KNIGHT NATURAL GAS, INC.
Tower I, Suite 340, 12385 E. Arapahoe Road
Englewood, CO 80112
ANNUAL REPORT FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1995
Dear Shareholders:
Fiscal 1995 was not an exceptional year for our Company. Revenues and
earnings were non-existent. Subsequent to the end of the fiscal year, the
Company embarked upon a program to complete a major acquisition, As a result,
1996 promises to be a milestone in our Company's history. The acquisition of
certain defined assets of Sedcore Exploration Company Limited, a Ghanian
company, promises to increase the scope, assets, revenues and earnings of our
Company beyond our greatest expectations.
I believe in the future of our Company. I feel that we as shareholders can
look forward to a very exciting coming fiscal year for our Company.
Very truly yours,
Gregory W. Skufca
President
<PAGE>
KNIGHT NATURAL GAS, INC.
General Development of Business
Knight Natural Gas, Inc. (the "Company"), is a Colorado corporation. The
principal business address is 5650 Greenwood Plaza Blvd., Suite 216, Englewood,
Colorado 80111.
The Company was originally incorporated under the laws of the State of
Colorado on September 19, 1985 as a gas exploration company. On January 1, 1993,
the Company entered into the development stage.
In 1994, the present management became involved with the Company. Mr.
Gregory Skufca, one of the members of present management, provided consulting
services to reactivate the Company and received 1,500,000 post-split shares of
the Company for a consideration of par value. On November 1, 1994, the Company
did a one-for-twenty reverse split of its common stock. As of December 31, 1995,
the Company had a total of 2,052,500 common shares issued and outstanding. The
Company has not been subject to any bankruptcy, receivership or similar
proceeding.
Operations
Proposed Business
Since January 1, 1993, the primary activity of the Company has been
directed towards organizational efforts. During this last fiscal year, the
Company searched for potential acquisition candidates. As of the fiscal year
end, the Company had not engaged in any preliminary efforts intended to identify
possible business opportunities and had neither conducted negotiations nor
entered into a letter of intent concerning any business opportunity.
The Company had a business plan to investigate and, if warranted, merge
with or acquire the assets or common stock of an entity actively engaged in
business. The Company sought opportunities for long-term growth potential as
opposed to short-term earnings.
As of the end of the fiscal year, the Company had no business opportunities
under investigation. None of the Company's officers, directors, promoters or
affiliates had engaged in any preliminary contact or discussions with any
representative of any other company regarding the possibility of an acquisition
or merger between the Company and such other company.
The Company has no full-time employees. The Company's President and
SecretaryTreasurer have agreed to allocate a portion of their time to the
activities of the Company, without compensation. These officers anticipate that
the business plan of the Company can be implemented by their collectively
devoting approximately twenty-five hours per month to the business affairs
<PAGE>
of the Company and, consequently, conflicts of interest may arise with respect
to the limited time commitment of such officers.
The primary attraction of the Company as a merger partner or as an
acquisition vehicle will be its status as a public company. Any business
combination or transaction will likely result in a significant issuance of
shares and substantial dilution to present shareholders of the Company.
General Business Plan
The Company's purpose is to seek, investigate and, if such investigation
warrants, to acquire controlling interest in business opportunities presented to
it by persons or firms who or which desire to seek the perceived advantages of
an Exchange Act registered corporation. The Company will not restrict its search
to any specific business, industry, or geographical location. The Company may
participate in a business venture of virtually any kind or nature.
The Company may seek a business opportunity in the form of firms which have
recently commenced operations, are developing companies in need of expansion
into new products or markets, are seeking to develop a new product or service or
are established, mature businesses.
In seeking business opportunities, the management decision of the Company
will be based upon the objective of seeking long-term appreciation in the value
of the Company. Current income will only be a minor factor in such decisions.
It is not anticipated that the Company will be able to participate in more
than one business opportunity. However, Management may, in its sole discretion,
elect to enter into more than one acquisition if it believes these transactions
Can be effectuated on terms favorable to the Company. This lack of
diversification will not permit the Company to offset potential losses from one
business opportunity against profits from another and should be considered a
substantial risk to shareholders of the Company.
Markets
The Company's initial marketing plan will be focused completely on finding
an acquisition candidate as discussed above. No efforts toward this marketing
plan have been made as of the fiscal year end.
Raw Materials
The use of raw materials is not now material factor in the Company's
operations at the present time.
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Customers and Competition
As of the fiscal year end, the Company expected to be an insignificant
participant among the firms which engage in the acquisition of business
opportunities. There are a number of established companies, such as venture
capital and financial concerns, many of which are larger and better capitalized
than the Company and/or have greater personnel resources and technical
expertise. In view of the Company's combined extremely limited financial
resources and limited management availability, the Company will continue to be
at a significant competitive disadvantage compared to the Company's competitors.
Backlog
At December 31, 1995, the Company had no backlogs.
Employees
At as of the date hereof, the Company has no employees. The Company does
not plan to hire employees in the future.
Proprietary Information
The Company has no proprietary information.
Government Regulation
The Company is not subject to any material governmental regulation or
approvals.
Research and Development
The Company has never spent any amount in research and development
activities.
Environmental Compliance
At the present time, the Company is not subject to any costs for compliance
with any environmental laws.
Subsequent Events
On August 26, 1996, the Company entered into an acquisition of certain
defined assets and liabilities of Sedcore Exploration Company Limited
("Sedcore") in exchange for 5,000,000 common shares of the Company. On August
27, 1996, the Company entered into an additional acquisition of certain
additional defined assets of Sedcore in exchange for 8,500,000 common shares of
the Company. The transactions have given the Company effective control of
defined
3
<PAGE>
assets of Sedcore, and the current control shareholders of Sedcore now control
both companies. The Company's name is proposed to be changed to "KALAN GOLD
CORPORATION" or some derivation thereof.
Principal Market or Markets
General
The Company's securities have never been listed for trading on any market
and are not quoted at the present time. At the present time, the Company does
not know where secondary trading will eventually be conducted. The place of
trading, to a large extent, will depend upon the size of the Company's eventual
acquisition. To the extent, however, that trading will be conducted in the
over-the-counter market in the so-called "pink sheets" or the NASD's "Electronic
Bulletin Board," a shareholder may find it more difficult to dispose of or
obtain accurate quotations as to price of the Company's securities. In addition,
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure and documentation related to the market for penny stock
and for trades in any stock defined as a penny stock.
Approximate Number of Holders of Common Stock
As of the fiscal year end, a total of 2,052,500 of shares of the Company's
Common Stock were outstanding and the number of holders of record of the
Company's common stock at that date was approximately 35. All of the Company's
shareholders acquired their respective shares in the Company prior to 1990, with
the exception of Mr. Skufca, who acquired his shares in 1994 for cash at par
value. All of the issued and outstanding shares of the Company's common stock,
$0.00001 par value, were issued in accordance with the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933, as amended,
in that these were private offerings to individuals who was sophisticated
investors and received all pertinent information relative to these investments.
Dividends
Holders of common stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends on the common stock
were paid by the Company during the periods reported herein nor does the Company
anticipate paying dividends in the foreseeable future.
The Securities Enforcement and Penny Stock Reform Act of 1990
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure and documentation related to the market for penny stock
and for trades in any stock defined as a penny stock. Unless the Company can
acquire substantial assets and trade at over $5.00 per share on the bid, it is
more likely than not that the Company's securities, for some
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<PAGE>
period of time, would be defined under that Act as a "penny stock." As a result,
those who trade in the Company's securities may be required to provide
additional information related to their fitness to trade the Company's shares.
These requirements present a substantial burden on any person or brokerage firm
who plans to trade the Company's securities and would thereby make it unlikely
that any liquid trading market would ever result in the Company's securities
while the provisions of this Act might be applicable to those securities.
Blue Sky Compliance
The trading of blank check companies may be restricted by the securities
laws ("Blue Sky" laws) of the several states. Management is aware that a number
of states currently prohibit the unrestricted trading of blank check companies
absent the availability of exemptions, which are in the discretion of the
states' securities administrators. The effect of these states' laws would be to
limit the trading market, if any, for the shares of the Company and to make
resale of shares acquired by investors more difficult.
The impact of these Blue Sky laws is considered to be minimal since the
Company does not intend to qualify the Company's outstanding securities for
secondary trading in any state until such time as an acquisition or merger has
been consummated.
Investment Company Act of 1940
The Company does not intend to engage in any activities which would cause
it to be classified as an "investment company" under the Investment Company Act
of 1940, as amended. However, to the extent that the Company would inadvertently
become an investment company because of its activities, the Company would be
subjected to additional, costly and restrictive regulation.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Results of Operations
The Company has generated no substantial revenues from its operations and
has been a development stage company since inception. Since the Company has not
generated revenues and has never been in a profitable position, it operates with
minimal overhead. The Company's primary activity will be to seek an acquisition
candidate. As of the end of the reporting period, the Company has concluded no
acquisitions and has spoken with no potential candidates. The attempt to seek an
acquisition candidate or candidates will be the primary focus of the Company's
activities in the coming fiscal year.
5
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Liquidity and Capital Resources
As of the end of the reporting period, the Company had no material cash or
cash equivalents. There was no significant change in working capital during this
fiscal year.
Management feels that the Company has inadequate working capital to pursue
any business opportunities other than seeking an acquisition candidate. The
Company will have negligible capital requirements prior to the consummation of
any acquisition but can pursue an acquisition candidate. The Company does not
intend to pay dividends in the foreseeable future.
Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure.
There were no disagreements between the Company and its accountants during
the relevant period.
