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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended: December 31, 1996
Commission File No. 0-25658
KALAN GOLD CORPORATION
FORMERLY KNOWN AS KNIGHT NATURAL GAS, INC.
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(Exact Name of Small Business Issuer as specified in its charter)
COLORADO 84-1357927
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(State or other (IRS Employer File Number)
jurisdiction of
incorporation)
Tower I, Suite 340,
12835 E. Arapahoe Road
Englewood, Colorado 80112
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(Address of principal executive offices) (zip code)
(303) 706-1606
--------------
(Registrant's telephone number, including area code)
Securities to be Registered Pursuant to Section 12(b) of the Act: None
Securities to be Registered Pursuant to Section 12(g) of the Act:
Common Stock, $0.00001 per share par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes: X No:
----- -----
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is contained in this form and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB. [X]
State issuer's revenues for its most recent fiscal year $-0-
The aggregate market value of the voting stock of the Registrant held by
non-affiliates as of December 31, 1996 was $8,962,500.
The number of shares outstanding of the Registrant's common stock, as of
the latest practicable date, March 15, 1996, was 7,052,500.
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DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference are found in Item 13.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS
Kalan Gold Corporation (the "Company" or the "Registrant"), is a Colorado
corporation. The principal business address is Tower I, Suite 340, 12835 E.
Arapahoe Road, Englewood, Colorado 80112. Its phone number is (303) 706-1606.
The Company was originally incorporated under the laws of the State of
Colorado on September 19, 1985 as a gas exploration company under the name
Knight Natural Gas, Inc. On January 1, 1993, the Company entered into the
development stage.
The Company has had no operations since 1989. On November 1, 1994, the
Company did a one-for-twenty reverse split of its common stock and began
searching for an acquisition candidate. 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. This second acquisition was rescinded on
December 30, 1996 and the shares returned to treasury and cancelled.
The Company's name was changed to "KALAN GOLD CORPORATION" in November,
1996.
As of December 31, 1996, the Company had a total of 7,052,500 common shares
issued and outstanding. The Company has not been subject to any bankruptcy,
receivership or similar proceeding.
(b) NARRATIVE DESCRIPTION OF THE BUSINESS
GENERAL
From December, 1989 until the acquisition of the Sedcore assets, the
Company has had no activities. The Company currently has no operations and is in
the development stage. Since 1989, the Company has carried no inventories or
accounts receivable. No independent market surveys have ever been conducted to
determine demand for the Company's products and services,
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since the Company has never had any products or services which it has provided
to anyone. During this period, the Company has carried on no operations and
generated no revenues.
OIL AND GAS OPERATIONS
From inception to December, 1989, the Company operated briefly as an oil
and gas company. No operations remain from this period. The Company
investigated certain possibilities but drilled no oil or gas wells. This was the
entire extent of the Company's activities.
GOLD OPERATIONS
The Company has succeeded to Sedcore's interests in certain defined 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.
ORGANIZATION
The Company presently comprises one corporation with no subsidiaries or
parent entities and is in the developmental stage.
(c) OPERATIONS
PROPOSED BUSINESS
From January 1, 1993 until August, 1996, the primary activity of the
Company had been directed towards organizational efforts. With the acquisition
of the Sedcore assets, the focus of the Company has shifted.
It is now the plan of the Company's management that the Company will focus
in the gold mining business, initially solely with respect to the two
concessions which were assigned to the Company by Sedcore. 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.
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
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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. In March, 1997, the Company completed
an agreement with Trio Gold Corp., an Alberta private corporation (Trio),
whereby Trio will earn a 50% ownership interest in the Ahanta and Esikaman
Concessions, in return for the payment of $144,000 to the Company and for the
expenditure of $375,000 on geochemical studies on both properties. Trio will be
responsible for all operations on these properties.
In addition, the 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. However, it is
not anticipated that the search for acquisition candidates would be a material
focus of the Company in the next fiscal year.
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.
(d) MARKETS
The Company's marketing plan will be focused completely on undertaking to
prove the commercial feasibility of the concessions which the Company received
from Sedcore. 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
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interests in these concessions to third parties. To date, no definitive
marketing plans have been developed with respect to these concessions.
(e) RAW MATERIALS
The use of raw materials is not now material factor in the Company's
operations at the present time. However, the Company plans to utilize the gold
from the concessions which the Company received from Sedcore. Therefore, once
operations have commenced, gold will become a significant raw material. The
success of the Company will be tied to the world price of gold, to a large
extent.
