posted
I know. I stayed away cuz of their R/S history. But could have played that alittle.
Posts: 395 | From: algonquin,il,usa | Registered: Sep 2004
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posted
The Horses mouth is saying the stock PPS is being supported, as the largest share holder is accumulating. As it would like a strong steady base on the PPS.
posted
Good to see someone else on top of that "Rumor". Looks like much higher numbers coming this week.
If the float is that low, a quick 200% gain is very likely. Very little sellers left. Most bailed out right after R/S
Posts: 271 | From: USA | Registered: Mar 2005
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posted
The rumor I'm seeing is a mortgage and or financial institution is involved and top holders are buying shares.
Posts: 352 | Registered: Jan 2005
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posted
Expecting some news this week to confirm those rumors and a larger amount of volume. Should see 200% + profit from these levels.
Posts: 271 | From: USA | Registered: Mar 2005
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posted
that would be nice.Still holding this after the split.Not many shares but every bit helps.
Posts: 1326 | From: Providence,RI,USA | Registered: May 2004
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posted
Same here. Looks like management has gotten it together and moving forward. With the float being bought up and low volume, it very well might see $1 short term.
Posts: 271 | From: USA | Registered: Mar 2005
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posted
Very strange LVL II this morning on this one. LVL III still shows PPS being supported. Trying to scare people out of shares???? No idea. Here is chart.
posted
Kroh...Strange LVL II still....more volume then normal....hidden LVL III support....very strange.
Posts: 271 | From: USA | Registered: Mar 2005
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posted
Interesting also is that at this hour nite is not to be seen and the MM lineup has changed
Posts: 85 | From: Greenville Texas USA | Registered: Jun 2004
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Ellen Salisbury, G. P. 7658 Municipal Dr., Orlando, Florida 32819 407 3704300 ------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)
August 2, 2005 ------------------------------------------------------------------------------- (Dates of Events which Require Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box |_|.
NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
SCHEDULE 13D
CUSIP No. 483006 10 2 -------------------------------------------------------------------------------- (1) Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons (entities only).
KMA Capital Partners, Ltd. (030531072) and Ellen Salisbury, G. P. -------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (a) |X| (b) |_| -------------------------------------------------------------------------------- (3) SEC Use Only
-------------------------------------------------------------------------------- (4) Source of Funds (See instructions)
WC and OO -------------------------------------------------------------------------------- (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) |_| -------------------------------------------------------------------------------- (6) Citizenship or Place of Organization
U.S. -------------------------------------------------------------------------------- Number of (7) Sole Voting Power KMA 100% Shares Bene- -------------------------------------------------------- ficially (8) Shared Voting Power Owned by -------------------------------------------------------- Each Report- (9) Sole Dispositive Power ing Person -------------------------------------------------------- With (10) Shared Dispositive Power -------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person
1,135,750 -------------------------------------------------------------------------------- (12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) |_| ------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11)
54.09% ------------------------------------------------------------------------------- (14) Type of Reporting Person (See Instructions)
PN ----------
(1) Includes warrants
(2) Based on information provided by Issuer Kairos Holdings, Inc. Issuer had 2,099,709 shares of common stock outstanding as of August 2, 2005.
ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to the common stock, $.0001 par value, of Kairos Holdings, Inc., a Nevada corporation ("Issuer"). The address of the principal executive offices of Issuer is 7658 Municipal Drive, Orlando, Florida 32819.
ITEM 2. IDENTITY AND BACKGROUND
The person filing this statement is KMA Capital Partners, Ltd. KMA Capital Partners, Ltd. is a Florida Limited Partnership. The address of 7658 Municipal Dr. Orlando, Florida 32819. KMA Capital Partners, Ltd. is a financial services firm.
During the last five years, KMA Capital Partners, Ltd. has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).
During the past five years, KMA Capital Partners, Ltd. has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which a judgment, decree, or final order has been issued enjoining future violations of, or prohibiting or mandating activities subject to, United States federal or state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The source of all funds used for the purchase of the securities identified herein was other consideration.
ITEM 4. PURPOSE OF TRANSACTION
The securities identified herein have been acquired by KMA Capital Partners, Ltd. solely for investment purposes.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) KMA Capital Partners, Ltd. beneficially owns 1,135,750 shares of common stock of Issuer representing 54.09% of Issuer's outstanding shares of common stock.
(b) KMA Capital Partners, Ltd. has the sole power to vote and dispose of 1,135,7500 of the shares of common stock identified in paragraph (a) of this Item 5.
(c) During the past 60 days, KMA Capital Partners, Ltd. has acquired the following shares of common stock of Issuer:
Date Shares Price Per Share ---- ------ ---------------
see attached schedule
(d) No other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, shares owned by KMA Capital Partners, Ltd.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER
None.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS
Purchase schedule
None.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
Date: August 2 2005
/s/ Ellen M. Salisbury --------------------------------
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Symbol Quantity Cost Basis Date Acquired ------ -------- ---------- -------------
posted
KAIROS Holdings, Inc. Achieves ``Tipping Point'' with Strategic Expansion Business Wire - August 03, 2005 11:29
ORLANDO, Fla., Aug 03, 2005 (BUSINESS WIRE) -- KAIROS Holdings, Inc. (OTCBB:KROH) announced today that a strategic plan for growth and repositioning has taken place with the addition of three new subsidiaries and the acquisition of Cummings Financial Services, Inc., a Florida-based mortgage broker corporation.
KAIROS Holdings, Inc. has launched KAIROS Consulting, Inc. (KCI), KAIROS Mortgage Banking Inc. (KMB), and KAIROS Investments, Inc. (KI). KCI is an executive consulting group with a focus on M&A, capital fund-raising, and management. KCI's current engagement portfolio includes companies in the multi-media catalogue, full-service discount real estate broker, and manufacturing arenas. KAIROS Investments, Inc. (KI) will specifically be devoted to raising capital for its consulting partners and acquiring assets within the financial sector.
"The compelling value proposition of KAIROS is the composition of its holdings, services and resources, often on a non-discretionary basis at economies of scale not otherwise under one roof," states Jack Craig, VP of Investor Relations. "KAIROS has reached our 'Tipping Point'. We are quickly emerging as the leader in the middle market BDC arena."
About KAIROS
Headquartered in Orlando, Florida, KAIROS Holdings, Inc., (KHI) is a publicly traded Business Development Corporation (BDC) with a targeted portfolio of middle-market companies in the financial services, financial technologies, and real estate industries.
Safe Harbor
The statements made in this release constitute "forward-looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, changing economic conditions, interest rates trends, continued acceptance of the Company's products in the marketplace, competitive factors and other risks detailed in the Company's periodic report Filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.
SOURCE: KAIROS Holdings, Inc.
KAIROS Holdings, Inc., Orlando Investor Contact: Jack Craig, 407-370-4306 jack.craig@kairosholdings.com or Press Contact: Dorian Beach, 407-370-4300 dorian.beach@kairosholdings.com
Copyright Business Wire 2005
Posts: 352 | Registered: Jan 2005
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posted
sold my shares yesterday for .26,not too bad considering this was a reverse stock play
Posts: 1326 | From: Providence,RI,USA | Registered: May 2004
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KAIROS HOLDINGS INC: 10-Q, Sub-Doc 1 BACK PRINT THIS PAGE CLOSE WINDOW
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-Q
----------- |X| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2005
OR
|_| 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 000-27277
KAIROS HOLDINGS, INC (Exact name of registrant as specified in its charter)
Nevada 88-0503197 ------ ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
7658 Municipal Dr. Orlando, Florida 32819 (Address of principal executive offices)
Registrant's telephone number, including area code: (407) 226-6866
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.
Class Outstanding at August 10, 2005 ----------------------------- -----------------------------
Common Stock, $.001 par value 2,099,709
TABLE OF CONTENTS
Item 1. Business 1
Item 2. Properties 11
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Market for Registrant's Common Equity and Related Stockholders Matters 12
Item 7. Management's Discussion and Analysis of Financial Condition and Result of Operations. 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 18
Item 8. Financial Statements and Supplementary Data F-1
ITEM 9. Control & Procedures 20
Item 10. Exhibits and Reports On Form 10-Q 20
Signatures 21
Item 1. Business
Overview
On August 3, 2004 the stockholders of Kairos Holdings, Inc. (the "Company") approved the proposal to allow the Company to adopt business development company ("BDC") status under the Investment Company Act of 1940 ("1940 Act"). A BDC is a specialized type of Investment Company under the 1940 Act. A BDC may primarily be engaged in the business of furnishing capital and managerial expertise to companies that do not have ready access to capital through conventional financial channels; such companies are termed "eligible portfolio companies". The Company as a BDC, may invest in other securities, however such investments may not exceed 30% of the Company's total asset value at the time of such investment. The Company filed its BDC election with the SEC (Form N-54A) on August 3, 2004.
Kairos Holdings, Inc. formally ACS Holdings, Inc and maxxzone.com, Inc., is a publicly traded Nevada corporation formed in April 2002, with its principal offices and operations center in Orlando, FL. Kairos Holdings, Inc. has an investment in and presently owns all (100%) of the outstanding stock in American Card Services, Inc.
On November 15, 2004, the Chief Executive Officer, Walter H. Roder, II, tendered his resignation to the Board of Directors. The resignation was accepted by the Board of Directors on November 16, 2004. Mr. Roder, while he remains a shareholder, elected to relinquish day-to-day management to the current management. He has also elected to step down from the board so that new independent directors could be appointed consistent with the requirements and process of the Company's election to be governed as a business development company.
Once the new directors assumed office, a restructuring plan was put into place to adjust the Company's capital structure and to move the Company into compliance with BDC regulations. On February 18, 2005 the Company restructured $1,818,101 of notes with creditors of both the Company and American Card Services, Inc. by entering into a Settlement and Release Agreement whereby the creditor's notes would be converted into preferred equity. Terms of the agreement call for the issuance of preferred shares and warrants and revenue sharing of 25% of the net revenue of the Company.