Directors and Executive Officers of the Company
The Directors and Executive Officers of the Company, their ages and
positions held in the Company as of the fiscal year end are as follows:
NAME AGE POSITION HELD
Gregory W. Skufca 33 President and Director
Gerald Loffredo 5 Secretary, Treasurer, and Director
The Company's Directors will serve in such capacity until the next annual
meeting of the Company's shareholders and until their successors have been
elected and qualified. The officers serve at the discretion of the Company's
Directors. There are no family relationships among the Company's officers and
directors, nor are there any arrangements or understandings between any of the
directors or officers of the Company or any other person pursuant to which any
officer or director was or is to be selected as an officer or director.
Messrs. Gregory W. Skufca and Gerald Loffredo should be considered
"parents" or "promoters" of the Company (as such terms are defined under the
Securities Act), inasmuch as Mr. Loffredo has taken significant initiative in
founding and organizing the business of the Company and because of the
shareholdings and control positions held by each in the Company.
Gregory W. Skufca. Mr. Skufca has been the president and a director of the
Company since August, 1994, and has been the president of Financial
Communications Corp. (Financial Communications) since January, 1989. Mr. Skufca,
through Financial Communications, advises public and private investors, assists
in the obtaining and structuring of venture capital financing and assists
companies in their public relations. Previous to Financial
6
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Communications, Mr. Skufca served as a loan officer and consultant with
Skufca-Meyer Financial Corp., Lakewood, Colorado, May, 1987, until January,
1989. Skufca-Meyer was a small, privately-held Denver area lender specializing
in residential mortgages and corporate financing, but is no longer in business.
From May, 1985, until May, 1987, Mr. Skufca was employed as an independent sales
representative with Charles Milne and Associates, Denver, Colorado, a
privately-held wholesale office furniture and supply company. Previous to that
he was employed as a new home salesman with Skufca and Shelton Company, Denver,
Colorado,, between October, 1984, and May, 1985. This entity is also no longer
in business. None of these companies or any other company with which Mr. Skufca
is affiliated will provide services for the Company. There is no written policy
of the Company to this effect. However, Mr. Skufca has indicated his intention
not to have any company with which he is or has been associated, including, but
not limited to Financial Communications Corp., provide services while he is an
officer and director.
Mr. Skufca earned a bachelor's degree from the University of Colorado at
Boulder in 1980 and has attended numerous seminars in financial planning, real
estate, and marketing. He is also licensed with the NASD as a sales agent. Mr.
Skufca is currently devoting approximately 15 hours per month to the affairs of
the Company.
Gerald Loffredo. Mr. Loffredo has been an officer and a director of the
Company since 1989. He was employed by IBM from 1966 through 1991 in various
capacities, with the last being Engineering and Program Manager for
approximately 13 years. From 1991 to the present, he has been an Engineering
Manager with Storage Technology Corporation. He was a co-developer of a
subdivision of duplexes, an apartment complex, and individual homes in the
Austin, Texas area. He is a partner of CF & C, a private partnership which
develops oil and gas properties in Colorado. He has also acted as Vice President
of Princeton Oil and Gas, a private company which is in the business of
acquisition and development of petroleum production opportunities in the Ohio
Valley. All are ventures which have been profitable. Mr. Loffredo has an
undergraduate degree in Mathematics, Physics, and Astronomy from the University
of Illinois. He has also done graduate work in Physics. He will devote
approximately 10 hours per month to the affairs of the Company.
Form 10-KSB
A copy of the Form 10-KSB filed with the U.S. Securities and Exchange
Commission is available to any shareholder upon written request to:
Corporate Secretary
KNIGHT NATURAL GAS, INC.
Tower I, Suite 340, 12385 E. Arapahoe Road
Englewood, CO 80112
7
<PAGE>
Shareholder Information
Corporate Offices:
Tower I, Suite 340, 12385 E. Arapahoe Road
Englewood, CO 80112
Independent Auditor:
Kish Leake and Associates
Certified Public Accountants
Transfer Agent:
Corporate Stock Transfer, Inc.
Denver, Colorado
(303)595-3300
Special Meeting
Stockholders of the Company are invited to attend the Special Meeting of
the Company in lieu of the Annual Meeting, which will be held at Tower I, Suite
340, 12385 E. Arapahoe Road, Englewood, CO 80112 on November 12, 1996, at 10:00
a.m., local time,
A Proxy Statement will be sent to shareholders of record as of
October 18, 1996.
8
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Knight Natural Gas, Inc.
(A Development Stage Company)
Balance Sheet
Unaudited Audited
June December
30, 1996 31, 1995
-------- --------
ASSETS - Cash ............................... 369 647
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES - Accounts Payable Trade ........ 1650 0
-------- --------
SHAREHOLDERS' EQUITY
Common Stock, $.00001 Par Value
Authorized 100,000,000 Shares;
Issued And Outstanding 2,052,500 Shares ..... 21 21
Capital Paid In Excess Of
Par Value Of Common Stock ................... 426,026 422,649
Preferred Stock, $.10 Par Value, Non Voting
Authorized 1,000,000 Shares;
Issued And Outstanding -0- Shares ........... 0 0
Retained Deficit Prior To January 1, 1993 ... (417,421) (417,421)
Deficit Accumulated During
The Development Stage ....................... (9,907) (4,602)
-------- --------
TOTAL SHAREHOLDERS' EQUITY .................. (1,281) 647
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY ........................ $ 369 $ 647
======== ========
The Accompanying Notes Are An Integral Part Of These Financial Statements.
F-1
<PAGE>
Knight Natural Gas, Inc.
(A Development Stage Company)
Unaudited Statement Of Operations
Three Months Three Months
June June
30, 1996 30, 1995
--------- ---------
Revenue ........................................ 0 0
--------- ---------
Expenses:
Office .......................................... 40 23
Licenses & Fees ................................ 210 0
Professional ................................... 5,027 0
--------- ---------
Total ........................................... 5,277 23
--------- ---------
Net (Loss) ...................................... (5277) (23)
========= =========
Net (Loss) Per
Common Share.................................... (0) (0)
========= =========
Common Shares Outstanding........................ 2,052,500 2,052,500
========= =========
The Accompanying Notes Are An Integral Part Of These Financial Statements.
F-2
<PAGE>
Knight Natural Gas, Inc.
(A Development Stage Company)
Unaudited Statement Of Operations
January
1, 1993
(Inception)
Six Months Six Months Through
June June June
30, 1996 30, 1995 30, 1996
--------- --------- ---------
Revenue ................. $ 0 $ 0 $ 0
--------- --------- ---------
Expenses:
Office .................. 68 45 460
Licenses & Fess ......... 210 0 210
Professional ............ 5,027 3,700 9,237
--------- --------- ---------
Total ................... 5,305 3,745 9,907
Net (Loss) .............. (5,305) (3,745) (9,907)
========= ========= =========
Net (Loss) Per
Common Share ........... (0) (0) (0)
========= ========= =========
Common Shares Outstanding 2,052,500 2,052,500 2,052,500
========= ========= =========
The Accompanying Notes Are An Integral Part Of These Financial Statements.
F-3
<PAGE>
Knight Natural Gas, Inc.
(A Development Stage Company)
Unaudited Statement Of Cash Flows
January
1, 1993
Six Six (Inception)
Months Months Through
June June June
30, 1996 30, 1995 30, 1996
----- ----- -----
Net (Loss) Accumulated
During The Development
Stage .............................. (5,305) (3,745) (9,907)
Stock Issued Not For Cash ........... 0 0 15
Increase In Accounts Payable ........ 1,650 0 1,650
----- ----- -----
Cash Flows From Operations .......... (3,655) (3,745) (8,242)
----- ----- -----
Cash Flows From Financing Activities:
Issuance Of Common Stock ............ 0 0 0
Contribution Of Capital ............. 3,377 3,700 7,077
----- ----- -----
Cash Flows From Financing ........... 3,377 3,700 7,077
----- ----- -----
Cash Flows From Investing Activities:
0 0 0
----- ----- -----
Cash Flows From Investing ........... 0 0 0
----- ----- -----
Net Increase In Cash ................ (278) (45) (1,165)
Cash At Beginning Of Period ......... 647 924 1,534
----- ----- -----
Cash At End Of Period ............... $ 369 $ 879 $ 369
===== ===== =====
Summary Of Non-Cash Investing And Financing Activities:
1,500,000 Shares Issued For Service @ $.00001 Per Share $ 15
=====
The Accompanying Notes Are An Integral Part Of These Financial Statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Knight Natural Gas, Inc.
(A Development Stage Company)
Unaudited Statement Of Shareholders' Equity
Deficit
Capital Accumulated
Number Of Paid In Number Of During The
Common Common Excess Of Preferred Preferred Retained Development
Notes Shares Stock Par Value Shares Stock Deficit Stage Total
----- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance At January 1, 1993 ... 552,500 6 418,949 0 0 (417,421) 0 1,534
Net (Loss) December 31, 1993 . (336) (336)
--------- --------- --------- --------- --------- --------- --------- ---------
Balance At December 31, 1993 . 552,500 6 418,949 0 0 (417,421) (336) 1,198
Issuance Of Common Stock: .... 1,2
November 1, 1994 - Services @
$.00001 per Share ........... 1,500,000 15 0 15
Net (Loss) December 31, 1994 . (289) (289)
--------- --------- --------- --------- --------- --------- --------- ---------
Balance At December 31, 1994 . 2,052,500 21 418,949 0 0 (417,421) (625) 924
Capital Contribution ......... 3,700 3,700
Net (Loss) @ December 31, 1995 (3,977) (3,977)
--------- --------- --------- --------- --------- --------- --------- ---------
Balance At December 31, 1995 . 2,052,500 21 422,649 0 0 (417,421) (4,602) 647
Capital Contribution ......... 3,377 3,377
Net (Loss) @ June 30, 1996 ... (5,305) (5,305)
--------- --------- --------- --------- --------- --------- --------- ---------
Balance At June 30, 1996 ..... 2,052,500 21 426,026 0 0 (417,421) (9,907) (1,281)
--------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
The Accompanying Notes Are An Integral Part Of These Financial Statements.