(f) CUSTOMERS AND COMPETITION
At the present time, the primary focus of the Company will be on the
development of the concessions which the Company received from Sedcore. As a
consequence, competition is not expected to be a material to the Company in the
next fiscal year. Once the Company has developed the concessions and has
operations, the competition to sell the gold from the concessions at the best
possible price is expected to be intense. There are a number of established
companies, many of which are larger and better capitalized than the Company
and/or have greater personnel resources and technical expertise, which could be
formidable competitors. In view of the Company's combined extremely limited
financial resources and limited management availability, the Company would be
at a significant competitive disadvantage compared to the Company's competitors.
(g) BACKLOG
At December 31, 1996, the Company had no backlogs.
(h) EMPLOYEES
As of December 31, 1996, the Company had two full-time employees. The
Company's President was paid at the rate of $48,000 per annum. The Company's
Vice President was paid at the rate of $36,000 per annum. During the past fiscal
year, each was actually paid a total of $14,709.68 and $11,302.26, respectively.
The Company does not plan to hire additional employees until it has begun
operations.
(i) PROPRIETARY INFORMATION
The Company has no proprietary information.
(j) GOVERNMENT REGULATION
The Company is not subject to any material governmental regulation or
approvals.
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(k) RESEARCH AND DEVELOPMENT
The Company has never spent any amount in research and development
activities.
(l) ENVIRONMENTAL COMPLIANCE
At the present time, the Company is not subject to any material costs for
compliance with any environmental laws.
(m) SUBSEQUENT EVENT
In March, 1997, the Company completed an agreement with Trio Gold Corp., an
Alberta private corporation (Trio), whereby Trio will earn a 50% ownership
interest in the Ahanta and Esikaman Concessions, in return for the payment of
$144,000 to the Company and for the expenditure of $375,000 on geochemical
studies on both properties. Trio will be responsible for all operations on these
properties.
Item 2. DESCRIPTION OF PROPERTIES.
As of December 31, 1996, the Company's business office was located at
Tower I, Suite 340, 12835 E. Arapahoe Road, Englewood, Colorado 80112, for
which it pays approximately $1361 per month in rent on a one year renewable
lease from an unaffiliated third party. The Company owns office furniture and
equipment which it utilizes at its principal office.
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. As a result of March, 1997 agreement,
Trio Gold Corp. will earn 50% ownership interest in the Ahanta and Esikaman
Concessions, in return for the payment of $144,000
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to the Company and for the expenditure of $375,000 on geochemical studies on
both properties. Otherwise, the Company has no other properties.
Item 3. LEGAL PROCEEDINGS.
No legal proceedings of a material nature to which the Company is a party
were pending during the reporting period, and the Company knows of no legal
proceedings of a material nature pending or threatened or judgments entered
against any director or officer of the Company in his capacity as such.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matter to a vote of security holders through
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year covered by this report.
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) PRINCIPAL MARKET OR MARKETS.
The Company's began trading in January, 1997. Prior to that time, the
Company's securities had never been listed for trading on any market. Market
makers and other dealers provide bid and ask quotations of the Company's Common
Stock under the symbol "KNGC." Trading is conducted in the over-the-counter
market on the NASD's "Electronic Bulletin Board."
(b) APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK
As of the date hereof, a total of 7,052,500 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 100. However, the
Company estimates that it has a significantly greater number of shareholders
because a substantial number of the Company's shares are held in nominee
names by the Company's market makers.
(c) 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.
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Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
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 for the next fiscal year will
be to conduct a reconnaissance for gold in the Butre river area of Western
Ghana and in a licensed area located in the Wassa Amanfi district of Ghana. In
March, 1997, the Company completed an agreement with Trio Gold Corp., an Alberta
private corporation (Trio), whereby Trio will earn a 50% ownership interest in
the Ahanta and Esikaman Concessions, in return for the payment of $144,000 to
the Company and for the expenditure of $375,000 on geochemical studies on both
properties. Trio will be responsible for all operations on these properties.
If the Company develops evidence of gold which can be commercially
extracted, then the Company will seek to develop these areas utilizing
additional capital which it must acquire, either itself or with joint venture
partners or investors. Also as of the end of the reporting period, the Company
has concluded no additional acquisitions and has spoken with no potential
candidates.
