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): September 9, 2003
-----------------
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 September 9, 2003, Kingdom Ventures, Inc., through its majority
owned subsidiary AACC Acquisition Corporation, Inc., a Nevada corporation,
merged with American Association of Christian Counselors, Inc., Texas
corporation. As a result of the merger, the shareholder, Tim Clinton of American
Association of Christian Counselors, Inc. exchanged all of the outstanding
shares of capital stock for consideration consisting of a secured promissory
note in the amount of $750,000, a Consulting Agreement requiring $1,250,000 in
cash payments to the shareholder and 6,000,000 shares of Kingdom Ventures, Inc.
common stock, $.001 par value per share, subject to adjustment for the market
price of such shares. AACC Acquisition Corporation, Inc. was the surviving
entity and immediately changed its name to American Association of Christian
Counselors, Inc.
ITEM 7. EXHIBITS.
The following Financial Statements for the American Association of
Christian Counselors, Inc., a Texas corporation, are filed as pages F-1 through
F-8 of 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* Agreement and Plan of Merger dated July 31, 2003 by and among Kingdom
Ventures, Inc., AACC Acquisition Corporation, Inc., American
Association of Christian Counselors, Inc., and Dr. Timothy E. Clinton.
2.2 Consulting Agreement between Kingdom Ventures, Inc. and Dr. Timothy E.
Clinton
2.3 Promissory Note between Kingdom Ventures, Inc. and Dr. Timothy E.
Clinton
99.1* Press release date September 9, 2003.
* Filed with the Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 9, 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: December 5, 2003 By: /s/ Gene Jackson
--------------------------
Gene Jackson, President and
Chief Executive Officer
2
TABLE OF CONTENTS
Page
Number
-------------
Report of Independent Auditors F-1
Audited Financial Statements:
Consolidated Balance Sheets F-2
Consolidated Statements of Operations and Accumulated Deficit F-3
Consolidated Statements of Cash Flows F-4
Notes to Consolidated Financial Statements F-5
Wrinkle, Gardner & Company, P.C.
Certified Public Accountants
PO Box 1707
Friendswood, Texas 77549
(281) 992-2200
Report of Independent Auditors
Board of Directors
American Association of Christian Counselors, Inc.
Forest, Virginia
We have audited the accompanying consolidated balance sheets of American
Association of Christian Counselors, Inc. (a Texas corporation) as of July 31,
2003 and December 31, 2002, and the related consolidated statements of
operations and accumulated deficit and cash flows for the seven 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 American Association of
Christian Counselors, Inc. as of July 31, 2003 and December 31, 2002, and the
results of its operations and its cash flows for the seven 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 7 to the
consolidated 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 7. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Wrinkle, Gardner & Company, P. C.
Friendswood, Texas
December 1, 2003
F-1
AMERICAN ASSOCIATION OF CHRISTIAN COUNSELORS, INC.
CONSOLIDATED BALANCE SHEETS
July 31 December 31
2003 2002
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 0 $ 11,377
Accounts receivable, trade (no allowance for bad debts) 3,488 3,586
Due from related parties and entities 250,370 238,232
Inventory 465,281 202,321
Prepaid expenses 120,067 0
----------- -----------
Total current assets 839,206 455,516
PROPERTY AND EQUIPMENT, at cost
Office furniture and equipment 125,544 125,544
Computer equipment 56,359 53,381
Magazine design 159,355 159,355
Mailshop equipment 48,998 48,998
Leasehold improvements 3,597 3,597
Less: Accumulated depreciation (113,776) (88,245)
----------- -----------
280,077 302,630
OTHER ASSETS 10,099 10,099
----------- -----------
Total assets $ 1,129,382 $ 768,245
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 2,951,750 $ 2,097,315
Notes payable 339,567 110,316
Current portion of long-term debt 40,442 56,100
----------- -----------
Total current liabilities 3,331,759 2,263,731
LONG-TERM DEBT, less current portion 19,516 24,418
MINORITY INTEREST (242,474) (187,664)
STOCKHOLDER'S DEFICIT
Common stock 1,000 1,000
Accumulated deficit (1,980,419) (1,333,240)
----------- -----------
Total stockholder's deficit (1,979,419) (1,332,240)
----------- -----------
Total liabilities and stockholder's deficit $ 1,129,382 $ 768,245
=========== ===========
See accompanying summary of accounting policies and notes financial statements.