F-5
<PAGE>
KNIGHT NATURAL GAS, INC.
Footnotes
June 30 1996
NOTE 1
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the six month period ended June 30 1996 and 1995 and for the
periods from inception at January 1 1993 to June 30 1996 (b) financial position
at June 30 1996 and December 31 1995 and the cash flows for the six months ended
June 30 1996 and 1995 and for the period from inception, January 1, 1993
(inception) to June 30 1996 have been made.
NOTE 2
The results for the six month period ended June 30 1996 are not necessarily
indicative of the results for the entire fiscal year ended December 31 1996.
F-6
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KNIGHT NATURAL GAS, INC.
Tower I, Suite 340, 12385 E. Arapahoe Road
Englewood, CO 80112
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 12, 1996
TO OUR SHAREHOLDERS:
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Knight Natural Gas, Inc. (the "Company") will be held at Tower I,
Suite 340, 12385 E. Arapahoe Road, Englewood, CO 80112 on November 12, 1996, at
10:00 a.m., local time, for the purposes set forth in this Notice of Special
Meeting of Shareholders. A Proxy Card and a Proxy Statement for the Meeting are
enclosed.
The Meeting is for the purposes of considering and acting upon:
1. The election of three (3) directors to the Board of Directors of the
Company, to serve until their resignation or removal from office, or until their
respective successors are elected and qualified;
2. The ratification and approval of the action of the Company's Board of
Directors to effect the acquisition of certain defined assets and liabilities of
Sedcore Exploration Company Limited;
3. Approval of the change of the Company's name to Kalan Gold Corporation,
or some derivation thereof;
4. The ratification of Cordovano and Company, CPA as the Company's auditors
for the fiscal year ended December 31, 1996; and
5. Consideration of any matters which may properly come before the Meeting,
or any adjournment thereof. At this time, the Board of Directors is not aware of
any other business to come before the Meeting.
Any action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above or on any date or dates to which the Meeting
may be adjourned. Only shareholders of record as of the close of business on
October 18, 1996 are entitled to notice of and to vote at the Meeting. The stock
transfer books of the Company will remain open. There is printed on the
following pages a Proxy Statement to which your attention is invited. Please
read it carefully.
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You are requested to fill in and sign the enclosed form of Proxy which
is solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The Proxy will not be used if you attend and vote at the Meeting in
person.
By Order of the Board of Directors
James H. Baum, President
Englewood, Colorado
October 22, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN
IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY PROMPTLY IN THE ENCLOSED POSTAGE PREPAID, ADDRESSED ENVELOPE. IF
YOU ATTEND THIS MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY. ANY
PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO
THE EXERCISE THEREOF.
2
<PAGE>
PROXY
KNIGHT NATURAL GAS, INC.
Tower I, Suite 340, 12385 E. Arapahoe Road
Englewood, CO 80112
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
OF KNIGHT NATURAL GAS, INC.
THE UNDERSIGNED hereby appoints and constitutes James H. Baum, John
Barksdale, or Robert J. Goldman, and each of them, as his true and lawful agents
and proxies, with full power of substitution and revocation in each, to attend,
represent and to vote the shares of common stock of the undersigned at the
Special Meeting of Shareholders, which will be held at Tower I, Suite 340, 12385
E. Arapahoe Road, Englewood, CO 80112 on November 12, 1996, at 10:00 a.m., local
time, for the purposes set forth in the Notice of Special Meeting of
Shareholders., and at any adjournment thereof, on all matters coming before said
meeting.
Management recommends a vote FOR items 1, 2, 3, 4, and 5, and SHARES WILL
BE SO VOTED UNLESS YOU INDICATE OTHERWISE:
1. Approval of the following individuals to serve on the Board of Directors:
James H. Baum FOR AGAINST ABSTAIN
Robert J. Goldman FOR AGAINST ABSTAIN
John Barksdale FOR AGAINST ABSTAIN
2. The ratification and approval of the action of the Company's Board of
Directors to effect the acquisition of certain defined assets and
liabilities of Sedcore Exploration Company Limited;
FOR AGAINST ABSTAIN
3. Approval of the change of the Company's name to Kalan Gold Corporation, or
some derivation thereof;
FOR AGAINST ABSTAIN
4. The ratification of Cordovano and Company, CPA as the Company's auditors
for the fiscal year ended December 31, 1996; and
FOR AGAINST ABSTAIN
5. Consideration of any matters which may properly come before the Meeting, or
any adjournment thereof. At this time, the Board of Directors is not aware
of any other business to come before the Meeting.
FOR AGAINST ABSTAIN
<PAGE>
Dated: , 1996
(Printed Name of Shareholder)
(Signature of Shareholder)
This Proxy Must Be Signed Exactly As Your Name Appears On Your Stock
Certificate. Executors, Administrators, Trustees, Etc., Should Give Full Title
As Such. If The Signer Is A Corporation, Please Sign Full Corporate Name By Duly
Authorized Officer.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY. THE FAILURE TO
CHECK A BLOCK WILL BE TAKEN AS A VOTE FOR THE PROPOSITION.
<PAGE>
KNIGHT NATURAL GAS, INC.
Tower I, Suite 340, 12385 E. Arapahoe Road
Englewood, CO 80112
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 12, 1996
INTRODUCTORY STATEMENT
This Proxy Statement and accompanying Proxy are furnished in connection
with a solicitation of Proxies by the Board of Knight Natural Gas, Inc.. (the
"Company") for use at the Special Meeting of Shareholders of the Company, to be
held at Tower I, Suite 340, 12385 E. Arapahoe Road, Englewood, CO 80112 on
November 12, 1996, at 10:00 a.m., local time, for the purposes set forth in the
accompanying Notice of Special Meeting of Shareholders.
Shareholders of record at the close of business on October 18, 1996 will be
entitled to receive notice of and to vote at the meeting. Each share of common
stock is entitled to one vote for each matter submitted to a vote at the
meeting. Shares represented by executed and unrevoked Proxies will be voted in
accordance with the specifications made thereon. If the enclosed form of Proxy
is executed and returned, it nevertheless may be revoked by giving another Proxy
or by letter or telegram directed to the Company. Any such revocation must show
the shareholder's name and must be received prior to the commencement of the
meeting in order to be effective. Additionally, any shareholder attending the
meeting in person, who wishes to do so, may vote by ballot at the meeting,
thereby canceling any Proxy previously given. Where no instructions are
indicated, Proxies will be voted "FOR" the nominees for directors indicated
below and "FOR" the proposals to be considered at the Special Meeting or any
adjournment thereof. Proxy materials will be mailed to shareholders of record on
or about October 22, 1996.
VOTING SECURITIES, PRINCIPAL HOLDERS AND SECURITY
OWNERSHIP OF MANAGEMENT
The approval of each of the proposals set forth in this Proxy Statement
requires the affirmative vote of a majority of the shares actually voted on such
proposal, except that the amendment to the Company's Articles of Incorporation
requires the affirmative vote of a majority of shares entitled to be voted at
the Meeting.
All voting rights are vested exclusively in the holders of the Company's
$0.00001 per share par value common stock, with each share entitled to one vote.
Only shareholders of record at the close of business on October 18, 1996 are
entitled to notice of and to vote at the meeting and any adjournment thereof. As
1
<PAGE>
of October 1, 1996, the Company had 15,552,500 shares of common stock
outstanding.
The following sets forth the number of shares of the Registrant's
$.0001 par value common stock beneficially owned by (i) each person who, as of
October 1, 1996, was known by the Company to own beneficially more than five
percent (5%) of its common stock, (ii) the individual Directors of the
Registrant, and (iii) the Officers and Directors of the Registrant as a group.
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership(1)(2) Class
James H. Baum .................... 260,000(3) 1.67%
Tower I, Suite 340
12385 E. Arapahoe Road
Englewood, CO 80112
John Barksdale ................... -0-(3) -0-
Tower I, Suite 340
12385 E. Arapahoe Road
Englewood, CO 80112
Robert J. Goldman ................ -0-(3) -0-
Tower I, Suite 340
12385 E. Arapahoe Road
Englewood, CO 80112
Sedcore Exploration .............. 13,500,000 86.8%
Company Limited
Suite 100
12385 E. Arapahoe Road,
Englewood, CO 80112
Gregory W. Skufca ................ 1,500,000 9.64%
5650 Greenwood Plaza Blvd
Suite 216. Englewood. CO 80111
All Officers and Directors as a Group 260,000(3) 1.67%
(three persons)
(1) All ownership is beneficial and on record, unless indicated otherwise.
(2) Beneficial owners listed above have sole voting and investment power
with respect to the shares shown, unless otherwise indicated.
2
<PAGE>
(3) The directors of the Company have received stock options, all of which
expire on January 1, 1999. The options are all at $0.02 per share. Mr. Baum
has an option for 125,000 common shares. Messrs Barksdale and Goldman each
have options for 75,000 common shares. None of the options have been
exercised as of the date of this Proxy Statement.