The Company continues to make progress and anticipates completing the restructuring by August 31, 2005.
Kairos Holdings, Inc. intends to provide equity and long-term debt financing to small and medium-sized private companies in a variety of industries throughout the United States. The Company's investment objective is to achieve long-term capital appreciation in the value of its investments and to provide current income primarily from interest, dividends and fees paid by the Company's portfolio companies. The focus of these investments will initially be in the areas of business intermediary consulting services, residential mortgage brokerages and commercial mortgage brokerages. Each investment will have its own core operations and will be able to make related investments.
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Portfolio Investments
The Company has investments in one controlled (portfolio) Company as of June 30, 2005.
1. American Card Services, Inc. 2.
American Card Services, Inc. ("ACS") is a Delaware corporation which prior to November 2004 sought to capture a large portion of the rapidly emerging stored-value debit card market that provides unbanked ethnic customers with a viable alternative to cash and traditional money transfers. ACS has since changed its direction and is seeking out investments in financial services and real estate entities. The Company currently owns 100% of the stock of American Card Services, Inc.
American Card Services, Inc. owns 100% of ACS Transaction Processing, Inc., a Delaware Corporation incorporated in August 2003. ACS Transaction Processing had no business activity through June 30, 2005.
American Card Services, Inc. owns 100% of ACS Sales, Inc., a Delaware Corporation incorporated in August 2003. ACS Sales, Inc. had no business activity through June 30, 2005.
Valuation of Investments
The most significant estimate inherent in the preparation of the Company's financial statements is the valuation of its investment and the related unrealized appreciation or depreciation.
Upon the Company's conversion to a business development company, the Board of Directors determined the value of its portfolio companies and investments at fair market value under a good faith standard.
As of June 30, 2005, the Board of Directors has deemed the value of the Company's investment in American Card Services, Inc. to be zero and accordingly, has fully reserved against the investment's cost of $2,291,102.
Investments in Private Companies
The Company intends to provide privately negotiated long-term debt and equity investment capital. The Company will provide capital in the form of debt with or without equity features, such as warrants or options, often referred to as mezzanine financing. In certain situations the Company may choose to take a controlling equity position in a company. The Company's private financing will be used to fund growth, buyouts, and acquisitions and bridge financing.
As of June 30, 2005 the Company's portfolio consisted 100% of equity securities.
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The Company intends to fund new investments using cash through the issuance of common stock. The Company intends to reinvest accrued interest, dividends and management fees into its various investments. When the Company acquires a controlling interest in a company, the Company may have the opportunity to acquire the company's equity with its common stock. The issuance of its stock as consideration may provide the Company with the benefit of raising equity without having to access the public markets in an underwritten offering, including the added benefit of the elimination of any underwriting commission.
As a business development company, the Company is required to provide significant managerial assistance available to the companies in its investment portfolio. In addition to the interest and dividends received from the Company's private finance investments, the Company will often generate additional fee income for the structuring, due diligence, transaction and management services and guarantees we provide to its portfolio companies.
Governmental Regulation
Business Development Company
A business development company is defined and regulated by the 1940 Act. Although the 1940 Act exempts a business development company from registration under the Act, it contains significant limitations on the operations of a business development company.
A business development company must be organized in the United States for the purpose of investing in or lending to primarily private companies and making managerial assistance available to them. A business development company may use capital provided by public shareholders and from other sources to invest in long-term, private investments in businesses. A business development company provides shareholders the ability to retain the liquidity of a publicly traded stock, while sharing in the possible benefits, if any, of investing in primarily privately owned companies. To qualify as a business development company, a company must:
o Have registered a class of its equity securities or have filed a registration statement with the Securities and Exchange Commission pursuant to Section 12 of the Securities and Exchange Act of 1934
o Operate for the purpose of investing in securities of certain types of portfolio companies, namely emerging companies and businesses suffering or just recovering from financial distress
o Extend significant managerial assistance to such portfolio companies and
o Have a majority of "disinterested" directors (as defined in the 1940 Act). o
Generally, a business development company must be primarily engaged in the business of furnishing capital and providing managerial expertise to companies that do not have ready access to capital through conventional financial channels. An eligible portfolio company is generally a domestic company that is not an investment company (other than a small business investment company wholly owned by a business development company), and that:
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o Does not have a class of securities registered on an exchange or included in the Federal Reserve Board's over-the-counter margin list; or
o Is actively controlled by a business development company and has an affiliate of a business development company on its board of directors; or
o Meets such other criteria as may be established by the Securities and Exchange Commission
Control under the 1940 Act is presumed to exist where a business development Company beneficially owns more than 25% of the outstanding voting securities of the portfolio company.
The 1940 Act prohibits or restricts companies subject to the 1940 Act from investing in certain types of companies such as brokerage firms, insurance companies, investment banking firms and investment companies.
As a business development company, the Company may not acquire any asset other than "qualifying assets" unless, at the time the Company makes the acquisition, the value of its qualifying assets represent at least 70% of the value of its total assets. The principal categories of qualifying assets relevant to our business are:
o Securities purchased in transactions not involving any public offering, the issuer of which is an eligible portfolio company;
o Securities received in exchange for or distributed with respect to securities described in the bullet above or pursuant to the exercise of options, warrants or rights relating to such securities; and
o Securities of bankrupt or insolvent companies that were eligible at the time of the business development company's initial acquisition of their securities but are no longer eligible, provided that the business development company has maintained a substantial portion of its initial investment in those companies.
o Cash, cash items, government securities or high quality debt securities (within the meaning of the 1940 Act), maturing in one year or less from the time of investment
A business development company is permitted to invest in the securities of public companies and other investments that are not qualifying assets, but those kinds of investments may not exceed 30% of the business development companies' total asset value at the time of the investment.
As a business development company, the Company is entitled to issue senior securities in the form of stock or senior securities representing indebtedness, including debt securities and preferred stock, as long as each class of senior security has asset coverage of at least 200% immediately after each such issuance.
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The Company is also prohibited under the 1940 Act from knowingly participating in certain transactions with its affiliates without the prior approval of its board of directors who are not interested persons and, in some cases, prior approval by the Securities and Exchange Commission.
A business development company must make significant managerial assistance available to the issuers of eligible portfolio securities in which it invests. Making available significant managerial assistance means among other things, any arrangement whereby the business development company, through its directors, officers or employees, offers to provide and, if accepted does provide, significant guidance and counsel concerning the management, operation or business objectives and policies of a portfolio company.
The Company may be periodically examined by the Securities and Exchange Commission for compliance with the 1940 Act. As of the date of this filing the Company has inquires from the Commission and has answered such inquiries received.
As with other companies regulated by the 1940 Act, a business development company must adhere to certain substantive regulatory requirements. A majority of its directors must be persons who are not interested persons, as that term is defined in the 1940 Act. Additionally, the Company is required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.
Furthermore, as a business development company, the Company is prohibited from protecting any director or officer against any liability to the Company or our shareholders arising from willful malfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person's office.
The Company maintains a Code of Ethics that establishes procedures for personal investment and restricts certain transactions by its personnel. The Company's Code of Ethics generally does not permit investment by its employees in securities that may be purchased or held by the Company.
The Company may not change the nature of its business so as to cease to be, or withdraw our election as, a business development company unless authorized by vote of a "majority of the outstanding voting securities," as defined in the 1940 Act, of its shares. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (i) 67% or more of such company's shares present at a meeting if more than 50% of the outstanding shares of such company are present and represented by proxy or (ii) more than 50% of the outstanding shares of such company. Since the Company elected to become a business development company election, it has not made any substantial change in the nature of its business.
The Company has received several inquiries from the SEC regarding its status as a BDC. The Company has responded to these inquiries in a timely manner and continues to work with the SEC to become a fully compliant BDC. The restructuring plan mentioned in the Overview section addresses the negative net worth of the Company and certain debt to equity ratios and steps are being taken to correct these issues.
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Regulated Investment Company
The Company has not elected to be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986.
Compliance with the Sarbanes-Oxley Act of 2002 and NYSE Corporate Governance Regulations.
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act imposes a wide variety of new regulatory requirements on publicly held companies and their insiders. Many of these requirements will affect us. For example:
o The Company's chief executive officer and chief financial officer must now certify the accuracy of the financial statements contained in our periodic reports;
o The Company's periodic reports must disclose conclusions about the effectiveness of its disclosure controls and procedures;
o The Company's periodic reports must disclose whether there were significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses; and
o The Company may not make any loan to any director or executive officer and may not materially modify any existing loans.
The Sarbanes-Oxley Act has required the Company to review its current policies and procedures to determine whether it complies with the Sarbanes-Oxley Act and the new regulations promulgated thereunder. The Company will continue to monitor its compliance with all future regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance.
Employees
As of June 30, 2005 the Company had no employees. The officers of the corporation provide services as needed for no compensation.
Risk Factors and Other Considerations
Investing in the Company's common stock involves a high degree of risk. Careful consideration should be given to the risks described below and all other information contained in this Quarterly Report, including our financial statements and the related notes and the schedules as exhibits to this Quarterly Report.
Limited Operating History as a Business Development Company Which May Impair Your Ability to Assess Our Prospects.
Prior to August 2004 the Company had not operated as a business development company under the Investment Company Act of 1940. As a result, the Company has limited operating results under this regulatory framework that can demonstrate either its effect on our business or management's ability to manage the Company under these frameworks. In addition, the Company's management has no prior experience managing a business development company. The Company cannot assure that management will be able to operate successfully as a business development company.
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Because there is generally no established market for which to value its investments, the Company's board of directors' determination of the value of our investments may differ materially from the values that a ready market or third party would attribute to these investments.