F-2
AMERICAN ASSOCIATION OF CHRISTIAN COUNSELORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
Seven months Year
Ended Ended
July 31, 2003 December 31, 2002
------------ ------------
Revenues:
Memberships $ 1,081,645 $ 3,206,738
Products 1,945,011 5,692,383
Conferences 398,127 941,791
Publications and other revenue 631,605 724,216
------------ ------------
Total revenues 4,056,388 10,565,128
Cost of revenues (2,725,597) (6,952,924)
------------ ------------
Gross margin 1,330,791 3,612,204
Operating expenses:
General and administrative 1,855,013 2,988,407
Depreciation and amortization expense 25,531 56,223
------------ ------------
Total operating expenses 1,880,544 3,044,630
------------ ------------
Net earnings before minority interest (549,753) 567,574
Minority interest 54,810 187,664
------------ ------------
Net earnings (494,943) 755,238
Accumulated deficit at beginning of period (1,333,240) (2,030,552)
Distributions to shareholder (152,236) (57,926)
------------ ------------
Accumulated deficit at end of period $ (1,980,419) $ (1,333,240)
============ ============
See accompanying summary of accounting policies and notes financial statements.
F-3
AMERICAN ASSOCIATION OF CHRISTIAN COUNSELORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Seven months Year
Ended Ended
July 31, 2003 December 31, 2002
------------- -----------------
OPERATING ACTIVITIES
Net earnings $(494,943) $ 755,238
Adjustments to reconcile net earnings to net cash
(used in) operating activities:
Provision for bad debts 11,592 81,085
Depreciation and amortization 25,531 56,223
Minority interest (54,810) (187,664)
Changes in operating assets and liabilities:
Accounts receivable, trade (11,494) 140,429
Inventory (262,960) (109,104)
Prepaid expenses (120,067) 0
Other assets 0 65,978
Accounts payable and other current liabilities 854,435 (808,935)
--------- ---------
Net cash (used in) operating activities (52,716) (6,750)
INVESTING ACTIVITIES
Capital expenditures (2,978) (80,664)
Related parties (12,138) 44,563
--------- ---------
Net cash (used in) investing activities (15,116) (36,101)
FINANCING ACTIVITIES
Proceeds from debt 229,250 110,316
Principal payments on debt (20,559) 0
Distributions to shareholder (152,236) (59,926)
--------- ---------
Net cash provided by financing activities 56,455 50,390
--------- ---------
(Decrease) increase in cash and cash equivalents (11,377) 7,539
Cash and cash equivalents at beginning of period 11,377 3,838
--------- ---------
Cash and cash equivalents at end of period $ 0 $ 11,377
========= =========
Supplemental disclosures:
Cash paid for interest $ 2,400 $ 7,800
========= =========
See accompanying summary of accounting policies and notes financial statements.
F-4
AMERICAN ASSOCIATION OF CHRISTIAN COUNSELORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2003
1. BUSINESS
American Association of Christian Counselors, Inc. (AACC) (a Texas corporation)
was incorporated on October 30, 1991. AACC exists to help professional, pastoral
and lay caregivers provide effective Christ-centered soulcare for those seeking
direction in life.
AACC is committed to assisting Christian counselors whether those counselors are
licensed professionals or caring church members with little or no formal
training. It is AACC's intention to equip professional, pastoral and lay
caregivers with biblical, theological and psychological truth that ministers to
the soul of a hurting person and helps them move to personal wholeness,
interpersonal competence, mental stability, and spiritual maturity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include 100% of the assets, liabilities,
revenues, expenses, income, loss and cash flows of AACC and all companies in
which AACC has a controlling voting interest ("subsidiary"), as if AACC and its
subsidiary were a single company. Intercompany accounts and transactions between
the consolidated companies have been eliminated. Significant accounts and
transactions between AACC and its affiliates are disclosed as related party
transactions.
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 and Equivalents
Cash equivalents consist of short-term investments that are readily convertible
into cash and have original maturities of three months or less when purchsed.
Cash equivalents are carried at cost, which approximates fair value.
Fair Value of Financial Instruments
The carrying value of AACC's financial instruments approximates fair value. The
fair value of financial instruments is generally based on estimates using
present value or other valuation techniques.
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 AACC's credit standing and other market
factors. As of July 31, 2003 and December 31, 2002, the carrying amount of
long-term borrowings approximates its fair value.
F-5
Allowance for Doubtful Accounts
Management has determined that no allowance doubtful accounts is necessary as of
July 31, 2003 or December 31, 2002.