INFORMATION REGARDING THE COMPANY AND INCORPORATION BY REFERENCE
This proxy statement is accompanied by a copy of its latest Annual Report
and Form 10-QSB as of June 30, 1996. The Company hereby incorporates by
reference its latest annual report on Form 10-KSB and all other reports since
the end of the Company's fiscal year filed pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended.
ACTION TO BE TAKEN UNDER THE PROXY
Proxies in the accompanying form that are properly executed and returned
will be voted at the Special Meeting in accordance with the instructions
thereon. Any proxy upon which no instructions have been indicated with respect
to a specific matter will be voted as follows with respect to such matter: (a)
"FOR" the election of the three (3) persons named in this Proxy Statement as
Management's nominees for election to the Board of Directors; (b) "FOR" the
approval and ratification of the acquisition of the defined assets and
liabilities of Sedcore Exploration Company, Limited; (c) "FOR" amendment to the
Company's Articles of Incorporation to change the name of the Company to "Kalan
Gold Corporation.", or some derivation thereof; (d) "FOR" the ratification of
Cordovano and Company, CPA, as the Company's independent public accountants; and
(e) "FOR" the transaction of any other business to come before the Meeting, in
the discretion of the holders of such Proxies.
Management knows of no other matters, other than those stated above, to be
presented for consideration at the Meeting. If, however, any other matters
properly come before the Meeting, the persons named in the enclosed proxy intend
to vote such proxy in accordance with their judgement on such matters. The
persons named in the enclosed proxy may also, if they deem it advisable, vote
such proxy to adjourn the Meeting from time to time.
ELECTION OF DIRECTORS
It is proposed that three (3) of Directors be elected to the Board of
Directors of the Company, each such Director to hold office until the next
annual meeting of shareholders or until their successors are elected and
qualified. All of the nominees are current directors who were appointed to fill
vacancies created with the acquisition of the defined assets and liabilities of
Sedcore Exploration Company Limited. The nominees for the Board of Directors are
as follows:
James H. Baum. Mr. Baum has been the President and a Director of the Company
since August, 1996. From 1971 to the present, he has been the owner of his own
tax preparation and investment company. Prior to that time, he was involved in
3
<PAGE>
the aerospace industry in a number of positions. Mr. Baum obtained is Bachelors
degree in Physics, Chemistry and Math from Middlebury College, his Masters in
Physics from Wesleyan University, and has done post graduate work at the
University of Minnesota in Physics and Physical Chemistry. He is a member of the
American Physical Society and Phi Beta Kappa. Mr. Baum will devote a minimum of
forty hours per week to the affairs of the Company.
John Barksdale. Mr. Barksdale has been a Vice President and a Director of the
Company since August, 1996. From 1989 to the present, he has been a trustee of a
private family trust. He was involved in the oil and gas business from 1980
until 1989 in various private companies as an officer and director. He attended
Frank Phillips Jr. College and North Texas State College. Mr. Barksdale will
devote a minimum of forty hours per week to the affairs of the Company.
Robert J. Goldman. Mr. Goldman has been the Secretary-Treasurer and a Director
of the Company since August, 1996. From 1972 to the present, he has been
associated with Coroni Mineral Group of Denver, Colorado, where he currently
serves as a Vice President. He has a Bachelor's degree in Business
Administration from the University of Denver. Mr. Goldman will devote a minimum
of forty hours per week to the affairs of the Company.
VOTING
Pursuant to the terms of the Company's Articles of Incorporation every
shareholder voting for the election of directors is entitled to one vote for
each share. A shareholder may vote each share once for one nominee to each of
the director positions being filled. A shareholder may not accumulate votes.
The Board of Directors intends to vote the Proxies solicited by it (other
than Proxies in which the vote is withheld as to one or more nominees) for the
three candidates standing for election as directors nominated by the Board of
Directors. If any nominee is unable to serve, the shares represented by all
valid Proxies will be voted for the election of such substitute as the Board of
Directors may recommend. At this time the Board of Directors knows of no reason
why any nominee might be unavailable to serve.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Company has no committees of the Board of Directors. No incumbent
director of the Company attended fewer then seventy-five percent (75%) of total
meetings of the Board of Directors since taking office. The Board of Directors
conducted no meetings during the fiscal year ended December 31, 1995.
The Directors and Executive Officers of the Company, their ages and present
positions held in the Company are as follows:
4
<PAGE>
NAME AGE POSITION HELD
James H. Baum 58 President
John Barksdale 54 Vice President
Robert J. Goldman 64 Secretary-Treasurer
The Company's Directors will serve in such capacity until the next annual
meeting of the Company's shareholders and until their successors have been
elected and qualified. The officers serve at the discretion of the Company's
Directors. There are no familial relationships among the Company's officers and
directors, nor are there any arrangements or understanding between any of the
directors or officers of the Company or any other person pursuant to which any
officer or director was or is to be selected as an officer or director.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 (the "34 Act")
requires the Company's officers and directors and persons owning more than ten
percent of the Company's Common Stock to file initial reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Additionally, Item 405 of Regulation S-B under the 34 Act requires the Company
to identify in its Form 10-KSB and proxy statement those individuals for whom
one of the above referenced reports was not filed on a timely basis during the
most recent fiscal year or prior fiscal years. Given these requirements, the
Company has the following report to make under this section. None of the
Company's previous officers or directors made timely filings of the Forms 3. As
of the date hereof, all current officers and directors have filed Forms 3 and
are otherwise current in their filings.
EXECUTIVE ENUMERATION
None of the Company's previous officers and/or directors received any
compensation for their respective services rendered to the Company. They all had
agreed to act without compensation until authorized by the Board of Directors,
which did occur prior to the acquisition of the defined assets and liabilities
of Sedcore Exploration Company, Limited. The current officers and directors have
not yet received any compensation but are expected to implement a compensation
plan. However, the terms of such plan have not been finalized. Any compensation
will be dependent upon a combination of factors, including the percentage of
time a person devotes to the business of the Company, experience of the
individual, and ability of the Company to pay.
The Company has no retirement, pension, profit sharing, stock option,
insurance or other similar programs.
5
<PAGE>
RATIFICATION AND APPROVAL OF ACQUISITION
Summary of the Acquisition
The following is a brief summary of certain information concerning the
Acquisition. The summary is not intended to be complete, and shareholders who
may have further questions are urged to ask the management of the Company.
The Parties.
Knight Natural Gas, Inc., a Colorado corporation (the Company), and Sedcore
Exploration Company Limited (Sedcore)., a Ghanian corporation are the parties to
the transaction. Sedcore's principal offices are located at Tower 1, Suite 340,
12385 East Arapahoe Road, Englewood, Co. 80112. The telephone number is
(303)799-0693.
The Terms.
This transaction is an acquisition of certain defined assets and
liabilities of Sedcore Exploration Company Limited ("Sedcore") dated August 26,
1996, in exchange for 5,000,000 common shares of the Company, and an acquisition
dated August 27, 1996 for certain additional defined assets of Sedcore in
exchange for 8,500,000 common shares of the Company. The transactions have given
the Company effective control of defined assets of Sedcore, and the current
control shareholders of Sedcore now control both companies. A copy of the
Purchase Agreements are attached to this Proxy Statement. These transactions
closed on August 26 and 27, respectively. The Company's name is proposed to be
changed to "KALAN GOLD CORPORATION" or some derivation thereof.
The Company has decided to engage in the transactions with Sedcore to
develop an asset base and increase the value of the Company's shares as a result
of acquiring a defined business venture. None of the rights of any securities
holders will be affected by these transactions. The securities of the Company
issued in these transactions are common shares, which will have the same rights
and privileges as all other common shares but will be restricted securities
under the Securities Act of 1933, as amended. In regard to these transactions,
the Company wishes to obtain the ratification and approval of the shareholders.
Representatives of the Company's accounting firm for the most recent fiscal year
are expected to be present at the shareholders' meeting, will have the
opportunity to make a statement if they so desire, and are expected to be
available to respond to appropriate questions.
As far as the Company's common share are concerned, there was no published
value for either the high or low bid prices as of the date preceding public
announcement of the transactions.
6
<PAGE>
Sedcore Assets and Liabilities
Sedcore originally entered into a two year agreement with Ahanta Mining Co.
Limited ("Ahanta"), a Ghanian corporation, to undertake exploration for gold in
the Butre River area in the Western Region of Ghana. Ahanta assigned its
exclusive mineral rights under Mining Concession No. 111 to Sedcore for the
period of the agreement. Sedcore, in turn, has assigned its rights under this
agreement with Ahanta to the Company. The Company has succeeded to all of
Sedcore's rights and responsibilities, including the requirement to make
scheduled payments to Ahanta of a total of $39,000 through March, 1998.
Further, Sedcore assigned to the Company its two and one-half year
agreement with Esikaman Mining Company Limited ("Esikaman") to conduct a
reconnaissance for gold in a licensed area located in the Wassa Amanfi district
of Ghana. The Company has succeeded to all of Sedcore's rights and
responsibilities, including the requirement to make scheduled payments to
Esikaman of a total of $90,000 through November, 1998.
In both situations, the Company will be required to pay all costs of an
exploration program in the licensed areas. There is no assurance that the
exploration programs will be successful.
Further, as of August 27, 1996, the Company acquired four concessions in
Burkina Faso, denominated as the Saouga, Diebougou, Pissila, and Dekaya gold
properties, in exchange for 8,500,000 common shares. The Company has succeeded
to all of Sedcore's rights and responsibilities, including the requirement to
make scheduled payments.
Sedcore has not been subject to any bankruptcy, receivership or similar
proceeding.