Under the 1940 Act the Company is required to carry its portfolio investments at market value, or, if there is no readily available market value, at fair value as determined by the board. The Company is not permitted to maintain a general reserve for anticipated loan losses. Instead, the Company is required by the 1940 Act to specifically value each individual investment and to record any unrealized depreciation for any asset that has decreased in value. Because, there is typically no public market for the loans and equity securities of the companies in which it invests, the Company's board will determine the fair value of these loans and equity securities pursuant to its valuation policy. These determinations of fair value may necessarily be somewhat subjective. Accordingly, these values may differ materially from the values that would be determined by a party or placed on the portfolio if there existed a market for our loans and equity securities.
Investing in Private Companies Involves a High Degree of Risk.
The Company's portfolio consists primarily of investments in private companies. Investments in private businesses involve a high degree of business and financial risk, which can result in substantial losses and accordingly should be considered speculative. There is generally no publicly available information about the companies in which the Company invests, and the Company relies significantly on the due diligence of its employees and agents to obtain information in connection with its investment decisions. If the Company is unable to uncover all material information about these companies, it may not make a fully informed investment decision and the Company may lose money on its investments.
In addition, some smaller businesses have narrower product lines and market shares than their competition, and may be more vulnerable to customer preferences, market conditions or economic downturns, which may adversely affect the return on, or the recover of, the Company's investment in such business.
The Lack of Liquidity of the Company's Privately Held Investments may Adversely Affect Our Business.
Substantially all of the investments the Company expects to acquire in the future will be, subject to restrictions on resale, including in some instances, legal restrictions, or will otherwise be less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to quickly obtain cash equal to the value at which we record our investments if the need arises. This could cause us to miss important business opportunities. In addition, if we are required to quickly liquidate all or a portion of our portfolio, we may realize significantly less than the value at which we have previously recorded our investments.
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If the Industry Sectors in which the Company's Portfolio is Concentrated Experience Adverse Economic or Business Conditions, Our Operating Results may be Negatively Impacted.
The Company's customer base will be in diversified industries. These customers can experience adverse business conditions or risks related to their industries. Accordingly, if the Company's customers suffer due to these adverse business conditions or risks or due to economic slowdowns or downturns in these industry sectors the Company will be more vulnerable to losses in its portfolio and our operating results may be negatively impacted.
Some of these companies may be unable to obtain financing from public capital markets or from traditional credit sources, such as commercial banks. Accordingly, advances made to these types of customers may entail a higher degree of risk than advances made to customers who are able to utilize traditional credit sources. These conditions may also make it difficult for us to obtain repayment of our loans.
Economic downturns or recessions may impair the Company's customers' ability to repay our loans and harm our operating result.
Many of the companies in which the Company will make investments may be susceptible to economic slowdowns or recessions. An economic slowdown may affect the ability of a company to engage in a liquidity event. The Company's non-performing assets are likely to increase and the value of its portfolio is likely to decrease during these periods. These conditions could lead to financial losses in its portfolio and a decrease in its revenues, net income and assets.
The Company's business of making private equity investments and positioning them for liquidity events also may be affected by current and future market conditions. The absence of an active senior leading environment may slow the amount of private equity investment activity generally. As a result, the pace of the Company's investment activity may slow. In addition, significant changes in the capital markets could have an effect on the valuations of private companies and on the potential for liquidity events involving such companies. This could affect the amount and timing of gains realized on its investments.
The Company's Borrowers May Default on Their Payments, Which May Have an Effect on Financial Performance.
Some of these companies may be unable to obtain financing from public capital markets or from traditional credit sources, such as commercial banks. Accordingly, advances made to these types of customers may entail a higher degree of risk than advances made to customers who are able to utilize traditional credit sources. These conditions may also make it difficult for the Company to obtain repayment of its loans. Numerous factors may affect a borrower's ability to repay its loan; including the failure to meet its business plan, a downturn in its industry, or negative economic conditions. Deterioration in a borrower's financial condition and prospects may be accompanied by deterioration in any related collateral.
If the Company Fails to Manage Its Growth, its Financial Results Could be Adversely Affected.
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The Company's growth may place a significant strain on its management systems and resources. The Company must continue to refine and expand its marketing capabilities, its management of the investing process, access to financing resources and technology. As the Company grows, it must continue to hire, train, supervise and manage new employees. The Company may not develop sufficient lending and administrative personnel and management and operating systems to manage its expansion effectively. Failure to manage the Company's future growth could have a material adverse effect on the Company's business, financial condition and results of operation.
The Company's Private Finance Investments May Not Produce Current Returns or Capital Gains.
The Company's private finance investments will be structured as debt securities with a relatively high fixed rate of interest and with equity features such as conversion rights, warrants or other options. As a result, the Company's private finance investments will be structured to generate interest income from inception of the investment and may also produce a realized gain from an accompanying equity feature. The Company cannot be sure that its portfolio will generate a current return or capital gain.
The Company Operates in a Competitive Market for Investment Opportunities
The Company competes for investments with a large number of private equity funds and mezzanine funds, investment banks and other equity and non-equity based investment funds, and other sources of financing, including traditional financial services companies such as commercial banks. Some of its competitors have greater resources than the Company. Increased competition would make it more difficult for the Company to purchase or originate investments at attractive prices. The Company cannot assure that these competitive pressures will not have a material adverse effect on its business, financial condition and results of operations. As a result of this competition, sometimes the Company may be precluded from making otherwise attractive investments.
Investing in the Company's Stock Is Highly Speculative and an Investor Could Lose Some or All of the Amount Invested
The value of the Company's common stock may decline and may be affected by numerous market conditions, which could result in the loss of some or the entire amount invested in its shares. The securities markets frequently experience extreme price and volume fluctuations, which affect market prices for securities of companies generally, and very small capitalization companies in particular. The price of its common stock may be higher or lower than the price you pay for your shares, depending on many factors, some of which are beyond the Company's control and may not be directly related to operating performance. These factors include the following:
o Price and volume fluctuations in the overall stock market from time to time; which are often unrelated to the operating performance of particular companies;
o Significant volatility in the market price and trading volume of securities of business development companies or other financial service companies; which is not necessarily related to the operating performance of these companies;
o Changes in the regulatory policies or tax guidance with respect to business development companies;
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o Actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the experience of securities analysts;
o Loss of business development company (BDC) status
o Changes in the value of our portfolio of investments
o Operating performance of comparable companies;
Fluctuations in the trading prices of the Company's shares may adversely affect the liquidity of the trading market of these shares and, if the Company seeks to raise capital through future equity financings, its ability to raise such equity capital may be limited.
The Company`s Business Depends on Key Personnel
The Company depends on the continued service of its executive officers and other key management personnel. If the Company were to lose any of these officers or other management personnel, such a loss could result in inefficiencies in the Company's operations and the loss of business opportunities. The Company does not maintain any key man life insurance on any of its officers or employees.
The Company's Business Plan is Dependent upon External Financing which may Expose the Company to Risks Associated with Leverage
The Company will require a substantial amount of cash to operate and grow. The Company may acquire additional capital from the following sources:
Senior Securities. The Company intends to issue debt securities, other evidences and preferred stock, up to the maximum amount permitted by the 1940 Act. The 1940 Act currently permits Kairos Holdings, as a business development company, to issue debt securities and preferred stock, to which is referred to as collectively senior securities, in amounts such that the asset coverage, as defined in the 1940 Act, is at least 200% after each issuance of senior securities. As a result of issuing senior securities, the Company will be exposed to the risks associated with leverage. Although borrowing money for investments increases the potential for gain, it also increases the risk of a loss. A decrease in the value of the Company's investments will have a greater impact on the value of the its common stock to the extent that it has borrowed money to make investments. There is a possibility that the costs of borrowing could exceed the income received on the investments made with such borrowed funds. In addition, the ability to pay dividends or incur additional indebtedness would be restricted if asset coverage is not at least twice that of indebtedness. If the value of assets declines, the Company might be unable to satisfy that test. If this happens, there may be a requirement to liquidate a portion of the loan portfolio and repay a portion of the indebtedness at a time when a sale may be disadvantageous. Furthermore, any amounts used to service indebtedness will not be available for distributions to stockholders.
Common Stock. Because the Company is limited in its ability to issue debt for the reasons given above, the Company is dependent on the issuance of equity as a financing source. If the Company raises additional funds by issuing more common stock or debt securities convertible into or exchangeable for our common stock, the ownership percentage of stockholders at the time of the issuance would decrease and they may experience dilution. In addition, any convertible or exchangeable securities that may be issued in the future may have rights, preferences and privileges more favorable than those of the common stock.
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Securitization. In addition to issuing securities to raise capital as described above, the Company anticipates that in the future it will securitize loans to generate cash for funding new investments. An inability to successfully securitize the Company's loan portfolio could limit the Company's ability to grow the business, fully execute its business strategy and impact profitability. Moreover, successful securitization of the loan portfolio might expose the Company to losses as the loans in which the Company does not plan to sell interests will be those that are riskier and more apt to generate losses.
Shares of Closed-End Investment Companies Frequently Trade at a Discount from Net Asset Value.
Shares of closed-end investment companies frequently trade at a discount from net asset value. This characteristic of shares of closed-end investment companies is separate and distinct from the risk that the Company's net asset value per share will decline.
Changes in the Law or Regulations That Govern the Company Could Have a Material Impact on its Operations
The Company is regulated by the Securities and Exchange Commission. In addition, changes in the laws or regulations that govern business development companies may significantly affect its business. Any changes in the law or regulations that govern its business could have a material impact on operations. The Company is subject to federal, state and local laws and regulations and is subject to judicial and administrative decisions that affect its operations. If these laws, regulations or decisions change, or if the Company expands its business into jurisdictions that have adopted more stringent requirements than those in which it currently conducts business, the Company may incur significant expenses in order to comply or might restrict operations.
Item 2. Properties
The Company's principal offices are located at 7658 Municipal Drive, Orlando, Florida. The office is equipped with an integrated network of computers for word processing, financial analysis, accounting and loan services. The Company believes its office space is suitable for its needs for the foreseeable future.