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 gold discoveries which can be commercially extracted. Therefore, the Company
will seek to develop these areas, if commercially feasible, utilizing additional
capital which it must acquire, either itself or with joint venture partners or
investors. The Company has entered into an agreement with Trio as a partner but
expects to require additional financing for its properties. The Company will
have negligible capital requirements prior to the decision to develop these
areas. The Company does not intend to pay dividends in the foreseeable future.
Item 7. FINANCIAL STATEMENTS.
The complete financial statements are included at Item 13 herein.
Item 8. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
The Company did not have any disagreements on accounting and financial
disclosures with its present accounting firm during the reporting period.
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PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The Directors and Executive Officers of the Company, their ages and
positions held in the Company as of December 31, 1996 are as follows:
NAME AGE POSITION HELD
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James H. Baum 59 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 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.
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
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.
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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. All of the
Company's officers or directors, and all persons owning more than ten percent of
its shares have filed the subject reports, if required, on a timely basis during
the past fiscal year.
Item 10. EXECUTIVE COMPENSATION.
During the fiscal year ended December 31, 1996, the Company's President
and Vice President each were paid a total of $14,709.68 and $11,302.26,
respectively. The Company has granted stock options to the Directors. Mr. Baum,
the Company's President and a Director, has an option for 125,000 common shares
at $.02 per share until November 14, 2001. Mr. Goldman, the Company's
Secretary-Treasurer and a Director, has an option for 75,000 common shares at
$.02 per share until November 14, 2001. Mr. Barksdale, the Company's Vice
President and a Director, has an option for 37,500 common shares at $.02 per
share until November 14, 2001. As of the date hereof, none of these options have
been exercised. Otherwise, none of the Company's officers and/or directors
received any compensation for their respective services rendered to the Company,
nor have they received such compensation in the past. The Company has no
retirement, pension, profit sharing, stock option, insurance or other similar
programs.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following sets forth the number of shares of the Registrant's $0.00001
par value common stock beneficially owned by (i) each person who, as of December
31, 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. As of December
31, 1996, there were 7,052,500 common shares issued and outstanding.
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Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership(1)(2) Class
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James H. Baum 175,000(3) 2.5%
Tower I, Suite 340
12385 E. Arapahoe Road
Englewood, CO 80112
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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 5,000,000 70.9%
Company Limited
Suite 100
12385 E. Arapahoe Road,
Englewood, CO 80112
All Officers and Directors as a Group 175,000(3) 2.5%
(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.
(3) The directors of the Company have received stock options, all of which
expire on November 14, 2001. The options are all at $0.02 per share.
Mr. Baum has an option for 125,000 common shares. Mr. Goldman has an
option for 75,000 common shares. Mr. Barksdale has an option for 37,500
common shares. None of the options have been exercised as of the date
hereof.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the last fiscal year, the Company's business office were located at
5650 Greenwood Plaza Blvd., Suite 216, Englewood, Colorado 80111, the office of
Mr. Gregory W. Skufca, its former President, for which it paid no rent. After
August, 1996, the offices were relocated to its present location, which is a
facility owned by an unaffiliated third party.
Orovi Corporation, a private company owned by one of the owners of Sedcore
advanced loans to the Company from time to time for operational purposes. A
total of approximately $90,971 in loans were advanced to the Company through
December 31, 1996.
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Otherwise, there have been no related party transactions, or any other
transactions or relationships required to be disclosed pursuant to Item 404 of
Regulation S-B.
PART IV
Item 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following financial information is filed as part of this
report:
(1) FINANCIAL STATEMENTS
(2) SCHEDULES
(3) EXHIBITS. The following exhibits required by Item 601
to be filed herewith are incorporated by reference to
previously filed documents:
<TABLE>
Exhibit number to
Item 601 Registration Statement
Exhibit No. Description on Form 10-SB
- ----------- ----------- ----------------------
<S> <C> <C>
* 3A Articles of Incorporation
* 3B Articles of Amendment
* 3C Bylaws
3D Articles of Amendment to change name to KALAN GOLD CORPORATION.
10A August 26, 1996 Purchase Agreement for defined assets and
liabilities of SEDCORE EXPLORATION COMPANY LIMITED
</TABLE>
*Previously Filed
(b) REPORTS ON FORM 8-K. The Company filed two reports on Form
8-K during the fourth quarter of the fiscal year ended December 31, 1996.