Narrative Description of the Business
Sedcore is presently in the development stage and has not engaged in any
operations. The Company has succeeded to Sedcore's interests in these gold
concessions and plans to undertake to prove the commercial feasibility of the
concessions. Once these concessions have been proven to be economically
feasible, the Company plans to undertake commercial development, either itself
or with a joint venture partner, or the Company may sell its interests in these
concessions to third parties..
It is the plan of the Company's management that the Company will focus in
the gold mining business, initially solely with respect to the assigned
concessions. The Company's management plans to develop operations through the
use of additional capital which the Company would plan to seek through a public
or private offering, through debt financing, or through internally generated
profits., although at this point, no definitive plans have been made regarding
such financing.
7
<PAGE>
In addition, the combined Company would seek, investigate and, if such
investigation warrants, acquire controlling interest in business opportunities
presented to it by persons or firms who are the gold business and wish to seek
the advantages of being acquired by the Company. The Company would restrict any
acquisitions to the gold business but would not restrict the geographical
location of such business. The Company would be the surviving entity in each
case.
The Company may seek a merger candidate in the form of firms which are
developing companies in need of expansion, are seeking to develop new
concessions or are established, mature businesses.
In seeking business opportunities, the management decision of the Company
will be based upon the objective of seeking long-term appreciation in the value
of the Company. Current income will be a significant factor in such decisions,
although long-term appreciation of the operations will be the prime
consideration..
The first priority of the combined Company during the coming fiscal year
will be to develop its assigned concessions and to identify viable, additional
concessions which it may acquire. However, such additional concessions have not
been finally determined at this time.
Markets
The combined Company's marketing plan is focused on developing its existing
assigned concessions. This plan will be the primary focus for the Company during
the coming fiscal year.
Raw Materials
The Company will use the gold which it mines as raw material for sales. The
availability of the gold for sale in commercial quantities is to be established
by the Company in the future. There can be no guarantee that sufficient gold
will be found in commercial quantities to permit the Company to be profitable.
Therefore, raw materials are an important factor in the Company's operations.
The availability and cost of producing gold will be a significant factor in
determining the profitability of the Company's operations. At the present time,
the Company does not know whether it can mine gold in sufficient and commercial
quantities.
Customers and Competition
The principal customers of the Company will be the consumers of the
Company's gold products in the markets in which the Company sells its products.
There are a number of companies which sell similar competing products as those
the Company plans to sell.
To the extent that the Company is unable to sell its gold products at a
commercially viable price, the Company could have difficulty in either achieving
its goals and objectives, or of ever becoming profitable. Nevertheless, the
8
<PAGE>
number of competitors could be substantial, and there can be no guarantee that
the Company will ever be profitable.
Backlog
At June 30, 1996, neither Sedcore nor the Company had no backlogs.
Employees
At as of the date hereof, the Company has three full-time employees, of
whom all are in management. The Company's employees are not represented by any
union or collective bargaining group, and there is no history of any labor
problems, or disputes. The Company has the human resources at present to fulfill
its current business plan but expects to hire additional employees in the future
for expansion of its operations in the ordinary course of business..
Proprietary Information
Sedcore uses no material proprietary information in connection with its
operations.
Government Regulation
The proposed gold mining operations will be subject to regulation under
Ghanian law regarding a number of factors, including environmental. Such
regulation could be considered to be burdensome on the Company and could have a
material effect on the Company's ability to make a profit. The complete nature
and extent of government regulation cannot be determined at this point.
Research and Development
The Company has spent no material amounts as of the period ended June 30,
1996 in research and development.
Environmental Compliance
The Company expects to be subject to material costs for compliance with
environmental laws in any jurisdiction in which it proposes to operate. At the
present time, the Company cannot assess the potential impact of any such
potential environmental regulation.
Financial Statements
Enclosed are the audited financial statements of Sedcore for the period
from inception (April 4, 1996) through June 30, 1996.
9
<PAGE>
SEDCORE EXPLORATION COMPANY LIMITED
(A DEVELOPMENT STAGE COMPANY)
Index to Financial Statements
Page
Independent auditors' report .................................. F-2
Balance sheet, as of June 30, 1996............................. F-3
Statement of operations, from April 4, 1996
(inception) through June 30, 1996............................ F-4
Statement of cash flows, from April 4, 1996
(inception) through June 30, 1996............................ F-5
Statement of shareholders' equity, April 4, 1996
(inception) through June 30, 1996............................ F-6
Notes to financial statements ................................. F-7
F-1
<PAGE>
To the Board of Directors
Sedcore Exploration Company Limited
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Sedcore Exploration Company
Limited (a development stage company) as of June 30, 1996, and the related
statements of operations, shareholders' equity and cash flows for the period
from April 4, 1996 (date of inception) through June 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sedcore Exploration Company
Limited as of June 30, 1996, and the results of its operations and its cash
flows for the period from April 4, 1996 through June 30, 1996, in conformity
with generally accepted accounting principles.
Cordovano and Company, P.C.
Denver, Colorado
August 12, 1996
F-2
<PAGE>
SEDCORE EXPLORATION COMPANY LIMITED
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
June 30, 1996
ASSETS
CURRENT ASSETS
Deferred property acquisition costs (Note C)..................... 119,808
----------
$ 119,808
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt............................. $ 39,091
----------
Total current liabilities...................................... 39,091
----------
LONG-TERM DEBT (Note D)
Notes payable, net of unamortized
discount of $10,224............................................ 60,685
----------
Total liabilities.............................................. 99,776
COMMITMENTS AND CONTINGENCIES (Note E)............................. -
SHAREHOLDERS' EQUITY
Common stock, no par value, 20,000
shares authorized; 20,000 shares
issued and outstanding ........................................ 20,800
Deficit accumulated during development stage .................... (768)
----------
TOTAL SHAREHOLDERS' EQUITY 20,032
----------
$ 119,808
==========
See accompanying notes to financial statements.
F-3
<PAGE>
SEDCORE EXPLORATION COMPANY LIMITED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
For the Period
April 4, 1996
(Inception)
Through
June 30, 1996
-------------
COSTS AND EXPENSES
Interest ............................. $ 768
----------
Net loss ......................... $(768)
See accompanying notes to financial statements.
F-4
<PAGE>
SEDCORE EXPLORATION COMPANY LIMITED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
For the Period
April 4, 1996
(Inception)
Through
June 30, 1996
-------------
OPERATING ACTIVITIES
Net loss .................................................. $ (768)
Transactions not requiring cash:
Amortization of discount on notes payable ............... 768
------------
Net cash provided by (used in) investing activities ......... $ -
------------
INVESTING ACTIVITIES
Cash paid for mineral property rights ..................... (20,800)
------------
Net cash used in investing activities ....................... (20,800)
------------
FINANCING ACTIVITIES
Cash proceeds from issuance of common stock ............... 20,800
------------
Net cash provided by financing activities ................... 20,800
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................... -
Cash and cash equivalents, beginning ........................ $ -
------------
CASH AND CASH EQUIVALENTS, ENDING ........................... $ -
------------
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ................................................ $ -
Taxes ................................................... $ -
SUPPLEMENTARY DISCLOSURE OF NONCASH INVESTING
ACTIVITIES:
Acquisition of property rights for notes payable ........ $ 99,776
See accompanying notes to financial statements.
F-5
<PAGE>
SEDCORE EXPLORATION COMPANY LIMITED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
April 4, 1996 (Inception) Through June 30, 1996
Deficit
Accumulated
During
Development
Shares Amount Stage Total
------ ------ ----- -----
Common stock
issued for cash 20,000 $20,800 $ - $20,800
Net loss for
the period ..... - - (768) (768)
----------- ----------- ----------- -----------
20,000 $20,800 $ (768) $20,032
=========== =========== =========== ===========
See accompanying notes to financial statements.
F-6
<PAGE>
SEDCORE EXPLORATION COMPANY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
Note A: Organization and basis of presentation
Nature of organization
Sedcore Exploration Company Limited (the Company) is in the development
stage in accordance with Statement of Financial Accounting Standards No. 7.
The Company was incorporated in the Republic of Ghana on April 4, 1996 as
Shamrock Mineral Resources Limited. The Company's name was changed by
special resolution and with the approval of the Registrar of Companies of
the Republic of Ghana effective May 6, 1996. The business which the Company
is authorized to carry on is (1) Mining; (2) mineral exploration; and (3)
provision of geological services.
Basis of presentation
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles. The Company's policy is to
transact business in U.S. currency.
Cash equivalents
For financial accounting purposes and the statement of cash flows, cash
equivalents include all highly liquid debt instruments with a maturity of
three months or less. statements.
Deferred property acquisition costs
Costs attributable to the lease of mineral rights are deferred until it is
determined whether a project is commercially feasible.
Income taxes
The Company reports income taxes in accordance with Statement of financial
Accounting Standards No. 109, Accounting for Income Taxes, which requires
the liability method in accounting for income taxes. Deferred tax assets
and liabilities arise from the difference between the tax basis of an asset
or liability and its reported amount in the financial statements.
As of June 30, 1996, the Company has not incurred any income tax liability
and the tax basis of its assets and liabilities approximates their reported
amounts in the accompanying financial statements.
F-7
<PAGE>
SEDCORE EXPLORATION COMPANY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
Note B: Related party transactions
The Company utilized office space on a rent-free basis from the president
of the Company during all periods presented. The Company does not
anticipate changing this arrangement until the Company's operations have
commenced.
The legal advisor who represented both the Company and Ahanta and Esikaman
in each of the mining transactions reflected in the accompanying financial
statements is also a director of the Company.
Note C: Deferred property acquisition costs
Ahanta gold field property
The Company entered into a two year agreement with Ahanta Mining Co.
Limited (Ahanta) on March 23, 1996 to undertake exploration for gold in the
Butre River area in the Western Region of Ghana.