Item 3. Legal Proceedings
The Company has been named as a defendant in a small claims case involving breach of contract. Management's position is that the case can be contested on its merits; maximum claim involves a potential exposure of not more than $5,000.
The Company filed on March 22, 2005, a civil suit in Orange County District Court, Orlando Florida against the former CEO of the Company, Walter Roder. The litigation alleges among other causes of action, various breaches of fiduciary and statutory duties. The Company intends to vigorously pursue its remedies against Mr. Roder.
All other matters involving pending or prospective litigation have been dismissed or resolved.
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Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholders Matters
Kairos Holdings, Inc. common stock, par value, $.001 per share ("Common Stock") is traded on the Over the Counter NADAQ Electronic Bulletin Board ("OTC") under the symbol "KROH.OB" The following table sets forth, for the period indicated, the range of high and low closing prices reported by the OTC. Such quotations represent prices between dealers and may not include markups, markdowns, or commissions and may not necessarily represent actual transactions.
HIGH LOW ---- --- 2005 Quarter Ended ------------------ June 30 $0.63 $0.05 March 31 $2.38 $0.38
2004 Quarter Ended* ------------------- December 31 $7.50 $0.038 September 30 $135.00 $3.13 June 30 $2,000.00 $125.00 March 31 $2,950.00 $400.00
* These high and low stock prices are adjusted for the 40:1 reverse split in September, 2004 and the 1250:1 reverse split in May 2005 (which in effect is 50,000:1).
On May 17, 2005 in a Consent to Action, the Stockholders of the Company approved and authorized the Officers of the Corporation to effect a reverse split at a ratio of 1250 to 1 of the common stock of the company and to decrease the authorized common stock from 2.4 billion shares to 50 million shares. This Consent also authorized a reverse split of 1250 to 1 of the convertible preferred stock of the company and to decrease the authorized preferred stock from 600 million shares to 30 million shares.
As of June 30, 2005 the authorized capital of the company is 50,000,000 shares of common voting stock par value $.001 per share with 2,099,709 shares issued and outstanding. The Company also has authorized 30,000,000 shares of convertible preferred stock par value $.001 per share with 480,000 shares issued and outstanding. The company has also authorized 10,000,000 shares of preferred Class B stock par value $.001, with 0 shares issued and outstanding and 10,000,000 shares of preferred Class C stock par value $.001, with 0 shares issued and outstanding.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following information should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Form 10-Q.
Forward Looking Statements
This Form 10-Q, including the Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve substantial risk and uncertainties. These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections about the Company's industry, beliefs, and assumptions. Such forward-looking statements involve risks and uncertainties that could cause outcomes that differ materially from those expressed in the forward-looking statements. Forward-looking statements may include without limitation, statements relating to the Company's plans, strategies, objectives, expectations and intentions and are intended to be made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", and "estimates" and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements including without limitation:
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o The state of securities markets in which the securities of the Company's portfolio companies trade or could be traded.
o Liquidity within the national financial markets.
o Economic downturns or recessions may impair the Company's customers' ability to repay loans and increase non-performing assets.
o A contraction of available credit and/or inability to access the equity markets could impair lending and investment activities.
o The risks associated with the possible disruption in the Company's operations due to terrorism and,
o The risks and uncertainties described under the caption "Risk Factors and Other Considerations" contained in Part I, Item I, which is incorporated herein by reference.
Although the assumptions on which these forward looking statements are based are reasonable, any of those assumptions also could be incorrect. In light of these and other uncertainties, the inclusion of a projection or forward-looking statements in this Quarterly Report should be regarded as a representation of the Company that its plans and objectives will be achieved. Undue reliance should not be placed on these forward-looking statements, which apply only as of the date of this Quarterly Report.
Overview
Kairos Holdings, Inc. is a financial service company providing financing and advisory services to small and medium-sized companies throughout the United States. Effective August 3, 2004 the Company stockholders approved the proposal to allow the Company to convert to a business development company ("BDC") under the Investment Company Act of 1940 ("1940 Act").
Kairos Holdings, Inc. intends to make long-term debt and equity investments in cash-flow positive companies with perceived growth potential primarily in the technology sectors. The Investment Committee has adopted a charter wherein these two criteria are weighed against other criteria including strategic fit, investment amount, management ability, etc. In principle, the Company preference is to make investments in portfolio companies in which it can acquire at least a 51% ownership interest in the outstanding capital of the portfolio company.
Investment opportunities will be identified for the Company by the management team. Investment proposals may, however, come to the Company from many sources, and may include unsolicited proposals from the public and from referrals from banks, lawyers, accountants and other members of the financial community. The management team brings an extensive network of investment referral relationships.
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Critical Accounting Policies and Estimates
The Company prepared its financial statements in accordance with accounting principles generally accepted in the United States of America for investment companies. For a summary of all of its significant accounting policies, including the critical accounting policies, see Note A to the financial statements in Item 8.
The increasing complexity of the business environment and applicable authoritative accounting guidance requires the Company to closely monitor its accounting policies. The Company has identified three critical accounting policies that require significant judgment. The following summary of the Company's critical accounting policies is intended to enhance your ability to assess its financial condition and results of operation and the potential volatility due to changes in estimates.
Valuation of Investments
At June 30, 2005, the Company's investments represented assets recorded at fair value. Value as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for which a market quotation is readily available and (ii) for all other securities and assets, fair value is determined in good faith by the board of directors. Since there is typically no readily ascertainable market value for the investments in the Company's portfolio, the fair value of substantially all of investments is determined in good faith by the board of directors pursuant to a valuation policy and consistent valuation process. Because of the inherent uncertainty in determining the fair value of investments that do not have a readily ascertainable market value, the fair value of its investments determined in good faith by the board of directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.
Initially, the fair value of each portfolio investment is based upon original cost. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment. The Board of Directors considers fair value to be the amount which the Company may reasonably expect to receive for portfolio securities when sold on the valuation date. The Company analyzes and values each individual investment on a quarterly basis, and records unrealized depreciation for an investment that it believes has become impaired, including where collection of a loan or realization of an equity security is doubtful. Conversely, the Company will record unrealized appreciation if it believes that the underlying portfolio company has appreciated in value and, therefore, the Company's equity security has also appreciated in value. Without a readily ascertainable market value and because of the inherent uncertainty of valuation, the fair value of the Company's investments determined in good faith by the Board of Directors may differ significantly from the values that would have been used had a ready market existed for the investments, and the favorable or unfavorable differences could be material.
In the valuation process, the Company uses financial information received monthly, quarterly, and yearly from the portfolio companies, which include both audited, and unaudited financial information supplied by portfolio companies management. This information is used to determine financial condition, performance and valuation of the portfolio investments. Valuation should be reduced if a company's performance and potential have significantly deteriorated. If the factors, which led to the reduction in valuation, are overcome, the valuation may be restated.
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Another key factor used in valuation of the equity investments is recent arms-length equity transactions entered into by the investment company. Many times the terms of these equity transactions may not be identical to those of the Company and the impact on these variations, as it relates to market value, may be impossible to quantify.
Any changes in estimated fair value are recorded in the statements of operations as "Net unrealized appreciation (deprecation) on investments."
Valuation of Equity Securities
With respect to private equity securities, each investment is valued using industry valuation benchmarks and then the value is assigned a discount reflecting the illiquid nature of the investment, as well as the Company's minority non-control positions. When an external event such as a purchase transaction, public offering, or subsequent equity sale occurs, the pricing indicated by the external event will be used to corroborate the Company's private equity valuation. Securities that are traded in the over-the-counter market or on a stock exchange will generally be valued at the prevailing bid price on the valuation date. However, restricted and unrestricted publicly traded securities may be valued at discounts from the public market value due to restrictions on sale, the size of its investment or market liquidity concerns.
Valuation of Loans and Debt Securities
As a general rule, the Company does not value its loans or debt securities above cost, but loans and debt securities will be subject to fair value write-downs when the asset is considered impaired.
Financial Condition
The Company's total assets increased by $9,492 up to $12,905 from the prior year. The increase in total assets can be attributed to an increase in the Company's cash position and the Company no longer reporting on a consolidated basis.
The Company's financial condition is dependent on the success of its portfolio holdings. Many of the businesses the Company intends to invest in tend to be thinly capitalized and may lack experienced management. The following summarizes the Company's investment portfolio as of June 30, 2005 and December 31, 2004, the Company's fourth and second quarter, respectively, as a business development corporation
June 30, 2005 December 31, 2004 ------------ ------------
Investment at Cost $ 2,291,102 $ 898,958
Unrealized (depreciation) appreciation, net (2,291,102) (898,958) ------------ ------------
Investment at fair value $ - $ - ============ ============
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Since BDC election, the Company has valued its equity and investment holdings in accordance with the established valuation policies (see "Valuation of Investments and Equity Holdings") above.
Cash approximated 55.60% and 100.00% of net assets of the Company as of June 30, 2005 and December 31, 2004, respectively.
Results of Operations
The results of operations for the three months ended June 30, 2005 reflect our results as a business development company under the Investment Company Act of 1940. The results of operations prior to August 3, 2004 reflect our results of operations prior to operating as a business development company under the Investment Company Act of 1940. The principal differences between these two reporting periods relate to accounting for investments. See Note A to our Financial Statements. In addition, certain prior year items have been reclassified to conform to the current year presentation as a business development company.
Dividends and Interest
There were no dividends or interest income on investments for the three and six months ended June 30, 2005 and 2004, respectively.
Management Fees
There was no Management fee income for the three and six months ended June 30, 2005 and 2004, respectively.