Inventory
Inventories consisting of paper and product merchandise are stated at the lower
of unamortized cost or net realizable value. Cost of produced merchandise
consists principally of direct production costs and production overhead. These
costs are amortized over thirty-six (36) months, the estimated useful life of
the product, unless a loss is anticipated for the production, in which case
losses are provided in full. Cost is determined using the first-in, first-out
method (FIFO).
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.
Segment and Geographic Information
AACC 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 July 31, 2003 and December 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
AACC 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.
Advertising
AACC expenses advertising costs as they are incurred. Advertising expense for
the seven months ended July 31, 2003 totaled $56,000 and for the year ended
December 31, 2002 totaled $24,000.
New Accounting Standards
Effective July 1, 2001, AACC adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 141, "Business Combinations," and SFAS No. 142,
"Goodwill and Other 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 adoption of SFAS 141 and SFAS 142 had no material impact on the
financial position, results of operations or cash flows of AACC.
F-6
AACC adopted the provisions of SFAS No. 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 AACC.
AACC adopted the provisions of SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," effective in 2002. The adoption of SFAS No. 144
had no material impact on the financial position, results of operations or cash
flows of AACC.
AACC has adopted the provisions of the Emerging Issues Task Force (EITF) Issue
No. 02-16, "Accounting by a Customer (including a Reseller) for Cash
Consideration Received from a Vendor." The provisions of EITF No. 02-16 are
effective for periods beginning after December 15, 2002 with certain provisions
effective for arrangements entered into after November 21, 2002. EITF No. 02-16
provides guidance as to the recognition and classification of monies received
from vendors. The adoption of this consensus had no material impact on the
financial position, results of operations or cash flows of AACC.
In November 2002, the EITF reached a consensus on Issue No. 00-21,
"Multiple-Deliverable Revenue Arrangements." EITF No. 00-21 addresses how to
account for revenue arrangements with multiple deliverables and provides
guidance relating to when such arrangements should be divided into components
for revenue recognition purposes. The consensus will be effective for agreements
entered into in fiscal 2004 with early adoption permitted. The adoption of this
consensus will not have a material impact on AACC's consolidated financial
statements.
In January 2003, the FASB issued Interpretation No. 46, :The adoption of SFAS
No. 144 had no material impact on the financial position, results of operations
or cash flows of AACC. "Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin (ARB) No. 51." This
interpretation introduces a new consolidation model, the variable interests
model, which determines control (and consolidation) based on potential
variability in gains and losses of the entity being evaluated for consolidation.
The interpretation's consolidation provisions apply immediately to variable
interests in variable interest entities (VIE's) created after January 31, 2003
and apply in the first fiscal year or interim period beginning after June 15,
2003 to VIE's acquired before February 1, 2003. The adoption of this
interpretation will not have a material impact on AACC's consolidated financial
statements.
F-7
Revenue Recognition
Membership and Renewal Revenue
Membership and renewal reveunue is recognized over the term of the membership,
which is generally one year, on a straight-line basis. Deferred revenue is
recorded as a liability on the accompanying balance sheets.
Conference Revenue
Conference revenue is recognized at the time the conference takes place.
Video and Product Sales
Revenue from video and product sales is recorded when the item ships to the
customer.
Advertising Revenue
Advertising revenue is recorded when the publication containing the ad is
distributed.
Deferred Revenue
Deferred revenue represents cash receipts prior to the balance sheet date for
events scheduled to occur subsequent to the balance sheet date. AACC typically
requires conference registration fees be paid in advance of the conference
taking place. As of July 31, 2003 and December 31, 2002, deferred revenue was
$1,077,672 and $81,608, respectively. These amounts relate primarily to the
World Conference which took place from September 24-27, 2003.
Shipping and Handling Costs
Shipping and handling costs include book packaging, postage and delivery costs
associated with the delivery of videos and other products to customers. These
costs are included in cost of goods sold and totaled $1.0 million for the seven
months ended July 31, 2003 and $2.6 million for the year ended December 31,
2002.
3. FEDERAL INCOME TAXES
The financial statements do not include a provision for federal income taxes
because AACC and its subsidiaries are tax exempt. Earnings and losses are
included in the owners' income tax returns. State income taxes are not material
to the financial statements taken as a whole.