One report was dated November 12, 1996. The other report was dated
December 31, 1996.
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KALAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditors' Reports............................................. F-2
Balance Sheet, December 31, 1996.......................................... F-4
Statement of Operations, years ended December 31, 1996
and 1995 and from January 1, 1993 (inception)
through December 31, 1996 (unaudited)................................... F-5
Statement of Shareholders' Equity, January 1, 1993
(inception) through December 31, 1996 (unaudited)....................... F-6
Statement of Cash Flows, years ended December 31, 1996
and 1995 and from January 1, 1993 (inception)
through December 31, 1996 (unaudited)................................... F-7
Summary of Significant Accounting Policies ............................... F-9
Notes to Financial Statements ............................................ F-11
F-1
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To the Board of Directors
Kalan Gold Corporation
INDEPENDENT AUDITORS' REPORT
We have audited the balance sheet of Kalan Gold Corporation (a development
stage company) as of December 31, 1996 and the related statements of
operations, shareholders' equity and cash flows for the year ended December
31, 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 the
financial position of Kalan Gold Corporation, as of December 31, 1996 and the
results of its operations and its cash flows for the year ended December 31,
1996 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in the Summary of Significant
Accounting Policies, the Company's net losses since inception raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Cordovano and Company, P.C.
Denver, Colorado
April 7, 1997
F-2
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To the Board of Directors
Kalan Gold Corporation
INDEPENDENT AUDITORS' REPORT
We have audited the statements of operations, shareholders' equity and cash
flows for the year ended December 31, 1995 of Knight Natural Gas, Inc. (now
known as Kalan Gold Corporation). 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 the
results of operations and cash flows for the year ended December 31, 1995 of
Knight Natural Gas, Inc., in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company is a development stage
enterprise. As discussed in the Summary of Significant Accounting Policies,
the deficiency in working capital as of December 31, 1995 raises substantial
doubt about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
April 26, 1996
F-3
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KALAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Balance Sheet
December 31, 1996
ASSETS
Cash .................................................... $ 7,228
Furniture and equipment, net ............................ 5,183
Property acquisition costs .............................. 119,808
----------
TOTAL ASSETS $ 132,219
----------
----------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable ........................................ $ 1,991
Advance from affiliate .................................. 90,971
Current portion - long-term debt, net (Note E) .......... 30,165
Notes payable, net (Note E) ............................. 42,028
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TOTAL LIABILITIES 165,155
----------
SHAREHOLDERS' EQUITY
Preferred stock, $.10 par value, 1,000,000 shares
authorized -0- issued and outstanding ................. -
Common stock, $.00001 par value, 100,000,000 shares
authorized, 7,052,500 issued and outstanding .......... 71
Additional paid-in capital .............................. 25,635
Deficit accumulated during the development stage ........ (58,642)
----------
TOTAL SHAREHOLDERS' EQUITY (32,936)
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .............. $ 132,219
----------
----------
See accompanying summary of significant accounting policies and
notes to financial statements.