Operating Expenses
Total operating expenses for the three months ended June 30, 2005 and 2004 were $422,365 and $843,226 respectively. A significant component of total operating expenses was professional fees of $417,736 (of which, $187,500 was stock issued for services to KMA Capital Partners, LTD - a related party that served as a restructuring consultant) for the three months ended June 30, 2005 and $560,180 (of which $463,018 was stock issued for services) for the three months ended June 30, 2004. A second component of total operating expenses is general and administrative expenses of $4,629 for the three months ended June 30,2005 and $280,228 for the three months ended June 30, 2004. The decrease in general and administrative expenses is primarily due to the Company no longer reporting on a consolidated basis.
Total operating expenses for the six months ended June 30, 2005 and June 30, 2004 were $894,079 and $1,224,243. A significant component of total operating expenses was professional fees of $887,374 (of which $337,500 was stock issued for services to KMA Capital Partners, LTD - a related party that served as a restructuring consultant) for the six months ended June 30, 2005 and $615,018 (of which $463,018 was stock issued for services) for the six months ended June 24, 2004.
Net Unrealized Depreciation on Investment
During the three months and six months ended June 30, 2005, the Company recorded an increase of $13,910 and $1,392,144 respectively in the net unrealized depreciation on investments. The company has determined that the investment is valued at $0 and accordingly has fully reserved against the investment's cost of $2,291,102.
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Liquidity and Capital Resources
At June 30, 2005 and December 31, 2004, the Company had $7,175 and $3,413 respectively in cash and cash equivalents. The Company's objective is to have sufficient cash on hand to cover current funding requirements and operations.
The Company expects its cash on hand and cash generated from operations to be adequate to meet its cash needs at the current level of operations, including the next twelve months. The Company generally funds new originations using cash on hand and equity financing and outside investments.
Private Portfolio Company Investments
The following is a list of the private companies in which the Company had an investment in and the cost and fair market value of such securities at June 30, 2005 and December 31 2004:
Name of Company Cost FMV --------------- ---- ---
American Card Services, Inc. 06/30/2005 $2,291,102 - American Card Services, Inc 12/31/2004 $ 898,958 -
Recent Developments
Kairos Holdings, Inc. entered into a Letter of Intent with Paeda International Finance Group, LLC (a factoring and asset-based lending company) on July 22, 2005 to acquire 45% of the company for an investment equal to $250,000 within 90 days of this agreement. The transaction is contingent upon the findings of Due Diligence by Kairos Holdings, Inc.
Kairos Holdings, Inc. entered into a Letter of Intent with Freedom Home Loan, Inc (a residential mortgage company) on July 27, 2005 to acquire 49% of the company for an investment equal to $150,000 within 90 days of this agreement. The transaction is contingent upon the findings of Due Diligence by Kairos Holdings, Inc.
Kairos Holdings, Inc. entered into a Letter of Intent with Bravo Brokers, Inc. (a real estate agency) on July 28, 2005 to acquire 30% of the company for an investment equal to $300,000 within 80 days of this agreement. The transaction is contingent upon the findings of Due Diligence by Kairos Holdings, Inc.
Kairos Holdings, Inc. formed Kairos Consulting, Inc., a Florida Corporation, on July 26, 2005. Kairos Holdings, Inc. owns 100% of the consulting company. Kairos Consulting, Inc. will offer management, professional and advisory services to portfolio companies of Kairos Holdings, Inc.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's investment activities contain elements of risk. The portion of the Company's investment portfolio consisting of equity or equity-linked debt securities in private companies is subject to valuation risk. Because there is typically no public market for the equity and equity-linked debt securities in which it invests, the valuation of the equity interest in the portfolio is stated at "fair value" and determined in good faith by the Board of Directors on a quarterly basis in accordance with the Company's investment valuation policy.
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In the absence of a readily ascertainable market value, the estimated value of the Company's portfolio may differ significantly from the value that would be placed on the portfolio if a ready market for the investments existed. Any changes in valuation are recorded in the Company's statement of operations as "Net unrealized appreciation (depreciation) on investments".
At times, a portion of the Company's portfolio may include marketable securities traded in the over-the-counter market. In addition, there may be a portion of the Company's portfolio for which no regular trading market exists. In order to realize the full value of a security, the market must trade in an orderly fashion or a willing purchaser must be available when a sale is to be made. Should an economic or other event occur that would not allow the markets to trade in an orderly fashion, the Company may not be able to realize the fair value of its marketable investments or other investments in a timely manner.
As of June 30, 2005 and December 31, 2004, the Company did not have any off-balance sheet investments or hedging investments.
Impact of Inflation
The Company does not believe that its business is materially affected by inflation, other than the impact inflation may have on the securities markets, the valuations of business enterprises and the relationship of such valuation to underlying earnings, all of which will influence the value of the Company's investments.
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Item 8. Financial Statements and Supplementary Data
KAIROS HOLDINGS, INC.(formerly ACS Holdings, Inc) BALANCE SHEETS UNAUDITED JUNE 30, 2005 and DECEMBER 31, 2004
ASSETS 6/30/2005 12/31/2004 CURRENT ASSETS
Cash and cash equivalents $ 7,175 $ 3,413 Investment (net of unrealized depreciation) -- -- Other current assets 5,730 -- ------------ ------------ TOTAL CURRENT ASSETS $ 12,905 $ 3,413 ============ ============
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES Accounts payable and accrued expenses $ 129,738 $ 69,866 Due to related parties 276,520 19,900 Notes payables 83,020 486,931 ------------ ------------ TOTAL CURRENT LIABILITIES 489,278 576,697 ------------ ------------ COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' (DEFICIT) EQUITY Convertible Preferred stock class A, $.001 par value, 30,000,000 and 600,000,000 480 -- shares authorized at June 30, 2005 and December 31, 2004 respectively; 480,000 and 0 issued and outstanding at June 30, 2005 and December 31, 2004, respectively Preferred stock class B, $.001 par value, 10,000,000 and 0 shares -- -- authorized at June 30, 2005 and December 31, 2004 respectively; None issued and outstanding at June 30, 2005 and December 31, 2004, respectively Preferred stock class C, $.001 par value, 10,000,000 and 0 shares -- -- authorized at June 30, 2005 and December 31, 2004 respectively; None issued and outstanding at June 30, 2005 and December 31, 2004, respectively Common stock, $.001 par value, 50,000,000 and 2,400,000,000 shares 2,100 424 authorized at June 30, 2005 and December 31, 2004, respectively; 2,099,709 and 423,750 issued and outstanding at June 30, 2005 and December 31, 2004, respectively Additional paid-in capital 4,327,714 1,942,629 Accumulated deficit (4,806,667) (2,516,337) ------------ ------------ TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (476,373) (573,284) ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY $ 12,905 $ 3,413 ============ ============
The accompanying notes are an intergral part of these financial statements
F-1
KAIROS HOLDINGS, INC.(formerly ACS Holdings, Inc) STATEMENT OF OPERATIONS UNAUDITED FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND 2004
OPERATING EXPENSES Depreciation and amortization -- 2,980 Professional fees 417,736 560,018 General and administrative 4,629 280,228 ------------ ------------ 422,365 843,226 ------------ ------------ NET OPERATING LOSS (422,365) (872,506) ------------ ------------
NET UNREALIZED DEPRECIATION ON INVESTMENTS (13,910) -- ------------ ------------
OTHER INCOME (EXPENSE) Interest Income -- 4 Interest Expense (5) (80,606) ------------ ------------ (5) (80,602) ------------ ------------
LOSS BEFORE INCOME TAX (436,280) (953,108)
INCOME TAX EXPENSE -- -- ------------ ------------
NET LOSS (436,280) (953,108)
DEEMED DIVIDENDS ON PREFERRED STOCK (130,000) -- ------------ ------------
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS $ (566,280) $ (953,108) ============ ============
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS PER SHARE BASIC AND FULLY DILUTED $ (0.36) $ (8.06) ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC AND FULLY DILUTED 1,572,893 118,120 ============ ============
The accompanying notes are an intergral part of these financial statements
F-2
KAIROS HOLDINGS, INC.(formerly ACS Holdings, Inc) STATEMENT OF OPERATIONS UNAUDITED FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
OPERATING EXPENSES Depreciation and amortization -- 5,533 Professional fees 887,374 615,018 General and administrative 6,706 603,692 ------------ ------------ 894,080 1,224,243 ------------ ------------ NET OPERATING LOSS (894,080) (1,230,630) ------------ ------------
NET UNREALIZED DEPRECIATION ON INVESTMENTS (1,392,144) -- ------------ ------------
OTHER INCOME (EXPENSE) Interest Expense (4,106) (137,175) ------------ ------------ (4,106) (137,175) ------------ ------------
LOSS BEFORE INCOME TAX (2,290,330) (1,367,805)
INCOME TAX EXPENSE -- -- ------------ ------------
NET LOSS (2,290,330) (1,367,805)
DEEMED DIVIDENDS ON PREFERRED STOCK (250,000) -- ------------ ------------
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS $ (2,540,330) $ (1,367,805) ============ ============
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS PER SHARE BASIC AND FULLY DILUTED $ (2.14) $ (11.77) ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC AND FULLY DILUTED 1,183,040 116,177 ============ ============
The accompanying notes are an intergral part of these financial statements
F-3
KAIROS HOLDINGS, INC.(formerly ACS Holdings, Inc) STATEMENT OF CHANGES IN STOCKHOLDERS (DEFICIT) EQUITY UNAUDITED FOR THE SIX MONTHS ENDED JUNE 30, 2005
Preferred Stock Common Stock Additional Accumulated Total ------------------ -------------------------- Paid in Income Stockholders Shares Amount Shares Amount Capital (Deficit) Equity ------- ------- ------------ --------- ----------- ----------- -----------
Balance at December 31, 2004 -- $ -- 529,687,869 $ 529,688 $ 1,413,365 $(2,516,337) $ (573,284)
The accompanying notes are an intergral part of these financial statements
F-4
KAIROS HOLDINGS, INC. (formerly ACS Holdings, Inc) STATEMENT OF CASH FLOWS UNAUDITED FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
6/30/2005 6/30/2004
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $(2,290,330) $(1,367,805)
RECONCILIATION OF NET LOSS TO CASH FLOWS USED IN OPERATING ACTIVITIES Stock issued for services 337,500 463,018 Unrealized depreciation on investments 1,392,144 -- Amortization expense of finance costs -- 36,667 Depreciation and amortization -- 5,533 Increase in receivables -- (7,065) Increase in accounts receivable allowance -- 200 (Increase) decrease in prepaid expenses (5,730) 5,254 Increase in inventory -- (25,661) Decrease in deferred revenue -- (9,012) Increase in accounts payable and accrued expenses 72,372 286,247 ----------- -----------
CASH FLOWS USED IN OPERATING ACTIVITIES (494,044) (612,624) ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES: Repayment of officer loan -- (7,855) Purchase of investments (35,076) -- ----------- ----------- CASH FLOWS USED IN INVESTING ACTIVITIES (35,076) (7,855) ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable 276,262 580,000 Proceeds from borrowing from related parties 256,620 110,000 Principal payment on note payable from related party -- (10,000) Payments on capital lease obligations -- (9,009) Cost of common stock issuance -- (9,964) ----------- ----------- CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 532,882 661,027
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,762 40,548
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 3,413 27,903 ----------- -----------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 7,175 $ 68,451 =========== =========== Supplementary Disclosure of Cash Flow Information: Cash paid during the period for: Income taxes $ -- $ -- =========== ===========
Interest $ -- $ 27,583 =========== ===========
Supplementary Disclosure of Noncash Investing and Financing Activities Flow Information: Common Stock issued to pay off debt $ 219,140 $ -- =========== ===========
Capital Lease obligation for property and equipment $ -- $ 4,263 =========== ===========
Preferred stock issued to pay off debt $ 451,032 $ -- =========== ===========
Preferred stock issued to pay off debt of portfolio company $ 1,357,069 $ -- =========== ===========
The accompanying notes are an intergral part of these financial statements
F-6
KAIROS HOLDINGS, INC (formerly ACS Holdings, Inc) NOTES TO FINANCIAL STATEMENTS UNAUDITED June 30, 2005
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company Activities
Kairos Holdings Inc. (formerly ACS Holdings, Inc. and maxxZone.com, Inc) & Subsidiaries (the "Company" or "Holdings") was incorporated in the state of Nevada in April, 2002.
