UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended October 31, 2004
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to ____________
Commission file number: 000-32273
KINGDOM VENTURES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada 88-0419183
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1045 Stephanie Way, Minden, Nevada 89423
(Address of Principal Executive Offices) (Zip Code)
As of December 15, 2004 the issuer had outstanding the following shares of
common stock:
Common Stock [29,321,546] shares
Series B Common Stock [22,530,762] shares
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets at October 31, 2004 (unaudited) 4
Statements of Operations for the three months and
nine months ended October 31, 2004 and October 31, 2003
(unaudited) 5
Statements of Cash Flows for the three months and
nine months ended October 31, 2004 and October 31, 2003
(unaudited) 6
Note to Unaudited Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
2
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim unaudited financial statements contained in this report
have been prepared by Kingdom Ventures, Inc. (the "Company") and, in the opinion
of management, reflect all material adjustments which are necessary for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods presented. Such adjustments consisted only of normal
recurring items. These financial statements should be read in conjunction with
the Company's audited financial statements and notes thereto for the period
ended January 31, 2004. The results of the interim periods are not necessarily
indicative of results which may be expected for any other interim period or for
the full year.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. These statements
relate to future events or the Company's future financial performance. Readers
of this report should exercise extreme caution with respect to all
forward-looking statements contained in this report. Specifically, the following
statements are forward-looking:
o statements regarding the Company's overall business strategy,
including, without limitation, the Company's intended markets and
future products;
o statements regarding the plans and objectives of the Company's
management for future operations, the production of products, including
the size and nature of the costs the Company expects to incur and the
people and services the Company may employ;
o statements regarding the Company's competition or regulations that may
affect the Company;
o statements regarding the Company's ability to compete with third
parties;
o any statements using the words "anticipate," "believe," "estimate,"
"expect," "intend," "may," "will," "should," "would," "expect," "plan,"
"predict," "potential," "continue" and similar words; and
o any statements other than historical fact.
Forward-looking statements reflect the current view of management with
respect to future events and are subject to numerous risks, uncertainties and
assumptions. However, such expectations may prove to be incorrect. Should any
one or more of these or other risks or uncertainties materialize or should any
underlying assumptions prove incorrect, actual results are likely to vary
materially from those described in this report. There can be no assurance that
the projected results will occur, that these judgments or assumptions will prove
correct or that unforeseen developments will not occur. The Company is under no
duty to update any of the forward-looking statements after the date of this
report.
3
KINGDOM VENTURES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
October 31, 2004
ASSETS
------
Current assets
Accounts receivable, net of allowance for doubtful accounts of $107,200 $ 329,463
Property and equipment, net of accumulated depreciation of $51,127 177,197
Other assets 4,167
-----------
Total assets 510,827
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities
Accounts payable and accrued expenses 338,354
Notes payable 1,109,760
-----------
Total current liabilities 1,448,114
Stockholders' deficit
Preferred stock, Series A, $.001 par value, 1,233,888 shares authorized,
issued and outstanding 1,233
Common stock (100,000,000 shares authorized, $.001 par
value, 27,652,688 shares issued and outstanding 27,653
Additional paid in capital 8,730,153
Shares to be issued (112,646)
Accumulated deficit (7,347,266)
-----------
1,299,127
Less - Treasury stock at cost (6,000,000 shares of common stock) (2,236,414)
-----------
Total stockholders' deficit (937,287)
-----------
Total liabilities and stockholders' deficit $ 510,827
===========
See accompanying note to financial statements
4
KINGDOM VENTURES, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
October 31, 2004 and October 31, 2003
Three Months Ended Nine Months Ended
October 31, October 31,
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net Revenues
Product - Apparel and gifts $ 26,596 $ 164,480 $ 199,538 $ 413,223