Ahanta holds exclusive mineral rights to Mining Concession No. 111 granted
by the Ghana government.
Under the terms of the agreement, the Company is committed to pay all costs
to ascertain the feasibility and economic viability of alluvial and lode
gold mineral production from deposits found in the Concession area. There
is no assurance that the project will be feasible or economically viable.
The agreement requires the Company to make scheduled payments totalling
$39,000 to Ahanta through March 23, 1998. Should the Company wish to
continue the with the exploration and feasibility studies after March 23,
1998, it must obtain approval from the Republic of Ghana and pay $50,000 to
Ahanta per year for each year that Ahanta remains in possession of the
Concession. In addition, should gold production commence during the term of
the agreement, the Company is required to pay to Ahanta a 2.5 percent
royalty from all gold recovered within the Concession area.
Costs incurred to date, less imputed interest, totalling $34,619 have been
deferred until it is determined whether the project is commercially
feasible.
F-8
<PAGE>
SEDCORE EXPLORATION COMPANY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
Note C: Deferred property acquisition costs, concluded
Esikiman property acquisition costs
The Company entered into a 2.5 year agreement with Esikaman Mining Company
Limited (Esikaman) on May 30, 1996 to conduct a reconnaissance in a
licensed area located in the Wassa Amanfi district of the Republic of
Ghana.
Esikaman holds the applicable reconnaissance license granted by the Ghana
government.
Under the terms of the agreement, the Company is committed to pay all costs
of an exploration program in the licensed area. There is no assurance that
the exploration program will be successful.
The agreement requires the Company to make scheduled payments totalling
$90,000 to Esikaman through November 30, 1998. Should the Company wish to
continue the with the exploration program after November 30, 1998, it must
obtain approval from the Republic of Ghana and pay $50,000 to Esikaman upon
obtaining a mining lease and $50,000 upon obtaining a mining permit.
Costs incurred to date, less imputed interest, totalling $83,389 have been
deferred until it is determined whether the project is commercially
feasible.
F-9
<PAGE>
SEDCORE EXPLORATION COMPANY LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
Note D: Notes payable
Following is a summary of notes payable outstanding as of June 30, 1996:
Non-interest bearing promissory note with
scheduled payments through
March 23, 1998, without collateral,
net of imputed interest of $3,833....... $ 31,167
Non-interest bearing promissory note
with scheduled payments through
November 30, 1998, without collateral,
net of imputed interest of $6,391....... 68,609
------
99,776
Less current maturities................ (39,091)
-------
$ 60,685
========
As of June 30, 1996, aggregate maturities of notes payable are as follows:
Year ending
June 30,
1997................................ $ 39,091
1998................................ $ 39,804
1999................................ $ 20,881
Note E: Commitments
The Company has committed to the payment of net smelter royalty interests
of 2 percent and 2.5 percent on all gold recovered within the properties in
which the Company has obtained an interest.
The Company is contingently liable to the Republic of Ghana for the payment
of a net smelter royalty interest of 10 percent on all gold recovered
within the properties in which the Company has obtained an interest.
In addition, the Republic of Ghana has a right of first refusal to acquire
a fifty percent ownership interest in the common shares in the Company at
the then fair market value of the shares of the Company's common stock.
F-10
<PAGE>
Closing of the Transaction.
The initial transaction was closed on August 26, 1996, and the second
transaction was closed on August 27, 1996, both with the approval of the Boards
of Directors of both the Company and Sedcore. The Board of the Company has
submitted these transactions to the shareholders of the Company for ratification
and approval and the change of the name of the Company. The management
designated by Sedcore has taken over the Company immediately as of August 26,
1996.
Votes Required.
The Board of Directors of the Company is proposing that the shareholders of
the Company ratify and approve the transactions which closed on August 26 and
27, 1996. This vote must be approved by the affirmative vote of the record
holders of a majority of the outstanding shares of the Company's Common Stock.
All shareholders of record as of September 27, 1996, which does include the new
shareholders from the acquisition, will be authorized to vote. The transactions
have been approved by the holders of all of the outstanding capital shares of
Sedcore.
Board of Director Recommendations.
The Board of Directors of the Company has unanimously approved the
transactions and believes they are in the best interests of the Company's
shareholders and unanimously recommends that the shareholders vote to ratify and
approve the proposal.
CHANGE OF THE NAME OF THE COMPANY
The Company seeks to change its name to Kalan Gold Corporation, or some
similar derivation thereof. The Company seeks the name change to better
emphasize its future business focus. As previously structured, the Company was
not involved in any activities, but was searching for an acquisition candidate.
The Company believes that its principal revenue and profit growth for the
foreseeable future will be in the assets acquired from Sedcore and the future
operations to be generated by those assets. It is, therefore, the Company's
intention to emphasize this business focus by utilizing the name Kalan Gold
Corporation. This resolution requires the affirmative vote of a majority of the
issued and outstanding shares of the Company. The Board of Directors recommends
that shareholders vote FOR the resolution.
10
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Company has appointed the Company's present independent public
accountants, Cordovano and Company, CPA, for the fiscal year ended December 31,
1996. This appointment will be submitted to the shareholders for ratification at
the Meeting.
The submission of the appointment of Cordovano and Company, CPA is not
required by law or the bylaws of the Company. The Board of Directors is
nevertheless submitting it to the shareholders to ascertain their views. If the
shareholders do not ratify the appointment, the selection of other independent
public accountants will be considered by the Board of Directors. To be adopted,
the resolution requires the affirmative vote of a majority of the shares voting
at the meeting. The Board of Directors recommends a vote FOR the resolution.
OTHER MATTERS
As of the date of this Proxy Statement, the Company's management has no
knowledge of any business, other than previously described herein, which should
be presented for consideration at the meeting. In the event that any other
business is presented at the meeting, it is intended that the persons named in
the enclosed Proxy will have authority to vote such Proxy in accordance with
their best judgment on such business.
SHAREHOLDER PROPOSALS
According to Rule 14a-8 under the Securities Exchange Act of 1934, a
shareholder may require that certain proposals suggested by shareholders be
voted on at a shareholders meeting. Information concerning such proposals must
be submitted to the Company for inclusion in its proxy statement. Such proposals
for inclusion in the Company's proxy materials relating to the next Annual
Meeting of the Company must be received by the Company not later than November
1, 1996.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders, including financial
statements, has been mailed with these materials to all shareholders of record.
Any shareholder who has not received a copy of such Annual Report may obtain a
copy by writing to the Company. Such Annual Report is not to be treated as part
of the proxy solicitation material, nor as having been incorporated by
reference.
SOLICITATION OF PROXIES
The cost of solicitation will be borne by the Company. The Company will
reimburse brokerage firms and other custodians, nominees, and fiduciaries for
reasonable expenses incurred by them in sending proxy material to the beneficial
owners of common stock. In addition to solicitation by mail, directors,
11
<PAGE>
officers, and regular employees of the Company may solicit Proxies personally or
by telegraph or telephone, without additional compensation.
NOTICE TO BANKS, BROKERS/DEALERS, VOTING TRUSTEES, AND THEIR NOMINEES
Please advise the Company, in care of its corporate address, whether any
other persons are the beneficial owners of the shares of common stock for which
Proxies are being solicited from you, and, if so, the number of copies of the
Proxy Statement, and other soliciting materials, you wish to receive in order to
supply copies to the beneficial owners of shares.
KNIGHT NATURAL GAS, INC.
By: James H. Baum
Chairman
Dated: October 22, 1996
12
<PAGE>
ATTACHMENT A
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT is entered into as of the 26th day of August,
1996, by and between KNIGHT NATURAL GAS, INC., a Colorado corporation,
(hereinafter "Acquiror"); and SEDCORE EXPLORATION COMPANY LIMITED, a Ghanian
corporation (hereinafter referred to as "SED").
RECITALS
SED has certain licenses as described in Exhibit A hereto (the "Licenses")
and various properties, rights and liabilities listed in Exhibit B hereto (the
"Rights"), which are incorporated by reference hereto.
The parties wish to reduce their understandings regarding the Licenses and
to the Rights to writing in this document and to be bound by the terms and
conditions thereof.
NOW, THEREFORE, for the mutual consideration set out herein, the parties
agree as follows:
AGREEMENT
1. Acquisition. SED the owner of the Licenses and the holder of the Rights. It
is the intention of the parties hereto and by this Agreement that the
Acquiror acquire the Licenses and all of SED's interests in and to the
Rights in exchange for the sum of 5,000,000 in common shares of the
Acquiror's restricted Common Stock to be paid by Acquiror to SED and the
assumption of certain defined debt and liabilities of SED as set forth in
Exhibit C hereto.
2. Efforts to Vest Ownership. Acquiror and SED agree to use their best efforts
to permit Acquiror to acquire full and unencumbered title to the Licenses
and the Rights as of the Closing Date or thereafter, as may be necessary.
3. Acquisition of Rights. By this Agreement and as of the Closing Date, SED
hereby transfers, assigns and delivers all of its rights, title, and
interest, of whatever nature, in and to the Rights. This transfer,
assignment, and delivery includes all rights to receive distributions on
the Rights. The Acquiror may take immediate possession and utilize the
Rights as of the Closing Date.
4. Representations of SED. SED hereby represents and warrants that, with
respect to the Licenses and the Rights to be transferred, effective this
date and the Closing Date, the representations listed below are true and
correct, to the best of
13
<PAGE>
its knowledge, information and belief. Said representations are meant and
intended by all parties to apply to the Licenses and the Rights.