F-8
4. LONG-TERM DEBT
July 31 December 31
2003 2002
---------------------------------------
Note payable to financial institution, bearing interest at prime plus 1%,
monthly installments of $1,535 including interest, balance due November 2003,
secured by equipment. $ 3,461 $ 13,913
Note payable to financial institution, bearing interest at prime plus 1%,
monthly installments of $502 including interest, balance due October 2003,
secured by equipment. 1,158 4,576
Note payable to financial institution, bearing interest at prime plus 1%,
monthly installments of $568 including interest, balance due February 2004,
secured by assets and guarantee 27,654 29,859
Note payable to financial institution, bearing interest at prime plus 1%,
monthly installments of $783 including interest, balance
due October 2006, secured by assets and guarantee of shareholder. 27,685 32,171
------------- --------------
59,958 80,519
Less: Current portion (40,442) (56,100)
------------- --------------
$ 19,516 $ 24,419
============= ==============
Future maturities of long-term debt are estimated as follows as of July 31,
2003:
2004 $ 40,442
2005 8,422
2006 8,876
2007 2,218
------------------
$ 59,958
==================
F-9
5. RELATED PARTY TRANSACTIONS
July 31 December 31
2003 2002
--------------------------
Receivables from related parties are as follows:
Entity 50% owned by AACC shareholder $ 3,184 $ 3,184
Entity 33.33% owned by AACC shareholder 168,252 168,252
Entity 25% owned by AACC shareholder 10,700 10,700
6. BENEFIT PLANS
AACC provides regular full time employees the option of participating in the
Company's retirement program after two years of service. AACC matches 100% up to
1% of the employees' yearly salary into their retirement account through a
Simple IRA program. Employee contributions are payroll deducted. AACC matching
contributions were $1,500 and $6,000 for the seven months ended July 31, 2003
and the year ended December 31, 2002, respectively.
7. GOING CONCERN
These statements are presented on the basis that AACC 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 $2.0 million from inception to July 31,
2003.
Should AACC need additional financing, management intends to raise the
additional capital through public and/or private equity and/or debt financing.
F-10
KINGDOM VENTURES, INC. (FORMERLY LEGENDS OF THE FAITH, INC.)
UNAUDITED PRO FORMA BALANCE SHEET
January 31, 2003
American
Kingdom Association Pro Pro
Ventures, Inc. of Christian Forma Forma
per 10KSB Counselors, Inc. Adjustments Total
----------------------------------------------------------------
ASSETS
Current assets $ 320,836 $ 400,000 $ 0 $ 720,836
Property and equipment, net 126,235 155,000 0 281,235
Other assets, including goodwill 506,386 10,000 4,200,000 4,716,386
----------------------------------------------------------------
Total assets $ 953,457 $ 565,000 $ 4,200,000 $ 5,718,457
================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 963,568 $ 2,482,000 $ 2,000,000 $ 5,445,568
Long term liabilities 0 23,000 0 23,000
Minority interest 22,323 (280,000) 0 (257,677)
Stockholders' equity (32,434) (1,660,000) 2,200,000 507,566
----------------------------------------------------------------
Total liabilities and stockholders' equity $ 953,457 $ 565,000 $ 4,200,000 $ 5,718,457
================================================================
Pro forma adjustments reflect goodwill recorded, notes payable of $2,000,000 and
issuance of 6,000,000 shares of common stock valued at $2,200,000 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.
F-11
KINGDOM VENTURES, INC. (FORMERLY LEGENDS OF THE FAITH, INC.)
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the year ended January 31, 2003
American
Kingdom Association Pro Pro
Ventures, Inc. of Christian Forma Forma
per 10KSB Counselors, Inc. Adjustments Total
---------------------------------------------------------------------
Revenues $ 3,194,813 $ 10,220,000 $ $ 13,414,813
Expenses 3,384,880 10,060,000 13,444,880
-------------------------------------------------------------------
Loss from operations (190,067) 160,000 (30,067)
Other income (expense) (581,090) 0 (581,090)
-------------------------------------------------------------------
Net income (loss) before minority interest (771,157) 160,000 (611,157)
Minority interest (22,323) 280,000 257,677
---------------------------------------------------------------------
Net income (loss) $ (793,480) $ 440,000 $ 0 $ (353,480)
=====================================================================
Net income (loss) per share -
basic and diluted $ (0.08) $ (0.03)
=====================================================================
Weighted average common shares, basic and diluted 10,394,986 13,394,986
The unaudited pro forma statement of operations for the year ended January 31,
2003 reflects the acquisition by Kingdom Ventures, Inc. of American Association
of Christian Counselors, Inc. on September 9, 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.
F-12