On April 28, 2004 the Company agreed to acquire the assets, subject to certain liabilities of American Card Services, Inc (ACS) for 3,570,000,000 shares of the Company, representing approximately 85% of the Company's stock. The assets, liabilities, and operations acquired from ACS have been recorded on the books of the company, and ACS is deemed a wholly owned subsidiary of the Company. In connection with this acquisition, the original assets and liabilities of the Company, (those not acquired from ACS), were transferred to Global Capital Trust, a St. Kitts and Nevis Trust, and holder of 1,680 shares of company stock. This transfer effectuated the extinguishment of debt owed to Global Capital Trust and related entities by the Company. The acquisition of ACS and transfer to Global Capital Trust were completed on May 12, 2004, after the Company increased authorized shares to a total sufficient to effect the transaction.
Since the acquisition resulted in the shareholders of American Card Services, Inc. owning a majority of the Company's outstanding shares, the business acquisition has been accounted for as a reverse acquisition, with Kairos Holding, Inc being treated as the accounting subsidiary and American Card Services, Inc. being treated as the accounting parent. Accordingly, the net assets of ACS were carried forward to Holdings at their historical carrying value. On August 3, 2004, the Company filed an election to adopt Business Development Company ("BDC") status (see below). This BDC status classified ACS as a portfolio investment of Kairos Holdings, Inc. The accompanying consolidated financial statements reflect the historical activity of ACS prior to May 12, 2004 (date of acquisition); the combined activity of Holdings and ACS from May 13, 2004 through August 3, 2004 (date of BDC election); and the activity of Holdings with ACS as a 100% owned investment company from August 3, 2004 through the current reporting period of these consolidated financial statements.
On August 3, 2004 the Company's shareholders consented to the proposal to allow the Company to adopt business development company ("BDC") status under the Investment Company Act of 1940 ("1940 Act"). A BDC is a specialized type of Investment Company under the 1940 Act. A BDC may primarily be engaged in the business of furnishing capital and managerial expertise to companies that do not have ready access to capital through conventional financial channels; such companies are termed "eligible portfolio companies". The Company as a BDC, may invest in other securities, however such investments may not exceed 30% of the Company's total asset value at the time of such investment. The Company filed its BDC election with the SEC (Form N-54A) on August 3, 2004.
On November 15, 2004, the Chief Executive Officer, Walter H. Roder, II, tendered his resignation to the Board of Directors. The resignation was accepted by the Board of Directors on November 16, 2004. Mr. Roder, while he remains a shareholder, elected to relinquish day-to-day management to the current management. He has also elected to step down from the board so that new independent directors could be appointed consistent with the requirements and process of the Company's election to be governed as a business development company.
F-7
KAIROS HOLDINGS, INC (formerly ACS Holdings, Inc) NOTES TO FINANCIAL STATEMENTS UNAUDITED June 30, 2005
On February 28, 2005 the Company restructured $1,818,101 of notes with creditors of both the Company and American Card Services, Inc. by entering into a Settlement and Release Agreement whereby the creditor's notes would be converted into preferred equity. Terms of the agreement call for the issuance of preferred shares and warrants and revenue sharing of 25% of the net revenue of the Company.
On May 17, 2005 in a Consent to Action by the Stockholders of the Company approved and authorized the Officers of the Corporation to effect a reverse split at a ratio of 1250 to 1 of the common stock of the company and to decrease the authorized common stock from 2.4 billion shares to 50 million shares. This Consent also authorized a reverse split of 1250 to 1 of the preferred stock of the company and to decrease the authorized preferred stock from 600 million shares to 30 million shares. As of June 30, 2005 the authorized capital of the company is 50,000,000 shares of common voting stock par value $.001 per share. The Company also has authorized 30,000,000 shares of preferred stock with a par value of $.001 per share. The company has also authorized 10,000,000 shares of preferred Class B stock and 10,000,000 shares of preferred Class C stock.
The Company plans to provide equity and long-term debt financing to small and medium-sized private companies in a variety of industries throughout the United States. The Company's investment objective is to achieve long-term capital appreciation in the value of its investments and to provide current income primarily from interest, dividends and fees paid by its portfolio companies.
Basis of Presentation
These consolidated financial statements include the activity of two different business focus periods of the Company: the "Pre-Conversion to a Business Development Company" period, and "Post Conversion to a Business Development Company" period. Different accounting principles are used in the preparation of financial statements of a business development company under the Investment Company Act of 1940 and, as a result, the financial results for periods prior to August 3, 2004 are not comparable to the period commencing on August 3, 2004, and are not expected to be representative of its financial results in the future. By becoming a BDC, the Company has effected a change in accounting principle and no longer consolidates its investments in portfolio companies, as further described below. See "Company Activities" above.
The accompanying financial statements for the period prior to August 3, 2004 include the accounts of the Company and its wholly owned subsidiaries American Card Services, Inc. and ACS Processing, Inc. American Card Services, Inc. is a Delaware corporation which owns 100% of ACS Transaction Processing, Inc. a Delaware Corporation and ACS Sales, Inc. a Delaware Corporation, both of which were incorporated in August, 2003. For the period subsequent to August 3, 2004 the Company, in accordance with Article 6 of Regulation S-X under the Securities Act of 1933 and Securities Act of 1934, does not consolidate portfolio company investments, including those in which it has a controlling interest.
F-8
KAIROS HOLDINGS, INC (formerly ACS Holdings, Inc) NOTES TO FINANCIAL STATEMENTS UNAUDITED June 30, 2005
Going Concern
The accompanying financial statements assume the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has incurred a net loss of $436,280 for the three months ended June 30, 2005 and a net loss of, $953,108 for the three months ended June 30, 2004. Net loss for the six months ended June 30, 2005 was $2,290,330 and for the six months ending June 30, 2004 was $1,367,805. The Company has limited income. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its business. Management has plans to seek additional capital through debt and/or equity financing. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue its existence.
These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might arise from such uncertainty.
Reclassification
Certain amounts in the prior years' financial statements have been reclassified to conform to the current year presentation. Due to the Company's reverse stock split of 1250:1 on May 17, 2005, all common and preferred stock transactions and disclosures to this date have been recalculated and restated to reflect the 1250:1 reverse split.
Income Recognition
The Company and its portfolio companies recognize revenue using the accrual method of accounting. The accrual method provides for a better matching of revenues and expenses. American Card Services revenues arose from two primary sources: card pack sales to distributors and recurring fees. American Card Services recognized revenue on card pack sales upon shipment, and transaction fee revenue was recognized when received.
The Company's policy is to accrue interest income on loans made to portfolio companies. The Company accrues the interest on such loans until the portfolio company has the necessary cash flow to repay such interest. If the Company's analysis of the portfolio companies' performance indicates that a portfolio company may not have the ability to pay the interest and principal on a loan, the Company will make an allowance provision on that entity and in effect cease recognizing interest income on that loan until all principal has been paid. However, the Company will make exceptions to this policy if the investment is well secured and in the process of collection.
For certain investment transactions the Company provides management services and recognizes an agreed upon fixed monthly fee and expenses.
F-9
KAIROS HOLDINGS, INC (formerly ACS Holdings, Inc) NOTES TO FINANCIAL STATEMENTS UNAUDITED June 30, 2005
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Cash and Cash Equivalents
For the purpose of the Statement of Cash Flows, cash and cash equivalents includes time deposits with original maturities of three months or less.