F-4
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KALAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statement of Operations
January 1, 1993 (inception) through December 31, 1996
January 1,
1993
(inception)
December 31, Through
------------------------ December 31,
1996 1995 1996
---------- ----------- -----------
(unaudited)
COSTS AND EXPENSES
Salaries ...................... $ 26,103 $ - $ 26,103
Professional .................. 16,429 3,850 20,279
General & administrative ...... 13,430 127 13,557
Depreciation .................. 263 - 263
Interest ...................... 2,417 - 2,417
---------- ----------- -----------
NET LOSS $ (58,642) $ (3,977) $ (62,619)
---------- ----------- -----------
---------- ----------- -----------
NUMBER OF WEIGHTED
AVERAGE SHARES OUTSTANDING 3,719,167 2,052,500 3,302,500
---------- ----------- -----------
---------- ----------- -----------
NET LOSS PER SHARE (.02) * (.02)
---------- ----------- -----------
---------- ----------- -----------
* Less than $.01
See accompanying summary of significant accounting policies and
notes to financial statements
F-5
<PAGE>
KALAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statement of Shareholders' Equity
January 1, 1993 (inception) through December 31, 1996
<TABLE>
Deficit
Accumulated
Preferred Stock Common Stock Additional During
------------------ -------------------- Paid-in Development
Shares Amount Shares Amount Capital Stage Total
------ -------- --------- ------ ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1993 (inception) (Note A).... - $ - 552,500 $ 6 $ 418,949 *$(417,421) $ 1,534
Net loss for the year ended
December 31, 1993..................... - - - - - (336) (336)
----- ------ --------- ------ --------- ---------- ---------
BALANCE, DECEMBER 31, 1993 - - 552,500 6 418,949 * (417,757) 1,198
November 1, 1994, shares issued
for services, at cost (Note B)...... - - 1,500,000 15 - - 15
Net loss for the year ended
December 31, 1994..................... - - - - - (289) (289)
----- ------ --------- ------ --------- ---------- ---------
BALANCE, DECEMBER 31, 1994 - - 2,052,500 21 418,949 * (418,046) 924
December 31, 1995,
Capital contribution (Note B)....... - - - - 3,700 - 3,700
Net loss for the year ended
December 31, 1995..................... - - - - (3,977) (3,977)
----- ------ --------- ------ --------- ---------- ---------
BALANCE, DECEMBER 31, 1995 - - 2,052,500 21 422,649 * (422,023) 647
Termination of S corporation (Note C). - - - - (422,023) 422,023 -
Shares issued for property acquisition
August 26, 1996 (Note D) ............ - - 5,000,000 50 19,982 20,032
December 31, 1996,
Capital contribution (Note B)....... 5,027 5,027
Net loss for the year ended
December 31, 1996..................... - - - - (58,642) (58,642)
----- ------ --------- ------ --------- ---------- ---------
BALANCE, DECEMBER 31, 1996 - $ - 7,052,500 $ 71 $ 25,635 $ (58,642) $ (32,936)
----- ------ --------- ------ --------- ---------- ---------
----- ------ --------- ------ --------- ---------- ---------
</TABLE>
* Restated See Note C.
See accompanying summary of significant accounting policies
and notes to financial statements.
F-6
<PAGE>
KALAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statement of Cash Flows
January 1, 1993 (inception) through December 31, 1996
January 1,
1993
(inception)
December 31, Through
----------------- December 31,
1996 1995 1996
---- ---- ------------
OPERATING ACTIVITIES (unaudited)
Net loss accumulated during
the development stage ..... $ (58,642) $ (3,977) $ (63,244)
Non-cash transactions:
Depreciation .............. 263 - 263
Amortization of note ...... 2,417 - 2,417
Contributed services ...... 5,027 - 5,027
Stock issued not for cash . - - 15
Changes in working capital:
Increase in accounts
payable.................. 1,991 - 1,991
---------- ----------- ----------
NET CASH (USED IN)
OPERATING ACTIVITIES (48,944) (3,977) (53,531)
---------- ----------- ----------
INVESTING ACTIVITIES
Purchase of equipment ....... (5,446) - (5,446)
---------- ----------- ----------
NET CASH (USED IN)
INVESTING ACTIVITIES (5,446) - (5,446)
---------- ----------- ----------
FINANCING ACTIVITIES
Proceeds from advances from
affiliate ................. 90,971 90,971
Payments of long-term debt .. (30,000) (30,000)
Capital contribution ........ 3,700 3,700
NET CASH PROVIDED BY
FINANCING ACTIVITIES 60,971 3,700 64,671
---------- ----------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS......... 6,581 (277) 5,694
Cash and cash equivalents,
beginning of year ........... 647 924 1,534
---------- ----------- ----------
CASH AND CASH EQUIVALENTS,
END OF YEAR ................. $ 7,228 $ 647 $ 7,228
---------- ----------- ----------
---------- ----------- ----------
See accompanying summary of significant accounting policies and
notes to financial statements
F-7
<PAGE>
KALAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statement of Cash Flows
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Noncash Investing and Financing Activities:
The Company acquired $119,808 of property acquisition costs and related non-
interest bearing notes payable in the amount of $99,776 in exchange for
5,000,000 shares of .00001 par value common stock. $19,982 was recorded as
capital paid in excess of par. Amortized discount on the notes payable for the
year ended December 31, 1996 was $2,417.
There was no cash paid during the year for interest or taxes.