Product - Newspaper 178,012 26,435 463,976 26,435
------------ ------------ ------------ ------------
204,608 190,915 663,514 439,658
Cost of Goods Sold
Product - Apparel and gifts (19,214) 77,956 46,978 153,432
Product - Newspaper 25,217 26,549 93,746 26,549
------------ ------------ ------------ ------------
6,003 104,505 140,724 179,981
Gross profit 198,605 86,410 522,790 259,677
Operating Expenses
Selling (33,727) 5,451 6,480 48,686
General and administrative 40,280 311,294 859,706 631,416
Stock based compensation expense 100,000 -- 250,000 3,507,277
Bad debt expense 451,418 -- 782,467 --
Impairment of intangible assets -- -- 880,232 --
Depreciation 6,000 5,000 17,212 11,000
------------ ------------ ------------ ------------
563,971 321,745 2,796,097 4,198,379
------------ ------------ ------------ ------------
Loss from continuing operations (365,366) (235,335) (2,273,307) (3,938,702)
Non-Operating Expenses (Income)
nterest expense 93,819 1,385 89,045 1,385
oss (gain) on settlement of debt (150,000) -- 125,425 --
ther (income) expense 879 -- 1,081 (1,536)
nterest income (3,300) -- (3,000) --
------------ ------------ ------------ ------------
(58,602) 1,385 212,551 (151)
------------ ------------ ------------ ------------
Loss from continuing operations (306,764) (236,720) (2,485,858) (3,938,551)
Discontinued operations -
Net operations of sold assets -- 925,611 -- 871,298
------------ ------------ ------------ ------------
Net income (loss) $ (306,764) $ 688,891 $ (2,485,858) $ (3,067,253)
============ ============ ============ ============
Net loss per share - Basic and diluted
Continuing operations (0.01) (0.01) (0.10) (0.21)
============ ============ ============ ============
Discontinued operations $ -- $ 0.04 $ -- $ 0.05
============ ============ ============ ============
Basic and diluted weighted average number of
common shares outstanding 27,289,890 22,954,102 24,675,644 18,491,720
============ ============ ============ ============
Weighted average number of shares used to compute basic
and diluted loss per share is the same since the effect
of dilutive securities is anti-dilutive.
See accompanying note to financial statements
5
KINGDOM VENTURES, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
October 31, 2004 and October 31, 2003
Nine months ended October 31,
2004 2003
------------ ------------
Operating Activities
Net loss $ (2,485,858) $ (3,188,332)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation 17,212 30,418
Stock based compensation 250,000 3,559,752
Loss on settlement of debt 125,412 --
Impairment of intangible assets 880,232 --
Bad debt expense 782,467 5,296
Loss on disposal of assets -- 98,500
Changes in operating assets and liabilities:
Accounts receivable (329,413) (86,698)
Inventory -- 231,333
Long-term assets -- (378,144)
Accounts payable and accrued expenses 215,624 (355,410)
------------ ------------
Net cash used in operating activities (544,324) (83,285)
Investing activities
Purchase of investments -- (1,573,037)
Capital expenditures (14,365) (84,227)
------------ ------------
Net cash used in investing activities (14,365) (1,657,264)
Financing activities
Related parties
Minority interest -- (22,323)
Reductions in other assets 131 (56,318)
Principal payments received 64,619 --
Proceeds from debt 275,642 1,348,370
Principal payment on debt (274,180) (301,470)
Proceeds from issuance of stock 474,406 726,706
------------ ------------
Net cash provided by financing activities 540,618 1,694,965
------------ ------------
Net change in cash (18,071) (45,584)
Cash at beginning of period 18,071 63,655
------------ ------------
Cash at end of period $ -- $ 18,071
============ ============
Supplemental cash flow information:
Cash paid for interest $ -- $ 15,000
Non-cash investing and financing activities:
Stock based compensation $ 250,000 $ 3,559,752
Provision for bad debts 782,467 --
Impairment of intangible assets 880,232 --
Loss on settlement of debt 125,412 --
Notes receivable from disposal of assets -- 739,886
See accompanying note to financial statements
6
KINGDOM VENTURES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
October 31, 2004
Note 1 - Background and Summary of Significant Accounting Policies
Background
Kingdom Ventures, Inc. ("the Company") was incorporated on March 17, 1999 in the
state of Nevada as Legends of the Faith, Inc. The Company is a media
communications and product company for the Christian marketplace. The Company's
primary media property is Christian Times Today, a monthly newspaper distributed
by and to churches. The Company's product group activities are done by Mr. Roy
Productions, a northern Nevada silk screen, embroidery and production facility
that serves a local clientele and provides product support for each of the
Company's other activities. In July, 2002, the Company changed its name to
Kingdom Ventures, Inc. to better represent the nature of its evolving business
as a church and people development company.