Income Taxes
The Company complies with SFAS No. 109, "Accounting for Income Taxes," which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for temporary differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Following the change in control of the Company on November 11, 2004, the Company's pre-change-in-control net operating loss carryforwards will be substantially limited, if not completely eliminated, due to a lack of continuity of business enterprise under Section 382 of the Tax Reform Act of 1986. No federal tax expense or benefit has been recorded in the financial statements due to the uncertainty of future operations.
Net Income (Loss) Per Common Share
Net Income (Loss) per common share is computed using the weighted average of shares outstanding during the periods presented in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share. Basic net income (loss) per common share excludes the effect of potentially dilutive securities and is computed by dividing net income or loss by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is adjusted for the effect of convertible securities, warrants and other potentially dilutive financial instruments only in the periods in which such effect would have been dilutive. The Company has experienced net losses for the three and six months ended June 30, 2005 and 2004, respectively, and for the year ended December 31, 2004
The following securities were not included in the computation of diluted net loss per share because to do so would have had an anti-dilutive effect for the periods presented:
June 30 June 30 2005 2004 ------------ ------------ Stock options 0 0 Warrants 262,843 3,473
F-10
KAIROS HOLDINGS, INC (formerly ACS Holdings, Inc) NOTES TO FINANCIAL STATEMENTS UNAUDITED June 30, 2005
Segments
The Company operates as one segment as defined by Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information.
Fixed Assets
Fixed assets are stated at cost. The cost of equipment is charged against income over their estimated useful lives, using the straight-line method of depreciation. Repairs and maintenance which are considered betterments and do not extend the useful life of equipment are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation is removed from the accounts and the resulting profit and loss are reflected in income. The Company does not currently own any fixed assets.
Fair Value of Financial Instruments
The recorded amounts for financial instruments, including cash equivalents, investments, accounts payable and accrued expenses, and short-term debt approximate their market values as of June 30, 2005 and December 31, 2004. The Company has no investments in derivative financial instruments.
Goodwill and Other Intangibles
The Company records Goodwill in accordance with Statement of Financial Accounting Standards No.142, Goodwill and Other Intangible Assets. Intangible assets such as goodwill are not amortized; instead the Company will review the goodwill not less than annually to see if it has been impaired. If an impairment has incurred, it will be recorded as an expense in that period. The Company does not currently have Goodwill or Other Intangible Assets.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123 "), provides for the use of a fair value based method of accounting for employee stock compensation. However, SFAS 123 also allows an entity to continue to measure compensation cost for stock options granted to employees using the intrinsic value method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (" APB 25 "), which requires charges to compensation expense for the excess, if any, of the fair value of the underlying stock at the date a stock option is granted (or at an appropriate subsequent measurement date) over the amount the employee must pay to acquire the stock. The Company has elected to continue to account for employee stock options using the intrinsic value method under APB 25.
In accordance with SFAS 123, all other issuances of Common Stock, stock options or other equity instruments issued to employees and non-employees as consideration for goods or services received by the Company are accounted for based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more readily measurable. Such fair value is measured at an appropriate date pursuant to the guidance in EITF Issue No. 96-18 and capitalized or expensed as appropriate.
F-11
KAIROS HOLDINGS, INC (formerly ACS Holdings, Inc) NOTES TO FINANCIAL STATEMENTS UNAUDITED June 30, 2005
As a result of amendments to SFAS 123, the Company will be required to expense the fair value of employee stock options over the vesting period in the first annual reporting period beginning after January 1, 2006.
NOTE B - INVESTMENTS
Valuation of Investments
The most significant estimate inherent in the preparation of the Company's financial statements is the valuation of its investments in portfolio companies and the related unrealized appreciation or depreciation on those investments.
Upon conversion to a BDC, the Board of Directors states all portfolio company investments at fair market value as determined under a good faith standard. The Company has investments in 1 controlled investment corporation as of June 30, 2005.
1. American Card Services, Inc.
American Card Services, Inc. ("ACS") is a Delaware corporation which prior to November 2004 sought to capture a large portion of the rapidly emerging stored-value debit card market that provides unbanked ethnic customers with a viable alternative to cash and traditional money transfers. ACS has since changed its direction and is seeking out investments in financial services and real estate entities. The Company currently owns 100% of the stock of American Card Services, Inc. Based on Management's good faith estimate, the fair market value of American Card Services, Inc. at June 30, 2005 and December 31, 2004 is deemed to be $0 and therefore, the Company has fully reserved against the investment's carrying cost of $2,291,102 and $898,958, respectively.
American Card Services, Inc. owns 100% of ACS Transaction Processing, Inc. a Delaware Corporation, incorporated in August 2003. ACS Transaction Processing had no business activity through June 30, 2005.
American Card Services, Inc. owns 100% of ACS Sales, Inc. a Delaware Corporation incorporated in August 2003. ACS Sales, Inc. had no business activity through June 30, 2005.
F-12
KAIROS HOLDINGS, INC (formerly ACS Holdings, Inc) NOTES TO FINANCIAL STATEMENTS UNAUDITED June 30, 2005
Note C - STOCK ISSUED FOR SERVICES
During the three months ended June 30, 2005 and June 30, 2004 the Company issued shares of the Company's common stock to KMA Capital, LTD (a related Party)and to a third party consultant, respectively. A summary of these activities as adjusted for the 1250:1 reverse split, is as follows:
Three months ended June 30, 2005 Six months ended June 30, 2005 -------------------------------- ------------------------------ Common Shares Amount Common Shares Amount ------------- ------ ------------- ------
Professional consulting services 440,000 $187,500 740,000 $337,500
Three months ended June 30, 2004 Six months ended June 30, 2004 -------------------------------- ------------------------------ Common Shares Amount Common Shares Amount ------------- ------ ------------- ------
Professional consulting services 13,295 $463,018 13,295 $463,018
The value assigned to these shares is based on the stock's traded market price on or about the date the shares were issued. For the three and six months ended June 30, 2005 and June 30, 2004, the above amounts were included in stock based compensation/professional fees. 300,000 shares were issued in the three months ended March 31, 2005 with a value of $150,000 and 440,000 shares were issued in the three months ended June 30, 2005 with a value of $187,500. No shares were issued in the three months ended March 31, 2004 and 13,295 shares were issued in the three months ended June 30, 2004 with a value of $463,018.
NOTE D -- COMMITMENTS AND CONTINGENCIES
The Company leases office and operating facilities under short-term operating leases.
Rent expense for the three and six months ending June 30, 2005 was $2,777 and $3,703 respectively. Rent expense for the three and six months ending June 30, 2004 was $18,002 and $33,511 respectively.
The Company has been named as a defendant in a small claims case involving breach of contract. Management's position is that this case can be contested on its merits; maximum potential liability exposure is $5,000.
The Company filed on March 22, 2005, a civil suit in Orange County District Court, Orlando Florida against the former CEO of the Company, Walter Roder. The litigation alleges among other causes of action, various breaches of fiduciary and statutory duties. The Company intends to vigorously pursue its remedies against Mr. Roder.
All other matters involving pending or prospective litigation have been dismissed or resolved.
NOTE E - NOTES PAYABLE
Notes payable as of June 30, 2005 and December 31, 2004 consisted of the following:
F-13
KAIROS HOLDINGS, INC (formerly ACS Holdings, Inc) NOTES TO FINANCIAL STATEMENTS UNAUDITED June 30, 2005
June 30, December 31, 2005 2004
7% note payable to Nelanda Holdings due in 2005 $486,931 $0 8% convertible debenture in the amount of 50,000 to an individual due no later than September, 2005 convertible to 85% of the closing bid price of the common stock on the date the Company issues such conversion notice. 3,020 8% convertible debenture dated June 10, 2005 in the amount of $40,000 to an individual due no later than June 2006 convertible to 50% of the closing bid price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture 40,000 0 8% convertible debenture dated June 24, 2005 in the amount of $40,000 to an individual due no later than June 2006 convertible to 50% of the closing bid price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture. 20,000 0 8% convertible debenture dated June 26, 2005 in the amount of $20,000 to an individual due no later than June 2006 convertible to 50% of the closing bid price of the common stock on the date the Company issues the conversion notice. The Holder shall be entitled to convert not more than 20% of the debenture at the first conversion date which is 90 days after the original date of the debenture. Thereafter, the Holder shall be entitled to convert an additional 20% of the debenture principal every 60 days until the due date or until payment in full of this debenture.
20,000 0 ------- -------- Total $83,020 $486,931 ======= ========
At June 30, 2005 and December 31, 2004 the notes are classified as current liabilities
NOTE F - STOCKHOLDERS EQUITY
As of June 30, 2005 the authorized capital of the company is 50,000,000 shares of common voting stock par value of $.001 per share and 30,000,000 shares of convertible preferred stock with par value of $.001 per share. The company has also authorized 10,000,000 shares of preferred Class B stock with par value of $.001 per share and 10,000,000 shares of preferred Class C stock with par value of $.001 per share. All terms, rights and preferences of the Class B and C preferred stock are determined by the Board of Directors at the time of issuance. No shares of preferred stock Class B or C were issued or outstanding at June 30, 2005 and December 31, 2004.
F-14
KAIROS HOLDINGS, INC (formerly ACS Holdings, Inc) NOTES TO FINANCIAL STATEMENTS UNAUDITED June 30, 2005
The convertible preferred shares are convertible into common stock one to one. The convertible preferred shares shall be entitled to one vote per share and, as a group, shall be entitled to a revenue sharing dividend of 25% of net revenues of the Company. Net revenue is defined as the net revenue as reported under SEC filings. Said dividend may be payable in cash or common stock at the option of the investors. The convertible preferred shares are callable by the Company at 120% of value after 24 months.
NOTE G - REVERSE STOCK SPLIT
On May 17, 2005, the Board of Directors with a Consent to Action by the Stockholders, authorized a 1250:1 reverse stock split of the Company's $.001 par value common stock and $.001 convertible preferred stock. All references in the accompanying financial statements to the number of common shares and per share amounts for 2004 and 2005 reflect this reverse split.