(a) SED is the sole owner of the Licenses and the Rights and has the
unqualified right to transfer and dispose of the Licenses and the Rights as
of the Closing Date.
(b) There are no liabilities, either fixed or contingent against the Licenses
or the Rights not reflected in Exhibit D hereto other than contracts or
obli gations in the ordinary and usual course of business; and no such
contracts or obligations in the usual course of business constitute liens
or other liabilities which, if disclosed, would alter substantially the
financial condition of the Licenses or the Rights, unless disclosed in
Exhibit D hereto.
(c) Prior to the Closing Date there will not be any negative material changes
in the Licenses or in the financial position of the Rights, except changes
arising in the ordinary course of business, which changes will in no event
adversely affect the financial position of said Licenses or Rights.
(d) To the best of SED's knowledge, information and belief, neither the
Licenses nor the Rights is involved in any pending litigation or
governmental investigation or proceeding not reflected in Exhibit D or
otherwise disclosed in writing to Acquiror and, to the best knowledge of
SED, no litigation, claims, assessments, or governmental investigation or
proceeding is otherwise threatened against the Licenses or the Rights.
(e) Except as disclosed on any Exhibit, SED has not breached any agreement to
which it is a party which relates to the Licenses or the Rights.
(f) The execution of this Acquisition Agreement will not violate or breach any
agreement, contract, or commitment to which SED is a party and has been
duly authorized by all appropriate and necessary action.
(g) At the date of this Agreement, SED has, and at the Closing Date hereof,
will have to the best of each's knowledge, disclosed all events, conditions
and facts materially affecting the business and prospects of Licenses and
the Rights. SED has not now and will not have, at the Closing Date,
withheld knowledge of any such events, conditions, and facts which each
knows, or has reasonable grounds to know, may materially affect, directly
or indirectly, the business and prospects of the Licenses or the Rights.
14
<PAGE>
5. Representations of Acquiror. Acquiror hereby represents and warrants as
follows:
(a) The officers of Acquiror are duly authorized to execute this Agreement and
have taken all actions required by law and agreements, charters, and
bylaws, to properly and legally execute this Agreement.
(b) As of the Closing Date and date hereof, Acquiror is duly organized, validly
existing and in good standing under the laws of the State of Colorado; it
has the corporate power to own the Licenses and the Rights and to carry on
its business as now being conducted and is duly qualified to do business in
any jurisdiction where so required.
6. Closing Date. The Closing Date herein referred to shall be upon such date as
the parties hereto may mutually agree upon but is expected to be August 26,
1996. This Agreement is executed by the parties and effective as of the date
hereof.
7. Conditions Precedent to the Obligations of SED. All obligations of SED under
this Agreement are subject to the fulfillment, prior to or as of the Closing
Date, of each of the following conditions:
(a) The representations and warranties by or on behalf of Acquiror contained in
this Agreement or in any certificate or document delivered to SED pursuant
to the provisions hereof shall be true in all material respects at and as
of the time of Closing as though such representations and warranties were
made at and as of such time.
(b) Acquiror shall have performed and complied with all covenants, agreements,
and conditions required by this Agreement to be performed or complied with
by it prior to or at the Closing on the Closing Date.
(c) The Directors of Acquiror shall have approved this transaction and such
other reasonable matters as requested by SED as pertaining to this trans
action. The Directors of Acquiror shall have resigned and shall designate
new Directors as proposed by SED.
(d) All instruments and documents delivered to SED pursuant to the provisions
hereof shall be reasonably satisfactory to SED.
8. Conditions Precedent to the Obligations of Acquiror. All obligations of the
Acquiror under this Agreement are subject to the fulfillment, prior to or at the
Closing on the Closing Date, of each of the following conditions:
15
<PAGE>
(a) The representations and warranties by SED contained in this Agreement or in
any certificate or document delivered to Acquiror pursuant to the
provisions hereof shall be true at and as of the time of Closing as though
such representations and warranties were made at and as of such time.
(b) SED shall have performed and complied with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by
it prior to or at the Closing.
(c) SED shall deliver to the Acquiror a letter commonly known as an "investment
letter" agreeing that the shares of Acquiror are being acquired for
investment purposes, and not with a view to resale.
9. Indemnification. Within the period provided in paragraph 10 herein and in
accordance with the terms of that paragraph, each party to this Agreement, shall
indemnify and hold harmless each other party at all times after the date of this
Agreement against and in respect of any liability, damage or deficiency, all
actions, suits, proceedings, demands, assessments, judgments, costs and expenses
including attorney's fees incident to any of the foregoing, resulting from any
misrepresentations, breach of covenant or warranty or non-fulfillment of any
agreement on the part of such party under this Agreement or from any
misrepresentation in or omission from any certificate furnished or to be
furnished to a party hereunder. Subject to the terms of this Agreement, the
defaulting party shall reimburse the other party or parties on demand, for any
reasonable payment made by said parties at any time after the Closing, in
respect of any liability or claim to which the foregoing indemnity relates, if
such payment is made after reasonable notice to the other party to defend or
satisfy the same and such party failed to defend or satisfy the same.
10. Nature and Survival of Representations. All representations, warranties and
covenants made by any party in this Agreement shall survive the Closing
hereunder and the consummation of the transactions contemplated hereby for two
years from the date hereof. All of the parties hereto are executing and carrying
out the provisions of this Agreement in reliance solely on the representations,
warranties and covenants and agreements contained in this Agreement or at the
Closing of the transactions herein provided for and not upon any investigation
upon which it might have made or any representations, warranty, agreement,
promise or information, written or oral, made by the other party or any other
person other than as specifically set forth herein.
11. Documents at Closing. Between the date hereof and the date of Closing, the
following transactions shall occur, all of such transactions being deemed to
occur simultaneously:
16
<PAGE>
(a) SED will deliver, or cause to be delivered, to Acquiror the following:
(1) such executed documents as required by this Agreement.
(2) certified copies of resolutions by SED's Board of Directors authorizing
this transaction;
(3) such other instruments, documents and certificates, if any, as are required
to be delivered pursuant to the provisions of this Agreement or which may
be reasonably requested in furtherance of the provisions of this Agreement;
(b) Acquiror will deliver or cause to be delivered to SED:
(1) the consideration as required under this Agreement.
(2) certified copies of resolutions by Acquiror's Board of Directors
authorizing this transaction;
(3) such other instruments and documents as are required to be delivered
pursuant to the provisions of this Agreement.
12. Miscellaneous.
(a) Further Assurances. At any time, and from time to time, after the effective
date, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or
perfect title to the Licenses or any Rights transferred hereunder or
otherwise to carry out the intent and purposes of this Agreement.
(b) Waiver. Any failure on the part of any party hereto to comply with any of
its obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
(c) Notices. All notices and other communications hereunder shall be in writing
and shall be deemed to have been given if delivered in person or sent by
prepaid first class registered or certified mail, return receipt requested,
to the following:
KNIGHT NATURAL GAS, INC.
5650 Greenwood Plaza Blvd
Suite 216, Englewood, CO 80111
17
<PAGE>
SEDCORE EXPLORATION COMPANY LIMITED, INC.
Tower I, Suite 300
12385 E. Arapahoe Road,
Englewood, CO 80112
(d) Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(e) Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) Governing Law. This Agreement was negotiated and is being contracted for in
the State of Colorado, and shall be governed by the laws of the State of
Colorado.
(g) Binding Effect and Assignment. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their respective
heirs, administrators, executors, successors and assigns. This Agreement
may be assigned by either party; provided, however, that the appropriate
permission has been given by those governmental entities whose permission
may be necessary to effect the performance of this Agreement.
(h) Time. Time is of the essence.
(i) Severability. If any part of this Agreement is deemed to be unenforceable
the balance of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
KNIGHT NATURAL GAS, INC.
By: /S/Gregory W. Skufca
--------------------
Gregory W. Skufca
Authorized Officer
SEDCORE EXPLORATION COMPANY LIMITED
By: /s/Sanford Altberger
--------------------
Sanford Altberger
Authorized Officer
18
<PAGE>
EXHIBIT A
LICENSE LIST
1. Assignment of Sedcore's rights to undertake gold exploration in the Butre
River area in the Western Region of Ghana under a license owned by Ahanta Mining
Company Limited.
2. Assignment of Sedcore's agreement with Esikaman Mining Company Limited to
conduct a reconnaissance in a licensed area located in the Wassa Amanfi district
of the Republic of Ghana.
19
<PAGE>
EXHIBIT B
PROPERTY AND RIGHTS TO BE TRANSFERRED PURSUANT TO THIS AGREEMENT:
20
<PAGE>
EXHIBIT C
LIST OF DEBT AND LIABILITIES TO BE ASSUMED
All Current Liabilities as Listed on the Balance Sheet of Sedcore
Exploration Company Limited as of June 30, 1996.
21
<PAGE>
EXHIBIT D
LIABILITIES AND CONTINGENCIES
None
22
<PAGE>
ATTACHMENT B
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT is entered into as of the 27th day of August,
1996, by and between KNIGHT NATURAL GAS, INC., a Colorado corporation,
(hereinafter "Acquiror"); and SEDCORE EXPLORATION COMPANY LIMITED, a Ghanian
corporation (hereinafter referred to as "SED").
RECITALS
SED has certain licenses as described in Exhibit A hereto (the "Licenses"),
which are incorporated by reference hereto.
The parties wish to reduce their understandings regarding the Licenses to
writing in this document and to be bound by the terms and conditions thereof.
NOW, THEREFORE, for the mutual consideration set out herein, the parties
agree as follows:
AGREEMENT
1. Acquisition. SED the owner of the Licenses. It is the intention of the
parties hereto and by this Agreement that the Acquiror acquire the Licenses
in exchange for the sum of 8,500,000 in common shares of the Acquiror's
restricted Common Stock to be paid by Acquiror to SED.
