30,153
---------------
Total stockholders' equity 30,153
---------------
Total liabilities and stockholders' equity $ 418,810
===============
See accompanying summary of accounting policies and notes to financial
statements.
F-2
BLUE HILL MEDIA, INC. DBA MINISTRY VALUES FOR GROWING CHURCHES
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
PERIOD FROM INCEPTION (DECEMBER 13, 2002) TO JULY 31, 2003
Revenue $ 567,057
Cost of goods sold:
Printing expense 201,397
Postage and delivery expense 231,275
----------------
Gross Margin 432,672
----------------
134,385
Operating expenses:
General and administrative 102,232
Depreciation and amortization expense 2,000
----------------
Total operating expenses 104,232
----------------
Net income 30,153
Retained earnings at beginning of period 0
----------------
Retained earnings at end of period $ 30,153
================
See accompanying summary of accounting policies and notes to financial
statements.
F-3
BLUE HILL MEDIA, INC. DBA MINISTRY VALUES FOR GROWING CHURCHES
STATEMENT OF CASH FLOWS
PERIOD FROM INCEPTION (DECEMBER 13, 2002) TO JULY 31, 2003
OPERATING ACTIVITIES
Net income $ 30,153
Adjustments to reconcile net income to net cash
(used in) operating activities:
Provision for bad debts 6,000
Depreciation and amortization 2,000
Changes in operating assets and liabilities:
Accounts receivable, trade (74,483)
Accounts payable and other current liabilities 6,574
--------------
NET CASH (USED IN) OPERATING ACTIVITIES (29,756)
FINANCING ACTIVITIES
Cash received through assumption of note payable 1,000
Principal payments on note payable (15,354)
Related party 122,437
--------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 108,083
--------------
INCREASE IN CASH AND CASH EQUIVALENTS 78,327
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 0
--------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 78,327
==============
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 11,000
==============
NON-CASH ACTIVITIES:
Assets acquired through assumption of note payable $ 274,000
==============
See accompanying summary of accounting policies and notes to financial
statements.
F-4
BLUE HILL MEDIA, INC. DBA MINISTRY VALUES FOR GROWING CHURCHES
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2003
1. BUSINESS
On December 13, 2002, Blue Hill Media, Inc. (Blue Hill) purchased certain assets
from AMEN Properties, Inc. (AMEN) related to the direct mail advertising
division of AMEN for a promissory note of $275,000 and a 3.5% net profits
interest in the business' future gross margin. From that date forward, the
operations of Blue Hill have been a distinct business which generates
advertising revenue through the issuance of mailers called "card decks". Six
times annually, Blue Hill will distribute these card decks to over 225,000
churches bringing awareness of over fifty ad clients' products in each mailing.
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. The fair value of long-term borrowings was estimated by discounting
future cash flows, including interest payments, using rates currently available
for debt of similar terms and maturities, based on Blue Hills credit standing
and other market factors. As of July 31, 2003, the carrying amount of long-term
borrowings approximates its fair value.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Management has determined that an allowance of $6,000 for doubtful accounts is
necessary as of July 31, 2003.
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
of five years, using the straight-line method.
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
Blue Hill operates in one principal business segment across domestic markets in
the United States.
F-5
CONCENTRATIONS OF CREDIT RISK
As of July 31, 2003, 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 number of customers and
their geographic and economic dispersion. Financial instruments that potentially
subject the Company to credit risks consist primarily of accounts receivable.
IMPAIRMENT OF LONG-LIVED ASSETS
Blue Hill 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
Blue Hill accounts for goodwill under Statement of Financial Accounting
Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. Under SFAS No.
142, goodwill is no longer amortized but is tested for impairment using a fair
value approach. An impairment charge is recognized for any amount by which the
carrying amount of goodwill exceeds its fair value. Discounted cash flows are
used to establish fair values.
Blue Hill adopted the provisions of SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." The adoption of SFAS No. 144 has not had a
material effect on Blue Hill's financial statements.
Blue Hill adopted the provisions of SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 provides alternative
methods of transition to SFAS No. 123, "Accounting for Stock-Based Compensation,
" fair value method of accounting for stock-based employee compensation if a
company elects to adopt these provisions. SFAS No. 148 also specifies required
disclosures of an entity's accounting policy with respect to stock-based
employee compensation on reported net earnings and earnings per share in annual
and interim financial statements.
Blue Hill adopted the provisions of the EITF Issue No. 02-17, "Recognition of
Customer Relationship Intangible Assets Acquired in a Business Combination."
EITF Issue No. 02-17 addresses the intangible asset recognition criteria of SFAS
No. 141, "Business Combinations," and provides that an intangible asset related
to customer relationship intangibles may exist even thought the relationship is
not evidenced by a contract. The adoption of this consensus resulted in $257,000
being recorded as an intangible asset apart from goodwill.