NOTE H - UNAUDITED PRO FORMA
As described in Note A the assets and liabilities acquired from American Card Services, Inc. and resulting operations have been put into Kairos Holdings, Inc. in compliance with the accounting guidelines of a reverse acquisition. The acquisition was completed on May 12, 2004, after the Company increased authorized shares to a total sufficient to effect the transaction. The following unaudited pro forma information summarizes the combined results of Kairos Holdings, Inc. and American Card Services as if the merger took place at the beginning of 2004.
Net Loss ($2,635,714) ($2,288,936) ($592,702) ($1,459,562) Basic and diluted net loss per share (2.23) (19.70) (0.38) (12.36) Weighted average shares outstanding 1,183,040 116,177 1,572,893 118,120
NOTE I - CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially expose the Company to concentrations of credit risk, consist principally of cash.
The Company maintains its cash accounts with financial institutions located in Florida. Federal Deposit Insurance Corporation (FDIC) guarantees the Company's deposits in financial institutions up to $100,000 per account.
F-15
KAIROS HOLDINGS, INC (formerly ACS Holdings, Inc) NOTES TO FINANCIAL STATEMENTS UNAUDITED June 30, 2005
The Company had no deposits with financial institutions that exceeded the federally insured limit at June 30, 2005 or December 31, 2004. Historically, the Company has not experienced any losses on its deposits in excess of federally insured guarantees.
NOTE J- COMMON STOCK SHARES ISSUED INTO ESCROW
On June 13, 2005, The Company settled a disputed debt with a creditor. The terms of the settlement required the Company to place 180,000 shares of its common stock into escrow as collateral against a $22,500 due to this creditor. At June 30, 2005, the balance due to this creditor is $17,500 and is classified as Accounts Payable. The Company is scheduled to satisfy the debt on August 31, 2005. Once the debt is satisfied, the 180,000 shares will be returned to the Company's treasury.
NOTE K- PREFERRED STOCK AND WARRANTS
On February 18, 2005, Kairos Holdings, Inc. entered into an agreement with its major note holder and the note holders of American Card Services, Inc. to exchange the debt that existed at February 18, 2005 for equity securities of Kairos Holdings, Inc. The Company issued 240,000 shares of convertible preferred stock and 260,000 warrants to the note holders. (The Company also issued 240,000 shares of convertible preferred stock and 260,000 warrants to KMA Capital Partners, LTD for professional services rendered in connection with the restructuring of this debt.) The number of shares and warrants to be issued was determined based on the value of the securities on the grant date in relation to the debt owed to the note holders. The warrants are convertible into preferred stock at a price of $.0001 and become convertible at the earlier of the effective date of a reverse split or six months. As of June 30, 2005, no warrants have been converted to preferred stock. The convertible preferred shares are convertible into common stock one to one. The convertible preferred shares shall be entitled to one vote per share and, as a group, shall be entitled to a revenue sharing dividend of 25% of net revenues of the Company. Net revenue is defined as the net revenue as reported under SEC filings. Said dividend may be payable in cash or common stock at the option of the investors. The convertible preferred shares are callable by the Company at 120% of value after 24 months.
In accounting for the transaction, the Company used APB Opinion 23, Early Extinguishment of Debt. In Footnote 1 of APB 23, "extinguishment transactions between related parties may in essence be capital transactions" and not immediate recognition of income. Emerging Issues Task Force (EITF) 98-5, Accounting for Convertible Securities with Beneficial Conversion Features of Contingently Adjustable Conversion Ratios, takes the position that embedded beneficial conversion features of convertible securities should be recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is the difference between the conversion price and the fair value of the security. In addition, any recorded discount resulting from the allocation of proceeds to the beneficial conversion feature is analogous to a dividend (deemed dividend) and should be recognized as a return to the preferred shareholder over the minimum period from the date of issuance to the date at which the preferred shareholder can realize that return using the effective yield method.
F-16
KAIROS HOLDINGS, INC (formerly ACS Holdings, Inc) NOTES TO FINANCIAL STATEMENTS UNAUDITED June 30, 2005
The convertible preferred shares are convertible on the date of issuance and the embedded beneficial conversion feature is recognized immediately On the date of issuance of the preferred stock (February 28, 2005), the Company recorded a deemed dividend of $120,000 using the intrinsic value of each convertible share ($.50) multiplied by the number of shares (240,000).
The warrants, as stated above, are convertible to preferred shares upon the earlier of the effective date of a reverse stock split or six months. The Company effectuated a reverse stock split of 1250:1 on of May 17, 2005. This reverse split triggered the embedded beneficial conversion feature of the warrants and therefore, the Company recorded a deemed dividend of $130,000 (260,000 warrants multiplied by the intrinsic value of $0.50).
NOTE L- RELATED PARTY TRANSACTIONS
ACS owes Mr. Roder and affiliates $474,500 in notes payable at June 30, 2005 and December 31, 2004, respectively, and approximately $173,129 and $131,409 in accrued interest at June 30, 2005 and December 31, 2004, respectively.
The Company owes KMA Capital Partners, Ltd. $70,784 and $19,900 in advances as of June 30, 2005 and December 31, 2004 respectively and is currently classified as Due to Related Parties
The Company incurred $375,000 in professional fees for reorganization services from KMA Capital Partners, Ltd. for the three months ended June 30, 2005 and $750,000 for the six months ended June 30, 2005. $187,500 represented the value of common stock issued for services for the three months ended June 30, 2005 and $337,500 represented the value of common stock issued for services for the six months ended June 30, 2005. As of June 30, 2005, the Company owes KMA Capital Partners, Ltd. $205,736 for these professional fees, which is currently classified as Due to Related Parties.
The Company occupies office space and utilizes office equipment and utilities from a related party for a nominal cost.
NOTE M- SUBSEQUENT EVENTS
Kairos Holdings, Inc. entered into a Letter of Intent with Paeda International Finance Group, LLC (a factoring and asset-based lending company) on July 22, 2005 to acquire 45% of the company for an investment equal to $250,000 within 90 days of this agreement. The transaction is contingent upon the findings of Due Diligence by Kairos Holdings, Inc.
Kairos Holdings, Inc. entered into a Letter of Intent with Freedom Home Loan, Inc (a residential mortgage company) on July 27, 2005 to acquire 49% of the company for an investment equal to $150,000 within 90 days of this agreement. The transaction is contingent upon the findings of Due Diligence by Kairos Holdings, Inc.)
F-17
KAIROS HOLDINGS, INC (formerly ACS Holdings, Inc) NOTES TO FINANCIAL STATEMENTS UNAUDITED June 30, 2005
Kairos Holdings, Inc. entered into a Letter of Intent with Bravo Brokers, Inc. (a real estate agency) on July 28, 2005 to acquire 30% of the company for an investment equal to $300,000 within 80 days of this agreement. The transaction is contingent upon the findings of Due Diligence by Kairos Holdings, Inc.
Kairos Holdings, Inc. formed Kairos Consulting, Inc., a Florida Corporation, on July 26, 2005. Kairos Holdings, Inc. owns 100% of the consulting company. Kairos Consulting, Inc. will offer management, professional and advisory services to portfolio companies of Kairos Holdings, Inc.
F-18
Item 9. Control & Procedures
Evaluation of Disclosure Control and Procedures
The Company's management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that such disclosure controls and procedures were deficient and designed new controls and procedures to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported with the time periods specified in applicable SEC rules and forms were effective.
Changes in Internal Control Over Financial Reporting
There have been no significant changes in our internal control or in other factors that could significantly affect those controls subsequent to our evaluation, including corrective actions with regard to significant deficiencies and material weaknesses.
PART III
Item 10. Exhibits and Reports on Form 10-Q
Exhibit No. Description
31.1 Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002
32.1 Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 906, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
Company Financial Statements June 30, 2005
-20-
SIGNATURES
In accordance with Section 13or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Kairos Holdings, Inc.
BY: /s/ Donald M. Stein ---------------------------- Donald M. Stein Chief Financial Officer Dated: August 12, 2005
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities as indicated and on the dates indicated.
Kairos Holdings, Inc.
BY: /s/ Mark Width ---------------------------- Mark Width President and CEO Dated: August 12, 2005 Kairos Holdings, Inc.
BY: /s/ Donald M. Stein ---------------------------- Donald M. Stein Chief Financial Officer Dated: August 12, 2005
posted
ORLANDO, Fla., Aug 16, 2005 (BUSINESS WIRE) --KAIROS Holdings, Inc. (OTCBB:KROH) announced today that insiders are accumulating shares from the public float. The company estimates that the total float is approximately 1,160,000.
KMA Capital Partners, LLC over the past two months has accumulated approximately sixteen percent (16%) of the float. KMA Capital Partners has filed a revised 13d stating they now own fifty four and nine tenths percent (54.09%) of the total issued shares of the company. KMA intends on continuing to acquire shares. The full 13d can be viewed by accessing the SEC website, http://www.sec.gov/, Search for Company Filings, Companies and Other Filings, Company name: KAIROS Holdings.
About KAIROS
Headquartered in Orlando, Florida, KAIROS Holdings, Inc., KHI is a publicly traded Business Development Corporation (BDC) with a targeted portfolio of middle-market companies in the financial services, financial technologies, and real estate industries.
Safe Harbor
The statements made in this release constitute "forward-looking" statements, usually containing the words "believe," "estimate," "project," "expect," or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, changing economic conditions, interest rates trends, continued acceptance of the Company's products in the marketplace, competitive factors and other risks detailed in the Company's periodic report Filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release.
SOURCE: KAIROS Holdings, Inc.
KAIROS Holdings, Inc., Orlando Investor Contact: Jack Craig, 407-370-4306 Jack.craig@kairosholdings.com or Press Contact: Dorian Beach, 407-370-4300 Dorian.beach@kairosholdings.com
Copyright Business Wire 2005
Posts: 85 | From: Greenville Texas USA | Registered: Jun 2004
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