See accompanying summary of significant accounting policies and
notes to financial statements
F-8
<PAGE>
KALAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Summary of Significant Accounting Policies
December 31, 1996
NATURE OF ORGANIZATION
Kalan Gold Corporation (the "Company") is in the development stage in
accordance with Statement of Financial Accounting Standards No. 7. The
company was incorporated on September 19, 1985 under the name of Knight
Natural Gas, Inc. in the state of Colorado. During 1996, the Company's
board of directors changed the name of the Company to Kalan Gold Corporation.
The Company is engaged in the gold mining business, initially solely with
respect to two concessions which were assigned to the Company by Sedcore
Exploration Company Limited ("Sedcore").
In the course of its development, the Company has sustained operating losses
and expects such losses to continue for the foreseeable future. The ability
of the Company to continue as a going concern is dependent upon successful
completion of its business plan and, ultimately, upon achieving profitable
operations.
CASH EQUIVALENTS
For the purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and tax
basis of assets and liabilities for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled. Deferred taxes are
also recognized for operating losses that are available to offset future
taxable income and tax credits that are available to offset future federal
income taxes.
PROPERTY
Computer equipment and office furniture is recorded at cost and depreciated
on a straight-line basis over a period of 36 months. Depreciation expense for
the period from January 1, 1993 (inception) through December 31, 1996 was
$263.
DEFERRED PROPERTY ACQUISITION COSTS
Costs attributable to the lease of mineral rights are deferred until it is
determined whether a project is commercially feasible.
F-9
<PAGE>
KALAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Summary of Significant Accounting Policies
December 31, 1996
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-10
<PAGE>
KALAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
December 31, 1996
Note A: BACKGROUND
The Company was incorporated in Colorado on September 19, 1985
to explore for natural gas. In December 1989 the Company ceased
operations in the oil and gas business. Effective January 1,
1993, under new management, the Company began the search for and
evaluation of privately owned operating companies. Effective
August 26, 1996, the Company acquired certain gold mine
concessions in the Republic of Ghana.
Note B: RELATED PARTY TRANSACTIONS
During 1996, an affiliate of the Company made periodic short-
term cash advances to the Company for working capital purposes.
These advances in the amount of $90,971 are expected to be paid
within one year.
During 1995 and 1996, certain shareholders made
contributions to the Company in the form of rendering
professional services. These amounts were $3,700 and
$5,027, respectively.
Note C: SHAREHOLDERS' EQUITY
At December 31, 1995, the Company had elected to be taxed as a
subchapter "S" corporation, meaning that the tax expense and or
benefits accrued to the shareholders. During the year ended
1996, the number of shareholders increased to approximately 100,
terminating the "S" election. As of December 31, 1996, income
tax expense and/or benefit accrues to the Company. Accordingly,
the retained deficit of $417,421 related to the oil and gas
operations, and the accumulated deficit during development of
$4,602 were reclassified to additional-paid-in-capital in the
current year.
Note D: DEFERRED PROPERTY ACQUISITION COSTS
On August 26, 1996, the Company entered into an acquisition of
certain defined assets and liabilities of Sedcore in exchange
for 5,000,000 common shares of the Company. Substantially all of
the assets and liabilities acquired, were related to two gold
mine concessions in the Republic of Ghana.
F-11
<PAGE>
KALAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
December 31, 1996
Note D: DEFERRED PROPERTY ACQUISITION COSTS CONTINUED:
AHANTA GOLD FIELD PROPERTY
The Company received, as part of the aforementioned transaction,
the rights to undertake exploration for gold in the Butre area
in the Western Region of Ghana. These rights were part of an
agreement between Ahanta Mining Co. Limited ("Ahanta") and
Sedcore, in which the Company has succeeded to all of Sedcore's
rights and responsibilities as of August 26, 1996. 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 productions 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. $9,000 of
this amount has been paid as of December 31, 1996. Should the
Company wish to continue with the exploration and feasibility
studies after March 23, 1989, 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.
ESIKIMAN PROPERTY ACQUISITION COST
The 2.5 year agreement with Esikaman Mining Company Limited
("Esikaman"), dated May 30, 1996 provides for the Company 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.
F-12
<PAGE>
KALAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
December 31, 1996
Note D: DEFERRED PROPERTY ACQUISITION COSTS CONCLUDED:
The agreement requires the Company to make scheduled payments
totalling $90,000 to Esikaman through November 30, 1998.
$40,000 of this amount was paid as of December 31, 1996. Should
the Company wish to continue 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.