Note 2 - Condensed Financial Statements and Footnotes
The interim financial statements presented herein have been prepared by the
Company and include the unaudited accounts of the Company and its subsidiaries,
Mr. Roy, Inc. and Christian Times Today. All significant intercompany accounts
and transactions have been eliminated in the consolidated financial statements.
These condensed financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Form 10-QB and Item 310(b) Regulations S-B. Certain
information and footnote disclosures normally included in financial statements
presented in accordance with generally accepted accounting principles have been
condensed or omitted. The Company believes the disclosures made are adequate to
make the information presented not misleading. The condensed consolidated
financial statements should be read in conjunction with the Company's
consolidated financial statements for the year ended December 31, 2004 and notes
thereto included in the Company's Form 10-KSB.
Note 3 - Reclassifications
Certain comparative amounts have been reclassified to conform to the current
period's presentation.
Note 4 - Notes Payable
Notes payable consist of the following at October 31, 2004
Notes payable to related parties, bearing interest at
7% per annum, due within twelve months. $ 566,854
Other notes payable bearing interest at 5% to 7% interest
all due within twelve months. 542,906
------------
$ 1,109,760
============
Accrued interest on the notes payable totals $75,979 at October 31, 2004.
7
KINGDOM VENTURES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
October 31, 2004
Note 5 - Basic and diluted net income (loss) per share
Net loss per share is calculated in accordance with the Statement of Financial
Accounting Standards No. 128 (SFAS No. 128), "Earnings per Share". Basic net
loss per share is based upon the weighted average number of common shares
outstanding. Diluted net loss per share is based on the assumption that all
dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the period.
Weighted average number of shares used to compute basic and diluted loss per
share is the same in these financial statements since the effect of dilutive
securities is anti-dilutive.
Note 6 - Stockholders' equity
During the nine months ended October 31, 2004, the Company issued common stocks
for various services to the following parties:
The Company issued 2,500,000 shares toward the exercise of warrants at the
exercise price of $.10. The Company recorded consulting expense in the amount of
$250,000.
The Company issued 1,406,500 shares of common stock valued at $367,365 in
settlement of notes payable amounting to $241,940 and recognized a loss of
$125,425 as loss on settlement of debt.
The Company issued 741,432 shares for cash of $58,042.
As of October 31, 2004, the Company had 321,846 shares of common stock valued at
$112,646 to be issued.
Note 7 - Segment reporting
The Company has two reportable segments consisting of the distribution of the
newspaper and the selling of merchandise. The Company evaluates performance
based on sales, gross profit margins and operating profit before income taxes.