F-6
REVENUE RECOGNITION
Blue Hill recognizes advertising revenue when the card deck is finalized at the
printer.
SHIPPING AND HANDLING COST
Shipping and handling costs include postage and delivery costs associated with
the delivery of card deck mailings to customers. These costs are included in
cost of goods sold.
3. FEDERAL INCOME TAXES
There has been no provision for U.S. federal or state taxes for the period
because it is anticipated that Blue Hill will 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. No deferred income taxes
exist as of July 31, 2003.
4. LONG-TERM DEBT
The note payable is to AMEN in the original amount of $275,000. The note bears
interest at 6% per annum and is secured by receivables, property and equipment,
customer mailing list and printing contract with Solar Communications. Quarterly
installments began April 10, 2003, equal to 20% of the gross margin of the
company's operations for the prior calendar quarter, except that the payment due
on each January 10 shall be the greater of such 20% or the amount necessary to
cause the total of the quarterly payments for the prior calendar year to equal
$50,000, with all remaining unpaid principal and interest due on January 10,
2010.
Future maturities of long-term debt are estimated as follows as of July 31,
2003:
2004 $ 50,000
2005 50,000
2006 50,000
2007 50,000
2008 50,000
Thereafter 9,646
---------------
$ 259,646
===============
5. GOING CONCERN
These statements are presented on the basis that Blue Hill 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.
While a division of AMEN, the Company incurred substantial losses.
Management plans to fund upcoming operations through advances from its parent
company, Kingdom Ventures, Inc. Should Blue Hill need additional financing,
management intends to raise the additional capital through public and/or private
equity and/or debt financing.
F-7
KINGDOM VENTURES, INC. (FORMERLY LEGENDS OF THE FAITH, INC.)
UNAUDITED PRO FORMA BALANCE SHEET
JULY 31, 2003
Pro Pro
Kingdom Blue Hill Forma Forma
Ventures, Inc. Media, Inc. Adjustments Total
-------------------------------------------------------
ASSETS
Current assets $ 455,221 $ 146,810 $ $ 602,031
Property and equipment, net 198,453 15,000 213,453
Other assets 950,904 257,000 180,000 1,387,904
-------------------------------------------------------
Total assets $ 1,604,578 $ 418,810 $ 180,000 $ 2,203,388
=======================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 1,201,558 $ 179,011 $ $ 1,380,569
Long-term liabilities 0 209,646 209,646
Minority interest 10,254 0 10,254
Stockholders' equity 392,766 30,153 180,000 602,919
-------------------------------------------------------
Total liabilities and stockholders' equity $ 1,604,578 $ 418,810 $ 180,000 $ 2,203,388
=======================================================
Pro forma adjustments reflect intangible asset recorded related to customer list
and issuance of common stock as if transaction had occurred February 1, 2003 and
includes all material adjustments considered necessary by management for
presentation in accordance with generally accepted accounting principles.
F-8
KINGDOM VENTURES, INC. (FORMERLY LEGENDS OF THE FAITH, INC.)
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 2003
Pro
Kingdom Blue Hill Forma Forma
Ventures, Inc. Media, Inc. Adjustments Total
------------------------------------------------------------------
Revenues $ 2,188,358 $ 567,057 $ $ 2,755,415
Expenses 6,010,747 536,904 6,547,651
------------------------------------------------------------------
Loss from operations (3,822,389) 30,153 (3,792,236)
Other income (expense) 1,536 0 1,536
------------------------------------------------------------------
Net income (loss) before minority interest (3,820,853) 30,153 (3,790,700)
Minority interest 12,069 0 12,069
------------------------------------------------------------------
Net income (loss) $ (3,808,784) $ 30,153 $ 0 $ (3,778,631)
==================================================================
Net income (loss) per share -
basic and diluted $ (0.24) $ (0.24)
=============== ===============
Weighted average common shares, basic and diluted 15,874,759 15,874,759
The unaudited pro forma statement of operations for the six months ended July
31, 2003 reflects the acquisition by Kingdom Ventures, Inc. of Blue Hill Media,
Inc. on July 31, 2003 as if it had occurred on February 1, 2003. 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, 2003 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.
F-9
EXHIBIT INDEX
2.1* Asset Purchase Agreement dated July 31, 2003, between Blue Hill Media,
Inc., a Virginia corporation, and Kingdom Communications Group, Inc., a
Nevada corporation.
99.1* Press release date August 4, 2003.
*Incorporated by reference to the exhibits filed with the Current
Report on Form 8-K on August 7, 2003.
3