Note E: NOTES PAYABLE
Following is a summary of notes payable outstanding as of
December 31, 1996:
Non-interest bearing promissory note
with scheduled payments through
March 23, 1998, without collateral,
net of imputed interest of $2,738........ $ 27,262
Non-interest bearing promissory note
with scheduled payments through
November 30, 1998, without collateral,
net of imputed interest of $5,069........ 44,931
---------
72,193
Less current maturities (30,165)
---------
$ 42,028
---------
---------
As of December 31, 1996, aggregate maturities of notes
payable are as follows:
Year ending
December 31,
------------
1997................................ $ 30,165
1998................................ $ 42,028
F-13
<PAGE>
KALAN GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
December 31, 1996
Note F: 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 ten 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 Company's
common stock at the then fair market value of the Company's common
stock.
LEASED PROPERTY
The Company maintains offices in Englewood, Colorado for which
it pays approximately $1,361 per month in rent on a one year
renewable lease from an unaffiliated third party. The Company
owns office furniture and equipment which it utilizes at its
principal office.
Note G: SUBSEQUENT EVENT
In March 1997, the Company completed an agreement with Trio Gold
Corporation, an Alberta private corporation ("Trio"), whereby
Trio will earn a fifty percent ownership interest in the Ahanta
and Esikaman concessions, in return for the payment of $144,000
to the Company and for the expenditure of $375,000 on geochemical
studies on both properties. Trio will be responsible for all
operations on these properties.
F-14
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Kalan Gold Corporation
Dated: 4/14/97 By: Signed
-----------------------------
James M. Baum
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
CHIEF FINANCIAL AND ACCOUNTING OFFICER
Dated: 4/14/97 By: Signed
-----------------------------
Robert J. Goldman
Treasurer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
EXHIBITS
TO
Kalan Gold Corporation
<PAGE>
<TABLE>
INDEX TO EXHIBITS
Exhibit Page or
Number Description Cross Reference
- ------- ----------- ---------------
<S> <C> <C>
* 3A Articles of Incorporation
* 3B Articles of Amendment
* 3C Bylaws
3D Articles of Amendment to change name to KALAN GOLD CORPORATION.
10A August 26, 1996 Purchase Agreement for defined assets and
liabilities of SEDCORE EXPLORATION COMPANY LIMITED
</TABLE>
*Previously Filed
<PAGE>
3D
Articles of Amendment to change name to
KALAN GOLD CORPORATION.
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is KNIGHT NATURAL GAS, INC.
SECOND: The following amendment to the Articles of Incorporation was adopted on
November 12, 1996. as prescribed by the Colorado Business Corporation Act, by a
vote of the shareholders. The number of shares voted for the amendment was
sufficient for approval.
ARTICLE I. The name of the Corporation is KALAN GOLD CORPORATION.
THIRD: The manner, if not set forth in such amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the amendment
shall be effected, is as follows: None.
This amendment is effective immediately.
KNIGHT NATURAL GAS, INC.
By: ///Signed///
-----------------------------------
Its President
Title
<PAGE>
10A
August 26, 1996 Purchase Agreement for defined assets and liabilities of SEDCORE
EXPLORATION COMPANY LIMITED
<PAGE>
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 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.
<PAGE>
(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 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 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.
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.
<PAGE>
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
transaction. 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.
(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
<PAGE>
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.
(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.
<PAGE>
(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
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.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
KNIGHT NATURAL GAS, INC.
By: ///Signed///
------------------------------
Authorized Officer
SEDCORE EXPLORATION COMPANY
LIMITED
By: ///Signed///
------------------------------
Authorized Officer
<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.
<PAGE>
EXHIBIT B
PROPERTY AND RIGHTS TO BE TRANSFERRED PURSUANT TO THIS AGREEMENT:
<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.
<PAGE>
EXHIBIT D
LIABILITIES AND CONTINGENCIES
None
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,228
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,228
<PP&E> 5,446
<DEPRECIATION> (263)
<TOTAL-ASSETS> 132,219
<CURRENT-LIABILITIES> 123,127
<BONDS> 42,028
0
0
<COMMON> 71
<OTHER-SE> 33,007
<TOTAL-LIABILITY-AND-EQUITY> 132,219
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 56,225
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,417
<INCOME-PRETAX> (58,642)
<INCOME-TAX> 0
<INCOME-CONTINUING> (58,642)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,642)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