The following information is information for the Company's reportable segments
for the nine month period ended October 31, 2004 (in thousands):
Newspaper Merchandise
Segment Segment Total
($) ($) ($)
Revenue 464 200 664
Gross margin 370 153 523
Depreciation -- 17 17
Interest expense -- 89 89
Loss from operations
before income taxes (142) (2,344) (2,486)
Identifiable assets 158 353 511
Capital expenditures -- 14 14
8
KINGDOM VENTURES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
October 31, 2004
The Company operated in three segments in the nine month period ended October
31, 2003. How- ever, the Company sold its "tools and technology" and "media and
marketing" segments and has reported loss from such segments as a separate line
item. The following is information for the Company's reportable segments for the
nine month period ended October 31, 2003 (in thousands):
Newspaper Merchandise
Segment Segment Total
($) ($) ($)
Revenue 40 400 440
Gross margin 14 246 260
Depreciation -- 11 11
Interest expense -- 1 1
Loss from operations
before income taxes (17) (3,050) (3,067)
Identifiable assets 224 619 843
Capital expenditures -- 95 95
The following is information for the Company's reportable segments for the three
month period ended October 31, 2004 (in thousands):
Newspaper Merchandise
Segment Segment Total
($) ($) ($)
Revenue 178 27 205
Gross margin 153 45 198
Depreciation --
Interest expense -- 94 94
Loss from operations
before income taxes 144 (451) (307)
Identifiable assets 158 353 511
Capital expenditures -- 2 2
The following is information for the Company's reportable segments for the three
month period ended October 31, 2003 (in thousands):
Newspaper Merchandise
Segment Segment Total
($) ($) ($)
Revenue 26 165 191
Gross margin 26 60 86
Depreciation --
Interest expense -- 1 1
Loss from operations
before income taxes (17) 706 689
Identifiable assets 36 807 843
Capital expenditures -- 84 84
9
KINGDOM VENTURES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
October 31, 2004
Note 8 - Contingencies
The Company is a defendant in two lawsuits filed against the Company. The
Company is vigorously defending itself against these claims, and believes that
should a negative outcome occur the potential loss to the Company is
approximately $120,000, plus legal fees.
Securities and Exchange Commission Inquiry - During the fiscal year ended
January 31, 2004, the Company received an informal request from the Securities
and Exchange Commission to voluntarily provide information relating to a Form 8K
and associated press releases referring to a Web Hosting Agreement with
YourNetPlus.Com. The Company has provided the information to the SEC and intends
to continue in responding to the inquiry. In accordance with its normal
practice, the Securities and Exchange Commission has not advised the Company
when its inquiry may be concluded, and the Company is unable to predict the
outcome of this inquiry.
Note 9 - Impairment of intangible assets
The Company evaluated the valuation of the Company's intangible assets during
the period and determined that intangible assets have been impaired and were of
no future value based upon the fair market value of similar assets and future
cash flow projected from these assets. The impaired intangible assets consisted
of the following:
Trademark and trade names $ 150,260
Goodwill product group 729,972
-------------
880,232
Fair market value --
-------------
Impairment loss $ 880,232
=============
The Company recorded an impairment expense equal to the book value of the
intangible assets amounting to $880,232 in the accompanying financial
statements.
Note 10 - Going Concern
The accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue as 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. These condensed
financial statements show that there are minimal revenues and that the Company
has sustained losses of $7,347,266 since inception. The future of the Company is
dependent upon its ability to identify a prospective target business and raise
the capital it will require through the issuance of equity securities,
borrowings or a combination thereof. The condensed consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and classifications of
liabilities that might be necessary in the event the Company cannot continue in
existence.
Note 11 - Commitments
The Company leases certain property and equipment under several operating
leases. Terms range from thirty days to three years. The following is a schedule
of future minimum lease payments for operating leases with initial or remaining
non-cancelable lease terms in excess of one year for the twelve months ended
October 31:
2004-2005 $ 36,000
2005-2006 1,000
-------------
$ 37,000
=============
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
General
Kingdom Ventures, Inc. ("we," "us," "KDMV," or the "Company") was
incorporated under the laws of the State of Nevada on March 17, 1999 as Legends
of the Faith, Inc. ("Legends"), and commenced business operations on May 1,
1999. We voluntarily became subject to the filing requirements of the Securities
and Exchange Commission on April 1, 2001. Our principal office was located at
1045 Stephanie Way, Minden, Nevada 89423. We operated websites at
www.kdmvcorp.com, www.iexalt.com, www.yahwear.com, www.mrroy.com, and our
primary e- commerce website at www.iexaltmall.com.