2. Efforts to Vest Ownership. Acquiror and SED agree to use their best efforts
to permit Acquiror to acquire full and unencumbered title to the Licenses
as of the Closing Date or thereafter, as may be necessary.
3. Acquisition of Licenses. By this Agreement and as of the Closing Date, SED
hereby transfers, assigns and delivers all of its rights, title, and
interest, of whatever nature, in and to the Licenses. This transfer,
assignment, and delivery includes all rights to receive distributions on
the Licenses. The Acquiror may take immediate possession and utilize the
Licenses as of the Closing Date.
4. Representations of SED. SED hereby represents and warrants that, with
respect to the Licenses to be transferred, effective this date and the
Closing Date, the representations listed below are true and correct, to the
best of its knowledge, information and belief. Said representations are
meant and intended by all parties to apply to the Licenses.
23
<PAGE>
(a) SED is the sole owner of the Licenses and has the unqualified right to
transfer and dispose of the Licenses as of the Closing Date.
(b) There are no liabilities, either fixed or contingent against the Licenses
not reflected in Exhibit B hereto other than contracts or obligations in
the ordinary and usual course of business; and no such contracts or
obligations in the usual course of business constitute liens or other
liabilities which, if disclosed, would alter substantially the financial
condition of the Licenses, unless disclosed in Exhibit B hereto.
(c) Prior to the Closing Date there will not be any negative material changes
in the Licenses, except changes arising in the ordinary course of business,
which changes will in no event adversely affect the financial position of
said Licenses.
(d) To the best of SED's knowledge, information and belief, the Licenses are
not involved in any pending litigation or governmental investigation or
proceeding not reflected in Exhibit B or otherwise disclosed in writing to
Acquiror and, to the best knowledge of SED, no litigation, claims, assess
ments, or governmental investigation or proceeding is otherwise threatened
against the Licenses.
(e) Except as disclosed on any Exhibit, SED has not breached any agreement to
which it is a party which relates to the Licenses.
(f) The execution of this Acquisition Agreement will not violate or breach any
agreement, contract, or commitment to which SED is a party and has been
duly authorized by all appropriate and necessary action.
(g) At the date of this Agreement, SED has, and at the Closing Date hereof,
will have to the best of each's knowledge, disclosed all events, conditions
and facts materially affecting the business and prospects of Licenses. SED
has not now and will not have, at the Closing Date, withheld knowledge of
any such events, conditions, and facts which each knows, or has reasonable
grounds to know, may materially affect, directly or indirectly, the
business and prospects of the Licenses.
5. Representations of Acquiror. Acquiror hereby represents and warrants as
follows:
(a) The officers of Acquiror are duly authorized to execute this Agreement and
have taken all actions required by law and agreements, charters, and
bylaws, to properly and legally execute this Agreement.
24
<PAGE>
(b) As of the Closing Date and date hereof, Acquiror is duly organized, validly
existing and in good standing under the laws of the State of Colorado; it
has the corporate power to own the Licenses and to carry on its business as
now being conducted and is duly qualified to do business in any
jurisdiction where so required.
6. Closing Date. The Closing Date herein referred to shall be upon such date as
the parties hereto may mutually agree upon but is expected to be August 27,
1996. This Agreement is executed by the parties and effective as of the date
hereof.
7. Conditions Precedent to the Obligations of SED. All obligations of SED under
this Agreement are subject to the fulfillment, prior to or as of the Closing
Date, of each of the following conditions:
(a) The representations and warranties by or on behalf of Acquiror contained in
this Agreement or in any certificate or document delivered to SED pursuant
to the provisions hereof shall be true in all material respects at and as
of the time of Closing as though such representations and warranties were
made at and as of such time.
(b) Acquiror shall have performed and complied with all covenants, agreements,
and conditions required by this Agreement to be performed or complied with
by it prior to or at the Closing on the Closing Date.
(c) The Directors of Acquiror shall have approved this transaction and such
other reasonable matters as requested by SED as pertaining to this trans
action. The Directors of Acquiror shall have resigned and shall designate
new Directors as proposed by SED.
(d) All instruments and documents delivered to SED pursuant to the provisions
hereof shall be reasonably satisfactory to SED.
8. Conditions Precedent to the Obligations of Acquiror. All obligations of the
Acquiror under this Agreement are subject to the fulfillment, prior to or at the
Closing on the Closing Date, of each of the following conditions:
(a) The representations and warranties by SED contained in this Agreement or in
any certificate or document delivered to Acquiror pursuant to the
provisions hereof shall be true at and as of the time of Closing as though
such representations and warranties were made at and as of such time.
25
<PAGE>
(b) SED shall have performed and complied with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by
it prior to or at the Closing.
(c) SED shall deliver to the Acquiror a letter commonly known as an "investment
letter" agreeing that the shares of Acquiror are being acquired for
investment purposes, and not with a view to resale.
9. Indemnification. Within the period provided in paragraph 10 herein and in
accordance with the terms of that paragraph, each party to this Agreement, shall
indemnify and hold harmless each other party at all times after the date of this
Agreement against and in respect of any liability, damage or deficiency, all
actions, suits, proceedings, demands, assessments, judgments, costs and expenses
including attorney's fees incident to any of the foregoing, resulting from any
misrepresentations, breach of covenant or warranty or non-fulfillment of any
agreement on the part of such party under this Agreement or from any
misrepresentation in or omission from any certificate furnished or to be
furnished to a party hereunder. Subject to the terms of this Agreement, the
defaulting party shall reimburse the other party or parties on demand, for any
reasonable payment made by said parties at any time after the Closing, in
respect of any liability or claim to which the foregoing indemnity relates, if
such payment is made after reasonable notice to the other party to defend or
satisfy the same and such party failed to defend or satisfy the same.
10. Nature and Survival of Representations. All representations, warranties and
covenants made by any party in this Agreement shall survive the Closing
hereunder and the consummation of the transactions contemplated hereby for two
years from the date hereof. All of the parties hereto are executing and carrying
out the provisions of this Agreement in reliance solely on the representations,
warranties and covenants and agreements contained in this Agreement or at the
Closing of the transactions herein provided for and not upon any investigation
upon which it might have made or any representations, warranty, agreement,
promise or information, written or oral, made by the other party or any other
person other than as specifically set forth herein.
11. Documents at Closing. Between the date hereof and the date of Closing, the
following transactions shall occur, all of such transactions being deemed to
occur simultaneously:
(a) SED will deliver, or cause to be delivered, to Acquiror the following:
(1) such executed documents as required by this Agreement.
26
<PAGE>
(2) certified copies of resolutions by SED's Board of Directors authorizing
this transaction;
(3) such other instruments, documents and certificates, if any, as are required
to be delivered pursuant to the provisions of this Agreement or which may
be reasonably requested in furtherance of the provisions of this Agreement;
(b) Acquiror will deliver or cause to be delivered to SED:
(1) the consideration as required under this Agreement.
(2) certified copies of resolutions by Acquiror's Board of Directors
authorizing this transaction;
(3) such other instruments and documents as are required to be delivered
pursuant to the provisions of this Agreement.
12. Miscellaneous.
(a) Further Assurances. At any time, and from time to time, after the effective
date, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or
perfect title to the Licenses transferred hereunder or otherwise to carry
out the intent and purposes of this Agreement.
(b) Waiver. Any failure on the part of any party hereto to comply with any of
its obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
(c) Notices. All notices and other communications hereunder shall be in writing
and shall be deemed to have been given if delivered in person or sent by
prepaid first class registered or certified mail, return receipt requested,
to the following:
KNIGHT NATURAL GAS, INC.
5650 Greenwood Plaza Blvd
Suite 216, Englewood, CO 80111
SEDCORE EXPLORATION COMPANY LIMITED, INC.
Suite 100
12385 E. Arapahoe Road,
Englewood, CO 80112
27
<PAGE>
(d) Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(e) Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) Governing Law. This Agreement was negotiated and is being contracted for in
the State of Colorado, and shall be governed by the laws of the State of
Colorado.
(g) Binding Effect and Assignment. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their respective
heirs, administrators, executors, successors and assigns. This Agreement
may be assigned by either party; provided, however, that the appropriate
permission has been given by those governmental entities whose permission
may be necessary to effect the performance of this Agreement.
(h) Time. Time is of the essence.
(i) Severability. If any part of this Agreement is deemed to be unenforceable
the balance of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
KNIGHT NATURAL GAS, INC.
By: /s/James H. Baum
----------------
James H. Baum
Authorized Officer
SEDCORE EXPLORATION COMPANY LIMITED
By: /s/Sanford Altberger
--------------------
Sanford Altberger
Authorized Officer
28
<PAGE>
EXHIBIT A
LICENSE LIST
Four concessions in Burkina Faso, denominated as the Saouga, Diebougou, Pissila,
and Dekaya gold properties
29
<PAGE>
EXHIBIT B
LIABILITIES AND CONTINGENCIES
None
30
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<ARTICLE> 5
<CIK> 0000940516
<NAME> Knight Natural Gas, Inc.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Apr-4-1996
<PERIOD-END> Jun-30-1996
<EXCHANGE-RATE> 1
<CASH> 31,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 149,008
<CURRENT-LIABILITIES> 39,091
<BONDS> 0
0
0
<COMMON> 50,000
<OTHER-SE> (768)
<TOTAL-LIABILITY-AND-EQUITY> 149,008
<SALES> 0
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<INTEREST-EXPENSE> 768
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</TABLE>