Kingdom Ventures, Inc. was a media and products company for the
Christian marketplace. It consisted of two operating units -- Kingdom Media
Group and Kingdom Products Group. Christian Times(TM)was a part of the Kingdom
Media Group, which also includes iExalt.com and iExaltMall.com. The Kingdom
Products Group includes, Yahwear Clothing and Mr. Roy Productions.
Results of Operations
Comparison of the Three Months Ended October, 2004 to the Three Months Ended
October 31, 2003
For the three months ended October 31, 2004, we generated revenues of $
204,608. This is an increase of $ 13,693 (7.18%) over the $ 190,915 in revenues
in the same period in 2003.
Our cost of goods sold decreased $ 98,502 to $ 6,003 for the three
months ended October 31, 2004 from $ 104,505 for the three months ended October
31, 2003. This decrease is proportional to the decreased revenue activity. Our
operating expenses Increased by $ 242,226 from $321,745 for the three months
ended October 31, 2003 to $ 563,971 for the three months ended October 31, 2004.
For the three months ended October 31, 2004, we had a net loss of $
306,764, compared to a net of $ 688,691 for the same three month period ended
October 2003. This decreasae is primarily the result of an operation sold in
2003.
11
Liquidity and Capital Resources
We had total assets of $510,827 and total liabilities of $ 1,448,114 at
October 31, 2004, compared to total assets of $1,929,781 and total liabilities
of $1,598,740 at January 31, 2004. As of October 31, 2004, we had cash of $ 0
compared to $ 17,665 at January 31, 2004.
Historically, we have financed our operations through product sales,
proceeds from the private placement of our common stock. In addition, a portion
of our expenses have been paid by the issuance of common stock or warrants to
purchase shares of our common stock in lieu of cash payments.
We believe our existing cash and cash from operations will not be
sufficient for us to meet our cash requirements for at least the next 90 days.
We have been unable to secure such financing when needed, and will be unable to
expand, respond to competitive pressures, increase and diversify our product
offerings, maintain adequate inventory, increase our advertising and marketing,
implement our e-commerce strategy and otherwise implement our business plan.
Stock Transactions
During the nine month period ended October 31, 2004, the Company issued common
stocks for various services to following parties:
The Company issued 1,406,500 shares of common stock valued at $367,365 in
settlement of notes payable amounting $ 241,940 and recognized a loss of $
125,425 as loss on settlement of debt.
The company issued 3,241,432 shares in cash and notes of $ 308,042.
As of October 31,, 2004, the Company had 321,846 shares of common stocks valued
at $112,646 to be issued.
Subsequent Events
Kingdom Ventures closed its remaining business units in November of 2004.
12
PART II.
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended October 31, 2004, the Company re -issued
from treasury an aggregate of 3,241,432 shares of its common stock valued at $
308,042 . The securities issued in such transactions were issued without
registration under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance on the exemption provided in Section 4(2) of the Securities
Act. The recipients of securities in each such transaction acquired the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates issued in such transactions. The Company believes the recipient was
an "accredited investor" within the meaning of Rule 501(a) of Regulation D under
the Securities Act, or had such knowledge and experience in financial and
business matters as to be able to evaluate the merits and risks of an investment
in the Company's common stock. The recipient had adequate access, through their
relationships with the Company and its officers and directors, to information
about the Company. None of the transactions involved general solicitation or
advertising.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as exhibits to this report:
None
(b) The Company filed the following Current Reports on Form 8-K during
the three months ended October 31, 2004:
None
13
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
KINGDOM VENTURES, INC.
Dated: June 8, 2004 By: /s/ Gene Jackson
-------------------------------
Gene Jackson, President
(Principal Executive Officer)
14